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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): July 8, 1998
Nitinol Medical Technologies, Inc.
----------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware 0-21001 95-4090463
- --------------- ------------------------ -------------------
(State or Other (Commission File Number) (I.R.S. Employer
Jurisdiction of Identification No.)
Incorporation)
27 Wormwood Street, Boston, MA 02210
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(617)737-0930
- --------------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
Not Applicable
- --------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
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ITEM 2. Acquisition or Disposition of Assets.
On July 8, 1998, Nitinol Medical Technologies, Inc. (the "Company" or
the "Registrant") completed its acquisition of the neurosurgical instruments
business (the "Business") of Elekta AB (PUBL), a Swedish corporation ("Seller"
or "Elekta"), comprised of (i) assets and (ii) all of the outstanding capital
stock of certain Elekta affiliates, including Elekta Instruments Ltd., a
corporation formed under the laws of the United Kingdom, Elekta Implants S.A., a
French corporation, Elekta Instruments SARL, a French corporation, Elekta
Holding S.A., a French corporation, Elekta Instruments N.V./S.A., a Belgian
corporation, Elekta Instruments S.A., a Spanish corporation, Elekta Instruments
B.V., a Netherlands corporation, Cordis Innovasive Systems, Inc., a Florida
corporation, Spembly Medical Ltd., a corporation formed under the laws of the
United Kingdom, Swedemed AB, a Swedish corporation and Spembly Cryosurgery
Limited, a corporation formed under the laws of the United Kingdom, for
approximately U.S. $33 million in cash pursuant to a Purchase Agreement, dated
as of May 8, 1998 (the "Purchase Agreement"), between the Company and Elekta
(the "Purchase"). In addition, the Company assumed substantially all the
liabilities of the Business as part of the Purchase.
The Purchase Agreement contains customary representations and
warranties from Elekta and the Company and post-closing covenants including
business support services to be provided by Elekta, non-solicitation and non-
hiring of former Elekta employees hired by the Company and indemnification for
breach of representations and warranties. The terms of the Purchase were
determined on the basis of arm's-length negotiations.
Prior to the acquisition, the Business was operated as a division of
the Swedish medical technology group of Elekta and derived sales from a broad
range of specialty implants and instruments for neurosurgery. The Company
currently intends to continue the Business substantially in the manner conducted
by Elekta immediately prior to the Acquisition.
The acquisition was approved by the Board of Directors of the Company,
and by the Board of Directors and the stockholders of Elekta. Prior to the
execution of the Purchase Agreement, neither the Company nor any of its
affiliates, nor any director or officer of the Company or any associate of any
such director of officer, had any material relationship with Elekta.
The Purchase was financed with $13 million of the Company's cash and
$20 million of subordinated debt from an affiliate of J.H. Whitney & Co., a
significant stockholder of the Company. The subordinated debt is secured by
substantially all of the assets of the Company and is due September 30, 2003,
with interest payable quarterly at 10.101% per annum. A total of 675,000 shares
of the Company's common stock were issued to J.H. Whitney & Co., and its
affiliates in connection with the transaction. The shares are accompanied by
certain demand and "piggy-back" registration rights. The purchase price for the
shares was $5.80, representing the closing
2
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price of the Company's common stock as reported by the Nasdaq National Market on
July 7, 1998, discounted by 20%. Of the 675,000 shares, 113,793 shares were
issued to J.H. Whitney & Co. as a transaction fee. In addition, the Company paid
J.H. Whitney & Co. a debt placement fee of $600,000.
Junewicz & Co. acted as the Company's financial advisor in connection
with the Acquisition and the financing and issued fairness opinions with respect
thereto.
The foregoing description of the Purchase Agreement does not purport
to be complete and is qualified in its entirety by reference to the full text of
the Purchase Agreement which is filed as Exhibit 2.1 to this Current Report on
Form 8-K and incorporated herein by reference.
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ITEM 7. Financial Statement, Pro Forma Financial Information and Exhibits.
(a) The financial statements of the Business that are required to be
filed pursuant to this item will be filed by amendment not later than 60 days
following the date hereof in accordance with Item 7(a)(4) hereof.
(b) The pro forma financial information required to be filed pursuant
to this item will be filed by amendment not later than 60 days following the
date hereof in accordance with Item 7(b)(2) hereof.
(c) Exhibits:
2.1 Purchase Agreement, dated as of May 8, 1998, between the
Registrant and Elekta AB (PUBL) as amended by Amendment No.1 dated as of July
8, 1998.
10.1 Assignment and Assumption Agreement, dated July 8, 1998, by and
among Elekta AB (PUBL) and the Registrant.
10.2 Tax Covenant, dated as of July 8, 1998, between Elekta AB
(PUBL) and the Registrant.
10.3 Subordinated Note and Common Stock Purchase Agreement by and
among the Registrant, Whitney Subordinated Debt Fund, L.P. and, for certain
purposes, J.H. Whitney & Co., dated as of July 8, 1998.
10.4 Subordinated Promissory Note of the Registrant dated July 8,
1998.
10.5 Guarantee and Collateral Agreement made by the Registrant and
certain of its Subsidiaries in favor of J.H. Whitney & Co., as Agent, dated as
of July 8, 1998.
10.6 Agreement and Deed of Pledge of Shares in Yellow Tape B.V. and
Nitinol Medical Technologies International B.V. between NMT NeuroSciences
(International), Inc., Yellow Tape B.V., the Registrant, Nitinol Medical
Technologies International B.V. and J.H. Whitney & Co., as trustee, dated as of
July 8, 1998.
10.7 Registration Rights Agreement among the Registrant, Whitney
Subordinated Debt Fund, L.P. and J.H. Whitney & Co., dated as of July 8, 1998.
99.1 Press Release dated July 8, 1998.
The Company agrees to furnish supplementally to the Securities and
Exchange Commission a copy of any omitted schedule or similar attachment to
Exhibit 2.1.
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Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
Date: July 23, 1998 NITINOL MEDICAL TECHNOLOGIES, INC.
By: /s/ Theodore I. Pincus
------------------------------------
Name: Theodore I. Pincus
Title: Executive Vice President and
Chief Financial Officer
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INDEX TO EXHIBITS
Exhibit Number Description
- -------------- -----------
2.1 Purchase Agreement, dated as of May 8, 1998, between
the Registrant and Elekta AB (PUBL), as amended by
Amendment No. 1 dated as of July 8, 1998.
10.1 Assignment and Assumption Agreement, dated July 8,
1998, by and among Elekta AB (PUBL) and the Registrant.
10.2 Tax Covenant, dated as of July 8, 1998, between Elekta
AB (PUBL) and the Registrant.
10.3 Subordinated Note and Common Stock Purchase Agreement
by and among the Registrant, Whitney Subordinated Debt
Fund, L.P. and, for certain purposes, J.H. Whitney &
Co., dated as of July 8, 1998.
10.4 Subordinated Promissory Note of the Registrant dated
July 8, 1998.
10.5 Guarantee and Collateral Agreement made by the
Registrant and certain of its Subsidiaries in favor of
J.H. Whitney & Co., as Agent, dated as of July 8, 1998.
10.6 Agreement and Deed of Pledge of Shares in Yellow Tape
B.V. and Nitinol Medical Technologies International
B.V. between NMT NeuroSciences (International), Inc.,
Yellow Tape B.V., the Registrant, Nitinol Medical
Technologies International B.V. and J.H. Whitney & Co.,
as trustee, dated as of July 8, 1998.
10.7 Registration Rights Agreement among the Registrant,
Whitney Subordinated Debt Fund, L.P. and J.H. Whitney
& Co., dated as of July 8, 1998.
99.1 Press Release dated July 8, 1998
<PAGE>
EXHIBIT 2.1
PURCHASE AGREEMENT
Between
ELEKTA AB (PUBL)
and
NITINOL MEDICAL TECHNOLOGIES, INC.
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INDEX
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Page
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1. DEFINITIONS.............................................................. 1
1.1 "Acquired Companies".............................................. l
1.2 "Affiliate"....................................................... 1
1.3 "Affiliate Distribution Business"................................. 1
1.4 "Andover Facility"................................................ 1
1.5 "Andover Real Property"........................................... 1
1.6 "Assets".......................................................... 1
1.7 "Assignment and Assumption Agreement"............................. 2
1.8 "Assumed Liabilities"............................................. 2
1.9 "Authorizations".................................................. 2
1.10 "Balance Sheet" shall mean the balance sheet of the Business as
of February 28, 1998 which is attached hereto as Exhibit 3.6.
l.11 "Biot Facility"................................................... 2
1.12 "Biot Real Property".............................................. 2
1.13 "Business"........................................................ 2
l.14 "Buyer's Closing Net Worth Amount"................................ 2
1.15 "CIS"............................................................. 2
1.16 "Closing"......................................................... 2
1.l7 "Closing Balance Sheet"........................................... 2
1.18 "Closing Date".................................................... 2
l.19 "Closing Financial Statements".................................... 2
l.20 "Closing Net Worth" shall mean the assets minus the liabilities
of the Business as of the Effective Date, as shown on the Closing
Balance Sheet.
1.21 "Code"............................................................ 3
1.22 "Companies"....................................................... 3
1.23 "Company Intellectual Property"................................... 3
1.24 "Copyrights"...................................................... 3
1.25 "Critical Contracts".............................................. 3
1.26 "Descriptive Memorandum".......................................... 3
1.27 "EBEL"............................................................ 3
1.28 "EGBH"............................................................ 3
1.29 "EHSA"............................................................ 3
1.30 "EIAL"............................................................ 3
1.31 "EII"............................................................. 3
1.32 "EIL"............................................................. 3
1.33 "EISA"............................................................ 3
1.34 "ENTH"............................................................ 3
1.35 "ESP"............................................................. 3
1.36 "ESRL"............................................................ 3
1.37 "Effective Date".................................................. 4
1.38 "Employee Benefit Plans".......................................... 4
1.39 "Environmental Laws".............................................. 4
l.40 "Excluded Assets"................................................. 4
1.41 "Excluded Environmental Liabilities".............................. 4
l.42 "Hazardous Materials"............................................. 4
</TABLE>
(i)
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<TABLE>
<S> <C>
1.43 "Improvements".................................................... 4
l.44 "Intellectual Property"........................................... 4
l.45 "International Accounting Standards".............................. 4
1.46 "Know-How"........................................................ 4
1.47 "Patents"......................................................... 4
1.48 "Products"........................................................ 5
l.49 "Provisional Purchase Price"...................................... 5
1.50 "Purchase Price".................................................. 5
l.5l "Purchase Price Adjustment"....................................... 5
1.52 "Real Property"................................................... 5
1.53 "Release"......................................................... 5
1.54 "SCL"............................................................. 5
1.55 "SEK"............................................................. 5
1.56 "Swedemed"........................................................ 5
1.57 "Spembly"......................................................... 5
1.58 "Target Net Worth"................................................ 5
1.59 "Taxes"........................................................... 5
1.60 "Tax Return"...................................................... 5
1.6l "Tentative Purchase Price"........................................ 6
1.62 "Trademarks"...................................................... 6
1.63 "U.K. Tax Covenant"............................................... 6
1.64 "USD"............................................................. 6
2. Purchase and Sale of Assets.............................................. 6
2.1 Transfer.......................................................... 6
2.2 Determination and Payment of Purchase Price....................... 6
2.3 Assumption of Liabilities......................................... 7
2.4 Instruments of Transfer and Assumption............................ 8
2.5 Consents.......................................................... 8
2.6 Further Assurances................................................ 8
2.7 Sales and Transfer Taxes; Fees.................................... 9
3. Representations and Warranties of Seller................................. 9
3.1 Seller's Organization, Power, Execution........................... 9
3.2 Right to Transfer................................................. 10
3.3 Governmental Compliance........................................... 10
3.4 Notices of Violation.............................................. 10
3.5 Defaults.......................................................... 10
3.6 Balance Sheet and Changes......................................... 10
3.7 Tax Consolidation................................................. ll
3.8 Tax Returns....................................................... 11
3.9 Contracts, Etc.................................................... 12
3.10 Intellectual Property............................................. 12
3.11 Misappropriation of Intellectual Property......................... 13
3.12 Labor Matters..................................................... 13
3.l3 Employee Benefit Plans............................................ l3
3.14 Customers and Suppliers........................................... 15
3.l5 Environmental, Health and Safety Matters.......................... 15
3.16 Insurance......................................................... 15
3.17 Related Party Relationships....................................... 16
</TABLE>
(ii)
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<TABLE>
<S> <C>
3.18 Ownership of Tangible Assets and Leases............................ 16
3.19 Brokers--Seller ................................................... 17
3.20 Capitalization of the Acquired Companies........................... 18
3.21 Companies.......................................................... 18
3.22 Descriptive Memorandum............................................. l8
3.23 Litigation......................................................... 18
3.24 Export............................................................. 18
3.25 Product Warranty and Product Liability Claims...................... 19
4. Representations and Warranties of Buyer.................................. 19
4.1 Buyer's Organization, Power, Execution............................. 19
4.2 Brokers--Buyer..................................................... 19
4.3 No Violation....................................................... 19
4.4 Approvals and Consents............................................. 19
5. Covenants of Seller...................................................... 19
5.1 Conduct of the Business............................................ 19
5.2 Certain Changes.................................................... 20
5.3 Employees.......................................................... 21
5.4 Exclusivity........................................................ 21
5.5 Limitations on Employee Solicitation and Competition............... 21
5.6 Intercompany Debt.................................................. 21
5.7 Patent assignments................................................. 22
6. Conditions Precedent to Obligations of Buyer............................. 22
6.1 Representations True at Closing.................................... 22
6.2 Covenants of Seller................................................ 22
6.3 No Injunction, Etc................................................. 22
6.4 Consents, Approvals, and Waivers................................... 22
6.5 Absence of Adverse Changes......................................... 22
6.6 Opinions of Seller's Counsel....................................... 22
7. Conditions Precedent to the Obligations of the Seller to Close........... 23
7.1 Representations True at Closing.................................... 23
7.2 Covenants of Buyer................................................. 23
7.3 No Injunction, Etc................................................. 23
7.4 Consents, Approvals and Waivers.................................... 23
7.5 Opinions of Buyer's Counsel........................................ 23
8. Publicity................................................................ 23
9. Information.............................................................. 23
9.1 Right to Investigate............................................... 23
9.2 Confidentiality.................................................... 24
10. Cooperation.............................................................. 24
11. Termination.............................................................. 24
11.1 Both Parties....................................................... 24
11.2 Buyer.............................................................. 24
</TABLE>
(iii)
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<TABLE>
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11.3 Seller............................................................ 24
12. Closing.................................................................. 25
12.1 Time and Place of Closing......................................... 25
12.2 Transactions at Closing........................................... 25
13. Survival of Representations and Warranties and Covenants................. 26
13.1 Survival of Representations and Warranties and Covenants
of Seller......................................................... 26
13.2 Survival of Representations and Warranties and Covenants
of Buyer.......................................................... 26
14. Indemnification.......................................................... 26
14.1 Indemnification by Seller......................................... 26
14.2 Indemnification by Buyer.......................................... 27
14.3 Limitations on Indemnification For Breach of Representations
and Warranties.................................................... 27
14.4 Claims for Indemnification........................................ 27
14.5 Defense by Indemnifying Party..................................... 28
14.6 Payment of Indemnification Obligation............................. 28
14.7 Exclusive Remedy.................................................. 28
15. Post-Closing Actions..................................................... 28
15.1 Services.......................................................... 28
15.2 Change of Names................................................... 28
15.3 Release of Guarantees by Seller................................... 28
15.4 Post-Closing Agreements........................................... 29
16. General.................................................................. 30
16.1 Affiliate Involvement............................................. 30
16.2 Payment of Expenses............................................... 30
16.3 Modifications; Waivers............................................ 31
16.4 Assignability..................................................... 31
16.5 No Other Representations.......................................... 31
16.6 Notices........................................................... 31
16.7 Captions.......................................................... 32
16.8 Counterparts and Attachments...................................... 32
16.9 Knowledge......................................................... 32
16.10 Governing Law..................................................... 32
17. Dispute Resolution....................................................... 32
17.1 Objective......................................................... 32
17.2 No Affiliate Actions.............................................. 32
17.3 Arbitration....................................................... 33
18. Entire Agreement......................................................... 33
</TABLE>
(iv)
<PAGE>
PURCHASE AGREEMENT
------------------
THIS AGREEMENT, executed this day of May, 1998 between ELEKTA AB (PUBL),
a Swedish corporation ("Seller") and NITINOL MEDICAL TECHNOLOGIES, INC., a
Delaware corporation ("Buyer").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Seller is the ultimate parent of certain Affiliates, which are
engaged in the neurosurgical instrument business;
WHEREAS, Buyer desires to acquire the Seller's neurosurgical instrument
business; and
WHEREAS, Seller is willing to cause its Affiliates to sell its
neurosurgical instrument business to Buyer and/or its Affiliates,
NOW THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained herein, the parties hereto agree as
follows:
1. DEFINITIONS. In this Agreement the following terms shall have the meanings
-----------
assigned to them below.
1.1 "Acquired Companies" shall mean EIL, EISA, ESRL, EHSA, EBEL, ESP,
ENTH, CIS, Spembly, Swedemed and SCL.
1.2 "Affiliate" of a specified person (natural or juridical) shall mean a
person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, the person
specified.
1.3 "Affiliate Distribution Business" shall mean that part of the Business
which is conducted by Affiliates of Seller (other than the Acquired Companies)
which are engaged primarily in businesses other than the Business and which act
as distributors of the Products.
1.4 "Andover Facility" shall mean the facility of the Business in Andover,
England located on the Andover Real Property.
1.5 "Andover Real Property" shall mean the real property described on
Exhibit 3.18.2.3A on which the Andover Facility is located, and which is leased
by Spembly.
1.6 "Assets" shall mean the property described on the attached Schedule of
Assets, but excluding the property described on the attached Schedule of
Excluded Assets, with only such changes therein as shall have occurred between
the Effective Date and the Closing Date in the ordinary course of business in
transactions not inconsistent with any of Seller's
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representations, warranties, covenants and agreements set forth herein. The
Assets shall include without limitation all of the outstanding capital stock of
all of the Acquired Companies and shall also be deemed to include all assets of
the Acquired Companies which are not Excluded Assets.
1.7 "Assignment and Assumption Agreement" shall have the meaning set
forth in Section 2.3 hereof.
1.8 "Assumed Liabilities" shall have the meaning set forth in Section 2.3
hereof.
1.9 "Authorizations" shall have the meaning described in Section 3.3
hereof.
1.10 "Balance Sheet" shall mean the balance sheet of the Business as of
February 28, 1998 which is attached hereto as Exhibit 1.10.
1.11 "Biot Facility" shall mean the facility of the Business in Sophia
Antipolis (Biot), France located on the Biot Real Property.
1.12 "Biot Real Property" shall mean the real property described on
Exhibit 3.18.2.1, on which the Biot facility is located, and which is owned by
EISA.
1.13 "Business" shall mean the research, development, manufacturing,
marketing, selling and distribution conducted by Seller and its Affiliates
(including without limitation the Companies) with respect to the Products.
1.14 "Buyer's Closing Net Worth Amount" shall have the meaning set
forth in subsection 2.2(c).
1.15 "CIS" shall mean Cordis Innovasive Systems, Inc., a Florida
corporation, which is an indirect, wholly-owned subsidiary of Seller.
1.16 "Closing" shall mean the meeting of the parties at which the
sale, assignment, licensing, transfer and delivery of the Assets to Buyer and
the payment of the Purchase Price, purchase and acquisition of the Assets and
assumption of the Assumed Liabilities by Buyer are completed, which meeting
shall be held at the offices of Jones, Day, Reavis & Pogue in London, England,
at 10:00a.m. on the later of (a) June 16, 1998, or (b) the second English
business day following receipt of the necessary governmental consents referred
to in Section 2.5 hereof.
1.17 "Closing Balance Sheet" shall mean the balance sheet described
in Section 2.2 hereof.
1.18 "Closing Date" shall mean the date on which the Closing takes
place. The Closing shall be effective as of the close of business, English time,
on the Closing Date.
1.19 "Closing Financial Statements" shall mean the financial statements
described in Section 2.2 hereof.
1.20 "Closing Net Worth" shall mean the "TOTAL ASSETS" minus "Goodwill"
minus "TOTAL INTEREST-FREE LIABILITIES" minus "Interest-bearing Loans" (non-
group) minus "TOTAL PROVISIONS" of the Business as of the Effective Date, each
determined using
2
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the corresponding line item on the Closing Balance Sheet, and calculated to be
the "Total Adjusted" amount for such item as indicated on the Closing Balance
Sheet. An example of the calculation of net worth at February 28, 1998, which is
the template for the calculation of Closing Net Worth attached as Exhibit 1.20.
1.21 "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.22 "Companies" shall mean, collectively, the following, and "Company"
shall mean each of the following: EIL, EISA, ESRL, EHSA, EBEL, ESP, ENTH,
Spembly, Swedemed, SCL, CIS, EIAL, the Seller, and EII; provided, however, the
-------- -------
Seller, EII, EGBH and EIAL shall each constitute one of the Companies only in
relation to its activities, assets, liabilities, and employees which relate
primarily to the Business.
1.23 "Company Intellectual Property" means all Intellectual Property
used in the Business as it is currently conducted.
1.24 "Copyrights" shall mean all copyrights, rights to mask works and
database rights, and all registrations and applications for registration of any
of the foregoing.
1.25 "Critical Contracts" is defined in Section 2.5(c) hereof.
1.26 "Descriptive Memorandum" shall mean the offering memorandum
relating to the neurosurgical instrument business of Seller and its Affiliates
prepared by Credit Suisse First Boston (Europe) Ltd. and delivered to the Buyer
on or about December 15, 1997.
1.27 "EBEL" shall mean Elekta Instruments S.A., a Belgian corporation,
which is a wholly-owned subsidiary of Seller.
1.28 "EGBH" shall mean Elekta Instruments GmbH, a German limited liability
company, which is a wholly-owned subsidiary of Seller.
1.29 "EHSA" shall mean Elekta Holding S.A., a French corporation, which is
a wholly-owned subsidiary of Seller.
1.30 "EIAL" shall mean Elekta Instruments Asia Ltd., a Hong Kong
corporation, which is an indirect, wholly-owned subsidiary of Seller.
1.31 "EII" shall mean Elekta Instruments, Inc., a Georgia
corporation, which is an indirect, wholly-owned subsidiary of Seller.
1.32 "EIL" shall mean Elekta Instruments Ltd., an English corporation,
which is an indirect, wholly-owned subsidiary of Seller.
1.33 "EISA" shall mean Elekta Implants S.A., a French corporation, which
is a wholly-owned subsidiary of EHSA.
1.34 "ENTH" shall mean Elekta Instruments B.V., a Netherlands corporation,
which is an indirect, wholly-owned subsidiary of Seller
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1.35 "ESP" shall mean Elekta Instruments S.A., a Spanish corporation,
which is a wholly-owned subsidiary of EHSA.
1.36 "ESRL" shall mean Elekta Instruments SARL, a French corporation,
which is a wholly-owned subsidiary of EHSA.
1.37 "Effective Date" shall mean April 30, 1998.
1.38 "Employee Benefit Plans" shall mean all pension, retirement, profit
sharing, deferred compensation, stock ownership, stock purchase, stock option,
restricted stock, bonus, severance or termination pay, cafeteria, medical,
hospital, life, health, accident, disability, death, or other material employee
benefit plans or arrangements.
1.39 "Environmental Laws" shall mean any applicable law, rule, regulation,
permit, administrative order, or decision, common law precedent or other binding
determination (whether national, provincial, state or local) pertaining to (1)
the use, analysis, generation, manufacture, storage, discharge, release,
disposal or transportation of Hazardous Materials, (2) health and safety of
employees and the public, (3) environmental regulation, (4) with respect to
Hazardous Materials, contamination, clean-up or disclosure, drinking water,
groundwater, landfills, open dumps, storage tanks (underground or otherwise),
solid waste, waste water, stormwater runoff, emissions, or wells.
1.40 "Excluded Assets" shall mean the property described on the attached
Schedule of Excluded Assets.
1.41 "Excluded Environmental Liabilities" is defined in Section 2.3
hereof.
1.42 "Hazardous Materials" shall mean petroleum, including crude oil or
any fraction thereof, or any other chemical substance, material, object,
condition, waste, pollutant or combination thereof which is hazardous to human
health or safety or to the environment due to its radioactivity, ignitability,
corrosivity, reactivity, explosivity, toxicity, carcinogenicity, infectiousness
or other harmful or potentially harmful properties or effects and all of those
chemicals, substances, materials, objects, conditions, wastes, pollutants or
combinations thereof which are now listed, defined or regulated by any
applicable law or regulation (whether national, provincial, state or local)
based upon, directly or indirectly, such properties or effects.
1.43 "Improvements" shall mean, collectively, any and all buildings,
fixtures and other improvements located on the Real Property
1.44 "Income Statement" shall mean the income statement of the Business
for the ten months ended on February 28, 1998, attached as Exhibit 1.10 hereto.
1.45 "Intellectual Property" shall mean Copyrights, Patents, Know-
How, and Trademarks, and all rights vesting in the owner thereof pursuant to the
applicable laws of any competent jurisdiction.
1.46 "International Accounting Standards" shall mean International
Accounting Standards, as adopted by the International Accounting Standards
Committee.
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1.47 "Know-How" shall mean methods, devices, technology, trade secrets,
industrial designs, know-how, technical manuals and documentation and other
proprietary information, including, without limitation, proprietary processes
and formulae.
1.48 "Patents" shall mean patents and patent applications, all
continuations, continuations-in-part, divisions, reissues, reexaminations,
extensions and foreign counterparts of such patents and patent applications, and
all invention disclosures.
1.49 "Products" shall mean the products described on the attached Schedule
of Products.
1.50 "Provisional Purchase Price" is defined in subsection 2.2(d)(i)
hereof.
1.51 "Purchase Price" shall mean the Tentative Purchase Price less the
Purchase Price Adjustment.
1.52 "Purchase Price Adjustment" shall be determined as follows:
(a) If the Closing Net Worth is equal to or greater than the Target
Net Worth, the Purchase Price Adjustment shall be zero; or
(b) If the Closing Net Worth is less than the Target Net Worth, the
Purchase Price Adjustment shall be equal to the excess of the Target Net Worth
over the Closing Net Worth, converted from SEK to USD based on the exchange rate
equal to 7.733 SEK per USD.
1.53 "Real Property" shall mean the Andover Real Property and the Biot
Real Property.
1.54 "Release" shall mean any intentional or accidental spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping, or disposing of any Hazardous Materials (including the
abandonment or discarding of barrels, containers and other closed receptacles
containing any Hazardous Materials).
1.55 "SCL" shall mean Spembly Cryosurgery Limited, an English corporation,
which is a wholly-owned subsidiary of Spembly.
1.56 "SEK" shall mean Swedish crowns.
1.57 "Swedemed" shall mean Swedemed AB, a Swedish corporation, which is a
wholly-owned subsidiary of EIL.
1.58 "Swedish GAAP" shall mean generally accepted accounting principles of
Sweden.
1.59 "Spembly" shall mean Spembly Medical Ltd., an English corporation,
which is a wholly-owned subsidiary of EIL.
1.60 "Target Net Worth" shall mean the amount of SEK 158,832,000.
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1.61 "Taxes" shall mean any national, state, or local taxes, assessments,
interest, penalties, deficiencies, fees and other governmental charges or
impositions, including, without limitation, all income, gross receipts,
unemployment compensation, social security, payroll, sales, use, excise,
privilege, property, ad valorem, franchise, license, school and any other tax or
similar governmental charge or imposition under the laws of any nation or any
state or municipal or political subdivision thereof or any other country.
1.62 "Tax Return" shall mean any return, declaration, report, claim
for refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
1.63 "Tentative Purchase Price" shall mean the amount of USD 33,000,000.
1.64 "Trademarks" shall mean (a) registered trademarks and registered
service marks, applications for registration for trademarks and service marks,
renewal registrations and applications for renewal registrations, extensions and
foreign counterparts of such registrations and applications for registration;
(b) material unregistered trademarks and service marks; (c) corporate names,
business names and trade names, whether registered or unregistered; and (d)
Internet domain names and associated addresses and URLs.
1.65 "U.K. Tax Covenant" shall mean the covenant in respect of EIL, SCL
and Spembly to be entered into at Closing by Buyer and Seller in the agreed
form.
1.66 "USD" shall mean United States Dollars.
2. PURCHASE AND SALE OF ASSETS.
---------------------------
2.1 TRANSFER. At the Closing, Seller shall (and/or shall cause its
--------
Affiliates to) sell, assign, license, transfer and deliver the Assets to Buyer,
and Buyer shall purchase and acquire the Assets and assume the Assumed
Liabilities.
2.2 DETERMINATION AND PAYMENT OF PURCHASE PRICE.
-------------------------------------------
(a) As soon as practicable after the Effective Date, Seller shall
prepare and deliver to Buyer a balance sheet as of the Effective Date (the
"Closing Balance Sheet"). The Closing Balance Sheet shall be audited by an
internationally recognized certified public accountant firm. The Closing Balance
Sheet shall be prepared by Seller (at its expense) accurately and in accordance
with International Accounting Standards with amounts expressed in SEK using
prevailing exchange rates (as reported by the Swedish Central Bank as of the
Effective Date) and, to the extent possible given the difference in audit
valuation of individual items between Swedish GAAP and International Accounting
Standards, in a manner consistent with, and using the same methodology as, the
Balance Sheet, including "Adjustments" and "Group Adjustments" consistent with,
and using the same methodology as, the "Adjustments" and "Group Adjustments" in
the Balance Sheet. In the event Buyer asserts that the nature or amount of any
item reflected on the Closing Balance Sheet which affects the determination of
Closing Net Worth is not in accordance with International Accounting Standards
or is not determined in a manner consistent with the Balance Sheet (except as
provided above), Buyer and Seller shall in good faith attempt to resolve any
such dispute with respect to the Closing Balance Sheet. If Buyer and Seller
cannot reach agreement with respect to the determination of Closing
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Net Worth within ten (10) days after the delivery of the Closing Balance Sheet
to Buyer, Buyer and Seller shall jointly appoint an internationally recognized
certified public accountant firm to determine the proper resolution of the
disagreements between Buyer and Seller concerning the determination of Closing
Net Worth, whose determination (the cost of which shall be divided equally
between Seller and Buyer) shall be made within thirty (30) days and be final and
binding on the parties. If Buyer and Seller cannot agree on the appointment of
such a certified public accounting firm, such firm shall be selected by
arbitration pursuant to Section 17.3 hereof.
(b) If the amount determined as the Purchase Price Adjustment
pursuant to subsection 1.52 is greater than USD 1,500,000, then:
(i) Seller shall have the right to give written notice to Buyer,
not later than four (4) days after the final determination of the Purchase Price
Adjustment, that Seller desires to terminate this Agreement; and
(ii) If Seller gives the notice pursuant to subparagraph (i)
above, Buyer may either:
(A) Give written notice to Seller not later than midnight
Boston time on the fourth full day following receipt by Buyer of the Seller's
notice that Buyer elects to fix the Purchase Price Adjustment at USD1,500,000,
in which event this Agreement shall not terminate; or
(B) Allow this Agreement to terminate pursuant to Seller's
notice, which shall occur automatically if Buyer does not give Seller the
written notice pursuant to subparagraph (A) above not later than four (4) days
after its receipt of Seller's notice, in which event Seller shall pay to Buyer
the amount of USD 500,000 as a termination fee.
(c) On the Closing Date, Buyer shall divide and pay the Purchase
Price to and among Seller and its Affiliates in such portions as Seller may
designate, such payments to be made by wire transfers of funds from banks
selected by Buyer to banks selected by Seller. Prior to the Closing Date, Buyer
and Seller shall use their best efforts to agree on the allocation of the
Purchase Price among the Assets.
(d) Notwithstanding the provisions of subsection 2.2(c) hereof, if
the Closing Net Worth shall not have been finally determined by the Closing
Date, the Closing shall nevertheless take place if the amount which Buyer
asserts to be the correct amount for the Closing Net Worth (the "Buyer's Closing
Net Worth Amount") would result in a Purchase Price Adjustment of no more than
USD 1,500,000, and in such event the following rules shall apply:
(i) At Closing, Buyer shall pay an amount (the "Provisional
Purchase Price") equal to what the Purchase Price would be if the Buyer's
Closing Net Worth Amount is the correct amount for the Closing Net Worth; and
(ii) Promptly after the Closing Net Worth is finally determined
in accordance with subsection 2.2 (a), Buyer shall pay to Seller the amount, if
any, by which the Purchase Price exceeds the Provisional Purchase Price.
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2.3 ASSUMPTION OF LIABILITIES. Buyer shall assume at the Closing (a) the
-------------------------
Closing Balance Sheet items listed on Exhibit 2.3 A, (b) the obligations of the
Companies under the contracts listed on Exhibit 3.9, all of which shall be
assumed pursuant to an assignment of contracts, and assumption of liabilities in
the form attached hereto as Exhibit 2.3 (the "Assignment and Assumption
Agreement"), and (c) the other obligations and liabilities described on Exhibit
2.3A (collectively the "Assumed Liabilities"). Buyer shall perform all
obligations related to the Assumed Liabilities. After Closing, Seller shall have
no responsibility to the Buyer or the Acquired Companies for the Assumed
Liabilities of the Companies except for any liability attributable to a
violation of any Environmental Law(s) by the Business prior to the Closing or
the Release of any Hazardous Materials prior to the Closing ("Excluded
Environmental Liabilities"). Buyer's assumption of the Assumed Liabilities
relating to the Acquired Companies is intended solely for the benefit of Seller
and its Affiliates and is not intended to create rights for any other parties.
2.4 INSTRUMENTS OF TRANSFER AND ASSUMPTION.
--------------------------------------
(a) Seller shall deliver to Buyer at the Closing such endorsed share
certificates, stock transfer forms, bills of sale, assignments of lease, deeds,
assignments of lease, licenses and other instruments of assignment and transfer,
in form reasonably satisfactory to Buyer, as shall be effective to convey to
Buyer all of Seller's right, title and interest in and to each of the Assets.
(b) Buyer shall deliver to Seller at the Closing such instruments of
assumption, in form reasonably satisfactory to Seller, as shall be effective to
assure Seller that Buyer will perform all obligations related to the Assumed
Liabilities, including without limitation the Assignment and Assumption
Agreement.
2.5 CONSENTS.
--------
(a) Buyer and Seller shall cooperate in securing before and after the
Closing all consents with respect to the sales and transfers of the Assets from
each governmental authority whose consent is necessary to such sales and
transfers.
(b) The Seller, the Companies and any other relevant Affiliates of
Seller shall use their reasonable commercial efforts to obtain the waiver,
consent and approval of all non-governmental persons whose waiver, consent or
approval (i) is required in order to consummate the transactions contemplated by
this Agreement or (ii) is required by any material agreement, lease, mortgage or
security instrument, arrangement, judgment, decree, order, permit or license to
which Seller or any of the Companies is a party or subject on the Closing Date
and (A) which would prohibit, or require the waiver, consent or approval of any
person to such transactions or (B) under which, without such waiver, consent or
approval, such transactions would constitute an occurrence of default under the
provisions thereof, result in the acceleration of any obligation thereunder or
give rise to a right of any party thereto to terminate its obligations
thereunder.
(c) Nothing in this Agreement shall be deemed to constitute or
require an assignment or an attempt to assign any contract or other agreement
with any third party if the attempted assignment thereof without the consent of
any such third party would constitute a breach thereof or adversely affect in
any way the rights of Seller and its assignee thereunder. If,
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after Seller shall have used reasonable efforts to obtain such consents from any
such third party, any such consent shall not have been obtained at or prior to
the Closing, or the attempted assignment of such contract or agreement without
such consent at the Closing would have an adverse effect on such rights or Buyer
would not in fact receive such rights, Seller shall cooperate with Buyer, at
Buyer's expense, in any reasonable arrangement designed to provide for Buyer the
benefits thereunder, including enforcing for the benefit of Buyer any or all
rights of Seller against any such third party arising out of the breach or
cancellation thereof by any such third party or otherwise. Provided, however,
-------- -------
Buyer shall not be obligated to close until Seller has obtained all consents of
third parties which are required for the assignment of those contracts listed on
Exhibit 2.5 hereto (the "Critical Contracts").
2.6 FURTHER ASSURANCES. Buyer and Seller shall each, from time to time
------------------
after the Closing, at the request of the other and without further
consideration, execute and deliver such further instruments of assignment,
transfer, license or assumption and take such further action as the other may
reasonably request in order more effectively to transfer, reduce to possession
and record title to any of the Assets, or to implement the assumption of the
Assumed Liabilities. Reasonable out of pocket expenses incurred in compliance
with this Section by one party at the request of the other party shall be
promptly reimbursed by the requesting party to the party incurring such
expenses.
2.7 SALES AND TRANSFER TAXES; FEES. All applicable sales, transfer,
------------------------------
registration, documentary, use, filing and other taxes (other than income taxes)
and other governmental (and notarial) fees that may be levied or are otherwise
payable with respect to the sale and transfer of the Business and the Assets
hereunder, whether levied on or payable by Seller or Buyer, shall be divided
equally between Buyer and Seller, and Buyer and Seller shall each pay one-half
(1/2) thereof.
3. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents and warrants to
----------------------------------------
Buyer as follows.
3.1 SELLER'S ORGANIZATION, POWER, EXECUTION.
---------------------------------------
(a) Each of Seller and the Companies is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite power and authority (corporate and other) to
own its properties, to carry on its business as now being conducted, to execute,
and deliver this Agreement and the agreements contemplated herein and to carry
out the transactions contemplated hereby and thereby. Each of the Companies is
duly qualified to do business and in good standing in all jurisdictions in which
its ownership of property or the character of its business requires such
qualification, except where the failure to be qualified in the case of any such
Company would not have a material adverse effect on the business or assets of
such Company. Certified copies of the charter and bylaws or other governing
documents of the Seller and each of the Acquired Companies, as amended to date,
have been previously delivered to the Buyer, are complete and correct, and no
amendments have been made thereto or have been authorized since the date
thereof.
(b) The execution and delivery of this Agreement and the agreements
provided for herein and the consummation of all transactions contemplated hereby
and thereby have been duly authorized by all necessary corporate action on the
part of Seller, and this Agreement has been duly executed and delivered by
Seller and constitutes, and each other
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document and instrument required hereby to be executed and delivered to Buyer
will when delivered constitute, the valid and legally binding obligation of
Seller or its relevant Affiliate enforceable in accordance with its terms,
subject to bankruptcy laws and general equitable principles. The execution and
delivery of this Agreement and performance of the transactions contemplated
hereby will not with or without the giving of notice or the passage of time or
both, conflict with, result in a breach, violation or termination of any term or
provision by Seller or any of the Companies of, or constitute a default by
Seller or any of the Companies under, any agreement, instrument or order to
which Seller or any of the Companies is a party or by which Seller or any of the
Companies is bound or the corporate charter or by-laws or other governing
documents of Seller or any of the Companies, or any statute, judgment, order,
award, injunction, decree, regulation or ruling of any court, governmental
authority or arbitrator, or cause any acceleration under, or cause the creation
of any lien, charge or encumbrance upon the properties or assets of the Seller
or any of the Companies pursuant to, any indenture, mortgage, deed of trust or
other instrument or agreement to which the Seller or any of the Companies is a
party or by which the Seller or any of the Companies or any of their respective
properties is or may be bound.
3.2 RIGHT TO TRANSFER. Seller and its Affiliates have the right to
-----------------
transfer the Assets to Buyer and/or its Affiliates, subject to the consents
referred to in Subsections 2.5(b) and 2.5(c).
3.3 GOVERNMENTAL COMPLIANCE. Each of Seller and the Companies has the
-----------------------
corporate power and authority and all licenses and permits: (i) which are
required by governmental authorities to own and operate the Business and to
carry on the Business as now being conducted and (ii) whose absence would have a
material adverse effect on the Business (the "Authorizations"). The
Authorizations are in full force and effect. All of the Products comply, and
have been manufactured, marketed and sold in compliance, in all material
respects with all applicable laws and regulations. None of the Companies have
reasonable grounds to believe that any of the Authorizations will not in the
ordinary course be renewed or continued. To the knowledge of the Companies, the
current operation of the Business is not in material violation of any applicable
statute, ordinance, regulation or administrative or judicial order or ruling.
3.4 NOTICES OF VIOLATION. None of the Companies has received any written
--------------------
claim or written assertion that there has been any breach of any of the terms or
conditions of any Authorizations (or has knowledge of any threat thereof) in
such manner (a) as would permit any other party to cancel, terminate or
materially amend any Authorization, or (b) that any such breach or breaches
singly or in the aggregate could materially and adversely affect the financial
condition or results of operations of the Business. None of the Companies has
received any written notice requiring the accumulation and submission of
substantial clinical data necessary to establish the safety and effectiveness of
any Product not previously required or imposing any other material condition or
requirement restricting the continued commercial distribution of such Product.
3.5 DEFAULTS. Neither the execution and delivery of this Agreement nor the
--------
carrying out of any of the provisions hereof or the transactions contemplated
hereby will result in the creation or imposition of any security interest, lien,
claim, charge, or other encumbrance of any nature whatsoever upon any of the
Assets after the Closing Date.
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3.6 FINANCIAL STATEMENTS AND CHANGES.
--------------------------------
(a) The Balance Sheet was prepared in accordance with Swedish GAAP
(insofar as applicable to the description of a portion of a business). The
Balance Sheet reflects all liabilities of the Business, whether absolute,
contingent, accrued or otherwise existing as of the date thereof which are of a
nature required to be reflected in financial statements prepared in accordance
with Swedish GAAP. The Income Statement was prepared in accordance with Swedish
GAAP (insofar as applicable to the description of a portion of a business). The
Balance Sheet and the Income Statement fairly present, in all material respects,
the financial condition and results of operations, respectively, of the Business
at the date of such Balance Sheet and for the ten month period covered by the
Income Statement. If the Balance Sheet and Income Statement had been prepared in
accordance with International Accounting Standards instead of Swedish GAAP, they
would not be materially different, except for possible differences attributable
to: (i) group adjustments for restructuring provisions, acquisition goodwill and
consolidation; (ii) treatment of pension plan overfunding or underfunding; and
(iii) valuation of intellectual property. Except as reflected in the Balance
Sheet or as disclosed on Exhibit 1.10 and Exhibit 3.9, the Companies are not in
default with respect to any material liabilities or obligations, and any
liabilities incurred or accrued subsequent to the date of the Balance Sheet have
been, or are being, paid and discharged in the normal course as they become due,
and all such liabilities and obligations were incurred in the ordinary course of
business except as indicated on Exhibit 1.10.
(b) Since the date of the Balance Sheet, there has been (a) no change
in the financial condition, assets, liabilities or business of the Business or
the Assets which has had a material adverse effect on the Business; (b) no
damage, destruction or loss (whether or not covered by insurance) materially
adversely affecting the Business or the Assets; (c) no labor trouble materially
adversely affecting the Business or the Assets; (d) no sale or transfer of any
Assets, except sales in the ordinary course of business; (e) no imposition of
any material lien, charge, encumbrance (which as used herein includes, without
limitation, any mortgage, deed of trust, conveyance to secure debt or security
interest) or claim upon any of the Assets, except for statutory landlord's liens
with respect to rent not yet due and payable and any current year lien with
respect to personal or real property taxes not yet due and payable; (f) no
default in any liability or obligation which would have a material adverse
effect on the Business; (g) no agreement by any of the Companies to any material
adverse change in the terms of any material contract or instrument to which it
is a party; or (h) no waiver, cancellation or disposal by any of the Companies
of, for less than the face amount thereof, any material claim or right which it
has against others; (i) no transaction or event which would materially increase
the tax liability of any of the Acquired Companies for any prior taxable year or
the tax liability of any of the Companies for any prior taxable year for which
Purchaser, the Assets, or any of the Acquired Companies would become liable; (j)
no payment of any dividend or other distribution to a shareholder by any of the
Acquired Companies; or (k) no transaction other than in the ordinary course of
business which can be reasonably expected to have a material adverse effect on
the Business.
3.7 TAX CONSOLIDATION. None of the Acquired Companies has ever been a
-----------------
member of an "affiliated group" of corporations (within the meaning of Section
1504 of the Code), other than the group of which Elekta Holding U.S., Inc. is
the common parent and, previously, the groups of which Cordis Corporation and
Johnson & Johnson were the common parents. Neither CIS nor any member of any
"affiliated group" of which Elekta Holdings U.S., Inc. is the common parent has
any outstanding waivers or extensions of any applicable statute of limitations
relating to the assessment of Taxes. An election under Treasury Reg. Section
1.1502-20(g) has not been
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made with respect to CIS by Elekta Holdings U.S., Inc. A basis reduction
pursuant to Treasury Reg. Section 1.1502-20(b) or Treasury Reg. Section
1.337(d)-2T(b) has not been required to be made with respect to CIS with respect
to any period during which CIS has been a member of the "affiliated group" of
which Elekta Holdings U.S., Inc. is the common parent. CIS does not have any
actual or potential liability for any Tax obligation of any other taxpayer
(including without limitation any affiliated group of corporations or other
entities that included CIS during a prior period).
3.8 TAX RETURNS. Each of the Companies has, as of the date hereof, and
-----------
will prior to Closing have, timely and accurately filed all Tax Returns required
to be filed by it prior to such dates and has timely paid, and will on the
Closing Date be current in the payment and remittance of all Taxes. None of the
Companies is, or will become, subject to any additional Taxes as a result of the
failure to file timely or accurately, as required by applicable law, any Tax
Return or to pay timely any amount shown to be due thereon. No written
assessments or notices of deficiency or other communications have been received
by any of the Companies with respect to any Tax Return which has not been paid
or discharged, and no amendments or applications for refund have been filed or
are planned with respect to any such Tax Return. There are no agreements between
any of the Companies and any taxing authority waiving or extending any statute
of limitations with respect to any Tax Return. Save in the ordinary course of
their businesses, none of the Companies has incurred with respect to any period
ending on or prior to the Closing Date any taxable income or liability for
taxes. True and correct copies of the income tax returns for each of the
Acquired Companies for the past three years (or for such portion thereof as each
Acquired Company may have been in existence and may have been owned by Seller)
have heretofore been delivered by Seller to Buyer. None of the Acquired
Companies are parties to any tax sharing agreements. The provisions for Taxes
shown on the Closing Balance Sheet will be adequate to discharge all Taxes
incurred by the Acquired Companies with respect to all periods ending on or
before the Effective Date, including as if the taxable year of each of the
Acquired Companies ended on the Effective Date. Except as set forth in Exhibit
3.8 hereto, none of the Tax Returns of the Acquired Companies has been audited
by any taxing authority within the past three (3) years and no adjustments have
been made to any Tax Returns of the Acquired Companies by any taxing authority
pursuant to any such audit. CIS has not made or is not obligated to make any
payment which will be or may be characterized as an "excess parachute payment"
within the meaning of Section 280G(b)(1) of the Code. CIS has not flied a
consent pursuant to Section 341(f) of the Code nor has CIS agreed to have
Section 341(f)(2) of the Code apply to any disposition of a subsection (f) asset
(as such term is defined in Section 341(f)(4) of the Code). CIS is not and has
not been a United States real property holding corporation within the meaning of
Section 897(c)(2) of the Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code.
3.9 CONTRACTS, ETC.
---------------
(a) Exhibit 3.9 and Exhibit 3.9(c) hereto (together with the
agreements described in Section 3.10(a) below) consists of a true and complete
list of all material contracts, agreements and other instruments entered into in
respect of the Business); and contemporaneously with or prior to the execution
of this Agreement, Seller has provided Buyer access to a true and complete copy
of each such contract, agreement or instrument which is in writing.
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(b) All of the contracts, agreements, policies of insurance or
instruments described on the Schedule of Assets or in Exhibit 3.9 hereto and the
agreements described in Section 3.10(a) below are, except as disclosed on the
Schedule of Assets or Exhibit 3.9 hereto, valid and binding upon the Companies
and the other parties thereto and are in full force and effect and enforceable
in accordance with their terms, and, except as disclosed in Exhibit 3.9, none of
the Companies nor, to the knowledge of the Companies, any other party to any
such contract, commitment or arrangement has breached any material provision of,
the terms thereof. Except as disclosed in Exhibit 3.9, none of the Companies has
received any payment from any contracting party in connection with or as an
inducement for entering into any contract, agreement, policy or instrument
except for payment for actual services rendered or to be rendered by the
Companies consistent with amounts historically charged for such services.
(c) Exhibit 3.9(c) is a true and complete list of certain contracts
between Seller and/or the Acquired Companies and certain management employees of
the Business pursuant to which such management employees will be paid incentive
compensation upon the sale of the Business and pursuant to which one management
employee is promised certain compensation in the event his employment is
terminated under certain circumstances. Except as indicated on Exhibit 3.9(c),
Buyer shall not be required to assume any obligations of the Seller under the
contracts or arrangements listed on Exhibit 3.9(c).
3.10 INTELLECTUAL PROPERTY.
---------------------
(a) The Schedule of Assets sets forth a complete and correct list and
summary description of all Company Intellectual Property, together with a
complete list of all material agreements relating thereto, including without
limitation all licenses granted by or to the Companies with respect to any
Company Intellectual Property. Except as disclosed on the Schedule of Assets,
all such Company Intellectual Property is beneficially owned and owned of record
by the Companies, free and clear of all liens, claims, security interests and
encumbrances of any nature whatsoever and constitute all of such items necessary
for the lawful conduct of the Business as now conducted.
(b) (i) Each Company has, or will have upon Closing, such rights to
use, protect, prosecute, sell, transfer, license, dispose of or bring actions
for the infringement of its rights in and to, and to exclude others from using
the Company Intellectual Property as are established by, the applicable laws of
each relevant jurisdiction (and to the extent provided in each agreement under
which each Company is licensee) to the sole and exclusive owner of an item of
Intellectual Property of such kind; (ii) except as disclosed on the Schedule of
Assets, each Company is the sole beneficial and record owner of its intellectual
property and the Company Intellectual Property which is registered or the
subject of an application for registration (collectively, the "Company
Registered Intellectual Property") has been duly maintained in all material
respects in accordance with the legal and administrative requirements of the
appropriate jurisdictions, and has (except for patents which may have expired on
their normal expiration dates) not lapsed, expired, been canceled or been
abandoned; (iii) no registration or application for registration of any material
item of Company Registered Intellectual Property is the subject of any pending
opposition, interference, cancellation or other legal or governmental proceeding
filed before any governmental authority in any competent jurisdiction.
(c) Except as disclosed on Exhibit 3.10, none of the Companies is
currently in receipt of any written notice of any violation of, and, to the
knowledge of the Companies,
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none of Companies (and none of their employees or agents) is infringing,
misappropriating, misusing or violating, the rights of others in any
Intellectual Property. To Seller's knowledge the business of Spembly, SCL and
EIL is not subject to any claim to pay compensation pursuant to Sections 40 and
41 of the Patents Act 1977, and, to the Seller's knowledge, there are not any
facts likely to give rise to such a claim.
3.11 MISAPPROPRIATION OF INTELLECTUAL PROPERTY. There has been, to the
-----------------------------------------
knowledge of the Companies, no infringement, unauthorized use or disclosure or
misappropriation by any third party of any Company Intellectual Property that
could reasonably be expected to have a material adverse effect on the Business.
3.12 LABOR MATTERS.
-------------
3.12.1 Within the last three (3) years none of the Companies has been the
subject of any labor dispute, nor has there been any strike of any kind called
or threatened to be called against either of them. To the knowledge of the
Companies, none of the Companies has committed a violation of any applicable law
or regulation relating to labor or labor practices which would have a material
adverse effect on the Business.
3.12.2 Except as specified on Exhibit 3.12, there are no agreements or
arrangements including recognition agreements between any of the Companies and
any trade union or other body representing employees.
3.12.3 To Seller's knowledge, no executive of the Business has given or
received notice terminating his employment and no such executive or officer will
be entitled to give such notice as a result of this Agreement.
3.12.4 To Seller's knowledge, there are no current investigations by any
governmental or regulatory body in relation to any employment practice in the
Business.
3.13 EMPLOYEE BENEFIT PLANS.
----------------------
3.13.1 All Employee Benefit Plans have been maintained in substantial
compliance with the requirements of all applicable laws and regulations and in
the case of The Surgical Technology Group Pension and Life Assurance Scheme
("Pension Scheme") the rules of that Scheme.
3.13.2 None of the Companies maintains, contributes to, or is obligated to
contribute to any "multiemployer plan," as defined in Section 3(37) of Employee
Retirement Income Security Act of 1974 (as amended).
3.13.3 Attached hereto as Exhibit 3.13.3 is a complete list of all
Employee Benefits Plans currently maintained by the Acquired Companies.
3.13.4 No action, investigation or audit (other than routine claims for
benefits) is pending or threatened against any Employee Benefit Plan of any of
the Acquired Companies.
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3.13.5 The Balance Sheet reflects an accrual for any unpaid liabilities
relating to Employee Benefit Plans which are required to be accrued by
International Accounting Standards.
3.13.6 Except pursuant to the contracts listed on Exhibit 3.9(c), no
amounts will be paid, or benefits or vesting of benefits accelerated under, any
Employee Benefit Plan of any Acquired Company as a result of the transactions
provided for in this Agreement.
3.13.7 The Assumed Liabilities do not include any Employee Benefit Plans
of EII, EIAL, EGBH or the Seller.
3.13.8 Attached hereto as Exhibit 3.13.8 is a current list of all
employees of the Business and their current compensation.
3.13.9 No power under the Pension Scheme to augment benefits or to
provide benefits which would not otherwise have been provided has been exercised
since the date of its last actuarial valuation.
3.13.10 Only employees of Spembly, SCL and EIL have participated in the
Pension Scheme.
3.13.11 All lump sum death in service benefits (other than a refund of the
member's contributions with interest where appropriate) payable under the
Pension Scheme on death before normal pension age of a member while in an
employment to which the Pension Scheme relates are insured fully under a policy
with an insurance company of good repute.
3.13.12 All contributions to the Pension Scheme have at all times been
made in accordance with the provisions of the Pension Scheme and the
recommendations of the actuary to the Pension Scheme.
3.13.13 Save as set out in Exhibit 3.13.13, there has been no increase or
decrease in the rate of any contribution to the Pension Scheme by Spembly, SCL
or EIL by any member at any time in the three years ending on the date of this
Agreement and no such increase or decrease is agreed, or, on the basis of
actuarial advice received in respect of the Pension Scheme, proposed or advised.
3.13.14 So far as the Seller is aware there is not in respect of the
Pension Scheme or the benefits thereunder any material actions, suits or claims
pending or threatened (other than routine claims for benefits).
3.13.15 No "surplus payment" within the meaning of the Pension Scheme
Surpluses (Administration) Regulations 1987 (S.I. 1987 No.352) has been made out
of the Pension Scheme.
3.14 CUSTOMERS AND SUPPLIERS. None of the Companies has received any
-----------------------
written notice that any customer or supplier of the Companies has taken any
steps which could disrupt the business relationship of the Companies with such
customer or supplier in a way that would result in a material adverse effect on
the Business.
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3.15 ENVIRONMENTAL, HEALTH AND SAFETY MATTERS. Except as set forth on
----------------------------------------
Exhibit 3.l5 hereto:
3.15.1 The Companies are and have at all times been in substantial
compliance with all applicable Environmental Laws in connection with the
leasing, ownership, operation and condition of the Real Property, Assets and the
Business. There are no past or pending violations or alleged violations by the
Companies of any Environmental Laws asserted by any governmental entity or third
party. Set forth on Exhibit 3.15 are all permits, licenses, and approvals
necessary to conduct the Business in compliance with Environmental Laws.
3.15.2 There is no past or ongoing Release of Hazardous Materials
into the environment on, from or within any real property owned, leased, or
utilized by the Business. Any Release of Hazardous Materials into the
environment set forth on Exhibit 3.15 has not caused or aggravated any condition
or damage which would necessitate response, removal, or other remedial action
after the date of this Agreement with respect to any property, regardless of
whether the property is owned, leased or otherwise utilized by the Companies.
Set forth on Exhibit 3.15 are all environmental assessments, reports, or
investigations, whether commissioned by the Companies with respect to any
property currently or previously owned, leased, or utilized by the Business.
3.15.3 No employee, invitee, trespasser, or member of the public at
large has had his or her health impaired or threatened as the result of the
operation of the Business or as the result of the release of Hazardous Materials
related to the operation of the Business.
3.15.4 There are no Hazardous Materials located on, contained in, or
otherwise part of any property utilized by the Business. The Business has not
arranged for the transportation, storage, or disposal of any Hazardous Materials
at any property or site not owned or controlled by the Business that has or is
reasonably likely to give rise to any liability under any Environmental Law to
the Companies.
3.15.5 There are no landfills, lagoons, impoundments, waste piles,
drum storage areas, or underground storage tanks on any property previously or
currently owned, leased, or utilized by the Business.
3.16 INSURANCE. Seller has obtained insurance for the risks of the Business
---------
in amounts and at rates details of which have been provided to Buyer. Since
January 1, 1998, there has not been any material adverse change in the
Companies' relationship with its insurers or in premiums payable. Attached
hereto as Exhibit 3.16 is a list of pending insurance claims relating to the
Business and a history of insurance claims relating to the Business for the five
(5) years preceding the date of this Agreement (or with respect to parts of the
Business owned by Seller for less than five (5) years, for the period of time
owned by Seller).
3.17 RELATED PARTY RELATIONSHIPS. No officer or director of the Companies
---------------------------
possesses, directly or indirectly, any beneficial interest in, or is a director,
officer or employee of, any corporation, partnership, firm, association or
business organization which is a client, supplier, customer, lessor, lessee,
lender, creditor, borrower, debtor or contracting party with or of the Companies
(except as a stockholder holding less than a one percent interest in a
corporation whose shares are traded on a national or regional securities
exchange or in the over-the-counter market).
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3.18 OWNERSHIP OF TANGIBLE ASSETS AND LEASES.
---------------------------------------
3.18.1 With respect to Assets other than intellectual property,
Real Property and Improvements:
3.18.1.1 Except as disclosed on Exhibit 3.18.1.2 (with
respect to leased Assets), the Companies have good title to all of the Assets
subject to no mortgage, pledge, lien, security interest, conditional sale
agreement, encumbrance, charge or adverse claim whatsoever, except for statutory
landlord's liens with respect to rent not yet due and payable and lien for
current year's property tax not yet due and payable.
3.18.1.2 Exhibit 3.18.1.2, describes each of the
material Assets which has a value in excess of USD 100,000 which are held under
any lease, or as conditional vendee under any conditional sale or other title
retention agreement.
3.18.1.3 Each of the leases and agreements described in
Exhibit 3.18.1.2 is in full force and effect and constitutes a legal, valid and
binding obligation of each of the Companies and the other respective parties
thereto and is enforceable in accordance with its terms, and there is not under
any of such leases or agreements existing any material default of any of the
Companies or, to the knowledge of the Companies, of any other parties thereto
(or event or condition which, with notice or lapse of time, or both, would
constitute a material default). None of the Companies has received any payment
from lessor in connection with or as inducement for entering into any such lease
except as set forth on Exhibit 3.18.1.2. Any security deposits made under the
leases listed in Exhibit 3.18.1.2 is set forth in such exhibit.
3.18.1.4 None of the Assets are leased by any of the
Companies to any other person or entity.
3.18.1.5 The Assets include all material assets which
are necessary to conduct the Business as presently conducted, except for certain
items of shared equipment not currently devoted exclusively to the Business,
which consist of office equipment and computer hardware and software necessary
for financial reporting and consolidation.
3.18.1.6 To the knowledge of the Companies, all material
items of machinery and equipment used in the Business is usable and operable in
good working order and is in a reasonable state of repair, subject only to
ordinary wear and tear, and has been subject to regular maintenance.
3.18.1.7 Except pursuant to this Agreement and the
License and Technology Agreement among EII, Kevin Maughan, Ferenc Schmidt and
Florida Hospital Supply, Inc. dated May 10, 1994, none of the Companies is a
party to any contract or obligation whereby there has been granted to anyone an
absolute or contingent right to purchase, obtain or acquire any rights in any of
the Assets.
3.18.2 With respect to the Real Property and Improvements:
3.18.2.1 The Biot Real Property is the only owned real
estate used in the Business.
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3.18.2.2 EISA owns good title to the Biot Real Property
and to all of the Improvements on the Biot Real Property, subject to no
mortgage, pledge, lien or any other encumbrance, except for: liens for property
taxes not yet due and payable, easements and other restrictions of record which
do not have a material adverse effect on the use of the Real Property in
connection with the Business, restrictions imposed by zoning or planning laws
which do not have a material adverse effect on the Business as presently
conducted, and an obligation to dispose of the undeveloped portion of the Biot
Real Property if certain additional building space is not constructed prior to
December 31, 2004.
3.18.2.3 The properties described in Exhibits 3.18.2.3A
and 3.18.2.3B constitute the only leased real estate used in the Business in
France, the United Kingdom and the United States. The leases described in
Exhibits 3.18.2.3A and 3.18.2.3B are in full force and effect and constitute
legal, valid and binding obligations of the Companies and the other respective
parties thereto and are enforceable in accordance with their terms, subject to
bankruptcy laws and general equitable principles. There is not existing under
any of such leases any material default of the Companies or, to the knowledge of
the Companies, of any other party thereto (or event or condition which, with
notice or lapse of time, or both, would constitute a default). None of the
Companies has received any payment from a lessor in connection with or as
inducement for entry into any such lease except as set forth on Exhibits
3.18.2.3A or 3.18.2.3B.
3.18.2.4 None of the property or part thereof shown on
Exhibits 3.18.2.1, 3.18.2.3A or 3.18.2.3B is leased by any of the Companies to
any other person or entity.
3.18.2.5 No taxes, assessments, water charges or sewer
charges relating to the Real Property or the Improvements are delinquent and
there are no special taxes, assessments or charges pending or, to the knowledge
of the Companies, threatened against the Real Property or the Improvements.
3.18.2.6 The Real Property and the Improvements are
usable and operable in the Business and the Improvements are in good working
order and in a reasonable state of repair, subject only to ordinary wear and
tear.
3.18.2.7 There are no pending or, to the knowledge of
the Companies, threatened or contemplated condemnation proceedings affecting the
Real Property or any part thereof.
3.18.2.8 None of EIL, SCL or Spembly is or has been in
occupation of or entitled to any estate or interest in land or premises save the
property at Andover referred to in Exhibit 3.18.2.3A
3.18.2.9 Save for the deposit of the title deeds of the
property at Andover referred to in Exhibit 3.18.2.3A such property and its title
deeds are free from any encumbrance or other third party right whether in the
nature of security or otherwise.
3.18.2.10 Spembly, in respect of the property at Andover
referred to in Exhibit 3.18.2.3A has, to the Seller's knowledge, performed and
observed all material covenants affecting such property requiring observance or
performance by it and, to Seller's knowledge, no notice of any breach of any
such material covenants has been received.
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3.19 BROKERS-SELLER. None of the Seller, the Companies or any of their
--------------
Affiliates have engaged any person which could have any valid claim against
Buyer for a finder's fee, brokerage commission or other similar payment nor
otherwise acted in such a manner as to give rise to any valid claim against
Buyer for a finder's fee, brokerage commission or other similar payment.
3.20 CAPITALIZATION OF THE ACQUIRED COMPANIES.
----------------------------------------
The current capitalization of each of the Acquired Companies and
the current shareholder(s) of each of the Acquired Companies is set forth in
Exhibit 3.20 hereto. All of the issued and outstanding shares of each Acquired
Company have been and on the Closing Date will be duly and validly issued and
are, or will be on such date, fully paid and non-assessable. All of the issued
and outstanding shares of each Acquired Company are owned by its shareholder(s)
listed on Exhibit 3.20 free and clear of all liens, claims, charges and
encumbrances of any nature whatsoever, and the authorization or consent of no
other person or entity is required in order to consummate the transactions
contemplated herein by virtue of any such person or entity having an equitable
or beneficial interest in such Acquired Company or the capital stock of such
Acquired Company. There are not, and on the Closing Date there will not be,
outstanding any options, warrants, or other rights to purchase from any Acquired
Company any capital stock of such Acquired Company; any securities or
obligations which are convertible into or exchangeable for any shares of capital
stock of such Acquired Company; or any other commitments of any kind by any
Acquired Company to issue any additional shares of its capital stock to pay any
dividends on such shares or to purchase, redeem, or retire any outstanding
shares of its capital stock. The number of issued and outstanding shares of each
Acquired Company held in the treasury of such Acquired Company is set forth in
Exhibit 3.20 hereto.
3.21 COMPANIES. Exhibit 3.20 attached hereto sets forth (i) the
---------
jurisdiction of incorporation, capitalization and ownership of each Acquired
Company; (ii) the names of the officers and directors of each Acquired Company;
(iii) the jurisdictions in which each Acquired Company is qualified or holds
licenses to do business as a foreign corporation; and (iv) the name and
percentage ownership by each Acquired Company of each corporation, partnership,
joint venture or other entity in which such Company has, directly or indirectly,
an equity interest representing 50% or more of the capital stock thereof or
other equity interests therein.
3.22 DESCRIPTIVE MEMORANDUM. To the knowledge of Seller, the
----------------------
Descriptive Memorandum does not contain any untrue statement of a material fact
and does not omit to state a material fact necessary to make the statements
contained therein, in light of the circumstances under which they are made, not
misleading. Provided, however, Buyer and Seller hereby acknowledge that the
-------- -------
financial projections contained in the Descriptive Memorandum are no longer
current.
3.23 LITIGATION. Except as otherwise set forth in Exhibits 3.23 or
----------
3.10 hereto, there is no suit, action, proceeding, claim or investigation
pending or, to the knowledge of Seller, threatened against any of the Acquired
Companies or against any of the other Companies relating to the Business,
including without limitation claims for breach of product warranties. Within the
five (5) years preceding the date of this Agreement, there have been no product
liability claims asserted in writing against any of the Companies with respect
to any of the Products, except as disclosed on Exhibit 3.23 hereto.
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3.24 EXPORT. Neither the Seller nor any of the other Companies has
------
sold (directly or indirectly) any Products that were manufactured in the United
States in or to any of the following countries (or to any party known by Seller
to be acting on behalf of any of the following countries): Cuba, Libya, Iran,
Iraq, North Korea, Sudan or Syria.
3.25 PRODUCT WARRANTY AND PRODUCT LIABILITY CLAIMS. No Product sold or
---------------------------------------------
delivered by any Company is subject to any warranty, guaranty, right of return
or other indemnity other than the relevant Company's applicable standard terms
and conditions of sale, which are consistent with customary industry practice.
Seller has maintained product liability insurance coverage in amounts of not
less than SEK 500,000,000 per occurrence and SEK 500,000,000 in the aggregate
with respect to products sold by the Companies. Such product liability insurance
is on a claims made basis.
4. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and warrants to
---------------------------------------
Seller as follows.
4.1 BUYER'S ORGANIZATION, POWER, EXECUTION. Buyer is a corporation
--------------------------------------
duly organized validly existing and in good standing under the laws of Delaware,
and has all requisite corporate power and authority to carry out the
transactions contemplated by this Agreement. 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 Buyer, and this
Agreement has been duly executed and delivered by Buyer and constitutes a valid
and legally binding obligation of Buyer enforceable in accordance with its
terms, subject to bankruptcy laws and general equitable principles.
4.2 BROKERS-BUYER. Buyer has not engaged any person which could have
-------------
any valid claim against Seller for a finders fee, brokerage commission or other
similar payment.
4.3 NO VIOLATION. Assuming receipt of the approvals referred to in
------------
Section 2.5(a), the execution and delivery of Buyer of this Agreement does not,
and the performance by Buyer of its obligations hereunder and the consummation
by Buyer of the transactions contemplated hereby will not (i) violate any law or
regulation, governmental or court order, judgement or decree applicable to
Buyer, or (ii) result in any breach of any contract, agreements, license or
permit to which Buyer is a party or by which Buyer is bound.
4.4 APPROVALS AND CONSENTS. Except for the approvals referred to in
----------------------
Section 2.5(a), no consent, approval, authorization or order of, action by
filing with or notification to any governmental, regulatory or administrative
authority is required for the execution and delivery of this Agreement by Buyer
and for the consummation by Buyer of the transactions contemplated hereby.
5. COVENANTS OF SELLER. Seller covenants and agrees as follows.
-------------------
5.1 CONDUCT OF THE BUSINESS. From the date hereof to the Closing
-----------------------
Date, except as otherwise permitted by this Agreement or unless the prior
written consent of Buyer is obtained (such consent not to be unreasonably
withheld or delayed), Seller shall cause the Companies to: (a) carry on the
Business in the usual, regular and ordinary course in substantially the same
manner as heretofore and use commercially reasonable efforts to preserve intact
the present business organization, keep available the services of present
employees, and preserve
20
<PAGE>
relationships with customers, suppliers and others having dealings with the
Business, (b)refrain from making or instituting any unusual or new methods of
manufacture, purchase, sale, shipment or delivery, lease, management, accounting
or operation, or shipping or delivering any quantity of Products in excess of
normal shipment or delivery levels, except as agreed to in writing by the Buyer,
(c) except with respect to EGBH, make no sales or other dispositions of assets
other than sales in the ordinary course of business, (d) perform each obligation
(for which there is no reason to contest) under agreements affecting the Assets
or Business, (e) maintain the books of account and records concerning the
Business in a regular manner consistent with past practices, (f) maintain the
physical assets of the Companies in substantially the same working order and
condition as such physical assets are in as of the date of this Agreement,
reasonable wear and tear excepted; and (g) continue in effect all insurance of
the Business including without limitation the product liability insurance
referred to in Section 3.25. All of the property of the Companies shall be used,
operated, repaired and maintained in a normal business manner consistent with
past practice.
5.2 CERTAIN CHANGES. Between the date hereof and the Closing Date,
---------------
except as otherwise specifically permitted by this Agreement or unless the prior
written consent of Buyer is obtained (such consent not to be unreasonably
withheld or delayed), Seller shall not permit (a) the mortgage, pledge or
subjection to any lien, lease, security interest or other charge or encumbrance
of any of the Assets except for landlord's liens with respect to rent not yet
due and payable and liens for property taxes not yet due and payable and other
inchoate liens incurred in the ordinary course of business which do not have a
material adverse effect on the Business, (b) the sale, assignment, transfer,
abandonment or other disposition of any of the Assets, or any interest therein,
otherwise than sales in the ordinary course of business, (c) the merger or
consolidation of any of the Companies with any corporation, partnership,
association or other business organization or division thereof, unless such
transaction specifically excludes the Assets and provides for their sale as
contemplated by this Agreement; (d) the modification, amendment, alteration or
termination of any of the contracts described on Exhibit 3.9; (e) the
declaration or payment of any dividends or other distributions to a shareholder
by any of the Acquired Companies or the purchase or redemption of any shares of
its capital stock; or (f) any of the Acquired Companies to (i) take any action
to amend its charter or bylaws or other governing documents; (ii) issue any
stock, bonds or other corporate securities or grant any option or issue any
warrant to purchase or subscribe to any of such securities or issue any
securities convertible into such securities; (iii) incur any obligation or
liability (absolute or contingent), except current liabilities incurred and
obligations under contracts entered into in the ordinary course of business;
(iv) cancel any debts or claims, except in the ordinary course of business; (v)
make, accrue or become liable for any bonus, profit sharing or incentive
payment, except for accruals under existing plans, if any, or increase the rate
of compensation payable or to become payable by it to any of its officers,
directors or employees, other than increases in the ordinary course of business
consistent with past practice; (vi) make any election or give any consent under
the Code or the tax statutes of any state or other jurisdiction or make any
termination, revocation or cancellation of any such election or any consent or
compromise or settle any claim for past or present tax due; (vii) waive any
rights of material value; (viii) make or permit any act or omission constituting
a breach or default under any contract, indenture or agreement by which it or
its properties are bound; (ix) enter into any leases, contracts, agreements or
understandings other than those entered into in the ordinary course of business
calling for payments which in the aggregate do not exceed $100,000 for each such
lease, contract, agreement or understanding; (x) engage any employee for a
salary in excess of $575,000 per annum; (xi) materially alter the terms, status
or
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funding condition of any Employee Benefit Plan; or (xii) commit or agree to do
any of the foregoing in the future.
5.3 EMPLOYEES. Seller agrees to encourage the employees of the
---------
Business to continue their employment with Buyer or its Affiliates after
Closing. Buyer shall offer (or cause one of its Affiliates to offer) to hire all
employees of the Business who are employed by EII, EGBH or EIAL on the Closing
Date for substantially the same salary and benefits which they presently have.
EII will take all actions necessary to provide any employee of the Business
employed by EII (or dependents of such employee) with any health care
continuation coverage mandated by Section 4980B of the Code or Part 6 of Title I
of the Employee Retirement Income Security Act of 1974 (as amended) as a result
of any qualifying event experienced on or before the Closing Date, including
delivery of any notices required by such provisions.
5.4 EXCLUSIVITY. Prior to the Closing Date or the date on which this
-----------
Agreement is terminated pursuant to Section 11, neither the Seller nor any of
its shareholders, officers, directors, representatives, agents or affiliates
shall (i) directly, or indirectly through any other party, engage in any
discussions or negotiations with, or provide any information to, any other
person, firm or corporation with respect to an acquisition transaction involving
the Business, or (ii) directly, or indirectly through any other party, solicit
any proposal or offer relating to the acquisition of, or other major transaction
involving the Business.
5.5 LIMITATIONS ON EMPLOYEE SOLICITATION AND COMPETITION. During the
----------------------------------------------------
period of two (2) years following the Closing Date, Seller and its Affiliates
shall not:
(a) Offer employment to or employ any individual (other than Mats
Ekstrom and Maryse Kergueno) who is/was an employee of the Business at the time
of the offer/employment or at any time within six (6) months prior to the
offer/employment;
(b) Manufacture, market or sell any product which has the same or
substantially the same form, function or primary applications as any of the
Products (as defined in this Agreement) which are manufactured, marketed or sold
by the Buyer. Provided, however, this Section 5.5(b) shall not prohibit Seller
-------- -------
or its Affiliates from marketing or selling any surgical instruments or medical
devices in conjunction with the Leksell Microstereotactic System, the Leksell
Gamma Knife or image guided surgery systems.
The parties hereto agree that the duration and geographic scope of the non-
competition provision set forth in this Subsection 5.5 are reasonable. In the
event that any court determines that the duration or the geographic scope, or
both, are unreasonable and that such provision is to that extent unenforceable,
the parties hereto agree that the provision shall remain in full force and
effect for the greatest time period and in the greater area that would not
render it unenforceable. The parties intend that this non-competition provision
shall be deemed to be a series of separate covenants, one for each and every
county of each and every state of the United States of America and each and
every political subdivision of each and every country outside the United States
of America where this provision is intended to be effective. The Seller agrees
that damages are an inadequate remedy for any breach of this provision and that
the Buyer shall, whether or not it is pursuing any potential remedies at law, be
entitled to equitable relief in the form of preliminary and permanent
injunctions without bond or other security upon any actual or threatened breach
of this non-competition provision.
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5.6 INTERCOMPANY DEBT. Prior to the Closing Date, Seller will,
-----------------
effective as of the Effective Date, cause the cancellation of all debt and
intercompany accounts owed by any of the Companies, on the one hand, to Seller
or any of its Affiliates (other than the Companies), on the other hand, and the
cancellation of all debt and intercompany accounts owed by Seller or any of its
Affiliates (other than the Companies), on the one hand, to any of the Companies,
on the other hand.
5.7 PATENT ASSIGNMENTS. Prior to the Closing Date, to the extent not
------------------
heretofore accomplished, Seller will cause all assignment documents transferring
record ownership of all patents and trademarks listed in the Schedule of Assets
as being beneficially owned by the Companies to be executed and filed in
relevant governmental offices. Provided, however, the covenant set forth in the
-----------------
preceding sentence shall not include patents numbered 24 to 32 inclusive in the
list entitled "Title to Be Assigned - Patents and Patents Applications", with
respect to which Seller shall use its best commercial efforts to fulfill the
covenant set forth in the preceding sentence.
5.8 EMPLOYEE NOTIFICATION. Prior to the Closing Date, Seller shall
---------------------
cause the Companies to (i) complete all consultations required to be made with
their respective worker's committees or works councils regarding the
transactions contemplated hereby and (ii) provide all notices required to be
given to employees regarding the transactions contemplated hereby.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER.
--------------------------------------------
All of the obligations of Buyer to consummate the transactions contemplated
by this Agreement shall be contingent upon and subject to the satisfaction, on
or before the Closing Date, of each and every one of the following conditions,
all or any of which may be waived, in whole or in part, by Buyer for purposes of
consummating such transactions, but without prejudice to any other right or
remedy which Buyer may have hereunder as a result of any misrepresentation by,
or breach of any covenant or warranty of, Seller or the Companies contained in
this Agreement or any other certificate or instrument furnished by Seller or the
Companies hereunder.
6.1 REPRESENTATIONS TRUE AT CLOSING. The representations and
-------------------------------
warranties made by Seller to Buyer in Section 3 of this Agreement shall be true
and correct in all material respects on the Closing Date with the same force and
effect as though such representations and warranties had been made on and as of
such time, except for changes contemplated by this Agreement.
6.2 COVENANTS OF SELLER. Seller shall have performed in all material
-------------------
respects all of the covenants, acts and undertakings to be performed by it on or
prior to the Closing Date, and a duly authorized officer of Seller shall deliver
to Buyer a certificate dated as of the Closing Date certifying to the
fulfillment of this condition and the condition set forth in Section 6.1 hereof.
6.3 NO INJUNCTION, ETC. No action, proceeding, investigation,
------------------
regulation or legislation shall have been instituted or threatened before any
court, governmental agency or legislative body to enjoin, restrain, or prohibit
the consummation of the transactions contemplated hereby, if such action,
proceeding, investigation, regulation or legislation makes it impracticable to
consummate such transactions.
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6.4 CONSENTS, APPROVALS, AND WAIVERS. Buyer shall have received a
--------------------------------
true and correct copy of each and every consent, approval and waiver (a)
referred to in Section 2.5(a) hereof, and (b) required for the assignment of
Critical Contracts.
6.5 ABSENCE OF ADVERSE CHANGES. Since the date of the Balance Sheet,
--------------------------
there shall have been no material adverse change in the assets, liabilities,
results of operations or financial condition of the Business.
6.6 OPINIONS OF SELLER'S COUNSEL. Buyer shall have received the legal
----------------------------
opinions described on Exhibit 6.6 hereto.
7. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLER TO CLOSE.
--------------------------------------------------------------
All of the obligations of Seller to consummate the transactions
contemplated by this Agreement shall be contingent upon and subject to the
satisfaction, on or before the Closing Date, of each and every one of the
following conditions, all or any of which may be waived, in whole or in part, by
Seller for purposes of consummating such transactions, but without prejudice to
any other right or remedy which it may have hereunder as a result of any
misrepresentation by, or breach of any covenant or warranty of Buyer contained
in this Agreement, or any certificate or instrument furnished by it hereunder.
7.1 REPRESENTATIONS TRUE AT CLOSING. The representations and
-------------------------------
warranties made by Buyer to the Seller in Section 4 of this Agreement shall be
true and correct in all material respects on the Closing Date with the same
force and effect as though such representations and warranties had been made on
and as of such date, except for changes contemplated by this Agreement.
7.2 COVENANTS OF BUYER. Buyer shall have performed in all material
------------------
respects all of the covenants, acts and undertakings to be performed by it on or
prior to the Closing Date, and a duly authorized officer of Buyer shall deliver
a certificate dated as of the Closing Date certifying to the fulfillment of this
condition and the condition set forth under Section 7.1 above.
7.3 NO INJUNCTION, ETC. No action, proceeding, investigation,
------------------
regulation or legislation shall have been instituted or threatened before any
court, governmental agency or legislative body to enjoin, restrain, prohibit the
consummation of the transactions contemplated hereby, if such action,
proceedings, investigation, regulation or legislation makes its impracticable to
consummate such transactions.
7.4 CONSENTS, APPROVALS AND WAIVERS. Seller shall have received a
-------------------------------
true and correct copy of each and every consent, approval and waiver referred to
in Section 2.5(a) hereof.
7.5 OPINIONS OF BUYER'S COUNSEL. Seller shall have received the legal
---------------------------
opinions described on Exhibit 7.5 hereto.
8. PUBLICITY. Except as may be required by law or legal authorities or
---------
applicable rules of a stock exchange, neither Seller nor Buyer shall release,
generate or permit any publicity concerning the transactions contemplated hereby
without the express consent of the other, which consent shall not be
unreasonably withheld or delayed. The term "publicity" shall not include
internal communications by a party directed solely to its employees.
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<PAGE>
9. INFORMATION.
-----------
9.1 RIGHT TO INVESTIGATE. Before and after the Closing, Seller shall
--------------------
afford to the authorized representatives of Buyer, including its independent
accountants and attorneys, reasonable access to the offices, plants, properties,
books and records, management and outside consultants of Seller and the
Companies in order that Buyer may have the opportunity to make such
investigations as it shall desire of the Assets and the Business, and Seller
shall furnish Buyer with such financial and operating data and other information
as to the Assets and the Business as Buyer shall from time to time reasonably
request.
9.2 CONFIDENTIALITY. Prior to the Closing, Buyer and its
---------------
representatives shall hold confidential all information obtained from Seller,
the Companies or Seller's other Affiliates in connection herewith and, if the
Closing shall be abandoned as provided herein, shall treat such information as
confidential and, where such information is in documentary form, return such
information to Seller, provided, Buyer may retain one copy of such information
for its files. The provisions of this Section 9.2 shall not apply to information
which is in the public domain due to no fault of Seller or its representatives.
10. COOPERATION. The parties recognize that in order for control of the
-----------
Business to pass from Seller to Buyer in an orderly manner on the Closing Date
it will be necessary for the parties to cooperate before and after the Closing
on matters relating to the recruiting of Seller's personnel by Buyer,
integration of sales force activity, identification of the Assets, ordering of
inventory, and preservation of relationships with customers, suppliers and
distributors. The parties shall render such cooperation to one another with
respect to such matters and with respect to such other matters concerning the
transition of control of the Business as reason and commercial prudence dictate
should be addressed before and after the Closing.
11. TERMINATION.
-----------
11.1 BOTH PARTIES. This Agreement may be terminated at any time prior
------------
to the Closing: (a) by the mutual consent of Seller and Buyer; (b) by Seller or
Buyer if there shall be any action or proceeding (other than an action or
proceeding commenced or induced by a party hereto or by a party claiming a
successor interest to a party hereto seeking to terminate or restrain
performance under this Agreement) instituted by any governmental authority which
shall seek to restrain, assess liability in respect of, or prohibit or
invalidate the transactions contemplated by this Agreement and which, in the
judgment of such party, made in good faith and based upon the advice of its
counsel, makes it inadvisable to proceed with the Closing; or (c) by Seller or
Buyer if, through no fault of the terminating party, the Closing shall not have
occurred by August 31, 1998.
11.2 BUYER. This Agreement may be terminated by Buyer: (a) at any time
-----
prior to the Closing, if Seller shall have failed to comply in any material
respect with any of its covenants or agreements contained in this Agreement and
such failure shall not have been rectified during the period of twenty-eight
(28) days after written notification thereof to Seller, (b) at any time prior to
the Closing, if there shall be any action or proceeding (other than an action or
proceeding commenced or induced by a party hereto or by a party claiming a
successor interest to a party hereto seeking to terminate or restrain
performance under this Agreement) instituted by or before any court or other
governmental body which could reasonably be expected to materially affect
25
<PAGE>
the right of Buyer to own, operate or control the Business or the Assets
subsequent to the Closing and which makes it impractical to proceed with the
Closing; or (c) if any of the conditions precedent to the performance of its
obligations at the Closing shall not have been fulfilled by August 31, 1998.
11.3 SELLER. This Agreement may be terminated by Seller: (a) as
------
provided for in subsection 2.2(b)(i); (b)at any time prior to the Closing, if
Buyer shall have failed to comply in any material respect with any of its
covenants or agreements contained in this Agreement and such failure shall not
have been rectified during the period of twenty-eight (28) days after written
notification thereof to Buyer; or (c) if any of the conditions precedent to the
performance of its obligations at the Closing shall not have been fulfilled by
August 31, 1998.
12. CLOSING.
-------
12.1 TIME AND PLACE OF CLOSING. The Closing shall be held at the
-------------------------
offices of Jones, Day, Reavis & Pogue, London, England, commencing at 10:00 a.m.
local time, on the Closing Date, unless another place or date is agreed to in
writing by the parties, but in no event will the Closing be held later than
August 31, 1998.
12.2 TRANSACTIONS AT CLOSING. At the Closing, each of the following
-----------------------
transactions shall occur:
12.2.1 THE COMPANIES' AND THE SELLER'S PERFORMANCE. At the
-------------------------------------------
Closing, Seller shall deliver (and/or cause its Affiliates to deliver) to Buyer
the following:
(a) the instruments of transfer, endorsed stock
certificates (or indemnities in an agreed form in respect of any missing stock
certificates) and assumption described in Section 2.4 and the Assignment and
Assumption Agreement executed by the Companies and the Seller;
(b) the certificate of the authorized officer of Seller
described in Section 6.2;
(c) copies of the consents and waivers described in
Section 2.5(b) and the consents referred to in the last sentence of Section
2.5(c);
(d) satisfactory evidences of the approvals described in
Section 2.5(a);
(e) letters of resignation from each of the directors
(except for the Managing Director of EIL) and statutory auditors (if any) of the
Acquired Companies, dated as of the Closing Date;
(f) such other evidence of the performance of all
covenants and satisfaction of all conditions required of the Companies and the
Seller by this Agreement, at or prior to the Closing, as Buyer or its counsel
may reasonably require;
26
<PAGE>
(g) a copy of the resolutions of the directors of the
Seller authorizing and approving the Agreement and all other transactions and
agreements contemplated hereby;
(h) resolutions of the directors and stockholders (if
necessary) of the Acquired Companies to the extent required authorizing the
transfer of the stock of all of the Acquired Companies, subject to the related
stock transfer forms being duly stamped and accepting the resignations referred
to in Section 12.2.1(e) above;
(i) resolutions of the directors and stockholders of EII,
EGBH and EIAL authorizing the transfer of Assets held by each of them;
(j) the U.K. Tax Covenant duly executed for and on behalf
of Seller;
(k) corporate record books of each Acquired Company
(except to the extent prohibited by law);
(l) the assignment of accounts receivable referred to in
subsection 15.4(d)(ii)(D).
(m) such other certificates, instruments and other
documents reasonably requested by Buyer to effect the transactions contemplated
hereby, all of which shall be reasonably satisfactory in form and substance to
Buyer.
12.2.2 PERFORMANCE BY BUYER. At the Closing, Buyer shall deliver
--------------------
to Seller the following:
(a) evidence of the wire transfers of the Purchase Price
(or the Provisional Purchase Price in the event subsection 2.2(d) applies);
(b) the instruments of transfer and assumption described
in Section 2.4 and the Assignment and Assumption Agreement executed by the
Buyer;
(c) the certificate of the authorized officer of Buyer
described in Section 7.2;
(d) satisfactory evidence of the approvals described in
Section 2.5(a);
(e) such other evidence of the performance of all the
covenants and satisfaction of all of the conditions required of Buyer by this
Agreement at or before the Closing as the Companies and the Seller or their
counsel may reasonably require;
(f) a copy of the resolutions of the directors of the
Buyer authorizing and approving the Agreement and all other transactions and
agreements contemplated hereby; and
27
<PAGE>
(g) the U.K. Tax Covenant duly executed for and on behalf
of Buyer.
13. SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND COVENANTS.
--------------------------------------------------------
13.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND COVENANTS OF
-----------------------------------------------------------
SELLER. All representations and warranties and covenants made by Seller in this
- ------
Agreement or in any document or instrument executed and delivered pursuant
hereto shall survive the Closing.
13.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND COVENANTS OF BUYER.
-----------------------------------------------------------------
All representations and warranties and covenants made by Buyer in this Agreement
or in any document or instrument executed and delivered pursuant hereto shall
survive the Closing.
14. INDEMNIFICATION.
---------------
14.1 INDEMNIFICATION BY SELLER. The Seller shall indemnify and hold
-------------------------
Buyer harmless from and against all direct damages and liabilities including
reasonable attorneys' fees (excluding lost profits and other consequential
damages) suffered or incurred by Buyer (and calculated on an after-tax basis)
arising from the falsity of any representation or warranty of Seller or breach
of any covenant contained in this Agreement by Seller or from any Excluded
Environmental Liabilities.
14.2 INDEMNIFICATION BY BUYER. Buyer shall indemnify and hold the
------------------------
Seller harmless from and against all direct damages and liabilities including
reasonable attorneys' fees (excluding lost profits and other consequential
damages) suffered or incurred by the Seller (and calculated on an after-tax
basis) arising from (j) the falsity of any representation or warranty of the
Buyer or the breach of any covenant contained in this Agreement by Buyer; and
(ii) the Assumed Liabilities except those relating to a breach of a
representation and warranty by Seller.
14.3 LIMITATIONS ON INDEMNIFICATION FOR BREACH OF REPRESENTATIONS AND
----------------------------------------------------------------
WARRANTIES. Any claim for indemnification for breach of a representation,
- ----------
warranty or covenant under Sections 14.1 or 14.2(i) must be made by giving
written notice of such claim to the person from whom indemnity is sought not
later than eighteen (18) months after the Closing Date. (Provided, however, the
-------- -------
survival period for indemnification based on the falsity of Sections 3.8,
3.18.1.1 or 3.l 8.2.2 shall be seven (7) years from the Closing Date, the
survival period for indemnification based on the falsity of Section 3.15 shall
be five (5) years from the Closing Date, the survival period for indemnification
based on the breach of Section 5.5 shall be two (2) years from the Closing Date,
and the survival period for indemnification based on the breach of Section 15.4
shall be three (3) years from the Closing Date.) There shall be no
indemnification for any such claim for breach of representation or warranty
under Section 14.1 or 14.2(i) or under the U.K. Tax Covenant unless the amount
of any such single claim exceeds USD 50,000 (excluding costs and interest
claimed) and until the aggregate amount of all claims which each exceed USD
50,000 (excluding costs and interest claimed) made by the party seeking
indemnification exceeds an amount equal to one million dollars ($l,000,000),
after which time such party shall be fully indemnified for all such claims (to
the extent provided in Section 14.1 or 14.2(i) or in the U.K. Tax Covenant, as
the case may be) from the first dollar of each such claim (including the amounts
used to satisfy the $1,000,000 threshold set forth in this Section 14.3). The
cumulative maximum liability (including costs and interest claimed) of Seller
for indemnification pursuant
28
<PAGE>
to Section 14.1(i) and for claims under the U.K. Tax Covenant shall not exceed
the amount of the Purchase Price.
14.4 CLAIMS FOR INDEMNIFICATION. Whenever any claim shall arise for
--------------------------
indemnification hereunder, the party seeking indemnification (the "Indemnified
Party") shall promptly notify the party from whom indemnification is sought (the
"Indemnifying Party") of the claim and, when known, the facts constituting the
basis for such claim. For purposes of this Section 14.4, notice shall be deemed
to be promptly made if it is given to the Indemnifying Party within ten (10)
days of receipt by the Indemnified Party of any written notice of any third
party claim. In the event of any claim for indemnification under this Agreement
resulting from or in connection with any claim or legal proceedings by a third
party, the notice to the Indemnifying Party shall specify, if known, the amount
or an estimate of the amount of the liability arising from such claim or legal
proceeding. Except as provided in Section 14.5 of this Agreement, the
Indemnified Party shall not settle or compromise any claim by a third party for
which it may claim indemnification under this Agreement without the prior
written consent of the Indemnifying Party.
14.5 DEFENSE BY INDEMNIFYING PARTY. In connection with any claim by an
-----------------------------
Indemnified Party resulting from or arising out of any claim or legal proceeding
by a person who is not a party to this Agreement, the Indemnifying Party at its
sole cost and expense may, upon written notice to the Indemnified Party, assume
the defense of any such claim or legal proceeding if it acknowledges to the
Indemnified Party in writing its obligation to indemnify the Indemnified Party
with respect to all elements of such claim. The Indemnified Party shall be
entitled to participate in (but not control) the defense of any such action,
with its own counsel and at its own expense. If the Indemnifying Party does not
assume the defense of any such claim or litigation resulting therefrom within 30
days after the date of such claim is made, (a) the Indemnified Party may defend
against such claim or litigation, in such manner as it may deem appropriate,
including, but not limited to, settling such claim or litigation, after giving
notice of the same to the Indemnifying Party, on such terms as the Indemnified
Party may deem appropriate, and (b) the Indemnifying Party shall be entitled to
participate in (but not control) the defense of such action, with its own
counsel and at its own expense.
14.6 PAYMENT OF INDEMNIFICATION OBLIGATION. All indemnification
-------------------------------------
hereunder shall be effected by payment of cash or delivery of a cashier's or
certified check in the amount of the indemnification liability. Any
indemnification payment by Seller to Buyer hereunder shall be deemed to be a
reduction in the Purchase Price.
14.7 EXCLUSIVE REMEDY. The rights of indemnification set forth in this
----------------
Section 14 and in the U.K. Tax Covenant shall be, from and after the Closing
Date, the exclusive remedy of each party for the breach by the other party of
any representation, warranty, covenant or other term in this Agreement, except
for claims based upon fraud and claims for specific performance or other
equitable relief.
15. ADDITIONAL ACTIONS.
------------------
15.1 SERVICES. The parties recognize that in order for Buyer to assume
--------
control of the Business in an orderly manner it may be necessary for Seller to
assist Buyer in the performance of certain business support functions after the
Closing in view of the fact that the Business has not been a freestanding
enterprise. Understanding that Seller is not in the business of providing
29
<PAGE>
such support services to others and that Buyer must diligently develop the
capacity to support the Business as soon as practicable after the Closing Date,
the parties shall cooperate during the period from the date hereof to the
Closing Date to identify those areas in which the Business will require support
and to enter into one or more service agreements providing for the rendering of
such support by Seller to Buyer such services to be performed at a reasonable
level and at no charge to the Buyer. The services to be provided by Seller and
the duration of each service are described in Exhibit 15.1 hereto.
15.2 CHANGE OF NAMES. As soon as practicable (but no later than thirty
---------------
(30) days) after Closing, Buyer shall cause the name of each of the Acquired
Companies which contains the word "Elekta" to be changed to a name which does
not contain the word "Elekta."
15.3 RELEASE OF GUARANTEES BY SELLER. As soon as practicable (but no
-------------------------------
later than thirty (30) days) after Closing, Buyer shall use its best efforts to
cause to be released all guarantees by Seller of the obligations of any of the
Acquired Companies listed on Exhibit 15.3 and pending such release the Buyer
shall indemnify and keep Seller indemnified from and against any and all costs,
claims, demands or liabilities incurred or arising from any such guarantees.
15.4 ADDITIONAL AGREEMENTS.
---------------------
The Seller and Buyer agree that:
(a) Proprietary Information.
-----------------------
(i) From and after the Closing Date, the Seller shall hold
in confidence, and use its best efforts to have all of its officers, directors
and personnel and each of the Companies hold in confidence, all knowledge and
information of a secret or confidential nature with respect to the Business and
shall not disclose, publish or make use of the same without the consent of the
Buyer, except to the extent that such information shall have become public
knowledge other than by breach of this Agreement by any of the Companies or to
the extent required by law.
(ii) The Seller agrees that the remedy at law for any breach
of this Subsection 15.4 would be inadequate and that the Buyer shall be entitled
to injunctive relief in addition to any other remedy it may have upon breach of
any provision of this Subsection 15.4.
(b) Sharing of Data.
---------------
(i) The Seller shall have the right for a period of three
years following the Closing Date to have reasonable access to such books,
records and accounts, including financial and tax information, correspondence,
production records, employment records and other similar information as are
transferred to the Buyer pursuant to the terms of this Agreement for the limited
purposes of concluding its involvement in the Business prior to the Closing Date
and for complying with its obligations under applicable securities, tax,
environmental, employment or other laws and regulations. The Buyer shall have
the right for a period of three years following the Closing Date to have
reasonable access to those books, records and accounts, including financial and
tax information, correspondence, production records, employment records and
other records which are retained by the Seller pursuant to the terms of this
Agreement to the extent that any of the foregoing relates to the Business
transferred to the Buyer hereunder or is otherwise
30
<PAGE>
needed by the Buyer in order to comply with its obligations under applicable
securities, tax, environmental, employment or other laws and regulations.
(ii) The Seller and the Buyer agree that from and after the
Closing Date they shall cooperate fully with each other to facilitate the
transfer of the Assets from the Seller to the Buyer and the operation thereof by
the Buyer.
(c) Cooperation in Litigation. Each party hereto will fully cooperate
-------------------------
with the other in the defense or prosecution of any litigation or proceeding
already instituted or which may be instituted hereafter against or by such party
relating to or arising out of the conduct of the Business prior to or after the
Closing Date (other than litigation arising out the transactions contemplated by
this Agreement). The party requesting such cooperation shall pay the out-of-
pocket expenses (including legal fees and disbursements) of the party providing
such cooperation and of its officers, directors, employees and agents reasonably
incurred in connection with providing such cooperation, but shall not be
responsible to reimburse the party providing such cooperation for such party's
time spent in such cooperation or the salaries or costs of fringe benefits or
similar expenses paid by the party providing such cooperation to its officers,
directors, employees and agents while assisting in the defense or prosecution of
any such litigation or proceeding.
(d) Conduct of Business between Effective Date and Closing Date by
--------------------------------------------------------------
EII, EIAL, EGBH and Seller
- --------------------------
(i) That portion of the Business conducted by EII, EIAL, EGBH and Seller
shall, during the period between the Effective Date and the Closing Date, be
conducted by EII, EIAL, EQBH and Seller for the account of the Buyer.
(ii) In order to effectuate the agreement set forth in subparagraph (i)
above, Buyer and Seller agree to implement the following procedure:
(A) During the period which begins on the Effective Date and ends on
the Closing Date, EII, EIAL, EGBH and Seller shall receive any
payments made by customers for Products sold after the Effective Date
by EII, EIAL, EGBH and Seller (the total amount thus received being
referred to herein as the "Gross Receipts");
(B) During the period which begins on the Effective Date and ends on
the Closing Date, EII, EIAL, EGBH and Seller shall continue to make
cash expenditures which are properly allocable to the normal operation
of the Business in the ordinary course consistent with prior practice
(but excluding the cost of providing the services described in Exhibit
15.1) (the total amount thus expended being referred to herein as
"Gross Expenditures");
(C) Fifteen (15) days after the Closing Date, Seller shall deliver to
Buyer a statement which itemizes the Gross Receipts and the Gross
Expenditures in reasonable detail, subject to Buyer's right to review
and dispute such statement. If Gross Receipts exceed Gross
Expenditures, Seller shall promptly pay to Buyer an amount equal to
such excess, or, if Gross Expenditures exceed Gross
31
<PAGE>
Receipts, Buyer shall promptly pay to Seller an amount equal to
such excess; and
(D) On the Closing Date, Seller shall deliver to Buyer an
assignment of all unpaid accounts receivable which result from
delivery of Products by EII, EIAL, EGBH or Seller after the
Effective Date.
(e) Open Accounts Receivable. In the event Buyer receives
------------------------
payment on an account receivable which does not constitute part of the Assets,
Buyer shall promptly remit such amount to Seller. If Seller receives payment
after the Closing Date of an account receivable which constitutes part of the
Assets, it shall promptly remit such amounts to Buyer.
16. GENERAL.
-------
16.1 AFFILIATE INVOLVEMENT. It is understood that both Seller and Buyer
---------------------
conduct parts of their respective businesses through and in conjunction with
Affiliates and are likely to do so in the future. In this Agreement, references
to Affiliates are made in certain provisions for the sake of clarity, but some
repeated references have been avoided because the terms "Seller" and "Buyer" are
intended to encompass the Affiliates of each insofar as that is necessary to
give full effect to the rights and obligations of the parties hereunder and to
prevent results which are anomalous in the context of the transactions
contemplated hereby. The covenant or agreement of a party to do or not to do a
thing is also such party's covenant or agreement to cause its relevant
Affiliates to do or not to do that thing. A covenant, agreement, representation
or warranty for the benefit of a party is also for the benefit of such party's
relevant Affiliates. The act, omission or knowledge of a party's relevant
Affiliate is attributed to the party. Damages suffered by a relevant Affiliate
of a party are also suffered by the party. Buyer shall have the right to require
that certain of the Assets be conveyed at Closing to Affiliates of Buyer
specified by Buyer.
16.2 PAYMENT OF EXPENSES. Except as specifically set forth elsewhere in
-------------------
this Agreement, expenses related to this Agreement and attendant transactions,
including the fees of brokers, counsel and accountants, shall be borne by the
party incurring such expenses. No transaction expenses shall be borne by the
Acquired Companies.
16.3 MODIFICATIONS; WAIVERS. This Agreement may be modified and rights
----------------------
hereunder may be waived only by a writing executed and delivered on behalf of
the party against whom such modification or waiver is asserted.
16.4 ASSIGNABILITY. This Agreement and the rights and obligations
-------------
hereunder shall be binding upon and inure to the benefit of the parties hereto
and their respective successors (including successors by operation of law) and
legal representatives. This Agreement shall not be assignable by either party
hereto, except that Seller and Buyer may assign its rights and obligations
hereunder to one or more of its Affiliates, provided that, the assignor shall
-------------
guarantee the performance of such assignees under this Agreement and further
provided that if the Affiliate of Buyer to which the Buyer assigns its rights
and obligations under this Agreement ceases to be an Affiliate of Buyer, Buyer
shall cause such former Affiliate to assign its rights and obligations under
this Agreement to Buyer or another Affiliate of Buyer.
32
<PAGE>
16.5 NO OTHER REPRESENTATIONS. Each of the parties acknowledges that in
------------------------
entering into this Agreement it has not relied on any representation, warranty,
agreement or statement not set out in this Agreement (or in any document,
instrument or certificate contemplated hereby), whether express or implied, and
that (in the absence of fraud) it will not have any right or remedy arising out
of any such representation, warranty, agreement or statement.
16.6 NOTICES. Any communication to be given hereunder by either party to
-------
the other party shall be in writing and delivered by messenger, sent by
overnight courier, or transmitted by facsimile, to the address or designation of
such party set forth below or as changed by such party by notice given
hereunder. A communication transmitted by facsimile shall be deemed effective
when transmitted; a communication sent by overnight courier shall be deemed
effective two days after being sent; and a communication delivered by messenger
shall be deemed effective when delivered.
SELLER: Elekta AB (publ)
P.O. Box 7593
53 Birger Jarlsgatan
S-10393 Stockholm, Sweden
Attention: Dr. Laurent Leksell, President
Fax: 46-8-402-5500
WITH A COPY TO:
Jones, Day, Reavis & Pogue
303 Peachtree Street, N.E.
3500 SunTrust Plaza
Atlanta, Georgia 30308-3242
Attention: R. Mason Cargill, Esq.
Fax: (404) 581-8330
BUYER: Nitinol Medical Technologies, Inc.
27 Wormwood Street
Boston, MA 02110-1625
Attention: Mr. Tom Tully, President
Fax: (617)737-0924
WITH A COPY TO:
Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attention: Steven D. Singer, Esq.
Fax: (617)526-5000
The foregoing is not intended to be exclusive; any written communication
actually received shall be effective when received.
33
<PAGE>
16.7 CAPTIONS. The section captions used in this Agreement are for
--------
reference and cross-reference purposes only and shall not otherwise affect the
meaning or interpretation of this Agreement.
16.8 COUNTERPARTS AND ATTACHMENTS. This Agreement may be executed in two
----------------------------
or more counterparts, each of which shall be deemed to be an original and all of
which shall be deemed to constitute the same Agreement. The schedules and other
attachments hereto are part of this Agreement.
16.9 KNOWLEDGE. Any statement in this Agreement qualified by the
---------
expression "so far as Seller is aware" or "to the knowledge of Seller" or "to
the knowledge of the Companies" or any similar expression shall be deemed to
include the knowledge of the following individuals (and only the knowledge of
such individuals), regardless of the corporation which employs each such
individual): Peter Gibson, James St. John, Steve Sinyard, Jacques Le Guillerm
and Kent Iverson.
16.10 GOVERNING LAW. This Agreement shall be governed by and construed in
-------------
accordance with the law of the State of Georgia.
17. DISPUTE RESOLUTION
------------------
17.1 OBJECTIVE. This Agreement will be implemented by the parties and
---------
their Affiliates in more than one jurisdiction. The negotiations of the parties
have focused primarily on the ordinary meaning of the provisions of this
Agreement and not on the legal effects those provisions might have under the
laws of a particular jurisdiction. One of the purposes of this Section is to
minimize the possibility of an unexpected reordering of agreed rights and
obligations.
17.2 NO AFFILIATE ACTIONS. Neither party shall permit any of its
--------------------
Affiliates to initiate or participate in any legal proceeding in connection with
any controversy or claim arising out of or relating to this Agreement or the
transactions contemplated hereby; rather, the parties shall settle all such
controversies or claims on behalf of their Affiliates by arbitration conducted
by the parties in accordance with this Section. The parties shall cause their
Affiliates to comply with any award rendered in an arbitration proceeding
pursuant hereto.
17.3 ARBITRATION. Any controversy or claim arising out of or relating to
-----------
this Agreement or the transactions contemplated hereby shall be finally settled
by arbitration in accordance with the Rules of Arbitration of the London Court
of Arbitration by an arbitrator or arbitrators appointed in accordance with said
rules. Judgment upon the award rendered by the arbitral tribunal may be entered
in any court having jurisdiction thereof or application may be made to such
court for judicial acceptance of such award and an order of enforcement, as the
case may be. The place of arbitration shall be London, England, and the language
of the arbitration shall be English. The parties hereby agree that the rendering
of an award by the arbitrator or arbitrators shall be a condition precedent to
the initiation of any legal proceeding with respect to any dispute arising in
connection with this Agreement. Such award shall be final, binding and
enforceable. Each of EHSA and EISA expressly waives its rights to the
jurisdiction of the French courts. The arbitral tribunal shall apply the
substantive laws of the State of Georgia, without regard to the conflicts of
laws principles of the State of Georgia.
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<PAGE>
18. ENTIRE AGREEMENT. This Agreement (including the Exhibits and Schedules
----------------
hereto) constitutes the entire agreement among the parties hereto and supersedes
and cancels any prior agreements, representations, warranties, or
communications, whether oral or written, among the parties hereto relating to
the transactions contemplated hereby or the subject matter herein. Neither this
Agreement nor any provision hereof may be changed, waived, discharged or
terminated orally, but only by an agreement in writing signed by the party
against whom or which the enforcement of such change, waiver, discharge or
termination is sought.
IN WITNESS WHEREOF, Buyer and Seller have each caused this Agreement to be
duly executed in its corporate name by a duly authorized representative as of
the date first above written.
SELLER:
ELEKTA AB (PUBL)
By: /s/ Jonas Serlachius
-------------------------------
Title: VP. CORP DEV.
-------------------------
BUYER:
NITINOL MEDICAL TECHNOLOGIES, INC.
By: /s/ Thomas M. Tully
--------------------------------
Title: CEO
-----------------------------
35
<PAGE>
SCHEDULE OF ASSETS
All assets and property, tangible and intangible, wherever located, used by
Seller and/or its Affiliates (including without limitation the Companies) in the
conduct of the Business, including, without limitation, the following
significant Assets:
(1) The real estate, buildings and equipment which comprise the Biot
Facility;
(2) The books, records, technical manuals, customer lists and other
documents and tangible embodiments of information necessary to the conduct of
the Business;
(3) The inventory of raw materials, parts and finished and in-process
Products;
(4) All Company Intellectual Property, including without limitation the
patents and patent applications described on the attached lists with the
indication "TITLE TO BE ASSIGNED" subject, in the case of those patents with the
indication "TO BE LICENSED BACK TO ELEKTA", to a royalty-free, non-exclusive
license in favor of Seller and its Affiliates and Johnson & Johnson and its
Affiliates to make, have made, use and sell, and to sublicense customers to use,
inventions covered by the claims of the U.S. patents (and their foreign
equivalents) for products other than neuroscience products;
(5) Seller's rights to the patents described on the attached lists with the
indication "LICENSED PATENTS WITH ROYALTY BEARING AGREEMENTS and CIS's rights to
the patents described on the attached lists with the indication "CORDIS
INNOVASIVE SYSTEMS, INC. PATENTS";
(6) The trademarks listed on the attached List of Trademarks, provided
--------
that, (a) the right to use the trademark and name CORDIS (whether alone or with
- ----
other trademarks or names) shall be limited to (i) use in the promotion and
labeling of Products, and (ii) a period ending on October 11, 1998; (b) the
right to use the trademark and name HAKIM shall be limited to (i) use until
December 18, 2007 in connection with the promotion and labeling of the Products
which bear the trademark on the Closing Date, and (ii) subject to (a) above, use
in conjunction with a name or trademark (other than CORDIS) in the manner used
on the Closing Date; and (c) the right to use each of the trademarks and names
ELEKTA and LEKSELL (whether alone or with other trademarks or names) shall be
limited to (i) use in the promotion and labeling of Products which bear the
corresponding trademark or name on the Closing Date, and (ii) a period ending
six (6) months after the Closing Date; the trademarks which contain the name
CORDIS or the names ELEKTA or LEKSELL will be licensed to Buyer with the above
restrictions, and the other trademarks will be assigned to Buyer;
(7) Seller's rights under agreements assumed by Buyer.
(8) All outstanding shares of capital stock in the Acquired Companies, as
well as the corporate minute book and all corporate records of the Acquired
Companies.
<PAGE>
(9) A perpetual, non-exclusive, royalty-free license (with no right to
sublicense other than to an Affiliate of Buyer) to use the computer software
used in the Business which is known as MIPOS/DCS, in object code form only, it
being understood that Seller is not obligated to provide maintenance services
for such software.
(10) The licenses referred to in paragraphs (4) and (6) above shall be
memorialized in separate license agreements to be executed by Seller and Buyer
at Closing.
-2-
<PAGE>
TITLE TO BE ASSIGNED
PATENTS AND PATENT APPLICATIONS
1. Fluid heating apparatus for medical use - has controllable infra-red light
source emitting radiation to fluid which temperature is monitored by
sensor- patent no. GB2312736A. Registered holder - Spembly.
2. Liquid cryogen supply apparatus - has cryogen tank with valveless outlet
and inlet supplied with gas at controlled pressure that manages cryogen
outflow patent no. WO9630816A. Registered holder - Spembly.
3. Connection apparatus to link instrument to supply source - has two
connectors fitted with complementary bayonet locking formations with sleeve
on non-sterile side and sleeve displacement formation on sterile side for
locking - patent no. GB2289510A. Registered holder - Spembly.
4. Cryosurgical instrument - comprising a metal cooling tip cooled by a flow
of cryogenic fluid within the tip and coated in heat-insulated coating -
patent no. GB2289414A. Registered holder - Spembly.
5. Cryosurgical instrument for surgical use where living tissues have been
destroyed - has cooling tip operable to be cooled to flow having exhaust
conduit carrying fluid to atmospheric air vent with purging flow of cool
gas supplied from vessel - patent no. GB2289413A. Registered holder -
Spembly.
6. Cryosurgical instrument for surgical operative where living tissues have
been destroyed - has cooling tip cooled by flow of fluid from transfer
chamber having outlet communicating with having air vent having by pass
valve - patent no. GB2289412A. Registered holder - Spembly.
7. Cryosurgical probe for cardiac surgery - comprises probe head cooled by
expansion of refrigerant gas, handle with gas precooler and flexible
catheter linking handle and head - patent no. GB2283678A. Registered
holder - Spembly.
8. Ultrasonic surgical instrument - has unitary construction operating tip
being of length of at least one quarter wave length of ultrasonic
vibrations generated by transducer - patent no. GB2273445A. Registered
holder - Spembly. (Lapsed)
9. Cryosurgical probe with cooling element tip - has channel for introducing
heat-conducting liquid into cavity, and cooling element with associated
thermo couple sensor at tip of probe - patent nos. GB2269107A, EP584930B,
GB2269107B and US5403309A. Registered holder - Spembly. (Lapsed)
-3-
<PAGE>
10. Ultrasonic surgical aspirator with vacuum control - comprises vacuum
source, handpiece, handpiece comprising aspiration tip with aperture for
communicating with vacuum source - patent no. GB2267828A. Registered
holder - Spembly.
11. Coupling assembly for cryogen supply line - has respective rubber O-rings
located externally of male and female coupling members, secured together
with screw threaded portions - patent no. WO9308870A. Registered holder -
Cryogenic Technology Limited (beneficial interest assigned to SCL).
12. Cryosurgical equipment thawing method - involves circulating heated inert
gas through equipment circuit via heat exchanger - patent nos. WO9308752A
and US5632743A. Registered holder - Cryogenic Technology Limited
(beneficial interest assigned to SCL).
13. Cryosurgical probe assembly - has exhaust and cryogen supply passages
leading to tip, insulated by air filled or partially evacuated jacket -
patent no. WO9308751A. Registered holder - Cryogenic Technology Limited
(beneficial interest assigned to SCL).
14. Rapid purge cryosurgical probe - has valve allowing purging gas to pass
through supply passages without going through Joule-Thomson nozzle - patent
nos. WO9006726A, GB2246710B and US5224943A. Registered holder - Spembly.
15. Cryosurgical probe for percutaneous use in surgery - has steerable catheter
connected between probe head and handle for guiding probe with safety and
precision along arteries - patent nos. GB2226497A, GB2226497B, US5078713A.
Registered holder - Spembly.
16. Pressure monitor - has disc with coded tracks divided into transparent and
opaque portions, and rotated to intercept beam of light going to
photosensor -patent no. GB2153172A. Registered holder - Spembly.
17. Stainless steel cryosurgical probe - has hollow tip with exhaust passage
extending into problem body for removing cooled, expanded gas - patent no.
GB2094636A. Registered holder - Spembly.
18. Cryogenic surgical probe for stimulating nerves - has closed end forming
point and contg. or forming exposed electrode - patent no. DE2732486A.
Registered holder - Spembly.
19. Curved ultrasonic knife for brain or spinal surgery - consists of
transducer unit with curved resonance rod located between piezoelectric
unit and horn - patent nos. EP305627A, EP305627B and US4974581A.
Registered holder - Swedemed.
-4-
<PAGE>
20. Surgical equipment for removing tissue - has frequency generator driving
transducer unit causing tip portion of ultrasonic knife to oscillate -
patent no. EP282684A, EP282684B and US4886060A. Registered holders - EIL.
21. Ultrasonic aspirator with tip functioning as knife - has amplitude
transformer providing separated maximum longitudinal mode oscillation
resonant frequency - patent no. EP229003A, EP229003B and US5062827A.
Registered holder - EIL.
22. Surgical heating apparatus for preventing unwanted freezing of tissue
adjacent to site of cryogenic surgery - has bag for location adjacent to
tissue which provides for entry of liquid at required temperature and
circulation of liquid through outer wall of bag - patent no. PCT/GB95/00974
(USA and Japan designated on PCT application). Registered holder -
Cryogenic Technology Limited (beneficial interest assigned to SCL).
23. (Not used).
24. Visualization surgical cart design - patent no. 355,257. Registered holder
- CIS.
25. Optical shunt cutter system - patent applications:- United States
08/215,130 (registered holder - CIS), Germany 19509606.1 and Japan
61133/95. Registered holder - Nobles - Lai (beneficial interest assigned
to CIS).
26. Adjustable arm for instrument holder - provisional (ABN) 60/005,473,
application 08/731,502, application PCT US96/16765. Registered holder -
Nobles - Lai (beneficial interest assigned to CIS).
27. Control module for controlling a neuroendoscopic visualization system
having a plurality of video input sources and method thereof - patent
application 08/712,933. Registered holder - CIS.
28. Punch catheter - provisional no. 60/030,929. Registered holder - CIS.
29. Interchangeable handle and surgical tools for endoscopic use - provisional
patent application [dated April 14, 1997] [no. ].
Registered holder - CIS.
30. Variable length shunt placement introducer - provisional patent application
60/036,208. Registered holder - CIS.
31. Neuroendoscopic training model - provisional patent application dated
February 24, 1997 [no. ]. Registered holder - CIS.
32. Malleable cannula bender - provisional patent application [dated April 11,
1997] [no. ]. Registered holder - CIS.
-5-
<PAGE>
Assignments of the patents numbered 24 to 32 above by Nobles-Lai
Engineering, Inc. to CIS have not been completed, hence Nobles-Lai
Engineering, Inc. remains the registered owner. The patents numbered 24 to
32 above are also subject to non-exclusive, non-sublicensable, worldwide,
royalty-free license granted by CIS is favor of Nobles-Lai Engineering,
Inc.
33. Intracranial pressure monitoring catheter (assigned with a royalty-bearing
agreement).
U.S. patent no. 4,114,603 dated September 19, 1978
Canada - patent no. 1,068,514 dated December 15, 1979
France - patent no. 7724065 dated August 4, 1977
Great Britain - patent no. 1547064 dated August 5, 1977 (expired)
Japan - patent no. 1424424 dated August 4, 1977
Netherlands - patent no. 182197 dated July 5, 1977
Sweden - patent no. 429297 dated August 3, 1977
Switzerland - patent no. 615819 dated August 4, 1977
34. Intercranial pressure regulator valve.
US - patent no. 4,769,002 dated September 6, 1988
Canada - patent no. 1,248,425 dated January 10, 1989
France - patent no. 117050 dated January 13, 1984
Great Britain - patent no. 117050 dated January 13, 1984
Germany - patent no. P3483539.3 dated January 13, 1984
Italy - patent no. 117050 dated January 13, 1984
Japan - patent no. 1792101 dated February 7, 1984
Netherlands - patent no. 117050 dated January 13, 1984
35. Three stage valve (assigned with a royalty-bearing agreement).
US patent no. 4,776,838 dated October 11, 1988
Canada - patent no. 1236749 dated May 17, 1988
France - patent no. 156974 dated December 7, 1984
Great Britain - patent no. 156974 dated December 7, 1984
Germany - patent no. P3479565.0 dated December 7, 1984
Italy - patent no. 156974 dated December 7, 1984
Japan - patent no. 1808729 dated December 8, 1983
Netherlands - patent no. 156974 dated December 7, 1984
36. Three stage intercranial pressure relief valve having single-piece valve
stem (assigned with a royalty-bearing agreement).
US - patent no. 4,627,832 dated December 9, 1986.
-6-
<PAGE>
France - patent no. 163897 dated April 22, 1985
Great Britain - patent no. 163897 dated April 22, 1985
Germany - patent no. P3563683.1 dated April 22, 1985
Italy - patent no. 163897 dated April 22, 1985
Netherlands - patent no. 163897 dated April 22, 1985
37. Three stage intercranial pressure control valve.
U.S. - patent no. 4,714,459 dated December 22, 1987
France - patent no. 233324 dated November 4, 1986
Great Britain - patent no. 233324 dated November 4, 1986
Germany - patent no. P3679541.0 dated November 4, 1986
Italy - patent no. 233324 dated November 4, 1986
Netherlands - patent no. 233324 dated November 4, 1986
38. Three stage implantable pressure relief valve with adjustable valve stem
members.
U.S. - patent no. 4,729,762 dated March 8, 1988
France - patent no. 233325 dated November 4, 1986
Great Britain - patent no. 233325 dated November 4, 1986
Germany - patent no. P3666350.6 dated November 4, 1986
Italy - patent no. 233325 dated November 4, 1986
Netherlands - patent no. 233325 dated November 4, 1986
39. Hydrocephalus valve.
U.S. - patent no. 5,069,663 dated December 3, 1991
Japan - patent application no. 261221/89 filed October 5, 1989
40. Reservoir membrane implantable under the skin of a patient.
French patent application no. 8903998 filed March 28, 1989
U.S. patent no. 5,102,389 dated April 7, 1992
European patent no. 399,857 - validated in Germany, Italy, Spain and France
Japan patent application no. 277167 filed March 28, 1990
41. Three stage implantable drainage valve for treatment of hydrocephalus.
French patent application no. 9115778 filed December 19, 1991
U.S. patent no. 5,336,166 dated August 9, 1994
European patent application no. 93400817.8 filed March 30, 1993
42. Implantable drainage valve for the treatment of hydrocephalus.
-7-
<PAGE>
French patent application no. 9200671 filed January 22, 1992
U.S. patent no. 5,368,556 dated November 29, 1994
European patent application no. 93400818.6 filed March 30, 1993
43. Implantable valve for the treatment of hydrocephaly.
French patent application no. 9210972 filed September 1992
U.S. patent no. 5,437,627 dated August 1, 1995
European patent application no. 93401464.8 filed June 9, 1993
44. Dilatation balloon catheter for endoscopy.
French patent application no. 9409890 (assigned with a royalty-bearing
agreement in favor of Christian Sainte Rose) filed August 10, 1994
U.S. patent no. 5718712.
45. Implantable drainage valve for treatment of hydrocephalus - French patent
application no. 9306356 filed June 27, 1993 (Docket 91087).
46. Pressure and anti-gravity regulating valve - French patent application no.
9603721 filed March 26, 1996 (Docket 95103).
47. OSV2 - French Patent application no. 9603726 filed March 26, 1996.
48. Implantable hand-operable dispensers for fluid medicaments
U.S. patent no. 4,668,231 dated May 26, 1987.
Dutch patent application no. 8400489 filed February 15, 1984
Canada - patent no. 1243913 dated November 1, 1988
France - patent no. 143503 dated November 23, 1984
Great Britain - patent no. 143503 dated November 23, 1984
Germany - patent no. P3476521.2 dated November 23, 1984
Italy - patent no. 143503 dated November 23, 1984
Japan - patent no. 1830123 dated November 24, 1984
Netherlands - patent no. 143503 dated November 23, 1984
49. Pompe multidose. This patent was purchased from Applied Precision Limited
and assignment has not been recorded in the U.S. Patent and Trademark
Office.
French patent no. 2582222 dated May 21, 1985
U.S. patent - no. 4,718,894 dated January 12, 1988
Canada - patent no. 1262851 dated November 14, 1989
EPO - patent no. 202696 dated November 26, 1986
-8-
<PAGE>
Germany - patent no. P3664259 dated July 12, 1989
50. Manufacture of tubing assembly for drainage catheter - patent no.
4,601,724. Subject to license in favor of Cordis Corporation.
51. Intracranial ventricular catheter assembly - patent no. 4,723,556. Subject
to license in favor of Johnson & Johnson and its Affiliates.
52. External drainage antisiphon device - patent no. 4,731,056. Subject to
license in favor of Johnson & Johnson and its Affiliates.
53. Porous ventricular catheter - patent no. 4,767,400. Subject to license in
favor of Johnson & Johnson and its Affiliates.
54. Cyst puncture catheter assembly - patent no. 5,409,462. Subject to license
in favor of Johnson & Johnson and its Affiliates.
55. Catheter introducer (subject to license in favor of Johnson & Johnson and
its Affiliates).
French patent application no. 8714852 filed October 27, 1987
U.S. patent no. 4,946,443.
56. [Device for a carriage for pallet handling] - patent no. 9616267 dated
December 31, 1996.
57. Mechanical arm for a neuroendoscopy device - patent no. 9704060 dated April
3, 1997.
58. Catheter for neurosurgery - patent no. 9704061 dated April 3, 1997.
59. Implantable microinfusion pump system - patent no. 4487603 dated
December 11, 1984.
60. Non-invasively adjustable valve - patent no. 4540400 dated September 10,
1985.
61. Implantable manually actuated medication dispensing system - patent no.
4548607 dated October 22, 1985.
62. Cerebrospinal fluid shunt value - patent no. 4551128 dated November 5,
1985.
63. Servo valve - patent no. 4557721 dated December 10, 1985.
64. Fill port for an implantable dispensing system dated December 10, 1985.
-9-
<PAGE>
65. Self-calibrating differential condition sensor - patent no. 4576035 dated
March 18, 1986.
66. Ventricular right angle connector and system - patent no. 4578057 dated
March 25, 1986.
67. Telescoping catheter shunt system - patent no. 4583967 dated April 22,
1986.
68. Portable instrument to test pressure/flow of ventricular shunt valves -
patent no. 4598579 dated July 8, 1986.
69. Ventricular amniotic shunt and introducer system - patent no. 4631051 dated
December 23, 1986.
70. Differential thermal expansion driven pump - patent no. 4636149 dated
January 13, 1987.
71. Three stage pressure regulator valve - patent no. 4675003 dated June 23,
1987.
72. Adjustable implantable valve having non-invasive position indicator dated
June 30, 1987.
73. Plural valve three stage pressure relief system - patent no. 4681559 dated
July 21, 1987.
74. Implantable servo valve having integral pressure sensor - patent no.
4705499 dated October 11, 1987.
75. Three stage valve with flexible valve seat - patent no. 4714458 dated
December 22, 1987.
76. Infusion pump - patent no. 4744786 dated May 17, 1988.
77. Three stage implantable pressure relief valve with improved valve stem
member - patent no. 4776839 dated October 11, 1988.
78. Three stage implantable flow control valve with improved valve closure
member - patent no. 4781672 dated November 1, 1988.
79. Adjustable implantable valve having non-invasic position indication -
patent no. 4,676,772 dated June 30, 1987.
The patents and patent applications numbered 33 to 79 above were acquired
from Johnson & Johnson or its Affiliates as part of the acquisition of the
Cordis Neuroscience business dated April 11, 1997. The United States and
Canadian patents
-10-
<PAGE>
and patent applications are registered in the name of the Seller.
Assignments of the other patents and patent applications numbered 33 to 79
above to the Seller have not been completed hence Johnson & Johnson or its
Affiliates remain the registered holder.
-11-
<PAGE>
LICENSED PATENTS WITH ROYALTY BEARING AGREEMENTS
1. COCHRAN - Infusion pump
U.S. patent no. 4,561,856 dated December 31, 1985
2. HAKIM - Servo valve
U.S. patent no. 4,106,510 dated August 15, 1978 (expired)
Canada - patent no. 1080080 dated June 24, 1980
France - patent no. 7735554 dated November 25, 1977 (expired)
Great Britain - patent no. 1554100 dated November 24, 1977
Japan - patent no. 1417682 dated November 22, 1977
3. Method and apparatus for the treatment of ascites
U.S. patent no. 4,261,341 dated April 14, 1981
Canada - patent no. 1152408 dated August 23, 1983
France - patent no. 8012654 dated June 6, 1980
Germany - patent no. P3020991.7 dated June 3, 1980
Japan - patent no. 1477965 dated June 6, 1980
4. Agreement to transfer a patent license agreement dated January 1, 1990
between (1) Cordis S.A. and (2) Cordis Europa N.V. concerning an
implantable drainage device for the treatment of hydrocephalus.
5. Patent license agreement dated December 5, 1994 between (1) Cordis S.A. and
(2) Christian Sainte Rose concerning a dilatation balloon catheter for
endoscopy. French patent application no. 9409890 dated August 10, 1994 in
the name of Cordis S.A. (beneficially assigned to EISA).
6. Patent license agreement dated December 5, 1994 between (1) Cordis S.A. and
(2) Christian Sainte Rose concerning a subdural drainage catheter.
7. Patent license agreement dated December 5, 1994 between (1) Cordis S.A. and
(2) Christian Sainte Rose concerning an integral drainage device.
8. License and technology agreement dated May 10, 1994 between (1) Kevin
Maughan, (2) Ferenc Schmidt, (3) Florida Hospital Supply, Inc. and (4) EII
concerning titanium aneurysm clips. US patent no. 5,053,045 and US patent
application no. PCT/US93/10054 in the name of Ferenc Schmidt
-12-
<PAGE>
9. License agreement between (1) Robert F. Spetzler and (2) EII concerning
powered surgical instrument/powered clip applier. Patent application no.
07/882,945 in the name of Robert Spetzler.
-13-
<PAGE>
CORDIS INNOVASIVE SYSTEMS, INC. PATENTS
<TABLE>
<CAPTION>
Title Country Patent/Application Date
- ----- ------- ------------------ ----
<S> <C> <C> <C>
Improved visualization trocar* United States 08/376,759 January 20, 1995
Visualization surgical cart United States D355,257 February 7, 1995
Optical shunt cutter system Germany 19509606.1 March 16, 1995
Optical shunt cutter system Japan 61133/95 March 20, 1995
Optical shunt cutter system United States 08/215,130 March 18, 1994
Adjustable arm for instrument United States 60/005,473 October 16, 1995
holder
Suturing device and method United States 60/002,769 August 24, 1995
Trocar for endoscopic surgery* Canada 2,151,926 November 12, 1993
Trocar for endoscopic surgery* EPO 94902247.9 November 12, 1993
Trocar for endoscopic surgery* United States US93/11024 November 12, 1993
Trocar for endoscopic surgery* United States 5,385,572 January 31, 1995
Method and apparatus for Germany P4418263.5 May 25, 1994
replacing a cannula*
Method and apparatus for Japan 112963/94 May 26, 1994
replacing a cannula*
Method and apparatus for United States 5,437,644 August 1, 1995
replacing a cannula*
</TABLE>
* Assigned to Ethicon Endo-Surgery, Inc. with license to Cordis Innovasive
Systems, Inc.
-14-
<PAGE>
TRADEMARKS
<TABLE>
<CAPTION>
TRADEMARK COUNTRY REGN/APPLN
--------- ------- ----------
<S> <C> <C> <C>
1. ATLAS Benelux 453,921
International Registration 537,063
Denmark 06 986-1990
Finland 112,866
Ireland 130,929
United Kingdom 1,559,120
2. HAWKVISION Benelux 564,550
International Registration 640,757
United Kingdom 2,029,274
3. LIGHTOUCH Benelux 559,395
International Registration 634,240
United Kingdom 2,013,166
4. OMNISHUNT United States 1,602,100
Benelux 476,926
5. ORBIS-SIGMA United States 1,612,836
Benelux 446,700
International Registration 531,693
Canada 395,796
Denmark 08 398-1991
Finland 109,287
Ireland 128,481
Japan 2,571,829
Norway 140,936
Sweden 222,897
United Kingdom 1,355,753
6. SECOR United States 1,416,512
Benelux 402,972
International Registration 492,374
Denmark 0010/86
United Kingdom B123,0202
Norway 127,864
</TABLE>
-15-
<PAGE>
<TABLE>
<CAPTION>
TRADEMARK COUNTRY REGN/APPLN
--------- ------- ----------
<S> <C> <C> <C>
Sweden 199,767
7. CORDIS MINIPORT Benelux 460,991
International Registration 543,819
Denmark 7370-1990
Finland 129,956
Norway 144,286
Sweden 230,494
United Kingdom 1,389,454
8. CORDIS MPAP United States 1,625,836
Benelux 461,100
International Registration 543,821
Denmark 7371-1990
Finland 129,955
Norway 144,187
Sweden 230,492
United Kingdom 1,389,453
9. CORDIS Benelux 460,992
MULTIPURPOSE International Registration 543,820
ACCESS PORT Denmark 7372-1990
Finland 129,954
Norway 144,188
Sweden 230,493
United Kingdom 1,389,455
10. CORDIS-SECOR Japan 2,252,933
11. CORDIS-SECOR Japan 2,252,934
(Katakana Characters)
</TABLE>
Trade marks and trade mark applications numbered 1 to 11 were acquired from
Johnson & Johnson as part of the acquisition of the Cordis Neuroscience business
dated April 11, 1997. Numbers 1 to 11 are registered in the name of Cordis
Europa N.V. save that the US trade marks set out in numbers 4 to 6 and 8 are
registered in the name of Seller and the Canadian trade mark set out in number 5
is registered in the name of Cordis Corporation. Cordis Europa N.V. and Cordis
Corporation are Affiliates of Johnson & Johnson. The beneficial interest in such
trade marks have been transferred to the Companies.
-16-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
12. CRYOTECH United Kingdom 1560476
United States 74/555391
13. CRYOTECH logo (x2) United Kingdom 1560323
1565601
United States 74/555392 (suspended)
14. HCS2000 (series of 3) United Kingdom 1577747 (abandoned)
15. LCS2000 (series of 3) United Kingdom 1563254 (abandoned)
United States 74/564754 (abandoned)
</TABLE>
Trade marks and trade mark applications numbered 12 to 15 are registered in the
name of Cryogenic Technology Limited while the beneficial interest has been
transferred to SCL pursuant to an asset purchase agreement between (1) Cryogenic
Technology Limited, (2) SCL and (3) Spembly dated August 30, 1995.
<TABLE>
<S> <C> <C> <C>
16. SONOCUT Sweden 209645
17. SWEDEMED Sweden
18. SELECTOR Japan 4040537
United Kingdom 1367059
United States 1629037
19. AMOILS United Kingdom 1138472
20. CRYONEEDLE United Kingdom 1559062
21. ENDOCRYO United Kingdom 1559059
United States 74/515948
(published for opposition - fifth extension granted (October 14, 1997)).
22. NEUROSTAT United Kingdom B1074084
23. PULSAR United Kingdom B1259448
</TABLE>
Trade marks and trade mark applications numbered 16 to 23 are registered in the
name of Spembly.
-17-
<PAGE>
LICENSED TRADEMARKS
HAKIM
-18-
<PAGE>
AMENDMENT NO. 1
TO
PURCHASE AGREEMENT
This Amendment No. 1 to the Purchase Agreement dated May 8, 1998 by and
between Elekta AB (Publ), a corporation organized and existing under the laws of
Sweden (the "Seller") and Nitinol Medical Technologies, Inc., a corporation
organized under the laws of the State of Delaware (the "Buyer") is entered into
as of July 8, 1998 by and between the Seller and the Buyer.
WHEREAS, the Buyer and the Seller have agreed to amend the Purchase
Agreement of hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual promises and undertakings
herein contained, and for other good and valuable consideration, the parties
agree as follows:
1. All capitalized terms used herein shall have the meanings assigned to them
in the Purchase Agreement.
2. Section 5.6 of the Purchase Agreement is hereby amended by adding the
following to the end thereof:
", except for (i) the promissory notes referred to on Exhibit 5.6 attached
hereto and (ii) trade accounts receivable held by the Acquired Companies due
from the Seller and/or its Affiliates (other than the Acquired Companies) as of
April 30, 1998 (the "Acquired Companies' Receivables from Group") and (iii)
trade accounts receivable held by Seller and/or its Affiliates (other than the
Acquired Companies) due from the Acquired Companies as of April 30, 1998 (the
"Group's Receivables from the Acquired Companies"). Effective as of the
Closing, Buyer shall cause the Acquired Companies to transfer the Acquired
Companies' Receivables from Group to Elekta Instrument AB, an Affiliate of
Seller. Effective as of the Closing, Seller shall, and shall cause its
Affiliates to, transfer the Group's Receivables from the Acquired Companies
(except for the account payable owed by EIL to Seller totalling SEK 3,866,070
relating to the Birmingham Surgiscope and the account payable from ESRL to
Seller totalling SEK 1,723,962.50 relating to the Marseilles Leksell Gamma Plan)
to such Affiliates of Buyer as may be designated by Buyer. On or before July 22,
1998, the Seller shall provide the Buyer with a written itemization of the
Group's Receivables from the Acquired Companies, indicating the amount of the
trade account receivable due to the Seller and each Affiliate of the Seller, as
the case may be, from each Acquired Company as of April 30, 1998, certified as
accurate and complete by the Chief Financial Officer of the Seller. The Seller
shall cause its Affiliates to promptly execute and deliver to the Buyer any
additional transfer of the Group's Receivables from the Acquired Companies as
the Buyer may request after receipt of such itemization from the Seller (except
for the account payable owed by EIL to Seller totalling SEK 3,866,070 relating
to the Birmingham Surgiscope and the account payable from ESRL to Seller
totalling SEK 1,723,962.50 relating to the Marseilles Leksell Gamma Plan)."
3. The Schedule of Assets to the Purchase Agreement is hereby amended by
adding the following to the end thereof:
1
<PAGE>
"(11) The following promissory notes, each dated April 30, 1998, payable to
the Seller, copies of which are attached:
<TABLE>
<CAPTION>
Borrower Amount Rate Approximate USD
- -------- ------ ---- ---------------
<S> <C> <C> <C>
Elekta Holding SA, France FF 66,838,000 0.1655 $11,061,689
Elekta Holding SA, France ESP 2,500,000 0.0066 $ 16,500
Elekta Instruments SA., Spain ESP 16,450,000 0.0066 $ 108,570
Elekta Instruments Ltd., UK GBP 350,912.64 1.672 $ 586,726
Spembly Medical Ltd., UK GBP 1,129,746.69 1.672 $ 1,888,936
Spembly Cryosurgery Ltd., UK GBP 350,000 1.672 $ 585,200
-----------
Total $14,247,621
===========
</TABLE>
(12) Trade accounts receivable held by the Seller and/or its Affiliates
(other than the Acquired Companies) from any of the Acquired Companies as of
April 30, 1998, excluding (i) accounts payable from ESRL to the Seller totalling
1,723,962.50 SEK relating to the Marseilles Leksell Gamma Plan and (ii) accounts
payable owed by EIL to the Seller totalling 3,866,070 SEK relating to the
Birmingham Surgiscope."
4. There shall be added a new paragraph (f) at the end of Section 15.4, as
follows:
"(f) MODUS Consignment Inventory. At any time prior to December 31, 1998,
---------------------------
the Buyer may, by giving written notice to the Seller, require the Seller to
repurchase, at book value, any MODUS consignment inventory which is suitable
exclusively for facial use and, following such repurchase, the Buyer shall
deliver such inventory to EII."
5. Notwithstanding any other provision of the Purchase Agreement to the
contrary, the Purchase Price shall be $32,760,261 and no further adjustments
shall be made in such Purchase Price, except for indemnification payments
pursuant to Section 14.6 of the Purchase Agreement that are treated as a
reduction in the Purchase Price.
6. Except as set forth above, the Purchase Agreement is hereby ratified and
confirmed in all respects.
IN WITNESS WHEREOF, the Buyer and the Seller have each caused this
amendment to be duly executed in its corporate name by a duly authorized
representative as of the date first above written.
SELLER:
ELEKTA AB (PUBL)
/s/ Jonas Serlachius
-------------------------------
By: JONAS SERLACHIUS
----------------------------
Title: Attorney-in-Fact
-------------------------
BUYER:
NITINOL MEDICAL TECHNOLOGIES, INC.
/s/ TM Tully
-------------------------------
By: TM TULLY
----------------------------
Title: CEO
-------------------------
2
<PAGE>
Exhibit 5.6
Promissory Notes Payable to the Seller, each dated April 30, 1998
Borrower Amount Rate Approximate USD
- -------- ------ ---- ---------------
Elekta Holding SA, France FF 66,838,000 0.1655 $ 11,061,689
Elekta Holding SA, France ESP 2,500,000 0.0066 $ 16,500
Elekta Instruments SA, Spain ESP 16,450,000 0.0066 $ 108,570
Elekta Instruments Ltd., UK GBP 350,912.64 1.672 $ 586,726
Spembly Medical Ltd., UK GBP 1,129,746.69 1.672 $ 1,888,936
Spembly Cryosurgery Ltd., UK GBP 350,000 1.672 $ 585,200
------------
Total $ 14,247,621
============
3
<PAGE>
EXHIBIT 10.1
ASSIGNMENT AND ASSUMPTION AGREEMENT
This ASSIGNMENT AND ASSUMPTION AGREEMENT (this "Agreement") is made and
entered into on July 8, 1998 (the "Closing Date"), by and among ELEKTA AB
(publ), a Swedish corporation ("Seller") and NITINOL MEDICAL TECHNOLOGIES, INC.,
a Delaware corporation ("Buyer").
RECITALS:
WHEREAS, Seller and Buyer have entered into that certain Purchase Agreement
dated as of May 8, 1998 (the "Purchase Agreement"), providing for, among
other things, the sale by the Seller and its Affiliates, and the purchase by
Buyer, of certain assets of the Seller and its Affiliates constituting the
Business;
WHEREAS, the execution and delivery of this Agreement by the parties hereto
is a condition to the obligation of the other parties hereto to consummate the
transactions contemplated by the Purchase Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual promises,
representations, warranties and covenants set forth herein, the parties hereto
hereby agree as follows:
1. Defined Terms. Capitalized terms used in this Agreement and not
-------------
otherwise defined herein are used herein as defined in the Purchase Agreement.
2. Assignment of Contracts. Seller and the Companies hereby convey and
-----------------------
assign to the Buyer, its successors and assigns, all of their title, rights and
interests in and to the contracts listed on Exhibit 3.9 of the Purchase
Agreement (the "Assigned Contracts").
3. Assumption of Assigned Contracts. Buyer hereby undertakes, assumes and
--------------------------------
agrees, subject to the limitations contained herein, to perform, pay or
discharge when due those liabilities of the Seller and its Affiliates under the
Assigned Contracts.
4. Contested Liabilities. Nothing contained herein shall require Buyer to
---------------------
perform, pay or discharge any debts, liabilities or obligations assumed hereby
so long as Buyer shall in good faith contest or cause to be contested and amount
or validity thereof.
5. Indemnification. Nothing contained herein shall reduce or otherwise
---------------
affect Buyer's rights to be indemnified by the Seller in accordance with the
terms of the Purchase Agreement.
6. Consequences of Absence of Consent. Nothing in this Agreement shall be
----------------------------------
deemed to constitute or require an assignment or an attempt to assign any
contract or other agreement with any third party if the attempted assignment
thereof without the consent of any such third party would constitute a breach
thereof or adversely affect in any way the rights of
1
<PAGE>
Seller and Buyer thereunder. If any such consent has not been obtained at or
prior to the Closing Date, or the attempted assignment of such contract or
agreement without such consent would have an adverse effect on such rights or
Buyer would not in fact receive such rights, Seller shall cooperate with Buyer,
at Buyer's expense, in any reasonable arrangement designed to provide for Buyer
the benefits thereunder, including enforcing for the benefit of Buyer any or all
rights of Seller (or any of its Affiliates) against any such third party arising
out of the breach or cancellation thereof by any such third party or otherwise.
7. AFFILIATE INVOLVEMENT. It is understood that both Seller and Buyer
---------------------
conduct parts of their respective businesses through and in conjunction with
Affiliates and are likely to do so in the future. In this Agreement, references
to Affiliates are made in certain provisions for the sake of clarity, but some
repeated references have been avoided because the terms "Seller" and "Buyer" are
intended to encompass the Affiliates of each insofar as that is necessary to
give full effect to the rights and obligations of the parties hereunder and to
prevent results which are anomalous in the context of the transactions
contemplated hereby. The covenant or agreement of a party to do or not to do a
thing is also such party's covenant or agreement to cause its relevant
Affiliates to do or not to do that thing. A covenant, agreement, representation
or warranty for the benefit of a party is also for the benefit of such party's
relevant Affiliates. The act, omission or knowledge of a party's relevant
Affiliate is attributed to the party. Damages suffered by a relevant Affiliate
of a party are also suffered by the party.
8. DISPUTE RESOLUTION
------------------
8.1 OBJECTIVE. This Agreement will be implemented by the parties and
---------
their Affiliates in more than one jurisdiction. The negotiations of the parties
have focused primarily on the ordinary meaning of the provisions of this
Agreement and not on the legal effects those provisions might have under the
laws of a particular jurisdiction. One of the purposes of this Section is to
minimize the possibility of an unexpected reordering of agreed rights and
obligations.
8.2 NO AFFILIATE ACTIONS. Neither party shall permit any of its
--------------------
Affiliates to initiate or participate in any legal proceeding in connection with
any controversy or claim arising out of or relating to this Agreement or the
transactions contemplated hereby; rather, Buyer and Seller shall settle all such
controversies or claims on behalf of their Affiliates by arbitration conducted
by the parties in accordance with this Section. Buyer and Seller shall cause
their Affiliates to comply with any award rendered in an arbitration proceeding
pursuant hereto.
8.3 ARBITRATION. Any controversy or claim arising out of or relating
-----------
to this Agreement or the transactions contemplated hereby shall be determined by
arbitration in accordance with the Rules of Arbitration of the London Court of
Arbitration, and judgment upon the award rendered by the arbitral tribunal may
be entered in any court having jurisdiction thereof. The place of arbitration
shall be London, England, and the language of the arbitration shall be English.
The arbitral tribunal shall apply the substantive laws of the State of Georgia
without regard to the conflicts of laws principles of the State of Georgia.
8.4 GOVERNING LAW. This Agreement shall be governed by and
-------------
interpreted in accordance with the laws of the State of Georgia.
2
<PAGE>
9. Conflict. If there is any conflict between the terms of this Agreement
--------
and the Purchase Agreement, the terms of the Purchase Agreement shall prevail.
Nothing contained in this Agreement shall be deemed to amend any provision of
the Purchase Agreement.
IN WITNESS WHEREOF, Buyer and Seller have each caused this Agreement to be
duly executed in its corporate name by a duly authorized representative as of
the date first above written.
SELLER:
ELEKTA AB (PUBL)
By: /s/ Jonas Serlachius
---------------------------------
Title: Attorney-in-Fact
------------------------------
BUYER:
NITINOL MEDICAL TECHNOLOGIES, INC.
By: /s/ Thomas M. Tully
---------------------------------
Title: CEO
------------------------------
3
<PAGE>
EXHIBIT 10.2
TAX COVENANT
as of
July 8, 1998
Between
ELEKTA AB (PUBL)
and
NITINOL MEDICAL TECHNOLOGIES, INC.
relating to the acquisition of the entire
issued share capital of
ELEKTA INSTRUMENTS LIMITED
1
<PAGE>
DEED OF COVENANT
This DEED of COVENANT, dated as of July 1998 between ELEKTA AB (PUBL) a Swedish
corporation ("Seller") and NITINOL MEDICAL TECHNOLOGIES, INC., a Delaware
corporation ("Buyer")
WITNESSETH
This DEED is entered into pursuant to the Agreement (as defined below).
1 INTERPRETATION.
--------------
1.1 In this Deed and unless the context otherwise requires words and
expressions referred to in the Agreement shall have the meanings set out therein
save that the following expressions shall have the following meanings:
Expression Meaning
---------- -------
"the Accounting Date" 30th April 1998
"Accounts" The [audited] accounts of each of the
Companies for the financial year ended
on the Accounting Date comprising a
balance sheet, a profit and loss
account, notes and directors' and
auditors reports, which are consolidated
in the "Closing Balance Sheet" referred
to in the Agreement.
"ACT" Advance corporation tax
"Agreement" The agreement dated 8th May 1998
herewith between (1) Seller and (2)
Buyer concerning the sale of the
Seller's neurosurgical instruments
business
"the Auditors" The auditors for the time being of each
of the Companies
"Assessment" A claim, assessment, notice, demand or
other document issued or action taken by
or on behalf of a Taxation Authority by
which a Company is liable or is sought
to be made liable to make payment to a
Taxation Authority or is denied or
sought to be denied a Relief
"Buyer's Relief" (a) Any Relief which was treated as an
asset of any of the Companies in
their respective Accounts;
2
<PAGE>
(b) any Relief which was taken into
account in computing (and so
reducing or eliminating) any
provision for deferred tax which
appears in the Accounts or which
would have appeared in the
Accounts but for the presumed
availability of such Relief; and
(c) any Relief which arises wholly or
mainly as a result of any Event
which has occurred or occurs after
the Accounting Date
"Claim" Any notice, demand, assessment, letter
or other document issued, or action
taken, by or on behalf of any Taxation
Authority and the submission of any
Taxation form, return or computation
from which, in either case, it appears
that any of the Companies are or may be
subject to a Liability to Taxation or
other liability in respect of which the
Seller is or may be liable under c1ause
------
2
-
"Companies" EIL, SCL and Spembly
"Company" Any of the Companies
"Dispute" Any dispute, appeal, negotiations or
other proceedings in connection with a
Claim
"Event" Any event, fact or circumstance
including but not limited to:
(a) any transaction, action or
omission (whether or not any of
the Companies are party to it);
(b) the earning, receipt or accrual
for any Taxation purpose of any
income, profits or gains;
(c) the incurring for any Taxation
purpose of any loss or
expenditure;
(d) the declaration, payment or making
of any dividend or other
distribution;
(e) the sale and purchase of the
shares in the Companies pursuant
to the Agreement; and
3
<PAGE>
(f) Closing
"ICTA" Income and Corporation Taxes Act 1988
"Liability to Taxation" (a) Any liability of any of the
Companies to make an actual
payment of Taxation; and
(b) the use by any of the Companies of
any Buyer's Relief to reduce or
eliminate any liability of any of
the Companies to make an actual
payment of Taxation in respect of
which Seller would otherwise have
been liable under clause 2
--------
"Relief" Any relief, allowance, exemption, set-
off, deduction or credit available from,
against or in relation to Taxation or in
the computation for any Taxation purpose
of income, profits or gains
"Saving" The reduction or elimination of any
liability of any of the Companies to
make an actual payment of any Taxation
in respect of which the Seller would not
have been liable under clause 2, by the
--------
use of any Relief arising wholly as a
result of a Liability to Taxation in
respect of which the Seller has made a
payment under clause 2
--------
"Tax" and "Taxation" (a) Any tax, duty, impost or levy,
past or present, of the United
Kingdom or elsewhere, whether
governmental, state, provincial,
local governmental or municipal,
including but not limited to
income tax (including income tax
required to be deducted or
withheld from or accounted for in
respect of any payment under
section 203 ICTA or otherwise),
corporation tax, ACT, capital
gains tax, inheritance tax, VAT,
customs and other import or export
duties, rates, stamp duty, stamp
duty reserve tax, national
insurance and social security
contributions; and
(b) any fine, penalty, surcharge,
interest or other imposition
relating to any tax, duty, impost
or levy mentioned in paragraph (a)
-------------
of this definition or to any
account, record, form, return or
4
<PAGE>
computation required to be kept,
preserved, maintained or submitted
to any person for the purposes of
any such tax, duty, impost or levy
"Taxation Authority" Any authority, whether of the United
Kingdom or elsewhere, competent to
impose, assess or collect Taxation,
including but not limited to the Board
of Inland Revenue, the Commissioners of
Customs and Excise and the Department of
Social Security
"VAT" Value added tax.
1.2 references to Events include Events which are deemed to have occurred
for any Taxation purpose and references to income, profits or gains earned,
received or accrued for any Taxation purpose include income, profits or gains
which are deemed to have been earned, received or accrued for any Taxation
purpose and any reference to any Event which occurred on or before Closing shall
be deemed to include a series or combination of Events, the first of which
occurred outside the ordinary course of business on or before Closing and those
occurring after Closing occurred within the ordinary course of trading;
1.3 references to the loss of a Relief include the disallowance (whether
in whole or in part) of a Relief and the failure to obtain (whether in whole or
in part) a Relief (whether as a result of the surrender of the Relief to another
company or otherwise);
1.4 references to any statute or statutory provisions will, unless the
context otherwise requires, be construed as including references to any earlier
statute or the corresponding provisions of any earlier statute, whether repealed
or not, directly or indirectly amended, consolidated, extended or replaced by
such statute or provisions, and to any subsequent statute or the corresponding
provisions of any subsequent statute directly or indirectly amending,
consolidating, extending, replacing or re-enacting the same, and will include
any orders, regulations, instruments or other subordinate legislation made under
the relevant statute or statutory provisions.
2 COVENANT. Subject to the provisions of this Deed, the Seller covenants with
--------
the Buyer (for itself and as trustee for its successors in title) to pay to the
Buyer an amount equal to the amount of any Liability to Taxation which has
arisen or arises as a result of or in connection with any Event which occurred
on or before Closing, whether or not such Liability to Taxation has been
discharged on or before Closing and all reasonable costs and expenses incurred
by the Buyer in connection with any successful claim under this Deed.
3 QUANTIFICATION. For the purposes of clause 2 the amount of a Liability to
-------------- --------
Taxation will be determined as follows:
3.1 the amount of a Liability to Taxation falling within paragraph (a)
-------------
of the definition of that expression in clause 1.1 will be the amount of the
----------
actual payment of Taxation which any of the Companies are liable to make; and
5
<PAGE>
3.2 the amount of a Liability to Taxation falling within paragraph (b) of
-------------
the definition of that expression in clause 1.1 will be the amount of Taxation
----------
saved by the Companies as a result of the use of the Buyer's Relief.
4 Exclusions.
----------
4.1 The Seller will not be liable under this Deed unless within seven
years after Closing the Buyer has given written notice to the Seller of any
Claim whatsoever relating to such Liability to Taxation.
4.2 Clause 2 does not apply to a liability hereunder to the extent that:
--------
4.2.1 any provision or reserve in respect of the liability is made in
the Accounts or discharge thereof is reflected in the Accounts; and/or
4.2.2 the liability arises in consequence of an Event which has
occurred since the Accounting Date in the relevant Company's ordinary course of
trading; and/or
4.2.3 it arises or is increased or any allowance, provision or
reserve for the liability made in the Accounts is insufficient by reason of the
imposition of or increase in the rates of Tax (whether or not retrospective) as
a consequence of any change in law, regulation or published revenue authority
practice or policy or the withdrawal of any concession occurring after Closing
with or without retrospective effect; and/or
4.2.4 the liability arises in consequence of a voluntary act or
omission of the Buyer or a Company or any member of the Buyer's group after
Closing otherwise than in the ordinary course of business of a Company; and/or
4.2.5 any amount otherwise subject to the covenant contained in
clause 2 has been recovered under the Agreement; and/or
- --------
4.2.6 a Company or the Buyer has already recovered from any other
person any sum in respect of the Liability for Tax in question; and/or
4.2.7 the liability would not have arisen but for a disclaimer, of,
or election to reduce, capital allowances or any other claim, election,
surrender or disclaimer where such claim, election, surrender or disclaimer is
made after Closing and was not assumed to have been made, given or done in the
Accounts; and/or
4.2.8 the liability arises as a result of any matter or thing done or
omitted to be done prior to Closing by the Seller or the Companies at the
request of the Buyer; and/or
4.2.9 the liability arises in respect of stamp duty or stamp duty
reserve tax arising by virtue of the agreement to sell and purchase the shares
or the assets pursuant to the Agreement or the completion of the transfer of
such shares or assets; and/or
4.2.10 the liability would not have arisen but for or has been
increased by a failure or omission by a Company to make any proper claim,
election, surrender or disclaimer or to give any notice or consent or do any
other thing after Closing, the making
6
<PAGE>
giving or doing of which was taken into account or assumed in computing the
provision for Tax (including the provision for deferred tax) in the Accounts;
and/or
4.2.11 the liability would not have arisen or is increased because
notice in writing of any Assessment which does or may give rise to a liability
under this Deed (specifying in reasonable detail, so far as reasonably
practicable, the event matter or default which gives rise to the Assessment and,
if known to the Buyer, the amount of the liability) is not given to the Seller
in accordance with clause 6.1 of this Deed; and/or
----------
4.2.12 the liability is to fines, penalties or interest in respect of
any Tax which arises or which is increased as a result of the failure of the
Buyer to comply with its obligations under this Deed or under the Agreement;
and/or
4.2.13 there is available to a Company any Relief, other than a
Relief arising after Closing or a Relief which is taken into account as an asset
in the Accounts, which is or can be offset against the liability in question
(and so that the Group Member shall take all necessary steps to claim the
benefit of any such Relief); and/or
4.2.14 the liability is in respect of any Tax which has been paid or
discharged prior to Closing at no cost to the Buyer;
4.2.15 the liability arises or is increased by a change in the
accounting principles, bases, policies and methods of a Company after Closing;
and/or
4.2.16 the liability to fines, penalties or interest in respect of
any Tax which arises or which is increased as a result of the failure of the
Buyer to comply with its obligations under the Agreement or this Deed, and/or
4.2.17 the liability is increased, or would not have arisen, but for
the Buyer's residence for Tax purposes outside the United Kingdom; and/or
4.2.18 the liability arises from the cessation of trade or the
winding up of a Company or a major change in the nature of conduct of the trade
of a Company which, in any case, occurs after Closing; and/or
4.2.19 the liability arises in respect of actual as opposed to deemed
profits which are earned or received by a Company; and/or
4.2.20 the Seller has made payment in respect of the liability
pursuant to section 767A et seq ICTA or any other provision in the UK or
elsewhere imposing liability on the Seller or any connected person (howsoever
defined) for Tax primarily chargeable against a Company (and so that the Seller
shall be entitled to pay relevant amounts assessed under any such provision
directly to the Tax Authority in question towards discharge of its obligations
hereunder or under the Agreement).
4.3 The provisions of section 14.3 of the Agreement (other than the
provision concerning the period during which written notice of a claim must be
made) shall operate to limit the liability of the Seller under this Deed.
7
<PAGE>
4.4 The Seller shall not be liable under this Deed to the extent more than
one claim is made, or action brought, by the Buyer in respect of loss in respect
of the same facts or subject matter.
5 Due Date for Payment.
--------------------
5.1 The due date for the making of a payment by the Seller under this Deed
will be:-
5.1.1 the date falling ten clear business days after the Buyer has
served written notice on the Seller demanding such payment; or
5.1.2 in any case involving a liability of any of the Companies or
the Buyer to make an actual payment (whether or not a payment of Taxation), the
later of the date mentioned in clause 5.1.1 and the date falling seven clear
------------
business days before the last date upon which the payment is required to be made
to the person entitled to the payment (after taking into account any
postponement of the due date for payment of any Taxation which is obtained).
5.2 If any payment required to be made by the Seller under this Deed is
not made by the due date, ascertained in accordance with clause 5.1. then,
----------
except to the extent that the Seller's liability under clause 2 compensates the
--------
Buyer for the late payment by virtue of the definition of the expression
"Taxation" in clause 1.1 extending to interest, such payment will bear interest
----------
from the due date for payment at the annual rate of 2 per cent above the base
lending rate from time to time of Barclays Bank plc, accruing on a daily basis
until payment is made, whether before or after any judgment.
6 Claims Procedure.
----------------
6.1 The Buyer will as soon as reasonably practicable give notice of any
Claim to the Seller, provided that the giving of such notice will not be a
condition precedent to the liability of the Seller under clause 2.
--------
6.2 Provided that the Seller indemnifies and secures the Company to the
reasonable satisfaction of the Buyer against all reasonable costs and expenses
(including interest on overdue Taxation) which may be incurred thereby, the
Buyer will procure that the Company, at the Seller's cost and expense, takes
such action and gives such information and assistance in connection with its
Taxation affairs as the Seller may reasonably request to dispute, appeal
against, settle or compromise any Claim, including, but not limited to,:-
6.2.1 applying to postpone (so far as legally possible) the payment
of any Taxation; and
6.2.2 allowing the Seller to undertake, at its own cost and expense,
the conduct of the Dispute.
8
<PAGE>
6.3 The Seller will as soon as reasonably practicable inform the Buyer of
all matters relating to any Dispute conducted by or at the request of the Seller
and will provide the Buyer with copies of all correspondence and other documents
relating thereto.
6.4 Without prejudice to the liability of the Seller under this Deed:
6.4.1 the Buyer will not be obliged to prevent the Company from
making a payment of Taxation at the time necessary to avoid incurring any fine,
penalty, surcharge, interest or other imposition in respect of any unpaid
Taxation; and
6.4.2 if the Seller fails within fifteen business days of the Buyer
giving written notice requiring it to do so to inform the Buyer of any action
which it wishes the Buyer to procure any of the Companies to take under clause
------
6.2, the Buyer will be entitled to procure that the Companies settle or
- ---
compromise any Claim on such terms as it determines in its absolute discretion.
7 SAVINGS.
-------
7.1 If (at the Seller's request) the Auditors determine that any of the
Companies have obtained a Saving, the Buyer will as soon as reasonably
practicable thereafter, repay to the Seller the lesser of:
7.1.1 the amount of the Saving (as determined by the Auditors); and
7.1.2 the amount paid by the Seller under clause 2 in respect of the
--------
Liability to Taxation which gave rise to the Saving less any part of that amount
previously repaid to the Seller under any provision of this Deed.
7.2 In determining whether any of the Companies have obtained a Saving,
the Auditors will act as experts and not as arbitrators and their determination
will (in the absence of manifest error) be conclusive and binding on the
parties.
8 OVER PROVISIONS AND UNDERSTATEMENT.
----------------------------------
8.1 The amount of the Sellers' liability under this Deed shall be reduced
by: (i) the amount (if any) by which any provision for any Liability to Taxation
in the Accounts is confirmed by the relevant Group Member's auditors at the
request of any party to be an over provision; and/or (ii) the amount (if any) by
which the value attributed in the Accounts to any Relief which is treated as an
asset therein is confirmed by the relevant Company's auditors at the request of
any party shall be understated, and to the extent that any such over provision
or under-statement shall be so taken into account in computing the Seller's
liability under this Deed, it shall not thereafter be regarded as an over
provision or understatement in the Accounts.
8.2 If the Seller shall have paid any amount under this Deed and
subsequently: (i) the amount (if any) by which any provision for any Liability
to Taxation in the Accounts is confirmed by the relevant Company's auditors at
the request of any party to be an over provision; and/or (ii) the amount (if
any) by which the value attributed in the Accounts to any Relief which is
treated as an asset therein is confirmed by the relevant Company's auditors at
9
<PAGE>
the request of any party shall be understated, the Buyer shall or shall procure
that the relevant Company shall repay to the Seller an amount equal to the
lesser of such payment and the amount of the over provision or the under-
statement (as the case may be) and the amount of any relevant over provision or
under-statement shall thereafter for the purposes of this clause 9 be treated as
--------
reduced (or, in the case of an understatement, increased) by the amount of such
repayment hereunder.
8.3 If the Buyer shall discover that there has been such an over provision
or under-statement it shall as soon as reasonably practicable give to the Seller
such details of it of which the Buyer shall be aware, together with such
relevant information as the Seller shall (at the Seller's expense) reasonably
request for the purposes of determining the extent of such over provision or
under-statement.
9 BUYER'S COVENANT.
----------------
The Buyer covenants to pay to the Seller:
9.1 any Liability to Taxation of a Company in respect of which the Seller
is liable to make a payment to the Buyer pursuant to this Deed and where the
assessment under section 767A ICTA would not have been made but for the failure
by a Group Member to discharge that liability to Taxation; and
9.2 where the Seller has made a payment in respect of Taxation to the
Buyer under this Deed and a Company fails to discharge such Taxation, an amount
equal to any Liability to Taxation which subsequently becomes payable by the
Seller under section 767A ICTA in respect of the same subject matter.
10 RECOVERY FROM OTHER PERSONS.
---------------------------
10.1 If the Company recovers from any other person (including any
Taxation Authority) any amount which is referable to a Liability to Taxation or
other liability of any of the Companies in respect of which the Seller has made
a payment under clause 2, the Buyer will repay to the Seller the lesser of:
--------
10.1.1 the amount so recovered (less any reasonable costs and
expenses incurred by the Company); and
10.1.2 the amount paid by the Buyer under clause 2 in respect of the
--------
Liability to Taxation or other liability in question less any part of such
amount previously repaid to the Buyer under any provision of this Deed.
10.2 Upon the Buyer becoming aware that the Companies are entitled to
recover any amount mentioned in clause 9.1, the Buyer will promptly give notice
----------
of that fact to the Seller and provided that the Seller indemnifies and secures
the Company to the reasonable satisfaction of the Buyer against all reasonable
costs and expenses which may be incurred thereby, the Buyer will procure that
the Company, at the Seller's cost and expense, takes such action as the Seller
may reasonably and promptly request to effect such recovery.
10
<PAGE>
11 WITHHOLDINGS. All sums payable by the Seller under this Deed shall be paid
------------
free and clear of all deductions or withholdings unless the deduction or
withholding is required by law, in which event the Seller shall pay such
additional amount as shall be required to ensure that the net amount received by
the Buyer under this Deed will equal the full amount which would have been
received by it had no such deduction or withholding been required to be made
provided that if the Buyer subsequently obtains a credit, repayment or other
form of relief for Taxation in respect of the amount withheld or deducted it
shall, as soon as reasonably practicable after it obtains the benefit of the
credit, repayment or other form of relief account to the Seller for the lesser
of: (a) the amount of the benefit of the credit, repayment or other form of
relief less the reasonable costs and expenses incurred in obtaining such credit,
repayment or other benefit; and (b) the amount of the withholding or deduction.
12 TAX ON INDEMNITY PAYMENTS. If any Taxation Authority brings into charge to
-------------------------
tax any sum paid to the Buyer (other than a payment to the Buyer in its capacity
as trustee for its successors in title or interest payable under Clause 5.2)
under this Deed (including in circumstances when any Relief is available in
respect of such charge to tax) then the Seller shall pay such additional amount
as shall be required to ensure that the total amount paid, less the tax
chargeable on such amount (or that would be so chargeable but for such Relief),
is equal to the amount which would otherwise be payable under this Deed.
13 GENERAL. All payments by the Seller under this Deed will be treated as
-------
repayments by the Seller of the consideration paid pursuant to the Agreement.
14 GOVERNING LAW. This Deed shall be governed by and interpreted in accordance
-------------
with the law of Georgia.
15 DISPUTE RESOLUTION. Any controversy or claim arising out of or relating to
------------------
this Agreement shall be finally settled by arbitration as provided in section
17.3 of the Agreement.
11
<PAGE>
IN WITNESS of which this Deed has been duly executed by the parties and
Delivered on the date set out above.
SIGNED by the undersigned ) /s/ Jonas Serlachius
----------------------
for and on behalf ) By: Jonas Serlachius
of ELEKTA AB (PUBL) and ) Title: Attorney-in-Fact
DELIVERED as a Deed )
SIGNED by the undersigned ) /s/ Thomas M. Tully
----------------------
for and on behalf ) By: TM Tully
of NITINOL MEDICAL ) Title: CEO
TECHNOLOGIES, INC. and )
DELIVERED as a Deed )
12
<PAGE>
EXHIBIT 10.3
________________________________________________________________________
SUBORDINATED NOTE
AND
COMMON STOCK
PURCHASE AGREEMENT
BY AND AMONG
NITINOL MEDICAL TECHNOLOGIES, INC.,
WHITNEY SUBORDINATED DEBT FUND, L.P.
AND,
FOR CERTAIN PURPOSES,
J.H. WHITNEY & CO.
_________________________________
DATED AS OF JULY 8, 1998
_________________________________
_______________________________________________________________________
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
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<C> <S> <C>
ARTICLE 1 DEFINITIONS 1
1.1 Definitions 1
1.2 Accounting Term: Financial Statements 13
1.3 Knowledge of the Company 13
ARTICLE 2 PURCHASE AND SALE OF THE WSDF NOTE AND THE PURCHASED SHARES 13
2.1 Purchase and Sale of the WSDF Note and the Purchased Shares 13
2.2 Fees at Closing 14
2.3 Closing 14
2.4 Financial Accounting Positions; Tax Reporting 14
ARTICLE 3 CONDITIONS TO THE OBLIGATION OF THE
PURCHASER TO PURCHASE THE WSDF NOTE AND THE PURCHASED SHARES 15
3.1 Representations and Warranties 15
3.2 Compliance with this Agreement 15
3.3 Secretary's Certificates 15
3.4 Documents 15
3.5 Opinion of Counsel 16
3.6 Approval of Counsel to the Purchaser 16
3.7 Consents and Approvals 16
3.8 No Material Judgment or Order 16
3.9 Pro Forma Balance Sheet 16
3.10 Goodstanding Certificates 16
3.11 No Material Adverse Change 17
3.12 Due Diligence 17
3.13 Certificate of Incorporation and By-Laws of the Company
and the Subsidiaries 17
3.14 Market Conditions 17
3.15 No Default or Breach 17
3.16 Elekta Purchase Agreement 17
3.17 Fairness Opinion 18
3.18 Facilities Fee and Transaction Fee 18
3.19 Registration Rights Agreement. 18
3.20 Security Documents. 18
ARTICLE 4 CONDITIONS TO THE OBLIGATION OF THE COMPANY
TO ISSUE AND SELL THE WSDF NOTE AND THE PURCHASED SHARES 18
4.1 Representations and Warranties 19
4.2 Compliance with this Agreement 19
</TABLE>
<PAGE>
<TABLE>
Page
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<C> <S> <C>
4.3 Consents and Approvals 19
4.4 Elekta Purchase Agreement 19
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE COMPANY 19
5.1 Corporate Existence and Power 19
5.2 Corporate Authorization; No Contravention 20
5.3 Governmental Authorization; Third Party Consents 20
5.4 Binding Effect 20
5.5 No Legal Bar 20
5.6 Litigation 20
5.7 Compliance with Laws 21
5.8 No Default or Breach 21
5.9 Title to Properties 21
5.10 Use of Real Property 22
5.11 Taxes 23
5.12 Financial Condition 25
5.13 ERISA -- Prohibited Transactions 26
5.14 Disclosure 26
5.15 Absence of Certain Changes or Events 27
5.16 Environmental Matters 27
5.17 Investment Company/Government Regulations 28
5.18 Subsidiaries 28
5.19 Capitalization 29
5.20 Private Offering 30
5.21 Broker's, Finder's or Similar Fees 30
5.22 Labor Relations 30
5.23 Employee Benefit Plans 31
5.24 Patents, Trademarks, Etc. 32
5.25 Potential Conflicts of Interest 34
5.26 Trade Relations 35
5.27 Outstanding Borrowings 35
5.28 Material Contracts 35
5.29 Insurance 35
5.30 Products Liability 36
5.31 Solvency 36
5.32 Year 2000 Systems 36
5.33 Elekta Purchase Agreement 36
5.34 Commission Documents 36
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER AND WHITNEY 37
6.1 Authorization; No Contravention 37
6.2 Binding Effect 37
6.3 No Legal Bar 37
6.4 Purchase for Own Account 38
6.5 Broker's, Finder's or Similar Fees 38
6.6 Governmental Authorization; Third Party Consent 38
</TABLE>
<PAGE>
<TABLE>
Page
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<C> <S> <C>
ARTICLE 7 INDEMNIFICATION 38
7.1 Indemnification 38
7.2 Procedure; Notification 39
ARTICLE 8 AFFIRMATIVE COVENANTS 40
8.1 Financial Statements and Other Information 41
8.2 Preservation of Corporate Existence 44
8.3 Payment of Obligations 45
8.4 Compliance with Laws 45
8.5 Inspection 45
8.6 Payment of Note 46
8.7 Insurance 46
8.8 Books and Records 46
8.9 Use of Proceeds 46
8.10 Initial Interest Payments 46
ARTICLE 9 NEGATIVE COVENANTS 47
9.1 Fundamental Changes; Consolidations, Mergers and Acquisitions 47
9.2 Transactions with Affiliates 47
9.3 No Inconsistent Agreements 47
9.4 Limitation on Indebtedness 47
9.5 Limitation on Liens 49
9.6 Dispositions of Assets 50
9.7 Limitations on Restricted Payments 51
9.8 Financial Covenants 51
9.9 Employee Benefit Plans 53
9.10 Limitation on Business of the Company 54
9.11 Investments 54
9.12 Contingent Obligations 54
9.13 Management Fees and Compensation 55
9.14 Fiscal Year 55
9.15 Subsidiaries 55
9.16 No Negative Pledges 55
9.17 No Restrictions on Subsidiary Distributions to the Company 55
9.18 Bank Accounts 55
ARTICLE 10 PREPAYMENT 56
10.1 Optional Prepayment 56
10.2 Mandatory Prepayment 56
ARTICLE 11 MISCELLANEOUS 56
11.1 Survival of Representations and Warranties 56
11.2 Dispositions by the Purchaser 56
11.3 Notices 56
11.4 Successors and Assigns 57
11.5 Termination 58
</TABLE>
<PAGE>
<TABLE>
Page
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<C> <S> <C>
11.6 Amendment and Waiver 58
11.7 Signatures; Counterparts 59
11.8 Headings 59
11.9 GOVERNING LAW 59
11.10 Determinations, Request or Consents 59
11.11 JURISDICTION, JURY TRIAL WAIVER, ETC. 59
11.12 Severability 60
11.13 Rules of Construction 60
11.14 Entire Agreement 60
11.15 Certain Expenses 61
11.16 Publicity 61
11.17 Further Assurances 61
</TABLE>
Exhibit A Form of WSDF Note
Exhibit B-1 Form of Legal Opinion of Hale and Dorr LLP
Exhibit B-2 Form of Legal Opinion of Collyer-Bristow
Exhibit B-3 Form of Legal Opinion of Nauta Dutilh
Exhibit C Form of Guarantee and Collateral Agreement
Exhibit D Form of UK Pledge Agreement
Exhibit E Form of Dutch Pledge Agreement
Exhibit F Form of Registration Rights Agreement
Exhibit G Form of Compliance Certificate
Exhibit H Financial Covenant Calculations
<PAGE>
Schedule 5.6 Litigation
Schedule 5.7 Compliance with Laws
Schedule 5.9(a) Title to Properties
Schedule 5.9(b) Title to Properties -- Leases
Schedule 5.10 Use of Real Property
Schedule 5.11 Taxes
Schedule 5.14(b) Material Adverse Effects
Schedule 5.15 Absence of Certain Changes or Events
Schedule 5.16 Environmental Matters
Schedule 5.18 Subsidiaries
Schedule 5.19(a) Capitalization
Schedule 5.19(b) Exchangeable Securities
Schedule 5.22 Labor Relations
Schedule 5.23(a) Employee Benefit Plans
Schedule 5.23(c) Prohibited Transaction
Schedule 5.23(d) COBRA
Schedule 5.24(a) Intellectual Property Exceptions
Schedule 5.24(b)(i) Patents, Copyrights and Trademarks
Schedule 5.24(b)(ii) IP Licenses - Licensee
Schedule 5.24(b)(iii) IP Licenses - Licensor
Schedule 5.24(e) Intellectual Property - Litigation
Schedule 5.24(h) Intellectual Property - Indemnification
Schedule 5.25 Potential Conflicts of Interest
Schedule 5.26 Trade Relations
Schedule 5.27 Outstanding Borrowings
Schedule 5.28 Material Contracts
Schedule 5.29 Insurance
Schedule 5.30 Products Liability
Schedule 5.32 Year 2000 Systems
Schedule 9.2 Transactions with Affiliates
Schedule 9.5 Existing Liens
Schedule 9.12 Permissible Contingent Obligations
Schedule 9.13 Permissible Management Fees and Compensation
<PAGE>
SUBORDINATED NOTE AND COMMON STOCK
PURCHASE AGREEMENT
SUBORDINATED NOTE AND COMMON STOCK PURCHASE AGREEMENT, dated as of July 8,
1998, by and among NITINOL MEDICAL TECHNOLOGIES, INC. (the "COMPANY"), a
Delaware corporation, WHITNEY SUBORDINATED DEBT FUND, L.P. (the "PURCHASER")
and, solely for the purposes of Section 2.2, Article 6 and Section 11.2 hereof,
J.H. WHITNEY & CO. ("WHITNEY").
W I T N E S S E T H:
WHEREAS, the Company proposes to acquire (the "ACQUISITION") certain assets
of Elekta AB (PUBL), a Swedish corporation ("ELEKTA"), relating to its
neurosurgical instrument business pursuant to a Purchase Agreement, dated May 8,
1998, among Elekta and the Company (the "ELEKTA PURCHASE AGREEMENT"); and
WHEREAS, concurrently with the Acquisition, the Company wishes to sell
to the Purchaser and the Purchaser wishes to purchase from the Company, a
subordinated promissory note (the "WSDF NOTE"), due September 30, 2003, in the
principal amount of $20,000,000, substantially in the form attached hereto as
Exhibit A, and 561,207 shares (the "PURCHASED SHARES") of common stock, $.001
- ---------
par value (the "COMMON STOCK"), of the Company upon the terms and subject to the
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and for other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
-----------
1.1 DEFINITIONS. As used in this Agreement, and unless the context
-----------
requires a different meaning, the following terms have the meanings indicated:
"ACQUISITION" shall have the meaning ascribed to such term in the first
Whereas clause.
"ACQUISITION DOCUMENTS" shall mean the Elekta Purchase Agreement and the
agreements entered into in connection therewith.
<PAGE>
"AFFILIATE" shall mean any Person (a) directly or indirectly controlling,
controlled by, or under common control with, the Company, (b) directly or
indirectly owning or holding five percent (5%) or more of any equity interest in
the Company, or (c) five percent (5%) or more of whose voting stock or other
equity interest is directly or indirectly owned or held by the Company. For
purposes of this definition, "control" (including with correlative meanings, the
terms "controlling," "controlled by" and under "common control with") means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"AFFILIATED GROUP" shall have the meaning set forth in Section 1504(a) of
the Code.
"AGREEMENT" shall mean this Agreement, including the exhibits and schedules
attached hereto, as the same may be amended, supplemented or modified in
accordance with the terms hereof.
"ASSET DISPOSITION" shall mean the disposition, whether by sale, lease,
transfer, loss, damage, destruction, condemnation or otherwise of any of the
following: (a) any of the stock of any of the Company's Subsidiaries or (b) any
substantial portion or all of the assets of the Company or its Subsidiaries
other than sales of inventory in the ordinary course of business. "NET PROCEEDS"
of any Asset Disposition means cash proceeds received by the Company or any of
its Subsidiaries from any Asset Disposition (including insurance proceeds,
awards of condemnation, and payments under notes or other debt securities
received in connection with any Asset Disposition), net of (x) the costs of such
sale, lease, transfer or other disposition (including taxes attributable to such
sale, lease or transfer), and (y) amounts applied to repayment of Indebtedness
secured by a Lien on the asset or property disposed.
"AUDITED FINANCIAL STATEMENTS" shall have the meaning assigned to that term
in Section 5.12(a) of this Agreement.
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or other
day on which commercial banks in the City of New York are authorized or required
by law or executive order to close.
"BY-LAWS" shall mean, unless the context in which it is used otherwise
requires, the By-laws of the Company or any of its Subsidiaries as in effect on
the Closing Date.
"CAPITAL EXPENDITURES" shall mean the aggregate expenditures (whether or
not financed) made by the Company and its Subsidiaries for fixed or capital
assets
2
<PAGE>
(other than interests in real property held for resale in which only purchase
money Indebtedness is issued in payment therefor) or improvements, or for
replacements, substitutions or additions thereto, that have a useful service
life of one year or more at the time the asset is acquired by the Company or any
of its Subsidiaries, and are used in the production, distribution and/or the
sale of the goods or services or offered for sale by the Company or any of its
Subsidiaries, all as determined in accordance with GAAP.
"CAPITAL LEASE OBLIGATIONS" of any Person shall mean the obligations of
such Person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP
and, for the purposes of this Agreement, the amount of such obligations at any
time shall be the capitalized amount thereof at such time determined in
accordance with GAAP consistently applied.
"CASH" shall mean the currency of the United States of America.
"CASH EQUIVALENTS" shall mean: (i) marketable direct obligations issued or
unconditionally guaranteed by the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within two (2) years from the date of acquisition thereof;
(ii) commercial paper maturing no more than one (1) year from the date issued
and, at the time of acquisition, having a rating of at least A-1 from Standard &
Poor's rating service or a least P-1 from Moody's Investors Service, Inc., (iii)
certificates of deposit or bankers' acceptances maturing within one (1) year
from the date of issuance thereof issued by, or overnight reverse repurchase
agreements from, any commercial bank organized under the laws of the United
States of America or any state thereof or the District of Columbia having
combined capital and surplus of not less than $500,000,000; (iv) time deposits
maturing no more than thirty (30) days from the date of creation thereof with
commercial banks having membership in the Federal Deposit Insurance Corporation
in amounts not exceeding the lesser of $100,000 or the maximum amount of
insurance applicable to the aggregate amount of the Company's and its
Subsidiaries' deposits at such institution; and (v) deposits or investments in
mutual or similar funds offered or sponsored by brokerage or other companies
having membership in the Securities Investor Protection Corporation in amounts
not exceeding the lesser of $100,000 or the maximum amount of insurance
applicable to the aggregate amount of the Company's and its Subsidiaries,
deposits at such institution.
"CERTIFICATE OF INCORPORATION" shall mean, unless the context in which it
is used shall otherwise require, the Certificate of Incorporation of the Company
or any of its Subsidiaries as in effect on the Closing Date.
"CHANGE OF CONTROL" means (i) any transaction or series of transactions in
which any Person or group, other than the Purchaser, Whitney Equity Partners,
L.P., the Company or any affiliates of the foregoing becomes the beneficial
owner of 50% or
3
<PAGE>
more of the then outstanding capital stock of the Company or of any Subsidiary
of the Company, the operations of which in the reasonable judgment of the
Purchaser would constitute a material part of the business or operations of the
Company and all of its Subsidiaries, taken as a whole, (ii) the sale of all or
substantially all of the assets of the Company or any Subsidiary of the Company,
the operations of which in the reasonable judgment of the Purchaser would
constitute a material part of the business or operations of the Company and all
of its Subsidiaries, taken as a whole, (iii) the liquidation of the Company, and
(iv) the combination of the Company or of any Subsidiary of the Company, the
operations of which in the reasonable judgement of the Purchaser would
constitute a material part of the business or operations of the Company and all
of its Subsidiaries, taken as a whole, with another entity, as a result of which
(A) the shareholders of the Company or any of its Subsidiaries hold less than
50% of the total of all voting shares outstanding or (B) directors of the
Company or any of its Subsidiaries constitute less than a majority of the Board
of Directors of the combined entity.
"CLOSING" shall have the meaning assigned to that term in Section 2.3.
"CLOSING DATE" shall have the meaning assigned to that term in Section 2.3.
"CODE" shall mean the Internal Revenue Code of 1986, as amended, or any
successor statute thereto.
"COMMISSION" shall mean the Securities and Exchange Commission or any
similar agency then having jurisdiction to enforce the Securities Act.
"COMMISSION DOCUMENTS" shall have the meaning assigned to such term in
Section 5.34.
"COMMON STOCK" shall have the meaning assigned to that term in the second
Whereas clause hereof, or any other capital stock of the Company into which such
stock is reclassified or reconstituted.
"COMPLIANCE CERTIFICATE" shall have the meaning assigned to such term in
Section 8.1(c).
"CONDITION OF THE COMPANY" shall mean the assets, business, properties,
prospects, operations or financial or other condition of the Company and its
Subsidiaries, taken as a whole.
"CONTINGENT OBLIGATION" as applied to any Person, shall mean any direct or
indirect liability, contingent or otherwise, of that Person: (i) with respect to
any indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the primary
effect thereof, is to provide assurance to the obligee of such liability that
such liability will be paid or
4
<PAGE>
discharged, or that any agreements relating thereto will be complied with, or
that the holders of such liability will be protected (in whole or in part)
against loss with respect thereto; (ii) with respect to any letter of credit
issued for the account of that Person or as to which that Person is otherwise
liable for reimbursement of drawings; or (iii) under any foreign exchange
contract, currency swap agreement, interest rate swap agreement or other similar
agreement or arrangement designed to alter the risks of that Person arising from
fluctuations in currency values or interest rates. Contingent Obligations shall
include (a) the direct or indirect guaranty, endorsement (other than for
collection or deposit in the ordinary course of business), co-making,
discounting with recourse or sale with recourse by such Person of the obligation
of another, (b) the obligation to make take-or-pay or similar payments if
required regardless of nonperformance by any other party or parties to an
agreement, and (c) any liability of such Person for the obligations of another
through any agreement to purchase, repurchase or otherwise acquire such
obligation or any property constituting security therefor, to provide funds for
the payment or discharge of such obligation or to maintain the solvency,
financial condition or any balance sheet item or level of income of another. The
amount of any Contingent Obligation shall be equal to the amount of the
obligation so guaranteed or otherwise supported or, if not a fixed and
determined amount, the maximum amount so guaranteed.
"CONTRACTUAL OBLIGATIONS"shall mean as to any Person, any provision of any
security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust or other instrument to which such Person is a
party or by which it or any of its property is bound.
"CURRENT ASSETS" shall mean, at any date, the aggregate of the current
assets of the Company and its Subsidiaries determined on a consolidated basis as
of such date, as determined in accordance with GAAP.
"CURRENT LIABILITIES" shall mean, at any date, the aggregate of the current
liabilities of the Company and its Subsidiaries, determined on a consolidated
basis as of such date, as determined in accordance with GAAP.
"DEFINED BENEFIT PLAN" shall mean a defined benefit plan within the meaning
of Section 3(35) of ERISA or Section 414(j) of the Code, whether funded or
unfunded, qualified or non-qualified (whether or not subject to ERISA or the
Code).
"EBITDA" shall be calculated as set forth in Exhibit H.
---------
"ELEKTA" shall have the meaning ascribed to such term in the first Whereas
clause.
"ELEKTA PURCHASE AGREEMENT" shall have the meaning ascribed to such term in
the first Whereas clause.
5
<PAGE>
"ENVIRONMENTAL LAWS" shall mean any applicable federal, state, territorial,
provincial or local law, common law doctrine, rule, order, decree, judgment,
injunction, license, permit or regulation relating to environmental matters,
including those pertaining to land use, air, soil, surface water, ground water
(including the protection, cleanup, removal, remediation or damage thereto,
public or employee health or safety or any other environmental matter, together
with any other laws (federal, state, territorial, provincial or local) relating
to emissions, discharges, releases or threatened releases of any pollutant or
contaminant including, without limitation, medical, chemical, biological,
biohazardous or radioactive waste and materials, into ambient air, land, surface
water, groundwater, personal property or structures, or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transportation, discharge or handling of any contaminant, including, without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act (42 U.S.C. 9601 et seq.), the Hazardous Material Transportation Act (49
-- ---
U.S.C. 1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C.
-- ---
6901 et seq.), the Federal Water Pollution Control Act (33 U.S.C. 1251
-- ---
et seq.), the Clean Air Act (42 U.S.C. 1251 et seq.), the Toxic Substances
- -- --- -- ---
Control Act (15 U.S.C. 2601 et seq.), and the Occupational Safety and Health
-- ---
Act (29 U.S.C. 651 et seq.), as such laws have been, or are, amended, modified
-- ---
or supplemented heretofore.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE" shall mean a corporation that is or was a member of a
controlled group of corporations with the Company within the meaning of section
4001(a) or (b) of ERISA or section 414(b) of the Code, a trade or business
(including a sole proprietorship, partnership, trust, estate or corporation)
that is under common control with the Company within the meaning of section
414(m) of the Code, or a trade or business which together with the Company, is
treated as a single employer under section 414(o) of the Code.
"EVENT OF DEFAULT" shall have the meaning assigned to such term in the
Note.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission thereunder.
"FDA" shall have the meaning ascribed to such term in Section 5.7.
"FUNDED DEBT" means with respect to any Person and as at any date of
determination thereof, without duplication, (a) all Indebtedness of such Person
as at such date for money borrowed, (b) the principal component of all Capital
Lease Obligations, (c) all Indebtedness for the deferred purchase price of
property or services represented by a note or other security (other than in
respect of any trade payable) or other Indebtedness arising under any
conditional sale or other title retention agreement with
6
<PAGE>
respect to property acquired by such Person (even though the rights and remedies
of the seller or lender under such agreement in the event of default are limited
to repossession or sale of such property), and (d) all Indebtedness of such
Person secured by a purchase money mortgage or other lien to secure all or part
of the purchase price of property subject to such mortgage or lien.
"GAAP" shall mean generally accepted accounting principles in effect from
time to time within the United States.
"GOVERNMENTAL AUTHORITY" shall mean the government of any nation, state,
city, locality or other political subdivision of any thereof, any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, and any corporation or other entity
owned or controlled, through stock or capital ownership or otherwise, by any of
the foregoing.
"GUARANTEE AND COLLATERAL AGREEMENT" means the Guarantee and Collateral
Agreement substantially in the form of Exhibit C to be delivered by the Company
and the Guarantors under the terms of this Agreement, including any future such
agreement delivered by a Subsidiary pursuant to Section 8.1(j) hereof.
"GUARANTORS" means any Subsidiary of the Company that is party to the
Guarantee and Collateral Agreement, including without limitation, NMT
NeuroSciences (International), Inc., NMT Investments Corp., NMT NeuroSciences
(US), Inc., NMT NeuroSciences (IP), Inc., NMT Heart, Inc. and Cordis Innovasive
Systems, Inc.
"HAZARDOUS MATERIALS" shall mean (i) any chemical pollutant, contaminant,
pesticide, petroleum or petroleum product or byproduct radioactive substance,
solid waste (hazardous or extremely hazardous), special, dangerous or toxic
waste, hazardous or toxic substance, chemical or material regulated, listed,
referred to, limited or prohibited under any Environmental Law, including
without limitation: (i) friable or damaged asbestos, asbestos-containing
material, polychlorinated biphenyls (PCBs), solvents and waste oil; (ii) any
"hazardous substance" as defined under CERCLA or any environmental law, statute,
regulation or rule; (iii) any hazardous waste defined under RCRA or any
Environmental Law; and (iv) even if not prohibited, listed, limited or regulated
by an Environmental Law, all pollutants, contaminants, hazardous, dangerous or
toxic chemical materials, wastes or any other substances, including without
limitation, any industrial process or pollution control waste (whether or not
hazardous within the meaning of RCRA) which could pose a hazard to the
environment, or the health and safety of any person or impair the use or value
of any portion of the property of the Company or any of its Subsidiaries.
"INDEBTEDNESS" shall mean as to any Person (a) all obligations of such
Person for borrowed money (including, without limitation, reimbursement and all
other obligations with respect to surety bonds, unfunded credit commitments,
letters of credit and bankers' acceptances, whether or not matured), (b) all
obligations of such Person
7
<PAGE>
evidenced by notes, bonds, debentures or similar instruments, (c) all
obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable and accrued commercial or trade
liabilities arising in the ordinary course of business, (d) all interest rate
and currency swaps, caps, collars and similar agreements or hedging devices
under which payments are obligated to be made by such Person, whether
periodically or upon the happening of a contingency, (e) all indebtedness
created or arising under any conditional sale or other title retention agreement
with respect to property acquired by such Person (even though the rights and
remedies of the seller or lender under such agreement in the event of default
are limited to repossession or sale of such property), (f) all Capital Lease
Obligations of such Person, (g) all indebtedness secured by any Lien (other than
Liens in favor of lessors under leases other than leases included in clause (f))
on any property or asset owned or held by that Person regardless of whether the
indebtedness secured thereby shall have been assumed by that Person or is non-
recourse to the credit of that Person, and (h) any Contingent Obligation of such
Person.
"INDEMNIFIED PARTY" shall have the meaning assigned to such term in
Section 7.1.
"INTELLECTUAL PROPERTY" shall mean all of the following as they exist in
all jurisdictions throughout the world:
(i) patents and patent applications (including any divisions,
continuations, continuations-in-part, substitutions or reissues thereof, whether
or not patents are issued on such applications and whether or not such
applications are modified, withdrawn or resubmitted) ("PATENTS")'
(ii) trademarks, service marks, trade dress, trade names, brand
names, designs and logos, corporate names, product or service identifiers,
whether registered or unregistered, and all registrations and applications for
registration thereof (collectively, "TRADEMARKS");
(iii) copyright registrations and applications for registration
thereof, and any non-registered copyrights ("COPYRIGHTS");
(iv) trade secrets, inventions (whether or not patentable and
whether or not reduced to practice), invention disclosures and improvements
thereto (collectively, "TRADE SECRETS");
(v) proprietary computer software programs and source code; and
(vi) any other information concerning the Company or any Subsidiary
that is not generally available to the public and which is treated as
confidential
8
<PAGE>
or proprietary by the Company or such Subsidiary (collectively, "CONFIDENTIAL
INFORMATION").
"INTEREST COVERAGE" shall be determined as set forth in Exhibit H.
---------
"INTEREST EXPENSE" shall mean, with respect to the Company and its
Subsidiaries on a consolidated basis for any period, the sum of (a) gross
interest expense of the Company and its Subsidiaries for such period determined
on a consolidated basis in accordance with GAAP consistently applied, including
(i) the amortization of debt discounts, (ii) the amortization of all fees
payable in connection with the incurrence of Indebtedness to the extent included
in interest expense, (iii) the portion of any payments or accruals with respect
to Capital Lease Obligations allocable to interest expense and (iv) all
commissions paid to factors during such period, and (b) any other capitalized
interest of the Company and its Subsidiaries for such period determined on a
consolidated basis in accordance with GAAP consistently applied.
"INTERIM FINANCIAL STATEMENTS" shall have the meaning assigned to that term
in Section 5.12(a) of this Agreement.
"INVESTMENT" shall mean (i) any direct or indirect purchase or other
acquisition by the Company or any of its Subsidiaries of any beneficial interest
in, including stock, partnership interest or other equity securities of, any
other Person (other than a Person that prior to the relevant purchase or
acquisition was a Subsidiary of the Company) or (ii) any direct or indirect
loan, advance or capital contribution by the Company or any of its Subsidiaries
to any other Person (other than a Subsidiary of the Company), including all
indebtedness and accounts receivable from that other Person that are not current
assets or did not arise from sales to that other Person in the ordinary course
of business. The amount of any Investment shall be the original cost of such
Investment plus the cost of all additions thereto, without any adjustments for
----
increases or decreases in value, or writeups, write-downs or write-offs with
respect to such Investment.
"IP LICENSES" shall have the meaning assigned to that term in Section
5.24(b)(ii).
"ITC" shall have the meaning assigned to that term in Section 5.12(b) of
this Agreement.
"ITC AUDITED FINANCIAL STATEMENTS" shall have the meaning assigned to that
term in Section 5.12(b) of this Agreement.
"ITC INTERIM FINANCIAL STATEMENTS" shall have the meaning assigned to that
term in Section 5.12(b) of this Agreement.
"LIABILITIES" shall have the meaning assigned to that term in Section 7.1.
9
<PAGE>
"LIEN" shall mean any mortgage, deed of trust, pledge, hypothecation,
assignment, encumbrance, lien (statutory or other), charge, claim, restriction
or preference, priority, right or other security interest or preferential
arrangement of any kind or nature whatsoever (excluding preferred stock and
equity related preferences) including, without limitation, those created by,
arising under or evidenced by any conditional sale or other title retention
agreement, the interest of a lessor under a Capital Lease Obligation, or any
financing lease having substantially the same economic effect as any of the
foregoing.
"MULTIEMPLOYER PLAN" shall mean a multiemployer plan within the meaning of
Section 3(37) or 4001(a)(3) of ERISA or Section 414(f) of the Code.
"NET FUNDED INDEBTEDNESS" shall be calculated as set forth in Exhibit H.
---------
"NOTES" shall mean the WSDF Note, together with all notes issued in
connection with the substitution, replacement or transfer thereof.
"OPERATING CASH FLOW" shall be calculated as set forth in Exhibit H.
---------
"OPTIONS" shall have the meaning assigned to that term in Section 5.19(a)
of this Agreement.
"OUTSTANDING BORROWINGS" shall mean all Indebtedness of the Company and its
Subsidiaries for money borrowed that is outstanding at the relevant time of
determination.
"PERSON" shall mean any individual, firm, corporation, limited liability
company, partnership, trust, incorporated or unincorporated association, joint
venture, joint stock company, Governmental Authority or other entity of any
kind, and shall include any successor (by merger or otherwise) of such entity.
"PLANS" shall have the meaning assigned to that term in Section 5.23 of
this Agreement.
"PLEDGE AGREEMENTS" means the pledge agreements substantially in the forms
of Exhibits D and E hereto to be delivered by (x) NMT NeuroSciences
(International) Inc., in respect of the stock of NMT NeuroSciences (U.K.) Ltd.
and (y) NMT Neurosciences (International) Inc. and Nitinol Medical Technologies,
Inc. in respect of the stock of Yellow Tape B.V. and Nitinol Medical
Technologies International, B.V., under the terms of this Agreement, and any
future pledge agreements delivered by the Company or a Subsidiary pursuant to
Section 8.1(j) hereof.
"PREFERRED STOCK" shall have the meaning assigned to that term in Section
5.19(a) of this Agreement.
10
<PAGE>
"PRO FORMA BALANCE SHEET" shall mean the pro forma consolidated balance
sheet of the Company and its Subsidiaries referred to in Section 5.12(a).
"PURCHASED SHARES" shall have the meaning assigned to such term in the
second Whereas clause.
REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement
substantially in the form attached hereto as Exhibit F granting registration
---------
rights to the Purchaser and Whitney.
"REQUIREMENTS OF LAW" shall mean as to any Person, provisions of the
Certificate of Incorporation and By-laws or other organizational or governing
documents of such Person, or any law, treaty, rule, regulation, right,
privilege, qualification, license or franchise or determination of an arbitrator
or a court or other Governmental Authority, in each case applicable or binding
upon such Person or any of its property or to which such Person or any of its
Property is subject or pertaining to any or all of the transactions contemplated
or referred to herein.
"RESTRICTED PAYMENT"shall mean: (i) any dividend or other distribution,
direct or indirect, on account of any shares of any class of stock, limited
liability company interest, or partnership interest of the Company or any of its
Subsidiaries now or hereafter outstanding, except a dividend payable solely in
shares of that class of stock, limited liability company interest, or
partnership interest to the holders of that class; (ii) any redemption,
conversion, exchange, retirement, sinking fund or similar payment, purchase or
other acquisition for value, direct or indirect, of any shares of any class of
stock, limited liability company interest or partnership interest of the Company
or any of its Subsidiaries now or hereafter outstanding; (iii) any payment or
prepayment of interest on, principal of, premium, if any, redemption,
conversion, exchange, purchase, retirement, defeasance, sinking fund or similar
payment with respect to, any Indebtedness subordinated to the Indebtedness
existing pursuant to the Note and this Agreement; (iv) any payment made to
retire, or to obtain the surrender of, any outstanding warrants, options or
other rights to acquire shares of any class of stock, limited liability company
interest, or partnership interest of the Company or any of its Subsidiaries now
or hereafter outstanding; and (v) any payment under any noncompete agreement.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or any
similar Federal statute, and the rules and regulations thereunder as the same
shall be in effect at the time.
"SECURITY DOCUMENTS" shall mean, collectively, the Guarantee and Collateral
Agreement and the Pledge Agreements.
"SENIOR INDEBTEDNESS" shall mean all Indebtedness of the Company and its
Subsidiaries currently outstanding or incurred in the future pursuant to any
borrowing by the Company or any of its Subsidiaries from any bank or
institutional lender having
11
<PAGE>
total assets (together with its affiliates) in excess of $500,000,000, and any
renewals, extensions, refinancings or refundings thereof.
"SHARES" shall mean the Purchased Shares and the Transaction Fee Shares.
"SOLVENT" shall mean, with respect to the Company and its Subsidiaries
considered as a whole, based on the Pro Forma Balance Sheet, that (i) the assets
and the property of the Company and its Subsidiaries, considered as a whole,
exceed the aggregate liabilities (including contingent and unliquidated
liabilities) of the Company and its Subsidiaries, considered as a whole, and
(ii) after giving effect to the transactions contemplated by the Transaction
Documents and the Acquisition Documents, the Company and its Subsidiaries,
considered as a whole, are able to both service and pay their liabilities as
they mature. In computing the amount of contingent or unliquidated liabilities
at any time, such liabilities will be computed as the amount that, in light of
all the facts and circumstances existing at such time, represents the amount
that is likely to become an actual or matured liability.
"STOCK PLAN" shall have the meaning assigned to that term in Section
5.19(a) of this Agreement.
"STOCK PLAN SHARES" shall have the meaning assigned to that term in Section
5.19(a) of this Agreement.
"SUBSIDIARY" shall mean, with respect to any Person, a corporation or other
entity of which 50% or more of the voting power of the voting equity securities
or equity interest is owned, directly or indirectly, by such Person. Unless
otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in
this Agreement shall refer to a Subsidiary or Subsidiaries of the Company.
"TAX" shall mean any federal, state, local or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Section
59A), customs duties, capital stock, franchise profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
"TAX RETURN" shall mean, any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"TRANSACTION DOCUMENTS" shall mean, collectively, this Agreement, the Note,
the Security Documents, and any other document, certificate, notice or consent
related to any of the foregoing.
12
<PAGE>
"TRANSACTION FEE SHARES" has the meaning assigned such term in Section 2.2.
"WARRANTS" shall have the meaning assigned to that term in Section 5.19(a)
of this Agreement.
"WHITNEY" shall have the meaning assigned to such term in the preamble
hereto.
"WSDF NOTE" shall have the meaning ascribed such term in the second Whereas
clause.
1.2 ACCOUNTING TERM: FINANCIAL STATEMENTS. All accounting terms used
--------------------------------------
herein and not expressly defined in this Agreement shall have the respective
meanings given to them in conformance with GAAP. Financial statements and other
information furnished pursuant to this Agreement or the other Transaction
Documents shall be prepared in accordance with GAAP as in effect at the time of
such preparation. No "Accounting Changes" (as defined below) shall affect
financial covenants, standards or terms in this Agreement; provided that the
--------
Company shall prepare footnotes to each Compliance Certificate and the financial
statements required to be delivered hereunder that show the differences between
the financial statements delivered (which reflect such Accounting Changes) and
the basis for calculating financial covenant compliance (without reflecting such
Accounting Changes). "ACCOUNTING CHANGES" means: (a) changes in accounting
principles required by GAAP and implemented by the Company and (b) changes in
accounting principles recommended by the Company's certified public accountants
and implemented thereby.
1.3 KNOWLEDGE OF THE COMPANY. All references to the knowledge of the
------------------------
Company or to facts known by the Company shall mean actual knowledge or notice
of its Chief Executive Officer, President, Chief Financial Officer or other
executive officer or any Chief Executive Officer, Chief Financial Officer or
other executive officer of any Subsidiary (prior to giving effect to the
Acquisition) or division thereof or knowledge which such Person could reasonably
have acquired through the exercise of due inquiry.
ARTICLE 2
PURCHASE AND SALE OF THE WSDF NOTE
AND THE PURCHASED SHARES
------------------------
2.1 PURCHASE AND SALE OF THE WSDF NOTE AND THE PURCHASED SHARES.
------------------------------------------------------------
Subject to the terms and conditions herein set forth, the Company agrees that it
will issue and sell to the Purchaser, and the Purchaser agrees that it will
acquire from the Company on the Closing Date, the WSDF Note and the Purchased
Shares. The purchase price for
13
<PAGE>
the WSDF Note and the Purchased Shares shall be $20,000,000. The parties hereto
covenant and agree that they shall allocate $3,255,001 of the purchase price to
the purchase by the Purchaser of the Purchased Shares.
2.2 FEES AT CLOSING. Concurrently with the execution hereof, the
---------------
Company shall (a) pay to Whitney a debt placement fee of $600,000, (b) pay to
Whitney a transaction fee of 113,793 shares (the "TRANSACTION FEE SHARES") of
Common Stock in connection with the Elekta Purchase Agreement and (c) reimburse
all of the Purchaser's and Whitney's reasonable out-of-pocket expenses
(including, without limitation, reasonable fees, charges, disbursements of
counsel (including Paul, Weiss, Rifkind, Wharton & Garrison, Rowe & Maw and
Stibbe Simont Monahan Dubot) and travel expenses) incurred in connection with
(i) the negotiation and execution and delivery of this Agreement and the
Transaction Documents and the Purchaser's due diligence investigation and (ii)
the transactions contemplated by this Agreement and the other Transaction
Documents, which payments shall be made, if in cash, by wire transfer of
immediately available funds to an account or accounts designated by the
Purchaser and, if in Common Stock, as set forth herein.
2.3 CLOSING. The purchase and issuance of the WSDF Note and the
-------
Purchased Shares shall take place at the closing (the "CLOSING") to be held at
the offices of Paul, Weiss, Rifkind, Wharton & Garrison, 1285 Avenue of the
Americas, New York, New York 10019-6064 concurrently with the closing of the
Acquisition pursuant to the Elekta Purchase Agreement (the "CLOSING DATE"). At
the Closing, the Company shall deliver the WSDF Note and the Purchased Shares to
the Purchaser against delivery by the Purchaser to the Company of the purchase
price therefor specified in Section 2.1. Payment of such purchase price shall be
by wire transfer.
2.4 FINANCIAL ACCOUNTING POSITIONS; TAX REPORTING. Each of the
---------------------------------------------
parties hereto agrees to take reporting and other positions with respect to the
WSDF Note and the Purchased Shares which is consistent with the purchase price
of the WSDF Note and the Purchased Shares set forth herein for all financial
accounting purposes, unless otherwise required by applicable GAAP or Commission
rules (in which case the parties agree only to take positions inconsistent with
the purchase price of the WSDF Note and the Purchased Shares set forth herein
provided that the Purchaser has consented thereto, which consent shall not be
unreasonably withheld). Each of the parties to this Agreement agrees to take
reporting and other positions with respect to the WSDF Note and the Purchased
Shares which is consistent with the purchase price of the WSDF Note and the
Purchased Shares set forth herein for all other purposes, including without
limitation, for all federal, state and local tax purposes.
14
<PAGE>
ARTICLE 3
CONDITIONS TO THE OBLIGATION OF THE
PURCHASER TO PURCHASE THE WSDF NOTE
AND THE PURCHASED SHARES
------------------------
The obligation of the Purchaser to purchase the WSDF Note and the
Purchased Shares, to pay the purchase price therefor at the Closing and to
perform any obligations hereunder shall be subject to the satisfaction as
determined by, or waived by, the Purchaser of the following conditions on or
before the Closing Date or as specified herein.
3.1 REPRESENTATIONS AND WARRANTIES. The representations and
------------------------------
warranties of the Company contained in Article 5 hereof shall be true and
correct (a) at and as of the Closing Date and (b) after giving effect to the
transactions contemplated by the Transaction Documents and the Acquisition
Documents, as if made at and as of such date, and the Purchaser shall have
received at the Closing a certificate to the foregoing effect, dated the Closing
Date, and executed by the Chief Executive Officer, President or a Vice President
of the Company.
3.2 COMPLIANCE WITH THIS AGREEMENT. The Company shall have performed
------------------------------
and complied with all of its agreements and conditions set forth or contemplated
herein that are required to be performed or complied with by the Company on or
before the Closing Date, and the Purchaser shall have received at the Closing a
certificate to the foregoing effect, dated the Closing Date, and executed by the
Chief Executive Officer, President or a Vice President of the Company.
3.3 SECRETARY'S CERTIFICATES. The Purchaser shall have received
------------------------
certificates from the Company and each of its Subsidiaries that is party to the
Guarantee and Collateral Agreement, dated the Closing Date and signed by the
Secretary or an Assistant Secretary of the Company or its appropriate
Subsidiary, certifying (a) that the attached copies of the Certificate of
Incorporation and By-laws of the Company or its Subsidiary, and resolutions of
the Board of Directors of the Company or its Subsidiary, approving the
Transaction Documents to which it is a party and the transactions contemplated
hereby and thereby, are all true, complete and correct and remain unamended and
in full force and effect, and (b) as to the incumbency and specimen signature of
each officer of the Company or its Subsidiaries, as appropriate, executing any
Transaction Document to which it is a party or any other document delivered in
connection herewith on behalf of the Company or one of its Subsidiaries, as
appropriate.
3.4 DOCUMENTS. The Purchaser shall have received true, complete and
---------
correct copies of such agreements, schedules, exhibits, certificates, documents,
financial information and filings as it may request in connection with or
relating to the transactions contemplated hereby, all in form and substance
satisfactory to the Purchaser.
15
<PAGE>
3.5 OPINION OF COUNSEL. The Purchaser shall have received opinions
------------------
of Hale and Dorr LLP, Collyer-Bristow, and Nauta Dutilh, outside counsel to the
Company and its Subsidiaries, dated as of the Closing Date, relating to the
transactions contemplated by or referred to herein, in form and substance
attached hereto as Exhibits B-1, B-2 and B-3.
-------------------------
3.6 APPROVAL OF COUNSEL TO THE PURCHASER. All actions and
------------------------------------
proceedings hereunder and all agreements, schedules, exhibits, certificates,
opinions, financial information, filings and other documents required to be
delivered by the Company and each of its Subsidiaries hereunder or in connection
with the consummation of the transactions contemplated hereby, and all other
related matters, shall have been in form and substance acceptable to Paul,
Weiss, Rifkind, Wharton & Garrison, counsel to the Purchaser, in its reasonable
judgment.
3.7 CONSENTS AND APPROVALS. All consents, exemptions, authorizations, or
----------------------
other actions by, or notices to, or filings with, Governmental Authorities and
other Persons in respect of all Requirements of Law and with respect to those
Contractual Obligations of the Company and each of its Subsidiaries necessary,
desirable, or required in connection with the execution, delivery or performance
(including, without limitation, the payment of interest on the Note) by the
Company or its Subsidiaries, or enforcement against the Company or its
Subsidiaries, of those Transaction Documents to which it is a party shall have
been obtained and be in full force and effect, and the Purchaser shall have been
furnished with appropriate evidence thereof, and all waiting periods shall have
lapsed without extension or the imposition of any conditions or restrictions.
3.8 NO MATERIAL JUDGMENT OR ORDER. There shall not be on the Closing
-----------------------------
Date any judgment or order of a court of competent jurisdiction or any ruling of
any Governmental Authority or any condition imposed under any Requirement of Law
which, in the judgment of the Purchaser, would prohibit the purchase and
issuance of the WSDF Note or the Purchased Shares or the issuance of the
Transaction Fee Shares or the payment of the debt placement fee hereunder or
subject the Purchaser to any penalty or other onerous condition under or
pursuant to any Requirement of Law if the WSDF Note or the Purchased Shares were
to be purchased hereunder; and the Purchaser shall have received such
certificates or other evidence as it may reasonably request to establish
compliance with this condition.
3.9 PRO FORMA BALANCE SHEET. The Company shall have delivered to the
-----------------------
Purchaser as of the Closing Date the Pro Forma Balance Sheet, certified by the
Chief Financial Officer of the Company that fairly presents the pro forma
adjustments reflecting the consummation of the transactions contemplated by the
Transaction Documents and the Acquisition Documents, including all material fees
and expenses in connection therewith.
3.10 GOODSTANDING CERTIFICATES. The Company shall have delivered to
-------------------------
the Purchaser as of the Closing Date, goodstanding certificates for the Company
and each
16
<PAGE>
of its Subsidiaries that is a party to the Guarantee and Collateral
Agreement for each of their respective jurisdictions of incorporation and all
other jurisdictions where they are qualified to do business as a foreign
corporation.
3.11 NO MATERIAL ADVERSE CHANGE. Since December 31, 1997, except as
--------------------------
publicly announced and identified on Schedule 5.14(b), there shall have been no
----------------
material adverse change, nor shall any such change be threatened, in the
Condition of the Company.
3.12 DUE DILIGENCE. The Purchaser shall have completed its due
-------------
diligence review of the assets, business, properties, prospects, operations and
financial and other condition of the assets of Elekta being acquired pursuant to
the Elekta Purchase Agreement, and shall be reasonably satisfied with the
results of such review. Such due diligence review shall include, without
limitation, receipt of audited Elekta financial statements for the 12 months
ended April 30, 1998 and review of Elekta's financial systems integration plan
and audit work papers by the Purchaser's Chief Financial Officer, Daniel
O'Brien.
3.13 CERTIFICATE OF INCORPORATION AND BY-LAWS OF THE COMPANY AND THE
---------------------------------------------------------------
SUBSIDIARIES. No amendments to the articles or certificate of incorporation or
- ------------
by-laws of the Company or any of its Subsidiaries as in effect on the date
hereof shall have been effected.
3.14 MARKET CONDITIONS. Prior to the Closing Date, (a) trading in
-----------------
securities generally on the National Market System of the Nasdaq Stock Market
shall not have been suspended or limited or minimum or maximum prices shall not
have been generally established on such exchange, or additional material
governmental restrictions, not in force on the date of this Agreement, shall not
have been imposed upon trading in securities generally by such exchange or by
order of the Commission or any court or other Governmental Authority, (b) a
general banking moratorium shall not have been declared by either federal, New
York State or Commonwealth of Massachusetts authorities or (c) any material
adverse change in the financial or securities markets in the United States or in
political, financial or economic conditions in the United States or any outbreak
or material escalation of hostilities or declaration by the United States of a
national emergency or war or other calamity or crisis shall not have occurred.
3.15 NO DEFAULT OR BREACH. Neither the Company nor any of its
--------------------
Subsidiaries shall have been in default under or with respect to any of the
Transaction Documents or the Acquisition Documents and, after giving effect to
the transactions contemplated hereby and thereby, neither the Company nor any of
its Subsidiaries will be in default under any of the Transaction Documents or
the Acquisition Documents.
3.16 ELEKTA PURCHASE AGREEMENT. The closing of the transactions
-------------------------
contemplated by the Elekta Purchase Agreement shall simultaneously occur with
the Closing hereof and all of the conditions set forth in Article 6 thereof
shall have been
17
<PAGE>
satisfied or waived; provided, that any such waiver shall have been given only
-------- ----
with the prior written consent of the Purchaser.
3.17 FAIRNESS OPINION. At least three (3) Business Days prior to the
----------------
Closing, the Company shall have obtained and delivered to the Purchaser a copy
of an opinion from Junewicz & Co., Inc., in form and substance satisfactory to
the Purchaser, that the terms of this Agreement are fair, from a financial point
of view, to the Company.
3.18 FACILITIES FEE AND TRANSACTION FEE. The Company shall have paid
----------------------------------
to Whitney the fees and payments provided for in Section 2.2 hereof.
3.19 REGISTRATION RIGHTS AGREEMENT. The Company shall have duly
-----------------------------
executed and delivered the Registration Rights Agreement.
3.20 SECURITY DOCUMENTS. The Company and its Subsidiaries, as
------------------
appropriate, shall have duly executed and delivered to the Purchaser, the
Security Documents. The Security Documents shall be accompanied by (i)
financing statements (UCC-1) duly executed and in proper form for filing under
the Uniform Commercial Code of all jurisdictions necessary or, in the opinion of
the Purchaser, desirable, to perfect the security interests created by the
Security Documents, and (ii) certified copies of requests for information
identifying all of the financing statements on file with respect to the debtors
in all jurisdictions referred to under (i), indicating that no party claims an
interest in any of the Collateral (as defined in the Security Documents), except
for Liens identified on Schedule 5.27. The Guarantee and Collateral Agreement
shall be accompanied by duly executed instruments for filing with the United
States Patent and Trademark Office and the United States Copyright Office and
searches of the files of such offices indicating that no party claims an
interest in any of the Collateral (as defined in the Guarantee and Collateral
Agreement). Pledges of stock pursuant to the Pledge Agreements and Section 5.7
of the Guarantee and Collateral Agreement shall be accompanied by certificates
representing the pledged shares referred to therein accompanied by undated stock
powers executed in blank.
ARTICLE 4
CONDITIONS TO THE OBLIGATION OF THE COMPANY
TO ISSUE AND SELL THE WSDF NOTE AND THE PURCHASED SHARES
--------------------------------------------------------
The obligation of the Company to issue and sell the WSDF Note and the
Purchased Shares and to perform its other obligations hereunder relating thereto
shall be subject to the satisfaction as determined by, or waived by, the Company
of the following conditions on or before the Closing Date:
18
<PAGE>
4.1 REPRESENTATIONS AND WARRANTIES. The representations and
------------------------------
warranties of the Purchaser contained in Article 6 hereof shall be true and
correct at and as of the Closing Date as if made at and as of such date.
4.2 COMPLIANCE WITH THIS AGREEMENT. The Purchaser shall have
------------------------------
performed and complied with all of its agreements and conditions set forth or
contemplated herein that are required to be performed or complied with by the
Purchaser on or before the Closing Date.
4.3 CONSENTS AND APPROVALS. All consents, exemptions, authorizations
----------------------
or other actions by, or notices to, or filings with, Governmental Authorities
and other Persons in respect of all Requirements of Law and with respect to
those Contractual Obligations of the Company and each of its Subsidiaries
necessary, desirable, or required in connection with the execution, delivery or
performance (including, without limitation, the payment of interest on the Note)
by the Company or enforcement against the Company, of the Transaction Documents
to which it is a party shall have been obtained and be in full force and effect,
and the Company shall have been furnished with appropriate evidence thereof.
4.4 ELEKTA PURCHASE AGREEMENT. The closing of the transactions
-------------------------
contemplated by the Elekta Purchase Agreement shall simultaneously occur with
the Closing hereof.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
The Company hereby represents and warrants to the Purchaser as follows:
5.1 CORPORATE EXISTENCE AND POWER. The Company and each of its
-----------------------------
Subsidiaries: (a) is, and after giving effect to the transactions contemplated
by the Transaction Documents and the Acquisition Documents, will be a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation; (b) will have all requisite corporate
power and authority to own and operate its property, to lease the property it
operates as lessee and to conduct the business in which it is currently, or is
currently proposed to be, engaged; (c) is, and after giving effect to the
transactions contemplated by the Transaction Documents and the Acquisition
Documents, will be duly qualified as a foreign corporation, licensed and in good
standing under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct of its business requires such
qualification, except to the extent that the failure to do so would not have a
material adverse effect on the Condition of the Company; and (d) has the
corporate power and authority to execute, deliver and perform its obligations
under each Transaction Document to which it is or will be a party.
19
<PAGE>
5.2 CORPORATE AUTHORIZATION; NO CONTRAVENTION. The execution,
-----------------------------------------
delivery and performance by the Company and its Subsidiaries of each Transaction
Document to which it is a party and the consummation of the transactions
contemplated hereby and thereby, including without limitation the issuance of
the WSDF Note and the Shares: (a) has been duly authorized by all necessary
corporate, and if required, stockholder action; (b) does not contravene the
terms of the Company's or any of its Subsidiaries' Certificate of Incorporation
or By-laws, or any amendment thereof, and (c) will not violate, conflict with or
result in any breach or contravention of or the creation of any Lien under, any
Contractual Obligation of the Company or any of its Subsidiaries or any
Requirement of Law applicable to the Company or any of its Subsidiaries.
5.3 GOVERNMENTAL AUTHORIZATION; THIRD PARTY CONSENTS. No approval,
------------------------------------------------
consent, compliance, exemption, authorization, or other action by, or notice to,
or filing with, any Governmental Authority or any other Person in respect of any
Requirement of Law, and no lapse of a waiting period under a Requirement of Law,
is necessary or required in connection with the execution, delivery or
performance by (including, without limitation, the payment of interest on the
Note), or enforcement against, the Company or any of its Subsidiaries of the
Transaction Documents to which it is a party or the consummation of the
transactions contemplated hereby or thereby.
5.4 BINDING EFFECT. This Agreement has been, and each of the other
--------------
Transaction Documents to which the Company or any of its Subsidiaries will be a
party to, will be duly executed and delivered by the Company or one of its
Subsidiaries, as applicable, and this Agreement constitutes, and such
Transaction Documents will constitute, the legal, valid and binding obligation
of the Company or its Subsidiaries, as applicable, enforceable against the
Company or its Subsidiaries in accordance with their respective terms, except as
enforceability may be limited by applicable bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors' rights generally and by
general principles of equity relating to enforceability.
5.5 NO LEGAL BAR. Neither the execution, delivery and performance of
------------
the Transaction Documents or the Acquisition Documents, the issuance of the
Shares nor the issuance or performance of the terms of the WDSF Note will
violate any Requirement of Law or any Contractual Obligation of the Company or
any of its Subsidiaries. Neither the Company nor any of its Subsidiaries has
previously entered into any agreement which is currently in effect or to which
the Company or any of its Subsidiaries is currently bound, granting any rights
to any Person which are inconsistent with the rights to be granted by the
Company in the Transaction Documents.
5.6 LITIGATION. Except as set forth on Schedule 5.6, there are no
---------- ------------
legal actions, suits, proceedings, claims or disputes pending or, to the
knowledge of the Company, threatened, at law, in equity, in arbitration or
before any Governmental Authority against or affecting the Company or any of its
Subsidiaries (or, as applicable, to the Company's knowledge, any of their
respective shareholders, directors, officers,
20
<PAGE>
employees or agents). No injunction, writ, temporary restraining order, decree
or any order of any nature has been issued by any court or other Governmental
Authority purporting to enjoin or restrain the execution, delivery or
performance of the Transaction Documents.
5.7 COMPLIANCE WITH LAWS. Except as set forth on Schedule 5.7, the
-------------------- ------------
Company and each of its Subsidiaries are in compliance with all Requirements of
Law. Except as set forth on Schedule 5.7, there are no product recalls by the
------------
United States Food and Drug Administration ("FDA") or any comparable foreign
regulatory authority pending or, to the knowledge of the Company, contemplated
or threatened, with respect to any products manufactured, sold, marketed,
distributed or delivered by the Company or any of its Subsidiaries or, to the
knowledge of the Company, with respect to any licensed products manufactured,
sold, marketed, distributed or delivered by the Company's licensees pursuant to
license agreements with the Company and, to the knowledge of the Company, there
are no pending or threatened investigations by any Governmental Authority with
respect to such products which, either individually or in the aggregate, could
have a material adverse effect on the Condition of the Company. Except as set
forth on Schedule 5.7, the Company and each of its Subsidiaries is in compliance
------------
in all material respects with all applicable FDA or comparable foreign
regulatory authority requirements, including, without limitation, facility
registration, device listing and product notifications, and the Company has no
knowledge that it or any of its Subsidiaries or licensees is not operating in
compliance in all material respects with FDA or comparable foreign regulatory
authority operating requirements, including, without limitation, good
manufacturing practices. In April 1990 the FDA accepted the Company's 510(k)
notification with respect to the Simon Nitinol Filter and all 510(k)
notifications with respect to subsequent modifications thereto have been
accepted by the FDA.
5.8 NO DEFAULT OR BREACH. No event has occurred and is continuing or
--------------------
would result from the incurring of obligations by the Company and its
Subsidiaries under the Transaction Documents or the Acquisition Documents which
constitutes or, with the giving of notice or lapse of time or both, would
constitute an Event of Default. Neither the Company nor any of its Subsidiaries
is in default under or with respect to any Contractual Obligation in any
material respect.
5.9 TITLE TO PROPERTIES.
-------------------
(a) The Company and/or its Subsidiaries have good and marketable
title in and to all real property reflected on the Pro Forma Balance Sheet or
used in connection with their business, free and clear of all Liens, liabilities
and rights except as provided on Schedule 5.9(a).
---------------
(b) The Company and/or its Subsidiaries hold all of the right, title
and interest of the tenant under the leases reflected on the Pro Forma Balance
Sheet free and clear of all Liens, liabilities and rights except as provided on
Schedule 5.9(b).
- ---------------
21
<PAGE>
5.10 USE OF REAL PROPERTY. Except as set forth on Schedule 5.10, the
-------------------- -------------
owned and leased real properties reflected on the Pro Forma Balance Sheet or
used in connection with the business of the Company and its Subsidiaries, are
used and operated in compliance and conformity with all applicable leases,
contracts, commitments, licenses and permits, except to the extent that the
failure so to comply would not, in the aggregate, materially adversely affect
the Condition of the Company; neither the Company nor any of its Subsidiaries
has received notice of violation of any applicable zoning or building
regulation, ordinance or other law, order, regulation or requirement relating to
the operations of either the Company or any of its Subsidiaries; and there is no
such violation. Except as set forth on Schedule 5.10, all structures,
-------------
improvements and other buildings that are owned or covered by leases reflected
on the Pro Forma Balance Sheet or used in connection with the business of the
Company and its Subsidiaries, comply with all applicable ordinances, codes,
regulations and requirements, have a valid and subsisting certificate of
occupancy for their present use, and neither the Company nor any Subsidiary
thereof has received any written notice from any Governmental Authority which is
still outstanding of any failure to obtain any certificate, permit, license or
approval with respect to the real property, or any intended revocation,
modification or cancellation of same, and no law or regulation presently in
effect or condition precludes or materially restricts continuation of the
present use of such properties. Each lease relating to leased real property
reflected on the Pro Forma Balance Sheet or used in connection with the business
of the Company and its Subsidiaries is in full force and effect and the Company
enjoys peaceful and undisturbed possession thereunder. There is no default on
the part of the Company or any of its Subsidiaries or event or condition which
with notice or lapse of time, or both, would constitute a default on the part of
the Company or any of its Subsidiaries under any such lease. There are no
service contracts, maintenance contracts, union contracts, concession
agreements, licenses, agency agreements or any other written contracts or
agreements affecting the real property or the leased property, reflected on the
Pro Forma Balance Sheet or used in connection with the business of the Company
and its Subsidiaries, or the operation thereof, other than those listed on
Schedule 5.10, except for contracts or agreements (oral or written) which are
- -------------
cancelable on no more than thirty (30) days' notice. There are no pending or,
to the knowledge of the Company, threatened condemnation or eminent domain
proceedings that would affect any part of the real property or the leased
property reflected on the Pro Forma Balance Sheet or used in connection with the
business of the Company and its Subsidiaries. There are no actions, suits or
proceedings pending or, to the knowledge of the Company, threatened against the
real property or the leased property on the Pro Forma Balance Sheet or used in
connection with the business of the Company and its Subsidiaries, at law or in
equity, before any federal, state, municipal or governmental department,
commission, board, bureau, agency or instrumentality which would in any way
affect title to such real property or the leased property.
22
<PAGE>
5.11 TAXES.
-----
(a) Each of the Company and its Subsidiaries has filed all Tax Returns
that it was required to file. All such Tax Returns were correct and complete in
all respects. All Taxes owed by the Company or any of its Subsidiaries (whether
or not shown on any Tax Return) have been paid. Except as set forth on Schedule
--------
5.11, neither the Company nor any of its Subsidiaries currently is the
- ----
beneficiary of any extension of time within which to file any Tax Return. No
claim has ever been made by a Governmental Authority in a jurisdiction where the
Company or any of Subsidiaries does not file Tax Returns that the Company or any
of its Subsidiaries is or may be subject to taxation by that jurisdiction.
There are no Liens on any of the assets of the Company or any of its
Subsidiaries that arose in connection with any failure (or alleged failure) to
pay any Tax.
(b) Each of the Company and its Subsidiaries has withheld and paid all
Taxes required to have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, stockholder, or other
third party.
(c) Neither the Company nor any of its Subsidiaries expects any
Governmental Authority to assess any additional Taxes for any period for which
Tax Returns have been filed. There is no dispute or claim concerning any Tax
liability of the Company or any of its Subsidiaries either (i) claimed or raised
by any Governmental Authority in writing or (ii) as to which the Company has
knowledge based upon personal contact with any agent of such authority.
Schedule 5.11 lists all federal, state, local, and foreign income Tax Returns
- -------------
filed with respect to any of the Company and its Subsidiaries for taxable
periods ended on or after December 31, 1995, indicates those Tax Returns that
have been audited, and indicates those Tax Returns that currently are the
subject of an audit. The Company has delivered to the Purchaser correct and
complete copies of all federal income Tax Returns, examination reports and
statements of deficiencies assessed against or agreed to by any of the Company
and its Subsidiaries since December 31, 1995.
(d) Neither the Company nor any of its Subsidiaries has waived any
statute of limitations in respect of Taxes or agreed to any extension of time
with respect to a Tax assessment or deficiency.
(e) Neither the Company nor any of its Subsidiaries has filed a
consent under Code (S) 341(f) concerning collapsible corporations. Neither the
Company nor any of its Subsidiaries has made any payments, is obligated to make
any payments, or is a party to any agreement that under certain circumstances
could obligate it to make any payments that will not be deductible under Code
(S) 280G. Neither the Company nor any of its Subsidiaries has been a United
States real property holding corporation within the meaning of Code (S)
897(c)(2) during the applicable period specified in Code (S) 897(c)(1)(A)(ii).
Each of the Company and its Subsidiaries has disclosed on
23
<PAGE>
its federal income Tax Returns all positions taken therein that could give rise
to a substantial understatement of federal income Tax within the meaning of Code
(S) 6621. Neither the Company nor any of its Subsidiaries is a party to any Tax
allocation or sharing agreement. Neither the Company nor any of its Subsidiaries
has been a member of an Affiliated Group filing a consolidated federal income
Tax Return other than a group consisting of the Company and its Subsidiaries.
(f) Schedule 5.11 sets forth the following information with respect to
-------------
each of the Company and its Subsidiaries (or, in the case of clause (ii) below,
with respect to each of the Subsidiaries) as of the most recent practicable date
(as well as on an estimated pro forma basis as of the Closing giving effect to
the consummation of the transactions contemplated hereby and by the other
Transaction Documents and the Acquisition Documents); (i) the basis of the
Company or Subsidiary in its assets, (ii) the basis of the stockholder(s) of the
Subsidiary in its stock (or the amount of any excess loss account); (iii) the
amount of any net operating loss, net capital loss, unused investment or other
credit, unused foreign tax, or excess charitable contribution allocable to the
Company or Subsidiary; and (iv) the amount of any deferred gain or loss
allocable to the Company or Subsidiary arising out of any deferred intercompany
transaction.
(g) The unpaid Taxes of the Company and its Subsidiaries (i) did not,
as of April 30, 1998 month end, exceed the reserve for Tax liability (rather
than any reserve for deferred Taxes established to reflect timing differences
between book and Tax income) set forth on the face of the balance sheet for such
month end (rather than in any notes thereto) and (ii) do not exceed that reserve
as adjusted for the passage of time through the Closing Date in accordance with
the past custom and practice of the Company and its Subsidiaries in filing their
Tax Returns.
(h) Neither the Company nor any of its Subsidiaries has any liability
for the Taxes of any person or entity other than the Company and its
Subsidiaries (i) under Reg. (S) 1.1502-6 (or any similar provision of state,
local or foreign law), (ii) as a transferee or successor, (iii) by contract, or
(iv) otherwise.
(i) Each Affiliated Group has filed all income Tax Returns that it was
required to file for each taxable period during which any of the Company and its
Subsidiaries was a member of the group. All such Tax Returns were correct and
complete (i) in all respects insofar as they relate to any of the Company and
its Subsidiaries and (ii) in all material respects insofar as they do not relate
to the Company and its Subsidiaries. All material income Taxes owed by any
Affiliated Group (whether or not shown on any Tax Return) have been paid for
each taxable period during which any of the Company and its Subsidiaries was a
member of the group.
(j) Neither the Company nor any of its Subsidiaries expects any
Governmental Authority to assess any additional income Tax against any
Affiliated Group for any taxable period during which any of the Company and its
Subsidiaries was a member of the group. There is no dispute or claim concerning
any income Tax liability
24
<PAGE>
of any Affiliated Group for any taxable period during which any of the Company
and its Subsidiaries was a member of the group either (i) claimed or raised by
any Governmental Authority in writing or (ii) as to which the Company has
knowledge based upon personal contact with any agent of such authority. Except
as disclosed on Schedule 5.11, no Affiliated Group has waived any statute of
-------------
limitations in respect of any income Taxes or agreed to any extension of time
with respect to an income Tax assessment or deficiency for any taxable period
during which any of the Company and its Subsidiaries was a member of the group.
5.12 FINANCIAL CONDITION.
-------------------
(a) The Company has furnished the Purchaser with true and complete
copies of (i) the audited consolidated balance sheets of the Company and its
Subsidiaries as of December 31, 1997, December 1, 1996 and December 31, 1995 and
the related consolidated statements of operations, stockholders' equity
(deficit) and cash flows, together with the notes thereto, of the Company and
its Subsidiaries for the years then ended, together with the report of Arthur
Andersen LLP thereon (the "AUDITED FINANCIAL STATEMENTS") and (ii) the unaudited
consolidated balance sheet of the Company and its Subsidiaries as of April 30,
1998 and the related consolidated statements of operations, stockholders' equity
(deficit) and cash flow of the Company and its Subsidiaries for the four month
period ended April 30, 1998 (the "INTERIM FINANCIAL STATEMENTS"). The Audited
Financial Statements and the Interim Financial Statements fairly present, in all
material respects, the consolidated financial position of the Company and its
Subsidiaries as of the respective dates thereof, and the consolidated results of
operations and cash flows of the Company and its Subsidiaries as of the
respective dates or for the respective periods set forth therein, all in
conformity with GAAP consistently applied during the periods involved, except as
otherwise set forth in the notes thereto and subject, in the case of the Interim
Financial Statements, to normal year-end audit adjustments.
(b) The Company has furnished the Purchaser with true and complete
copies of (i) the audited balance sheet of Image Technologies Corporation
("ITC") as of December 31, 1997, and the related statements of operations,
stockholders' equity (deficit) and cash flows, together with the notes thereto,
of ITC for the year then ended, and for the period from inception (November 17,
1995) to December 31, 1997, together with the report of Arthur Andersen LLP
thereon (the "ITC AUDITED FINANCIAL STATEMENTS") and (ii) the unaudited balance
sheet of ITC as of April 30, 1998 and the related statements of operations,
stockholders' equity (deficit) and cash flow of ITC for the four months ended
April 30, 1998 (the "ITC INTERIM FINANCIAL STATEMENTS"). The ITC Audited
Financial Statements and the ITC Interim Financial Statements fairly present, in
all material respects, the financial position of ITC as of the respective dates
thereof, and the results of operations and cash flows of ITC as of the
respective dates or for the respective periods set forth therein, all in
conformity with GAAP consistently applied during the period involved, except as
otherwise set forth in the notes thereto and
25
<PAGE>
subject, in the case of the ITC Interim Financial Statements, to normal year-end
audit adjustments.
(c) The Pro Forma Balance Sheet delivered to the Purchaser sets forth
the assets and liabilities of the Company and each of its Subsidiaries on a pro
forma consolidated basis after taking into account the consummation of the
transactions contemplated in this Agreement and by the other Transaction
Documents and the Acquisition Documents as of the Closing Date. The Pro Forma
Balance Sheet has been prepared in a manner that fairly presents in all material
respects the assets and liabilities of the Company and each Subsidiary and: (i)
in respect of information relating to periods ending on or prior to April 30,
1998, (x) in relation to the Company and Subsidiaries of the Company prior to
the consummation of the Acquisition, in accordance with GAAP and (y) in relation
to entities and assets acquired by the Company upon consummation of the
Acquisition, based upon an audited financial statement prepared by Coopers &
Lybrand in accordance with International GAAP; and (ii) in respect of
information relating to the period commencing May 1, 1998, (x) in relation to
the Company and Subsidiaries of the Company prior to the consummation of the
Acquisition, in accordance with the Company's normal accounting practices which
are, to the best of the Company's knowledge, consistent with GAAP, consistently
applied, and (y) in relation to entities and assets acquired by the Company upon
consummation of the Acquisition, in accordance with such entities' normal
accounting practices which are, to the best of the Company's knowledge,
consistent with International GAAP, consistently applied; provided, however,
-------- -------
that information in the Pro Forma Balance Sheet for the period commencing May 1,
1998 with respect to the business being acquired in the Acquisition represents
the best estimate by the Company of such information.
(d) The projections of the Company and its Subsidiaries on a
consolidated basis heretofore delivered to the Purchaser (i) were prepared by
the Company in the ordinary course of its operations consistent with past
practice, (ii) are the most current projections prepared by the Company relating
to the periods covered thereby, and (iii) are based on assumptions which were
reasonable when made and such assumptions and projections are reasonable on the
date hereof. Neither the Company nor any of its Subsidiaries have delivered to
any Person any later dated projections.
5.13 ERISA -- PROHIBITED TRANSACTIONS. The execution and delivery of
--------------------------------
the Transaction Documents and the Acquisition Documents, the purchase and sale
of the WSDF Note hereunder and the consummation of the transactions contemplated
hereby and thereby will not result in any prohibited transaction within the
meaning of Section 406 of ERISA or Section 4975 of the Code.
5.14 DISCLOSURE.
----------
(a) Agreement and Other Documents. Neither (i) the Acquisition
-----------------------------
Agreements or (ii) the Transaction Documents contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
26
<PAGE>
statements contained herein or therein, in the light of the circumstances under
which they were made, not misleading; provided however, that to the extent the
----------------
representation made by the Company in this Section 5.14(a) relates to statements
or omissions regarding the assets acquired pursuant to the Acquisition
Documents, it is made by the Company solely to the extent of its knowledge.
(b) Material Adverse Effects. Except as described in Schedule
------------------------ --------
5.14(b), there is no fact known to the Company, which the Company has not
disclosed to the Purchaser in writing which materially adversely affects or,
insofar as the Company can reasonably foresee, could materially adversely
affect, the Condition of the Company or the ability of the Company or any of its
Subsidiaries to perform its obligations under the Transaction Documents or the
Acquisition Documents, or any agreement or other document contemplated hereby or
thereby to which it is a party.
5.15 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1997,
------------------------------------
except as set forth on Schedule 5.15 or as contemplated by this Agreement,
-------------
neither the Company nor any of its Subsidiaries has (i) issued any stock, bonds
or other corporate securities, (ii) borrowed any amount or incurred any
liabilities (absolute or contingent), other than in the ordinary course of
business, in excess of $10,000, (iii) discharged or satisfied any Lien or
incurred or paid any obligation or liability (absolute or contingent), other
than in the ordinary course of business, in excess of $10,000, (iv) declared or
made any payment or distribution to stockholders or purchased or redeemed any
shares of its capital stock or other securities, (v) mortgaged, pledged or
subjected to Lien any of its assets, tangible or intangible, other than in the
ordinary course of business consistent with past practice, (vi) sold, assigned
or transferred any of its tangible assets, or canceled any debts or claims,
other than in the ordinary course of business consistent with past practice
(vii) sold, assigned or transferred any patents, trademarks, trade names,
copyrights, trade secrets or other intangible assets, other than in the ordinary
course of business consistent with past practice, (viii) suffered any losses of
property or waived any rights of substantial value, (ix) suffered any material
adverse change in the Condition of the Company, (x) expended any material
amount, granted any bonuses or extraordinary salary increases, (xi) entered into
any transaction involving consideration in excess of $50,000 other than in the
ordinary course of its business and consistent with past practice or except as
otherwise contemplated hereby or (xii) entered into any agreement or
transaction, or amended or terminated any agreement, with an Affiliate.
5.16 ENVIRONMENTAL MATTERS. Except as described on Schedule 5.16:
--------------------- -------------
(a) The property, assets and operations of the Company and its
Subsidiaries are and have been in compliance with all applicable Environmental
Laws; there are no Hazardous Materials stored or otherwise located in, on or
under any of the property or assets of the Company or its Subsidiaries,
including, without limitation, the groundwater, except in compliance with
applicable Environmental Laws; and there have been no releases or threatened
releases of Hazardous Materials in, on or under any property adjoining any of
the property or assets of the Company or its Subsidiaries which
27
<PAGE>
have not been remediated to the satisfaction of the appropriate Governmental
Authorities and in compliance with Environmental Laws.
(b) None of the property, assets or operations of the Company or its
Subsidiaries is the subject of any Federal, state, local or foreign
investigation evaluating whether (i) any remedial action is needed to respond to
a release or threatened release of any Hazardous Materials into the environment
or (ii) any release or threatened release of any Hazardous Materials into the
environment is in contravention of any Environmental Law.
(c) Neither the Company nor any of its Subsidiaries has received any
notice or claim, nor are there pending, threatened or reasonably anticipated,
lawsuits or proceedings against any of them, with respect to violations of an
Environmental Law or in connection with the presence of or exposure to any
Hazardous Materials in the environment or any release or threatened release of
any Hazardous Materials into the environment, and neither the Company nor its
Subsidiaries is or was the owner or operator of any property which (i) pursuant
to any Environmental Law has been placed on any list of Hazardous Materials
disposal sites, including, without limitation, the "National Priorities List" or
"CERCLIS List," (ii) has, or had, any subsurface storage tanks located thereon,
or (iii) has ever been used as or for a waste disposal facility, a mine, a
gasoline service station or, other than for petroleum substances stored in the
ordinary course of business, a petroleum products storage facility.
(d) Neither the Company nor any of its Subsidiaries has any present
or contingent liability in connection with the presence either on or off the
property or assets of the Company or its Subsidiaries of any Hazardous Materials
in the environment or any release or threatened release of any Hazardous
Materials into the environment.
5.17 INVESTMENT COMPANY/GOVERNMENT REGULATIONS. The Company is not an
-----------------------------------------
"investment company" within the meaning of the Investment Company Act of 1940,
as amended. Neither the Company nor its Subsidiaries is subject to regulation
under the Public Utility Holding Company Act of 1935, as amended, the Federal
Power Act, the Interstate Commerce Act, or any federal or state statute or
regulation limiting its ability to incur Indebtedness.
5.18 SUBSIDIARIES.
------------
(a) Schedule 5.18 sets forth a complete and accurate list, after
-------------
giving effect to the transactions contemplated by the Acquisition Documents, of
all of the Subsidiaries of the Company together with their respective
jurisdictions of incorporation or organization. All of the outstanding shares
of capital stock of such Subsidiaries that are corporations are validly issued,
fully paid and nonassessable. Except as set forth on Schedule 5.18 or as
-------------
contemplated by the Transaction Documents, as of the Closing Date,
28
<PAGE>
all of the outstanding shares of capital stock of, or other ownership interests
in, each of such Subsidiaries are owned by the Company or by a wholly owned
Subsidiary free and clear of any Liens. No Subsidiary has outstanding options,
warrants, subscriptions, calls, rights, convertible securities or other
agreements or commitments obligating the Subsidiary to issue, transfer or sell
any securities of the Subsidiary.
(b) Except for the Subsidiaries of the Company and as set forth on
Schedule 5.18, the Company does not own of record or beneficially, directly or
- -------------
indirectly, (i) any shares of outstanding capital stock or securities
convertible into capital stock of any other corporation, and (ii) any equity,
voting or participating interest in any limited liability company, partnership,
joint venture or other noncorporate business enterprises.
5.19 Capitalization.
--------------
(a) As of the Closing Date, the authorized capital stock of the
Company consists of 30,000,000 shares of Common Stock, of which 9,828,210 shares
are issued and outstanding, and 3,000,000 shares of preferred stock, $.001 par
value per share (the "PREFERRED STOCK"), of which no shares were issued and
outstanding. The Company has no shares of capital stock held in treasury. As
of the Closing Date, after giving effect to the transactions contemplated hereby
and by the other Transaction Documents and the Acquisition Documents, there will
be: (i) no shares of issued and outstanding Preferred Stock; (ii) 10,503,210
shares of Common Stock issued and outstanding; (iii) an aggregate of 1,865,789
shares of Common Stock reserved for issuance pursuant to the exercise of stock
options issuable in accordance with the terms of the Company's 1994 Stock Option
Plan, 1996 Stock Option Plan, 1996 Stock Option Plan for Non-Employee Directors
and the 1998 Stock Incentive Plan and an aggregate of 1,320,002 shares of Common
Stock reserved for issuance pursuant to the exercise of stock options not issued
pursuant to a plan (collectively, the "OPTIONS"); (iv) 83,329 shares of Common
Stock reserved for issuance upon exercise of the stock purchase warrant issued
in February 1996 to Fletcher Spaght, Inc. relating to the acquisition by the
Company of certain technology relating to the CardioSEAL Septal Occluder; (v)
28, 489 shares of Common Stock reserved for issuance upon exercise of the stock
purchase warrant transferred by Fletcher Spaght, Inc. in June 1998 to David
Chazanovitz; (vi) 99,660 shares of Common Stock reserved for issuance upon
exercise of the stock purchase warrant issued in February 1996 to Junewicz &
Co., Inc.; (vii) 5,263 shares of Common Stock reserved for issuance upon
exercise of the stock purchase warrant issued in April 1996 to Dr. Lloyd Marks
(together with the warrants described above in (iii), (iv) and (v), the
"WARRANTS"); and (viii) 84,973 shares (the "STOCK PLAN SHARES") of Common Stock
reserved for issuance in connection with the Company's Employee Stock Purchase
Plan (the "STOCK PLAN"). The Options, the Warrants, the Stock Plan Shares and
all outstanding shares of capital stock of the Company have been duly authorized
by all necessary corporate action. All outstanding shares of capital stock of
the Company are, and the shares of Common Stock issuable upon (i) exercise of
the Options and the Warrants and (ii) purchase under the Stock Plan, when
issued, will be,
29
<PAGE>
validly issued, fully paid and nonassessable. Schedule 5.19(a) provides an
----------------
accurate list of all of the holders of warrants, options, rights and securities
convertible into Common Stock, together with the number of shares of Common
Stock to be issued upon the exercise or conversion of such warrants, options,
rights and convertible securities.
(b) On the Closing Date, except for the Warrants and the Options and
as set forth on Schedule 5.19(b), there will be no outstanding securities
----------------
convertible into or exchangeable for capital stock of the Company or options,
warrants or other rights to purchase or subscribe to capital stock of the
Company or contracts, commitments, agreements, understandings or arrangements of
any kind to which the Company is a party relating to the issuance of any capital
stock of the Company, any such convertible or exchangeable securities or any
such options, warrants or rights.
5.20 PRIVATE OFFERING. No form of general solicitation or general
----------------
advertising was used by the Company or any of its Subsidiaries, or their
respective representatives in connection with the offer or sale of the WSDF Note
and the Purchased Shares. No registration of the WSDF Note or the Shares
pursuant to the provisions of the Securities Act or the state securities or
"blue sky" laws will be required by the offer, sale or issuance of the WSDF Note
pursuant to this Agreement. The Company agrees that neither it, nor anyone
acting on its behalf, will offer or sell the WSDF Note or any other security so
as to require the registration of the WSDF Note pursuant to the provisions of
the Securities Act or any state securities or "blue sky" laws.
5.21 BROKER'S, FINDER'S OR SIMILAR FEES. Except as provided in
----------------------------------
Section 2.2 hereof, there are no brokerage commissions, finder's fees or similar
fees or commissions payable in connection with the transactions contemplated
hereby based on any agreement, arrangement or understanding with the Company or
any of its Subsidiaries, or any action taken by any such entity.
5.22 LABOR RELATIONS. Neither the Company nor any of its Subsidiaries
---------------
has committed or is engaged in any unfair labor practice. Except as set forth
in Schedule 5.22, there is (a) no unfair labor practice complaint pending or, to
-------------
the knowledge of the Company, threatened against the Company or any of its
Subsidiaries before the National Labor Relations Board and no grievance or
arbitration proceeding arising out of or under collective bargaining agreements
is so pending or, to the knowledge of the Company, threatened, (b) no strike,
labor dispute, slowdown or stoppage pending or, to the knowledge of the Company,
threatened against the Company or any of its Subsidiaries, (c) no union
representation question existing with respect to the employees of the Company or
any of its Subsidiaries and, to the knowledge of the Company, no union
organizing activities are taking place, and (d) no employment contract with any
employee or independent contractor of the Company or any Subsidiary. The Company
and each Subsidiary is in compliance in all material respects with all federal,
state or other applicable laws respecting employment and employment practices,
terms and conditions of employment and wages and hours. Neither the Company,
nor any of its Subsidiaries, is a party to any collective bargaining agreement.
30
<PAGE>
5.23 EMPLOYEE BENEFIT PLANS.
----------------------
(a) Employee Benefit Plans and Liabilities. Neither the Company nor
--------------------------------------
any ERISA Affiliate has contributed to nor has any actual or contingent, direct
or indirect, liability in respect of any employee benefit plan (as defined in
Section 3(3) of ERISA) or other employee benefit arrangement (collectively, the
"PLANS"), within the five-consecutive-year period immediately preceding the
first day of the year in which the Closing Date occurs other than those
liabilities with respect to such Plans specifically described on Schedule
--------
5.23(a). Schedule 5.23(a) sets forth all Plans. At no time during such five
- ------- ----------------
year period has the Company or any ERISA Affiliate participated in or
contributed to any Multiemployer Plan, nor during such period has the Company or
any ERISA Affiliate had an obligation to participate in or contribute to any
such Multiemployer Plan. No agreement subject to Section 4204 of ERISA has been
entered into in connection with the transactions contemplated in this Agreement.
There are no outstanding liabilities of the Company or any ERISA Affiliate to
any employee benefit plans previously maintained by the Company or any ERISA
Affiliate, and the Company is not aware of any potential liabilities in
connection therewith. There are no actions, suits or claims, other than for
benefits in the ordinary course, pending or, to the knowledge of the Company,
threatened against the Company or the Plans which might subject the Company to
any material liability. The Company has delivered to the Purchaser accurate and
complete copies of all of the Plans.
(b) Plan Compliance. The Company and each of its Subsidiaries is in
---------------
compliance in all material respects with all reporting, disclosure and
registration requirements applicable to it under the Code, ERISA and all federal
and state securities laws, and Department of Labor, Internal Revenue Service and
Commission rules and regulations promulgated thereunder, with respect to all of
the Plans, and is not subject to any liability, whether asserted or not, for any
penalties to any Governmental Authority for late filing, of any return, report
or other governmental filing. No civil or criminal action brought pursuant to
the provisions of Title 1, Subtitle B, Part 5 of ERISA or any other federal or
state law is pending or threatened against any fiduciary of the Plans. No Plan,
or any fiduciary thereof, has been, or is currently the direct or indirect
subject of an audit, investigation or examination by any Governmental Authority.
All of the Plans comply currently, and have complied in the past, both as to
form and operation, in all material respects, with their terms and with all
Requirements of Law. Each of the Plans maintained by the Company or any
Subsidiary that is an "employee benefit pension plan" (within the meaning of
Section 3(2)(A) of ERISA) has obtained a favorable determination (covering all
changes or amendments applicable under Requirements of Law) from the Internal
Revenue Service as to its qualification under Sections 401(a) and 501(a) of the
Code or is within the remedial amendment period (as provided in Section 401(b)
of the Code) for making any required changes or amendments, and nothing has
occurred before or after the date of each such determination letter that would
adversely affect such qualification. All amounts that are currently owing to
plan participants or contributions required to be made to the Plans (without
giving effect to the transactions contemplated by the Acquisition Documents)
31
<PAGE>
have been timely paid or contributed with respect to all periods prior to the
Closing Date or provided for by adequate reserves on the Pro Forma Balance
Sheet.
(c) Prohibited Transaction. Except as set forth on Schedule 5.23(c),
---------------------- ----------------
no Plan, nor any related trust, nor the Company, nor any Subsidiary thereof, nor
any trustee, administrator or other "party in interest" or "disqualified person"
(within the meaning of Section 3(14) of ERISA or Section 4975(e)(2) of the Code,
respectively) with respect to the Plans, has engaged in any nonexempt
"prohibited transaction" (within the meaning of Section 406 of ERISA or Section
4975(c) of the Code, respectively) with respect to the participation of Company
or any of its Subsidiaries therein, which could subject any of the Plans or
related trusts, or any trustee, administrator or other fiduciary of any such
Plan, or the Company, any Subsidiary of the Company or the Purchaser, or any
other party dealing with the Plans, to the penalties or excise tax imposed on
prohibited transactions by Section 502 of ERISA or Section 4975 of the Code
which could have a material adverse effect on the Condition of the Company.
(d) COBRA. Except as set forth in Schedule 5.23(d), the Company and
----- ----------------
each of its Subsidiaries has complied with the continuation coverage
requirements of group health plans provided in Section 4980B of the Code,
Sections 601 et seq. of ERISA, the Family and Medical Leave Act of 1994, and the
regulations promulgated thereunder.
(e) Miscellaneous. Neither the Company, its Subsidiaries, nor any
-------------
Plan provides for or promises retiree medical, disability or life insurance
benefits to any current or former employees, officers or directors of the
Company or any of its Subsidiaries, other than continuation coverage required by
section 4980B of the Code. Neither the Company nor any of its Subsidiaries is a
party to or obligated under any agreement, plan, contract or other arrangements
that will result, separately or in the aggregate, in the payment of any "excess
parachute payment" within the meaning of section 280G of the Code.
5.24 PATENTS, TRADEMARKS, ETC.
-------------------------
(a) Except as set forth on Schedule 5.24(a), the Company or one of
----------------
its Subsidiaries owns or is licensed or otherwise has the right to use all
Intellectual Property necessary for the operation of its business as presently
conducted (including its business after giving effect to the transactions
contemplated by the Elekta Purchase Agreement).
(b) (i) Schedule 5.24(b)(i) sets forth all Patents, Copyrights and
-------------------
Trademarks owned by or issued to the Company or any Subsidiary, and all
applications relating to Patents, Copyrights and Trademarks filed by the Company
or any Subsidiary, specifying as to each item, as applicable: (A) the nature of
the item, including the title or description; (B) the owner of the item; (C) the
jurisdictions by or in which the item
32
<PAGE>
is recognized without regard to registration, or in which the item has been
issued or registered, or in which an application for issuance or registration
has been filed, including the respective registration or application numbers;
(D) the registration or application number; (E) the issue date and expiration
date of the item; and (F) with respect to each Trademark, the class or classes
of goods or services on which such trademark is or is intended to be used.
(ii) Schedule 5.24(b)(ii) sets forth all material licenses,
--------------------
sublicenses, registered user agreements and other agreements or permissions ("IP
LICENSES") under which the Company or any Subsidiary is a licensee or otherwise
is authorized to use or practice any Intellectual Property.
(iii) Schedule 5.24(b)(iii) sets forth all IP Licenses under
---------------------
which the Company or any Subsidiary is a licensor or otherwise authorizes any
person to use or practice Intellectual Property.
(c) To the knowledge of the Company, all issued Patents and
registered Trademarks and Copyrights held by the Company or any Subsidiary are
valid and subsisting. The Company and its Subsidiaries have taken all necessary
and desirable action to maintain and protect each item of Intellectual Property
owned or used by the Company and its Subsidiaries.
(d) To the knowledge of the Company, no party is in breach or default
under any IP License in any material respect, nor does any condition exist which
with notice or lapse of time or both would constitute a material breach or
default or permit termination, modification or acceleration thereunder, and no
party has repudiated any provision thereof. Except as disclosed with respect to
the IP Licenses listed on Schedule 5.24(b)(ii), there are no material royalties,
--------------------
fees or other payments payable by the Company or any Subsidiary to any other
Person by reason of the ownership, use, license, sale or disposition of any
Intellectual Property.
(e) Except as set forth on Schedule 5.24(e), no litigation is pending
----------------
or, to the knowledge of the Company, threatened that challenges the validity,
enforceability, ownership or right to use, sell, license or dispose of any item
of Intellectual Property used (including after giving effect to the transactions
contemplated by the Elekta Purchase Agreement) by the Company or any Subsidiary,
and no such item of Intellectual Property is subject to any outstanding order,
ruling, judgment, decree, stipulation, charge or settlement agreement,
restricting in any manner the use or the licensing thereof by the Company or any
Subsidiary.
(f) To the knowledge of the Company, neither the Company nor any
Subsidiary has ever infringed upon the material intellectual property rights of
any third party, or received any claim, charge, complaint, demand or notice in
writing alleging any such infringement or other violation of the intellectual
property rights of any third party, or knows of any basis for any such claim.
To the knowledge of the
33
<PAGE>
Company, the use of any Intellectual Property as a result of the operation of
the businesses as currently conducted or proposed to be conducted (including
after giving effect to the transactions contemplated by the Elekta Purchase
Agreement) will not infringe upon or otherwise violate the intellectual property
rights of any third party.
(g) To the knowledge of the Company, no third party is materially
infringing upon or otherwise materially violating rights of the Company or any
Subsidiary in the Intellectual Property.
(h) Except as set forth on Schedule 5.24(h), neither the Company nor
----------------
any Subsidiary has agreed to indemnify any person against any charge of
infringement or other violation, or granted any third party the right to bring
infringement or other enforcement actions, with respect to any Intellectual
Property owned or used by the Company or any Subsidiary. Except as set forth on
Schedule 5.24(h), the Company or one of its Subsidiaries has the exclusive right
- ----------------
to file, prosecute and maintain all applications and registrations with respect
to the Intellectual Property owned or used by the Company or any Subsidiary.
(i) To the knowledge of the Company, no current or former employee of
the Company or any Subsidiary is in violation of any Requirement of Law
applicable to such employee, or any term of any employment agreement, patent or
invention disclosure agreement, or other agreement with the Company or such
Subsidiary concerning Intellectual Property. No former employer of any Company
or Subsidiary employee, or current or former employer of any Company or
Subsidiary consultant, has made a claim against the Company or any Subsidiary,
or, to the knowledge of the Company, against any other person, that such
employee or such consultant is utilizing proprietary information of such
employer.
5.25 POTENTIAL CONFLICTS OF INTEREST. Except as set forth on Schedule
------------------------------- --------
5.25, no officer or director of the Company or any of its Subsidiaries (other
- ----
than a director of the Company who is a representative of Whitney or any
investment fund affiliate of Whitney): (a) owns, directly or indirectly, any
interest in (excepting less than 5% stock holdings for investment purposes in
securities of publicly held and traded companies), or is an officer, director,
employee or consultant of, any Person that is, or is engaged in business as, a
competitor, lessor, lessee, supplier, distributor, sales agent or customer of,
or lender to or borrower from, the Company or any of its Subsidiaries; (b) owns,
directly or indirectly, in whole or in part, any tangible or intangible property
that the Company or any of its Subsidiaries uses in the conduct of business; or
(c) has any cause of action or other claim whatsoever against, or owes or has
advanced any amount to, the Company or any of its Subsidiaries, except for
claims in the ordinary course of business such as for accrued vacation pay,
accrued benefits under employee benefit plans, and similar matters and
agreements existing on the date hereof; provided however, that to the extent the
----------------
representation made by the Company in this Section 5.25 relates to Subsidiaries
to be acquired pursuant to the Acquisition Documents, it is made by the Company
solely to the extent of its knowledge.
34
<PAGE>
5.26 TRADE RELATIONS. Set forth on Schedule 5.26 is a true and
--------------- -------------
correct list of the twenty largest customers of the Company and its Subsidiaries
taken as a whole in terms of sales during the twelve-month period ended December
31, 1997 and the five-month period ended May 31, 1998, and any other customers
who accounted for more than 3% of such sales, and a list of the five largest
suppliers to the Company and its Subsidiaries taken as a whole in terms of
purchases during the twelve-month period ended December 31, 1997 and the five-
month period ended May 31, 1998, as well as any sole source suppliers of goods
or services for which there is no ready alternative to the Company and its
Subsidiaries on comparable terms. There exists no actual or, to the knowledge
of the Company, threatened termination, cancellation or limitation of, or any
adverse modification or change in, the business relationship of the Company, its
Subsidiaries or their business with any customer or any group of customers whose
purchases are individually or in the aggregate material to the business of the
Company or any such Subsidiary, or with any material supplier, and there exists
no present condition or state of facts or circumstances that would materially
adversely affect the Condition of the Company or prevent the Company or its
Subsidiaries from conducting their business after the consummation of the
transactions contemplated by the Transaction Documents and the Acquisition
Documents, in substantially the same manner in which such business has
heretofore been conducted.
5.27 OUTSTANDING BORROWINGS. Schedule 5.27 lists (i) the amount of
---------------------- -------------
all Outstanding Borrowings of the Company and its Subsidiaries (other than
Indebtedness under this Agreement) as of the closing of the transactions
contemplated hereby and by the Acquisition Documents, (ii) the Liens that relate
to such Outstanding Borrowings and that encumber the assets of the Company and
its Subsidiaries, (iii) the name of each lender thereof, and (iv) the amount of
any unfunded commitments available to the Company in connection with any
Outstanding Borrowings; provided however, that to the extent the representation
----------------
made by the Company in Section 5.27(ii) relates to Liens relating to Outstanding
Borrowings of Subsidiaries to be acquired pursuant to the Acquisition Documents,
it is made by the Company solely to the extent of its knowledge.
5.28 MATERIAL CONTRACTS. Neither the Company nor any Subsidiary is a
------------------
party to any Contractual Obligation, or is subject to any charge, corporate
restriction, judgment, injunction, decree, or Requirement of Law, materially
adversely affecting the Condition of the Company. Schedule 5.28 lists all
-------------
contracts, agreements and commitments of the Company and its Subsidiaries as of
the Closing Date, whether written or oral, other than (a) the Transaction
Documents and the Acquisition Documents, (b) purchase orders in the ordinary
course of business, and (c) any other contracts, agreements and commitments of
the Company that do not extend beyond one year and involve the receipt or
payment of not more than $25,000. Each of the contracts, agreements and
commitments of the Company set forth on Schedule 5.28 is in full force and
-------------
effect.
5.29 INSURANCE. Schedule 5.29 accurately summarizes all of the
--------- -------------
insurance policies or programs of the Company and each Subsidiary in effect as
of the
35
<PAGE>
date hereof, and indicates the insurer's name, policy number, expiration
date, amount of coverage, type of coverage, annual premiums, exclusions and
deductibles, and also indicates any self-insurance program that is in effect.
All such policies are in full force and effect, are underwritten by financially
sound and reputable insurers, are sufficient for all applicable Requirements of
Law and otherwise are in compliance with the criteria set forth in Section 8.7
hereof. All such policies will remain in full force and effect and will not in
any way be affected by, or terminate or lapse by reason of any of the
transactions contemplated by the Transaction Documents or the Acquisition
Documents.
5.30 PRODUCTS LIABILITY. Except as set forth on Schedule 5.30, there
------------------ -------------
is no action, suit, proceeding or, to the knowledge of the Company, inquiry or
investigation pending, by or before any Governmental Authority against the
Company or any of its Subsidiaries relating to any product alleged to have been
sold by the Company or any of its Subsidiaries and alleged to have been
defective, or improperly designed or manufactured, nor to the knowledge of the
Company is there any valid basis for any such action, proceeding or
investigation; provided however, that to the extent the representation made by
----------------
the Company in this Section 5.30 relates to Subsidiaries to be acquired pursuant
to the Acquisition Documents, it is made by the Company solely to the extent of
its knowledge.
5.31 SOLVENCY. On and as of the Closing Date, after giving effect to
--------
the transactions contemplated by the Transaction Documents and the Acquisition
Documents, the Company and its Subsidiaries, taken as a whole, will be Solvent.
5.32 YEAR 2000 SYSTEMS. Except as set forth in Schedule 5.32 and
----------------- -------------
except with respect to any assets acquired under the Elekta Purchase Agreement,
to the Company's knowledge, the Company's computer systems and software are able
to process accurately date data, including, without limitation, calculating,
comparing and sequencing from, into and between the twentieth century (through
year 1999), in the year 2000 and the twenty-first century, including, without
limitation leap year calculations.
5.33 ELEKTA PURCHASE AGREEMENT. The copy of the Elekta Purchase
-------------------------
Agreement provided by the Company to the Purchaser (a) is a true and correct
copy thereof, (b) has not been amended or modified since May 8, 1998 and (c) is
in full force and effect and will be in full force and effect as of the Closing
Date. On the Closing Date, each of the representations and warranties made by
the Company and, to the knowledge of the Company, Elekta in the Elekta Purchase
Agreement is true and correct in all material respects. All consents, approvals
and authorizations of, and filings, registrations and qualifications with, any
Governmental Authority on the part of the Company and, to the knowledge of the
Company, Elekta required in connection with the consummation of the Acquisition
have been obtained or made and remain in full force and effect.
5.34 COMMISSION DOCUMENTS. The Company has filed all registration
--------------------
statements, proxy statements, reports and other documents required to be filed
by it
36
<PAGE>
under the Securities Act and the Exchange Act, and all amendments thereto
(collectively, the "COMMISSION DOCUMENTS"), and the Company has furnished or
made available to the Purchaser correct and complete copies of all Commission
Documents, each as filed with the Commission. Each Commission Document was true
and accurate in all material respects and did not omit to state a material fact
necessary to make the statements contained therein, in the light of the
circumstances under which they were made, not misleading when filed with the
Commission and in compliance in all material respects with the requirements of
its respective report form.
The representations and warranties made by the Company in Sections
5.9, 5.10, 5.18 and 5.24 with respect to the assets being acquired by the
Company simultaneously herewith pursuant to the Elekta Purchase Agreement are
made solely to the extent and in reliance upon the representations and
warranties made by Elekta to the Company in the Elekta Purchase Agreement.
The representations and warranties made by the Company in the first
sentence of Section 5.6 and in Sections 5.7, 5.8, 5.11, 5.13, 5.15, 5.16, 5.22,
5.23, 5.26, 5.28 and 5.29 shall be made by the Company prior to giving effect to
the consummation of the transactions contemplated by the Acquisition Documents.
ARTICLE 6
REPRESENTATIONS AND
WARRANTIES OF THE PURCHASER AND WHITNEY
---------------------------------------
Each of the Purchaser and Whitney, severally and not jointly, hereby
represents and warrants as follows:
6.1 AUTHORIZATION; NO CONTRAVENTION. The execution, delivery and
-------------------------------
performance by it of this Agreement: (a) is within its power and authority and
has been duly authorized by all necessary action; (b) does not contravene the
terms of its organizational documents or any amendment thereof, and (c) will not
violate, conflict with or result in any breach or contravention of any of its
Contractual Obligations, or any order or decree directly relating to it.
6.2 BINDING EFFECT. This Agreement has been duly executed and
--------------
delivered by it and this Agreement constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency, or similar
laws affecting the enforcement of creditors' rights generally or by equitable
principles relating to enforceability.
6.3 NO LEGAL BAR. The execution, delivery and performance of this
------------
Agreement by it will not violate any Requirement of Law applicable to it.
37
<PAGE>
6.4 PURCHASE FOR OWN ACCOUNT. The WSDF Note and/or the Shares to be
------------------------
acquired by it pursuant to this Agreement are being or will be acquired for its
own account and with no intention of distributing or reselling such security or
any part thereof in any transaction that would be in violation of the securities
laws of the United States of America, or any state, without prejudice, however,
to its right at all times to sell or otherwise dispose of all or any part of the
WSDF Note or the Shares under an effective registration statement under the
Securities Act, or under an exemption from such registration available under the
Securities Act, and subject, nevertheless, to the disposition of its property
being at all times within its control. If it should in the future decide to
dispose of all or any portion of the WSDF Note or the Shares, it understands and
agrees that it may do so only in compliance with the Securities Act and
applicable state securities laws, as then in effect. It agrees to the
imprinting of a legend on certificates representing the WSDF Note and the Shares
to the following effect: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE
STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS."
6.5 BROKER'S, FINDER'S OR SIMILAR FEES. Except as set forth in
----------------------------------
Section 2.2 hereof, there are no brokerage commissions, finder's fees or similar
fees or commissions payable in connection with the transactions contemplated
hereby based on any agreement, arrangement or understanding with it or any
action taken by it.
6.6 GOVERNMENTAL AUTHORIZATION; THIRD PARTY CONSENT. No approval,
-----------------------------------------------
consent, compliance, exemption, authorization, or other action by, or notice to,
or filing with, any Governmental Authority or any other Person in respect of any
Requirement of Law, and no lapse of a waiting period under a Requirement of Law,
is necessary or required in connection with the execution, delivery or
performance by it or enforcement against it of this Agreement or the
transactions contemplated hereby.
ARTICLE 7
INDEMNIFICATION
---------------
7.1 INDEMNIFICATION. In addition to all other sums due hereunder or
---------------
provided for in this Agreement, the Company agrees to indemnify and hold
harmless the Purchaser and its Affiliates and each of their respective officers,
directors, agents, employees, subsidiaries, partners, attorneys, accountants and
controlling persons (each, an "INDEMNIFIED PARTY") to the fullest extent
permitted by law from and against any and all losses, claims, damages, expenses
(including, without limitation, reasonable fees, disbursements and other charges
of counsel incurred by an Indemnified Party in any
38
<PAGE>
action or proceeding between the Company and such Indemnified Party (or
Indemnified Parties) or between an Indemnified Party (or Indemnified Parties)
and any third party or otherwise) or other liabilities, losses, or diminution in
value (collectively, "LIABILITIES") resulting from or arising out of any breach
of any representation or warranty, covenant or agreement of the Company in this
Agreement, the Note or the other Transaction Documents, including without
limitation, the failure to make payment when due of amounts owing pursuant to
this Agreement, the Note or the other Transaction Documents, on the due date
thereof (whether at the scheduled maturity, by acceleration or otherwise) or any
legal, administrative or other actions (including, without limitation, actions
brought by the Purchaser, the Company, any of its Subsidiaries or any equity
holders of the Company or any of its Subsidiaries or derivative actions brought
by any Person claiming through or in the Company's or any Subsidiary's name),
proceedings or investigations (whether formal or informal), or written threats
thereof, based upon, relating to or arising out of the Transaction Documents,
the transactions contemplated thereby, or any Indemnified Party's role therein
or in the transactions contemplated thereby; provided, however, that the Company
-------- -------
shall not be liable under this Section 7.1 to an Indemnified Party: (a) for any
amount paid by the Indemnified Party in settlement of claims by the Indemnified
Party without the Company's consent (which consent shall not be unreasonably
withheld), (b) to the extent that it is finally judicially determined that such
Liabilities resulted primarily from the willful misconduct or gross negligence
of such Indemnified Party or (c) to the extent that it is finally judicially
determined that such Liabilities resulted primarily from the breach by such
Indemnified Party of any representation, warranty, covenant or other agreement
of such Indemnified Party contained in this Agreement; provided, further, that
-------- -------
if and to the extent that such indemnification is unenforceable for any reason,
the Company shall make the maximum contribution to the payment and satisfaction
of such Liabilities which shall be permissible under applicable laws. In
connection with the obligation of the Company to indemnify for reasonable
expenses as set forth above, the Company further agrees, upon presentation of
appropriate invoices containing reasonable detail, to reimburse each Indemnified
Party for all such expenses (including, without limitation, reasonable fees,
disbursements and other charges of counsel incurred by an Indemnified Party in
any action or proceeding between the Company and such Indemnified Party (or
Indemnified Parties) or between an Indemnified Party (or Indemnified Parties)
and any third party or otherwise) as they are incurred by such Indemnified
Party; provided, however, that if an Indemnified Party is reimbursed hereunder
-------- -------
for any expenses, such reimbursement of expenses shall be refunded to the extent
it is finally judicially determined that the Liabilities in question resulted
primarily from (i) the willful misconduct or gross negligence of such
Indemnified Party or (ii) the breach by such Indemnified Party of any
representation, warranty, covenant or other agreement of such Indemnified Party
contained in this Agreement or any other Transaction Document.
7.2 PROCEDURE; NOTIFICATION. Each Indemnified Party under this
-----------------------
Article 7 will, promptly after the receipt of notice of the commencement of any
action, investigation, claim or other proceeding against such Indemnified Party
in respect of which indemnity may be sought from the Company under this Article
7, notify the
39
<PAGE>
Company in writing of the commencement thereof. The omission of any Indemnified
Party so to notify the Company of any such action shall not relieve the Company
from any liability which it may have to such Indemnified Party unless, and only
to the extent that, such omission results in the Company's forfeiture of
substantive rights or defenses. In case any such action, claim or other
proceeding shall be brought against any Indemnified Party, and it shall notify
the Company of the commencement thereof, the Company shall be entitled to assume
the defense thereof at its own expense, with counsel satisfactory to such
Indemnified Party, in its reasonable judgment; provided, however, that any
-------- -------
Indemnified Party may, at its own expense, retain separate counsel to
participate in such defense. Notwithstanding the foregoing, in any action, claim
or proceeding in which the Company, on the one hand, and an Indemnified Party,
on the other hand, is, or is reasonably likely to become, a party, such
Indemnified Party shall have the right to employ separate counsel at the
Company's expense and to control its own defense of such action, claim or
proceeding if, in the reasonable opinion of counsel to such Indemnified Party, a
conflict or potential conflict exists between the Company, on the one hand, and
such Indemnified Party, on the other hand, that would make such separate
representation advisable; provided, however, that in no event shall the Company
-------- -------
be required to pay fees and expenses under this Article 7 for more than one firm
of attorneys in any jurisdiction in any one legal action or group of related
legal actions. The Company agrees that it will not, without the prior written
consent of the Purchaser, settle, compromise or consent to the entry of any
judgment in any pending or threatened claim, action or proceeding relating to
the matters contemplated hereby (if any Indemnified Party is a party thereto or
has been actually threatened to be made a party thereto) unless such settlement,
compromise or consent includes an unconditional release of the Purchaser and
each other Indemnified Party from all liability arising or that may arise out of
such claim, action or proceeding. The Company shall not be liable for any
settlement of any claim, action or proceeding effected against an Indemnified
Party without its written consent, which consent shall not be unreasonably
withheld. The rights accorded to Indemnified Parties hereunder shall be in
addition to any rights that any Indemnified Party may have at common law, by
separate agreement or otherwise.
ARTICLE 8
AFFIRMATIVE COVENANTS
---------------------
Until the payment by the Company of all principal of and interest on
the Note and all other amounts due to the Purchaser under this Agreement and the
other Transaction Documents, including, without limitation, all fees, expenses
and amounts due in respect of indemnity obligations under Article 7, the Company
hereby covenants and agrees with the Purchaser as follows:
40
<PAGE>
8.1 FINANCIAL STATEMENTS AND OTHER INFORMATION. The Company shall
------------------------------------------
maintain, and cause each of its Subsidiaries to maintain, a system of accounting
established and administered in accordance with sound business practices to
permit preparation of financial statements in conformity with GAAP (it being
understood that monthly financial statements are not required to have footnote
disclosures). The Company shall deliver to the Purchaser each of the financial
statements and other reports described below:
(a) Monthly and Quarterly Financial. As soon as available and in any
-------------------------------
event within thirty (30) days after the end of each month, the Company shall
deliver (i) the consolidated balance sheet of the Company and its Subsidiaries,
as at the end of such month and the related consolidated statements of
operations, stockholders' equity (deficit) and cash flow for such month and for
the period from the beginning of the then current fiscal year of the Company to
the end of such month (and, with respect to financial statements delivered for
months that are also the last month of any fiscal quarter, accompanied by the
related consolidated statements of operations, stockholders' equity (deficit)
and cash flow for such fiscal quarter) and a schedule of the outstanding
Indebtedness for borrowed money of the Company and its Subsidiaries describing
in reasonable detail each such debt issue or loan outstanding and the principal
amount and amount of accrued and unpaid interest with respect to each such debt
issue or loan. As soon as available and in any event within forty-five (45)
days after the end of each month that is also the last month of any fiscal
quarter, the Company shall deliver the consolidated balance sheet of the Company
and its Subsidiaries, as at the end of such fiscal quarter and the related
consolidated statements of operations, stockholders' equity (deficit) and cash
flow for such fiscal quarter and for the period from the beginning of the then
current fiscal year of the Company to the end of such fiscal quarter, in each
case presenting data for each business unit of the Company and its Subsidiaries.
(b) Year-End Financial. As soon as available and in any event within
------------------
ninety (90) days after the end of the fiscal year of the Company, the Company
shall deliver (i) the consolidated balance sheet of the Company and its
Subsidiaries as at the end of such year and the related consolidated statements
of operations, stockholders' equity (deficit) and cash flow for such fiscal
year, (ii) a schedule of the outstanding Indebtedness for borrowed money of the
Company and its Subsidiaries describing in reasonable detail each such debt
issue or loan outstanding and the principal amount and amount of accrued and
unpaid interest with respect to each such debt issue or loan, and (iii) a report
with respect to the financial statements from Arthur Andersen LLP or another
"Big Six" firm of certified public accountants selected by the Company and
reasonably acceptable to the Purchaser, which report shall be prepared in
accordance with Statement of Auditing Standards No. 58 entitled "Reports on
Audited Financial Statements" and such report shall be "Unqualified" (as such
term is defined in such Statement). Together with each delivery of financial
statements of the Company and its Subsidiaries pursuant to this subsection
8.1(b), the Company shall deliver to the Purchaser a copy of a letter from the
Company to such accounting firm, which letter shall have been delivered to such
accounting firm prior to its delivery of such financial
41
<PAGE>
statements, stating that an intent of the Company in engaging the accounting
firm's professional services to prepare the audit report relating to such
financial statements was to benefit and influence the Purchaser and their
successors or assigns. Such letter shall state that the Purchaser intends to
rely on the audit report and the accounting firm's professional services
provided to the Company and its Subsidiaries.
(c) Company's Compliance Certificate. Together with each delivery of
--------------------------------
financial statements of the Company and its Subsidiaries pursuant to Sections
8.1(a) and 8.1(b) above, the Company shall deliver or cause to be delivered a
fully and properly completed compliance certificate (in substantially the form
attached hereto as Exhibit G (or in such other form or substance as shall be
---------
satisfactory to Purchaser) and referred to as a "COMPLIANCE CERTIFICATE") signed
by the chief executive officer or chief financial officer of the Company. The
Company and the Purchaser acknowledge and agree that calculations of covenant
compliance, with respect to the financial covenants contained in Section 9.8
hereof and contained in any such compliance certificate delivered for a month
that is not the last month of a calendar quarter, will be for informational
purposes only and shall not measure compliance (or lack of compliance) with such
financial covenants.
(d) Accountants' Reports. Promptly upon receipt thereof, the Company
--------------------
shall deliver copies of all significant reports submitted by the Company's firm
of certified public accountants in connection with each annual, interim or
special audit or review of any type of the financial statements or related
internal control systems of the Company and its Subsidiaries made by such
accountants, including any comment letter submitted by such accountants to
management in connection with their services.
(e) Management Reports. Together with each delivery of financial
------------------
statements of the Company and its Subsidiaries pursuant to subsections 8.1(a)
and 8.1(b), the Company will deliver a management report (i) describing the
operations and financial condition of the Company and its Subsidiaries for the
month then ended and the portion of the current fiscal year then elapsed (or for
the fiscal year then ended in the case of year-end financial), (ii) setting
forth in comparative form the corresponding figures for the corresponding
periods of the previous fiscal year and the corresponding figures from the most
recent projections for the current fiscal year delivered pursuant to subsection
8.1(f) and (iii) discussing the reasons for any significant variations. The
information above shall be presented in reasonable detail and shall be certified
by the chief financial officer of the Company to the effect that such
information fairly presents the results of operations and financial condition of
the Company and its Subsidiaries as at the dates and for the periods indicated.
In addition to the foregoing management report, the chief financial officer of
the Company shall discuss with the Purchaser on a monthly basis, either in
person or by telephone conference call, the Company's operations and financial
condition for each of the first six months following the Closing Date.
42
<PAGE>
(f) Projections/Plan of Operation. As soon as available and in any
-----------------------------
event no later than the last day of the Company's fiscal year, the Company shall
deliver projections of the Company and its Subsidiaries for the forthcoming
fiscal year, prepared on a month by month basis. As soon as available and in
any event within thirty (30) days after the end of the fiscal year of the
Company, the Company shall deliver a plan of operation covering the current and
succeeding fiscal year of the Company, in form and substance reasonably
satisfactory to the Purchaser.
(g) Commission Filings and Press Releases. Promptly upon their
-------------------------------------
becoming available, the Company shall deliver copies of (i) all financial
statements, reports, notices and proxy statements sent or made available by the
Company or any of its Subsidiaries to their security holders, (ii) all regular
and periodic reports and all registration statements and prospectuses, if any,
filed by the Company or any of its Subsidiaries with any securities exchange or
with the Commission or any governmental or private regulatory authority, and
(iii) all press releases and other statements made available by the Company or
any of its Subsidiaries to the public concerning material developments in the
business of the Company or any of its Subsidiaries.
(h) Events of Default, Etc. Promptly upon the Company obtaining
----------------------
knowledge of any of the following events or conditions, the Company shall
deliver copies of all notices given or received by the Company or any of its
Subsidiaries with respect to any such event or condition and a certificate of
the Company's chief executive officer specifying the nature and period of
existence of such event or condition and what action the Company has taken, is
taking and proposes to take with respect thereto: (i) any condition or event
that constitutes an Event of Default; (ii) any notice that any Person has given
to the Company or any of its Subsidiaries or any other action taken with respect
to a claimed default or event or condition in any other agreement to which the
Company or any of its Subsidiaries is a party; or (iii) any event or condition
that could reasonably be expected to result in any material adverse effect on
the Condition of the Company.
(i) Litigation. Promptly upon any officer of the Company obtaining
----------
knowledge of (i) the institution of any material action, suit, proceeding,
governmental investigation or arbitration against or affecting the Company or
any of its Subsidiaries or any property of the Company or any of its
Subsidiaries not previously disclosed by the Company to the Purchaser or (ii)
any material development in any action, suit, proceeding, governmental
investigation or arbitration at any time pending against or affecting the
Company or any of its Subsidiaries or any property of the Company or any of its
Subsidiaries which, in each case, is reasonably possible to have a material
adverse effect on the Condition of the Company, the Company will promptly give
notice thereof to the Purchaser and provide such other information as may be
reasonably available to them to enable the Purchaser and its counsel to evaluate
such matter.
43
<PAGE>
(j) Subsidiaries. Not less than fifteen (15) days prior to creating
------------
a Subsidiary or acquiring the stock of a Person, such that such Person will
become a Subsidiary, the Company shall notify the Purchaser of the Company's or
any of its Subsidiary's intention to create such Subsidiary or acquire such
stock, and following such notice, such Subsidiary will not be created or
acquired until the Company has caused each Subsidiary, to execute a joinder to
the appropriate Security Documents in form and substance satisfactory to the
Purchaser. For purposes of clarification, (I) each newly created or acquired
domestic Subsidiary shall execute and deliver to the Purchaser (a) the Guarantee
and Collateral Agreement, together with all other items customarily delivered in
connection with such a security agreement, (b) an opinion of counsel to the
Company and such Subsidiary addressed to the Purchaser, in form and substance
reasonably satisfactory to the Purchaser, as to such matters as the Purchaser
may reasonably require, including, without limitation, the creation and
perfection of the Purchaser's security interests, and (c) such other approvals,
opinions or documents as the Purchaser may reasonably request; and (II) each
newly created or acquired first tier foreign Subsidiary of the Company or any of
its domestic Subsidiaries, shall execute and deliver (x) the Guarantee and
Collateral Agreement pledging 100% of the stock of each such domestic Subsidiary
and 65% of the stock of the first tier foreign Subsidiary, (y) an opinion of
counsel to the Company, addressed to the Purchaser, in form and substance
reasonably satisfactory to the Purchaser, as to such matters as the Purchaser
may reasonably require, including, without limitation, the creation and
perfection of the Purchaser's security interests, and (z) such other approvals,
opinions or documents as the Purchaser may reasonably request.
(k) Supplemental Schedules; Notices of Corporate Changes. Annually,
----------------------------------------------------
concurrently with the delivery of the projections required by subsection 8.1(f),
the Company shall supplement in writing and deliver to the Purchaser revisions
of the Schedules annexed to this Agreement to the extent necessary to disclose
new or changed facts or circumstances after the Closing Date; provided that
--------
subsequent disclosures shall not constitute a cure or waiver of any Event of
Default resulting from the matters disclosed. The Company shall provide prompt
written notice to the Purchaser of (i) all jurisdictions in which the Company or
any of its Subsidiaries becomes qualified after the Closing Date to transact
business, and (ii) any material change after the Closing Date in the authorized
and issued capital stock or other equity interests of the Company or any of its
Subsidiaries or any other material amendment to their charter, by-laws or other
organization documents, such notice, in each case, to identify the applicable
jurisdictions or capital structures, as applicable.
(l) Other Information. With reasonable promptness, the Company shall
-----------------
deliver such other information and data with respect to the Company or any of
its Subsidiaries as from time to time may be reasonably required by the
Purchaser.
8.2 PRESERVATION OF CORPORATE EXISTENCE. The Company shall, and
-----------------------------------
shall cause each of its Subsidiaries to:
44
<PAGE>
(a) preserve and maintain in full force and effect its corporate
existence;
(b) conduct its business in accordance with sound business practices,
keep its properties in good working order and condition (normal wear and tear
excepted), and from time to time make all needed repairs to, renewals of or
replacements of its properties (except to the extent that any of such properties
are obsolete or are being replaced) so that the efficiency of its business
operations shall be fully maintained and preserved; and
(c) file or cause to be filed in a timely manner all reports,
applications, estimates and licenses that shall be required by a Governmental
Authority.
8.3 PAYMENT OF OBLIGATIONS. The Company shall, and shall cause each
----------------------
of its Subsidiaries to, pay and discharge as the same shall become due and
payable, all their respective obligations and liabilities, including without
limitation:
(a) all Tax liabilities, assessments and governmental charges or
levies upon it or its properties or assets, unless the same are being contested
in good faith by appropriate proceedings and adequate reserves in accordance
with GAAP are being maintained by the Company or such Subsidiary;
(b) all lawful claims which the Company and each of its Subsidiaries
is obligated to pay, which are due and which, if unpaid, might by law become a
Lien upon its property, unless the same are being contested in good faith by
appropriate proceedings and adequate reserves in accordance with GAAP are being
maintained by the Company or such Subsidiary; and
(c) all payments of principal, interest and other amounts when
due on Indebtedness.
8.4 COMPLIANCE WITH LAWS. The Company shall comply, and shall cause
--------------------
each of its Subsidiaries to comply, in all material respects with all
Requirements of Law and with the directions of any Governmental Authority having
jurisdiction over them or their business or property (including all applicable
Environmental Laws).
8.5 INSPECTION. The Company will permit, and will cause each of its
----------
Subsidiaries to permit, representatives of the Purchaser to visit and inspect
any of their properties, to examine their corporate, financial and operating
records and make copies thereof or abstracts therefrom, and to discuss their
affairs, finances and accounts with their respective directors, officers and
independent public accountants, all at such reasonable times during normal
business hours and as often as may be reasonably requested, upon reasonable
advance notice.
45
<PAGE>
8.6 PAYMENT OF NOTE. The Company shall pay the principal of,
---------------
interest on and other amounts due in respect of, the Note on the dates and in
the manner provided in the Note.
8.7 INSURANCE. The Company and its Subsidiaries will maintain or
---------
cause to be maintained with financially sound and reputable insurers that have a
rating of "A" or better as established by Best's Rating Guide (or an equivalent
rating with such other publication of a similar nature as shall be in current
use), public liability and property damage insurance with respect to their
respective businesses and properties against loss or damage of the kinds
customarily carried or maintained by companies of established reputation engaged
in similar businesses and in amounts acceptable to Purchaser and will deliver
evidence thereof to Purchaser.
8.8 BOOKS AND RECORDS. The Company shall, and shall cause each of
-----------------
its Subsidiaries to, keep proper books of record and account, in which full and
correct entries shall be made of all financial transactions and the assets and
business of the Company and each of its Subsidiaries in accordance with GAAP
consistently applied to the Company and its Subsidiaries taken as a whole.
8.9 USE OF PROCEEDS. The Company shall use the proceeds of the sale
---------------
of the Note and the Shares hereunder only as follows: (i) for the payment of
fees and expenses in connection with the transactions contemplated hereunder and
in the other Transaction Documents and (ii) to fund the payment of the purchase
price of the Acquisition under the Elekta Purchase Agreement.
8.10 INITIAL INTEREST PAYMENTS. Notwithstanding anything to the
-------------------------
contrary contained herein or in the Note, the Company agrees that the Purchaser
shall deduct $1,475,868.33 from the amount to be paid pursuant to Section 2.1
for the WDSF Note. Such amount shall be retained by the Purchaser and applied as
follows in full satisfaction of the first four interest payments (but
specifically excluding any additional interest accruing under the Note upon and
during the occurrence of an Event of Default) otherwise due and owing under the
Note:
<TABLE>
<CAPTION>
Interest Payment Date Amount
- ----------------------- -----------
<S> <C>
September 30, 1998 $ 465,768.33
December 31, 1998 $ 505,050
March 31, 1999 $ 505,050
</TABLE>
The Purchaser agrees to deposit the amount deducted and retained under
this Section 8.10 into an interest bearing account (at the discretion of the
Purchaser) and to pay to the Company all interest received on such deposit on a
quarterly basis.
46
<PAGE>
ARTICLE 9
NEGATIVE COVENANTS
------------------
Until the payment by the Company of all principal of and interest on
the Note and all other amounts due at the time of payment of such principal and
interest to the Purchaser under this Agreement and the other Transaction
Documents, including, without limitation, all fees, expenses and amounts due at
such time in respect of indemnity obligations under Article 7, the Company
hereby covenants and agrees with the Purchasers as follows:
9.1 FUNDAMENTAL CHANGES; CONSOLIDATIONS, MERGERS AND ACQUISITIONS.
-------------------------------------------------------------
The Company shall not, and shall not permit any of its Subsidiaries directly or
indirectly to: (a) amend, modify or waive any term or provision of its
certificate of incorporation, by-laws or other organization or governing
agreements and documents, unless required by law; (b) enter into any transaction
of merger or consolidation; (c) liquidate, wind-up or dissolve itself (or suffer
any liquidation or dissolution); or (d) except pursuant to the exercise by the
Company of its option to purchase the portion of ITC it does not already own,
acquire by purchase or otherwise all or any substantial part of the business
assets of any other Person.
9.2 TRANSACTIONS WITH AFFILIATES. Except in the ordinary course of
----------------------------
business and consistent with past practices or as set forth on Schedule 9.2, the
------------
Company shall not, and shall not permit any of its Subsidiaries to, (a) enter
into any transaction or agreement with, or make any payment (other than pursuant
to agreements existing on the date hereof or subsequently approved by the
Purchaser) to, any Affiliate, (b) amend or terminate any existing agreement with
any Affiliate, (c) purchase from or provide to an Affiliate any selling,
general, management or administrative services, (d) directly or indirectly make
any sales to or purchases from an Affiliate, or (e) increase the compensation
being paid to an Affiliate.
9.3 NO INCONSISTENT AGREEMENTS. Neither the Company nor any of its
--------------------------
Subsidiaries shall enter into any Contractual Obligation or enter into any
amendment or other modification to any currently existing Contractual Obligation
of the Company or any of their Subsidiaries, which by its terms restricts or
prohibits the ability of the Company to pay the principal of or interest on the
Note or to fully satisfy all of the obligations under the Transaction Documents
of the Company or its Subsidiaries.
9.4 LIMITATION ON INDEBTEDNESS. The Company shall not, and shall not
--------------------------
cause, suffer or permit any of its Subsidiaries to, directly or indirectly,
collectively and in the aggregate, issue, assume or otherwise incur any
Indebtedness, other than:
(a) Indebtedness created under the Transaction Documents;
47
<PAGE>
(b) (i) at such time as the financial covenants contained in Sections
9.8(e) and (f) are no longer applicable (and so long as, on a pro forma basis
after giving effect to the incurrence of any Indebtedness proposed to be
incurred under this Section 9.4(b)(i), the Company would be in compliance with
the covenants contained in Sections 9.8(e) and (f)), Indebtedness, including
without limitation Capital Lease Obligations, up to an aggregate outstanding
amount of $10,000,000 (including any Indebtedness previously incurred under (ii)
below), and (ii) prior to such time as the Company may incur Indebtedness under
Section 9.4(b)(i), Indebtedness, including without limitation Capital Lease
Obligations, up to an aggregate outstanding principal amount of $3,500,000, in
either case inclusive of Indebtedness listed on Schedule 5.27;
-------------
(c) Non-current liabilities for post-employment healthcare and
other insurance benefits;
(d) Trade payables and accrued expenses, in each case arising in
the ordinary course of business;
(e) Indebtedness secured by a Lien permitted under Section 9.5(e);
(f) Indebtedness between and/or among the Company and its
Subsidiaries; provided that the obligations of such Indebtedness shall:
--------
(i) be subordinated in right of payment to all Indebtedness
under the Note and this Agreement from and after such time as any portion
of the Indebtedness under the Note and this Agreement shall become due and
payable (whether at stated maturity, by acceleration or otherwise); and
(ii) have such other terms and provisions as the Purchaser may
reasonably require;
(g) Refinancings, refundings or extensions of the foregoing;
provided, that any such refinancings, refundings or extensions shall not:
- --------
(i) exceed the principal amount refinanced, refunded or
extended;
(ii) shorten the maturity (or weighted average life to maturity)
of such Indebtedness or convert a revolving credit facility into a facility
which provides for the amortization of principal;
(iii) increase the interest rate applicable to such Indebtedness;
48
<PAGE>
(iv) upon the occurrence and during the continuance of an Event
of Default, cause any covenants or undertakings (whether affirmative or
negative) of the Company or its Subsidiaries in respect of such
Indebtedness to be more restrictive than such covenants or undertakings had
been prior to such refinancing, refunding or extension;
(v) facilitate the exercise or enforcement of any remedies of
any obligee of such Indebtedness in respect of any default or event of
default thereunder;
(vi) materially and adversely affect any obligations under the
Transaction Documents to the Purchaser; or
(vii) result in any amendments or modifications of any of the
subordination provisions applicable to such Indebtedness.
9.5 LIMITATION ON LIENS. The Company will not, nor will it permit
-------------------
any of its Subsidiaries, directly or indirectly, to create, incur, assume or
permit to exist any Lien on or with respect to any property or asset (including
any document or instrument with respect to goods or accounts receivable) of the
Company or its Subsidiaries, whether now owned or hereafter acquired, or any
income or profits therefrom, except Permitted Encumbrances. "PERMITTED
ENCUMBRANCES" means the following:
(a) Liens for taxes, assessments or other governmental charges which
are not yet due and payable or which are being contested in good faith with a
reserve or other appropriate provision having been made thereof;
(b) Liens of landlords, carriers, warehousemen, mechanics,
materialmen and other similar Liens imposed by law, which are incurred in the
ordinary course of business for sums not more than thirty (30) days delinquent
or which are being contested in good faith; provided that a reserve or other
--------
appropriate provision shall have been made therefor and the aggregate amount of
such Liens is less than $100,000;
(c) Liens (other than any Lien imposed by ERISA or any rule or
regulation promulgated thereunder) incurred or deposits made in the ordinary
course of business in connection with workers' compensation, unemployment
insurance and other types of social security, or to secure the performance of
tenders, statutory obligations, surety, stay, customs and appeal bonds, bids,
leases, government contracts, trade contracts, performance and return of money
bonds and other similar obligations (exclusive of obligations for the payment of
borrowed money);
(d) Deposits in an aggregate amount not to exceed $100,000, made in
the ordinary course of business to secure liability to insurance carriers;
49
<PAGE>
(e) Liens for purchase money obligations to acquire assets;
provided that:
- --------
(i) such Lien attaches to such asset concurrently with or
within 10 days after acquisition thereof;
(ii) such Lien does not exceed the purchase price of such asset;
and
(iii) the Indebtedness secured by all such Liens, shall not
exceed $1,000,000; and
(iv) any such Lien encumbers only the asset so purchased;
(f) Any attachment or judgment Lien not constituting an Event of
Default;
(g) Leases or subleases granted to others not interfering in any
material respect with the business of the Company or its Subsidiaries;
(h) Easements, rights of way, restrictions and other similar charges
or encumbrances not interfering in any material respect with the ordinary
conduct of the business of the Company or any of its Subsidiaries;
(i) Liens to secure Senior Indebtedness and Indebtedness
permitted under Section 9.4(a);
(j) Liens to secure Indebtedness permitted under Section 9.4(b);
and
(k) Liens existing on the date hereof and renewals and extensions
thereof, which Liens are set forth on Schedule 9.5 hereto.
------------
9.6 DISPOSITIONS OF ASSETS. The Company will not, nor will it permit
----------------------
any of its Subsidiaries, directly or indirectly, to: convey, sell (pursuant to
a sale/leaseback or otherwise), lease, sublease, transfer or otherwise dispose
of, or grant any Person an option to acquire, in one transaction or a series of
transactions, any of its property, business or assets, or the capital stock of
or other equity interests in any of its Subsidiaries, whether now owned or
hereafter acquired, except for:
(a) Bona fide sales of inventory, including real estate acquired in
the ordinary course of business, to customers for fair value in the ordinary
course of business and dispositions of obsolete equipment not used or useful in
the business;
50
<PAGE>
(b) Asset Dispositions if all of the following conditions are
met:
(i) the market value of assets sold or otherwise disposed of
(by the Company and its Subsidiaries taken as a whole) in any fiscal
year do not exceed $500,000;
(ii) the Net Proceeds received is at least equal to the fair
market value of such assets;
(iii) at least 75% of the consideration received is Cash;
(iv) after giving effect to the sale or other disposition of
the assets included within the Asset Disposition and the repayment of
Indebtedness with the proceeds thereof, the Company would be in
compliance on a pro forma basis with the covenants set forth in
Section 9.8 hereof recomputed for the most recently ended month for
which information is available and is in compliance with all other
terms and conditions of this Agreement;
(v) no Event of Default then exists or shall result from
such sale or other disposition; or
(c) Sale and leaseback transactions relating to real estate or
capital equipment; provided however, that 50% of the Net Proceeds of any such
----------------
transaction shall be utilized by the Company to prepay the outstanding principal
and any outstanding interest or penalties on the Note pursuant to Section 4 of
the Note.
9.7 LIMITATIONS ON RESTRICTED PAYMENTS. The Company shall not, and
----------------------------------
shall not permit any of its Subsidiaries to declare, or make any Restricted
Payment.
9.8 FINANCIAL COVENANTS. The Company covenants and agrees that until
-------------------
payment in full of all Indebtedness hereunder and under the Note, the Company
shall comply with and shall cause each of its Subsidiaries to comply with all
covenants in this Section 9.8 applicable to such Person.
(a) Interest Coverage. The Company shall not permit Interest Coverage
for any twelve (12) month period ending on the last day of a calendar quarter
during any of the periods set forth below, to be less than the ratio set forth
below for such period:
<TABLE>
<CAPTION>
Period Ratio
- ------------------------------------------------------- -----------
<S> <C>
September 30, 1998 to and including March 31, 1999 2.75 : 1.00
June 30, 1999 to and including September 30, 1999 3.0 : 1.00
December 31, 1999 to and including December 31, 2000 3.5 : 1.00
March 31, 2001 and thereafter 4.0 : 1.00
</TABLE>
51
<PAGE>
"INTEREST COVERAGE" will be calculated as illustrated on Exhibit H.
---------
Notwithstanding anything to the contrary contained herein or in Exhibit H
---------
hereto, the determination of Interest Coverage for the periods ended September
30, 1998, December 31, 1998 and March 30, 1999 shall not be calculated for a
twelve month period, but rather shall be calculated for the 3 month, 6 month and
9 month periods, respectively, ending on the last day of each such calendar
quarter.
(b) Total Leverage Test. The Company shall not permit the ratio of
Net Funded Indebtedness as of the last day of any calendar quarter during any of
the periods set forth below to Adjusted Operating Cash Flow for the twelve (12)
month period ending on the last day of such calendar quarter to be greater than
the ratio set forth below for such period:
<TABLE>
<CAPTION>
Period Ratio
- ---------------------------------------------------- ------------
<S> <C>
September 30, 1998 5.0 : 1.00
December 31, 1998 to and including March 31, 1999 4.5 : 1.00
June 30, 1999 4.25 : 1.00
September 30, 1999 to and including March 31, 2000 4.0 : 1.00
June 30, 2000 to and including March 31, 2001 3.5 : 1.00
June 30, 2001 and thereafter 3.0 : 1.00
</TABLE>
"NET FUNDED INDEBTEDNESS" and "ADJUSTED OPERATING CASH FLOW" will be calculated
as illustrated on Exhibit H. Notwithstanding anything to the contrary contained
---------
herein or in Exhibit H hereto, (x)(i) the determination of EBITDA for the period
---------
ended September 30, 1998 shall be calculated by multiplying the EBITDA of the
Company and its Subsidiaries for the three months then ended by 4; (ii) the
determination of EBITDA for the period ended December 31, 1998 shall be
calculated by multiplying the EBITDA of the Company and its Subsidiaries for the
six months then ended by 2; and (iii) the determination of EBITDA for the period
ended March 31, 1999 shall be calculated by multiplying the EBITDA of the
Company and its Subsidiaries for the nine months then ended by 1.33 and (y) any
calculation of this covenant requiring reference to the Adjusted Operating Cash
Flow of the Company for any of the periods ended on or before June 30, 1999,
shall be calculated assuming that the Capital Expenditures of the Company for
the relevant period are equal to the lesser of the actual Unfinanced Capital
Expenditures for such period or $575,000.
(c) Fixed Charge Coverage. The Company shall not permit Fixed Charge
Coverage for any twelve (12) month period ending on the last day of a calendar
quarter during any of the periods set forth below to be less than the ratio set
forth below for such period:
<TABLE>
<CAPTION>
Period Ratio
- ---------------------------------------------------- -----------
<S> <C>
September 30, 1998 to and including March 31, 1999 1.15 : 1.00
June 30, 1999 to and including September 30, 1999 1.25 : 1.00
December 31, 1999 to December 31, 2000 1.5 : 1.00
March 31, 2001 and thereafter 1.75 : 1.00
</TABLE>
52
<PAGE>
"FIXED CHARGE COVERAGE" will be calculated as illustrated on Exhibit H.
----------
Notwithstanding anything to the contrary contained herein or in Exhibit H
---------
hereto, the determination of Fixed Charge Coverage for the periods ended
September 30, 1998, December 31, 1998 and March 30, 1999 shall not be calculated
for a twelve month period, but rather shall be calculated for the 3 month, 6
month and 9 month periods, respectively, ending on the last day of each such
calendar quarter.
(d) Capital Expenditures. The Company shall not permit Capital
Expenditures in any fiscal period to exceed the amounts set forth below for each
corresponding period.
<TABLE>
<CAPTION>
Period Amount
- ----------------------------------------------- ----------
<S> <C>
July 1, 1998 through June 30, 1999 $2,300,000
July 1, 1999 through June 30, 2000 $1,900,000
July 1 through June 30 for each annual period
commencing July 1, 2000 and thereafter $1,000,000
</TABLE>
(e) Funded Debt to Cash and Cash Equivalents. The Company shall not
permit the ratio of Funded Debt of the Company and its Subsidiaries on a
consolidated basis to the sum of the cash and Cash Equivalents of the Company
and its Subsidiaries on a consolidated basis to be greater than 2.0:1.0;
provided, however, that this Section 9.8(e) shall be of no further force or
- -------- -------
effect at such time as the ratio of Net Funded Indebtedness to Adjusted
Operating Cash Flow, as determined in accordance with Section 9.8(b) of this
Agreement without regard to the last sentence thereof, is less than 4.0:1 for
four consecutive fiscal quarters.
(f) Current Ratio. The Company shall not permit the ratio of Current
Assets less cash and Cash Equivalents to Current Liabilities as of the last day
of any calendar quarter during any of the periods set forth below to be less
than the ratio set forth below for such period; provided, however, that this
-------- -------
Section 9.8(f) shall be of no further force or effect at such time as the ratio
of Net Funded Indebtedness to Adjusted Operating Cash Flow, as determined in
accordance with Section 9.8(b) of this Agreement without regard to the last
sentence thereof, is less than 4.0:1.0 for four consecutive fiscal quarters.
<TABLE>
<CAPTION>
Period Ratio
- ------------------------------------------------------- ------------
<S> <C>
September 30, 1998 to and including December 31, 1999 1.5 : 1:00
March 31, 2000 and thereafter 1.75 : 1:00
</TABLE>
9.9 EMPLOYEE BENEFIT PLANS. The Company shall not, and shall not permit
----------------------
any of its Subsidiaries or any ERISA Affiliate, without the prior approval of
the
53
<PAGE>
Purchaser, (a) to establish or contribute to any employee benefit plan
(within the meaning of Section 3(3)) of ERISA) or other employee benefit
arrangement which (i) is subject to Title IV of ERISA or is otherwise a Defined
Benefit Plan, Multiemployer Plan or multiple employer plan (within the meaning
of Section 413(c) of the Code); or (ii) provides post-retirement welfare
benefits or "parachute payments" (within the meaning of Section 280G(b) of the
Code); or (b) to amend any Plan if the effect of such amendment would cause such
Plan to be a plan or arrangement described in clause (a)(i) hereof or to provide
any of the benefits described in clause (a)(ii) hereof.
9.10 LIMITATION ON BUSINESS OF THE COMPANY. Neither the Company nor
-------------------------------------
any of its Subsidiaries shall engage in any business or transaction other than
the business in which it is currently engaged and the transactions contemplated
by, or permitted under, the Transaction Documents and the Acquisition Documents.
9.11 INVESTMENTS. Except in the ordinary course of business and
-----------
consistent with past practices, the Company shall not, and shall not permit any
of its Subsidiaries, directly or indirectly, to make or own any Investment in
any Person except: (a) Investments in Cash Equivalents; provided that such Cash
Equivalents are not subject to setoff rights in favor of the issuing bank
arising from any existing banking relationship; (b) intercompany loans and
investments to the extent permitted under Sections 9.2 or 9.4; (c) loans and
advances to employees for moving, entertainment, travel and other similar
expenses in the ordinary course of business not to exceed $50,000 in the
aggregate at any time outstanding; (d) loans of up to $2 million to ITC in
accordance with the terms and provisions of that certain Loan and Security
Agreement, dated May 29, 1997, between the Company and ITC (including the
conversion of such loans into shares of ITC's redeemable convertible preferred
stock, par value $.01 per share, representing a 20% ownership interest therein);
(e) the acquisition by the Company of the portion of ITC it does not already own
for $24,500,000 pursuant to the exercise of its option to acquire such ownership
interest in accordance with the terms of that certain Stockholders Option
Agreement dated May 29, 1997 among the Company, ITC and the holders of common
stock and warrants of ITC listed on Schedule A thereto and (f) a loan to or
investment in ITC in an amount not to exceed $800,000, and in a manner
consistent with the terms and conditions previously approved by the Company's
Board of Directors.
9.12 CONTINGENT OBLIGATIONS. The Company shall not, nor shall it
----------------------
permit any of its Subsidiaries directly or indirectly to create or become or be
liable with respect to any Contingent Obligation except those: (a) resulting
from endorsements of negotiable instruments for collection in the ordinary
course of business; (b) arising under the Transaction Documents; (c) existing on
the Closing Date and as described in Schedule 9.12 annexed hereto; (d) arising
-------------
with respect to customary indemnification and purchase price adjustment
obligations incurred in connection with any Asset Dispositions; (e) incurred in
the ordinary course of business with respect to surety and appeal bonds,
performance and return-of-money bonds, letter of credit and similar obligations
not exceeding any time outstanding $150,000 in aggregate liability; (f) incurred
with respect
54
<PAGE>
to any Indebtedness permitted pursuant to Section 9.4 hereof; (g) not otherwise
permitted by clauses (a) through (f) above so long as any such Contingent
Obligations, in the aggregate at any time outstanding do not exceed $100,000.
9.13 MANAGEMENT FEES AND COMPENSATION. The Company shall not, nor
--------------------------------
shall it permit any of its Subsidiaries, directly or indirectly, to pay any
management, consulting or similar fees to any Affiliate or to any director,
officer or employee of the Company or any of its Subsidiaries except reasonable
director's fees and expenses and except as set forth on Schedule 9.13.
-------------
Notwithstanding the foregoing, no payments may be made with respect to any items
set forth on Schedule 9.13 upon the incurrence and during the continuation of an
-------------
Event of Default.
9.14 FISCAL YEAR. The Company and its Subsidiaries shall not change
-----------
their fiscal year without the prior consent of the Purchaser.
9.15 SUBSIDIARIES. Except as permitted in Section 8.1(j), the Company
------------
shall not, nor shall any of the Subsidiaries be permitted to, directly or
indirectly, establish, create or acquire any new Subsidiary.
9.16 NO NEGATIVE PLEDGES. Except pursuant to agreements with the
-------------------
creditors of the Senior Indebtedness, the Company will not and will not permit
any of its Subsidiaries directly or indirectly to enter into or assume any
agreement prohibiting the creation or assumption of any Lien upon its properties
or assets, whether now owned or hereafter acquired.
9.17 NO RESTRICTIONS ON SUBSIDIARY DISTRIBUTIONS TO THE COMPANY.
----------------------------------------------------------
Except as otherwise provided herein, the Company will not and will not permit
any of its Subsidiaries directly or indirectly to create or otherwise cause or
suffer to exist or become effective any consensual encumbrance or restriction of
any kind on the ability of the Company or any such Subsidiary to: (a) pay
dividends or make any other distribution on any of such Subsidiary's capital
stock owned by the Company or any Subsidiary; (b) subject to subordination
provisions for the benefit of Purchaser, pay any Indebtedness owed to the
Company or any other Subsidiary; (c) make loans or advances to the Company or
any other Subsidiary; or (d) transfer any of its property or assets to the
Company or any other Subsidiary.
9.18 BANK ACCOUNTS. The Company will not and will not permit any of
-------------
its U.S. Subsidiaries to establish any new bank accounts without prior written
notice to the Purchaser.
55
<PAGE>
ARTICLE 10
PREPAYMENT
----------
10.1 OPTIONAL PREPAYMENT. The Company may prepay outstanding
-------------------
principal (together with accrued interest) on the Note at any time without
penalty.
10.2 MANDATORY PREPAYMENT. Subject to Section 7 of the Note, the
--------------------
Company shall prepay outstanding principal (together with accrued interest) on
the Note in accordance with the "Mandatory Prepayment" provisions set forth in
Section 3 of the Note.
ARTICLE 11
MISCELLANEOUS
-------------
11.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
------------------------------------------
representations and warranties made herein shall survive the execution and
delivery of this Agreement, any investigation by or on behalf of the Purchaser,
acceptance of the WSDF Note and payment therefor.
11.2 DISPOSITIONS BY THE PURCHASER. At any time prior to the earlier
-----------------------------
to occur of (x) one year from the Closing Date or (y) a Change of Control of the
Company, each of the Purchaser and Whitney covenants and agrees that it will not
sell or otherwise dispose of the Shares.
11.3 NOTICES. All notices, demands and other communications provided
-------
for or permitted hereunder shall be made in writing and shall be by registered
or certified first-class mail, return receipt requested, telecopier (with
receipt confirmed), courier service or personal delivery:
(a) if to the Purchaser:
Whitney Subordinated Debt Fund, L.P.
177 Broad Street
Stanford, Connecticut 06901
Telecopier No.: (203) 973-1422
Attention: Mr. Daniel J. O'Brien
56
<PAGE>
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Telecopier No.: (212) 757-3900
Attention: Bruce A. Gutenplan, Esq.
(b) if to the Company:
Nitinol Medical Technologies, Inc.
27 Wormwood Street
Boston, Massachusetts 02210
Telecopier: 617-737-0924
Attention: Mr. Theodore I. Pincus
with a copy to:
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Telecopier: 617-526-5000
Attention: Steven D. Singer, Esq.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; when delivered by
courier, if delivered by commercial overnight courier service; if mailed, five
Business Days after being deposited in the mail, postage prepaid; or if
telecopied, when receipt is acknowledged.
11.4 SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
----------------------
benefit of and be binding upon the successors and permitted assigns of the
parties hereto. Subject to applicable securities laws, the Purchaser may assign
any of its rights under any of the Transaction Documents to any Person and any
holder of the Note may assign the Note to any Person. The Company may not
assign any of its rights under this Agreement without the prior written consent
of the Purchaser. Except as provided in Article 7, no Person other than the
parties hereto and their successors and permitted assigns is intended to be a
beneficiary of any of the Transaction Documents.
57
<PAGE>
11.5 TERMINATION.
-----------
(a) This Agreement may be terminated prior to the Closing as
follows:
(i) at the election of the Company if any one or more of the
conditions to its obligation to close has not been fulfilled as of August 31,
1998;
(ii) at the election of the Purchaser if any one or more of
the conditions to its obligation to close has not been fulfilled as of August
31, 1998;
(iii) at the election of the Company if the Purchaser has
breached a covenant or agreement contained in this Agreement, which breach
cannot be or is not cured by August 31, 1998;
(iv) at the election of the Purchaser if the Company has
breached a covenant or agreement contained in this Agreement, which breach
cannot be or is not cured by August 31, 1998; or
(v) at any time on or prior to the Closing Date, by mutual
written consent of the Company and the Purchaser.
If this Agreement so terminates, it shall become null and void and
have no further force or effect, except as provided in Section 11.5(b).
(b) If this Agreement is terminated in accordance with Section
11.5(a) and the transactions contemplated by this Agreement are not consummated,
this Agreement shall become null and void and of no further force and effect,
except for (i) the provisions of Section 2.2(b) relating to the obligation of
the Company to pay the Purchaser's reasonable out-of-pocket expenses and (ii)
the provisions of Article 7 and this Article 11. If this Agreement is terminated
in accordance with Section 11.5(a) and the transactions contemplated by this
Agreement are not consummated, none of the parties shall have any liability in
respect of a breach of a representation, warranty, covenant or agreement, except
to the extent that failure to satisfy the conditions of Article 3 or Article 4,
as the case may be, results from the intentional or willful violation by such
party of its obligations contained in this Agreement or any documents delivered
pursuant to this Agreement.
11.6 AMENDMENT AND WAIVER.
--------------------
(a) No failure or delay on the part of any of the parties hereto in
exercising any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. The
58
<PAGE>
remedies provided for herein are cumulative and are not exclusive of any
remedies that may be available to the parties hereto at law in equity, or
otherwise.
(b) Any amendment, supplement or modification of or to any provision
of this Agreement, any waiver of any provision of this Agreement and any consent
to any departure by any party from the terms of any provision of this Agreement
shall be effective (i) only if it is made or given in writing and signed by all
of the parties hereto, and (ii) only in the specific instance and for the
specific purpose for which made or given. Except where notice is specifically
required by this Agreement, no notice to or demand on the Company in any case
shall entitle the Company to any other or further notice or demand in similar or
other circumstances.
11.7 SIGNATURES; COUNTERPARTS. Telefacsimile transmissions of any
------------------------
executed original document and/or retransmission of any executed telefacsimile
transmission shall be deemed to be the same as the delivery of an executed
original. At the request of any party hereto, the other parties hereto shall
confirm telefacsimile transmissions by executing duplicate original documents
and delivering the same to the requesting party or parties. This Agreement may
be executed in any number of counterparts and by the parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
11.8 HEADINGS. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof
11.9 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICTS OF LAW OF SUCH STATE.
11.10 DETERMINATIONS, REQUEST OR CONSENTS. All determinations,
-----------------------------------
requests, consents, waivers or amendments to be made by the Purchaser in its
opinion or judgment or with its approval or otherwise pursuant to the
Transaction Documents shall be made (i) if prior to the Closing Date, by the
Purchaser in its sole discretion and (ii) if after the Closing Date, by the
holders of a majority of the aggregate outstanding principal amount of the Note.
11.11 JURISDICTION, JURY TRIAL WAIVER, ETC.. (A) EACH PARTY TO THIS
-------------------------------------
AGREEMENT HEREBY IRREVOCABLY AGREES THAT THE ANY LEGAL ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTE OR ANY AGREEMENTS OR
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY MAY BE BROUGHT IN THE COURTS OF THE
STATE OF NEW YORK OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT
OF NEW YORK AND HEREBY EXPRESSLY SUBMITS TO THE PERSONAL JURISDICTION AND VENUE
OF SUCH COURTS
59
<PAGE>
FOR THE PURPOSES THEREOF AND EXPRESSLY WAIVES ANY CLAIM OF IMPROPER VENUE AND
ANY CLAIM THAT SUCH COURTS ARE AN INCONVENIENT FORUM. EACH PARTY HEREBY
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF
BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO ITS ADDRESS SET FORTH IN
SECTION 11.3, SUCH SERVICE TO BECOME EFFECTIVE 10 DAYS AFTER SUCH MAILING.
(B) EACH OF THE COMPANY AND ITS SUBSIDIARIES HEREBY WAIVES ITS RIGHT
TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE
IN CONNECTION WITH THIS AGREEMENT, THE NOTE OR ANY OF THE OTHER TRANSACTION
DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER OR THE PERFORMANCE
OF SUCH RIGHTS AND OBLIGATIONS. EXCEPT AS PROHIBITED BY LAW, EACH OF THE
COMPANY AND ITS SUBSIDIARIES HEREBY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR
RECOVER IN ANY LITIGATION REFERRED TO IN THE PRECEDING SENTENCE ANY SPECIAL,
EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN
ADDITION TO, ACTUAL DAMAGES. EACH OF THE COMPANY AND ITS SUBSIDIARIES (1)
CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE PURCHASER HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE PURCHASER WOULD NOT, IN THE EVENT
OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (2) ACKNOWLEDGES THAT
THE PURCHASER HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER
TRANSACTION DOCUMENTS TO WHICH IT IS A PARTY BY, AMONG OTHER THINGS, THE WAIVERS
AND CERTIFICATIONS CONTAINED HEREIN.
11.12 SEVERABILITY. If any one or more of the provisions contained
------------
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired, unless the provisions held
invalid, illegal or unenforceable shall substantially impair the benefits of the
remaining provisions hereof.
11.13 RULES OF CONSTRUCTION. Unless the context otherwise requires,
---------------------
"or" is not exclusive, any references to sections or subsections refer to
sections or subsections of this Agreement.
11.14 ENTIRE AGREEMENT. This Agreement is intended by the parties as a
----------------
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein and therein. There are no restrictions,
promises, warranties or undertakings other than those set forth or referred to
herein or therein.
60
<PAGE>
This Agreement and the other Transaction Documents supersede all prior
agreements and understandings between the parties with respect to such subject
matter.
11.15 CERTAIN EXPENSES. The Company will pay all expenses of the
----------------
Purchaser (including, without limitation, reasonable fees, charges and
disbursements of counsel) in connection with any amendment, supplement,
modification or waiver of or to any provision of this Agreement or any of the
other Transaction Documents or any documents relating thereto (including,
without limitation, a response to a request by the Company for the Purchaser's
consent to any action otherwise prohibited hereunder or thereunder), or consent
to any departure from, the terms of any provision of this Agreement or such
other documents.
11.16 PUBLICITY. Except as may be required by applicable law, none of
---------
the parties hereto shall issue a publicity release or announcement or otherwise
make any public disclosure concerning this Agreement or the transactions
contemplated hereby, without prior approval by the other party hereto. If any
announcement is required by law to be made by any party hereto, prior to making
such announcement such party will deliver a draft of such announcement to the
other party and shall give the other party an opportunity to comment thereon.
11.17 FURTHER ASSURANCES. Each of the parties shall execute such
------------------
documents and perform such further acts (including, without limitation,
obtaining any consents, exemptions. authorizations, or other actions by, or
giving any notices to, or making any filings with, any Governmental Authority or
any other Person) as may be reasonably required or desirable to carry out or to
perform the provisions of this Agreement.
61
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered by their respective officers hereunto duly authorized
as of the date first above written.
NITINOL MEDICAL TECHNOLOGIES, INC.
By: /s/ Theodore I. Pincus
--------------------------------
Name: Theodore I. Pincus
Title: EVP/CFO
WHITNEY SUBORDINATED DEBT FUND, L.P.
By:
--------------------------------
Name:
A General Partner
IN WITNESS WHEREOF, solely for purposes of being bound by Section 2.2,
Article 6 and Section 11.2 of this Agreement, J.H. Whitney & Co. has caused this
Agreement to be executed and delivered by its officer hereunto duly authorized
as of the date first above written.
J.H. WHITNEY & CO.
By:
--------------------------------
Name:
Title:
62
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered by their respective officers hereunto duly authorized
as of the date first above written.
NITINOL MEDICAL TECHNOLOGIES, INC.
By:
--------------------------------
Name:
Title:
WHITNEY SUBORDINATED DEBT FUND, L.P.
By: /s/ Jeffrey R. Jay
--------------------------------
Name: Jeffrey R. Jay
A General Partner
IN WITNESS WHEREOF, solely for purposes of being bound by Section 2.2,
Article 6 and Section 11.2 of this Agreement, J.H. Whitney & Co. has caused this
Agreement to be executed and delivered by its officer hereunto duly authorized
as of the date first above written.
J.H. WHITNEY & CO.
By: /s/ Jeffrey R. Jay
--------------------------------
Name: Jeffrey R. Jay
Title: General Partner
63
<PAGE>
Exhibit A - See Exhibit 10.4 to the Company's Current Report on Form 8-K as
filed with the Securities and Exchange Commission on July 23, 1998 for a copy of
the executed WSDF Note.
Exhibit C - See Exhibit 10.5 to the Company's Current Report on Form 8-K as
filed with the Securities and Exchange Commission on July 23, 1998 for a copy of
the executed Guarantee and Collateral Agreement.
Exhibit E - See Exhibit 10.6 to the Company's Current Report on Form 8-K as
filed with the Securities and Exchange Commission on July 23, 1998 for a copy of
the executed Dutch Pledge Agreement.
Exhibit F - See Exhibit 10.7 to the Company's Current Report on Form 8-K as
filed with the Securities and Exchange Commission on July 23, 1998 for a copy of
the executed Registration Rights Agreement.
<PAGE>
EXHIBIT B-1
HALE AND DORR LLP
Counsellors at Law
60 State Street, Boston, Massachusetts 02109
617-526-6000 * Fax 617-526-5000
July 8, 1998
Whitney Subordinated Debt Fund, L.P.
c/o J.H. Whitney & Co., Inc.
177 Broad Street
Stamford, Connecticut 06901
Ladies and Gentlemen:
We have acted as counsel to Nitinol Medical Technologies, Inc. ("Nitinol"
or the "Company"), a Delaware corporation, and certain of its subsidiaries, as
listed on Exhibit A (the "Subsidiaries", the Company and the Subsidiaries being
---------
collectively referred to herein as the "Borrowers") in connection with the
preparation, execution and delivery of (i) the Subordinated Note and Common
Stock Purchase Agreement (the "Note Purchase Agreement") by and among Nitinol,
Whitney Subordinated Debt Fund, L.P. (the "Lender"), and, for certain purposes,
J.H. Whitney & Co. ("J.H. Whitney" or "Agent") providing for, among other
things, a $20,000,000 loan from the Lender to the Company and the issuance by
the Company of an aggregate of 675,000 shares of common stock, par value $.001
per share (the "Shares"), to the Lender and Whitney, and (ii) the other loan
documents, including (a) the Subordinated Promissory Note (the "WSDF Note")
executed by Nitinol, (b) the Guarantee and Collateral Agreement (the "Guarantee
and Collateral Agreement") made by Nitinol and the Subsidiaries (collectively
with Nitinol, the "Grantors") in favor of the Agent, (c) the Agreement and Deed
of Pledge of Shares in Yellow Tape B.V. and Nitinol Medical Technologies
International, BV (the "Dutch Pledge Agreement") between NMT NeuroSciences
(International), Inc. as pledgor of certain shares in Yellow Tape B.V., Nitinol
Medical Technologies, Inc. as pledgor of certain shares of Nitinol Medical
Technologies International, BV and J.H. Whitney, as security trustee and (d) the
Charge Over Shares in NMT NeuroSciences (UK), Ltd. (the "Charge Over Shares")
between NMT NeuroSciences (International), Inc., as chargor, and J.H. Whitney,
as trustee. The shares pledged to or for the benefit of the Lender under the
Guarantee and Collateral Agreement, other than the shares of Nitinol Medical
Technologies FSC, Inc., are referred to herein as the "Pledged U.S. Shares."
This opinion is furnished to you pursuant to Section 3.5 of the Note Purchase
Agreement. All capitalized terms used but not defined herein have the respective
meanings given to such terms in the Note Purchase Agreement.
WASHINGTON, DC BOSTON, MA LONDON, UK
- --------------------------------------------------------------------------------
HALE AND DORR LLP INCLUDES PROFESSIONAL CORPORATIONS
BROBECK HALE AND DORR (AN INDEPENDENT JOINT VENTURE LAW FIRM)
<PAGE>
Whitney Subordinated Debt Fund, L.P.
July 8, 1998
Page 2
In rendering the opinions expressed below, we have examined:
(a) the Note Purchase Agreement;
(b) the WSDF Note;
(c) the Guarantee and Collateral Agreement;
(d) the Dutch Pledge Agreement;
(e) the Charge Over Shares;
(f) UCC-1 financing statements in the form annexed hereto as Exhibit B
---------
(the "Financing Statements") to be filed in the filing offices listed on
Schedule I;
- ----------
(g) The Certificate of Incorporation or similar charter document of each
of the Borrowers, each in effect on the date hereof (collectively, the
"Certificates of Incorporation");
(h) the By-laws of each of the Borrowers, each as in effect on the date
hereof, provided to us by the Borrowers (collectively, the "By-Laws");
(i) all records contained in the corporate minute books of each of the
Borrowers, as provided to us by the Borrowers, relating to the period commencing
on January 1, 1997 and ending on the date hereof, and the stock record books of
each of the Borrowers (other than the Company), as provided to us by such
Borrowers;
(j) the certificates of legal existence and corporate good standing listed
on Exhibit C hereto for the Company and each of the Subsidiaries, issued by the
---------
Secretary of State of the State of Delaware and the Secretaries of State of the
other jurisdictions listed thereon;
(k) certified copies of resolutions adopted by the Boards of Directors of
each of the Borrowers approving the transactions contemplated by the Note
Purchase Agreement and authorizing, among other things, the execution, delivery
and performance by the Borrowers of each of the Transaction Documents, as
defined below (the "Authorizing Resolutions");
(l) authorization, incumbency and signature certificates as to the
officers of each of the Borrowers;
<PAGE>
Whitney Subordinated Debt Fund, L.P.
July 8, 1998
Page 3
(m) the certificate of Theodore I. Pincus, Executive Vice President of the
Company and Treasurer of each of the Subsidiaries, in the form attached hereto
as Exhibit D;
----------
(n) such other documents, instruments and certificates (including, but not
limited to, certificates of public officials and officers of the Borrowers) as
we have considered necessary for purposes of this opinion; and
(o) the Acquisition Documents.
The documents listed in clauses (a)-(c) and (f) are referred to collectively
herein as the "Transaction Documents."
We assume, for purposes of this opinion, that the corporate records
(referred to in clause (i) above) contain an accurate record of all meetings of
the stockholders and directors of each of the Borrowers after January 1, 1997
and that the stock record books of each of the Borrowers are materially complete
and accurate.
In our examination of the documents described above, we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals, the conformity to original documents of all copies of documents
submitted to us, the authenticity of the originals of such latter documents, and
the legal capacity of all individual signatories.
Insofar as this opinion relates to factual information which is in the
possession of the Borrowers, we have relied, with your consent, exclusively upon
certificates, statements and representations made to us by one or more officers
or employees of the Borrowers and other representatives or agents of the Company
and the representations of the Borrowers contained in the Transaction Documents.
Nothing has come to our attention which causes us to believe that you are not
justified in relying upon such certificates, statements and representations of
officers and other representatives or agents of the Company.
Any reference to "our knowledge", or to matters "known to us", "coming to
our attention", or "of which we are aware", or any variation of any of the
foregoing shall mean the conscious awareness of the attorneys in this firm who
have rendered substantive attention to this transaction of the existence or
absence of any facts which would contradict our opinions set forth below. We
have not undertaken any independent investigation to determine the existence or
absence of such facts, and no inference as to our knowledge of the existence or
absence of such facts should be drawn from the fact of our representation of the
Borrowers. Without limiting the foregoing, we have not conducted a search of any
computerized or electronic databases or the dockets of any court or
administrative or other regulatory agency in any jurisdiction.
<PAGE>
Whitney Subordinated Debt Fund, L.P.
July 8, 1998
Page 4
We have assumed that all parties to the Transaction Documents other than
the Borrowers have the power and authority and have taken the corporate or
partnership action necessary to execute and deliver the Transaction Documents
and all other instruments to which they are a party in connection therewith, and
that except for the filing of Financing Statements, no consent, approval,
authorization, declaration or filing by or with any governmental commission,
board or agency is required for each of such parties' valid execution and
delivery of such documents. We have assumed each of such parties' due execution
and delivery of the Transaction Documents to which they are a party, and that
such Transaction Documents constitute such parties' valid and binding
obligations, enforceable against them in accordance with their respective terms.
We are expressing no opinion herein as to the application of or compliance with
any federal or state law or regulation to the power, authority or competence of
any party to the documents as to which we are opining herein, other than the
Borrowers.
We express no opinion herein with respect to the laws of any state or
jurisdiction other than the federal laws of the United States of America, the
state laws of the Commonwealth of Massachusetts and the General Corporation Law
statute of the State of Delaware. To the extent that the laws of any other
jurisdiction govern any of the matters as to which we are opining herein, we
have assumed that such laws are identical to the state laws of the Commonwealth
of Massachusetts, and we are expressing no opinion herein as to whether such
assumption is reasonable or correct. We note that the Transaction Documents are
governed by the laws of the State of New York. We further note that Cordis
Innovasive Systems, Inc. ("CIS") is a Florida corporation and, for purposes of
our opinions expressed in paragraphs 2 and 3 below as to no conflict with the
charter and by-laws of CIS and the due execution and delivery of the Guarantee
and Collateral Agreement, respectively, we have assumed that Massachusetts law
governs CIS. We express no opinion herein with respect to compliance with the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
The opinions expressed in paragraph l below, insofar as they relate to the
due organization, valid existence and corporate good standing of the Company and
each of the Subsidiaries, and the foreign qualification of certain of the
Subsidiaries are based solely upon the certificates listed on Exhibit C and are
---------
rendered as of the dates of such certificates and limited accordingly.
With respect to our opinions expressed in paragraphs 2, 4 and 9 below, the
Contractual Obligations "known to us" include only those documents to which the
Company and/or the Subsidiaries is a party and which are filed as exhibits to
reports filed by the Company with the Securities and Exchange Commission
pursuant to the reporting requirements of the Securities Exchange Act of 1934,
as amended (the "Exchange Act documents"). The opinion expressed in paragraph 4
as to the Company's issued and outstanding stock is based solely on a
certificate dated as of
<PAGE>
Whitney Subordinated Debt Fund, L.P.
July 8, 1998
Page 5
July 2, 1998 of American Stock Transfer and Trust Co., the Company's transfer
agent. The opinions expressed in the third sentence of paragraph 4 and as to the
fully paid and nonassessable nature of the outstanding shares of the Company's
and the Subsidiaries' capital stock are based solely on the Officer's
Certificate attached hereto as Exhibit D.
---------
Our opinions below are qualified to the extent that they may be subject to
or affected by (i) applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance, usury, or similar laws affecting the rights
of creditors generally, (ii) statutory or decisional law concerning recourse by
creditors to security in the absence of notice or hearing, and (iii) duties and
standards imposed on creditors and parties to contracts, including, without
limitation, requirements of good faith, reasonableness and fair dealing.
Notwithstanding the foregoing, our opinions set forth below are not qualified as
to the application of Massachusetts General Laws Chapter 271, Section 49(a)-(c),
based solely on our understanding that J.H. Whitney & Co., Inc., as agent, has
complied with the notification requirement set forth in (S)49(d) of Chapter 271,
and assuming for this purpose that the laws of the Commonwealth of Massachusetts
govern the Transaction Documents. Furthermore, we express no opinion as to the
availability of any equitable or specific remedy upon any breach of the
documents as to which we are opining here or any of the agreements, documents or
obligations referred to therein, or as to the successful assertion of any
equitable defense, as the availability of such remedies or defenses may be
subject to the discretion of a court. We express no opinion as to the
enforceability of a waiver of rights granted by the Constitution of the United
States of America, or any state thereof, or the vesting of jurisdiction in, or
the consent to the exercise of jurisdiction by, any court where the exercise of
such jurisdiction is within the discretion of such court, or the court is not a
court of general jurisdiction.
We are expressing no opinion as to compliance by the Borrowers with the so-
called "blue sky" or state securities laws (other than the securities laws of
the Commonwealth of Massachusetts), or with state or federal antifraud laws, in
connection with the issuance and sale of the WSDF Note or the Shares.
We express no opinion as to the enforceability of any right of set-off
against any deposit account of a Borrower to the extent that (i) the funds on
deposit in said accounts have been accepted by you with an intent to apply such
funds to a preexisting claim rather than to hold such funds subject to
withdrawals in the ordinary course, (ii) the set-off is directed against checks
held by you for collection only and not for deposit, (iii) the funds on deposit
in said accounts are in any manner special accounts which, by the express terms
on which they are created are made subject to the rights of a third party, or
(iv) the obligations against which any deposit account is set-off are not due
and payable.
<PAGE>
Whitney Subordinated Debt Fund, L.P.
July 8, 1998
Page 6
Based upon and subject to the foregoing, and further subject to the
qualifications set forth below, it is our opinion that:
1. The Company and each of its Subsidiaries: (i) is, and after giving
effect to the transactions contemplated by the Transaction Documents and the
Acquisition Documents, will be a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation;
(ii) has, and after giving effect to the transactions contemplated by the
Transaction Documents and the Acquisition Documents, will have all requisite
corporate power and authority to own and operate its property (as such property
is known to us), to lease the property it operates as lessee (as such property
is known to us) and to conduct the business in which it is, to our knowledge,
currently engaged; and (iii) has the corporate power and authority to execute,
deliver and perform its obligations under each Transaction Document to which it
is or will be a party. The Company and NMT Heart Inc. are duly qualified to do
business and in good standing in the Commonwealth of Massachusetts.
2. The execution, delivery and performance by the Company and each of the
Subsidiaries of each Transaction Document and Acquisition Document to which it
is a party and the consummation of the transactions contemplated hereby and
thereby, including without limitation the issuance of the WSDF Note and the
Shares: (i) has been duly authorized by all necessary corporate action; (ii)
does not contravene the terms of the Company's or any of the Subsidiaries'
Certificates of Incorporation or By-laws, and (iii) will not violate, conflict
with or result in any breach or contravention of or the creation of any Lien
under, any Contractual Obligation of the Company or any or the Subsidiaries
known to us or any Requirement of Law applicable to the Company or any of the
Subsidiaries.
3. Each Transaction Document and Acquisition Document to which the
Company and the Subsidiaries are parties has been duly executed and delivered by
the Company and each of the Subsidiaries parties thereto.
4. As of the Closing Date, the authorized capital stock of the Company
consists of 30,000,000 shares of Common Stock, of which 9,828,210 shares were
issued and outstanding as of July 2, 1998 and 3,000,000 shares of preferred
stock, $.001 par value per share (the "Preferred Stock"), of which no shares
were issued and outstanding. The Company has no shares of capital stock held in
treasury. To our knowledge, as of the Closing Date, after giving effect to the
transactions contemplated hereby and by the other Transaction Documents and the
Acquisition Documents, there will be: (i) no shares of issued and outstanding
Preferred Stock; (ii) 10,503,210 shares of Common Stock issued and outstanding;
(iii) an aggregate of 1,865,789 shares of Common Stock reserved for issuance
pursuant to the exercise of stock options issuable in accordance with the terms
of the Company's 1994 Stock Option Plan, 1996 Stock Option Plan, 1996 Stock
Option Plan for Non-Employee
<PAGE>
Whitney Subordinated Debt Fund, L.P.
July 8, 1998
Page 7
Directors and the 1998 Stock Incentive Plan and an aggregate of 1,320,002 shares
of Common Stock reserved for issuance pursuant to the exercise of stock options
not issued pursuant to a plan (collectively, the "Options"); (iv) 83,329 shares
of Common Stock reserved for issuance upon exercise of the stock purchase
warrant issued in June 1998 to Fletcher Spaght, Inc. relating to the acquisition
by the Company of certain technology relating to the CardioSEAL Septal Occluder;
(v) 28,489 shares of Common Stock reserved for issuance upon exercise of the
stock purchase warrant transferred by Fletcher Spaght, Inc. in June 1998 to
David Chazanovitz; (vi) 99,660 shares of Common Stock reserved for issuance upon
exercise of the stock purchase warrant issued in February 1996 to Junewicz &
Co., Inc.; (vii) 5,263 shares of Common Stock reserved for issuance upon
exercise of the stock purchase warrant issued in April 1996 to Dr. Lloyd Marks
(together with the warrants described above in (iv), (v) and (vi), the
"Warrants"); and (viii) 84,973 shares of Common Stock reserved for issuance in
connection with the Company's 1997 Employee Stock Purchase Plan. All outstanding
shares of capital stock of the Company issued after January 1, 1997 have been
duly authorized by all necessary corporate action and are validly issued, fully
paid and nonassessable. To our knowledge, the shareholders of the Company have
no preemptive or similar rights with respect to the issuance or sale of the
Shares under any Contractual Obligation known to us.
5. To our knowledge, except for the Warrants and the Options and as set
forth on Schedule 5.19(b) to the Note Purchase Agreement, there are, and after
giving effect to the transactions contemplated by the Transaction Documents and
the Acquisition Documents, there will be, no outstanding securities convertible
into or exchangeable for capital stock of the Company or options, warrants or
other rights to purchase or subscribe to capital stock of the Company or
contracts, commitments, agreement, understandings or arrangements of any kind to
which the Company is a party relating to the issuance of any capital stock of
the Company, any such convertible or exchangeable securities or any such
options, warrants or rights.
6. To our knowledge, except as disclosed in the Transaction Documents,
there are no actions, suits, proceedings, claims or disputes pending or
threatened, at law, in equity, in arbitration or before any federal or state
court or governmental authority or agency against the Company or any Subsidiary.
To our knowledge, no injunction, writ, temporary restraining order, decree or
any order of any nature specifically naming the Company or the Subsidiaries has
been issued by any court or other governmental authority purporting to enjoin or
restrain the execution, delivery and performance of any of the Transaction
Documents.
7. Assuming the accuracy of the representations and warranties contained
in the Note Purchase Agreement, the offer, sale and issuance of the Shares and
the WSDF Note are exempt from the registration requirements under the Securities
Act of 1933, as amended and applicable Massachusetts securities laws.
<PAGE>
Whitney Subordinated Debt Fund, L.P.
July 8, 1998
Page 8
8. After giving effect to the transactions contemplated by the
Acquisition Documents, neither the Company nor any Subsidiary is an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
9. To our knowledge, except as provided in the Transaction Documents or
disclosed on the Schedules to the Note Purchase Agreement, none of the
Contractual Obligations of the Company known to us (i) restricts the voting or
transfer or requires the registration of any capital stock of the Company, (ii)
requires the Company to repurchase or otherwise acquire, retire or sell any
capital stock of the Company or (iii) restricts the payments of dividends on any
shares of capital stock of the Company.
10. Each of the Note Purchase Agreement, the WSDF Note, the Guarantee and
Collateral Agreement and the Acquisition Documents constitutes the valid and
binding obligation of the Company and the Subsidiaries party thereto,
enforceable against the Company and the Subsidiaries party thereto in accordance
with its terms.
11. The stock certificates representing the Shares are in proper form
under all applicable provisions of Delaware law.
12. Except for filings which are necessary to perfect the security
interests granted under the Transaction Documents, for filings under United
States state and federal securities laws, and any other filings, authorizations
or approvals as are specifically provided for in the Transaction Documents, no
authorizations or approvals of, and no filings with, any governmental or
regulatory authority or agency are necessary under any relevant law for the
execution, delivery or performance by the Company or any of the Subsidiaries of
the Transaction Documents to which it is a party.
13. If the Guarantee and Collateral Agreement were governed by the laws of
the Commonwealth of Massachusetts, then after giving effect to the purchase of
the WSDF Note on the Closing Date, the Guarantee and Collateral Agreement would
create a valid security interest under the Uniform Commercial Code as enacted in
the Commonwealth of Massachusetts (the "Code") in favor of the Agent, for the
benefit of the Lender and the Agent, to secure the Obligations (as defined in
the Guarantee and Collateral Agreement), in all right, title and interest of the
Company and the Grantors (the "Debtors") in and to the Collateral (as defined in
the Guarantee and Collateral Agreement exclusive of the Pledged Securities) in
which a security interest can be created under the Code. The Agent's security
interest in the Collateral will be perfected under Article 9 of the Code upon
due filing of the financing statements in the form attached as Exhibit B in the
---------
offices listed on Schedule I with respect to filings made in filing offices in
----------
the Commonwealth of Massachusetts, or under the Uniform Commercial Code enacted
in the jurisdictions in which such other filing offices are located.
<PAGE>
Whitney Subordinated Debt Fund, L.P.
July 8, 1998
Page 9
14. If the Guarantee and Collateral Agreement were governed by the laws
of the Commonwealth of Massachusetts, then after giving effect to the purchase
of the WSDF Note on the Closing Date and assuming that (i) the Agent has, at the
date of this letter, possession of the certificates representing the Pledged
U.S. Shares of the Grantors, together with related stock powers which have been
duly executed in blank by the Borrower and certain of the Grantors, as the case
may be, and maintains continuous possession of the Pledged U.S. Shares and stock
powers, and (ii) on the date hereof the Lender and the Agent do not have notice
of any adverse claim to the Pledged U.S. Shares, then the Agent has a valid and
perfected security interest, for the benefit of the Lender and the Agent, to
secure the Obligations (as defined in the Guarantee and Collateral Agreement),
in all right, title and interest of the Company and the Grantors in and to the
Pledged U.S. Shares, which security interest has priority over any other
security interest in the Pledged U.S. Shares which can be perfected under the
Code.
The foregoing opinions are subject to the following comments and
qualifications:
i. The enforcement against the Borrowers of any rights and remedies is
or may be subject to the effect of certain general principles of contract law
that include (a) the unenforceability of provisions of an agreement to the
effect that provisions therein may only be amended or waived in writing to the
extent that an oral agreement modifying such provisions has been entered into;
and (b) the general rule that, where less than all of an agreement is
enforceable, the balance is enforceable only when the unenforceable provision is
not an essential part of the agreed exchange.
ii. We express no opinion in paragraph 13 as to the creation of security
interests in property in which a security interest cannot be created under the
Code or the perfection of security interests in property in which a security
interest cannot be perfected by the filing of UCC-1 Financing Statements
pursuant to Article 9 of the Code in the filing offices described in Schedule I
----------
hereto. We express no opinion as to the perfection of security interests in
fixtures.
iii. We express no opinion as to the priority of any security interests
granted by the Borrowers to or for the benefit of the Lender except with respect
to Pledged U.S. Shares. We express no opinion as to the existence of, or the
right, title or interest of the Borrowers in, to or under any property in which
it has granted a security interest.
iv. The perfection of the security interests may be terminated as to any
Collateral of a Borrower acquired by such Borrower more than four months after
such Borrower changes its name, identity or corporate structure so as to make
the Financing Statements seriously misleading (within the meaning of Section 9-
402(7) of
<PAGE>
Whitney Subordinated Debt Fund, L.P.
July 8, 1998
Page 10
the Code) unless new, appropriate financing statements indicating the new name,
identity or corporate structure of such Borrower are properly filed before the
expiration of such four-month period and all fees in connection therewith are
paid. The perfection of security interests in accounts, including receivables,
general intangibles and certain other Collateral of a Borrower may be terminated
if such Borrower changes the location of its chief executive offices.
v. Pursuant to the Code, continuation statements are required from time
to time to be filed in order to preserve valid, perfected security interests.
vi. We have assumed that the Collateral of the Borrowers is located at
the locations described on Schedule II hereto and that the chief executive
-----------
offices of the Borrowers are located as described on Schedule II.
-----------
vii. We express no opinion as to the adequacy of the description of the
Collateral of the Borrowers as defined in the Note Purchase Agreement insofar as
such description includes terms which are not defined under Article 9 of the
Code.
viii. We express no opinion as to the legal capacity of natural persons.
ix. Under certain circumstances, described in Section 9-306 of the Code,
the right of a secured party to enforce a perfected security interest in the
proceeds of collateral may be limited.
x. The grant of, or any realization on, security interests in
governmental licenses, permits, authorizations and other rights, in contracts
with government or governmental instrumentalities, commissions, boards or
agencies and in the proceeds thereof are or may be subject to restrictions or
limitations set forth therein or in applicable statutes, laws, rules or
regulations, and we express no opinion as to the creation or perfection of
security interests in such rights, contracts or proceeds (to the extent affected
by such restrictions or limitations).
xi. We express no opinion as to the enforceability of prospective
waivers of rights to notice, or to a hearing or other right granted by
constitution or statute, provisions purporting to relieve parties of the
consequences of their own negligence or misconduct, choice of law provisions, or
provisions purporting to establish evidentiary standards.
This opinion is based upon currently existing statutes, rules, regulations
and judicial decisions, and we disclaim any obligation to advise you of any
change in any of these sources of law or subsequent legal or factual
developments which might affect any matters or opinions set forth herein.
<PAGE>
Whitney Subordinated Debt Fund, L.P.
July 8, 1998
Page 11
Please note that we are opining only as to the matters expressly set forth
herein, and no opinion should be inferred as to any other matters. This opinion
is solely for your benefit, and the benefit of your counsel, in connection with
the consummation of the transactions contemplated by the Note Purchase
Agreement, and may not be quoted or relied upon by any other person or used for
any other purpose, without our prior written consent.
Very truly yours,
/s/ HALE AND DORR LLP
HALE AND DORR LLP
<PAGE>
EXHIBIT B-2
[LETTERHEAD OF COLLYER - BRISTOW APPEARS HERE]
Our ref: PJS/9687-l/tsc 8 JULY 1998
Your ref:
Whitney Subordinated Debt Fund, L.P. and
J H Whitney & Co., Inc.
177 Broad Street
Stamford
Connecticut 06901
USA
Dear Ladies and Gentlemen:
We have acted as English legal advisers to NMT Neurosciences (International),
Inc ("NMT International"), a Delaware corporation and its wholly owned
subsidiary, NMT Neurosciences (UK) Limited, a company incorporated in England
("NMT UK") in connection with the preparation, execution and delivery of a Deed
of Charge over shares in NMT UK ("the Deed of Charge") between NMT 1nternational
and J.H. Whitney & Co., Inc ("Whitney").
In rendering the opinions expressed below, we have examined:-
(a) the Deed of Charge;
(b) the Certificate of Incorporation of NMT UK;
(c) the Memorandum and Articles of Association of NMT UK certified to be in
effect by a director of NMT UK on 7th July 1998;
(d) the corporate minute books of NMT UK as provided to us by NMT International
from the date of its incorporation to the date hereof;
(e) such other documents as we have considered necessary for purposes of this
opinion.
We assume, for purposes of this opinion, that the corporate minute books
(referred to in clause (d) above) contain an accurate record of all meetings of
the shareholders and directors of NMT UK.
In our examination of the documents described above, we have assumed the
genuineness of all signatures, the capacity, power and authority of all parties
to execute and deliver the Deed of Charge and all other applicable documents,
the authenticity of all documents submitted to us as originals, the conformity
to original documents of all copies of documents submitted to us as certified or
photostatic copies, the authenticity of the originals of such latter documents,
the due execution and delivery of the Deed of Charge by NMT International and
Whitney, that the Memorandum and Articles of Association of NMT UK were true
complete and up-to-date as at the
<PAGE>
COLLYER - BRISTOW
solicitors
PAGE 2
J H WHITNEY & CO., INC. 8 JULY 1998
date of this opinion and that the resolutions in the minute books referred to in
clause (d) have not been amended or rescinded and are in full force and effect.
We have assumed that there are no provisions of the laws of any relevant
jurisdiction outside England which would be contravened by the execution,
delivery or performance of the Deed of Charge and that, insofar as any
obligation under the Deed of Charge fails to be performed in any jurisdiction
outside England, its performance will not be illegal or adversely affected by
virtue of the laws or regulations of or applicable in that jurisdiction.
We express no opinion herein with respects to the laws of any state or
jurisdiction other than that of England.
Our opinions below are qualified to the extent that the validity or
enforceability of the documents referred to or of any of the rights granted to
any party pursuant thereto may be subject to or affected by (i) applicable
bankruptcy, insolvency, reorganisation, moratorium, fraudulent conveyance, or
similar laws affecting the rights of creditors generally and (ii) duties and
standards imposed on creditors and parties to contracts, including, without
limitation, requirements of good faith, reasonableness and fair dealing.
Furthermore, we express no opinion as to the availability of any equitable or
specific remedy upon any breach of such documents or any of the agreements,
documents or obligations referred to therein, as the availability of such
remedies may be subject to the discretion of a court.
Based upon and subject to the foregoing, and further subject to the
qualifications set forth below, it is our opinion that:-
(a) NMT UK is a company duly incorporated in England;
(b) The register of members in the corporate minute books of NMT UK records
that NMT International is the holder of the entire issued share capital of
NMT UK consisting of 100 fully paid ordinary shares of (Pounds)1 each, all
of which have been duly issued to NMT International;
(c) To the best of our knowledge, there are no actions, suits, proceedings,
claims or disputes pending or threatened, at law, in equity, in arbitration
or before any court or governmental authority or agency in the UK against
NMT International or NMT UK with respect to the Deed of Charge or the
transactions contemplated thereby. To the best of our knowledge, no
injunction, writ, temporary restraining order, decree or any order of any
nature has been issued by any court or other governmental authority in the
UK purporting to enjoin or restrain the execution, delivery and performance
of the Deed of Charge;
(d) The execution, delivery and performance by NMT International of the Deed of
Charge and the transactions contemplated thereby does not contravene the
terms of NMT's Articles of Association and will not violate, conflict with
or result in any breach or contravention of any requirement of English law;
(e) The Deed of Charge creates an equitable fixed charge over the shares in NMT
UK expressed to be charged thereby;
<PAGE>
COLLYER - BRISTOW
solicitors
PAGE 3
J H WHITNEY & CO., INC. 8 JULY 1998
(f) The Deed of Charge creates a valid and binding obligation of NMT
International, enforceable in accordance with its terms;
(g) Except for filings which are necessary to perfect the security interests
granted under the Deed of Charge and any other filings, authorisations or
approvals as are specifically provided for in the Deed of Charge, no
authorisations or approvals of, and no filings with, any governmental or
regulatory authority or agency in England are necessary under English law
for the execution, delivery or performance by NMT International of the Deed
of Charge.
The foregoing opinions are subject to the following comments and qualifications:
(i) An English court may not give effect to a purported obligation to pay
another party's litigation costs and may make its own order as to costs;
(ii) While English courts have power to give judgment expressed as an order to
pay a currency other than pounds sterling, they may decline to do so in
their discretion and may not enforce the benefit of currency conversion
and indemnity clauses;
(iii) Claims may become barred under the Limitations Act or may be or become
subject to defences of set-off or counterclaim;
(iv) The enforcement of the rights and obligations of the parties to the Deed
of Charge may be limited by the provisions of English law concerning
frustration of contracts;
(v) It is beyond the scope of this opinion to deal comprehensively with
matters concerning property, assets and rights expressed to be subject to
the Deed of Charge and the priority, nature, registration and enforcement
of the Deed of Charge and its effectiveness in all circumstances. In
particular we express no opinion in this letter as to the following
matters:
(a) the marketability or value of any of the shares in NMT UK expressed
to be subject to the Deed of Charge;
(b) the priority of any security or whether any of the shares in NMT UK
are or may become subject to any equities, rights or interests in
favour of any other person in priority to the Deed of Charge or
otherwise;
(vi) The enforcement of security interests is subject to certain rules of law;
for example a person who holds a charge over property cannot sell the
property to himself and owes a duty to take reasonable care to realise
the property for a proper price;
(vii) Clause 9 of the Deed of Charge (Severability) may not be effective under
English law;
(viii) Although Clause 10.2 of the Deed of Charge (Waiver) contemplates written
waivers, an agreement may be varied, amended or discharged by a further
agreement or collateral agreement which may he effected by an oral
agreement or a course of dealing;
<PAGE>
COLLYER - BRISTOW
solicitors
PAGE 4
J H WHITNEY & CO., INC. 8 JULY 1998
(ix) Notwithstanding Clause l of Schedule 3 of the Deed of Charge, as between
NMT International and NMT UK English law entitles NMT International to
receive dividends from NMT UK and to exercise the voting and other rights
in respect of the shares of NMT UK which are subject to the Deed of Charge
while they are registered in the name of NMT International rather than
that of Whitney, whether or not any events of default have occurred. Thus
in theory NMT International could in future procure the issue of further
shares by NMT UK, so diluting the shares which are subject to the Deed of
Charge. Further NMT International could in theory transfer the charged
shares to a third party while they are registered in the name of NMT
International (if NMT International could induce the directors of NMT UK
to issue a duplicate share certificate). To perfect its security Whitney
need to be registered as the holder of the shares. If it is not so
registered, it could protect itself to some extent by serving a stop
notice on NMT UK;
(x) Although the Articles of Association of NMT UK do not give the Directors
of NMT UK the right to refuse registration of any transfer of shares which
are fully paid, they do give the Directors the right to refuse
registration in the case of shares on which NMT UK has a lien. The
Articles of Association could also in theory be amended in the future to
make registration more difficult for Whitney. To perfect its security
Whitney need to be registered as the holder of the shares.
This opinion is based upon currently existing statutes, rules, regulations and
judicial decisions, and we disclaim any obligation to advise you of any change
in any of these sources of law or subsequent legal or factual developments which
might affect any matters or opinions set forth herein.
Please note that we are opining only as to the matters expressly set forth
herein, and no opinion should be inferred as to any other matters. This opinion
is solely for your benefit, and the benefit of your Counsel, in connection with
the consummation of the transactions contemplated by the Deed of Charge, and may
not be quoted or relied upon by any other person or used for any other purpose,
without our prior written consent.
Very truly yours,
/s/ Collyer-Bristow
Collyer-Bristow
<PAGE>
EXHIBIT B-3
[LETTERHEAD OF NAUTA DUTILH APPEARS HERE]
Whitney Subordinated Debt Fund, L.P.
177 Broad Street
Stanford, Connecticut 06901
July 9, 1998
Ladies and Gentlemen:
This opinion is rendered to you at your request with respect to certain matters
of Netherlands Law relating to Yellow Tape B.V. ("Yellow Tape") and Nitinol
-----------
Medical Technologies International B.V. ("Nitinol"), each of the companies
-------
organized under Netherlands law, in connection with a notarial agreement and
deed of pledge dated July 9, 1998 among (i) NMT Neurosciences (International),
Inc., a Delaware corporation ("NMT") as pledgor of certain shares in Yellow
---
Tape, (ii) Nitinol Medical Technologies, Inc., a Delaware Corporation (the
"Borrower") as pledgor of certain shares in Nitinol, (iii) J.H. Whitney & Co.,
--------
Inc., a Delaware corporation ("Whitney"), acting not for itself but solely in
-------
its capacity as security agent of Whitney Subordinated Debt Fund, L.P., a
Delaware limited partnership (the "Purchaser") and any holders of any note from
---------
time to time pursuant to the Purchase Agreement (as defined below), (Whitney
acting in such capacity the "Agent"), (iv) Yellow Tape and (v) Nitinol (such
-----
notarial agreement and deed of pledge the "Deed of Pledge").
--------------
As the basis for my opinion, I have exclusively examined the following
documents:
(i) a copy of the deed of incorporation dated December 2, 1997 of Yellow Tape
(the "Yellow Tape Deed of Incorporation"), containing the articles of
---------------------------------
association of Yellow Tape (the "Yellow Tape Articles of Association");
-----------------------------------
<PAGE>
-2-
(ii) a copy of the deed of incorporation dated February 24, 1997 of Nitinol
(the "Nitinol Deed of Incorporation"), containing the articles of
-----------------------------
association of Nitinol (the "Nitinol Articles of Association");
-------------------------------
(iii) a facsimile copy of an extract dated July 7, 1998 from the Commercial
Register of the Chamber of Commerce and Industry of Amsterdam under
registration number 33298255 relating to Yellow Tape (the "Yellow Tape
-----------
Extract"), confirmed by me by telephone to be correct as of the date
-------
hereof, except for the fact that the appointment of Messrs. Thomas M.
Tully and Theodore I. Pincus as members of the board of managing
directors as of July 7, 1998 has not yet been accounted for in the
Yellow Tape Extract;
(iv) as extract dated June 26, 1998 from the Commercial Register of the
Chamber of Commerce and Industry of Centraal Gelderland under
registration number 10148235 relating to Nitinol (the "Nitinol Extract")
---------------
confirmed by me by telephone to be correct as of the date hereof;
(v) a facsimile copy of the relevant pages of the shareholders' register of
Yellow Tape (the "Yellow Tape Shareholdersregister");
--------------------------------
(vi) a facsimile copy of the relevant pages of the shareholders' register of
Nitinol (the "Nitinol Shareholdersregister");
----------------------------
(vii) a facsimile copy of an executed copy of written resolutions of the board
of managing directors of Yellow Tape dated July 8, 1998 authorizing the
execution of the Deed of Pledge (the "Yellow Tape Resolution");
----------------------
(viii) a facsimile copy of an executed copy of written resolutions of the board
of managing directors of Nitinol dated July 8, 1998 authorizing the
execution of the Deed of Pledge (the "Nitinol Resolution");
------------------
(ix) a copy of a signed statement dated July 8, 1998 by NMT in its capacity
as Yellow Tape's sole shareholder confirming that the execution and
delivery of the Deed of Pledge and all documents relating thereto are
not subject to approval of Yellow Tape's general meeting of
<PAGE>
-3-
shareholders pursuant to article 7.9 of the Yellow Tape Articles of
Association (the "NMT Confirmation Statement");
--------------------------
(x) a copy of a signed statement dated July 8, 1998 by the Borrower in its
capacity as Nitinol's sole shareholder confirming that the execution and
delivery of the Deed of Pledge and all documents relating thereto are not
subject to approval of Nitinol's general meeting of shareholders pursuant
to article 13.1 of the Nitinol Articles of Association (the "Borrower
--------
Confirmation Statement");
----------------------
(xi) a facsimile copy of a power of attorney granted by Yellow Tape dated July
8, 1998 authorizing the execution of the Deed of Pledge by each lawyer of
the lawfirm Stibbe Simont Monahan Duhot in Amsterdam (the "Yellow Tape
-----------
Power of Attorney");
-----------------
(xii) a facsimile copy of a power of attorney granted by Nitinol dated July 8,
1998 authorizing the excution of the Deed of Pledge by each lawyer of the
lawfirm Stibbe Simont Monahan Duhot in Amsterdam (the "Nitinol Power of
----------------
Attorney");
--------
(xiii) a facsimile copy of the executed copy of the Deed of Pledge.
(xiv) a facsimile copy of an executed copy of a subordinated note and common
stock purchase agreement dated as of July 8, 1998 among (i) the Borrower,
(ii) the Purchaser and (iii) Whitney (the "Purchase Agreement");
------------------
(xv) a facsimile copy of an executed copy of a guarantee and collateral
agreement dated as of July 8, 1998 among (i) the Borrower and (ii)
certain of the Borrower's US subsidiaries, in favor of the Agent (the
"Guarantee and Collateral Agreement"); and
----------------------------------
(xvi) a facsimile copy of an executed copy of a 10.101% US$20,000,000
subordinated promissory note due September 30, 2003 dated July 8, 1998 by
the Borrower (the "Note").
----
The Purchase Agreement, the Guarantee and Collateral Agreement and the Note
shall hereinafter be jointly referred to as the "New York Documents".
------------------
<PAGE>
-4-
As to matters of fact I have relied upon the documents I have examined and upon
statements or certificates of directors or representatives of Yellow Tape,
Nitinol, NMT or the Borrower and of public officials.
The following opinion is limited in all respects to the laws of (i) the
Netherlands with general applicability and (ii) the European Union insofar as
they are directly applicable in the Netherlands, as they stand at the date
hereof and as they are presently interpreted under published case law of the
courts of the Netherlands ("Netherlands Law"). I do not express any opinion on
---------------
tax law, on public international law or on the rules promulgated under or by any
treaty or treaty organization.
In this opinion letter Netherlands legal concepts are expressed in English terms
and not always in their original Netherlands terms. The concepts concerned may
not be identical to the concepts described by the same English terms as they
exist under the laws of other jurisdictions.
In rendering this opinion, I have assumed that:
(a) all original documents are authentic and the signatures thereon are genuine
and all documents submitted to me as final drafts of documents or as
photocopy or facsimile copy are in conformity with the executed originals;
(b) the Yellow Tape Deed of Incorporation has been signed by a civil law
notary (notaris) and the contents of the Yellow Tape Deed of Incorporation
are correct and complete;
(c) the Nitinol Deed of Incorporation has been signed by a civil law notary
(notaris) and the contents of the Nitinol Deed of Incorporation are correct
and complete;
(d) the Yellow Tape Extract was true, complete and correct on the date of its
issue and would be identical and also true, complete and correct if issued
on, as applicable, the date of the execution of each of the Deed of Pledge,
the Yellow Tape Resolution, the NMT Confirmation Statement and the Yellow
Tape Power of Attorney;
<PAGE>
-5-
(e) the Nitinol Extract was true, complete and correct on the date of its issue
and would be identical and also true, complete and correct if issued on, as
applicable, the date of the execution of each of the Deed of Pledge, the
Nitinol Resolution, the Borrower Confirmation Statement and the Nitinol
Power of Attorney;
(f) immediately prior to the execution of the Deed of Pledge, the information
contained in the Yellow Tape Shareholdersregister was true and correct;
(g) immediately prior to the execution of the Deed of Pledge, the information
contained in the Nitinol Shareholdersregister was true and correct;
(h) (i) each of the parties to the New York Documents and the Deed of Pledge,
other than Yellow Tape and Nitinol, has been duly incorporated, is and at
the time of the execution of the Deed of Pledge was validly existing and,
to the extent relevant in such party's jurisdiction, in good standing under
the laws applicable to such party, (ii) each of the parties to the New York
Documents and the Deed of Pledge, other than Yellow Tape and Nitinol, has
and had at the time of the execution of the New York Documents and the Deed
of Pledge, all requisite power (corporate and otherwise) to execute and
deliver, and to perform its obligations under, each of the New York
Documents and the Deed of Pledge to which it is a party, and (iii) under
any applicable law, other than Netherlands Law, the New York Documents and
the Deed of Pledge have been duly executed and delivered by each of the
parties thereto;
(i) the New York Documents constitute under any applicable law, other than
Netherlands Law, including the laws of the State of New York to which they
are expressed to be subject, the valid, legal and binding obligations of
all parties thereto, enforceable against such parties in accordance with
their respective terms;
(j) the jurisdiction provision in the Purchase Agreement and the Guarantee and
Collateral Agreement is valid under the laws of the State of New York and
the courts of the State of New York would accept jurisdiction on the basis
thereof;
<PAGE>
-6-
(k) at the moment of the execution of the Deed of Pledge (i) NMT was the owner
(eigenaar) and had full right to dispose (beschikkingsbevoegd) of the
Shares 01 (as defined in the Deed of Pledge) and the Rights (as defined in
the Deed of Pledge) relating thereto, and (ii) such Shares 01 and Rights
were not encumbered by any limited rights (beperkte rechten) or attachments
(beslagen);
(l) at the moment of the execution of the Deed of Pledge (i) the Borrower was
the owner (eigenaar) and had full right to dispose (beschikkingsbevoegd) of
the Shares 02 (as defined in the Deed of Pledge) and the Rights (as defined
in the Deed of Pledge) relating thereto, and (ii) such Shares 02 and Rights
were not encumbered by any limited rights (beperkte rechten) or attachments
(beslagen);
(m) the description of the Collateral (as defined in the Deed of Pledge)
sufficiently identifies (omschrijft met voldoende bepaaldheid) such
collateral within the meaning of Article 84, Section 2 of Volume 3 of the
Netherlands Civil Code (the "CC");
--
(n) to the extent future goods (toekomstige goederen) including future
registered claims (toekomstige vorderingen op naam) are part of the Rights
(as defined in the Deed of Pledge), NMT or the Borrower, as applicable,
shall at such future date be the proprietor (rechthebbende) and shall,
under the law applicable to such Rights have the right to dispose of
(beschikkingsbevoegdheid) and shall be validly obligated to pledge such
Rights and such Rights shall not be encumbered by any limited rights
(beperkte rechten) or attachments (beslagen);
(o) the Rights (as defined in the Deed of Pledge) are capable of being pledged
under Netherlands Law;
(p) the obligations under, or pursuant to, the New York Documents, to the
extent secured by the Deed of Pledge, are sufficiently identifiable
(voldoende bepaalbaar) within the meaning of Article 231, Section 2 of
Volume 3 of the CC;
<PAGE>
-7-
(q) the Yellow Tape Resolution, the Nitinol Resolution, the NMT Confirmation
Statement, the Borrower Confirmation Statement, the Yellow Tape Power of
Attorney and the Nitinol Power of Attorney have been duly executed, have
not been nor will be, wholly or partly, cancelled or revoked, amended,
terminated or wholly or partly invalidated or declared null and void by a
court of law;
(r) at the time of the Yellow Tape Resolution and the NMT Confirmation
Statement, no depository receipts of shares in Yellow Tape had been issued
and none of the shares in Yellow Tape was pledged or encumbered with a
right of usufruct;
(s) at the time of the Nitinol Resolution and the Borrower Confirmation
Statement, no depository receipts of shares in Nitinol had been issued and
none of the shares in Nitinol was pledged or encumbered with a right of
usufruct;
(t) at the date of the execution of the New York Documents and the Deed of
Pledge on the date of this opinion Yellow Tape had/has not been dissolved
(ontbonden), granted suspension of payments (surscance van betaling
verleend) or declared bankrupt (failliet verklaard); it being hereby
confirmed that our today's inquiries with the Trade Register of the Chamber
of Commerce and Industry in Amsterdam and the District Court of Amsterdam
have not revealed any information that any such event has occurred, but it
should be noted that this is not conclusive evidence that no such event has
occurred; and
(u) at the date of the execution of the New York Documents and the Deed of
Pledge on the date of this opinion Nitinol had/has not been dissolved
(ontbonden), granted suspension of payments (surscance van betaling
verleend) or declared bankrupt (failliet verklaard); it being hereby
confirmed that our today's inquiries with the Trade Register of the Chamber
of Commerce and Industry in Centraal Gelderland and the District Court of
Den Haag have not revealed any information that any such event has
occurred, but it should be noted that this is not conclusive evidence that
no such event has occurred.
<PAGE>
-8-
Based upon and subject to the foregoing and subject to the qualifications listed
below and to any factual matters, documents or events not disclosed to me in the
course of my examination referred to above, I am at the date hereof of the
opinion that:
(1) Yellow Tape has been duly incorporated and is validly existing under
Netherlands Law as a legal entity in the form of a besloten vennootschap
met beperkte aansprakelijkheid (closed company with limited liability).
(2) Nitinol has been duly incorporated and is validly existing under
Netherlands Law as a legal entity in the form of besloten vennootschap met
beperkte aansprakelijkheid (closed company with limited liability).
(3) Yellow Tape has the corporate power to execute, deliver and perform its
obligations under the Deed of Pledge.
(4) Nitinol has the corporate power to execute, deliver and perform its
obligations under the Deed of Pledge.
(5) Yellow Tape has taken all necessary corporate action to authorize the
execution, delivery and performance of its obligations under the Deed of
Pledge and the entry into the Deed of Pledge by Yellow Tape does not
violate the Yellow Tape Articles of Association or any applicable provision
of Netherlands Law.
(6) Nitinol has taken all necessary corporate action to authorize the
execution, delivery and performance of its obligations under the Deed of
Pledge and the entry into the Deed of Pledge by Nitinol does not violate
the Nitinol Articles of Association or any applicable provision of
Netherlands Law.
(7) The Deed of Pledge has been duly executed and delivered by Yellow Tape.
(8) The Deed of Pledge has been duly executed and delivered by Nitinol.
<PAGE>
-9-
(9) The Deed of Pledge creates a valid first ranking right of pledge (eerste
pandrecht) on the Shares and the Rights as defined therein, in favor of
Agent, which right of pledge is enforceable in the Netherlands in
accordance with its terms and the applicable provisions of Netherlands Law.
The opinions expressed above are subject to the following qualifications:
(A) The opinions expressed in paragraphs (3) and (4) above are limited by any
applicable bankruptcy, insolvency, reorganization, moratorium and other
similar laws of general application at the time of the execution of the
Deed of Pledge, now or hereafter in effect, relating to or effecting the
enforcement or protection of creditors' rights.
(B) The enforcement of the pledge created pursuant to the Deed of Pledge will
not be affected by the bankruptcy (faillissement) or suspension of payments
(surseance van betaling) of Yellow Tape or Nitinol, provided that (i) a
receiver in bankruptcy (curator) may require the holder of such pledge to
foreclose it within a reasonable time, and if such holder fails to do so
the receiver can sell the underlying assets himself and pay the proceeds to
such holder, and (ii) the foreclosure of such pledge can be suspended by a
court, at the request of any interested party, for a period not exceeding
two months.
(C) Any opinions expressed herein with respect to the validity of the Deed of
Pledge or any legal act (rechtshandeling) forming part thereof or
contemplated thereby are limited by the protection afforded by Netherlands
Law pursuant to rules regarding fraudulent conveyance (Actio Pauliana) to
creditors whose interests have been injured.
(D) The obligations of a party to an agreement, to the extent Netherlands Law
is applicable, are subject to and limited by rules of force majeure (niet
toerekenbare tekortkoming), set-off, reasonableness and fairness
(redelijkheid en billijkheid), unforeseen circumstances (onvoorziene
omstandigheden) and other defenses afforded by Netherlands Law to obligors
generally. Under Netherlands Law the remedy of specific performance may not
always and in all circumstances be available.
<PAGE>
-10-
(E) The opinion expressed in paragraph (9) above is limited to the extent that
(i) no opinion is rendered that the rights of pledge created by means of
the Deed of Pledge can be enforced in any jurisdiction other than the
Netherlands and that such other jurisdiction would recognize, give such
effect or grant such priority to such rights of pledge as would be the case
in the Netherlands and (ii) the foreclosure under the rights of pledge,
created by the Deed of Pledge, will be subject to certain mandatory share
transfer restrictions (blokkeringsregelingen) in Article 5 of the Yellow
Tape Articles of Association and Article 8 of the Nitinol Articles of
Association.
(F) I do not render any opinion on the recognition or enforceability in the
Netherlands of the security interests purporting to be created pursuant to
the New York Documents.
(G) To the extent Netherlands Law is applicable, any provision in the New York
Documents or the Deed of Pledge to the effect that such agreement or any of
the provisions thereof shall be binding on the successors or assigns of any
party thereto may not be valid in the absence of an agreement with any such
assign or successor.
(H) Any substitution of the Agent as contemplated in Section 8.5 of the
Guarantee and Collateral Agreement (Successors and Assigns) will result in
the former Agent losing the benefit of the Deed of Pledge without the
substitute agent acquiring such benefits. Consequently, in the event of
such substitution, (a) the security interests created in favor of the Agent
pursuant to the Deed of Pledge and (b) the right to administer (beheren)
and dispose of (beschikken) the rights in respects of the Shares (as
referred to in the Deed of Pledge) and the Rights (as referred to in the
Deed of Pledge) will need to be re-established by way of the re-execution
of a replacement Deed of Pledge.
(I) In accordance with Netherlands law a power of attorney can only be made
irrevocable to the extent its object is the performance of
rechtshandelingen (juridical acts) in the interest of the representative
appointed thereby or of a third party. In accordance with Netherlands law
any power of attorney or mandate will terminate upon the faillissement
(bankruptcy) or becomes ineffective upon the surseance van betaling
(suspension of payments) of the issuer thereof.
<PAGE>
-11-
(J) Pursuant to Article 7 Volume 2 of the CC any transactions entered in to by
a legal entity (such as Yellow Tape and Nitinol) may be nullified if the
objects of such entity were transgressed thereby and the other party to the
transaction knew or should have known this without independent
investigation. The description of the objects of Yellow Tape in Article 2
of the Yellow Tape Articles of Association include "... to provide security
for the debts of legal persons or of other companies with which the company
is affiliated in a group..." and the description of the objects of Nitinol
in Article 2 of the Nitinol Articles of Association include "... to provide
guarantees and to bind the company, or assets of the company, for the
benefit of enterprises and corporations with which the company is
affiliated in a group...". However, there is no case law confirming that
this fact alone is sufficient to conclude that the granting of such
security, would not be ultra vires. The view is widely expressed in the
literature that a transaction which patently violates the interest of a
company is ultra vires regardless of the description of the objects in its
article of association.
The opinion speaks as of its date. It is addressed solely to you and your
permitted successors, transferees and assigns. It may not be relied upon by any
person other than you and without my prior written consent, its contents may not
be disclosed to third parties, save to Yellow Tape's and Nitinol's law legal
advisor who may rely upon this opinion as though it were addressed to him.
Sincerely,
/s/ Richard Norbruis
Richard Norbruis
<PAGE>
EXHIBIT D
DATED 1998
------------------------------
(1) NMT NEUROSCIENCES (INTERNATIONAL), INC,
as chargor
(2) J. H. WHITNEY & CO., INC, as trustee
---------------------------------------
CHARGE OVER SHARES
in NMT NEUROSCIENCES (UK) LTD
---------------------------------------
ROWE & MAW
20 Black Friars Lane
London EC4V 6HD
Tel: + 44 (0)171-248 4282
Fax: +44 (0)171-248 2009
Ref: 184
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
CLAUSE SUBJECT MATTER PAGE
<S> <C> <C>
1. Definitions And Interpretation 1
2. Charging Clause 3
3. Warranties And Covenants 4
4. The Agent's Powers 4
5. Coutinuing Security 4
6. Releases Conditional, Retention Of Security 4
7. Third Party Protection 5
8. Indemnities 5
9. Severability 6
10. Amendments, Waivers And Rights 6
11. Assignment 7
12. Law And Jurisdiction 8
13. Notices 8
14. Counterparts 9
SCHEDULE
1. Representations and Warranties 10
2. Covenants 11
3. The Agent's Powers 14
</TABLE>
<PAGE>
CHARGE OVER SHARES
DATE:
PARTIES:
(1) NMT NEUROSCIENCES (INTERNATIONAL), INC., a company incorporated in
Delaware, whose principal place of business is at 27 Wormwood Street,
Boston, Massachusetts 02210 (the "CHARGOR"); and
(2) J. H. WHITNEY & CO., INC, a company incorporated in Delaware, whose
principal place of business is at 177 Broad Street, Stamford, Connecticut
06901 (the "AGENT") as trustee.
BACKGROUND:
(A) Pursuant to a subordinated note and common stock purchase agreement (the
"NOTE PURCHASE AGREEMENT") made on or about the date of this Charge
between (1) Whitney Subordinated Debt Fund, L.P. (the "PURCHASER") and (2)
Nitinol Medical Technologies, Inc. ("NITINOL"), Nitinol has agreed to issue
and the Purchaser has agreed to purchase the WSDF Note (as defined in the
Note Purchase Agreement).
(B) Pursuant to a guarantee and collateral agreement (the "GUARANTEE AND
COLLATERAL AGREEMENT") made on or about the date of this Charge between (1)
various parties, including Nitinol and the Chargor, as grantors and (2) the
Agent as agent for the Purchaser, the CHARGOR has (amongst other things)
granted security for its obligations relating to the Notes (as defined in
the Note Purchase Agreement).
(C) It is a condition precedent to the obligation of the Purchaser to purchase
the WSDF Note from Nitinol under the Note Purchase Agreement that the
Chargor shall have executed and delivered in favour of the Agent this
Charge over 65% of the shares held by it in the Company.
(D) The Agent holds the benefit of this Charge, including without limitation
the security created and other rights granted in it, on trust for the
Lenders and itself.
(E) This document is the deed of the Chargor even if it has not been duly
executed by the Agent or has been duly executed by the Agent, but not as a
deed.
THIS DEED WITNESSES THAT:
1. DEFINITIONS AND INTERPRETATION
1.1 DEFINED TERMS
In this Charge (including time Background):
"BORROWER OBLIGATIONS" has the meaning given to it in the Guarantee and
Collateral Agreement and for the avoidance of doubt includes, without
limitation, any obligation or liability owed by the Charger to the Agent
under this Charge.
1
<PAGE>
"CHARGED SECURITIES" means the Shares and all other shares and other assets
and rights from time to time the subject of this Charge.
"COMPANY" means NMT Neurosciences (UK) Limited, a company incorporated in
England with limited liability (registered number 3576961); registered
office c/o Collyer-Bristow, 4 Bedford Row, London WC1R 4DF.
"EVENT OF DEFAULT" shall have the meaning given to it in the Notes.
"GUARANTEE AND COLLATERAL AGREEMENT" has the meaning given to it in
Background (B).
"INTEREST RATE" means the rate applicable to default interest referred to
in the Notes.
"LENDERS" means the Purchaser and any holder of any Note from time to time.
"LOAN DOCUMENT" shall have the meaning given to it in the Guarantee and
Collateral Agreement.
"LOSSES" means losses, claims, demands, actions, proceedings, damages or
other payments, costs, expenses and other liabilities of any kind.
"NOTE PURCHASE AGREEMENT" has the meaning given to it in Background (A).
"NOTES" and "WSDF NOTE" have the meanings given to them respectively in the
Note Purchase Agreement.
"PURCHASER" has the meaning given to it in Background (A).
"SECURITY INTEREST" means any debenture, mortgage, charge, pledge, lien,
assignment, hypothecation, right of set-off, title retention or other
arrangement or agreement the effect of which is the creation of security.
"SHARES" means the 65 ordinary shares in the capital of the Company
numbered 1 to 65, being 65% of the issued share capital of the Company.
1.2 INDEX AND HEADINGS
The index and headings are for convenience only and shall not affect the
interpretation of this Charge.
1.3 REFERENCES
In this Charge, unless the context requires otherwise, any reference to:
(a) the AGENT, or the CHARGOR respectively includes its successors in
title and assigns and this Charge shall be enforceable notwithstanding
any change in the constitution of the Agent, its absorption in or
amalgamation with any other person or the acquisition of all or part
of its undertaking by any other person;
2
<PAGE>
(b) a PARTY or the PARTIES is to a party or the parties (as the case may
be) to this Charge;
(c) a BACKGROUND, CLAUSE or SCHEDULE is to the relevant statement of the
background of, clause of or schedule to this Charge (as the case may
be) and references made in a Schedule to PARAGRAPHS are to paragraphs
of that Schedule;
(d) this CHARGE (including the Schedules, which form part of this Charge
for all purposes) is to this Charge and the security created by,
pursuant to or supplemental to it;
(e) a STATUTE or STATUTORY PROVISION includes any consolidation, re-
enactment, modification or replacement of the same and any subordinate
legislation in force under the same from time to time;
(f) the MASCULINE FEMININE or NEUTER gender respectively includes the
other genders, references to the SINGULAR include the PLURAL (and vice
versa) and references to PERSONS include firms, corporations and
unincorporated associations; and
(g) a DOCUMENT is to that document as varied, supplemented or replaced
from time to time.
1.4 TERMS DEFINED IN NOTE PURCHASE AGREEMENT
Terms defined in the Note Purchase Agreement but not defined in this Charge
shall mean the same in this Charge.
2. CHARGING CLAUSE
As security for the Borrower Obligations, the Chargor, with full title
guarantee, charges to the Agent by way of first fixed charge:
(a) the Shares;
(b) all allotments, accretions, offers, rights, benefits and advantages
whatever at any time accruing, offered or arising in respect of or
incidental to the Shares including (without limitation) any dividends
or other distributions declared from time to time, and
(c) all stocks, shares, rights, money or property accruing to the Shares
or offered at any time by way of conversion, redemption, bonus,
preference, option or otherwise in respect of the Shares.
This is without prejudice to Paragraph 1.1 (Prior to an Event of Default)
of Schedule 3 (The Agent's Powers).
3
<PAGE>
3. WARRANTIES AND COVENANTS
The Chargor represents and warrants to the Agent as set out in Schedule 1
(Representations and Warranties) and covenants with the Agent as set out in
Schedule 2 (Covenants).
4. THE AGENT'S POWERS
The Agent shall have the powers set out in Schedule 3 (The Agent's Powers).
5 CONTINUING SECURITY
5.1 CONTINUING SECURITY
This Charge is a continuing security and shall secure the ultimate balance
of the Borrower Obligations, notwithstanding intermediate payment or
discharge of the whole or part of the Borrower Obligations to the Agent and
also notwithstanding liquidation or other incapacity of the Chargor or the
Company, or any change in the constitution, name or style of the Chargor or
the Company or any other event, matter or thing.
5.2 ADDITIONAL TO OTHER RIGHTS
This Charge is in addition to (and shall not merge with, otherwise
prejudice or affect or be prejudiced or affected by) any other remedy,
guarantee, indemnity, Security Interest or other right or interest which
may be or have been created in favour of the Agent in respect of the
Borrower Obligations. Accordingly, this Charge may be enforced
notwithstanding:
(a) the existence or invalidity of all or any of those rights and
interests; and
(b) the Agent or any of the Lenders at any time exchanging, releasing,
varying, abstaining from perfecting or enforcing or otherwise dealing
or omitting to deal with all or any of those rights and interests.
6. RELEASES CONDITIONAL, RETENTION OF SECURITY
6.1 RELEASES CONDITIONAL
Any release, settlement, discharge, re-assignment or arrangement (in this
Clause 6 a "release") made by the Agent on the faith of any assurance,
security or payment shall be conditional on the assurance, security or
payment not being avoided, reduced, clawed back or ordered to be repaid
under any enactment relating to liquidation, bankruptcy or insolvency. If
any avoidance, clawback or reduction occurs or such order is made, the
release given by the Agent shall have no effect and shall not prejudice
the right of the Agent to enforce this Charge in respect of the Borrower
Obligations and, as between the Chargor and the Agent, this Charge shall
(notwithstanding the release) be deemed to have remained at all times in
effect and held by the Agent as security for the Borrower Obligations.
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<PAGE>
6.2 RETENTION
Unless and until the Agent, acting reasonably, is satisfied as to the
solvency of the Chargor, the Agent may retain this Charge after the
payment, discharge or satisfaction of all of the Borrower Obligations and
notwithstanding any such payment, discharge or satisfaction for such period
as the Agent, acting reasonably, may consider that any such payment,
release or discharge is susceptible of being avoided, reduced or ordered to
be repaid under any enactment relating to liquidation, bankruptcy or
insolvency. In the event of the commencement of the bankruptcy or winding-
up of the person making such payment or effecting such discharge or
satisfaction at any time within that period, the Agent shall be entitled to
retain any such security for such further period as the Agent, acting
reasonably, may determine.
7. THIRD PARTY PROTECTION
No purchaser, mortgagee or other person dealing with the Agent shall be
concerned:
(a) to enquire whether any of the Borrower Obligations have become due or
payable or remain unpaid or undischarged or whether the power which
the Agent is purporting to exercise has become exercisable: or
(b) to see to the application of any money paid to the Agent.
8. INDEMNITIES
8.1 COSTS AND EXPENSES
The Chargor shall indemnify the Agent fully (and in the case of legal costs
and expenses on a solicitor and own client basis, such legal costs and
expenses where incurred prior to an enforcement of this Charge to be
limited to reasonable legal costs and expenses) on demand against all
Losses incurred by (or made or brought against) it (or any manager or agent
appointed by it or him) except Losses arising from a wilful misconduct or
gross negligence of the Agent or any Lender:
(a) as a result of any failure by the Chargor to perform any of its
obligations under this Charge;
(b) in the exercise (or purported exercise) of any of the powers or rights
conferred by this Charge or by any other Security Interest granted
(whether by the Chargor, the Company or any third party) for all or
part of the Borrower Obligations; or
(c) for any other matter or thing done or omitted relating to the Charged
Securities or the assets secured by any such other Security Interest,
together in each case with interest calculated on a daily basis from the
date it is incurred or becomes payable by the Agent at the Interest Rate,
compounded quarterly.
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8.2 CURRENCY INDEMNITY
(1) Any payment by the Chargor under this Charge shall be made in the currency
(in this Clause 8.2 the "CONTRACTUAL CURRENCY") in which the relevant
Borrower Obligations were denominated or incurred. If in respect of any of
the Borrower Obligations the Agent receives payment or that Borrower
Obligation is converted into a claim, proof, judgment or order, in either
case in a currency other than the Contractual Currency, then:
(a) the Chargor shall indemnify the Agent against any loss or liability
directly resulting from the conversion;
(b) if the amount received by the Agent, when converted into the
Contractual Currency by the Agent, is less than the amount of the
relevant Borrower Obligation in the Contractual Currency, then the
Chargor shall on demand pay to the Agent an amount in the Contractual
Currency equal to the difference; and
(c) the Chargor shall on demand pay to the Agent any exchange costs and
taxes payable in Connection with any conversion referred to in this
Clause 8.2.
(2) If and to the extent that the Chargor fails to pay on demand any amount due
under this Charge, the Agent may in its absolute discretion (and without
notice to the Chargor) purchase at any time after that so much of a
currency as the Agent considers necessary or desirable to cover any part of
the Borrower Obligations denominated or incurred in such currency. That
purchase shall be made at the then-prevailing spot rate of exchange
obtained by the Agent (as conclusively determined by the Agent) for
purchasing such currency with sterling. The Chargor agrees to indemnify
the Agent against the full sterling price (including all costs, charges
and expenses) paid by the Agent for such currency.
(3) All moneys received or held by the Agent from the Chargor or under this
Charge may from time to time be converted into such other currency as the
Agent considers necessary or desirable to cover any part of the Borrower
Obligations denominated or incurred in that currency. That conversion shall
be made at the then-prevailing spot rate of exchange obtained by the Agent
(as conclusively determined by the Agent) for purchasing tile currency to
be acquired with the existing currency.
9. SEVERABILITY
If any part of any provision of this Charge shall be or become invalid or
unenforceable under any applicable law, then the remainder of that
provision and all other provisions of this Charge shall remain valid and
enforceable.
10. AMENDMENTS, WAIVERS AND RIGHTS
10.1 AMENDMENTS
No amendment or variation of the terms of this Charge shall be effective
unless it is made or confirmed in a written document signed by the parties.
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10.2 WAIVER
No delay in the exercise or non-exercise by the Agent of any of its rights
under or in connection with this Charge shall operate as a release or
waiver of that right. Rather, any such waiver or release must be
specifically granted in writing signed by an authorised signatory of the
Agent and shall:
(a) be confined to the specific circumstances in which it is given;
(b) not affect any other enforcement of the same or any other right; and
(c) (unless it is expressed to be irrevocable) be revocable at any time
in writing.
10.3 RIGHTS AND REMEDIES CUMULATIVE
The rights and remedies of the Agent under this Charge are cumulative and
not exclusive of any rights or remedies of the Agent under the general
law. The Agent may exercise each of its rights as often as it thinks
necessary.
10.4 NO DUTY
The Agent shall be under no duty of any kind to the Chargor in respect of
the exercise or non-exercise of any of its rights under this Charge. The
Chargor shall not rely on such exercise or non-exercise in any way.
11. ASSIGNMENT
11.1 ASSIGNMENT BY AGENT
The Agent may assign all or any of its rights under this Charge to any
successor agent for the Lenders appointed from time to time by the
Lenders, without any requirement to notify the Chargor or obtain its
further consent. Any assignee or successor in title of the Agent shall be
treated for all purposes as if it had been an original party to this
Charge in addition to the Agent.
11.2 DISCLOSURE
Notwithstanding any confidentiality obligation imposed on the Agent, it
may disclose to any assignee, bona fide proposed assignee or person with
whom from time to time it has or wishes to enter into an agreement in
connection with this Charge such information about the Chargor as it
reasonably thinks fit.
11.3 DOCUMENTING ASSIGNMENTS
The Chargor shall on demand enter into such documents effecting such
assignment as the Agent may require and under which:
(a) the Agent will be released from all further liability arising under
this Charge;
(b) the successor shall undertake all obligations of the Agent with
effect from the date of such transfer; and
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<PAGE>
(c) the Chargor will covenant with that successor to observe and perform
its obligations under this Charge.
11.4 NO ASSIGNMENT BY CHARGOR
This Charge shall be binding on the Chargor's successors and assigns, but
the Chargor may not assign, transfer or otherwise dispose of any of its
rights or obligations under this Charge.
12. LAW AND JURISDICTION
12.1 LAW
This Charge shall be governed by and construed in accordance with English
law.
12.2 JURISDICTION
For the exclusive benefit of the Agent, the courts of England shall have
jurisdiction to settle any disputes which may arise in connection with
this Charge; but the Agent may bring proceedings in connection with this
Charge in any other court of competent jurisdiction.
12.3 PROCESS AGENT
(1) The Chargor shall at all times maintain an agent for service of process in
England.
(2) The Chargor appoints the Company (at its registered office from time to
time) as its agent for that purpose. The Chargor may not revoke such
appointment
(3) If for any reason an agent appointed under this Clause 12.3 ceases to act
as such, the Chargor shall promptly appoint another agent and notify the
Agent of its appointment and its name and address. If the Chargor does
not make such an appointment within seven days of that cessation, then the
Agent may do so on its behalf and shall notify the other parties if it
does so.
13. NOTICES
All notices, demands and other communications made by the Agent relating
to this Charge may (without prejudice to any other effective mode of
making the same) be delivered or sent to the agent referred to in Clause
12.3 (Process Agent) or such other address in England and Wales of which
the Agent has received no less than 15 business days' prior written actual
notice from the Chargor, as the case may be, and shall take effect:
(a) if delivered, upon delivery;
(b) if posted, at the earlier of the time of delivery and (if posted in
the United Kingdom by first class registered post) 10.00am on the
second business day after posting; and
8
<PAGE>
(c) if sent by facsimile, when a complete and legible copy of the
communication, whether that sent by facsimile or a hard copy sent by
post or delivered by hand, has been received at the appropriate
address,
provided that if any communication would otherwise become effective on a
non-business day or after 5.00pm on a business day, it shall instead
become effective at 10.00am on the next business day. Section 196 of the
Law of Property Act 1925 shall not apply to this Charge.
14. COUNTERPARTS
This Charge may be executed in any number of counterparts, which shall
together constitute one instrument.
EXECUTION:
The parties have shown their acceptance of the terms of this Charge by executing
it, in the case of the Chargor as a deed, at the end of the Schedules.
9
<PAGE>
SCHEDULE 1.
REPRESENTATIONS AND WARRANTIES
1. TITLE
1.1 TITLE TO THE SHARES
The Chargor represents and warrants that with regard to the Shares:
(a) it is the sole beneficial and legal owner of them, free from any
options or Security Interest;
(b) they are fully paid;
(c) there are no moneys or liabilities outstanding or payable in respect
of them or any of them;
(d) it is lawfully entitled to create this Charge over them in favour of
the Agent;
(e) they constitute 65% of the issued share capital of the Company; and
(f) they are fully transferable to the Agent or such other person as the
Agent shall direct, without restriction.
1.2 TITLE TO CHARGED SECURITIES
The Chargor further represents and warrants that Paragraph 1.1 (a) to (d)
and (f) will be true and accurate with regard to securities which become
Charged Securities after the execution of this Charge, as at the date on
which they become Charged Securities.
2. NON-COMPETITION
The Chargor represents and warrants that it has not taken or received and
undertakes not to take or receive the benefit of any security (from the
Company or any other person) extending to its liabilities under this
Charge.
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SCHEDULE 2
COVENANTS
1. NO DISPOSALS OR SECURITY INTERESTS
The Chargor shall not, without the prior written consent of the Agent:
(a) sell, transfer or otherwise deal in any way with any of the Charged
Securities or any interest in them or permit any other person to be
registered as holder of any of them or acquire any rights, including
(without limitation) any option or other future or inchoate rights; or
(b) create (or permit to continue or to be created) or suffer to
subsist any Security Interest over any of the Charged Securities
(whether ranking in priority to, pari passu with or subsequent to this
Charge).
2. DEPOSIT AND REGISTRATION
The Chargor shall:
(a) at any time the Agent so requests, transfer (or ensure that there
are transferred) all or any of the Charged Securities into the name of
the Agent or a nominee of the Agent. The Chargor agrees that the Agent
may hold all or any of the Charged Securities in any nominee and that
all of the Charged Securities held in the name of a nominee shall be
held at the expense, risk and responsibility of the Chargor;
(b) immediately upon execution of this Charge, deposit (or ensure that
there are deposited) with the Agent and permit the Agent to hold and
retain:
(i) all stock and share certificates and documents of title relating
to the Charged Securities;
(ii) transfers of the Charged Securities duly completed in favour of
the Agent (or otherwise as it may direct) and stamped at the
Chargor's expense; and
(iii) such other documents as the Agent may from time to time require
for perfecting its title to the Charged Securities (duly
executed by or signed on behalf of the registered holder) or for
vesting or enabling it to vest the same in itself or its nominee
or in any purchaser, to the intent that the Agent may at any
time without notice present them for registration; and
(c) hold to the order of the Agent and deposit with it forthwith (or
ensure that there are so held and deposited) all documents of title
and related documents from time to time relating to the Charged
Securities.
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3. NO ISSUE/ALLOTMENT OF SHARES
The Chargor shall ensure that no shares or other securities in or of the
Company will be issued or allotted and no agreement, option or arrangement
to make or call for such issue or allotment will be made or granted without
the Agent's prior written consent (which consent may not be unreasonably
refused if the Agent will, following the transaction for which consent is
sought, retain security over at least 65% of each class of shares in the
issued share capital of the Company).
4. THE COMPANY
(1) The Chargor shall ensure that the Company does not, unless the Agent's
prior written consent has been obtained which consent shall not be
unreasonably refused:
(a) modify the rights and obligations attached to any of the Shares in
any way;
(b) increase, consolidate, sub-divide or reduce its share capital;
(c) alter its memorandum or articles of association;
(d) purchase its own shares or reduce its share capital; or
(e) take any step to place itself in liquidation or administration or
pass any resolution to wind itself up.
(2) The Chargor undertakes that it shall not at any time until the Borrower
Obligations shall have been paid and discharged in full take any step to
place the Company into liquidation or administration; in particular (but
without limitation) the Chargor shall not present or support any petition,
or propose or vote in favour of any resolution, for the winding-up or
administration of the Company.
5. CALLS AND NOTICES
The Chargor shall:
(a) duly and promptly pay (or ensure that there are paid) and hold the
Agent and any nominee harmless against all calls, instalments or other
payments which may be made or become due in respect of any of the
Charged Securities as and when they become due; and
(b) provide the Agent with a copy of any report, accounts, circular,
notice or other item sent or provided to them (or to any person on
their behalf) in connection with the Charged Securities or any of them
immediately on its receipt.
6. NO PREJUDICE
The Chargor shall not do or permit or suffer to be done anything with the
primary intention of depreciating, jeopardising or otherwise prejudicing
the value of the Charged Securities. The Chargor shall immediately inform
the Agent of any such matter of which it becomes aware.
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7. FURTHER ASSURANCE
The Chargor shall execute and do, and ensure that its nominees execute and
do, at its own expense all such assurances, acts and things as the Agent
may reasonably require from time to time for perfecting or protecting this
Charge over the Charged Securities or any of them or for facilitating the
realisation of the same and in the proper exercise of all powers,
authorities and discretions vested by this Charge in the Agent. The Chargor
shall, and shall ensure its nominees shall, in particular (but without
limitation) promptly execute all transfers, conveyances, assignments,
assurances and legal mortgages of the Charged Securities in such form and
to such person as the Agent may from time to time reasonably require and
give all notices, orders and directions which the Agent may reasonably
require.
8. WAIVERS OF PRE-EMPTION RIGHTS
The Chargor shall ensure that all shareholders of the Company from time to
time enter into waivers in a form satisfactory to the Agent of all pre-
emption rights and restrictions in the Articles of Association of the
Company from time to time or otherwise which may in any respect vary,
restrict or affect the exercise of any rights which may arise in connection
with the enforcement of this Charge or the transfer of the Charged
Securities to the Agent or such other person as the Agent may so direct.
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SCHEDULE 3
THE AGENT'S POWERS
1. VOTING RIGHTS
1.1 PRIOR TO AN EVENT OF DEFAULT
Until Paragraph 1.2 applies:
(a) the Chargor shall be entitled to receive all distributions paid in
respect of the Charged Securities; and
(b) the Chargor shall be entitled to exercise all voting and other rights
and powers in respect of the Charged Securities; but it shall not do
so if the resolution or other action in question could impair the
Charged Securities or be inconsistent with, or result in any violation
of, any provision of any Loan Document.
1.2 FOLLOWING AN EVENT OF DEFAULT
If at any time an Event of Default is continuing and the Agent so notifies
the Chargor, then this Paragraph 1.2 applies from then on. When it applies,
the Agent or its nominees:
(a) shall be entitled to receive any distributions paid in respect of the
Charged Securities; and
(b) may (and the Chargor may not without the prior written consent of the
Agent) exercise in the name of the Chargor or otherwise (without any
further consent or authority on the part of the Chargor) in respect of
each of the Charged Securities any voting rights and any powers or
rights which may be exercisable by the person in whose name the
Charged Securities are registered or by their bearer or absolute
owner.
2. ENFORCEMENT
2.1 DISAPPLICATION OF LAW OF PROPERTY ACT 1925
Neither Section 93 nor Section 103 of the Law of Property Act 1925 shall
apply to this Charge.
2.2 ENFORCEMENT RIGHTS
Immediately on the happening of any Event of Default, this Charge shall
become enforceable and the Agent may enforce all or any part of this Charge
as it thinks fit and may without further notice exercise in relation to the
Charged Securities the power of sale and all other powers conferred on
mortgagees by the Law of Property Act 1925 (or otherwise by law) as
extended, varied or amended by this Charge. All dividends, interest or
other payments received or receivable by the Agent or its nominee in
respect of any of the Charged Securities (whether before or after any Event
of Default) may be applied by the Agent as though they were proceeds of
sale.
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2.3 NO LIABILITY
The Agent shall not be liable as a mortgagee in possession either to
account as such mortgagee in relation to any of the Charged Securities or
for any loss upon realisation or for any other default or omission for
which such a mortgagee may be liable and shall not be liable for any
failure to make or call for any payment or repayment, to accept or notify
the Chargor of any offer or for any other loss of any nature in connection)
with the Charged Securities.
2.4 DISCRETION OF AGENT
In exercising the power of sale in Paragraph 2.2, the Charged Securities or
any part may be sold or disposed of at such times, in such manner and
generally on such terms and conditions and for such consideration as the
Agent may think fit. Any such sale or disposition may be for cash,
debentures or other obligations, shares, stock, securities or other
valuable consideration and may be payable immediately or by instalments
spread over such period as the Agent shall think fit.
3. APPROPRIATION OF RECEIPTS
3.1 APPLICATION
Whether before or after any Event of Default, the Agent shall appropriate
amounts received by the Agent under the powers conferred by this Charge in
or toward the discharge of the Borrower Obligations in the order set out in
section 6.5 (Application of Proceeds) of the Guarantee and Collateral
Agreement.
3.2 SUSPENSE ACCOUNT
Any moneys received following the exercise of the powers conferred by this
Charge may, at the discretion of the Agent, be placed in a suspense or
securities realised account prior to or after any appropriation and kept
there for so long as the Agent thinks fit.
4. SET-OFF AND ACCOUNTS
The Agent may at any time (without notice and notwithstanding any
settlement of account or other matter whatever) combine, consolidate or
merge all or any of the Chargor's accounts or liabilities to the Agent and
may set off or transfer any sums staying in the credit of any such accounts
or any sum which the Agent may from time to time owe to the Chargor in or
towards the payment, discharge or satisfaction of any of the Borrower
Obligations.
5. POWER OF ATTORNEY
By way of security, the Chargor irrevocably appoints the Agent to be its
attorney and on its behalf and in its name and as its act or deed:
(a) to execute and do all such assurances, acts and things which it ought
lawfully to do under this Charge; and
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(b) to seal and deliver and otherwise perfect or do any deed, assurance,
agreement, instrument, act or thing which it may deem proper or
desirable in or for the purpose of exercising any of the powers,
authorities and discretions conferred by this Charge or by law on the
Agent.
By this Charge, the Chargor ratifies and confirms (and agree to ratify and
confirm) whatever the Agent as its attorney shall do in the proper and
lawful exercise or purported exercise of all or any of the powers,
authorities and discretions referred to in this Paragraph 5.
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EXECUTION:
THE CHARGOR
SIGNED AND DELIVERED as )
a deed by THEODORE I. PINCUS, )
duly authorised for and on behalf of ) /s/ Theodore I. Pincus
NMT NEUROSCIENCES )
(INTERNATIONAL), INC )
THE AGENT
SIGNED by )
duly authorised for and on behalf of )
J. H. WHITNEY & CO., INC )
17
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EXECUTION:
THE CHARGOR
SIGNED AND DELIVERED as )
a deed by THEODORE I. PINCUS, )
duly authorised for and on behalf of )
NMT NEUROSCIENCES )
(INTERNATIONAL), INC )
THE AGENT
SIGNED by )
duly authorised for and on behalf of ) /s/ Daniel J. O'Brien
J. H. WHITNEY & CO., INC )
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<PAGE>
EXHIBIT G
---------
NITINOL MEDICAL TECHNOLOGIES, INC.
COMPLIANCE CERTIFICATE
DATE: ____________, 19__
This certificate is given by Nitinol Medical Technologies, Inc., a
Delaware corporation (the "Company"), pursuant to Section 8. 1 (c) of that
certain Subordinated Note and Common Stock Purchase Agreement dated as of July
8, 1998 by and among the Company, Whitney Subordinated Debt Fund, L.P. and, for
certain purposes, J.H. Whitney & Co., as such agreement may have been amended,
restated, supplemented or otherwise modified from time to time (the
"Agreement"). Capitalized terms used herein without definition shall have the
meanings set forth in the Agreement.
The officer executing this certificate is the Chief Financial Officer
of the Company and as such is duly authorized to execute and deliver this
certificate on behalf of the Company. By executing this certificate such
officer hereby certifies that:
(a) the financial statements delivered with this certificate in
accordance with Section 8. 1 (a) and/or 8. 1 (b) of the Agreement fairly present
in all material respects the results of operations and financial condition of
the Company and its Subsidiaries as of the dates of such financial statements;
(b) he has reviewed the terms of the Agreement and the Note and has
made, or caused to be made under his supervision, a review in reasonable detail
of the transactions and conditions of the Company and its Subsidiaries during
the accounting period covered by such financial statements;
(c) such review has not disclosed the existence during or at the end
of such accounting period, and he has no knowledge of the existence as of the
date hereof, of any condition or event that constitutes an Event of Default,
except as set forth in Exhibit A hereto which includes a description of the
nature and period of existence of such Event of Default and what action the
Company has taken, is undertaking and proposes to take with respect thereto;
(d) the Company and its Subsidiaries are in compliance with the
covenants contained in Articles 8 and 9 of the Agreement. as demonstrated on the
attached worksheets (in substantially the same format as Exhibit H to the
Agreement), except as set forth or described in Exhibit A; and
(e) (i) Interest Coverage is ___:1.00
(ii) Ratio of Net Funded Indebtedness to Adjusted Operating Cash
Flow is __:1.00
(iii) Fixed Charge Coverage is ___:1.00
(iv) Capital Expenditures are $_________.
(v) Funded Debt to Cash and Cash Equivalents is ___:1.00
(vi) Current Assets less cash and Cash Equivalents to Current
Liabilities is __:1.00
IN WITNESS WHEREOF, the Company has caused this Certificate to be
executed by its Chief Financial Officer this ___ day of _____________, 19__.
By:
----------------------------
Chief Financial Officer
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EXHIBIT H
FINANCIAL COVENANT CALCULATIONS
-------------------------------
1. Calculation of Interest Coverage as set forth in Section 9.8(a).
---------------------------------------------------------------
EBITDA:
<TABLE>
<S> <C>
Net income (or loss) of the Company and its Subsidiaries, for the period in
question, on a consolidated basis determined in accordance with GAAP, but
excluding: (a) the income (or loss) of any Person (other than Subsidiaries of the
Company) in which the Company or any of its Subsidiaries has an ownership
interest, unless received by the Company or its Subsidiaries in a cash distribution;
(b) the income (or loss) of any Person accrued prior to the date it became a
Subsidiary of the Company or is merged into or consolidated with the Company;
and (c) any extraordinary gains and any insurance proceeds received by the
Company or any of its Subsidiaries. $__________
Plus: Any provision for (or less any benefit from) income and franchise Taxes __________
included in the determination of net income
Interest Expense (as defined in the Agreement) net of interest income, __________
deducted in the determination of net income
Depreciation deducted in the determination of net income __________
Amortization deducted in determining net income __________
Losses (or less gains) from Asset Dispositions (as defined in the __________
Agreement) or other non-cash items included in the determination of net
income (excluding sales, expenses or losses related to current assets)
Extraordinary losses (or less gains), as defined under GAAP, net of __________
related tax effects included in the determination of net income
Expenses of the transactions completed pursuant to the Transaction __________
Documents and the Acquisition Documents included in the determination
of net income provided that such expenses were included in the Pro
Forma Balance Sheet, or disclosed in the notes thereto
Expenses, which must be approved in advance by Whitney, related to any __________
write-down of the Company's investment in ITC
One time charges consistent in nature with those set forth on Schedule H, __________
and previously approved by Whitney, reflecting certain one time charges
to be taken by the Company in the 12 months following the
consummation of the Acquisition and in an amount not to exceed
$650,000 in the aggregate
__________
EBITDA $__________
INTEREST COVERAGE:
INTEREST EXPENSE (as defined in the Agreement), net of interest income, included __________
in the determination of net income of the Company and its Subsidiaries on a
consolidated basis
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
Less: Amortization of capitalized fees and expenses incurred with respect to the
Transaction Documents and the Acquisition Documents included in
interest expense __________
Interest paid in kind (PIK) and included in interest expense __________
INTEREST EXPENSES $__________
ACTUAL INTEREST COVERAGE (EBITDA DIVIDED BY INTEREST EXPENSE) __________
Required Interest Coverage __________
In Compliance __________
Yes/No
2. Calculation of Total Leverage Test as set forth in Section 9.8(b).
------------------------------------------------------------------
NET FUNDED INDEBTEDNESS:
Indebtedness as defined in subclauses (a), (b), (f) and (g) of the definition
thereof: $__________
Net Funded Indebtedness $__________
ADJUSTED OPERATING CASH FLOW (calculated in accordance with Item No. 4 of
this Exhibit): $__________
Actual Total Leverage (Net Funded Indebtedness divided by Adjusted Operating
Cash Flow) __________
Required Total Leverage __________
In Compliance __________
Yes/No
3. Calculation of Unfinanced Capital Expenditures
----------------------------------------------
Capital Expenditures (as defined in the Agreement) $__________
Plus: deposits made during such period in connection with property, plant, and
equipment; less deposits of a prior period included above. __________
Less: Portion of Capital Expenditures financed under capital leases or other
Indebtedness __________
UNFINANCED CAPITAL EXPENDITURES $__________
4. Calculation of Adjusted Operating Cash Flow
-------------------------------------------
ADJUSTED OPERATING CASH FLOW:
EBITDA (calculated in accordance with Item No. 1 of this Exhibit) $__________
- ------
Less: Unfinanced Capital Expenditures (calculated in accordance with Item
No. 4 of this Exhibit) $__________
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
Other capitalized costs, defined as the gross amount capitalized, for any
fiscal period, as long term assets (net of cash received in respect of long
term assets), other than (a) Capital Expenditures (as defined in the
Agreement) and (b) fees and expenses capitalized with respect to the
Transaction Documents and the Acquisition Documents __________
OPERATING CASH FLOW $__________
Plus: Pro Forma Target Operating Cash Flow (defined below) __________
-------------------------------------
PRO FORMA TARGET OPERATING CASH FLOW means the following with respect to any person whose
stock or assets were acquired by the Company or any of its Subsidiaries (a "Target") during the 12
month period ending on the date of determination:
Operating Cash Flow (calculated as set forth above in this Item 4) for the Target
during the portion of the 12 month period ending on the date of determination that
occurred prior to consummation of the applicable acquisition $__________
Plus: Addbacks approved by the Purchaser __________
Less: Target Capital Expenditures for the Target during the portion of the 12
month period ending on the date of determination that occurred prior to
consummation of the applicable acquisition, calculated as follows:
Amount capitalized as capital expenditures for the period, under GAAP, as
property, plant and equipment or similar fixed asset accounts, including net
present value of multi-year operating leases $__________
Plus: deposits made during the period in connection with property, plant and
equipment; less deposits of a prior period included above __________
Less: net proceeds of asset sales included in capital expenditures above, which
Target has reinvested __________
Target Capital Expenditures __________
PRO FORMA TARGET OPERATING CASH FLOW: $__________
ADJUSTED OPERATING CASH FLOW (sum of Adjusted Operating Cash Flow plus Pro
Forma Target Operating Cash Flow)
5. Calculation of Fixed Charge Coverage as set forth in Section 9.8(b)
-------------------------------------------------------------------
FIXED CHARGES:
Interest Expense $__________
Plus: Any provision for (benefit from) income or franchise taxes included in
the determination of net income, less any increases (decreases) in long-
term and short-term deferred tax liabilities and less any decreases
(increases) in long-term and short-term deferred tax assets __________
Scheduled payments of principal with respect to all Indebtedness
(including the principal portion of scheduled payments of Capital Lease
Obligations) of the Company and its Subsidiaries on a consolidated basis, __________
Cash payments of deferred tax liabilities stated on the Pro Forma Balance
Sheet (without duplication) __________
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
FIXED CHARGES $__________
OPERATING CASH FLOW:
EBITDA $__________
Less: Unfinanced Capital Expenditures (calculated in accordance with Item
No. 3 of this Exhibit). __________
Other Capitalized Costs, defined as the gross amount capitalized, for any
fiscal period, as long term assets (net of cash received in respect of long
term assets), other than (a) Capital Expenditures and (b) fees and
expenses capitalized with respect to the Transaction Documents and the
Acquisition Documents __________
ADJUSTED OPERATING CASH FLOW $__________
ACTUAL FIXED CHARGE COVERAGE (ADJUSTED OPERATING CASH FLOW DIVIDED BY
FIXED CHARGES) __________
Required Fixed Charge Coverage __________
In Compliance __________
Yes/No
</TABLE>
5
<PAGE>
EXHIBIT 10.4
SUBORDINATED PROMISSORY NOTE
----------------------------
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD,
TRANSFERRED, OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS
OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS
NITINOL MEDICAL TECHNOLOGIES, INC.
10.101% SUBORDINATED PROMISSORY NOTE
DUE SEPTEMBER 30, 2003
$20,000,000 New York, New York
July 8, 1998
FOR VALUE RECEIVED. the undersigned, NITINOL MEDICAL TECHNOLOGIES,
INC., a Delaware corporation (the "BORROWER") hereby promises to pay to the
order of Whitney Subordinated Debt Fund, L.P. ("WSDF"), a Delaware limited
partnership, or its registered assigns (the "HOLDER"), the principal sum of
TWENTY MILLION DOLLARS ($20,000,000) on September, 2003 (the "MATURITY DATE"),
with interest thereon from time to time as provided herein.
1. Purchase Agreement. This Subordinated Promissory Note (the
------------------
"NOTE") is issued by the Borrower, on the date hereof, pursuant to the
Subordinated Note and Common Stock Purchase Agreement (the "PURCHASE
AGREEMENT"), dated as of July 8, 1998, by and among the Borrower, WSDF and, for
certain purposes, J.H. Whitney & Co. This Note, together with all other notes
issued pursuant to paragraph 12 hereof are hereinafter referred to as the
"NOTES." The Holder is entitled to the benefits of this Note and the Purchase
Agreement, as it relates to the Note, and may enforce the agreements of the
Borrower contained herein and therein and exercise the remedies provided for
hereby and thereby or otherwise available in respect hereto and thereto.
Capitalized terms used herein without definition are used herein with the
meanings ascribed to such terms in the Purchase Agreement.
<PAGE>
2. Interest. The Borrower promises to pay interest on the principal
--------
amount of this Note at the rate of 10.101% per annum. The Borrower shall pay
accrued interest quarterly on each March 31, June 30, September 30 and December
31 of each year or, if any such date shall not be a Business Day, on the next
succeeding Business Day to occur after such date (each date upon which interest
shall be so payable, an "INTEREST PAYMENT DATE"), beginning on September 30,
1998; provided, however, that notwithstanding anything to the contrary contained
-------- -------
herein or in the Purchase Agreement, the interest accruing under this Note in
respect of the quarterly periods ending September 30, 1998, December 31, 1998
and March 31, 1999 (other than additional interest incurred upon and during the
occurrence of an Event of Default) shall be satisfied as specified in Section
8.10 of the Purchase Agreement. Interest on this Note shall be paid by wire
transfer of immediately available funds to an account at a bank designated by
the Holder. Interest on this Note shall accrue from the date of issuance until
repayment of the principal and payment of all accrued interest in full.
Interest shall accrue and be computed on the basis of a 360-day year of twelve
30-day months. Notwithstanding the foregoing provisions of this Section 2, but
subject to applicable law, any overdue principal of and overdue interest on this
Note shall bear interest, payable on demand in immediately available funds, for
each day from the date payment thereof was due to the date of actual payment, at
a rate equal to the rate of interest otherwise in effect pursuant to the first
sentence of this Section 2 plus 2% per annum, and, upon and during the
----
occurrence of an Event of Default (as hereinafter defined) (other than an Event
of Default pursuant to Section 6(a)(ii) of this Note), this Note shall bear
interest, from the date of the occurrence of such Event of Default until such
Event of Default is cured or waived, payable on demand in immediately available
funds, at a rate equal to the rate of interest otherwise in effect pursuant to
the first sentence of this Section 2 plus 2% per annum. Subject to applicable
----
law, any interest that shall accrue on overdue interest on this Note as provided
in the preceding sentence and shall not have been paid in full on or before the
next Interest Payment Date to occur after the Interest Payment Date on which the
overdue interest became due and payable shall itself be deemed to be overdue
interest on this Note to which the preceding sentence shall apply. In the event
that any interest rate provided for herein shall be determined to be unlawful,
such interest rate shall be computed at the highest rate permitted by applicable
law. Any payment by the Borrower of any interest amount in excess of that
permitted by law shall be considered a mistake, with the excess being applied to
the principal of this Note without prepayment premium or penalty.
3. Mandatory Prepayment.
--------------------
(a) Secondary Public Offering. Subject to the subordination
-------------------------
provisions of Section 7(b) hereof, upon the consummation of a Secondary Public
Offering (as hereinafter defined), the Borrower shall prepay the outstanding
principal amount of this Note (together with interest accrued and unpaid
thereon), within 5 Business Days after receipt by the Borrower of the proceeds
of such Secondary Public Offering. For the purposes hereof, "SECONDARY PUBLIC
OFFERING" means the sale by the Borrower of its capital stock pursuant to a
registration statement on Form S-1, Form S-3 or otherwise
2
<PAGE>
under the Securities Act in which the issuer receives Net Cash Proceeds equal to
or in excess of $25 million. For the purposes hereof, "NET CASH PROCEEDS" means
(x) the cash proceeds in respect of a Secondary Public Offering minus (y)
-----
brokerage commissions or underwriting fees and other fees and expenses
(including, without limitation, fees, charges and disbursements of counsel)
relating to such Secondary Public Offering.
(b) Change of Control. Subject to the subordination provisions of
-----------------
Section 7(b) hereof, upon a Change of Control (as hereinafter defined), the
Borrower shall prepay the outstanding principal amount of this Note (together
with interest accrued and unpaid thereon), within 5 Business Days after the
occurrence of such Change of Control. For the purposes hereof, "CHANGE OF
CONTROL" means (i) any transaction or series of transactions in which any Person
or group, other than WSDF, Whitney Equity Partners, L.P., the Borrower or any
affiliates of the foregoing becomes the beneficial owner of 50% or more of the
then outstanding capital stock of the Borrower or of any Subsidiary of the
Borrower, the operations of which in the reasonable judgment of the Holder would
constitute a material part of the business or operations of the Borrower and all
of its Subsidiaries, taken as a whole, (ii) the sale of all or substantially all
of the assets of the Borrower or any Subsidiary of the Borrower, the operations
of which in the reasonable judgment of the Holder would constitute a material
part of the business or operations of the Borrower and all of its Subsidiaries,
taken as a whole, (iii) the liquidation of the Borrower, or (iv) the combination
of the Borrower or of any Subsidiary of the Borrower, the operations of which in
the reasonable judgment of the Holder would constitute a material part of the
business or operations of the Borrower and all of its Subsidiaries, taken as a
whole, with another entity, as a result of which (A) the shareholders of
Borrower or any of its Subsidiaries hold less than 50% of the total of all
voting shares outstanding or (B) directors of the Borrower or any of its
Subsidiaries constitute less than a majority of the Board of Directors of the
combined entity; provided, however, that any of the events described in
-------- -------
subdivisions (i), (ii) or (iv) as applied to a Subsidiary of the Borrower shall
be a Change in Control only if such event is also an Event of Default.
(c) Notice. The Borrower shall give written notice to the Holder of
------
any mandatory prepayment pursuant to this Section 3 at least 5 Business Days
prior to the date of such prepayment. Such notice shall be given in the manner
specified in Section 11.3 of the Purchase Agreement.
3
<PAGE>
4. Optional Prepayment.
-------------------
(a) Upon notice given to the Holder as provided in Section 4(b),
the Borrower, at its option, may prepay all or any portion of this Note at any
time, by paying an amount equal to the outstanding principal amount of this
Note, or the portion of this Note called for prepayment, together with interest
accrued and unpaid thereon to the date fixed for prepayment, together with costs
and expenses (including, without limitation, reasonable fees, charges and
disbursements of counsel), if any, associated with such prepayment, without
penalty or premium; provided, however, each prepayment of less than the full
-------- -------
outstanding principal balance of the Note shall be in an aggregate principal
amount of $500,000 or a whole multiple thereof.
(b) The Borrower may give written notice of prepayment of this
Note or any portion thereof not less than 10 nor more than 30 days prior to the
date fixed for such prepayment. Such notice of prepayment shall be given in the
manner specified in Section 11.3 of the Purchase Agreement. Upon notice of
prepayment being given by the Borrower, the Borrower covenants and agrees that
it will prepay, on the date therein fixed for prepayment, this Note or, if
applicable, the portion hereof so called for prepayment, at the outstanding
principal amount thereof or the portion thereof so called for prepayment (less,
if applicable, the discount specified in Section 4(b) or 4(c) above), together
with interest accrued and unpaid thereon to the date fixed for such prepayment,
together with the costs and expenses referred to in Section 4(a), 4(b) or 4(c).
(c) All optional prepayments under this Section 4 shall include
payment of accrued and unpaid interest on the principal amount so prepaid and
shall be applied first to all costs, expenses and indemnities payable under the
Purchase Agreement, then to payment of default interest, if any, then to payment
of accrued interest, and thereafter to principal.
5. Amendment. Amendments and modifications of this Note may be made
---------
only in the manner provided in Section 11.6 of the Purchase Agreement.
6. Defaults and Remedies.
---------------------
(a) Events of Default. An "EVENT OF DEFAULT" shall occur if:
-----------------
(i) the Borrower shall default in the payment of the
principal of this Note, when and as the same shall become due and payable,
whether at maturity or at a date fixed for prepayment or by acceleration or
otherwise; or
(ii) the Borrower shall default in the payment of any
installment of interest on this Note according to its terms, when and as the
same shall become due and payable and such default shall continue for a period
of five days; or
4
<PAGE>
(iii) the Borrower shall default in the due observance or
performance of any covenant to be observed or performed pursuant to Sections
8.1, 8.2(a), 8.3 (except to the extent otherwise covered in Sections 6(a)(i) and
6(a)(ii) above), 8.7, 8.9 or Article 9 of the Purchase Agreement; or
(iv) the Borrower or any of its Subsidiaries shall default
in the due observance or performance of any other material covenant, condition
or agreement on the part of the Borrower, its parent or any of its Subsidiaries
to be observed or performed pursuant to the terms hereof or pursuant to the
terms of the Purchase Agreement or any of the Transaction Documents (other than
those referred to in clauses (i), (ii) or (iii) of this Section 6(a)), and such
default shall continue for 30 days after the earliest of (A) the date the
Borrower is required pursuant to the Transaction Documents or otherwise to give
notice thereof to the Holder (whether or not such notice is actually given) or
(B) the date of written notice thereof, specifying such default and, if such
default is capable of being remedied, requesting that the same be remedied,
shall have been given to the Borrower by the Holder; or
(v) any representation, warranty or certification made by or
on behalf of the Borrower or its Subsidiaries in the Purchase Agreement, this
Note, the Transaction Documents or in any certificate or other document
delivered pursuant hereto or thereto shall have been incorrect in any material
respect when made; or
(vi) any event or condition shall occur that results in (A)
the acceleration of the maturity of any Indebtedness of the Borrower or any of
its Subsidiaries, or (B) a default of any Indebtedness of the Borrower or any of
its Subsidiaries, in either case in a principal amount aggregating $1,000,000 or
more; or
(vii) any uninsured damage to or loss, theft or destruction
of any assets of the Borrower or any of its Subsidiaries shall occur that is in
excess of $250,000; or
(viii) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed in a court of competent jurisdiction seeking
(a) relief in respect of the Borrower or any of its Subsidiaries, or of a
substantial part of their property or assets, under Title 11 of the United
States Code, as now constituted or hereafter amended, or any other Federal or
state bankruptcy, insolvency, receivership or similar law, (b) the appointment
of a receiver, trustee, custodian, sequestrator, conservator or similar official
for the Borrower or any of its Subsidiaries, or for a substantial part of their
property or assets, or (c) the winding up or liquidation of the Borrower or any
of its Subsidiaries; and in each case such proceeding or petition shall continue
undismissed for 60 days, or an order or decree approving or ordering any of the
foregoing shall be entered; or
(ix) the Borrower or any of its Subsidiaries shall (a)
voluntarily commence any proceeding or file any petition seeking relief under
Title 11
5
<PAGE>
of the United States Code, as now constituted or hereafter amended, or
any other Federal or state bankruptcy, insolvency, receivership or similar law,
(b) consent to the institution of, or fail to contest in a timely and
appropriate manner, any proceeding or the filing of any petition described in
paragraph (viii) of this Section 6(a), (c) apply for or consent to the
appointment of a receiver, trustee, custodian, sequestrator, conservator or
similar official for the Borrower or any of its Subsidiaries, or for a
substantial part of their property or assets, (d) file an answer admitting the
material allegations of a petition filed against it in any such proceeding, (e)
make a general assignment for the benefit of creditors, (f) become unable, admit
in writing its inability or fail generally to pay its debts as they become due
or (g) take any action for the purpose of effecting any of the foregoing; or
(x) one or more judgments for the payment of money in an
aggregate amount in excess of $100,000 (to the extent not covered by insurance)
shall be rendered against the Borrower or any of its Subsidiaries and the same
shall remain undischarged for a period of 30 days during which execution shall
not be effectively stayed, or any action shall be legally taken by a judgment
creditor to levy upon assets or properties of the Borrower or any of its
Subsidiaries to enforce any such judgment; or
(xi) any guaranty given by a Guarantor shall at any time
after its execution and delivery and for any reason cease to be in full force
and effect or shall be declared null and void, or the validity or enforceability
thereof shall be contested by any Guarantor or any Guarantor shall deny it has
any further liability or obligation thereunder or shall fail to perform its
obligations thereunder; or
(xii) any Security Agreement shall at any time after its
execution and delivery and for any reason cease: (A) to create a valid and
perfected first priority security interest in and to the property purported to
be subject to such Agreement; or (B) to be in full force and effect or shall be
declared null and void, or the validity or enforceability thereof shall be
contested by the Borrower or any Guarantor or the Borrower or any Guarantor
shall deny it has any further liability or obligation under such Agreement or
the Borrower or any Guarantor shall fail to perform any of its obligations
thereunder; or
(xiii) any Pledge Agreement shall at any time after its
execution and delivery and for any reason cease: (A) to create a valid and
perfected priority security interest in and to the property purported to be
subject to such agreement; or (B) to be in full force and effect or shall be
declared null and void, or the validity or enforceability thereof shall be
contested by any party thereto, or such party shall deny it has further
liability or obligation thereunder or such party shall fail to perform any of
its obligations thereunder.
(b) Acceleration. If an Event of Default occurs under Section
------------
6(a)(viii) or (ix), then the outstanding principal of and all accrued interest
on this Note
6
<PAGE>
shall automatically become immediately due and payable, without
presentment, demand, protest or notice of any kind, all of which are hereby
expressly waived. If any other Event of Default occurs and is continuing the
Holder, by written notice to the Borrower may declare the principal of and
accrued interest on this Note to be immediately due and payable. Upon such
declaration, such principal and interest shall become immediately due and
payable. The Holder shall rescind an acceleration and its consequences if all
existing Events of Default have been cured or waived, except nonpayment of
principal or interest that has become due solely because of the acceleration,
and if the rescission would not conflict with any judgment or decree. Any
notice or rescission shall be given in the manner specified in Section 11.3 of
the Purchase Agreement.
7. Subordination. Subject to the limitations set forth in Section
-------------
7(o) below, this Note shall at all times be wholly subordinate and junior in
right of payment to all Senior Indebtedness to the extent and in the manner
provided in this Section 7.
(a) Definitions. As used in this Section 7, the following terms
-----------
shall have the following meanings:
"INDEBTEDNESS" shall have the meaning assigned to that term in the
Purchase Agreement.
"SENIOR COVENANT DEFAULT" shall mean any event of default as defined
under any agreement pertaining to Senior Indebtedness of the Borrower, other
than a Senior Payment Default.
"SENIOR INDEBTEDNESS" means all Indebtedness of the Borrower currently
outstanding or incurred in the future pursuant to any borrowing by the Borrower
from one or more banks or institutional lenders, each having total assets
(together with its affiliates) in excess of $500,000,000, and any renewals,
extensions, refinancings, modifications or refundings thereof, provided,
--------
however, in no event shall the aggregate principal amount of Senior Indebtedness
- -------
exceed $10,000,000.
"SENIOR DEFAULT" shall mean a Senior Payment Default or a Senior
Covenant Default.
"SENIOR PAYMENT DEFAULT" shall mean any default in the payment of any
Senior Indebtedness.
"SUBORDINATED INDEBTEDNESS" shall mean (i) the principal of and
interest on this Note; and (ii) any other obligations of the Borrower arising
out of or in connection with the Purchase Agreement or this Note.
(b) General. Upon the maturity of any Senior Indebtedness by lapse of
-------
time, acceleration, required prepayment or otherwise, all Senior Indebtedness
shall first be paid in full, or such payment duly provided for in cash or in a
manner
7
<PAGE>
satisfactory to the holders of such Senior Indebtedness, before any payment is
made on account of the Subordinated Indebtedness or by the Borrower or an
Affiliate of the Borrower to acquire this Note, except that (i) the Borrower may
prepay this Note in accordance with the provisions of Section 3 or Section 4 so
long as no Senior Default has occurred and is continuing or would occur as a
result of any such prepayment and (ii) the Holder may receive any distributions
provided for in Section 7(e)(ii) or 7(e)(iv) hereof.
(c) Limitation on Payment.
---------------------
(i) Upon receipt by the Borrower and the Holder of a
Blockage Notice (as defined below), then unless and until (1) all Senior
Defaults that gave rise to the Blockage Notice shall have been remedied or
effectively waived or shall have ceased to exist, or (2) the Senior Indebtedness
in respect of which such Senior Defaults shall have occurred shall have been
paid in full, no direct or indirect payment (in cash, property, securities or by
set-off or otherwise) of or on account of the principal of or interest on this
Note or as a sinking fund for this Note or in respect of any redemption,
retirement, purchase or other acquisition of this Note shall be made during any
period prior to the expiration of the Blockage Period (as defined below).
Notwithstanding the foregoing, all interest paid with respect to this Note prior
to the receipt of the Blockage Notice in question by the Holder hereof may be
kept by such Holder.
(ii) For purposes of this Section 7, a "BLOCKAGE NOTICE" is
a notice of a Senior Default that in fact has occurred and is continuing, given
to the Borrower and the Holder by the holders of a majority in principal amount
of the Senior Indebtedness then outstanding (or their authorized agent);
provided, however, that no such notice shall be effective as a Blockage Notice
- -------- -------
if an effective Blockage Notice shall have been given within 360 days prior
thereto.
(iii) For purposes of this Section 7, a "BLOCKAGE PERIOD"
with respect to a Blockage Notice is the period commencing upon the Borrower's
receipt of such Blockage Notice and having a duration as follows:
(1) 60 days if the Senior Default to which the Blockage
Notice refers is a Senior Payment Default; or
(2) 30 days if the Senior Default to which the Blockage
Notice refers is a Senior Covenant Default.
(d) Limitation on Remedies. As long as any Senior Indebted ness
----------------------
remains outstanding, upon the occurrence of an Event of Default under this Note,
the Holder shall not, unless the holders of any Senior Indebtedness shall have
caused such Senior Indebtedness to become due prior to its stated maturity or
any Event of Default pursuant to Section 6(a)(viii) or (ix) of this Note shall
have commenced, declare
8
<PAGE>
or join in any declaration of this Note to be due and payable by reason of such
Event of Default or otherwise take any action against the Borrower (including,
without limitation, commencing any legal action against the Borrower or filing
or joining in the filing of any insolvency petition against the Borrower) prior
to the expiration of 30 days after the written notice of intention to accelerate
on account of the occurrence of such Event of Default (a "REMEDY NOTICE") shall
have been given by the Holder to the Borrower and the holders of the Senior
Indebtedness (a "REMEDY STANDSTILL PERIOD"), provided, that such Remedy
Standstill Period shall be extended (i) to 60 days from the date of such Remedy
Notice if, at the time the Remedy Standstill Period would otherwise expire,
there exists any Senior Covenant Default and (ii) to 90 days from the date of
such Remedy Notice if, at the time the Remedy Standstill Period would otherwise
expire, there exists any Senior Payment Default.
Notwithstanding the foregoing, the Blockage Period shall be
inapplicable or cease to be effective if an Event of Default pursuant to Section
6(a)(viii) or (ix) shall have occurred. In addition, any Blockage Period shall
cease to be effective if at any time during such period: (i) substantial assets
of the Borrower, its parent or its Subsidiaries are sold or otherwise disposed
of outside of the ordinary course of business for less than fair value or (ii)
payment or any distribution of any character, whether in cash, securities or
other property of the Borrower, its parent or its Subsidiaries shall be made to
or received by any creditor on any Indebtedness which is on the same level of
priority with or junior and subordinate in right of payment to this Note.
Upon the expiration or termination of any Blockage Period and/or any
Remedy Standstill Period, the Holder shall be entitled to exercise any of its
rights with respect to this Note other than any right to accelerate the maturity
date of this Note based upon the occurrence of any Event of Default in respect
thereto which has been cured or otherwise remedied during the Blockage Period.
(e) Subordination Upon Certain Events. Upon the occurrence of any
---------------------------------
Event of Default with respect to the Borrower under Sections 6(a)(viii) or (ix)
of this Note:
(i) Upon any payment or distribution of assets of the
Borrower to creditors of such Borrower, holders of Senior Indebtedness shall be
entitled to receive indefeasible payment in full of all obligations with respect
to the Senior Indebtedness before the Holder shall be entitled to receive any
payment in respect of the Subordinated Indebtedness.
(ii) Until all Senior Indebtedness is paid in full, any
distribution to which the Holder would be entitled but for this Section 7 shall
be made to the holders of Senior Indebtedness, as their interests may appear,
except that the Holder may, pursuant to a plan of reorganization under Chapter
11 of the Bankruptcy Code of 1978, as amended, or any similar provision of any
successor legislation thereto, receive securities that are subordinate to the
Senior Indebtedness to at least the same
9
<PAGE>
extent as this Note if pursuant to such plan the distributions to the holders of
the Senior Indebtedness in the form of cash, securities or other property, by
set-off or otherwise, provide for payment of the full amount of the allowed
claim of the holders of the Senior Indebtedness.
(iii) For purposes of this Section 7, a distribution may
consist of cash, securities or other property, by set-off or otherwise.
(iv) Notwithstanding the foregoing provisions of Section
7(b),(c) or (e), if payment or delivery by the Borrower of cash, securities or
other property to the Holder is authorized by an order or decree giving effect,
and stating in such order or decree that effect is given, to the subordination
of this Note to the Senior Indebtedness, and made by a court of competent
jurisdiction in a proceeding under any applicable bankruptcy or reorganization
law, payment or delivery by such Borrower of such cash, securities or other
property shall be made to the Holder in accordance with such order or decree.
(f) Payments and Distributions Received. If the Holder shall have
-----------------------------------
received any payment from or distribution of assets of the Borrower in respect
of the Subordinated Indebtedness in contravention of the terms of this Section 7
before all Senior Indebtedness is paid in full, then and in such event such
payment or distribution shall be received and held in trust for and shall be
promptly paid over or delivered to the holders of Senior Indebtedness to the
extent necessary to pay all such Senior Indebtedness in full.
(g) Proofs of Claim. If, while any Senior Indebtedness is
---------------
outstanding, any Event of Default under Section 6(a)(viii) or (ix) of this Note
occurs with respect to the Borrower (but not of any one Subsidiary, the
operations of which in the reasonable judgment of the Holder is not material to
the operations of the Borrower, its parent and all Subsidiaries taken as a
whole), the Holder shall duly and promptly take such action as any holder of
Senior Indebtedness may reasonably request to collect any payment with respect
to this Note for the account of the holders of the Senior Indebtedness and to
file appropriate claims or proofs of claim in respect of this Note. Upon the
failure of the Holder to take any such action, each holder of Senior
Indebtedness is hereby irrevocably authorized and empowered (in its own name or
otherwise), but shall have no obligation, to demand, sue for, collect and
receive every payment or distribution referred to in respect of this Note and to
file claims and proofs of claim and take such other action as it may deem
necessary or advisable for the exercise or enforcement of any of the rights or
interests of the holder with respect to this Note.
(h) Subrogation. After all amounts payable under or in respect of
-----------
Senior Indebtedness are paid in full, the Holder shall be subrogated to the
rights of holders of Senior Indebtedness to receive payments or distributions
applicable to Senior Indebtedness to the extent that distributions otherwise
payable to the Holder have been
10
<PAGE>
applied to the payment of Senior Indebtedness. A distribution made under this
Section 7 to a holder of Senior Indebtedness which otherwise would have been
made to the Holder is not, as between the Borrower and the Holder, a payment by
the Borrower on the Indebtedness held by the Holder.
(i) Relative Rights. This Section defines the relative rights of the
---------------
Holder and the holders of Senior Indebtedness. Nothing in this Section shall:
(1) impair, as between the Borrower and the Holder, the obligation of the
Borrower, which is absolute and unconditional, to pay principal of and interest
(including default interest) on this Note in accordance with its terms; (2)
affect the relative rights of the Holder and creditors of the Borrower other
than holders of Senior Indebtedness or (3) prevent the Holder from exercising
its available remedies upon a default or Event of Default, subject to the
rights, if any, under this Section 7 of holders of Senior Indebtedness.
(j) Subordination May Not Be Impaired by the Borrower. No right of
-------------------------------------------------
any holder of any Senior Indebtedness to enforce the subordination of the
Indebtedness evidenced by this Note shall be impaired by any failure to act by
the Borrower or by the failure of the Borrower to comply with this Note. The
provisions of this Section 7 shall continue to be effective or be reinstated, as
the case may be, if at any time any payment of any of the Senior Indebtedness is
rescinded or must otherwise be returned by any holder of Senior Indebtedness as
a result of the insolvency, bankruptcy or reorganization of the Borrower or any
of its Subsidiaries or otherwise, all as though such payment had not been made.
(k) Payments. A payment with respect to principal of or interest on
--------
the Subordinated Indebtedness shall include, without limitation, payment of
principal of, and interest on this Note, any depositing of funds for the
defeasance of the Subordinated Indebtedness, any sinking fund and any payment on
account of mandatory prepayment or optional prepayment provisions.
(l) Section Not to Prevent Events of Default. The failure to make a
----------------------------------------
payment on account of principal of or interest on or other amounts constituting
Subordinated Indebtedness by reason of any provision of this Section 7 shall not
be construed as preventing the occurrence of an Event of Default under Section
6.
(m) Subordination Not Impaired: Benefit of Subordination. The Holder
----------------------------------------------------
agrees and consents that without notice to or assent by such Holder, and without
affecting the liabilities and obligations of the Borrower and the rights and
benefits of the holders of the Senior Indebtedness set forth in this Section 7:
(i) The obligations and liabilities of the Borrower and any
other party or parties for or upon the Senior Indebtedness may, from time to
time, be increased, renewed, refinanced, extended, modified, amended, restated,
compromised, supplemented, terminated, waived or released, except as prohibited
by Sections 9.3 and 9.4 of the Purchase Agreement;
11
<PAGE>
(ii) The holders of Senior Indebtedness, and any
representative or representatives acting on behalf thereof, may exercise or
refrain from exercising any right, remedy or power granted by or in connection
with any agreements relating to the Senior Indebtedness; and
(iii) Any balance or balances of funds with any holder of
Senior Indebtedness at any time outstanding to the credit of the Borrower may,
from time to time, in whole or in part, be surrendered or released;
all as the holders of the Senior Indebtedness, and any representative or
representatives acting on behalf thereof, may deem advisable, and all without
impairing, abridging, diminishing, releasing or affecting the subordination of
the Subordinated Indebtedness to the Senior Indebtedness provided for herein.
(n) Modification of Section 7. The provisions of this Section 7 are
-------------------------
for the benefit of the holders from time to time of Senior Indebtedness and, so
long as any Senior Indebtedness remains unpaid, may not be modified, rescinded
or canceled in whole or in part without the prior written consent thereto of all
holders of Senior Indebtedness.
(o) Miscellaneous.
-------------
(i) To the extent permitted by applicable law, the Holder
and the Borrower hereby waive (1) notice of acceptance hereof by the holders of
the Senior Indebtedness, and (2) all diligence in the collection or protection
of or realization upon the Senior Indebtedness.
(ii) The Borrower and the Holder hereby expressly agree that
the holders of Senior Indebtedness may enforce any and all rights derived herein
by suit, either in equity or law, for specific performance of any agreement
contained in this Section 7 or for judgment at law and any other relief
whatsoever appropriate to such action or procedure.
(iii) The Holder acknowledges and agrees that the foregoing
subordination provisions are, and are intended to be, an inducement and a
consideration to each holder of Senior Indebtedness, whether such Senior
Indebtedness was created or acquired before or after the issuance of this
Agreement, and each holder of Senior Indebtedness shall be deemed conclusively
to have relied upon such subordination provisions in acquiring and continuing to
hold such Senior Indebtedness.
8. Use of Proceeds. The Borrower shall use the principal from this
---------------
Note (a) for the payment of fees and expenses in connection with the
transactions contemplated under Transaction Documents and (b) to fund the
purchase price of the Acquisition under Elekta Purchase Agreement.
12
<PAGE>
9. Suits for Enforcement.
---------------------
(a) Subject to Section 7, upon the occurrence of any one or more
Events of Default, the Holder of this Note may proceed to protect and enforce
its rights hereunder by suit in equity, action at law or by other appropriate
proceeding, whether for the specific performance of any covenant or agreement
contained in the Purchase Agreement or this Note or in aid of the exercise of
any power granted in the Purchase Agreement or this Note, or may proceed to
enforce the payment of this Note, or to enforce any other legal or equitable
right of the Holders of this Note.
(b) In case of any default under this Note, the Borrower will pay
to the Holder such amounts as shall be sufficient to cover the reasonable costs
and expenses of such Holder due to such default, as provided in Article 7 of the
Purchase Agreement.
10. Remedies--Cumulative. No remedy herein conferred upon the Holder
--------------------
is intended to be exclusive of any other remedy and each and every such remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise.
11. Remedies Not Waived. No course of dealing between the Borrower
-------------------
and the Holder or any delay on the part of the Holder in exercising any rights
hereunder shall operate as a waiver of any right.
12. Transfer.
--------
(a) The term "HOLDER" as used herein shall also include any
transferee of this Note whose name has been recorded by the Borrower in the Note
Register. Each transferee of this Note acknowledges that this Note has not been
registered under the Securities Act, and may be transferred only pursuant to an
effective registration under the Securities Act or pursuant to an applicable
exemption from the registration requirements of the Securities Act.
(b) The Borrower shall maintain a register (the "NOTE REGISTER")
in its principal offices for the purpose of registering the Note and any
transfer thereof, which register shall reflect and identify, at all times, the
ownership of any interest in the Note. Upon the issuance of this Note, the
Borrower shall record the name of the initial purchaser of this Note in the Note
Register as the first Holder. Upon surrender for registration of transfer or
exchange of this Note at the principal offices of the Borrower, the Borrower
shall, at its expense, execute and deliver one or more new Notes of like tenor
and of denominations of at least $500,000 (except as may be necessary to reflect
any principal amount not evenly divisible by $500,000) of a like aggregate
principal amount, registered in the name of the Holder or a transferee or
transferees. Every Note surrendered for registration of transfer or exchange
shall be duly endorsed, or be
13
<PAGE>
accompanied by written instrument of transfer duly executed by the Holder of
such Note or such holder's attorney duly authorized in writing.
13. Replacement of Note. On receipt by the Borrower of an affidavit
-------------------
of an authorized representative of the Holder stating the circumstances of the
loss, theft, destruction or mutilation of this Note (and in the case of any such
mutilation, on surrender and cancellation of such Note), the Borrower, at its
expense, will promptly execute and deliver, in lieu thereof, a new Note of like
tenor. If required by the Borrower, such Holder must provide an indemnity bond
or other indemnity sufficient in the judgment of the Borrower to protect the
Borrower from any loss which it may suffer if a lost, stolen or destroyed Note
is replaced.
14. Covenants Bind Successors and Assigns. All the covenants,
-------------------------------------
stipulations, promises and agreements in this Note contained by or on behalf of
the Borrower shall bind its successors and assigns, whether so expressed or not.
15. GOVERNING LAW. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICTS OF LAW OF SUCH STATE.
16. Headings. The headings in this Note are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
NITINOL MEDICAL TECHNOLOGIES, INC.
By: /s/ Theodore I. Pincus
----------------------------------
Name: Theodore I. Pincus
Title: EVP/CFO
14
<PAGE>
EXHIBIT 10.5
------------------------------------------------------------
GUARANTEE AND COLLATERAL AGREEMENT
made by
NITINOL MEDICAL TECHNOLOGIES, INC.
and certain of its Subsidiaries
in favor of
J.H. WHITNEY & CO.,
as Agent
Dated as of July 8, 1998
------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
SECTION 1. DEFINED TERMS .................................................. 1
1.1 Definitions .......................................................... 1
1.2 Other Definitional Provisions ........................................ 5
SECTION 2. GUARANTEE ...................................................... 5
2.1 Guarantee ............................................................ 5
2.2 Right of Contribution ................................................ 6
2.3 No Subrogation ....................................................... 6
2.4 Amendments, etc. with respect to the Borrower Obligations ............ 7
2.5 Guarantee Absolute and Unconditional ................................. 7
2.6 Reinstatement ........................................................ 8
2.7 Payments ............................................................. 9
2.8 Subordination of Guarantee. .......................................... 9
SECTION 3. GRANT OF SECURITY INTEREST ..................................... 9
SECTION 4. REPRESENTATIONS AND WARRANTIES ................................ 10
4.1 Representations in Note Purchase Agreement .......................... 10
4.2 Title; No Other Liens ............................................... 10
4.3 Perfected First Priority Liens ...................................... 10
4.4 Chief Executive Office .............................................. 10
4.5 Inventory and Equipment ............................................. 11
4.6 Pledged Securities .................................................. 11
4.7 Receivables ......................................................... 11
SECTION 5. COVENANTS ..................................................... 11
5.1 Covenants in Note Purchase Agreement ................................ 11
5.2 Maintenance of Insurance ............................................ 11
5.3 Payment of Obligations .............................................. 12
5.4 Maintenance of Perfected Security Interest; Further Documentation ... 12
5.5 Changes in Locations, Name, etc. .................................... 13
5.6 Notices ............................................................. 13
<PAGE>
Page
----
5.7 Pledged Securities .................................................. 13
5.8 Receivables ......................................................... 15
5.9 Intellectual Property ............................................... 15
SECTION 6. REMEDIAL PROVISIONS ........................................... 17
6.1 Certain Matters Relating to Receivables ............................. 17
6.2 Communications with Obligors; Grantors Remain Liable ................ 17
6.3 Pledged Stock ....................................................... 18
6.4 Proceeds to be Turned Over To Agent ................................. 19
6.5 Application of Proceeds ............................................. 19
6.6 Code and Other Remedies ............................................. 20
6.7 Registration Rights ................................................. 21
6.8 Waiver; Deficiency .................................................. 22
SECTION 7. THE AGENT ..................................................... 22
7.1 Agent's Appointment as Attorney-in-Fact, etc. ....................... 22
7.2 Duty of Agent ....................................................... 24
7.3 Execution of Financing Statements ................................... 24
7.4 Authority of Agent .................................................. 24
SECTION 8. MISCELLANEOUS ................................................. 25
8.1 Amendments in Writing ............................................... 25
8.2 Notices ............................................................. 25
8.3 No Waiver by Course of Conduct; Cumulative Remedies ................. 25
8.4 Enforcement Expenses; Indemnification ............................... 25
8.5 Successors and Assigns .............................................. 26
8.6 Counterparts ........................................................ 26
8.7 Severability ........................................................ 26
8.8 Section Headings .................................................... 26
8.9 Integration ......................................................... 26
8.10 GOVERNING LAW ....................................................... 27
8.11 Submission To Jurisdiction; Waivers ................................. 27
8.12 Acknowledgments ..................................................... 27
8.13 WAIVER OF JURY TRIAL ................................................ 28
8.14 Additional Grantors ................................................. 28
8.15 Releases ............................................................ 28
<PAGE>
SCHEDULES
1 Notice Addresses of Guarantors
2 Description of Pledged Securities
3. Filings and Other Actions Required to Perfect Security Interests
4 Location of Offices and Jurisdiction of Incorporation
5. Location of Inventory and Equipment
6. Intellectual Property
ANNEX
1 Assumptions
<PAGE>
GUARANTEE AND COLLATERAL AGREEMENT
GUARANTEE AND COLLATERAL AGREEMENT, dated as of
July 8, 1998, made by each of the parties listed on Schedule A hereto (together
with any other entity that may become a party hereto as provided herein, the
"Grantors"), in favor of J.H. WHITNEY & CO., as Agent (in such capacity, the
- ---------
"Agent") for WHITNEY SUBORDINATED DEBT FUND, L.P. (the "Purchaser") and any
- ------ ---------
holder of any Note from time to time (such holders, together with the Purchaser,
being the "Lenders") pursuant to the Subordinated Note and Common Stock Purchase
-------
Agreement (the "Note Purchase Agreement") dated the date hereof among the
-----------------------
Purchaser, Nitinol Medical Technologies, Inc. (the "Borrower") and, for certain
--------
purposes, the Agent.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, pursuant to the Note Purchase Agreement, the Purchaser shall
purchase the WSDF Note from the Borrower upon the terms and subject to the
conditions set forth therein;
WHEREAS, the Borrower is a member of an affiliated group of companies
that includes each other Grantor;
WHEREAS, the Borrower and the other Grantors are engaged in related
businesses, and each Grantor will derive substantial direct and indirect benefit
from the sale of the WSDF Note under the Note Purchase Agreement; and
WHEREAS, it is a condition precedent to the obligation of the
Purchaser to purchase the WSDF Note from the Borrower under the Note Purchase
Agreement that the Grantors shall have executed and delivered this Agreement to
the Agent for the benefit of the Lenders;
NOW, THEREFORE, in consideration of the premises and to induce the
Purchaser to enter into the Note Purchase Agreement and to purchase the WSDF
Note from the Borrower, each Grantor hereby agrees with the Agent, for the
benefit of the Lenders, as follows:
SECTION 1. DEFINED TERMS
1.1 Definitions. (a) Unless otherwise defined herein, terms defined
-----------
in the Note Purchase Agreement and used herein shall have the meanings given to
them in the Note Purchase Agreement, and the following terms which are defined
in the Uniform Commercial Code in effect in the State of New York on the date
hereof are
1
<PAGE>
used herein as so defined: Accounts, Chattel Paper, Documents, Equipment,
Instruments, Inventory and Investment Property.
(b) The following terms shall have the following meanings:
"Agreement" means this Guarantee and Collateral Agreement, as the same
---------
may be amended, supplemented or otherwise modified from time to time.
"Borrower Obligations" means the unpaid principal of and interest on
--------------------
(including, without limitation, interest accruing after the maturity of the
Notes and interest accruing after the filing of any petition in bankruptcy, or
the commencement of any insolvency, reorganization or like proceeding, relating
to the Borrower, whether or not a claim for post-filing petition interest is
allowed in such proceeding) the Notes and all other obligations and liabilities
of the Borrower to the Agent or to any Lender, whether direct or indirect,
absolute or contingent, due or to become due, or now existing or hereafter
incurred which may arise under, out of, or in connection with, this Agreement,
any other Loan Document, or any other document made, delivered or given in
connection herewith or therewith, whether on account of principal, interest,
reimbursement obligations, fees, indemnities, costs, expenses (including,
without limitation, all fees, charges and disbursements of counsel to the Agent
or to any Lender that are required to be paid by the Borrower pursuant hereto or
otherwise).
"Capital Stock" means any and all shares, interests, participations or
-------------
other equivalents (however designated) of capital stock of a corporation, any
and all equivalent ownership interests in a Person (other than a corporation)
and any and all warrants, rights or options to purchase any of the foregoing.
"Collateral": as defined in Section 3.
----------
"Collateral Account": any collateral account established by the Agent
------------------
as provided in Section 6.1 or 6.4.
"Copyrights": (i) all copyrights arising under the laws of the United
----------
States, any other country or any political subdivision thereof, whether
registered or unregistered and whether published or unpublished (including,
without limitation, those listed in Schedule 6), all registrations and
-----------
recordings thereof, and all applications in connection therewith, including,
without limitation, all registrations, recordings and applications in the United
States Copyright Office, and (ii) the right to obtain all renewals thereof.
"Copyright Licenses": any written agreement naming any Grantor as
------------------
licensor or licensee (including, without limitation, those listed in Schedule
--------
6), granting
2
<PAGE>
any right under any Copyright, including, without limitation, the grant of
rights to manufacture, distribute, exploit and sell materials derived from any
Copyright.
"Fully Satisfied" means with respect to any Obligation as of any date,
---------------
(i) the principal amount of and interest accrued to such date on such Obligation
shall have been paid in full in cash, (ii) all fees, expenses and other amounts
then due and payable with respect to such Obligation shall have been paid in
full in cash and (iii) if such Obligation relates to the Notes, such Notes shall
have expired or irrevocably been terminated.
"General Intangibles": all "general intangibles" as such term is
-------------------
defined in Section 9106 of the Uniform Commercial Code in effect in the State of
New York on the date hereof and, in any event, including, without limitation,
with respect to any Grantor, all contracts, agreements, instruments and
indentures in any form, and portions thereof, to which such Grantor is a party
or under which such Grantor has any right, title or interest or to which such
Grantor or any property of such Grantor is subject, as the same may from time to
time be amended, supplemented or otherwise modified, including, without
limitation, (i) all rights of such Grantor to receive moneys due and to become
due to it thereunder or in connection therewith, (ii) all rights of such Grantor
to damages arising thereunder and (iii) all rights of such Grantor to perform
and to exercise all remedies thereunder, in each case to the extent the grant by
such Grantor of a security interest pursuant to this Agreement in its right,
title and interest in such contract, agreement, instrument or indenture is not
prohibited by such contract, agreement, instrument or indenture without the
consent of any other party thereto, would not give any other party to such
contract, agreement, instrument or indenture the right to terminate its
obligations thereunder, or is permitted with consent to the extent that all
necessary consents to such grant of a security interest have been obtained from
the other parties thereto (it being understood that the foregoing shall not be
deemed to obligate such Grantor to obtain such consents); provided, that the
--------
foregoing limitation shall not affect, limit, restrict or impair the grant by
such Grantor of a security interest pursuant to this Agreement in any Receivable
or any money or other amounts due or to become due under any such contract,
agreement, instrument or indenture.
"Guarantor Obligations": with respect to any Guarantor, the collective
---------------------
reference to (i) the Borrower Obligations and (ii) all obligations and
liabilities of such Guarantor which may arise under or in connection with this
Agreement or any other Loan Document to which such Guarantor is a party, in each
case whether on account of guarantee obligations, reimbursement obligations,
fees, indemnities, costs, expenses or otherwise (including, without limitation,
all fees and disbursements of counsel to the Agent or to the Lenders that are
required to be paid by such Guarantor pursuant to the terms of this Agreement or
any other Loan Document).
3
<PAGE>
"Guarantors": the collective reference to each Grantor other than the
----------
Borrower.
"Intellectual Property": the collective reference to all rights,
---------------------
priorities and privileges relating to intellectual property, whether arising
under United States, multinational or foreign laws or otherwise, including,
without limitation, the Copyrights, the Copyright Licenses, the Patents, the
Patent Licenses, the Trademarks and the Trademark Licenses, and all rights to
sue at law or in equity for any infringement or other impairment thereof,
including the right to receive all proceeds and damages from any and all past
infringements.
"Intercompany Note": any promissory note evidencing loans made by any
-----------------
Grantor to any Affiliate thereof.
"Issuers": the collective reference to each issuer of a Pledged
-------
Security.
"New York UCC": the Uniform Commercial Code as from time to time in
------------
effect in the State of New York.
"Loan Documents" means this Agreement, the Note Purchase Agreement and
--------------
the Notes.
"Obligations": (i) in the case of the Borrower, the Borrower
-----------
Obligations, and (ii) in the case of each Guarantor, its Guarantor Obligations.
"Patents": (i) all letters patent of the United States, any other
-------
country or any political subdivision thereof, all reissues and extensions
thereof and all goodwill associated therewith, including, without limitation,
any of the foregoing referred to in Schedule 6, (ii) all applications for
----------
letters patent of the United States or any other country and all divisions,
continuations and continuations-in-part thereof, including, without limitation,
any of the foregoing referred to in Schedule 6, and (iii) all rights to obtain
----------
any reissues or extensions of the foregoing.
"Patent License": all agreements, whether written or oral, providing
--------------
for the grant by or to any Grantor of any right to manufacture, use or sell any
invention covered in whole or in part by a Patent, including, without
limitation, any of the foregoing referred to in Schedule 6.
----------
"Pledged Notes": all promissory notes listed on Schedule 2, all
------------- ----------
Intercompany Notes at any time issued to any Grantor and all other promissory
notes issued to or held by any Grantor (other than promissory notes issued in
connection with extensions of trade credit by any Grantor in the ordinary course
of business).
4
<PAGE>
"Pledged Securities": the collective reference to the Pledged Notes
------------------
and the Pledged Stock.
"Pledged Stock": the shares of Capital Stock listed on Schedule 2,
------------- ----------
together with any other shares, stock certificates, options or rights of any
nature whatsoever in respect of the Capital Stock of any Person that may be
issued or granted to, or held by, any Grantor while this Agreement is in effect.
"Proceeds": all "proceeds" as such term is defined in Section 9-306(l)
--------
of the Uniform Commercial Code in effect in the State of New York on the date
hereof and, in any event, shall include, without limitation, all dividends or
other income from the Pledged Securities, collections thereon or distributions
or payments with respect thereto.
"Receivable": any right to payment for goods sold or leased or for
----------
services rendered, whether or not such right is evidenced by an Instrument or
Chattel Paper and whether or not it has been earned by performance (including,
without limitation, any Account).
"Securities Act": the Securities Act of 1933, as amended.
--------------
"Trademarks": (i) all trademarks, trade names, corporate names,
----------
company names, business names, fictitious business names, trade styles, service
marks, logos and other source or business identifiers, and all goodwill
associated therewith, now existing or hereafter adopted or acquired, all
registrations and recordings thereof, and all applications in connection
therewith, whether in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any State thereof or any other
country or any political subdivision thereof, or otherwise, and all common-law
rights related thereto, including, without limitation, any of the foregoing
referred to in Schedule 6, and (ii) the right to obtain all renewals thereof.
----------
"Trademark License": any agreement, whether written or oral, providing
-----------------
for the grant by or to any Grantor of any right to use any Trademark, including,
without limitation, any of the foregoing referred to in Schedule 6.
----------
1.2 Other Definitional Provisions. (a) The words "hereof," "herein,"
"hereto" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement, and Section and Schedule references are to this Agreement unless
otherwise specified.
(b) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
5
<PAGE>
(c) Where the context requires, terms relating to the Collateral or
any part thereof, when used in relation to a Grantor, shall refer to such
Grantor's Collateral or the relevant part thereof.
SECTION 2. GUARANTEE
2.1 Guarantee. (a) Each of the Guarantors hereby, jointly and
---------
severally, unconditionally and irrevocably, guarantees to the Agent, for the
benefit of the Lenders and their respective successors, indorsees, transferees
and assigns, the prompt and complete payment and performance by the Borrower
when due (whether at the stated maturity, by acceleration or otherwise) of the
Borrower Obligations.
(b) Anything herein or in any other Loan Document to the contrary
notwithstanding, the maximum liability of each Guarantor hereunder and under the
other Loan Documents shall in no event exceed the amount which can be guaranteed
by such Guarantor under applicable federal and state laws relating to the
insolvency of debtors (after giving effect to the right of contribution
established in Section 2.2).
(c) Each Guarantor agrees that the Borrower Obligations may at any
time and from time to time exceed the amount of the liability of such Guarantor
hereunder without impairing the guarantee contained in this Section 2 or
affecting the rights and remedies of the Agent or any Lender hereunder.
(d) The guarantee contained in this Section 2 shall remain in full
force and effect until all the Borrower Obligations and the obligations of each
Guarantor under the guarantee contained in this Section 2 shall have been
satisfied by payment in full.
(e) No payment made by the Borrower, any of the Guarantors, any other
guarantor or any other Person or received or collected by the Agent or any
Lender from the Borrower, any of the Guarantors, any other guarantor or any
other Person by virtue of any action or proceeding or any set-off or
appropriation or application at any time or from time to time in reduction of or
in payment of the Borrower Obligations shall be deemed to modify, reduce,
release or otherwise affect the liability of any Guarantor hereunder which
shall, notwithstanding any such payment (other than any payment made by such
Guarantor in respect of the Borrower Obligations or any payment received or
collected from such Guarantor in respect of the Borrower Obligations), remain
liable for the Borrower Obligations up to the maximum liability of such
Guarantor hereunder until the Borrower Obligations are Fully Satisfied.
6
<PAGE>
2.2 Right of Contribution. Each Guarantor hereby agrees that to the
---------------------
extent that a Guarantor shall have paid more than its proportionate share of any
payment made hereunder, such Guarantor shall be entitled to seek and receive
contribution from and against any other Guarantor hereunder which has not paid
its proportionate share of such payment. Each Guarantor's right of contribution
shall be subject to the terms and conditions of Section 2.3. The provisions of
this Section 2.2 shall in no respect limit the obligations and liabilities of
any Guarantor to the Agent and the Lenders, and each Guarantor shall remain
liable to the Agent and the Lenders for the full amount guaranteed by such
Guarantor hereunder.
2.3 No Subrogation. Notwithstanding any payment made by any Guarantor
--------------
hereunder or any set-off or application of funds of any Guarantor by the Agent
or any Lender, no Guarantor shall be entitled to be subrogated to any of the
rights of the Agent or any Lender against the Borrower or any other Guarantor or
any collateral security or guarantee or right of offset held by the Agent or any
Lender for the payment of the Borrower Obligations, nor shall any Guarantor seek
or be entitled to seek any contribution or reimbursement from the Borrower or
any other Guarantor in respect of payments made by such Guarantor hereunder,
until all amounts owing to the Agent and the Lenders by the Borrower on account
of the Borrower Obligations are Fully Satisfied. If any amount shall be paid to
any Guarantor on account of such subrogation rights at any time when all of the
Borrower Obligations shall not have been Fully Satisfied, such amount shall be
held by such Guarantor in trust for the Agent and the Lenders, segregated from
other funds of such Guarantor, and shall, forthwith upon receipt by such
Guarantor, be turned over to the Agent in the exact form received by such
Guarantor (duly indorsed by such Guarantor to the Agent, if required), to be
applied against the Borrower Obligations, whether matured or unmatured, in such
order as the Agent may determine.
2.4 Amendments, etc. with respect to the Borrower Obligations. Each
---------------------------------------------------------
Guarantor shall remain obligated hereunder notwithstanding that, without any
reservation of rights against any Guarantor and without notice to or further
assent by any Guarantor, any demand for payment of any of the Borrower
Obligations made by the Agent or any Lender may be rescinded by the Agent or
such Lender and any of the Borrower Obligations continued, and the Borrower
Obligations, or the liability of any other Person upon or for any part thereof,
or any collateral security or guarantee therefor or right of offset with respect
thereto, may, from time to time, in whole or in part, be renewed, extended,
amended, modified, accelerated, compromised, waived, surrendered or released by
the Agent or any Lender, and the Note Purchase Agreement and the other Loan
Documents and any other documents executed and delivered in connection therewith
may be amended, modified, supplemented or terminated, in whole or in part, as
the Agent (or the Lenders pursuant to the Note Purchase Agreement, as the case
may be) may deem advisable from time to time, and any collateral security,
guarantee or right of offset at any time held by the Agent or any Lender for the
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payment of the Borrower Obligations may be sold, exchanged, waived, surrendered
or released. Neither the Agent nor any Lender shall have any obligation to
protect, secure, perfect or insure any Lien at any time held by it as security
for the Borrower Obligations or for the guarantee contained in this Section 2 or
any property subject thereto.
2.5 Guarantee Absolute and Unconditional. Each Guarantor waives any
------------------------------------
and all notice of the creation, renewal, extension or accrual of any of the
Borrower Obligations and notice of or proof of reliance by the Agent or any
Lender upon the guarantee contained in this Section 2, or acceptance of the
guarantee contained in this Section 2. The Borrower Obligations, and any of
them, shall conclusively be deemed to have been created, contracted or incurred,
or renewed, extended, amended or waived, in reliance upon the guarantee
contained in this Section 2. All dealings between the Borrower and any of the
Guarantors, on the one hand, and the Agent and the Lenders, on the other hand,
likewise shall be conclusively presumed to have been had or consummated in
reliance upon the guarantee contained in this Section 2. Each Guarantor waives
diligence, presentment, protest, demand for payment and notice of default or
nonpayment to or upon the Borrower or any of the Guarantors with respect to the
Borrower Obligations. Each Guarantor understands and agrees that the guarantee
contained in this Section 2 shall be construed as a continuing, absolute and
unconditional guarantee of payment without regard to (a) the validity or
enforceability of the Note Purchase Agreement or any other Loan Document, any of
the Borrower Obligations or any other collateral security therefor or guarantee
or right of offset with respect thereto at any time or from time to time held by
the Agent or any Lender, (b) any defense, set-off or counterclaim (other than a
defense of payment or performance) which may at any time be available to or be
asserted by the Borrower or any other Person against the Agent or any Lender, or
(c) any other circumstance whatsoever (with or without notice to or knowledge of
the Borrower or such Guarantor) which constitutes, or might be construed to
constitute, an equitable or legal discharge of the Borrower for the Borrower
Obligations, or of such Guarantor under the guarantee contained in this Section
2, in bankruptcy or in any other instance. When making any demand hereunder or
otherwise pursuing its rights and remedies hereunder against any Guarantor, the
Agent or any Lender may, but shall be under no obligation to, make a similar
demand on or otherwise pursue such rights and remedies as it may have against
the Borrower, any other Guarantor or any other Person or against any collateral
security or guarantee for the Borrower Obligations or any right of offset with
respect thereto, and any failure by the Agent or any Lender to make any such
demand, to pursue such other rights or remedies or to collect any payments from
the Borrower, any other Guarantor or any other Person or to realize upon any
such collateral security or guarantee or to exercise any such right of offset,
or any release of the Borrower, any other Guarantor or any other Person or any
such collateral security, guarantee or right of offset shall not relieve any
Guarantor of any obligation or liability hereunder, and shall not impair or
affect the rights and remedies, whether express, implied or available
8
<PAGE>
as a matter of law, of the Agent or any Lender against any Guarantor. For the
purposes hereof "demand" shall include the commencement and continuance of any
legal proceedings.
2.6 Reinstatement. The guarantee contained in this Section 2 shall
-------------
continue to be effective, or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any of the Borrower Obligations is rescinded or
must otherwise be restored or returned by the Agent or any Lender upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of the
Borrower or any Guarantor, or upon or as a result of the appointment of a
receiver, intervenor or conservator of, or trustee or similar officer for, the
Borrower or any Guarantor or any substantial part of its property, or otherwise,
all as though such payments had not been made.
2.7 Payments. Each Guarantor hereby guarantees that payments
--------
hereunder will be paid to the Agent without set-off or counterclaim in United
States dollars, if possible, at the office of the Agent, at 177 Broad Street,
Stamford, Connecticut or as otherwise designated to the Guarantor from time to
time.
2.8 Subordination of Guarantee. Notwithstanding any other provision
--------------------------
of the guarantee contained in this Section 2, the guarantee set forth herein is
subordinate and junior in right of payment to all Senior Indebtedness (as
defined in the Notes) to the extent and as provided in Section 7 of the Notes.
SECTION 3. GRANT OF SECURITY INTEREST
Each Grantor hereby assigns and transfers to the Agent, and hereby
grants to the Agent, for the benefit of the Lenders, a security interest in, all
of the following property now owned or at any time hereafter acquired by such
Grantor or in which such Grantor now has or at any time in the future may
acquire any right, title or interest (collectively, the "Collateral"), as
----------
collateral security for the prompt and complete payment and performance when due
(whether at the stated maturity, by acceleration or otherwise) of such Grantor's
Obligations:
(a) all Accounts;
(b) all Chattel Paper;
(c) all Documents;
(d) all Equipment;
(e) all General Intangibles;
9
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(f) all Instruments;
(g) all Intellectual Property;
(h) all Inventory;
(i) all Pledged Securities;
(j) all Investment Property;
(k) all books and records pertaining to the Collateral; and
(l) to the extent not otherwise included, all Proceeds and products
of any and all of the foregoing and all collateral security and
guarantees given by any Person with respect to any of the
foregoing.
SECTION 4. REPRESENTATIONS AND WARRANTIES
To induce the Purchaser to enter into the Note Purchase Agreement and
to induce the Lenders to purchase the Notes, each Grantor hereby represents and
warrants to the Agent and each Lender that:
4.1 Representations in Note Purchase Agreement. In the case of each
------------------------------------------
Guarantor, the representations and warranties set forth in Article 5 of the Note
Purchase Agreement as they relate to such Guarantor or to the Loan Documents to
which such Guarantor is a party, each of which is hereby incorporated herein by
reference, are true and correct, and the Agent and each Lender shall be entitled
to rely on each of them as if they were fully set forth herein, provided that
--------
each reference in each such representation and warranty to the Borrower's
knowledge shall, for the purposes of this Section 4.1, be deemed to be a
reference to such Guarantor's knowledge.
4.2 Title; No Other Liens. Except for the security interest granted
---------------------
to the Agent for the benefit of the Lenders pursuant to this Agreement and the
other Liens permitted to exist on the Collateral by the Note Purchase Agreement,
such Grantor owns each item of the Collateral free and clear of any and all
Liens or claims of others. No financing statement or other public notice with
respect to all or any part of the Collateral is on file or of record in any
public office, except such as have been filed in favor of the Agent, for the
ratable benefit of the Lenders, pursuant to this Agreement or as are permitted
by the Note Purchase Agreement.
10
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4.3 Perfected First Priority Liens. The security interests granted
------------------------------
pursuant to this Agreement (a) upon completion of the filings and other actions
specified on Schedule 3 (which, in the case of all filings and other documents
----------
referred to on said Schedule, have been delivered to the Agent in completed and
duly executed form) will constitute valid perfected security interests in all of
the Collateral in favor of the Agent, for the benefit of the Lenders, as
collateral security for such Grantor's Obligations, enforceable in accordance
with the terms hereof against all creditors of such Grantor and any Persons
purporting to purchase any Collateral from such Grantor and (b) are prior to all
other Liens on the Collateral in existence on the date hereof except for (i)
Liens permitted by the Note Purchase Agreement.
4.4 Chief Executive Office. On the date hereof, such Grantor's
----------------------
jurisdiction of organization and the location of such Grantor's chief executive
office or sole place of business are specified on Schedule 4.
----------
4.5 Inventory and Equipment. On the date hereof, the Inventory and
-----------------------
the Equipment (other than mobile goods) are kept at the locations listed on
Schedule 5.
- ----------
4.6 Pledged Securities. (a) The shares of Pledged Stock pledged by
------------------
such Grantor hereunder constitute all the issued and outstanding shares of all
classes of the Capital Stock of each Issuer owned by such Grantor except that,
if the Issuer is organized under the laws of any jurisdiction outside the United
States, then the shares of Pledged Stock pledged by such Grantor hereunder
constitute all the issued and outstanding shares of all classes of the Capital
Stock of such Issuer owned by such Grantor up to 65% of such shares of each
class of Capital Stock of such Issuer.
(b) All the shares of the Pledged Stock have been duly and validly
issued and are fully paid and nonassessable.
(c) Each of the Pledged Notes constitutes the legal, valid and
binding obligation of the obligor with respect thereto, enforceable in
accordance with its terms, subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.
(d) Such Grantor is the record and beneficial owner of, and has good
and marketable title to, the Pledged Securities pledged by it hereunder, free of
any and all Liens or options in favor of, or claims of, any other Person, except
the security interest created by this Agreement.
4.7 Receivables. None of the obligors on any Receivables is a
-----------
Governmental Authority.
11
<PAGE>
SECTION 5. COVENANTS
Each Grantor covenants and agrees with the Agent and the Lenders that,
from and after the date of this Agreement until the Obligations shall have been
Fully Satisfied.
5.1 Covenants in Note Purchase Agreement. In the case of each
------------------------------------
Guarantor, such Guarantor shall take, or shall refrain from taking, as the case
may be, each action that is necessary to be taken or not taken, as the case may
be, so that no Default or Event of Default is caused by the failure to take such
action or to refrain from taking such action by such Guarantor or any of its
Subsidiaries.
5.2 Maintenance of Insurance. (a) Such Grantor will maintain, with
------------------------
financially sound and reputable companies, insurance policies (i) insuring the
Inventory and Equipment against loss by fire, explosion, theft and such other
casualties as may be reasonably satisfactory to the Agent and (ii) insuring such
Grantor, the Agent and the Lenders against liability for personal injury and
property damage relating to such Inventory and Equipment, such policies to be in
such form and amounts and having such coverage as may be reasonably satisfactory
to the Agent and the Lenders.
(b) As soon as practicable following the Closing Date, all such
insurance shall (i) provide that no cancellation, material reduction in amount
or material change in coverage thereof shall be effective until at least 30 days
after receipt by the Agent of written notice thereof, (ii) name the Agent as
insured party or loss payee, (iii) if reasonably requested by the Agent, include
a breach of warranty clause and (iv) be reasonably satisfactory in all other
respects to the Agent.
(c) The Borrower shall deliver to the Agent and the Lenders a report
of a reputable insurance broker with respect to such insurance during the month
of June in each calendar year and such supplemental reports with respect thereto
as the Agent may from time to time reasonably request.
5.3 Payment of Obligations. Such Grantor will pay and discharge or
----------------------
otherwise satisfy at or before maturity or before they become delinquent, as the
case may be, all taxes, assessments and governmental charges or levies imposed
upon the Collateral or in respect of income or profits therefrom, as well as all
claims of any kind (including, without limitation, claims for labor, materials
and supplies) against or with respect to the Collateral, except that no such
charge need be paid if the amount or validity thereof is currently being
contested in good faith by appropriate proceedings, reserves in conformity with
GAAP with respect thereto have been provided on the books of such Grantor and
such proceedings could not reasonably be expected to result in the sale,
forfeiture or loss of any material portion of the Collateral or any interest
12
<PAGE>
therein. Notwithstanding anything to the contrary in the foregoing sentence,
the Borrower shall not be in default under this Section 5.3 unless the aggregate
amount of non-contested Indebtedness or obligations which the Borrower and its
Subsidiaries have so failed to pay, discharge or satisfy before they become
delinquent and which remain delinquent at the time of determination is more than
$50,000 in the aggregate.
5.4 Maintenance of Perfected Security Interest; Further Documentation.
-----------------------------------------------------------------
(a) Such Grantor shall maintain the security interest created by this Agreement
as a perfected security interest having at least the priority described in
Section 4.3 and shall defend such security interest against the claims and
demands of all Persons whomsoever.
(b) Such Grantor will furnish to the Agent and the Lenders from time
to time statements and schedules further identifying and describing the
Collateral and such other reports in connection with the Collateral as the Agent
may reasonably request, all in reasonable detail.
(c) At any time and from time to time, upon the written request of the
Agent and at the sole expense of such Grantor, such Grantor will promptly and
duly execute and deliver, and have recorded, such further instruments and
documents and take such further actions as the Agent may reasonably request for
the purpose of obtaining or preserving the full benefits of this Agreement and
of the rights and powers herein granted, including, without limitation, the
filing of any financing or continuation statements under the Uniform Commercial
Code (or other similar laws) in effect in any jurisdiction with respect to the
security interests created hereby.
5.5 Changes in Locations, Name, etc. Such Grantor will not, except
--------------------------------
upon 15 days' prior written notice to the Agent and delivery to the Agent of (a)
all additional executed financing statements and other documents reasonably
requested by the Agent to maintain the validity, perfection and priority of the
security interests provided for herein and (b) if applicable, a written
supplement to Schedule 5 showing any additional location at which Inventory or
----------
Equipment shall be kept:
(i) permit any of the Inventory or Equipment to be kept at a location
other than those listed on Schedule 5;
----------
(ii) change the location of its chief executive office or sole place
of business from that referred to in Section 4.4; or
(iii) change its name, identity or corporate structure to such an
extent that any financing statement filed by the Agent in
connection with this Agreement would become misleading.
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<PAGE>
5.6 Notices. Such Grantor will advise the Agent and the Lenders
-------
promptly, in reasonable detail, of:
(a) any Lien (other than security interests created hereby or Liens
permitted under the Note Purchase Agreement) on any of the Collateral which
would adversely affect the ability of the Agent to exercise any of its remedies
hereunder, and
(b) of the occurrence of any other event which could reasonably be
expected to have a material adverse effect on the aggregate value of the
Collateral or on the security interests created hereby.
5.7 Pledged Securities. (a) If such Grantor shall become entitled to
------------------
receive or shall receive any stock certificate (including, without limitation,
any certificate representing a stock dividend or a distribution in connection
with any reclassification, increase or reduction of capital or any certificate
issued in connection with any reorganization), option or rights in respect of
the Capital Stock of any Issuer, whether in addition to, in substitution of, as
a conversion of, or in exchange for, any shares of the Pledged Stock, or
otherwise in respect thereof, such Grantor shall accept the same as the agent of
the Agent and the Lenders, hold the same in trust for the Agent and the Lenders
and deliver the same forthwith to the Agent in the exact form received, duly
indorsed by such Grantor to the Agent, if required, together with an undated
stock power covering such certificate duly executed in blank by such Grantor and
with, if the Agent so requests, signature guaranteed, to be held by the Agent,
subject to the terms hereof, as additional collateral security for the
Obligations. Any sums paid upon or in respect of the Pledged Securities upon
the liquidation or dissolution of any Issuer shall be paid over to the Agent to
be held by it hereunder as additional collateral security for the Obligations,
and in case any distribution of capital shall be made on or in respect of the
Pledged Securities or any property shall be distributed upon or with respect to
the Pledged Securities pursuant to the recapitalization or reclassification of
the capital of any Issuer or pursuant to the reorganization thereof, the
property so distributed shall, unless otherwise subject to a perfected security
interest in favor of the Agent, be delivered to the Agent to be held by it
hereunder as additional collateral security for the Obligations. If any sums of
money or property so paid or distributed in respect of the Pledged Securities
shall be received by such Grantor, such Grantor shall, until such money or
property is paid or delivered to the Agent hold such money or property in trust
for the Lenders, segregated from other funds of such Grantor, as additional
collateral security for the Obligations.
(b) Without the prior written consent of the Agent, such Grantor will
not (i) vote to enable, or take any other action to permit, any Issuer to issue
any stock or other equity securities of any nature or to issue any other
securities convertible into or granting the right to purchase or exchange for
any stock or other
14
<PAGE>
equity securities of any nature of any Issuer, except to the extent such stock
or other equity securities are pledged to the Lenders pursuant hereto, (ii)
sell, assign, transfer, exchange, or otherwise dispose of, or grant any option
with respect to, the Pledged Securities or Proceeds thereof (except pursuant to
a transaction expressly permitted by the Note Purchase Agreement), (iii) create,
incur or permit to exist any Lien or option in favor of, or any claim of any
Person with respect to, any of the Pledged Securities or Proceeds thereof, or
any interest therein, except for the security interests created by this
Agreement or (iv) enter into any agreement or undertaking restricting the right
or ability of such Grantor or the Agent to sell, assign or transfer any of the
Pledged Securities or Proceeds thereof.
(c) In the case of each Grantor which is an Issuer, such Issuer agrees
that (i) it will be bound by the terms of this Agreement relating to the Pledged
Securities issued by it and will comply with such terms insofar as such terms
are applicable to it, (ii) it will notify the Agent promptly in writing of the
occurrence of any of the events described in Section 5.7(a) with respect to the
Pledged Securities issued by it and (iii) the terms of Sections 6.3(c) and 6.7
shall apply to it, mutatis mutandis, with respect to all actions that may be
----------------
required of it pursuant to Section 6.3(c) or 6.7 with respect to the Pledged
Securities issued by it.
5.8 Receivables. (a) Other than in the ordinary course of business
-----------
consistent with its past practice or with the prior written consent of the
Agent, such Grantor will not (i) grant any extension of the time of payment of
any Receivable, (ii) compromise or settle any Receivable for less than the full
amount thereof, (iii) release, wholly or partially, any Person liable for the
payment of any Receivable, (iv) allow any credit or discount whatsoever on any
Receivable or (v) amend, supplement or modify any Receivable in any manner that
could adversely affect the value thereof.
(b) Such Grantor will deliver to the Agent a copy of each material
demand, notice or document received by it that questions or calls into doubt the
validity or enforceability of more than 5% of the aggregate amount of the then
outstanding Receivables.
5.9 Intellectual Property. (a) Such Grantor (either itself or
---------------------
through licensees) will (i) continue to use each material Trademark on each and
every trademark class of goods applicable to its current line as reflected in
its current catalogs, brochures and price lists in order to maintain such
Trademark in full force free from any claim of abandonment for non-use, (ii)
maintain as in the past the quality of products and services offered under such
Trademark, (iii) use such Trademark with the appropriate notice of registration
and all other notices and legends required by applicable Requirements of Law,
(iv) not adopt or use any mark which is confusingly similar or a colorable
imitation of such Trademark unless the Agent, for the benefit of
15
<PAGE>
the Lenders, shall obtain a perfected security interest in such mark pursuant to
this Agreement, and (v) not (and not permit any licensee or sublicensee thereof
to) do any act or knowingly omit to do any act whereby such Trademark may become
invalidated or impaired in any way.
(b) Such Grantor (either itself or through licensees) will not do any
act, or omit to do any act, whereby any material Patent may become forfeited,
abandoned or dedicated to the public.
(c) Such Grantor (either itself or through licensees) (i) will employ
each material Copyright and (ii) will not (and will not permit any licensee or
sublicensee thereof to) do any act or knowingly omit to do any act whereby any
material portion of the Copyrights may become invalidated or otherwise impaired.
Such Grantor will not (either itself or through licensees) do any act whereby
any material portion of the Copyrights may fall into the public domain.
(d) Such Grantor (either itself or through licensees) will not do any
act that knowingly infringes the intellectual property rights of any other
Person.
(e) Such Grantor will notify the Agent and the Lenders immediately if
it knows, or has reason to know, that any application or registration relating
to any material Intellectual Property may become forfeited, abandoned or
dedicated to the public, or of any adverse determination or development
(including, without limitation, the institution of, or any such determination or
development in, any proceeding in the United States Patent and Trademark Office,
the United States Copyright Office or any court or tribunal in any country)
regarding such Grantor's ownership of, or the validity of, any material
Intellectual Property or such Grantor's right to register the same or to own and
maintain the same.
(f) Whenever such Grantor, either by itself or through any agent,
employee, licensee or designee, shall file an application for the registration
of any Intellectual Property with the United States Patent and Trademark Office,
the United States Copyright Office or any similar office or agency in any other
country or any political subdivision thereof, such Grantor shall report such
filing to the Agent within five Business Days after the last day of the fiscal
quarter in which such filing occurs. Upon request of the Agent, such Grantor
shall execute and deliver, and have recorded, any and all agreements,
instruments, documents, and papers as the Agent may request to evidence the
Agent's and the Lenders' security interest in any Copyright, Patent or Trademark
and the goodwill and general intangibles of such Grantor relating thereto or
represented thereby.
(g) Such Grantor will take all reasonable and necessary steps,
including, without limitation, in any proceeding before the United States Patent
and
16
<PAGE>
Trademark Office, the United States Copyright Office or any similar office or
agency in any other country or any political subdivision thereof, to maintain
and pursue each application (and to obtain the relevant registration) and to
maintain each registration of the material Intellectual Property, including,
without limitation, filing of applications for renewal, affidavits of use and
affidavits of incontestability.
(h) In the event that any material Intellectual Property is infringed,
misappropriated or diluted by a third party, such Grantor shall (i) take such
actions as such Grantor shall reasonably deem appropriate under the
circumstances to protect such Intellectual Property and (ii) if such
Intellectual Property is of material economic value, promptly notify the Agent
after it learns thereof.
SECTION 6. REMEDIAL PROVISIONS
6.1 Certain Matters Relating to Receivables. (a) The Agent shall
---------------------------------------
have the right to make test verifications of the Receivables in any manner and
through any medium that it reasonably considers advisable, and each Grantor
shall furnish all such assistance and information as the Agent may require in
connection with such test verifications. At any time and from time to time,
upon the Agent's reasonable request and at the expense of the relevant Grantor,
such Grantor shall cause independent public accountants or others reasonably
satisfactory to the Agent to furnish to the Agent reports showing
reconciliations, aging and test verifications of, and trial balances for, the
Receivables.
(b) The Agent hereby authorizes each Grantor to collect such Grantor's
Receivables (or enter into arrangements with a third party for such collection),
subject to the Agent's reasonable direction and control and the Agent may
curtail or terminate said authority at any time after the occurrence and during
the continuance of an Event of Default. If required by the Agent at any time
after the occurrence and during the continuance of an Event of Default, any
payments of Receivables, when collected by any Grantor, (i) shall be forthwith
(and, in any event, within two Business Days) deposited by such Grantor in the
exact form received, duly indorsed by such Grantor to the Agent if required, in
a Collateral Account maintained under the sole dominion and control of the
Agent, subject to withdrawal by the Agent for the account of the Lenders only as
provided in Section 6.5, and (ii) until so turned over, shall be held by such
Grantor in trust for the Agent and the Lenders, segregated from other funds of
such Grantor. Each such deposit of Proceeds of Receivables shall be accompanied
by a report identifying in reasonable detail the nature and source of the
payments included in the deposit.
(c) At the Agent's request, each Grantor shall deliver to the Agent
all original and other documents evidencing, and relating to, the agreements and
17
<PAGE>
transactions which gave rise to the Receivables, including, without limitation,
all original orders, invoices and shipping receipts.
6.2 Communications with Obligors; Grantors Remain Liable. (a) The
----------------------------------------------------
Agent in its own name or in the name of others may at any time after the
occurrence and during the continuance of an Event of Default communicate with
obligors under the Receivables to verify with them to the Agent's satisfaction
the existence, amount and terms of any Receivables.
(b) Upon the request of the Agent at any time after the occurrence and
during the continuance of an Event of Default, each Grantor shall notify
obligors on the Receivables that the Receivables have been assigned to the Agent
for the benefit of the Lenders and that payments in respect thereof shall be
made directly to the Agent.
(c) Anything herein to the contrary notwithstanding, each Grantor
shall remain liable under each of the Receivables to observe and perform all the
conditions and obligations to be observed and performed by it thereunder, all in
accordance with the terms of any agreement giving rise thereto. Neither the
Agent nor any Lender shall have any obligation or liability under any Receivable
(or any agreement giving rise thereto) by reason of or arising out of this
Agreement or the receipt by the Agent or any Lender of any payment relating
thereto, nor shall the Agent or any Lender be obligated in any manner to perform
any of the obligations of any Grantor under or pursuant to any Receivable (or
any agreement giving rise thereto), to make any payment, to make any inquiry as
to the nature or the sufficiency of any payment received by it or as to the
sufficiency of any performance by any party thereunder, to present or file any
claim to take any action to enforce any performance or to collect the payment of
any amounts which may have been assigned to it or to which it may be entitled at
any time or times.
6.3 Pledged Stock. (a) Unless an Event of Default shall have
-------------
occurred and be continuing and the Agent shall have given notice to the relevant
Grantor of the Agent's intent to exercise its corresponding rights pursuant to
Section 6.3(b), each Grantor shall be permitted to receive all cash dividends
paid in respect of the Pledged Stock and all payments made in respect of the
Pledged Notes, in each case paid in the normal course of business of the
relevant Issuer and consistent with past practice, to the extent permitted in
the Note Purchase Agreement, and to exercise all voting and corporate rights
with respect to the Pledged Securities; provided, however, that no vote shall be
-------- -------
cast or corporate right exercised or other action taken which, in the Agent's
reasonable judgment, would impair the Collateral or which would be inconsistent
with or result in any violation of any provision of the Note Purchase Agreement,
this Agreement or any other Loan Document.
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<PAGE>
(b) If an Event of Default shall occur and be continuing and the Agent
shall give notice of its intent to exercise such rights to the relevant Grantor
or Grantors, (i) the Agent shall have the right to receive any and all cash
dividends, payments or other Proceeds paid in respect of the Pledged Securities
and make application thereof to the Obligations in the order set forth in
Section 6.5, and (ii) any or all of the Pledged Securities shall be registered
in the name of the Agent or its nominee, and the Agent or its nominee may
thereafter exercise (x) all voting, corporate and other rights pertaining to
such Pledged Securities at any meeting of shareholders of the relevant Issuer or
Issuers or otherwise and (y) any and all rights of conversion, exchange and
subscription and any other rights, privileges or options pertaining to such
Pledged Securities as if it were the absolute owner thereof (including, without
limitation, the right to exchange at its discretion any and all of the Pledged
Securities upon the merger, consolidation, reorganization, recapitalization or
other fundamental change in the corporate structure of any Issuer, or upon the
exercise by any Grantor or the Agent of any right, privilege or option
pertaining to such Pledged Securities, and in connection therewith, the right to
deposit and deliver any and all of the Pledged Securities with any committee,
depositary, transfer agent, registrar or other designated agency upon such terms
and conditions as the Agent may determine), all without liability except to
account for property actually received by it, but the Agent shall have no duty
to any Grantor to exercise any such right, privilege or option and shall not be
responsible for any failure to do so or delay in so doing.
(c) Each Grantor hereby authorizes and instructs each Issuer of any
Pledged Securities pledged by such Grantor hereunder to (i) comply with any
instruction received by it from the Agent in writing that (x) states that an
Event of Default has occurred and is continuing and (y) is otherwise in
accordance with the terms of this Agreement, without any other or further
instructions from such Grantor, and each Grantor agrees that each Issuer shall
be fully protected in so complying, and (ii) unless otherwise expressly
permitted hereby, pay any dividends or other payments with respect to the
Pledged Securities directly to the Agent.
6.4 Proceeds to be Turned Over To Agent. In addition to the rights of
-----------------------------------
the Agent and the Lenders specified in Section 6.1 with respect to payments of
Receivables, if an Event of Default shall occur and be continuing, all Proceeds
received by any Grantor consisting of cash, checks and other near-cash items
shall be held by such Grantor in trust for the Agent and the Lenders, segregated
from other funds of such Grantor, and shall, forthwith upon receipt by such
Grantor, be turned over to the Agent in the exact form received by such Grantor
(duly indorsed by such Grantor to the Agent, if required). All Proceeds
received by the Agent hereunder shall be held by the Agent in a Collateral
Account maintained under its sole dominion and control. All Proceeds while held
by the Agent in a Collateral Account (or by such Grantor in trust for the Agent
and the Lenders) shall continue to be held as collateral security for all the
19
<PAGE>
Obligations and shall not constitute payment thereof until applied as provided
in Section 6.5.
6.5 Application of Proceeds. At such intervals as may be agreed upon
-----------------------
by the Borrower and the Agent, or, if an Event of Default shall have occurred
and be continuing, at any time at the Agent's election, the Agent may apply all
or any part of Proceeds constituting Collateral, whether or not held in any
Collateral Account, and any proceeds of the guarantee set forth in Section 2, in
payment of the Obligations in the following order:
First, to pay incurred and unpaid fees and expenses of the Agent
-----
under the Loan Documents;
Second, to the Agent, for application by it towards payment of
------
amounts then due and owing and remaining unpaid in respect of the Obligations,
pro rata among the Lenders according to the amounts of the Obligations then due
- --- ----
and owing and remaining unpaid to the Lenders;
Third, to the Agent, for application by it towards prepayment of the
-----
Obligations, pro rata among the Lenders according to the amounts of the
--- ----
Obligations then held by the Lenders; and
Fourth, any balance of such Proceeds remaining after the obligations
------
of the Loan Parties under the Loan Documents have been paid in full shall be
paid over to the Borrower or to whomsoever may be lawfully entitled to receive
the same.
6.6 Code and Other Remedies. If an Event of Default shall occur and
-----------------------
be continuing, the Agent, on behalf of the Lenders, may exercise, in addition to
all other rights and remedies granted to them in this Agreement and in any other
instrument or agreement securing, evidencing or relating to the Obligations, all
rights and remedies of a secured party under the New York UCC or any other
applicable law. Without limiting the generality of the foregoing, the Agent,
without demand of performance or other demand, presentment, protest,
advertisement or notice of any kind (except any notice required by law referred
to below) to or upon any Grantor or any other Person (all and each of which
demands, defenses, advertisements and notices are hereby waived), may in such
circumstances forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give
option or options to purchase, or otherwise dispose of and deliver the
Collateral or any part thereof (or contract to do any of the foregoing), in one
or more parcels at public or private sale or sales, at any exchange, broker's
board or office of the Agent or any Lender or elsewhere upon such terms and
conditions as it may deem advisable and at such prices as it may deem best, for
cash or on credit or for future delivery without assumption of any credit risk.
The Agent or any Lender shall have the right upon any such public sale or sales,
and, to the extent permitted by law, upon any
20
<PAGE>
such private sale or sales, to purchase the whole or any part of the Collateral
so sold, free of any right or equity of redemption in any Grantor, which right
or equity is hereby waived and released. Each Grantor further agrees, at the
Agent's request, to assemble the Collateral and make it available to the Agent
at places which the Agent shall reasonably select, whether at such Grantor's
premises or elsewhere. The Agent shall apply the net proceeds of any action
taken by it pursuant to this Section 6.6, after deducting all reasonable costs
and expenses of every kind incurred in connection therewith or incidental to the
care or safekeeping of any of the Collateral or in any way relating to the
Collateral or the rights of the Agent and the Lenders hereunder, including,
without limitation, reasonable attorneys' fees and disbursements, to the payment
in whole or in part of the Obligations, in such order as the Agent may elect,
and only after such application and after the payment by the Agent of any other
amount required by any provision of law, including, without limitation, Section
9-504(l)(c) of the New York UCC, need the Agent account for the surplus, if any,
to any Grantor. To the extent permitted by applicable law, each Grantor waives
all claims, damages and demands it may acquire against the Agent or any Lender
arising out of the exercise by them of any rights hereunder except any such
claims arising out of the Agent or any Lender's gross negligence or wilful
misconduct. If any notice of a proposed sale or other disposition of Collateral
shall be required by law, such notice shall be deemed reasonable and proper if
given at least 10 days before such sale or other disposition.
6.7 Registration Rights. (a) If the Agent shall determine to
-------------------
exercise its right to sell any or all of the Pledged Stock pursuant to Section
6.6, and if in the opinion of the Agent it is necessary or advisable to have the
Pledged Stock, or that portion thereof to be sold, registered under the
provisions of the Securities Act or other similar law of any jurisdiction in
which an Issuer is located, the relevant Grantor will cause the Issuer thereof
to (i) execute and deliver, and cause the directors and officers of such Issuer
to execute and deliver, all such instruments and documents, and do or cause to
be done all such other acts as may be, in the reasonable opinion of the Agent,
necessary or advisable to register the Pledged Stock, or that portion thereof to
be sold, under the provisions of the Securities Act or other similar law of any
jurisdiction in which an Issuer is located, (ii) use its best efforts to cause
the registration statement relating thereto to become effective and to remain
effective for a period of one year from the date of the first public offering of
the Pledged Stock, or that portion thereof to be sold, and (iii) make all
amendments thereto and/or to the related prospectus which, in the opinion of the
Agent, are necessary or advisable, all in conformity with the requirements of
the Securities Act and the rules and regulations of the Securities and Exchange
Commission or other similar law of any jurisdiction in which an Issuer is
located, applicable thereto. Each Grantor agrees to cause such Issuer to comply
with the provisions of the securities or "Blue Sky" laws of any and all
jurisdictions which the Agent shall designate and to make available to its
security holders, as soon as practicable, an earnings statement (which need not
be audited) which will in the case of
21
<PAGE>
United States resident Issuers, satisfy the provisions of Section 11(a) of the
Securities Act.
(b) Each Grantor recognizes that the Agent may be unable to effect a
public sale of any or all the Pledged Stock, by reason of certain prohibitions
contained in the Securities Act and applicable state securities laws or
otherwise, and may be compelled to resort to one or more private sales thereof
to a restricted group of purchasers which will be obliged to agree, among other
things, to acquire such securities for their own account for investment and not
with a view to the distribution or resale thereof. Each Grantor acknowledges
and agrees that any such private sale may result in prices and other terms less
favorable than if such sale were a public sale and, notwithstanding such
circumstances, agrees that any such private sale shall be deemed to have been
made in a commercially reasonable manner. The Agent shall be under no
obligation to delay a sale of any of the Pledged Stock for the period of time
necessary to permit the Issuer thereof to register such securities for public
sale under the Securities Act, or under applicable state securities laws, even
if such Issuer would agree to do so.
(c) Each Grantor agrees to use its best efforts to do or cause to be
done all such other acts as may be necessary to make such sale or sales of all
or any portion of the Pledged Stock pursuant to this Section 6.7 valid and
binding and in compliance with any and all other applicable Requirements of Law.
Each Grantor further agrees that a breach of any of the covenants contained in
this Section 6.7 will cause irreparable injury to the Agent and the Lenders,
that the Agent and the Lenders have no adequate remedy at law in respect of such
breach and, as a consequence, that each and every covenant contained in this
Section 6.7 shall be specifically enforceable against such Grantor, and such
Grantor hereby waives and agrees not to assert any defenses against an action
for specific performance of such covenants except for a defense that no Event of
Default has occurred under the Note Purchase Agreement.
6.8 Waiver; Deficiency. Each Grantor waives and agrees not to assert
------------------
any rights or privileges which it may acquire under Section 9-112 of the New
York UCC. Each Grantor shall remain liable for any deficiency if the proceeds
of any sale or other disposition of the Collateral are insufficient to pay its
Obligations and the fees and disbursements of any attorneys employed by the
Agent or any Lender to collect such deficiency.
SECTION 7. THE AGENT
7.1 Agent's Appointment as Attorney-in-Fact, etc. (a) Each Grantor
---------------------------------------------
hereby irrevocably constitutes and appoints the Agent and any officer or agent
thereof, with full power of substitution, as its true and lawful attorney-in-
fact with full
22
<PAGE>
irrevocable power and authority in the place and stead of such Grantor and in
the name of such Grantor or in its own name, for the purpose of carrying out the
terms of this Agreement, to take any and all appropriate action and to execute
any and all documents and instruments which may be necessary or desirable to
accomplish the purposes of this Agreement, and, without limiting the generality
of the foregoing, each Grantor hereby gives the Agent the power and right, on
behalf of such Grantor, without notice to or assent by such Grantor, to do any
or all of the following:
(i) in the name of such Grantor or its own name, or otherwise,
take possession of and indorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of moneys due under any
Receivable or with respect to any other Collateral and file any claim or
take any other action or proceeding in any court of law or equity or
otherwise deemed appropriate by the Agent for the purpose of collecting any
and all such moneys due under any Receivable or with respect to any other
Collateral whenever payable;
(ii) in the case of any Intellectual Property, execute and
deliver, and have recorded, any and all agreements, instruments, documents
and papers as the Agent may request to evidence the Agent's and the
Lenders' security interest in such Intellectual Property and the goodwill
and general intangibles of such Grantor relating thereto or represented
thereby;
(iii) pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral, effect any repairs or any insurance
called for by the terms of this Agreement and pay all or any part of the
premiums therefor and the costs thereof;
(iv) execute, in connection with any sale provided for in Section
6.6 or 6.7, any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral; and
(v) (1) direct any party liable for any payment under any of the
Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Agent or as the Agent shall direct; (2) ask or
demand for, collect, and receive payment of and receipt for, any and all
moneys, claims and other amounts due or to become due at any time in
respect of or arising out of any Collateral; (3) sign and indorse any
invoices, freight or express bills, bills of lading, storage or warehouse
receipts, drafts against debtors, assignments, verifications, notices and
other documents in connection with any of the Collateral; (4) commence and
prosecute any suits, actions or proceedings at law or in equity in any
court of competent jurisdiction to collect the Collateral or any portion
thereof and to enforce any other right in respect of any Collateral; (5)
defend any suit, action or proceeding brought against such
23
<PAGE>
Grantor with respect to any Collateral; (6) settle, compromise or adjust
any such suit, action or proceeding and, in connection therewith, give such
discharges or releases as the Agent may deem appropriate; (7) assign any
Copyright, Patent or Trademark (along with the goodwill of the business to
which any such Copyright, Patent or Trademark pertains), throughout the
world for such term or terms, on such conditions, and in such manner, as
the Agent shall in its sole discretion determine; and (8) generally, sell,
transfer, pledge and make any agreement with respect to or otherwise deal
with any of the Collateral as fully and completely as though the Agent were
the absolute owner thereof for all purposes, and do, at the Agent's option
and such Grantor's expense, at any time, or from time to time, all acts and
things which the Agent deems necessary to protect, preserve or realize upon
the Collateral and the Agent's and the Lenders' security interests therein
and to effect the intent of this Agreement, all as fully and effectively as
such Grantor might do.
Anything in this Section 7.1(a) to the contrary notwithstanding, the Agent
agrees that it will not exercise any rights under the power of attorney provided
for in this Section 7.1(a) unless an Event of Default shall have occurred and be
continuing.
(b) If any Grantor fails to perform or comply with any of its
agreements contained herein, the Agent, at its option, but without any
obligation so to do, may perform or comply, or otherwise cause performance or
compliance, with such agreement.
(c) The reasonable expenses of the Agent incurred in connection with
actions undertaken as provided in this Section 7.1, together with interest
thereon at a rate per annum equal to the rate per annum at which interest would
then be payable on past due payments of principal under the Notes from the date
of payment by the Agent to the date reimbursed by the relevant Grantor, shall be
payable by such Grantor to the Agent on demand.
(d) Each Grantor hereby ratifies all that said attorneys shall
lawfully do or cause to be done by virtue hereof. All powers, authorizations
and agencies contained in this Agreement are coupled with an interest and are
irrevocable until this Agreement is terminated and the security interests
created hereby are released pursuant to Section 8.16(a) hereof.
7.2 Duty of Agent. The Agent's sole duty with respect to the custody,
-------------
safekeeping and physical preservation of the Collateral in its possession, under
Section 9-207 of the New York UCC or otherwise, shall be to deal with it in the
same manner as the Agent deals with similar property for its own account.
Neither the Agent, any Lender nor any of their respective officers, directors,
employees or agents shall be liable for failure to demand, collect or realize
upon any of the Collateral or for
24
<PAGE>
any delay in doing so or shall be under any obligation to sell or otherwise
dispose of any Collateral upon the request of any Grantor or any other Person or
to take any other action whatsoever with regard to the Collateral or any part
thereof. The powers conferred on the Agent and the Lenders hereunder are solely
to protect the Agent's and the Lenders' interests in the Collateral and shall
not impose any duty upon the Agent or any Lender to exercise any such powers.
The Agent and the Lenders shall be accountable only for amounts that they
actually receive as a result of the exercise of such powers, and neither they
nor any of their officers, directors, employees or agents shall be responsible
to any Grantor for any act or failure to act hereunder, except for their own
gross negligence or willful misconduct.
7.3 Execution of Financing Statements. Pursuant to Section 9-402 of
---------------------------------
the New York UCC and any other applicable law, each Grantor authorizes the Agent
to file or record financing statements and other filing or recording documents
or instruments with respect to the Collateral without the signature of such
Grantor in such form and in such offices as the Agent reasonably determines
appropriate to perfect the security interests of the Agent under this Agreement.
A photographic or other reproduction of this Agreement shall be sufficient as a
financing statement or other filing or recording document or instrument for
filing or recording in any jurisdiction.
7.4 Authority of Agent. Each Grantor acknowledges that the rights and
------------------
responsibilities of the Agent under this Agreement with respect to any action
taken by the Agent or the exercise or non-exercise by the Agent of any option,
voting right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this Agreement shall, as between the Agent and the
Lenders, be governed by such agreements with respect thereto as may exist from
time to time among them, but, as between the Agent and the Grantors, the Agent
shall be conclusively presumed to be acting as agent for the Lenders with full
and valid authority so to act or refrain from acting, and no Grantor shall be
under any obligation, or entitlement, to make any inquiry respecting such
authority.
SECTION 8. MISCELLANEOUS
8.1 Amendments in Writing. None of the terms or provisions of this
---------------------
Agreement may be waived, amended, supplemented or otherwise modified except in
accordance with Section 11.6 of the Note Purchase Agreement.
8.2 Notices. All notices, requests and demands to or upon the Agent
-------
or any Grantor hereunder shall be effected in the manner provided for in Section
11.3 of the Subordinated Note and Stock Purchase Agreement; provided that any
--------
such notice, request or demand to or upon any Guarantor shall be addressed to
such Guarantor at its notice address set forth on Schedule 1.
----------
25
<PAGE>
8.3 No Waiver by Course of Conduct; Cumulative Remedies. Neither the
---------------------------------------------------
Agent nor any Lender shall by any act (except by a written instrument pursuant
to Section 8.1), delay, indulgence, omission or otherwise be deemed to have
waived any right or remedy hereunder or to have acquiesced in any Default or
Event of Default. No failure to exercise, nor any delay in exercising, on the
part of the Agent or any Lender, any right, power or privilege hereunder shall
operate as a waiver thereof. No single or partial exercise of any right, power
or privilege hereunder shall preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. A waiver by the Agent or
any Lender of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Agent or such Lender would
otherwise have on any future occasion. The rights and remedies herein provided
are cumulative, may be exercised singly or concurrently and are not exclusive of
any other rights or remedies provided by law.
8.4 Enforcement Expenses; Indemnification. (a) Each Guarantor agrees
-------------------------------------
to pay or reimburse each Lender and the Agent for all its reasonable costs and
expenses incurred in collecting against such Guarantor under the guarantee
contained in Section 2 or otherwise enforcing or preserving any rights under
this Agreement and the other Loan Documents to which such Guarantor is a party,
including, without limitation, the reasonable fees and disbursements of counsel
to each Lender and of counsel to the Agent.
(b) Each Guarantor agrees to pay, and to save the Agent and the
Lenders harmless from, any and all liabilities with respect to, or resulting
from any delay in paying, any and all stamp, excise, sales or other taxes which
may be payable or determined to be payable with respect to any of the Collateral
or in connection with any of the transactions contemplated by this Agreement.
(c) Each Guarantor agrees to pay, and to save the Agent and the
Lenders harmless from, any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Agreement to the extent the Borrower
would be required to do so pursuant to Article 7 of the Note Purchase Agreement.
(d) The agreements in this Section 8.4 shall survive repayment of the
Obligations and all other amounts payable under the Note Purchase Agreement and
the other Loan Documents.
8.5 Successors and Assigns. This Agreement shall be binding upon the
----------------------
successors and assigns of each Grantor and shall inure to the benefit of the
Agent and the Lenders and their successors and assigns; provided that no Grantor
--------
may assign,
26
<PAGE>
transfer or delegate any of its rights or obligations under this Agreement
without the prior written consent of the Agent.
8.6 Counterparts. This Agreement may be executed by one or more of
------------
the parties to this Agreement on any number of separate counterparts (including
by telecopy), and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.
8.7 Severability. Any provision of this Agreement which is prohibited
------------
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
8.8 Section Headings. The Section headings used in this Agreement are
----------------
for convenience of reference only and are not to affect the construction hereof
or be taken into consideration in the interpretation hereof.
8.9 Integration. This Agreement and the other Loan Documents
-----------
represent the agreement of the Grantors, the Agent and the Lenders with respect
to the subject matter hereof and thereof, and there are no promises,
undertakings, representations or warranties by the Agent or any Lender relative
to subject matter hereof and thereof not expressly set forth or referred to
herein or in the other Loan Documents.
8.10 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
-------------
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
8.11 Submission To Jurisdiction; Waivers. Each Grantor hereby
-----------------------------------
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to which it
is a party, or for recognition and enforcement of any judgment in respect
thereof, to the non-exclusive general jurisdiction of the Courts of the State of
New York, the courts of the United States of America for the Southern District
of New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the venue
of any such action or proceeding in any such court or that such action or
27
<PAGE>
proceeding was brought in an inconvenient court and agrees not to plead or claim
the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail (or
any substantially similar form of mail), postage prepaid, to such Grantor at its
address referred to in Section 8.2 or at such other address of which the Agent
shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the right
to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to in
this Section any special, exemplary, punitive or consequential damages.
8.12 Acknowledgments. Each Grantor hereby acknowledges that:
---------------
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Loan Documents to which it is a party;
(b) neither the Agent nor any Lender has any fiduciary relationship
with or duty to any Grantor arising out of or in connection with this Agreement
or any of the other Loan Documents, and the relationship between the Grantors,
on the one hand, and the Agent and Lenders, on the other hand, in connection
herewith or therewith is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan Documents
or otherwise exists by virtue of the transactions contemplated hereby among the
Lenders or among the Grantors and the Lenders.
8.13 WAIVER OF JURY TRIAL. EACH GRANTOR HEREBY IRREVOCABLY AND
--------------------
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
8.14 Additional Grantors. Each Subsidiary of the Borrower that is
-------------------
required to become a party to this Agreement pursuant to Section 8.1(j) of the
Note Purchase Agreement shall become a Grantor for all purposes of this
Agreement upon execution and delivery by such Subsidiary of an Assumption
Agreement in the form of Annex 1 hereto.
28
<PAGE>
8.15 Releases. (a) At such time as the Obligations shall have been
--------
Fully Satisfied, the Collateral shall be released from the Liens created hereby,
and this Agreement and all obligations (other than those expressly stated to
survive such termination) of the Agent and each Grantor hereunder shall
terminate, all without delivery of any instrument or performance of any act by
any party, and all rights to the Collateral shall revert to the Grantors. At
the request and sole expense of any Grantor following any such termination, the
Agent shall deliver to such Grantor any Collateral held by the Agent hereunder,
and execute and deliver to such Grantor such documents as such Grantor shall
reasonably request to evidence such termination.
(b) If any of the Collateral shall be sold, transferred or otherwise
disposed of by any Grantor in a transaction permitted by the Note Purchase
Agreement, then the Agent, at the request and sole expense of such Grantor,
shall execute and deliver to such Grantor all releases or other documents
reasonably necessary or desirable for the release of the Liens created hereby on
such Collateral. At the request and sole expense of the Borrower, a Guarantor
shall be released from its obligations hereunder in the event that all the
Capital Stock of such Guarantor shall be sold, transferred or otherwise disposed
of in a transaction permitted by the Note Purchase Agreement; provided that the
--------
Borrower shall have delivered to the Agent, at least ten Business Days prior to
the date of the proposed release, a written request for release identifying the
relevant Guarantor and the terms of the sale or other disposition in reasonable
detail, including the price thereof and any expenses in connection therewith,
together with a certification by the Borrower stating that such transaction is
in compliance with the Note Purchase Agreement and the other Loan Documents.
IN WITNESS WHEREOF, each of the undersigned has caused this Guarantee
and Collateral Agreement to be duly executed and delivered as of the date first
above written.
NITINOL MEDICAL TECHNOLOGIES, INC.
By: /s/ Theodore I. Pincus
----------------------------------
Name: Theodore I. Pincus
Title: EVP/CFO
29
<PAGE>
NMT NEUROSCIENCES (INTERNATIONAL), INC.
By: /s/ Theodore I. Pincus
----------------------------------
Name: Theodore I. Pincus
Title: Treasurer and Secretary
NMT INVESTMENTS CORP.
By: /s/ Theodore I. Pincus
----------------------------------
Name: Theodore I. Pincus
Title: Treasurer and Clerk
NMT NEUROSCIENCES (US), INC.
By: /s/ Theodore I. Pincus
----------------------------------
Name: Theodore I. Pincus
Title: Treasurer and Secretary
30
<PAGE>
NMT NEUROSCIENCES (IP), INC.
By: /s/ Theodore I. Pincus
----------------------------------
Name: Theodore I. Pincus
Title: Treasurer and Secretary
CORDIS INNOVASIVE SYSTEMS, INC.
By: /s/ Theodore I. Pincus
----------------------------------
Name: Theodore I. Pincus
Title: Treasurer and Secretary
NMT HEART, INC.
By: /s/ Theodore I. Pincus
----------------------------------
Name: Theodore I. Pincus
Title: Treasurer and Secretary
31
<PAGE>
SCHEDULE A
THE GRANTORS
------------
Nitinol Medical Technologies, Inc.
NMT NeuroSciences (International), Inc.
NMT Investments Corp.
NMT NeuroSciences (US), Inc.
NMT NeuroSciences (IP), Inc.
Cordis Innovasive Systems, Inc.
NMT Heart, Inc.
32
<PAGE>
Annex I to
Guarantee and Collateral Agreement
----------------------------------
ASSUMPTION AGREEMENT, dated as of ___________________, 199 , made by
-
____________________________, a _______________ corporation (the "Additional
----------
Grantor"), in favor of J.H. Whitney & Co., as agent (in such capacity, the
- -------
"Agent") for the Lenders, as defined in the Guarantee and Collateral Agreement
- ------
referred to below. All capitalized terms not defined herein shall have the
meaning ascribed to them in such Note Purchase Agreement.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Nitinol Medical Technologies, Inc. (the "Borrower"), the
--------
Lenders and the Agent have entered into a Subordinated Note and Common Stock
Purchase Agreement, dated as of July 8, 1998 (as amended, supplemented or
otherwise modified from time to time, the "Note Purchase Agreement");
-----------------------
WHEREAS, in connection with the Subordinated Note and Common Stock
Purchase Agreement, the Borrower and certain of its Affiliates (other than the
Additional Grantor) have entered into the Guarantee and Collateral Agreement,
dated as of July 8, 1998 (as amended, supplemented or otherwise modified from
time to time, the "Guarantee and Collateral Agreement") in favor of the Agent
----------------------------------
for the benefit of the Lenders;
WHEREAS, the Note Purchase Agreement requires the Additional Grantor
to become a party to the Guarantee and Collateral Agreement; and
WHEREAS, the Additional Grantor has agreed to execute and deliver this
Assumption Agreement in order to become a party to the Guarantee and Collateral
Agreement;
NOW, THEREFORE, IT IS AGREED:
1. Guarantee and Collateral Agreement. By executing and delivering
----------------------------------
this Assumption Agreement, the Additional Grantor, as provided in Section 8.14
of the Guarantee and Collateral Agreement, hereby becomes a party to the
Guarantee and Collateral Agreement as a Grantor thereunder with the same force
and effect as if originally named therein as a Grantor and, without limiting the
generality of the foregoing, hereby expressly assumes all obligations and
liabilities of a Grantor thereunder. The information set forth in Annex 1-A
hereto is hereby added to the information set forth in Schedules
___________/1/ to the Guarantee and Collateral Agreement. The Additional
-
Grantor hereby represents and warrants that each of the representations and
warranties contained in Section 4 of the Guarantee and Collateral Agreement is
true and correct on and as the date hereof (after giving effect to this
Assumption Agreement) as if made on and as of such date.
___________
/1/ Refer to each Schedule which needs to be supplemented.
-
33
<PAGE>
2. GOVERNING LAW. THIS ASSUMPTION AGREEMENT SHALL BE GOVERNED BY,
-------------
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW
YORK.
IN WITNESS WHEREOF, the undersigned has caused this Assumption
Agreement to be duly executed and delivered as of the date first above written.
[ADDITIONAL GRANTOR]
By:
-------------------------
Name:
Title:
34
<PAGE>
EXHIBIT 10.6
-1-
AGREEMENT AND DEED OF PLEDGE OF SHARES DI/BK/682857A.agr
IN YELLOW TAPE B.V. AND NITINOL
MEDICAL TECHNOLOGIES INTERNATIONAL B.V.
Today, the ninth of July -------------------------------------------------------
nineteen hundred and ninety-eight, appeared before me, -- Hajo Bart Hendrik
Kraak, civil law notary officiating in Amsterdam: ------------------------------
1. Neeltje Jansen, prospective civil law notary, residing in Amsterdam, Javakade
594, born in Harlingen on the seventeenth day of February nineteen hundred
and sixty-five, married, holder of a Dutch passport with number N08541854,
-----------------------------------------------------------------------------
acting for the purpose hereof as attorney-in-writing of: J.H. WHITNEY & CO.,
a limited partnership organized and existing under the laws of the State of
New York, United States of America, having its registered office at 177 Broad
Street, Stanford, Connecticut 06901, ---- acting not for itself but solely in
its capacity as pledgee for and as agent in the name and for the ratable
benefit of the following Lenders as defined in the Guarantee and Collateral
Agreement (as defined below) (in such capacity herein called the "Security
Trustee") : ----------------------------------------------------------------
(a) WHITNEY SUBORDINATED DEBT FUND, L.P., a limited partnership organized and
existing under the laws of the State of Delaware, United States of
America, having its principal place of business at 177 Broad Street,
Stanford, Connecticut 06901, ----------------------- acting in its
capacity as the Purchaser as such term is defined in the Subordinated
Note and Common
<PAGE>
-2-
Stock Purchase Agreement (as defined below) and the Guarantee and
Collateral Agreement; ---------------------------------------------------
(b) any holder of any Note from time to time pursuant to the Subordinated
Note and Common Stock Purchase Agreement dated as of the eighth day of
July nineteen hundred and ninety-eight among the Purchaser, the Agent and
Nitinol Medical Technologies, Inc. (the "Subordinated Note and Common
Stock Purchase Agreement"), ---------------------------------------------
the Security Trustee and all of such Lenders, hereinafter collectively called
the "Secured Parties"; and --------------------------------------------------
2. Katelijne Jacqueline Ribbink, prospective civil law notary, residing in
Amsterdam, Patroclosstraat 9 huis, born in Deventer on the fourth day of
October nineteen hundred and seventy-two, unmarried nor registered as a
partner, holder of a Dutch passport with number -----------------------------
M927735, --------------------------------------------------------------------
acting for the purpose hereof as attorney-in-writing of:---------------------
a. NMT NEUROSCIENCES (INTERNATIONAL), INC., a corporation organized and
existing under the laws of the State of Delaware, United States of
America, having its registered office and principal place of ------------
business at 27 Wormwood Street, Boston, Massachusetts 02210,-------------
(hereinafter called the "Pledgor 0l"); ----------------------------------
b. YELLOW TAPE B.V., a private company with limited liability (besloten
vennootschap met beperkte aansprakelijkheid), with official seat in
Amsterdam, having its registered office at Frederik Roeskestraat 123
first floor, 1076 EE Amsterdam, ------------ The Netherlands, registered
with the Trade Register of the Chamber of Commerce and Industry in
Amsterdam under number 33298255,-----------------------------------------
<PAGE>
-3-
(hereinafter called the "Company 01");-----------------------------------
c. NITINOL MEDICAL TECHNOLOGIES, INC., a corporation organized and existing
under the laws of the State of Delaware, United States of America, having
its registered office and principal place of ---------------- business at
27 Wormwood Street, Boston, Massachusetts 02210,-------------------------
(hereinafter called the "Pledgor 02");-----------------------------------
d. NITINOL MEDICAL TECHNOLOGIES INTERNATIONAL B.V., a private company with
limited liability (besloten vennootschap met beperkte aansprakelijkheid),
with official seat in The Hague, having its registered office at
Hogewaldstraat 1-B, 6641 KD Beuningen (Gelderland), The Netherlands,
registered with the Trade Register of the Chamber of Commerce and
Industry in Arnhem under number 10148235, ----------------- (hereinafter
called the "Company 02"),---------------------------------------------
the Pledgor 0l and Pledgor 02 hereinafter jointly referred to as "Pledgors"; and
- -------------------------------- the Company 0l and Company 02 hereinafter
jointly referred to as "Companies". --------------------------------------------
The persons appearing before me, civil law notary, declared as follows:--------
A. On the date hereof:----------------------------------------------------------
(a) the Purchaser, the Agent and the Pledgor 02 have entered or will enter
into the Subordinated Note and Common Stock Purchase Agreement; ---------
(b) the Grantors and the Agent, acting not for itself but solely as agent for
the Purchaser and the Lenders, have entered or will enter into the
Guarantee and Collateral Agreement (the "Guarantee and Collateral
Agreement"); and --------------------------------------------------------
(c) each of the Pledgors will hereby enter into the Covenants to Pay as
referred to in Section 1 hereof
<PAGE>
-4-
with the Security Trustee (the "Covenants to Pay"), the Subordinated Note
and Common Stock Purchase Agreement, the Guarantee and Collateral Agreement
and the Notes hereinafter collectively referred to as the "Documents". -----
----------------------------------------------------------------------------
B. All capitalised terms and expressions used but not defined in this Agreement
and Deed of Pledge of Shares (the "Agreement") shall have the meaning as
defined in the Subordinated Note and Common Stock Purchase Agreement and the
Guarantee and Collateral Agreement.------------------------
C. To induce the Secured Parties to enter into the Subordinated Note and Common
Stock Purchase Agreement and the Guarantee and Collateral Agreement and as a
condition precedent to the obligations of the respective Secured Parties
thereunder, the Pledgor 01 has agreed to pledge and grant for the ratable
benefit of the Secured Parties a first priority right of pledge of sixty-five
percent (65%) of the issued shares in the share capital of the Company 01,
being twenty-six (26) fully paid-up common shares each having a par value of
one thousand Dutch Guilders (NLG 1,000.--), numbered 1 to 26 inclusive,
hereinafter referred to as the "Shares 01" and the Pledgor 02 has agreed to
pledge and grant for the ratable benefit of the Secured Parties a first
priority right of pledge of sixty-five percent (65%) of the issued shares in
the share capital of the Company 02, being twenty-six (26) fully paid-up
common shares each having a par value of one thousand Dutch Guilders (NLG
1,000.--), numbered 1 to 26 inclusive, hereinafter referred to as the "Shares
02", -------------------- the Shares 01 and Shares 02 hereinafter jointly
referred to as "Shares". ----------------------------------------------------
D. For the purpose of effecting the pledge as referred to under C. herein, each
of the Pledgors, the Companies
<PAGE>
-5-
and the Security Trustee have agreed to enter into this Agreement and the
Pledgor 01 has agreed to pledge the Shares 01 and the Pledgor 02 has agreed
to pledge the Shares 02 to the Security Trustee, in its aforesaid capacity as
described in paragraph 1 hereinabove, for the ratable benefit and in the name
of the Secured Parties, to secure the prompt and complete payment and
performance when due of each of the Pledgors' Guarantor Obligations as
defined in the Guarantee and Collateral Agreement and the Covenant Obligation
(as defined below), which shall for the time being be due, owing or incurred
to the Secured Parties under the Documents and the Covenant to Pay
(collectively, the "Secured Obligations"), ----------------------------------
NOW, THEREFORE, each of the Pledgors hereby agrees with and hereby pledges to
the Security Trustee for the ratable benefit and in the name of the Secured
Parties, and the Security Trustee hereby agrees with each of the Pledgors and
accepts such pledge, as follows:------------------------------------------------
SECTION 1. ---------------------------------------------------------------------
COVENANTS TO PAY.---------------------------------------------------------------
- ----------------
a. Each of the Pledgors hereby agrees and covenants with the Security Trustee,
solely in its capacity as pledgee for and as agent in the name and for the
ratable benefit of the Lenders (in such capacity herein called the "Security
Agent") that it shall pay directly to the Security Agent on its first demand,
any and all amounts equal to any and all amounts which each of the Pledgors
is now or may at any time and from time to time hereafter be obligated to pay
to the Secured Parties or any one or more of them under any of the Documents
to which the Pledgors are now or may at any time become a party, if and when
such amounts become due and payable (such agreement and covenant the
"Covenant Obligation"). ----
<PAGE>
-6-
b. Each of the Pledgors and the Security Agent agree and acknowledge that (i)
each of the Pledgors' Covenant Obligation consists of the obligations and
liabilities of each of the Pledgors to J.H. Whitney & Co., as Security Agent,
separate and independent from and without prejudice to the other Guarantor
Obligations which each of the Pledgors has or may have at any time to the
Lenders (including Whitney Subordinated Debt Fund, L.P.) and the Security
Agent under this Agreement or any of the other Documents or otherwise, and
(ii) each of the Pledgors' Covenant Obligation represents the Security
Agent's own claim ("vordering op naam") to receive payment of the Pledgor's
-----------------
Covenant Obligation, separate and independent from any claims of the Secured
Parties on each of the Pledgors; provided that the total liability of each of
the Pledgors under its Covenant Obligation and under its Guarantor Obligation
shall never exceed the total liability of the Pledgors' liability under the
Guarantor Obligations and that the total liability of the Pledgors under
their respective Covenant Obligations shall be decreased from time to time by
the amount that any of the Pledgors shall have permanently paid either toward
its Guarantor Obligation or its Covenant to Pay. ---------------------------
c. If, after foreclosure of all collateral in which a security interest or lien
has been granted or will be granted by each of the Pledgors, the proceeds are
not sufficient to satisfy and discharge each of the Pledgors' Covenant
Obligation, the remainder of such Covenant Obligation shall then cease to
exist, but without prejudice to any other Guarantor Obligations which any of
the Pledgors may have and without prejudice to any other remedies which the
Secured Parties may have under any of the Documents. ------------------------
<PAGE>
-7-
d. Without limitation of the foregoing provisions of this Section 1, nothing
contained in this Section shall in any way negate or affect any Guarantor
Obligations other than the Covenant Obligation which each of the Pledgors has
or at any time may have under the Documents or otherwise to the Lenders and
the Security Agent. ---------------------------------------------------------
SECTION 2. ---------------------------------------------------------------------
PLEDGE OF THE SHARES AND OTHER COLLATERAL --------------------------------------
- -----------------------------------------
2.1 - As security for the payment in full, when due, of its Secured
Obligations, the Pledgor 01 hereby pledges (vestigt hierbij een recht van
pand op) the Shares 01 to the Security Trustee for the ratable benefit
and in the name of the Secured Parties, which pledge is hereby accepted
by the Security Trustee for the ratable benefit and in the name of the
Secured Parties, and the Pledgor 01 hereby assigns to the Security
Trustee for the ratable benefit and in the name of the Secured Parties
all voting rights pertaining to the Shares 01 upon the terms and subject
to the conditions of subsection 5.1 and Section 7 of this Agreement.-----
- As security for the payment in full, when due, of its Secured
Obligations, the Pledgor 02 hereby pledges (vestigt hierbij een recht van
pand op) the Shares 02 to the Security Trustee for the ratable benefit
and in the name of the Secured Parties, which pledge is hereby accepted
by the Security Trustee for the ratable benefit and in the name of the
Secured Parties, and the Pledgor 02 hereby assigns to the Security
Trustee for the ratable benefit and in the name of the Secured Parties
all voting rights pertaining to the Shares 02 upon the terms and subject
to the conditions of subsection
<PAGE>
-8-
5.1 and Section 7 of this Agreement. -----------------------------------
2.2 Subject to subsection 5.1 hereof with respect to dividends and other
distributions, each of the Pledgors, to the extent such pledge is not
included in the pledge of the Shares, and to the fullest extent possible as
permitted by applicable law, hereby pledges to the Security Trustee for the
ratable benefit and in the name of the Secured Parties as security for the
prompt and complete payment and performance when due of its Secured
Obligations, all rights to or under dividends, cash distributions,
proceeds, options, warrants, claim rights and other similar rights other
than shares in the capital of the Companies currently existing or in the
future arising or received with respect to or out of its Shares (all such
collateral pledged to the Security Trustee under this subsection 2.2 being
collectively called the "Rights"). ---------------------------------------
2.3 To the extent no valid pledge of the Rights is created hereunder, each of
the Pledgors irrevocably and unconditionally undertakes to pledge to the
Security Trustee and to assign to the Security Trustee for the ratable
benefit and in the name of the Secured Parties the Rights subject to
subsection 5.1 (all of the collateral granted to the Security Trustee under
subsections 2.1, 2.2 and 2.3 of this Section 2 in respect of the Pledgors
to be collectively called the "Collateral"). ----------------------------
2.4 Each of the Pledgors undertakes to procure that at all times, so long as
this Agreement has not been terminated, the Companies shall include in its
shareholders register appropriate entries confirming the pledge of its
Shares granted hereunder. --------------------------- For the purpose of
this Agreement the term "Shares" shall be construed so as to include any
and all future
<PAGE>
-9-
shares in the capital of the Companies that may be acquired by each of the
Pledgors and pledged to the Security Trustee pursuant to this Agreement
after the date hereof. ----------------------------------------------------
2.5 Each of the Pledgors covenants and warrants that in the event any new
shares (of any class, description, kind and denomination) are issued to it
by the Companies, except if and to the extent the Security Trustee shall in
advance otherwise agree in writing: (i) all such new shares shall be fully
paid-up and shall be validly issued only to each of the Pledgors, (ii)
sixty-five percent (65%) of such new shares shall be pledged by each of the
Pledgors to the Security Trustee, for the ratable benefit and in the name
of the Secured Parties, as a valid and first ranking pledge, by execution
and delivery to the Security Trustee of an additional agreement and deed of
pledge (an "Additional Agreement"), the terms and conditions of which shall
be in form and substance the same as the terms and conditions of this
Agreement, (iii) it shall cause the Companies immediately upon issuance of
all such new shares to acknowledge the pledge made under such Additional
Agreement and to include in its shareholders register appropriate entries
confirming the pledge made by the Pledgors under such Additional Agreement,
and (iv) it shall procure that prior to the issuance of any such new shares
the general meeting of shareholders of the Companies shall approve the
pledge of such new shares as well as the assignment of voting rights in
respect thereof to the Security Trustee. --
2.6 Each of the Pledgors hereby grants to the Security Trustee an irrevocable
power of attorney to perform on behalf and in the name of each respective
Pledgor, after the occurrence of an Event of Default that is
<PAGE>
-10-
continuing, any and all of its obligations under this Agreement, which
irrevocable power shall survive, to the fullest extent permitted by law,
any and all circumstances affecting the Pledgors, including dissolution of
the Pledgors. -------------------------------------------------------------
SECTION 3. ---------------------------------------------------------------------
NO RELEASE; FURTHER ASSURANCES -------------------------------------------------
- ------------------------------
3.1 Nothing set forth in this Agreement shall (a) relieve the Pledgors from the
performance of any term, covenant, condition or agreement on its part to be
performed, or observed under or in respect of any of the Secured
Obligations, (b) impose any obligation on the Security Trustee to perform
or observe any such term, covenant, condition or agreement on the part of
the Pledgors to be so performed or observed, or (c) impose any liability on
the Security Trustee for any act or omission on the part of the Pledgors
relating thereto or for any breach of any representation or warranty on the
part of the Pledgors contained in this Agreement or in respect of the
Collateral or made in connection herewith or therewith. -------------------
3.2 If and to the extent that at any time, and from time to time, in the
reasonable opinion of the Security Trustee it shall be necessary or
appropriate that further instruments be executed in order to create or
perfect a valid pledge in favour of the Security Trustee with respect to
the Collateral or any part thereof, each of the Pledgors shall execute such
further instruments, to be made up in form and substance reasonably
satisfactory to the Security Trustee. -------------------------------------
SECTION 4. ---------------------------------------------------------------------
REPRESENTATIONS AND WARRANTIES -------------------------------------------------
- ------------------------------
- - Without limitation to the representations and warranties
<PAGE>
-11-
in the Subordinated Note and Common Stock Purchase Agreement or the Guarantee
and Collateral Agreement, the Pledgor 01 represents and warrants for the
ratable benefit of the Secured Parties as follows: ---------------------------
(i) the Shares 01 constitute sixty-five percent (65%) of the issued and
outstanding shares of any class and kind in the capital of the
Company 01, are fully paid-up and are free and clear of any Liens;
and -----------------------------------------------------------------
(ii) no depositary receipts ("certificaten van aandelen") have been
issued by the Company 01. -------------------------------------------
- - Without limitation to the representations and warranties in the Subordinated
Note and Common Stock Purchase Agreement or the Guarantee and Collateral
Agreement, the Pledgor 02 represents and warrants for the ratable benefit of
the Secured Parties as follows:-----------------------------------------------
(i) the Shares 02 constitute sixty-five percent (65%) of the issued and
outstanding shares of any class and kind in the capital of the
Company 02, are fully paid-up and are free and clear of any Liens;
and -----------------------------------------------------------------
(ii) no depositary receipts ("certificaten van aandelen") have been
issued by the Company 02. -------------------------------------------
SECTION 5. -------------------------------------------------------------------
RIGHTS IN RESPECT OF THE COLLATERAL ------------------------------------------
- -----------------------------------
5.1 So long as no Event of Default shall have occurred and be continuing, each
of the Pledgors shall remain entitled and authorized to exercise the voting
rights attached to the Shares, provided that such voting rights shall not be
exercised, and each of the Pledgors covenants that it shall not exercise
such voting rights for any purpose inconsistent with the terms and
conditions of this Agreement, the Subordinated Note and Common Stock
Purchase Agreement or the Guarantee
<PAGE>
-12-
and Collateral Agreement. --------------------------------------------------
5.2 Each of the Pledgors shall be entitled to receive, retain and utilize any
and all dividends and other distributions in respect of the Collateral until
the occurrence of an Event of Default that is continuing.
5.3 It is understood and agreed that both the Security Trustee and the Pledgors
shall have the rights which Netherlands law affords the holders of
depositary receipts of shares ("certificaten van aandelen") that are issued
with the cooperation of a company as referred to in Section 2:198 subsection
4 of the Netherlands Civil Code. -------------------------------------------
SECTION 6. ---------------------------------------------------------------------
COVENANTS AS TO THE COLLATERAL -------------------------------------------------
- ------------------------------
Except as otherwise permitted under the Subordinated Note and Common Stock
Purchase Agreement or the Guarantee and Collateral Agreement, so long as any of
the Secured Obligations shall remain outstanding, the Pledgors will be bound by
the covenants set forth in such agreements. ------------------------------------
SECTION 7. ---------------------------------------------------------------------
VOTING RIGHTS, DIVIDENDS AND OTHER DISTRIBUTIONS UPON --------------------------
- -----------------------------------------------------
EVENT OF DEFAULT ---------------------------------------------------------------
- ----------------
7.1 Subject to the amendment to the articles of association of each of the
Companies for the purpose of establishing that the voting rights attached
to the Shares may be transferred and the rights which Netherlands law
affords the holders of depositary receipts of shares ("certificaten van
aandelen") that are issued with the cooperation of a company as referred to
in Section 2:198 subsection 4 of the Netherlands Civil Code may be
attributed to a pledgee, the following provision shall apply: -------------
Upon the occurrence of an Event of Default that is continuing and upon
written notice thereof from the
<PAGE>
-13-
Security Trustee to the Pledgors: -----------------------------------------
a. any and all rights of the Pledgors under subsection 5.1 shall
automatically cease and the Security Trustee shall be fully entitled,
to the exclusion of the Pledgors, to exercise the voting rights
pertaining to its respective Shares; ----------------------------------
b. all rights of the Pledgors to receive the dividends and other
distributions, which it would otherwise be authorized to receive and
retain pursuant to subsection 5.2 hereof, shall automatically cease,
and thereupon the Security Trustee shall have the sole right to receive
and hold as Collateral such dividends and other distributions; --------
c. the Security Trustee shall be entitled to collect all liquidation
proceeds, if any, which are to be distributed on the Shares upon
dissolution and liquidation of the Companies or otherwise; and --------
d. all dividends and other distributions which are received by the
Pledgors contrary to the provisions of this subsection 7.1 shall be
received on behalf and for the benefit of the Security Trustee, shall
be segregated from the other assets of the Pledgors and shall be
immediately paid over or delivered (with any necessary endorsements) to
the Security Trustee or its authorized designee as Collateral in the
exact form as received, to be held by the Security Trustee as
Collateral and as further collateral security for the Secured
Obligations. ----------------------------------------------------------
7.2 Until the amendments to the articles of association as referred to in
subsection 7.1 have become effective, each of the Pledgors hereby
irrevocably agrees to exercise the voting rights attached to the Shares, in
the case of an Event of Default shall have occurred and be continuing, in
accordance with the instructions
<PAGE>
-14-
given by the Security Trustee. --------------------------------------------
SECTION 8. ---------------------------------------------------------------------
REMEDIES -----------------------------------------------------------------------
- --------
8.1 Upon the occurrence of an Event of Default that is continuing the Security
Trustee may, except as provided otherwise in the Subordinated Note and
Common Stock Purchase Agreement and the Guarantee and Collateral Agreement,
without demand, presentation or notice to the Pledgors, take any and all
action as permitted by Netherlands law for the purpose of foreclosing upon
and exercising its rights as pledgee. Without prejudice to the generality
of the foregoing, upon the occurrence of an Event of Default that is
continuing and after at least ten (10) days notice to the Pledgors and the
Companies, the Security Trustee shall have the right (i) to have the Shares
sold in a public sale and to apply the proceeds of such public sale as
provided in the Subordinated Note and Common Stock Purchase Agreement and
the Guarantee and Collateral Agreement, or (ii) to request the competent
Netherlands court to order that the Shares be sold or the pledges
established by or pursuant to this Agreement be otherwise realized in a
manner prescribed or authorized by such court and to apply the proceeds of
such sale or realization as provided above, all of the foregoing under (i)
and (ii) subject to and to the extent permitted by the applicable
provisions of Netherlands law and of the Articles of Association of the
Companies as the same shall read at the relevant time. --------------------
8.2 To the extent necessary, each of the Pledgors agrees that upon the
occurrence of an Event of Default it shall be deemed to be in default ("in
verzuim") within the meaning of Section 3:248 of the Netherlands Civil
<PAGE>
-15-
Code. ---------------------------------------------------------------------
8.3 In case of a public or private sale of all or any of the Shares by or on
behalf of the Security Trustee pursuant to this Agreement, each of the
Pledgors, to the fullest extent permitted under applicable law, hereby
agrees that it shall upon such sale (i) waive, irrevocably and
unconditionally, any and all rights of first refusal that it may have, or
(ii) grant, irrevocably and unconditionally, any and all approvals that may
be requisite, as the case may be. -----------------------------------------
SECTION 9. ---------------------------------------------------------------------
No Waiver ----------------------------------------------------------------------
- ---------
9.1 Except as otherwise provided by Netherlands law, no failure on the part of
the Security Trustee to exercise, and no course of dealing with respect to,
and no delay in exercising, any right, power or remedy hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise by
the Security Trustee of any right, power or remedy hereunder preclude any
other or further exercise thereof or the exercise of any other right, power
or remedy. ----------------------------------------------------------------
The remedies herein provided are to the fullest extent permitted by law
cumulative and are not exclusive of any remedies provided by law. ---------
Discontinued Proceedings -------------------------------------------------------
- ------------------------
9.2 In the event the Secured Parties shall have instituted any proceeding to
enforce any right, power or remedy under this Agreement by foreclosure,
sale, entry or otherwise, and such proceeding shall have been discontinued
or abandoned for any reason, then and in every such case the Pledgor, the
Security Trustee and each other Secured Party shall be restored to their
respective former positions and rights hereunder with respect to the
Collateral, and all rights, remedies
<PAGE>
-16-
and powers of the Security Trustee and any other Secured Party shall
continue as if no such proceeding had been instituted. --------------------
SECTION 10. --------------------------------------------------------------------
The Security Trustee and Replacement of the Security Trustee -------------------
- ------------------------------------------------------------
10.1 The Security Trustee has been appointed as Security Trustee hereunder
pursuant to and upon the terms set forth in the Guarantee and Collateral
Agreement. ---
The Security Trustee may be replaced and a successor Security Trustee may
be appointed in the manner provided in the Guarantee and Collateral
Agreement. ---
Upon the acceptance of any appointment as a Security Trustee by a successor
Security Trustee, the Security Trustee shall assign all of its rights under
the Documents and this Agreement to such successor Security Trustee who
shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Security Trustee and it shall
thereupon be discharged from its duties and obligations under this
Agreement. ----------------------------------------------------------------
Indemnification ----------------------------------------------------------------
- ---------------
10.2 Each of the Pledgors hereby agrees and undertakes to indemnify the
Security Trustee and each other Secured Party for any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses, disbursements of any kind and character whatsoever, which may be
imposed on, incurred by or asserted against the Security Trustee or any
other Secured Party relating directly or indirectly to the dealings by the
Security Trustee or any other Secured Party with the Pledgors arising out
of the Documents, or any other documents contemplated by or referred to
herein or therein or the transactions
<PAGE>
-17-
contemplated hereby or thereby or the enforcement of any of the terms
hereof or of any such other documents; subject to any limitations on
recoverability under the Subordinated Note and Common Stock Purchase
Agreement and the Guarantee and Collateral Agreement and provided,
however, that the Pledgors shall not be liable for any of the foregoing to
the extent they arise from (i) any breach by the Security Trustee of its
obligations hereunder, or (ii) the gross negligence or wilful misconduct
of the Security Trustee and any other Secured Party. ---------------------
SECTION 11. --------------------------------------------------------------------
AMENDMENTS ---------------------------------------------------------------------
- ----------
This Agreement may not be amended, modified, terminated or waived except in
accordance with the provisions of the Subordinated Note and Common Stock
Purchase Agreement and the Guarantee and Collateral Agreement. -----------------
Any amendment, modification or supplement of or to any provision of this
Agreement, any termination or waiver of any provision of this Agreement, and any
consent to any departure by the Pledgors from the terms of any provision of this
Agreement shall be effective only after the execution of a deed before a Dutch
civil law notary setting forth any such amendment, modification, supplement,
termination or waiver. ---------------------------------------------------------
No notice to or demand upon the Pledgors in any instance hereunder shall entitle
the Pledgors to any other or further notice or demand in similar or other
circumstances. -----------------------------------------------------------------
SECTION 12. --------------------------------------------------------------------
TERMINATION --------------------------------------------------------------------
- -----------
This Agreement and the right of pledge on the Shares created thereby shall
remain in full force and effect until the Security Trustee shall have confirmed
in writing
<PAGE>
-18-
to the Pledgors that all Secured Obligations have been fully and finally
satisfied.
SECTION 13. --------------------------------------------------------------------
NOTICES ------------------------------------------------------------------------
- -------
All notices, demands, instructions and other communications required or
permitted to be given to or made upon any party hereto shall be given in
accordance with the provisions of the Subordinated Note and Common Stock
Purchase Agreement and the Guarantee and Collateral Agreement. ----------------
For the purposes hereof, the addresses of the Secured Parties and the Security
Trustee shall be the addresses in effect from time to time under the
Subordinated Note and Common Stock Purchase Agreement and the Guarantee and
Collateral Agreement. ----------------------------------------------------------
SECTION 14. --------------------------------------------------------------------
CONTINUING SECURITY INTEREST ---------------------------------------------------
- ----------------------------
This Agreement shall (i) create a continuing security interest in the Collateral
which shall remain in full force and effect until termination of this Agreement
in accordance with Section 11 hereof, (ii) be binding upon each of the Pledgors,
its successors and assigns, and (iii) inure, together with the rights and
remedies of the Security Trustee hereunder, to the ratable benefit of the
respective Secured Parties and for each of their respective successors,
transferees and assigns; no other persons (including without limitation, any
other creditor of the Pledgor) shall have any interest herein or any right or
benefit with respect hereto. ---------------------------------------------------
For the avoidance of doubt it is understood and agreed that the parties to this
Agreement shall procure that any successor, transferee or assign of any of the
Secured Parties shall become a party to this Agreement. ------------------------
SECTION 15. --------------------------------------------------------------------
SECURITY INTEREST ABSOLUTE -----------------------------------------------------
- --------------------------
<PAGE>
-19-
All rights of the Security Trustee and the other Secured Parties and the
security interests hereby created or to be created pursuant hereto and all
obligations of the Pledgors hereunder shall be absolute and unconditional
irrespective of: ---------------------------------------------------------------
(i) any change in the time, manner or place of payment of all or any of
the Secured Obligations or any change of the Subordinated Note and
Common Stock Purchase Agreement, the Guarantee and Collateral
Agreement, or any other agreement or instrument relating to any of
them, provided that such change or changes shall not result in a
discharge, waiver or novation of the Secured Obligations; or
----------------------------------------------------------------------
(ii) any exchange, release or non perfection of any other collateral, or
any release or amendment or waiver of or consent to any departure from
any other collateral for all or any of the Secured Obligations.
----------------------------------------------------------------------
SECTION 16. --------------------------------------------------------------------
GOVERNING LAW AND JURISDICTION -------------------------------------------------
- ------------------------------
16.1 This Agreement shall be governed by and construed in accordance with
the laws of the Netherlands.-----------------------------------------
16.2 For the ratable benefit of the Security Trustee and the other Secured
Parties, each of the Pledgors hereby irrevocably agrees that the
Courts of the State of New York shall have jurisdiction to settle any
disputes which may arise in connection with the interpretation,
execution or performance of this Agreement, as well as any documents
executed in connection therewith, without prejudice to the right of
the Security Trustee and the other Secured Parties to take action
against the Pledgors in any other court of competent jurisdiction.
----------------------------------------------------------------------
SECTION 17. --------------------------------------------------------------------
SEVERABILITY OF PROVISIONS -----------------------------------------------------
- --------------------------
<PAGE>
-20-
Any provision of this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof or affecting the validity or enforceability of such provision
in any other jurisdiction. -----------------------------------------------------
SECTION 18. --------------------------------------------------------------------
HEADINGS -----------------------------------------------------------------------
- --------
Section headings used in this Agreement are for convenience of reference only
and shall not affect the construction of this Agreement. -----------------------
SECTION 19. --------------------------------------------------------------------
NO DISSOLUTION -----------------------------------------------------------------
- --------------
The Pledgors and the Security Trustee each waive any rights it may have to
dissolve this Agreement pursuant to Section 265 of Book 6 of the Netherlands
Civil Code or on any other ground and further agrees that the Security Trustee
shall not have the obligations referred to in Sections 249 and 252 of Book 3 of
the Netherlands Civil Code. ----------------------------------------------------
SECTION 20. --------------------------------------------------------------------
SHAREHOLDER APPROVAL -----------------------------------------------------------
- --------------------
- - With due observance of article 13 of the Articles of Association of the
Company 01, the Pledgor 01 as holder of all of the issued share capital of the
Company 01, hereby resolves, without holding a meeting, to approve the
assignment of the voting rights as referred to in subsection 2.1 of this
Agreement. -------------------------------------------------------------------
- - With due observance of article 22 of the Articles of Association of the
Company 02, the Pledgor 02 as holder of all of the issued share capital of the
Company 02, hereby resolves, without holding a meeting, to approve the
assignment of the voting rights as referred to in subsection 2.1 of this
Agreement. -------------------------------------------------------------------
<PAGE>
-21-
FINAL STATEMENTS ---------------------------------------------------------------
- - The Company 01 hereby declares that: ----------------------------------------
* it has reviewed this Agreement; ------------------------------------------
* it hereby acknowledges the pledge of the Shares set forth in this
Agreement; ---------------------------------------------------------------
* it shall act in accordance with the provisions of this Agreement and, in
particular, without limitation, shall notify the Security Trustee timely
and in writing of every general meeting of its shareholders; -------------
* it shall without delay register the pledging of the Shares 01 in its
shareholders register and the exact date and time of this pledge and
shall issue to the Security Trustee as soon as practically possible an
extract from such register relating to the pledge of the Shares 01. ------
- - The Company 02 hereby declares that: ----------------------------------------
* it has reviewed this Agreement; ------------------------------------------
* it hereby acknowledges the pledge of the Shares set forth in this
Agreement; ---------------------------------------------------------------
* it shall act in accordance with the provisions of this Agreement and, in
particular, without limitation, shall notify the Security Trustee timely
and in writing of every general meeting of its shareholders; -------------
* it shall without delay register the pledging of the Shares 02 in its
shareholders register and the exact date and time of this pledge and shall
issue to the Security Trustee as soon as practically possible an extract
from such register relating to the pledge of the Shares 02. --------------
- - The Pledgor 01 hereby declares that: ----------------------------------------
------------------------------------
it acquired the Shares 01 by virtue of a transfer following an agreement of
sale and purchase by deed executed on the third day of July nineteen hundred
and ninety-eight before R. Pfeiffer, civil law notary in
<PAGE>
-22-
Rotterdam, which transfer was acknowledged by the Company 01 in the
same deed.-------------------------------------------------------------
- The Pledgor 02 hereby declares that: ----------------------------------
-----------------------------------
it acquired the Shares 02 by virtue of a subscription upon
incorporation by deed executed on the twenty-fourth day of February
nineteen hundred and ninety-seven before M.G. van Ravesteyn, civil law
notary in Rotterdam. --------------------------------------------------
Sufficient proof of the existence of the powers of attorney has been given
to me, notary. ------------------------------------------------------------
./. The written powers of attorney are evidenced by five private instruments,
copies of which are attached to this deed. ---------------------------------
Wherefrom this deed, executed in Amsterdam in the form to be kept under a
civil law notary's custody on the date stated in the heading of this deed at
three hours twenty-five minutes post meridiem. -----------------------------
After the contents of this deed were briefly summed up for the appearers,
they declared to have noted the contents of this deed and not to require a
full reading thereof. ------------------------------------------------------
After it had been read in outline, this deed was then signed by the
appearers, who are known to me, civil law notary, and by me, civil law
notary. --------------------------------------------------------------------
(Signed): N. Jansen, K.J. Ribbink, H.B.H. Kraak. ---------------------------
<PAGE>
================================================================================
EXHIBIT 10.7
REGISTRATION RIGHTS AGREEMENT
among
NITINOL MEDICAL TECHNOLOGIES, INC.,
WHITNEY SUBORDINATED DEBT FUND, L.P.
and
J.H. WHITNEY & CO.
___________________________________
Dated as of July 8, 1998
__________________________________
<PAGE>
TABLE OF CONTENTS
Page
----
1. Definitions............................................................ 1
2. Securities Subject to this Agreement................................... 3
(a) Registrable Securities.......................................... 3
(b) Holders of Registrable Securities............................... 3
3. Demand Registration.................................................... 3
(a) Request for Demand Registration................................. 3
(b) Effective Demand Registration................................... 4
(c) Expenses........................................................ 4
(d) Underwriting Procedures......................................... 4
(e) Selection of Underwriters....................................... 5
(f) Limitations on Demand Registrations............................. 5
4. Piggy-Back Registration................................................ 6
(a) Piggy-Back Rights............................................... 6
(b) Priority of Registrations....................................... 7
(c) Expenses........................................................ 7
(d) Conditions and Limitations on Piggyback Registrations........... 7
5. Holdback Agreements.................................................... 8
(a) Restrictions on Public Sale by Holders.......................... 8
(b) Restrictions on Public Sale by the Company...................... 8
6. Registration Procedures................................................ 8
(a) Obligations of the Company...................................... 8
(b) Seller Information.............................................. 11
(c) Notice to Discontinue........................................... 11
7. Registration Expenses.................................................. 11
8. Indemnification; Contribution.......................................... 12
(a) Indemnification by the Company.................................. 12
(b) Indemnification by Holders...................................... 12
(c) Conduct of Indemnification Proceedings.......................... 13
(d) Contribution.................................................... 14
9. Rule 144; Other Exemptions............................................. 14
10. Certain Limitations on Registration Rights............................. 15
-i-
<PAGE>
Page
----
11. Miscellaneous.......................................................... 15
(a) Recapitalizations, Exchanges, etc............................... 15
(b) No Inconsistent Agreements; Other Registration Rights........... 15
(c) Remedies........................................................ 15
(d) Amendments and Waivers.......................................... 15
(e) Notices......................................................... 16
(f) Successors and Assigns.......................................... 17
(g) Counterparts.................................................... 17
(h) Headings........................................................ 17
(i) Governing Law................................................... 17
(j) Jurisdiction.................................................... 17
(k) Severability.................................................... 18
(l) Rules of Construction........................................... 18
(m) Entire Agreement................................................ 18
(n) Further Assurances.............................................. 18
-ii-
<PAGE>
REGISTRATION RIGHTS AGREEMENT
-----------------------------
REGISTRATION RIGHTS AGREEMENT, dated as of July 8, 1998, among NITINOL
MEDICAL TECHNOLOGIES, INC., a Delaware corporation (the Company"), WHITNEY
SUBORDINATED DEBT FUND, L.P., a Delaware limited partnership ("WSDF") and J.H.
WHITNEY & CO. ("Whitney").
WHEREAS, the Company, WSDF and Whitney have entered into that certain
Subordinated Note and Common Stock Purchase Agreement of even date herewith (the
"Purchase Agreement"), pursuant to which the Company has (i) sold to WSDF a
subordinated promissory note, due September 30, 2003, in the principal amount of
$20,000,000 (the "Note") and 113,793 shares of Common Stock and (ii) paid to
Whitney a transaction fee of 561,207 shares of Common Stock. In order to induce
WSDF to purchase the Note, the Company has agreed to provide registration rights
with respect to the Registrable Securities (as hereinafter defined) as set forth
in this Agreement.
The parties hereby agree as follows:
1. Definitions. As used in this Agreement, and unless the context
-----------
requires a different meaning, the following terms have the meanings indicated:
"Act" means the Securities Act of 1933, as amended, and the rules
---
and regulations of the SEC promulgated hereunder.
"Approved Underwriter" has the meaning assigned such term in
--------------------
Section 3(e).
"Approved Underwriter Amount" has the meaning assigned such term
---------------------------
in Section 3(d).
"Business Day" means any day other than a Saturday, Sunday or
------------
other day on which commercial banks in the City of New York are authorized or
required by law or executive order to close.
"Common Stock" means the Common Stock, $0.001 par value, of the
------------
Company, or any other capital stock of the Company into which such stock is
reclassified or reconstituted.
"Company Underwriter" has the meaning assigned such term in
-------------------
Section 4(a).
"Demand Registration" has the meaning assigned such term in
-------------------
Section 3(a).
<PAGE>
"Designated Holder" means WSDF and Whitney and any of their
-----------------
respective transferees to whom Registrable Securities have been transferred
other than the transferee to whom such securities have been transferred pursuant
to a registration statement under the Act or Rule 144 under the Act.
"Exchange Act" means the Securities and Exchange Act of 1934, as
------------
amended, and the rules and regulations of the SEC thereunder.
"Holder" has the meaning assigned such term in Section 2(b).
------
"Holders' Counsel" means (a) with respect to any Demand
----------------
Registration that has been requested pursuant to Section 3, the one counsel
selected by the Initiating Holders holding a majority of the Registrable
Securities held by all Initiating Holders being registered in such registration,
and (b) with respect to a request for registration of Registrable Securities
pursuant to Section 4, the one counsel selected by the Holders holding a
majority of the Registrable Securities being registered in such registration.
"Indemnified Party" has the meaning assigned such term in Section
-----------------
8(c).
"Indemnifying Party" has the meaning assigned such term in
------------------
Section 8(c).
"Initiating Holders" has the meaning assigned to such term in
------------------
Section 3(a).
"Inspector" has the meaning assigned such term in Section
---------
6(a)(viii).
"NASD" has the meaning assigned such term in Section 6(a)(xv).
----
"Other Investors" means holders of the Common Stock of the
---------------
Company not entitled to distribute such shares of Common Stock to the public
pursuant to Rule 144(k) (or any successor provision then in effect) under the
Act.
"Person" means any individual, firm, corporation, partnership,
------
trust, incorporated or unincorporated association, joint venture, joint stock
company, government (or an agency or political subdivision thereof) or other
entity of any kind, and shall include any successor (by merger or otherwise) of
any such entity.
"Registrable Securities" means, subject to Section 2(a), each of
----------------------
the following: (a) the 561,207 shares of Common Stock issued to WSDF pursuant to
the Purchase Agreement, (b) the 113,793 shares of Common Stock issued to Whitney
pursuant to the Purchase Agreement and (c) any shares of Common Stock issued or
issuable in respect of shares of Common Stock issued pursuant to clauses (a) and
(b)
-2-
<PAGE>
above by way of a stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise.
"Registration Expenses" has the meaning assigned such term in
---------------------
Section 7.
"SEC" means the Securities and Exchange Commission.
---
"Shares" means the Common Stock, any class of common stock of the
------
Company authorized after the date of this Agreement, or any other class of stock
resulting from successive changes or reclassifications of the Shares.
"Total Securities" has the meaning assigned such term in Section
----------------
4(a).
"Underwriters" has the meaning assigned such term in Section
------------
6(d).
"Valid Business Reason" has the meaning assigned such term in
---------------------
Section 3(f).
2. Securities Subject to this Agreement.
------------------------------------
(a) Registrable Securities. For the purposes of this Agreement,
----------------------
Registrable Securities will cease to be Registrable Securities when (i) a
registration statement covering such Registrable Securities has been declared
effective under the Act by the SEC and such Registrable Securities have been
disposed of pursuant to such effective registration statement or (ii) the entire
amount of Registrable Securities proposed to be sold in a single sale are or, in
the opinion of counsel satisfactory to the Company and the Holder, each in their
reasonable judgment, may, be distributed to the public pursuant to Rule 144 in
compliance with the requirements of paragraphs (c), (e), (f) and (g) of Rule 144
(notwithstanding the provisions of paragraph (k) of such Rule) (or any successor
provision then in effect) under the Act.
(b) Holders of Registrable Securities. A Person is deemed to be
---------------------------------
a holder of Registrable Securities (a "HOLDER") whenever such Person (i) is a
------
party to this Agreement (or a permitted transferee thereof) and (ii) owns of
record Registrable Securities. If the Company receives conflicting
instructions, notices or elections from two or more persons with respect to the
same Registrable Securities, the Company may act upon the basis of the
instructions, notice or election received from the registered owner of such
Registrable Securities.
3. Demand Registration.
-------------------
(a) Request for Demand Registration. Subject to Section 3(f)
-------------------------------
below, at any time the Designated Holders holding at least 25% of the
Registrable Securities held by all of the Designated Holders (the "INITIATING
----------
HOLDERS") may request in writing the registration of Registrable Securities
- -------
under the Act, and under
-3-
<PAGE>
the securities or blue sky laws of any jurisdiction designated by such holder or
holders (each such registration under this Section 3(a) that satisfies the
requirements set forth in Section 3(b) is referred to herein as a "DEMAND
------
REGISTRATION"). Notwithstanding the foregoing, in no event shall the Company be
- ------------
required to effect more than three Demand Registrations. Two or more
registrations filed in response to one demand shall be counted as one
registration statement. Each request for a Demand Registration by the
Initiating Holders in respect thereof shall specify the amount of the
Registrable Securities proposed to be sold, the intended method of disposition
thereof and the jurisdictions in which registration is desired. Upon a request
for a Demand Registration, the Company shall promptly take such steps as are
necessary or appropriate to prepare for the registration of the Registrable
Securities to be registered. Within fifteen (15) days after the receipt of such
request, the Company shall give written notice thereof to all other Designated
Holders and include in such registration all Registrable Securities held by a
Designated Holder from whom the Company has received a written request for
inclusion therein at least ten (10) days prior to the filing of the registration
statement. Each such request will also specify the number of Registrable
Securities to be registered, the intended method of disposition thereof and the
jurisdictions in which registration is desired. Subject to Section 3(d), the
Company shall be entitled to include in any registration statement and offering
made pursuant to a Demand Registration, authorized but unissued shares of Common
Stock, shares of Common Stock held by the Company as treasury shares or shares
of Common Stock held by Stockholders other than the Holders; provided, that such
inclusion shall be permitted only to the extent that it is pursuant to and
subject to the terms of the underwriting agreement or arrangements, if any,
entered into by the Initiating Holders exercising the Demand Registration
rights.
(b) Effective Demand Registration. The Company shall use its best
-----------------------------
efforts to cause any such Demand Registration to become effective not later than
ninety (90) days after it receives a request under Section 3(a). A registration
requested pursuant to Section 3(a) hereof shall not count as one of the three
demands to which the Designated Holders are entitled thereunder unless such
registration statement is declared effective and remains effective for at least
ninety (90) days.
(c) Expenses. In any registration initiated as a Demand Registration,
--------
the Company shall pay all Registration Expenses in connection therewith, whether
or not such requested Demand Registration becomes effective.
(d) Underwriting Procedures. If the Initiating Holders holding a
-----------------------
majority of the Registrable Securities held by all Initiating Holders to which
the requested Demand Registration relates so elect, the offering of such
Registrable Securities pursuant to such requested Demand Registration shall be
in the form of a firm commitment underwritten offering and the managing
underwriter or underwriters selected for such offering shall be the Approved
Underwriter selected in accordance with Section 3(e). In such event, if the
Approved Underwriter advises the Company in writing that, in its opinion, the
aggregate amount of such Registrable Securities requested to be included in such
offering (including those securities requested by the Company to be included in
such registration) is sufficiently large to have an adverse effect on the
success of such offering, then the Company shall include in such registration
-4-
<PAGE>
only the aggregate amount of Registrable Securities that in the opinion of the
Approved Underwriter may be sold without any such effect on the success of such
offering (the "APPROVED UNDERWRITER AMOUNT"), and (i) each Designated Holder
---------------------------
shall be entitled to have included in such registration Registrable Securities
equal to its pro rata portion of the Approved Underwriter Amount, as based on
the amounts of Registrable Securities sought to be registered by the Designated
Holders in their requests for participation in the requested Demand Registration
and (ii) to the extent that the number of Registrable Securities to be included
by the Designated Holders is less than the Approved Underwriter Amount,
securities that the Company proposes to register shall also be included.
If, as a result of the proration provision of this Section 3(d), any
Designated Holder shall not be entitled to include all Registrable Securities in
a registration that such Designated Holder has requested to be included, such
Designated Holder may elect to withdraw his request to include Registrable
Securities in such registration or may reduce the number requested to be
included; provided, however, that (x) such request must be made in writing prior
to the earlier of the execution of the underwriting agreement or the execution
of the custody agreement with respect to such registration and (y) such
withdrawal or reduction shall be irrevocable.
(e) Selection of Underwriters. If any requested Demand Registration
-------------------------
is in the form of an underwritten offering, the Initiating Holders holding a
majority of the Registrable Securities held by all Initiating Holders to be
included in the requested Demand Registration shall select and obtain an
investment banking firm of national reputation to act as the managing
underwriter of the offering (the "APPROVED UNDERWRITER"); provided, that such
--------------------
underwriter shall be reasonably satisfactory to the Company.
(f) Limitations on Demand Registrations. The Demand Registration
-----------------------------------
rights granted to the Holders in Section 3(a) are subject to the following
limitations: (i) each registration in respect of a Demand Registration must
include Registrable Securities having an aggregate market value of at least
$5,000,000.00, which market value shall be determined by multiplying the number
of Registrable Securities to be included in the Demand Registration by the
proposed per share offering price (provided that the limitation set forth in
this clause (i) shall not be in effect at any time the Holders' Registrable
Securities are not able to be sold under Rule 144 under the Act because of the
Company's failure to comply with the information requirements thereunder, unless
at such time, the Company's outside counsel (which shall be reasonably
acceptable to the Holders requesting such registration) delivers a written
opinion of counsel to such Holders to the effect that such Holders' Registrable
Securities may be publicly offered and sold without registration under the Act);
(ii) the Company shall not be required to cause a registration pursuant to
Section 3(a) to be declared effective within a period of 150 days after the
effective date of any registration statement of the Company effected in
connection with a Demand Registration; and (iii) if the Board of Directors of
the Company, in its good faith judgment, determines that any registration of
Registrable Securities should not be made or continued because it would
materially interfere with any material financing, acquisition, corporate
reorganization or merger or other
-5-
<PAGE>
transaction involving the Company or any of its subsidiaries (a "VALID BUSINESS
--------------
REASON"), the Company may (x) postpone filing a registration statement relating
- ------
to a Demand Registration until such Valid Business Reason no longer exists, but
in no event for more than ninety (90) days, and,(y) in case a registration
statement has been filed relating to a Demand Registration, if the Valid
Business Reason has not resulted from actions taken by the Company, the Company,
upon the approval of a majority of the Company's Board of Directors, such
majority to include at least one director affiliated with WSDF, may cause such
registration statement to be withdrawn and its effectiveness terminated or may
postpone amending or supplementing such registration statement; the Company
shall give written notice of its determination to postpone or withdraw a
registration statement and of the fact that the Valid Business Reason for such
postponement or withdrawal no longer exists, in each case, promptly after the
occurrence thereof. Notwithstanding anything to the contrary contained herein,
the Company may not postpone or withdraw a filing under Section 3(f)(iii) hereof
more than once in any twelve-month period.
Each Holder of Registrable Securities agrees that, upon receipt of any
notice from the Company that the Company has determined to withdraw any
registration statement pursuant to clause (iii) above, such Holder will
discontinue its disposition of Registrable Securities pursuant to such
registration statement and, if so directed by the Company, will deliver to the
Company (at the Company's expenses) all copies, other than permanent file
copies, then in such Holder's possession, of the prospectus covering such
Registrable Securities that was in effect at the time of receipt of such notice.
If the Company shall give any notice of postponement or withdrawal of a
registration statement, the Company shall, at such time as the Valid Business
Reason that caused such postponement or withdrawal no longer exists (but in no
event no later than ninety (90) days after the date of the postponement), use
its best efforts to promptly effect the registration under the Act of the
Registrable Securities covered by the postponed or withdrawn registration
statement in accordance with this Section 3 (unless the Holder(s) delivering the
Demand Registration request shall have withdrawn such request, in which case the
Company shall not be considered to have effected an effective registration for
the purposes of this Agreement), and such registration shall not be postponed or
withdrawn pursuant to clause (iii) above.
4. Piggy-Back Registration.
-----------------------
(a) Piggy-Back Rights. If the Company proposes to file a
-----------------
registration statement under the Act with respect to an offering by the Company
for its own account of any class of security (other than a registration
statement on Form S-4 or S-8 (or any successor form thereto)) under the Act,
then the Company shall give written notice of such proposed filing to each of
the Holders at least twenty (20) days before the anticipated filing date, and
such notice shall describe in detail the proposed registration and distribution
(including those jurisdictions where registration under the securities or blue
sky laws is intended) and offer such Holders the opportunity to register the
number of Registrable Securities as each such Holder may request. The Company
shall use its best efforts (within ten (10) days of the notice provided for in
the preceding sentence) to permit the Holders who have requested to participate
in the registration for such offering to include such Registrable Securities in
such offering on
-6-
<PAGE>
the same terms and conditions as the securities of the Company included therein.
Notwithstanding the foregoing, if such registration involves an underwritten
offering and the managing underwriters or underwriters (the "COMPANY
-------
UNDERWRITER") shall advise the Holders of Registrable Securities in writing
- -----------
that, in its opinion, the total amount of securities requested to be included in
such offering (the "TOTAL SECURITIES") is sufficiently large so as to have an
----------------
adverse effect on the success of the distribution of the Total Securities, then
the Company shall include in such registration, to the extent of the number of
Registrable Securities which the Company is so advised can be sold in (or during
the time of) such offering, first, all Common Stock or securities convertible
-----
into, or exchangeable or exercisable for, Common Stock that the Company proposed
to register for its own account, second, all securities proposed to be
------
registered by all Designated Holders and Other Investors, pro rata among such
Designated Holders and Other Investors, and third, all other securities proposed
-----
to be registered.
(b) Priority of Registrations. Subject to the provisions of Section
-------------------------
3(f)(iii), if the Company proposes to register securities pursuant to Section
4(a) hereof on the same day that the Designated Holders request a registration
pursuant to Section 3(a) hereof, then the Demand Registration requested pursuant
to Section 3(a) hereof shall be given priority.
(c) Expenses. The Company shall bear all Registration Expenses in
--------
connection with any registration pursuant to this Section 4.
(d) Conditions and Limitations on Piggyback Registrations. If, at any
-----------------------------------------------------
time after giving written notice of its intention to register any securities and
prior to the effective date of the registration statement filed in connection
with such registration, the Company shall determine for any reason not to
register or to delay registration of such securities, the Company may, at its
election, give written notice of such determination to all Holders of record of
Registrable Securities and (i) in the case of a determination not to register,
shall be relieved of its obligation to register the Registrable Securities in
connection with such abandoned registration, without prejudice, however, to the
rights of Holders under Section 3, and (ii) in the case of a determination to
delay the registration of its securities, shall be permitted to delay the
registration of such Registrable Securities for the same period as the delay in
registering such other equity securities.
Any Holder shall have the right to withdraw its request for inclusion
of its Registrable Securities in any registration statement pursuant to this
Section 4 by giving written notice to the Company of its request to withdraw;
provided, however, that (i) such request must be made in writing prior to the
earlier of the execution of the underwriting agreement or the execution of the
custody agreement with respect to such registration and (ii) such withdrawal
shall be irrevocable and, after making such withdrawal, a Holder shall no longer
have any right to include Registrable Securities in the registration as to which
such withdrawal was made.
-7-
<PAGE>
5. Holdback Agreements.
-------------------
(a) Restrictions on Public Sale by Holders. To the extent not
--------------------------------------
inconsistent with applicable law, each Holder agrees not to effect any public
sale or distribution of any Registrable Securities being registered or of any
securities convertible into or exchangeable or exercisable for such Registrable
Securities, including a sale pursuant to Rule 144 under the Act, during the
ninety (90) day period beginning on the effective date of such Demand
Registration or Piggy-Back Registration or other underwritten offering (except
as part of such registration), if and to the extent requested by any other
Holder, in the case of a non-underwritten public offering, or if and to the
extent requested by the Company Underwriter, in the case of an underwritten
public offering.
(b) Restrictions on Public Sale by the Company. The Company
------------------------------------------
agrees not to effect any public sale or distribution of any of its securities
for its own account (except pursuant to registrations on Form S-4 or S-8 (or any
successor form thereto) under the Act) during the ninety (90) day period
beginning on the effective date of any registration statement in which the
Holders are participating.
6. Registration Procedures.
-----------------------
(a) Obligations of the Company. Whenever registration of
--------------------------
Registrable Securities has been requested pursuant to Section 3 or 4 of this
Agreement, the Company shall use its best efforts to effect the registration and
sale of such Registrable Securities in accordance with the intended method of
distribution thereof as quickly as practicable, and in connection with any such
request, the Company shall, as expeditiously as possible:
(i) prepare and file with the SEC (in any event not later
than sixty (60) Business Days after receipt of a request to file a registration
statement with respect to Registrable Securities) a registration statement on
any form on which registration is requested for which the Company then
qualifies, which counsel for the Company and Holders' Counsel shall deem
appropriate and which shall be available for the sale of such Registrable
Securities in accordance with the intended method of distribution thereof, and
use its best efforts to cause such registration statement to become effective;
provided, however, that before filing a registration statement or prospectus or
- -------- -------
any amendments or supplements thereto, the Company shall (A) provide Holders'
Counsel with an adequate and appropriate opportunity to participate in the
preparation of such registration statement and each prospectus included therein
(and each amendment or supplement thereto) to be filed with the SEC, which
documents shall be subject to the review of Holders' Counsel, and (B) notify
Holders' Counsel and each seller of Registrable Securities pursuant to such
registration statement of any stop order issued or threatened by the SEC and
take all reasonable action required to prevent the entry of such stop order or
to remove it if entered;
(ii) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection
-8-
<PAGE>
therewith as may be necessary to keep such registration statement effective and
to comply with the provisions of the Act with respect to the disposition of all
Registrable Securities covered by such registration statement until the earlier
of (a) such time as all of such Registrable Securities and other securities have
been disposed of in accordance with the intended methods of disposition by the
sellers thereof set forth in such registration statement and (b) 180 days after
the effective date of such registration statement, except with respect to any
such registration statement filed pursuant to Rule 415 (or any successor Rule)
under the Act if the Company is eligible to file a registration statement on
Form S-3, in which case such period shall be two (2) years;
(iii) as soon as reasonably possible, furnish to each
seller of Registrable Securities, prior to filing a registration statement,
copies of such registration statement as it is proposed to be filed, and
thereafter such number of copies of such registration statement, each amendment
and supplement thereto (in each case including all exhibits thereto), the
prospectus included in such registration statement (including each preliminary
prospectus) and such other documents as each such seller may reasonably request
in order to facilitate the disposition of the Registrable Securities owned by
such seller;
(iv) use its best efforts to register or qualify such
Registrable Securities under such other securities or blue sky laws of such
jurisdictions as any seller of Registrable Securities may request, and to
continue such qualification in effect in each such jurisdiction for as long as
is permissible pursuant to the laws of such jurisdiction, or for as long as any
such seller requests or until all of such Registrable Securities are sold,
whichever is shortest, and do any and all other acts and things which may be
reasonably necessary or advisable to enable any such seller to consummate the
disposition in such jurisdictions of the Registrable Securities owned by such
seller; provided, however, that the Company shall not be required to (A) qualify
-------- -------
generally to do business in any jurisdiction where it would not otherwise be
required to qualify but for this Section 6(a)(iv), (B) subject itself to
taxation in any such jurisdiction or (C) consent to general service of process
in any such jurisdiction;
(v) use its best efforts to obtain all other approvals,
covenants, exemptions or authorizations from such governmental agencies or
authorities as may be necessary to enable the sellers of such Registrable
Securities to consummate the disposition of such Registrable Securities;
(vi) notify each seller of Registrable Securities at
any time when a prospectus relating thereto is required to be delivered under
the Act, upon discovery that, or upon the happening of any event as a result of
which, the prospectus included in such registration statement contains an untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances under which they were made, and the Company shall
promptly prepare a supplement or amendment to such prospectus and furnish to
each such seller a reasonable number of copies of a supplement to or amendment
of such prospectus as may be necessary so that, after delivery to the purchasers
of such Registrable Securities, such prospectus
-9-
<PAGE>
shall not contain an untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances under which they were made;
(vii) enter into and perform customary agreements
(including an underwriting agreement in customary form with the Approved
Underwriter or Company Underwriter, if any, selected as provided in Section 3 or
4; provided, that the underwriting agreement, if any, shall be reasonably
satisfactory in form and substance to the Company) and take such other actions
as are reasonably required in order to expedite or facilitate the disposition of
such Registrable Securities;
(viii) make available for inspection by any seller of
Registrable Securities, any managing underwriter participating in any
disposition pursuant to such registration statement, Holders' Counsel and any
attorney, accountant or other agent retained by any such seller or any managing
underwriter (each, an "INSPECTOR" and, collectively, the "INSPECTORS"), all
--------- ----------
financial and other records, per tinent corporate documents and properties of
the Company and any subsidiaries thereof as may be in existence at such time
(collectively, the "RECORDS") as shall be reasonably necessary to enable them to
-------
exercise their due diligence responsibility, and cause the Company's and any
subsidiaries' officers, directors and employees, and the independent public
accountants of the Company, to supply all information reasonably requested by
any such Inspector in connection with such registration statement; provided,
that such Inspector agrees to keep all such information confidential.
(ix) obtain a "cold comfort" letter from the Company's
independent public accountants in customary form and covering such matters of
the type customarily covered by "cold comfort" letters, as Holders' Counsel or
the managing underwriter reasonably request;
(x) furnish, at the request of any seller of Registrable
Securities on the date such securities are delivered to the underwriters for
sale pursuant to such registration or, if such securities are not being sold
through underwriters, on the date the registration statement with respect to
such securities becomes effective, an opinion, dated such date, of counsel
representing the Company for the purposes of such registration, addressed to the
underwriters, if any, and to the seller making such request, covering such legal
matters with respect to the registration in respect of which such opinion is
being given as such seller may reasonably request and as are customarily
included in such opinions;
(xi) otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC, and make available to its security
holders, as soon as reasonably practicable but no later than fifteen (15) months
after the effective date of the registration statement, an earnings statement
covering a period of twelve (12) months beginning after the effective date of
the registration statement, in a manner which satisfies the provisions of
Section 11(a) of the Act;
(xii) cause all such Registrable Securities to be listed on
each securities exchange on which similar securities issued by the Company are
then
-10-
<PAGE>
listed (if any) if the listing of such Registrable Securities is then permitted
under the rules of such exchange or, if no similar securities are then so
listed, cause all such Registrable Securities to be listed on an exchange on
which the Initiating Holders request that such Registrable Securities be listed,
subject to the satisfaction of the applicable listing requirements of each such
exchange;
(xiii) keep each seller of Registrable Securities advised in
writing as to the initiation and progress of any registration under Section 3 or
4 hereunder;
(xiv) provide officers' certificates and other customary
closing documents;
(xv) cooperate with each seller of Registrable
Securities and each underwriter participating in the disposition of such
Registrable Securities and their respective counsel in connection with any
filings required to be made with the National Association of Securities Dealers,
Inc. (the "NASD"); and
----
(xvi) use its best efforts to take all other steps
necessary to effect the registration of the Registrable Securities contemplated
hereby.
(b) Seller Information. The Company may require as a condition
------------------
precedent of the Company's obligations under this Section 6 that each seller of
Registrable Securities as to which any registration is being effected furnish to
the Company such information regarding such seller and the distribution of such
securities as the Company may from time to time reasonably request in writing.
(c) Notice to Discontinue. Each Holder agrees that, upon receipt of
---------------------
any notice from the Company of the happening of any event of the kind described
in Section 6(a)(vi), such Holder shall forthwith discontinue disposition of
Registrable Securities pursuant to the registration statement covering such
Registrable Securities until such Holder's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 6(a)(vi) and, if so
directed by the Company, such Holder shall deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in such
Holder's possession, of the prospectus covering such Registrable Securities
which is current at the time of receipt of such notice. If the Company shall
give any such notice, the Company shall extend the period during which such
registration statement shall be maintained effective pursuant to this Agreement
(including, without limitation, the period referred to in Section 6(a)(ii)) by
the number of days during the period from and including the date of the giving
of such notice pursuant to Section 6(a)(vi) to and including the date when the
Holder shall have received the copies of the supplemented or amended prospectus
contem plated by and meeting the requirements of Section 6(a)(vi).
7. Registration Expenses. The Company shall pay all expenses (other
---------------------
than underwriting discounts and commissions) arising from or incident to the
performance of, or compliance with, this Agreement, including, without
limitation, (a) SEC, stock exchange and NASD registration and filing fees, (b)
all fees and
-11-
<PAGE>
expenses incurred in complying with securities or blue sky laws (including,
without limitation, reasonable fees, charges and disbursements of counsel in
connection with blue sky qualifications of the Registrable Securities), (c) all
printing, messenger and delivery expenses, (d) the fees, charges and
disbursements of counsel to the Company and of its independent public
accountants and any other accounting and legal fees, charges and expenses
incurred by the Company (including, without limitation, any expenses arising
from any special audits incident to or required by any registration or
qualification) and (e) the reasonable fees, charges and expenses of any special
experts retained by the Company in connection with any requested Demand
Registration or piggy-back registration pursuant to the terms of this Agreement,
regardless of whether the registration statement filed in connection with such
registration is declared effective. In connection with each registration
hereunder, the Company shall reimburse the Holders of Registrable Securities
being registered in such registration for the reasonable fees, charges and
disbursements of not more than one Holders' Counsel. All of the expenses
described in this Section 7 are referred to in this Agreement as "REGISTRATION
------------
EXPENSES." Notwithstanding the foregoing provisions of this Section 7, in
- --------
connection with any registration hereunder, each Holder of Registrable
Securities being registered shall pay all underwriting discounts and commissions
and any capital gains, income or transfer taxes, if any, attributable to the
sale of such Registrable Securities, pro rata with respect to payments of
--- ----
discounts and commissions in accordance with the number of shares sold in the
offering.
8. Indemnification; Contribution.
-----------------------------
(a) Indemnification by the Company. In the event of any proposed
------------------------------
registration of securities of the Company pursuant to Section 3 or Section 4,
the Company agrees to indemnify and hold harmless each Holder, its directors,
officers, partners, employees, advisors and agents, and each Person who controls
(within the meaning of the Act or the Exchange Act) such Holder, to the extent
permitted by law, from and against any and all losses, claims, damages, expenses
(including, without limitation, reasonable costs of investigation and fees,
disbursements and other charges of counsel) or other liabilities resulting from
or arising out of or based upon any untrue, or alleged untrue, statement of a
material fact contained in any registration statement, prospectus or preliminary
prospectus or notification or offering circular (as amended or supplemented if
the Company shall have furnished any amendments or supplements thereto) or
arising out of or based upon any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except insofar as the same are caused by or contained in any
information furnished in writing to the Company by or on behalf of such Holder
expressly for use therein. The Company shall also indemnify any underwriters of
the Registrable Securities, their officers, directors and employees, and each
Person who controls any such underwriter (within the meaning of the Act and the
Exchange Act) to the same extent as provided above with respect to the
indemnification of the Holders of Registrable Securities.
(b) Indemnification by Holders. In connection with any proposed
--------------------------
registration in which a Holder is participating pursuant to Section 3 or 4
-12-
<PAGE>
hereof, each such Holder shall furnish to the Company in writing such
information with respect to such Holder as the Company may reasonably request or
as may be required by law for use in connection with any registration statement
or prospectus to be used in connection with such registration and each Holder
agrees to indemnify and hold harmless the Company, any underwriter retained by
the Company and their respective directors, officers, employees and each Person
who controls (within the meaning of the Act and the Exchange Act) the Company or
such underwriter to the same extent as the foregoing indemnity from the Company
to the Holders (subject to the proviso to this sentence and applicable law), but
only with respect to any such information furnished in writing by or on behalf
of such Holder expressly for use therein; provided, however, that the liability
-------- -------
of any Holder under this Section 8(b) shall be limited to the amount of the net
proceeds received by such Holder in the offering giving rise to such liability.
(c) Conduct of Indemnification Proceedings. Any Person entitled to
--------------------------------------
indemnification hereunder (the "INDEMNIFIED PARTY") agrees to give prompt
-----------------
written notice to the indemnifying party (the "INDEMNIFYING PARTY") after the
------------------
receipt by the Indemnified Party of any written notice of the commencement of
any action, suit, proceeding or investigation or threat thereof made in writing
for which the Indemnified Party intends to claim indemnification or contribution
pursuant to this Agreement; provided, that, the failure so to notify the
-------- ----
Indemnifying Party shall not relieve the Indemnifying Party of any liability
that it may have to the Indemnified Party hereunder. If notice of commencement
of any such action is given to the Indemnifying Party as above provided, the
Indemnifying Party shall be entitled to participate in and, to the extent it may
wish, jointly with any other Indemnifying Party similarly notified, to assume
the defense of such action at its own expense, with counsel chosen by it and
satisfactory to such Indemnified Party. The Indemnified Party shall have the
right to employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel (other than
reasonable costs of investigation) shall be paid by the Indemnified Party unless
(i) the Indemnifying Party agrees to pay the same, (ii) the Indemnifying Party
fails to assume the defense of such action with counsel satisfactory to the
Indemnified Party in its reasonable judgment, (iii) the named parties to any
such action (including any impleaded parties) have been advised by such counsel
that either (A) representation of such Indemnified Party and the Indemnifying
Party by the same counsel would be inappropriate under applicable standards of
professional conduct or (B) there may be one or more legal defenses available to
it which are different from or additional to those available to the Indemnifying
Party; provided, however, that the Indemnifying Party shall only have to pay the
fees and expenses of one firm of counsel for all Indemnified Parties in each
jurisdiction, except to the extent representation of all Indemnified Parties by
the same counsel is inappropriate under applicable standards of professional
conduct. In either of such cases the Indemnifying Party shall not have the
right to assume the defense of such action on behalf of such Indemnified Party.
No Indemnifying Party shall be liable for any settlement entered into without
its written consent, which consent shall not be unreasonably withheld. No
Indemnifying Party shall, without the written consent of the Indemnified Party,
effect the settlement or compromise of, or consent to the entry of any judgment
with respect to, any pending or threatened action or claim in respect of which
indemnification or contribution may
-13-
<PAGE>
be sought hereunder (whether or not the Indemnified Party is an actual or
potential party to such action or claim) unless such settlement, compromise or
judgment (A) includes an unconditional release of the Indemnified Party from all
liability arising out of such action or claim and (B) does not include a
statement as to or an admission of fault, culpability or a failure to act, by or
on behalf of any Indemnified Party. The rights accorded to any Indemnified Party
hereunder shall be in addition to any rights that such Indemnified Party may
have at common law, by separate agreement or otherwise.
(d) Contribution. If the indemnification provided for in Section 8(a)
------------
from the Indemnifying Party is unavailable to an Indemnified Party in respect of
any losses, claims, damages, expenses or other liabilities referred to therein,
then the Indemnifying Party, in lieu of indemnifying such Indemnified Party,
shall contribute to the amount paid or payable by such Indemnified Party as a
result of such losses, claims, damages, expenses or other liabilities in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party and Indemnified Party in connection with the actions which resulted in
such losses, claims, damages, expenses or other liabilities, as well as any
other relevant equitable considerations. The relative faults of such
Indemnifying Party and Indemnified Party shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact, was made by, or relates to information supplied by, such
Indemnifying Party or Indemnified Party, and the Indemnifying Party's and
Indemnified Party's relative intent, knowledge, access to information and
opportunity to correct or prevent such action. The amount paid or payable by a
party as a result of the losses, claims, damages, expenses or other liabilities
referred to above shall be deemed to include, subject to the limitations set
forth in Section 8(a), 8(b) and 8(c), any legal or other fees, charges or
expenses reasonably incurred by such party in connection with any investigation
or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 8(d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable con siderations referred to in the immediately preceding
paragraph. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution pursuant to this
Section 8(d).
9. Rule 144; Other Exemptions. The Company covenants that it shall
--------------------------
file any reports required to be filed by it under the Exchange Act and the rules
and regulations adopted by the SEC thereunder, and that it shall take such
further action as each Holder may reasonably request (including, but not limited
to, providing any information necessary to comply with Rules 144 and 144A under
the Act), all to the extent required from time to time to enable such Holder to
sell Registrable Securities without registration under the Act within the
limitation of the exemptions provided by (a) Rule 144 or Rule 144A under the
Act, as such rules may be amended from time to time, or (b) any other rules or
regulations now existing or hereafter adopted by the SEC. The Company shall,
upon the request of any Holder, deliver to
-14-
<PAGE>
such Holder a written statement as to whether the Company has complied with such
requirements.
10. Certain Limitations on Registration Rights. In the case of a
------------------------------------------
registration under Section 4 if the Company has determined to enter into an
underwriting agreement in connection therewith, no person may participate in
such registration unless such person (a) agrees to sell such person's securities
on the basis provided therein and (b) completes and executes all questionnaires,
powers of attorney, indemnities, lock-up agreements, underwriting agreements and
other documents reasonably required under the terms of such underwriting
agreements.
11. Miscellaneous.
-------------
(a) Recapitalizations, Exchanges, etc. The provisions of this
---------------------------------
Agreement shall apply, to the full extent set forth herein with respect to the
Shares, to any and all shares of capital stock of the Company or any successor
or assign of the Company (whether by merger, consolidation, sale of assets or
otherwise) which may be issued in respect of, in exchange for or in substitution
of, the Shares and shall be appropriately adjusted for any stock dividends,
splits, reverse splits, combinations, recapitalizations and the like occurring
after the date hereof.
(b) No Inconsistent Agreements; Other Registration Rights. The
-----------------------------------------------------
Company shall not enter into any agreement with respect to its securities that
is inconsistent with or adversely affects the rights granted to the Holders in
this Agreement other than any lock-up agreement with the underwriters in
connection with an underwritten offering pursuant to which the Company agrees,
for a period not in excess of 90 days, not to register for sale, and not to sell
or otherwise dispose of, Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock. The Company shall not grant any
other Person registration rights without the written consent of the Designated
Holders holding at least a majority of the Registrable Securities held by all of
the Designated Holders. If the Company shall at any time hereafter provide to
any holder of any securities of the Company rights with respect to the
registration of such securities and such rights are provided on terms or
conditions more favorable to such holder than the terms and conditions
applicable to the Designated Holders herein, the Company shall provide (by way
of amendment to this Agreement or otherwise) such more favorable terms or
conditions to the Designated Holders under this Agreement.
(c) Remedies. The Holders, in addition to being entitled to
--------
exercise all rights granted by law, including recovery of damages, shall be
entitled to specific performance of their rights under this Agreement. The
Company agrees that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach by it of the provisions of this Agreement
and hereby agrees to waive in any action for specific performance the defense
that a remedy at law would be adequate.
(d) Amendments and Waivers. Except as otherwise provided herein
----------------------
the provisions of this Agreement may not be amended, modified or supplemented,
-15-
<PAGE>
and waivers or consents to departures from the provisions of such section may
not be given unless the Company has obtained the prior written consent of (i)
the Designated Holders holding at least a majority of the Registrable Securities
held by all of the Designated Holders and (ii) the Holders holding at least a
majority of the Registrable Securities.
(e) Notices. All notices, demands and other communications
-------
provided for or permitted hereunder shall be made in writing and shall be by
registered or certified first-class mail, return receipt requested, telecopier,
courier service or personal delivery:
(i) if to Whitney Subordinated Debt Fund, L.P. or
J.H. Whitney & Co.:
c/o J.H. Whitney & Co.
177 Broad Street
Stamford, Connecticut 06901
Telecopier No.: (203) 973-1422
Attention: Jeffrey R. Jay, M.D.
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Telecopier No.: (212) 757-3990
Attention: Bruce A. Gutenplan, Esq.
-16-
<PAGE>
(ii) if to the Company:
Nitinol Medical Technologies, Inc.
27 Wormwood Street
South Boston, Massachusetts 02210
Telecopier No.: (617) 737-0924
Attention: Chief Executive Officer
with a copy to:
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Telecopier No.: (617) 526-5000
Attention: Steven D. Singer, Esquire
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; when delivered by
courier, if delivered by commercial overnight courier service; five Business
Days after being deposited in the mail, postage prepaid, if mailed; and when
receipt is acknowledged, if telecopied.
(f) Successors and Assigns. This Agreement shall inure to the benefit
----------------------
of and be binding upon the successors and assigns of the parties hereto;
provided, however, that the registration rights and the other obligations of the
- -------- -------
Company contained in this Agreement shall, with respect to any Registrable
Security, be automatically transferred from a Holder to any subsequent holder of
such Registrable Security (including any pledgee). Notwithstanding any transfer
of such rights, all of the obligations of the Company hereunder shall survive
any such transfer and shall continue to inure to the benefit of all transferees.
(g) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of New York, without regard to the
principles of conflicts of law of such State.
(j) Jurisdiction. Each party to this Agreement hereby irrevocably
------------
agrees that any legal action or proceeding arising out of or relating to this
Agreement or any agreements or transactions contemplated hereby may be brought
in the courts of the State of New York or of the United States of America for
the
-17-
<PAGE>
Southern District of New York and hereby expressly submits to the personal
jurisdiction and venue of such courts for the purposes thereof and expressly
waives any claim of improper venue and any claim that such courts are an
inconvenient forum. Each party hereby irrevocably consents to the service of
process of any of the aforementioned courts in any such suit, action or
proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to the address set forth in Section 10(e), such service to
become effective 10 days after such mailing.
(k) Severability. If any one or more of the provisions contained
------------
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired, it being intended that all
of the rights and privileges of the Holders shall be enforceable to the fullest
extent permitted by law.
(l) Rules of Construction. Unless the context otherwise requires,
---------------------
"or" is not exclusive, and references to sections or subsections refer to
sections or subsections of this Agreement.
(m) Entire Agreement. This Agreement is intended by the parties as a
----------------
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings in respect of the subject matter contained herein,
other than those set forth or referred to herein. This Agreement supersedes all
prior agreements and understandings between the parties with respect to such
subject matter.
(n) Further Assurances. Each of the parties shall execute such
------------------
documents and perform such further acts as may be reasonably required or
desirable to carry out or to perform the provisions of this Agreement.
-18-
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed and delivered by their respective officers hereunto duly authorized on
the date first above written.
NITINOL MEDICAL TECHNOLOGIES, INC.
By: /s/ Thomas M. Tully
--------------------------------------
Name: Thomas M. Tully
Title: President and Chief Executive Officer
WHITNEY SUBORDINATED DEBT FUND, L.P.
By: /s/ Daniel J. O'Brien
--------------------------------------
Name: Daniel J. O'Brien
Title: A General Partner
J.H. WHITNEY & CO.
By: /s/ Daniel J. O'Brien
--------------------------------------
Name: Daniel J. O'Brien
Title:
-19-
<PAGE>
Exhibit 99.1
[LETTERHEAD OF NITINOL MEDICAL TECHNOLOGIES APPEARS HERE]
AT THE COMPANY: AT THE FINANCIAL RELATIONS BOARD
- --------------- --------------------------------
Thomas M. Tully General Info: Paula Schwartz (212)661-8030
President & CEO Analyst Info: Kathy Brunson (312)266-7800
(617)737-0930 Brian Gill (212)661-8030
Media Info: Deanne Eagle (212)661-8030
FOR IMMEDIATE RELEASE
- ---------------------
July 8, 1998
NITINOL MEDICAL TECHNOLOGIES CLOSES ACQUISITION OF ELEKTA
---------------------------------------------------------
NEUROSURGICAL INSTRUMENTS FOR $33 MILLION
-----------------------------------------
BOSTON, MA, JULY 8, 1998 -- Nitinol Medical Technologies, Inc. (Nasdaq/NMS:NMTI)
today announced the closing of its acquisition of Elekta Neurosurgical
Instruments (ENI) from Elekta AB of Sweden for $33 million.
The acquisition will operate as a division of Nitinol Medical under the name NMT
Neurosciences and will be managed by David C. Chazanovitz, formerly President of
the Septal Repair Division of Nitinol Medical. Sales of the division are derived
from a broad range of specialty implants and instruments for neurosurgery,
including cerebral spinal fluid (CSF) shunts, the Selector(R) Ultrasonic
Aspirator, Ruggles/TM/ Surgical Instruments, the Spetzler/TM/ Titanium Aneurysm
Clip, and endoscopes and instrumentation for minimally invasive neurosurgery.
NMT Neurosciences has a leadership position in each of these product categories.
Sales of this division for the fiscal year ended April 30, 1998 were $38.0
million worldwide. NMT Neurosciences employs 267 people at locations primarily
in the United Kingdom, France, and Atlanta, Georgia. On a pro forma combined
basis for the calendar year 1997, including NMT Neurosciences, Nitinol Medical
would have had revenues of nearly $50 million.
Commenting on the acquisition, Thomas M. Tully, President and CEO of Nitinol
Medical Technologies, said, "NMT Neurosciences represents a profitable, growing,
fully integrated global business platform which we plan to further build through
additional acquisitions, licensing agreements and internal product developments.
With 38 sales and marketing employees around the world, and a high-quality
product line, we believe that we will have the most intensive focus on the
neurosurgeon of any company. Additionally, the important new technology
platforms and
<PAGE>
Nitinol Medical Technologies Closes
Acquisition of Elekta Neurosurgical Instruments for $33 Million
page 2
manufacturing capabilities we are acquiring will significantly broaden our
product development opportunities.
"This acquisition advances Nitinol Medical to the next level of medical device
companies, and expands our offering of minimally invasive products. With the
significant increase in revenues and diversification of our product line
accomplished by this acquisition, we believe we are better positioned for
continued significant growth in revenue and profits."
The transaction was financed with $13 million of the Company's cash and $20
million of subordinated debt from an affiliate of JH Whitney & Co., a
significant stockholder of the Company. The subordinated debt is due September
30, 2003, with interest payable quarterly at 10.101% per annum. A total of
675,000 shares of common stock were issued to JH Whitney & Co. and its
affiliates in connection with the transaction.
Nitinol Medical Technologies, Inc. designs, develops, and markets innovative
medical devices that utilize advanced technologies and are delivered by
minimally invasive procedures. The Company's products are designed to offer
alternative approaches to existing complex treatments, thereby reducing patient
trauma, shortening procedure, hospitalization and recovery times, and lowering
overall treatment costs. The Company's patented medical devices include
self-expanding stents, vena cava filters and septal repair devices. Elekta AB
is a leading international supplier of advanced medical technology for treatment
of neurological disorders and radiation of cancer.
To receive Nitinol's latest news release and other corporate documents via
FAX--at no cost--please dial 1-800-PRO-INFO. Enter Nitinol's ticker-NMTI.
This news release contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve risks and uncertainties that could cause actual results to
differ from predicted results. Achieving the anticipated benefits of the merger
will depend in part upon whether the integration of the two companies'
businesses is accomplished in an efficient manner, and there can be no assurance
that this will occur. The combination of the two companies will require, among
other things, integration of the companies' respective product offerings,
coordination of their sales and marketing organizations, and the research and
development efforts. There can be no assurance that integration will be
accomplished smoothly or successfully. The difficulties of such integration may
be increased by the necessity of coordinating geographically-separated
organizations. The integration of certain operations following the merger will
require the dedication of management resources which may temporarily distract
attention from the day-to-day business of the respective companies. The
inability of management to successfully integrate the operations of the two
companies could have an adverse affect on the business and results of operations
of the combined companies. In addition, there can be no assurance that present
and potential customers of Elekta and Nitinol will continue their current buying
patterns and any significant delay or reduction in orders could have an adverse
affect on the results of operations. Further information on factors that could
affect the combined company's results are included in "Management's Discussion
and Analysis of Financial Condition and Results of Operations" in the Company's
Annual Report on Form 10-K for the year ended December 31, 1997, and from time
to time in Nitinol's other filings with the Securities and Exchange Commission.
