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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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): April 19, 1996
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INAMED CORPORATION
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(Exact name of registrant as specified in its charter)
Florida 0-7101 59-0920629
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
3800 Howard Hughes Parkway
Suite 900
Las Vegas, Nevada 89109
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 701/791-3388
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N/A
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(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS.
In connection with the anticipated effectiveness of a Registration
Statement on Form S-3 Inamed Corporation, a Florida corporation (the
"Registrant"), is filing as exhibits hereto and incorporated herein material
contracts entered into in connection with the Registrant's private placement
of $35 million in principal amount of 11% Secured Convertible Notes due 1999.
EXHIBITS
The following exhibits are filed as part of this report:
Exhibit Exhibit
Number Description
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99.1 Form of Note Purchase Agreement
99.2 Indenture between the Registrant and Santa
Barbara Bank & Trust, as trustee
99.3 Form of 11% Secured Convertible Note due 1999
99.4 Security Agreement between the Registrant and
Santa Barbara Bank & Trust, as trustee
99.5 Guarantee and Security Agreement between
certain subsidiaries of the Registrant and
Santa Barbara Bank & Trust, as trustee
99.6 Guarantee Agreement between certain
subsidiaries of the Registrant and Santa
Barbara Bank & Trust, as trustee
99.7 Loan Purchase Agreement between First
Interstate Bank of California and Santa Barbara
Bank & Trust, as trustee
99.8 Escrow Agreement between the Registrant and
Santa Barbara Bank & Trust, as trustee
99.9 Escrow Agreement between the Registrant and
Santa Barbara Bank & Trust, as trustee
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INAMED CORPORATION,
a Florida corporation
(Registrant)
By: /s/ DONALD K. MCGHAN
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Donald K. McGhan
Chairman of the Board and President
Date: April 19, 1996
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INAMED CORPORATION
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NOTE PURCHASE AGREEMENT
Dated January 23, 1996
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11% Secured Convertible Notes due 1999
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TABLE OF CONTENTS
Page
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Section 1. ISSUANCE OF SECURITIES . . . . . . . . . . . . . . . . . . . . 1
Section 1.1. Authorization . . . . . . . . . . . . . . . . . . . . 1
Section 1.2. Purchase and Sale of the Securities; the Closing. . . 1
Section 1.3. Representations of the Purchaser. . . . . . . . . . . 2
Section 2. REPRESENTATIONS OF THE COMPANY . . . . . . . . . . . . . . . . 2
Section 2.1. Organization and Authority of the Company . . . . . . 2
Section 2.2. Business, Properties and Other Information
Regarding the Company. . . . . . . . . . . . . . . . 3
Section 2.3. Capital Stock . . . . . . . . . . . . . . . . . . . . 3
Section 2.4. Compliance with Laws and Other Instruments. . . . . . 4
Section 2.5. Governmental Authorizations, etc. . . . . . . . . . . 4
Section 2.6. Litigation; Observance of Statutes, Regulations
and Orders . . . . . . . . . . . . . . . . . . . . . 4
Section 2.7. Taxes . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.8. Title to Property . . . . . . . . . . . . . . . . . . 5
Section 2.9. Licenses, Permits, etc. . . . . . . . . . . . . . . . 5
Section 2.10. Compliance with ERISA . . . . . . . . . . . . . . . . 6
Section 2.11. Existing Indebtedness . . . . . . . . . . . . . . . . 6
Section 2.12. Investment Company Act. . . . . . . . . . . . . . . . 6
Section 2.13. Environmental Matters . . . . . . . . . . . . . . . . 6
Section 2.14. Security Documents. . . . . . . . . . . . . . . . . . 7
Section 2.15. Labor Relations . . . . . . . . . . . . . . . . . . . 7
Section 2.16 Reports . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2.17 Solvency. . . . . . . . . . . . . . . . . . . . . . . 8
Section 2.18 Use of Proceeds . . . . . . . . . . . . . . . . . . . 8
Section 2.19 Litigation Settlement . . . . . . . . . . . . . . . . 8
Section 3. CONDITIONS TO OBLIGATIONS OF THE PURCHASER.. . . . . . . . . . 9
Section 3.1. Proceedings Satisfactory. . . . . . . . . . . . . . . 9
Section 3.2. Opinion of Counsel. . . . . . . . . . . . . . . . . . 9
Section 3.3. Representations True, etc.; Officer's Certificate . . 9
Section 3.4. No Material Judgment or Order . . . . . . . . . . . . 9
Section 3.5. Security Interests. . . . . . . . . . . . . . . . . . 9
Section 4. FINANCIAL STATEMENTS AND INFORMATION . . . . . . . . . . . . . 10
Section 5. COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 5.1. Inspection. . . . . . . . . . . . . . . . . . . . . . 11
Section 5.2 Additional Guarantees . . . . . . . . . . . . . . . . 12
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Section 6. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 6.1. Reliance on and Survival of Representations . . . . . 12
Section 6.2. Successors and Assigns. . . . . . . . . . . . . . . . 12
Section 6.3. Notices . . . . . . . . . . . . . . . . . . . . . . . 13
Section 6.4. Counterparts. . . . . . . . . . . . . . . . . . . . . 13
Section 6.5. Governing Law . . . . . . . . . . . . . . . . . . . . 13
Section 6.6. Waiver of Jury Trial. . . . . . . . . . . . . . . . . 14
Exhibit A - Form of Security
Exhibit B - Form of Opinion of Nida & Maloney
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Inamed Corporation
3800 Howard Hughes Parkway, Suite 900
Las Vegas, Nevada 89109
NOTE PURCHASE AGREEMENT
January 23, 1996
To the Purchaser named on
the Signature Page Hereof
Ladies and Gentlemen:
Inamed Corporation, a Florida corporation (the "COMPANY"), hereby agrees
with you as follows:
SECTION 1. ISSUANCE OF SECURITIES.
SECTION 1.1. AUTHORIZATION. The Company has duly authorized
the issue of its 11% Secured Convertible Notes due 1999, in the aggregate
principal amount of up to $35,000,000 (the "SECURED NOTES" or the "SECURITIES"),
substantially in the form of EXHIBIT A, to be issued pursuant to an Indenture
(the "INDENTURE"), dated as of January 2, 1996 between the Company and Santa
Barbara Bank & Trust, as Trustee. Each Secured Note shall mature, shall bear
interest, shall be payable and shall be otherwise as provided herein and in
EXHIBIT A.
SECTION 1.2. PURCHASE AND SALE OF THE SECURITIES; THE CLOSING.
In reliance upon the representations of the Purchaser contained in SECTION 1.3
hereof and subject to the terms and conditions set forth herein, the Company
shall sell to the Purchaser on the Closing Date (as defined below) and, subject
to the terms and conditions hereof, the Purchaser shall purchase from the
Company on the Closing Date (as defined below) the Securities in the aggregate
principal amount set forth below the Purchaser's signature, at an aggregate
purchase price equal to 100% of the aggregate principal amount thereof. The
closing (the "CLOSING") of the Purchaser's purchase of the Securities shall be
held at 10:00 a.m., Las Vegas time, on January 23, 1996 (the "CLOSING DATE"), at
the offices of the Company, 3800 Howard Hughes Parkway, Suite 900, Las Vegas,
Nevada 89109, or at such other time or place as the parties hereto may mutually
agree.
On the Closing Date the Company will deliver to the Purchaser
one Secured Note, registered in the Purchaser's name or in the name of the
Purchaser's nominee, as may be specified by the Purchaser by timely written
notice to the Company, in the aggregate principal amount specified above, duly
executed and dated the Closing Date, against the Purchaser's delivery to the
Company (or to persons at the direction of the Company) of immediately available
funds in the amount of such purchase price.
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SECTION 1.3. REPRESENTATIONS OF THE PURCHASER.
The Purchaser represents and warrants to the Company that on the
date hereof:
(a) DISTRIBUTION. The Purchaser is not acquiring the
Securities with a view to the distribution or sale of the Securities in
violation of the Securities Act of 1933, as amended (the "SECURITIES ACT"),
subject, however, to any requirement of law that the disposition of its property
be at all times within its control.
(b) OFFERING OF SECURITIES. The Purchaser has not offered
the Securities for sale by any means of general solicitation or general
advertising including, but not limited to, any advertisements, articles, notices
or other communications published in any newspaper, magazine or similar medium
or broadcast over television or radio, or any seminar or meeting whose attendees
were invited by any general solicitation or general advertising.
(c) ACCREDITED INVESTOR. The Purchaser is an "accredited
investor" within the meaning of Rule 501 under the Securities Act and the
Purchaser has had an opportunity to investigate the terms of the Securities, the
business and financial condition of the Company and to obtain such information
as the Purchaser requires from the Company.
SECTION 2. REPRESENTATIONS OF THE COMPANY. The Company
represents and warrants to the Purchaser that on the date hereof and as of the
Closing Date:
SECTION 2.1. ORGANIZATION AND AUTHORITY OF THE COMPANY.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Florida and each
Guarantor (as defined in the Indenture) is duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation and
each of the Company and each such Guarantor has all requisite power and
authority to own or hold under lease the property it purports to own or hold
under lease, to transact the business it transacts and proposes to transact, to
execute and deliver this Agreement and the Secured Notes, the Indenture
governing the Secured Notes, the Collateral Documentation (as defined in the
Indenture), the Guarantee Agreements (as defined in the Indenture), the
Securities to be issued to other purchasers and all other documents and
agreements contemplated hereby and thereby (this Agreement, and all such other
documents and agreements, collectively, the "TRANSACTION DOCUMENTS") and to
perform the provisions hereof and thereof and to consummate the transactions
contemplated hereby and thereby. Each of the Company and each Guarantor is duly
qualified as a foreign corporation and is in good standing in each jurisdiction
in which the character of the properties owned or held under lease by it or the
nature of the business transacted by it requires such qualification, except
where the failure to be so qualified would not have a material adverse effect on
the business, prospects, properties, assets, operations or financial condition
of the Company. SCHEDULE 2.1A hereto sets forth the name of each Subsidiary (as
defined in the Indenture), the jurisdiction in which it is incorporated or
organized, the number of shares of its authorized capital
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stock, the number and class of shares thereof duly issued and outstanding, the
names of all stockholders or other equity owners and the number of shares of
stock owned by each stockholder or the amount of equity owned by each equity
owner.
(b) The execution, delivery and performance of the
Transaction Documents, and the consummation of the transactions contemplated
hereby and thereby, have been duly authorized and approved by the Company and,
with respect to each such agreement to which it is a party, each Guarantor. The
Transaction Documents to which it is a party have each been duly authorized,
executed and delivered by, and each is the valid and binding obligation of, the
Company and each Guarantor, enforceable against the Company and such Guarantor
in accordance with its terms, except as may be limited by applicable bankruptcy,
reorganization, insolvency, moratorium or other similar laws or by legal or
equitable principles relating to or limiting creditors' rights generally.
SECTION 2.2. BUSINESS, PROPERTIES AND OTHER INFORMATION
REGARDING THE COMPANY.
(a) The Company has provided the Purchaser with the
Confidential Offering Memorandum dated January 10, 1996 that (when read in
conjunction with this Agreement and the schedules and exhibits hereto and
thereto (including the Company's Annual Report on Form 10-K for the year ended
December 31, 1994 and the Company's Quarterly Reports on Form 10-Q for the
quarters ended March 31, June 30 and September 30, 1995) as amended or
supplemented (collectively, the "DISCLOSURE DOCUMENTS") describes, among other
things, in all material respects the business, prospects, properties, assets,
operations and financial condition of the Company.
(b) As of their respective dates, neither the Disclosure
Documents nor any certificate executed by the Company or any Guarantor in
connection with the transactions contemplated hereby, contained, and as of the
Closing Date no Disclosure Document or certificate contains, any untrue
statement of a material fact or omitted to state any material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. Since September 30, 1995, there has been no material
adverse change in the business, prospects, properties, assets, operations or
financial condition of the Company or any Guarantor not described in the
Disclosure Documents. Neither the Company nor any Guarantor has actual
knowledge, except as disclosed in the Disclosure Documents, of any fact that
materially adversely affects or, so far as the Company or any Guarantor can now
reasonably foresee, will materially adversely affect the business, prospects,
properties, assets, operations or financial condition of the Company or the
Guarantors, or the ability of the Company or the Guarantors to perform its
respective obligations under the Transaction Documents.
SECTION 2.3. CAPITAL STOCK.
(a) On the date hereof and on the Closing Date, the
authorized capital stock of the Company will consist of 20,000,000 shares of
common stock, no par value (the "COMMON
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STOCK"). On the date hereof and on the Closing Date, 7,677,617 shares of Common
Stock will be issued and outstanding.
(b) As of September 30, 1995, the Company had reserved for
issuance an aggregate of approximately 295,400 shares of Common Stock issuable
pursuant to: (i) outstanding vested and non-vested options, warrants and
similar rights; and (ii) contingent obligations to issue additional shares. The
Company is not subject to any obligation (contingent or otherwise) to repurchase
or otherwise acquire or retire any of its capital stock or other securities or
obligation evidencing the right of the holder thereof to purchase any of its
capital stock or other securities.
SECTION 2.4. COMPLIANCE WITH LAWS AND OTHER INSTRUMENTS. The
consummation of the transactions contemplated by the Transaction Documents and
the performance of the terms and provisions of the Transaction Documents will
not (i) contravene, result in any breach of, or constitute a default under, or
result in the creation of any Lien (except for Liens created under the Indenture
or the Collateral Documentation) in respect of any property of the Company or
any Guarantor under, any other material agreement or instrument to which the
Company or any Guarantor is a party or by which the Company or any Guarantor, or
any of its respective properties is bound, (ii) conflict with any provision of
any of the certificate of incorporation or bylaws or comparable organizational
documents of the Company or any Guarantor or conflict with or result in a breach
of any of the terms, conditions or provisions of any order of any court,
arbitrator or governmental entity applicable to the Company or any Guarantor or
(iii) violate any material provision of any statute or other rule or regulation
of any governmental entity applicable to the Company or any Guarantor.
SECTION 2.5. GOVERNMENTAL AUTHORIZATIONS, ETC. No consent,
approval or authorization of, or registration, filing or declaration with, any
governmental entity or third party is required for the issuance of the
Securities or the valid execution and delivery of the Securities or for the
performance by the Company or the Guarantors of the Transaction Documents, other
than the filings, registrations or qualifications under the securities laws or
"blue sky" laws of any State that may be required to be made or obtained in
connection with the offer, issuance, sale or delivery of the Securities or any
interest therein.
SECTION 2.6. LITIGATION; OBSERVANCE OF STATUTES, REGULATIONS
AND ORDERS.
(a) Except as disclosed or referred to in the Company's
Disclosure Documents, or other reports filed with the Securities and Exchange
Commission, or with respect to which resolution will be effected with the
proceeds of this Offering as described in Section 2.18, there are no actions,
suits or proceedings pending or, to the knowledge of the Company or any
Guarantor, threatened against or involving the Company or any Guarantor or any
property of the Company or any Guarantor in any court or before any arbitrator
of any kind or before or by any governmental entity except actions, suits or
proceedings arising in the ordinary course of business that individually or in
the aggregate, if adversely determined, would not materially adversely affect
the business, operations, prospects, properties, assets or financial condition
of the Company or any Guarantor or
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the ability of the Company or any Guarantor to perform its obligations under the
Transaction Documents.
(b) Neither the Company nor any Guarantor is in default
under or in breach of any order of any court, arbitrator or governmental entity,
and neither the Company nor any Guarantor is subject to or a party to any order
of any court or governmental entity arising out of any action, suit or
proceeding under any statute or other law respecting antitrust, monopoly,
restraint of trade, unfair competition or similar matters. Neither the Company
nor any Guarantor is in violation of any law or statute, or other rule or
regulation of any governmental entity, including without limitation laws
relating to the production, use, storage or disposal of hazardous materials (the
"HAZARDOUS MATERIALS LAWS"), the violation of which would materially adversely
affect the business, operations, prospects, properties, assets or financial
condition of the Company or any Guarantor or the ability of the Company or any
Guarantor to perform its obligations under the Transaction Documents.
SECTION 2.7. TAXES. Except for approximately $4,400,000 in
unpaid taxes which will be paid from the proceeds of this Offering and other
taxes reflected in the Company's balance sheet dated September 30, 1995, the
Company and each Guarantor has filed all tax returns that are required to have
been filed by it in any jurisdiction, and has paid all taxes shown to be due and
payable on such returns and all other taxes and assessments payable by the
Company or any Guarantor to the extent the same have become due and payable and
before they have become delinquent, except for any taxes and assessments the
amount, applicability or validity of which is currently being contested in good
faith by appropriate proceedings and with respect to which the Company has set
aside on its books reserves (segregated to the extent required by GAAP (as
defined in the Indenture)) deemed by it in its reasonable discretion to be
adequate. Neither the Company nor any Guarantor has actual knowledge of any
proposed material tax assessment against the Company or any Guarantor, and in
the opinion of the Company all tax liabilities of the Company and the Guarantors
are adequately provided for on the books of the Company.
SECTION 2.8. TITLE TO PROPERTY. The Company and each Guarantor
has good and marketable title to its respective real properties and good and
merchantable title to each of its other respective assets and properties, except
as sold or otherwise disposed of in the ordinary course of business. Except as
expressly permitted by the Indenture, all assets and properties of the Company
and each Guarantor are owned by the Company or such Guarantor free and clear of
all Liens.
The Company and each Guarantor enjoys full and undisturbed
possession under all leases necessary in any material respect for the operation
of its respective businesses (the "LEASES"). None of the Leases contains any
provisions that, individually or in the aggregate, would materially impair the
operation of the businesses of the Company or the Guarantors. The Leases are
valid and subsisting and are in full force and effect, and there are no existing
material defaults by the Company or events that with notice or lapse of time or
both would constitute material defaults by the Company under any of the Leases.
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SECTION 2.9. LICENSES, PERMITS, ETC. The Company and each
Guarantor possesses all material licenses, permits, franchises, authorizations,
patents, copyrights, trademarks and trade names and any other tangible or
intangible intellectual property rights, or rights thereto, required to conduct
its respective business substantially as now conducted and as currently proposed
to be conducted, without known conflict with the rights of others.
SECTION 2.10. COMPLIANCE WITH ERISA. Neither the Company nor
any of its Subsidiaries (as defined in the Indenture) has any employee benefit
plan established or maintained by the Company or any of its Subsidiaries or to
which the Company or any of its Subsidiaries has made contributions that is
subject to Part 3 of Subtitle B of Title 1 of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or Section 412 of the Internal
Revenue Code of 1954, as amended (the "CODE").
SECTION 2.11. EXISTING INDEBTEDNESS. The Company's September
30, 1995 balance sheet as contained in the Disclosure Documents includes all
Indebtedness (as defined in the Indenture) of the Company and its Subsidiaries
on a consolidated basis as of the date thereof, including the aggregate
principal amount outstanding. Neither the Company nor any Guarantor is in
default in the performance or observance of any of the terms, covenants or
conditions contained in any material instrument evidencing such Indebtedness or
pursuant to which such Indebtedness was issued or secured and has not requested
any waiver in respect of any default and no event has occurred and is continuing
which, with notice or the lapse of time or both, would constitute such a
default.
SECTION 2.12. INVESTMENT COMPANY ACT. Neither the Company nor
any Guarantor is an investment company subject to registration under the
Investment Company Act of 1940, as amended.
SECTION 2.13. ENVIRONMENTAL MATTERS.
(a) None of the Company, any Guarantor or, to the Company's
best knowledge, any previous owner, lessee, tenant, occupant or user of any real
property owned or leased on or prior to the date hereof by the Company or any
Guarantor (such real property and any and all buildings and other improvements
thereon being herein referred to as the "PROPERTY") used, generated,
manufactured, treated, handled, refined, processed, released, discharged, stored
or disposed of any Hazardous Materials on, under, in or about the Property, or
transported any Hazardous Materials to or from the Property in violation of any
Hazardous Materials Laws. "HAZARDOUS MATERIALS" as used herein, refers to any
flammable explosives, radioactive materials, asbestos, compounds known as
polychlorinated byphenyls, chemicals now known to cause cancer or reproductive
toxicity, pollutants, contaminants, hazardous wastes, toxic substances or
related materials, including, without limitation, any substances defined as or
included in the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," or "toxic substances" under the Hazardous Materials Laws.
No underground tanks or underground deposits or Hazardous Materials, to the
Company's best knowledge, existed on, under, in or about any Property previously
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owned or leased by the Company or any Guarantor on or prior to the date that fee
or leasehold title to such Property was transferred to a third party by the
Company or any Guarantor. No underground tanks or underground deposits or
Hazardous Materials, to the Company's best knowledge, exist on, under, in or
about any Property that is currently owned or leased by the Company or any
Guarantor.
(b) While any Property was owned or leased by the Company or
any Guarantor, the Company or such Guarantor kept and maintained such Property,
including, without limitation, the groundwater on or under such Property, and
conducted its businesses in material compliance with all applicable Hazardous
Materials Laws and other applicable federal, state and local laws, ordinances or
regulations, now or previously in effect, relating to environmental conditions,
industrial hygiene or Hazardous Materials on, under, in or about such Property.
(c) As of the date hereof there are no (i) enforcement,
clean-up, removal, mitigation or other governmental or regulatory actions
instituted, contemplated or threatened pursuant to any Hazardous Materials Laws
affecting any of the Property, (ii) claims made or threatened by any person or
governmental entity relating to the Property against the Property, the Company
or any Guarantor relating to damage, contribution, cost recovery, compensation,
loss or injury resulting from any Hazardous Materials nor (iii) to the Company's
best knowledge, any occurrence or condition on any Property that is currently
owned or leased by the Company or any Guarantor that could subject the Company,
any Guarantor or such Property to any material restrictions on occupancy,
transferability or use of any Property under any Hazardous Materials Laws.
SECTION 2.14. SECURITY DOCUMENTS. Upon proper filing of the
Form UCC-1 financing statements (or assignments thereof) in the offices of the
Secretary of State of Nevada with respect to the Company and upon proper filing
of the Form UCC-1 financing statements (or assignments thereof) in the locations
identified in the Guarantee and Security Agreement (as defined in the Indenture)
with respect to the Domestic Guarantors (as defined in the Indenture), the lien
of the Collateral Documentation shall constitute a fully perfected security
interest in all right, title and interest of the Company or such Domestic
Guarantor, as the case may be, in and to the personal property therein prior to
any other security interests against such property or interests therein other
than Permitted Liens (as defined in the Indenture).
SECTION 2.15. LABOR RELATIONS. No unfair labor practice
complaint for sex, age, race or other discrimination claim has been brought
during the last three years against the Company or any Guarantor before the
National Labor Relations Board, the Equal Employment Opportunity Commission or
any other governmental entity. During such period, the Company and each
Guarantor has complied in all material respects with all applicable laws
relating to the employment of labor including without limitation those relating
to wages, hours and collective bargaining.
SECTION 2.16 REPORTS. Since December 31, 1992, the Company
has filed all forms, reports and documents with the Securities and Exchange
Commission (the "SEC") required to be
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filed by it pursuant to the federal securities laws and the SEC rules and
regulations thereunder, all of which have complied in all material respects with
all applicable requirements of the Securities Act and the Securities Exchange
Act of 1934, as amended (the "EXCHANGE ACT") and the rules and regulations
promulgated thereunder (collectively, the "SEC REPORTS"). None of the SEC
Reports, including without limitation, any financial statements or schedules
included therein and all documents incorporated therein by reference, at the
time filed contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
The balance sheets and the related statements of income,
shareholders' equity and cash flows (including the related notes thereto) of the
Company included in the SEC Reports complied as to form in all material respects
with applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto, were prepared in accordance with generally
accepted accounting principles applied on a basis consistent with prior periods
(except as otherwise noted therein), and presented fairly the financial position
of the Company as of their respective dates, and the results of its operations
and its cash flows for the periods presented therein (subject, in the case of
the unaudited interim financial statements, to normal year-end adjustments).
SECTION 2.17 SOLVENCY. The Company and each Guarantor is,
and after giving effect to the purchase of the Securities and the application of
the proceeds therefrom the Company and each Guarantor will be, solvent.
SECTION 2.18 USE OF PROCEEDS. The Company will, to the
extent it has rights therein, apply the proceeds of the sale of the Securities
hereunder as follows: (i) $10 million to be placed in escrow pursuant to the
Escrow Agreement between the Company and Santa Barbara Bank & Trust for transfer
in accordance with the terms thereof, (ii) an additional $5 million to be placed
in escrow immediately concurrently with the Closing pursuant to a second Escrow
Agreement between the Company and Santa Barbara Bank & Trust,
(iii) approximately $10 million for long-term capital investments and
improvements relating to production capacity expansion, and (iv) approximately
$2 million for short-term capital investments and improvements relating to
production capacity expansion, with the remainder of the proceeds to be used by
the Company for general business purposes. The Company will apply the proceeds
as specified in clauses (iii) and (iv) of this paragraph in the due course of
business. The use of such proceeds shall be in compliance with all applicable
laws, rules and regulations. No part of the proceeds from the sale of the
Securities hereunder will be used, directly or indirectly, for the purpose of
buying or carrying any "margin stock" within the meaning of Regulation G of the
Board of Governors of the Federal Reserve System (12 CFR Section 207), or for
the purpose of buying or carrying or trading in any securities under such
circumstances as to involve the Company in a violation of Regulation X of said
Board (12 CFR Section 224) or to involve any broker or dealer in a violation of
Regulation T of said Board (12 CFR Section 220). The assets of the Company do
not include any margin stock, and the Company does not have any present
intention of acquiring any margin stock.
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SECTION 2.19 LITIGATION SETTLEMENT. The Company represents
and warrants that, to the best of its knowledge, the certification and
implementation of a Mandatory (non "opt-out" Limited Fund) Class under Rule
23(b)(1)(B) of the Federal Rules of Civil Procedure in the Company's and certain
of its Subsidiaries' litigation pending in the United States District Court for
the Northern District of Alabama, Southern Division stylized as "Silicone Gel
Breast Implant Products Liability Litigation (MDL 926)" will preclude further
litigation by all persons who are within the scope of the class and whose claims
arise during the class period.
SECTION 3. CONDITIONS TO OBLIGATIONS OF THE PURCHASER. The
obligation of the Purchaser to purchase and pay for the Securities on the
Closing Date shall be subject to the satisfaction on or before the Closing Date
of the conditions hereinafter set forth.
SECTION 3.1. PROCEEDINGS SATISFACTORY. All proceedings taken
on or prior to the Closing Date in connection with the issuance of the
Securities and the consummation of the transactions contemplated hereby and all
documents and papers relating thereto shall be satisfactory in form and
substance to the Purchaser and its counsel, and each such person shall have
received copies of such documents and papers, all in form and substance
satisfactory to such persons, as the Purchaser or its counsel may reasonably
request in connection therewith.
SECTION 3.2. OPINION OF COUNSEL. The Purchaser shall have
received an opinion dated the Closing Date from Nida & Maloney, substantially in
form and substance as attached hereto as EXHIBIT B.
SECTION 3.3. REPRESENTATIONS TRUE, ETC.; OFFICER'S CERTIFICATE.
All representations and warranties of the Company contained in SECTION 2 not
qualified as to materiality shall be true and correct in all material respects
and all representations and warranties of the Company contained in SECTION 2
qualified as to materiality shall be true and correct, on and as of the Closing
Date with the same effect as though such representations and warranties had been
made on and as of the Closing Date; the Company shall have performed in all
respects all agreements on its part required to be performed under this
Agreement on or prior to the Closing Date; no Default or Event of Default (each
as defined in the Indenture) shall have occurred and be continuing; the Company
shall not have consolidated with, merged into, or sold, leased or otherwise
disposed of its properties as an entirety or substantially as an entirety to any
person; and the Purchaser shall have received a certificate signed by the
chairman of the board, the president or other officer of the Company, dated the
Closing Date, certifying to the effect specified in this Section.
SECTION 3.4. 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 agency of the federal, state or local government that, in
the reasonable judgment of the Purchaser, would prohibit the purchase of the
Securities hereunder, or any interest or participations therein, or subject the
Purchaser to any material penalty if the Securities were to be purchased as
contemplated hereunder.
9
<PAGE>
SECTION 3.5. SECURITY INTERESTS. Each of the Transaction
Documents shall have been duly executed and delivered by the parties thereto
(together with any financing statements relating thereto). The Collateral
Documentation shall be duly filed or recorded in all places necessary or
advisable to perfect and maintain the Liens respectively purported to be created
thereby and all governmental charges in connection therewith shall have been
paid in full. The Collateral Documentation shall be in full force and effect
and no term or condition thereof shall have been amended, modified or waived
without the Purchaser's prior written consent.
SECTION 4. FINANCIAL STATEMENTS AND INFORMATION. The Company
will furnish:
A. copies of the annual and quarterly reports and of the
other information, documents, and other reports which the Company files or
is required to file with the SEC pursuant to the Exchange Act and of any
other reports or information which the Company delivers or makes available
to any of its securityholders, at the time of filing such reports with the
SEC or of delivery to the Company's securityholders, as the case may be;
B. quarterly reports for the first three quarters of each
fiscal year of the Company and annual reports which the Company would have
been required to file under any provision of the Exchange Act if it had a
class of securities listed on a national securities exchange, within
fifteen (15) Business Days of when such report is filed under Section 13 of
the Exchange Act, together with copies of a consolidating balance sheet of
the Company and its Subsidiaries as of the end of each such accounting
period and of the related consolidating statements of income and cash flow
for the portion of the fiscal year then ended, all in reasonable detail and
all certified by the principal financial officer of the Company to present
fairly the information contained therein in accordance with GAAP (and in
the case of annual reports, including financial statements, audited and
certified by the Company's independent public accountants as required under
the Exchange Act);
C. within ninety (90) days after the end of each fiscal
year, a written statement by the Company's independent certified public
accountants stating as to the Company whether in connection with their
audit examination, any Default or Event of Default (each as defined in the
Indenture) has come to their attention;
D. (1) within forty-five (45) days after the end of the
first three quarters of the Company's fiscal year and within ninety (90)
days after the end of the Company's fiscal year, a certificate of the chief
executive officer or principal financial officer of the Company setting
forth computations in reasonable detail showing, as at the end of such
quarter or fiscal year, as the case may be, the Company's compliance with
SECTIONS 8.7 AND 8.8 of the Indenture, and (2) within twenty (20) days
after the end of each month, a certificate of the chief executive officer
or the principal financial officer of the Company and a vice president of
the Company stating that as of the date of such certificate, based upon
such examination or investigation and review of the Indenture as in the
opinion of such signer is necessary to
10
<PAGE>
enable the signer to express an informed opinion with respect thereto, to
the best knowledge of such signer, the Company has kept, observed,
performed and fulfilled each and every covenant contained in the Indenture,
and is not in default in the performance or observance of any of the terms,
provisions and conditions hereof, and to the best of such signer's
knowledge, no Default or Event of Default exists or has existed during such
period or, if a Default or Event of Default shall exist or have existed,
specifying all such defaults, and the nature and period of existence
thereof, and what action the Company has taken, is taking or proposes to
take with respect thereto;
E. promptly after becoming aware of (1) the existence of a
Default or Event of Default or any default in any of the Collateral
Documentation or (ii) any default or event of default under any
Indebtedness of the Company or any of its Subsidiaries, a certificate of
the chief executive officer or the principal financial officer of the
Company specifying the nature and period of existence thereof and what
action the Company is taking or proposes to take with respect thereto; and
F. such other information, including financial statements
and computations, relating to the performance of the provisions of this
Agreement and the affairs of the Company and any of its Subsidiaries as any
Holder may from time to time reasonably request.
The Company shall make the reports referred to in Subsections A,
B, C, D and E above available promptly to each Holder of the Securities. In
addition, the Company shall make available to securities analysts and broker-
dealers, upon their reasonable request, copies of all annual, quarterly and
interim reports filed by the Company with the SEC pursuant to the Exchange Act.
The Company shall keep at its principal executive office a true copy of this
Agreement (as at the time in effect), and cause the same to be available for
inspection at said office, during normal business hours and after reasonable
notice to the Company by the Holders or any prospective purchaser of any Secured
Note or any interest or participation therein.
SECTION 5. COVENANTS.
SECTION 5.1. INSPECTION.
(a) Any Holder or Holders of at least $5,000,000 in
aggregate principal amount of the Securities and each of such Holder's
authorized representatives shall have the right to visit and inspect any of the
properties of the Company and any Subsidiaries, to examine the books of account
and records of the Company and any Subsidiaries, to be provided with copies and
extracts therefrom, to discuss the affairs, finances and accounts of the Company
and its Subsidiaries with, and to be advised as to the same by, its and their
officers and employees, and its and their independent public accountants (and
the Company authorizes such independent public accountants to discuss the
Company's or any Subsidiaries' financial matters with such Holder or Holders and
its representatives, regardless of whether any representative of the Company is
present, but provided
11
<PAGE>
that an officer of the Company will be afforded a reasonable opportunity to be
present at any such discussion), all at such reasonable times and intervals
during normal business hours, and upon reasonable prior notice to the Company as
such Holder or Holders and the Company shall agree. Any copying or similar
charges incurred in connection with the visitation and inspection rights set
forth in this Section shall be at the expense of such Holder or Holders except
when a Default or Event of Default has occurred and is continuing, in which case
any such costs incurred in connection with such visitation and inspection rights
shall be at the expense of the Company. The Company will likewise afford such
Holder or Holders the opportunity to obtain any information, to the extent the
Company or any of its Subsidiaries possesses such information or can acquire it
without unreasonable effort or expense, necessary to verify the accuracy of any
of the representations and warranties made by the Company hereunder.
(b) Each Holder by receipt of information under this SECTION
5 agrees that all information (other than such information that is publicly
available or any other information that is in such Holder's possession prior to
any disclosure under this SECTION 5) provided to it pursuant to this SECTION 5
shall be used by such holder solely in connection with its investment in the
Securities and for no other purpose, and such holder shall treat such
information as confidential in accordance with such reasonable internal
procedures as it applies generally to information of this kind and shall not
disclose such information to any person, except (i) to any governmental entity
(including for this purpose the National Association of Insurance Commissioners)
having jurisdiction over such holder in the law or ordinary course of business,
(ii) to any other person pursuant to subpoena or other process, whether legal,
administrative or other (and each holder hereby agrees to provide the Company
with prompt notice of any such subpoena or other process), (iii) to such
holder's officers, directors, trustees, employees, legal counsel, financial
advisors or auditors or accountants who need access to such information in
connection with their duties, (iv) to any transferee or prospective purchaser of
a Security or interest therein who agrees to be bound by this paragraph, or (v)
to the extent necessary in the enforcement of such holder's rights hereunder and
under the Secured Notes during the continuance of a Default or Event of Default.
SECTION 5.2 ADDITIONAL GUARANTEES. The Company agrees that
all future Subsidiaries shall become Domestic Guarantors or Foreign Guarantors,
as applicable, upon the terms and conditions provided in Section 8.11 of the
Indenture and that any Subsidiary that shall not be a Guarantor under such
Section because it had assets of less than $100,000 shall become a Domestic
Guarantor or Foreign Guarantor, as applicable, upon achieving such asset
threshold.
SECTION 6. MISCELLANEOUS.
SECTION 6.1 RELIANCE ON AND SURVIVAL OF REPRESENTATIONS. All
representations, warranties, covenants and agreements of the Company herein and
in any certificates or other instruments delivered pursuant to any of the other
Transaction Documents by the Company or any Guarantor shall (A) be deemed to be
material and to have been relied upon by each Holder, notwithstanding any
investigation heretofore or hereafter made by any Purchaser or on its behalf,
12
<PAGE>
and (B) survive the execution and delivery of this Agreement and of the
Securities, for so long as the Securities are outstanding.
SECTION 6.2 SUCCESSORS AND ASSIGNS. This Agreement shall bind
and inure to the benefit of and be enforceable by the Company, each Purchaser
and each of the Purchasers' respective successors and assigns, and, in addition,
shall inure to the benefit of and be enforceable by each person who shall from
time to time be a Holder of a Secured Note.
SECTION 6.3 NOTICES. All notices and other communications
provided for in this Agreement shall be in writing and delivered by registered
or certified mail, postage prepaid, or delivered by overnight courier (for next
business day delivery) or telecopied, addressed as follows, or at such other
address as any of the parties hereto may hereafter designate by notice to the
other parties given in accordance with this Section:
(i) if to the Company:
Inamed Corporation
3800 Howard Hughes Parkway, Suite 900
Las Vegas, Nevada 89109
Attention: Michael D. Farney
Telephone: 702-791-3388
Telecopy: 702-791-0592
With a copy of any notice to:
Nida & Maloney
801 Garden Street, Suite 201
Santa Barbara, California 93101
Attention: Joseph E. Nida
Telephone: 805-568-1151
Telecopy: 805-568-1955
(ii) if to the Holders, at the address of such Holder as it
appears on the Security Register (as defined in the
Indenture).
Any such notice or communication shall be deemed to have been
duly given on the fifth day after being so mailed, the next Business Day after
delivery by overnight courier, when sent by telecopier or upon receipt when
delivered personally.
13
<PAGE>
SECTION 6.4. COUNTERPARTS. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
SECTION 6.5. GOVERNING LAW. This Agreement and the Securities
and (unless otherwise provided) all amendments, supplements, waivers and
consents relating hereto or thereto shall be governed by and construed in
accordance with the laws of the State of New York.
SECTION 6.6 WAIVER OF JURY TRIAL. THE PURCHASER, EACH HOLDER
OF A SECURED NOTE BY ITS ACCEPTANCE THEREOF, AND THE COMPANY EACH HEREBY AGREE
TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF THIS AGREEMENT, THE COLLATERAL DOCUMENTATION, THE
SECURITIES OR ANY OTHER AGREEMENTS RELATING TO THE SECURITIES OR ANY DEALINGS
BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION. The scope of
this waiver is intended to be all-encompassing of any and all disputes that may
be filed in any court and that relate to the subject matter of this transaction,
including without limitation, contract claims, tort claims, breach of duty
claims and all other common law and statutory claims. You and the Company each
acknowledge that this waiver is a material inducement to enter into a business
relationship, that each has already relied on the waiver in entering into this
Agreement, and that each will continue to rely on the waiver in their related
future dealings. You and the Company further warrant and represent that each
has reviewed this waiver with its legal counsel, and that each knowingly and
voluntarily waives its jury trial rights following consultation with legal
counsel. NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING,
AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS
OR MODIFICATIONS TO THIS AGREEMENT, THE SECURITY DOCUMENTS, THE SECURITIES OR
ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE SECURITIES. In the event of
litigation, this Agreement may be filed as a written consent to a trial by the
court.
14
<PAGE>
If the Purchaser is in agreement with the foregoing, please sign
the form of acceptance in the space provided below whereupon this Note Purchase
Agreement shall become a binding agreement between the Purchaser and the
Company.
Very truly yours,
INAMED CORPORATION,
a Florida corporation
By: /s/ Michael D. Farney
-----------------------------------
Title: Chief Executive Officer
-------------------------------
The foregoing Note Purchase
Agreement is hereby accepted as
of the date first above written:
- ----------------------------------------
By:
-------------------------------------
Title:
----------------------------------
Secured Notes Purchased: $
-------------
15
<PAGE>
Schedule 2.1A
SUBSIDIARIES
<TABLE>
<CAPTION>
Name of Subsidiary Jurisdiction in Number of Number and Class Name of Number of Shares of
which shares of of Shares Issued Stockholders or Stock Owned by
Incorporated or Authorized and Outstanding Other Equity Each Stockholder (or
Organized Capital Stock Owners amount of equity
owned by each
equity owner)
<S> <C> <C> <C> <C> <C>
DOMESTIC SUBSIDIARIES:
Biodermis Corporation NV 15,000 C 5,000 C IC 5,000 C
1,000 P
Bioenterics Corporation CA 100,000 C 50,000 C IC 50,000 C
Bioplexus Corporation NV 15,000 C 1,000 C IC 1,000 C
1,000 P
CUI Corporation CA 100,000 100,000 C IC 100,000 C
Flowmatrix Corporation NV 15,000 C 1,000 C IC 1,000 C
1,000 P
Inamed Development CA 20,000 C 2,000 C IC 2,000 C
Company
Inamed Japan, Inc. NV 25,000 C 25,000 C IC 25,000 C
McGhan Medical CA
Corporation 4,000,000 C 1,823,165 C IC*
1,500,000 P 471,875 P
Medisyn Technologies NV
Corporation 15,000 C 5,000 C IC 5,000 C
1,000 P
FOREIGN SUBSIDIARIES
Biodermis Ltd. IRE 6 C IC, Owl, Farney, 1 C each
Wheatstone,
Allen, McDonald
Bioenterics Ltd. IRE 6 C IC, Owl, Farney,
Wheatstone
Bioplexus Ltd. IRE 1,000 C 1 C 1 C
Chamfield Ltd. IRE 1,000 C 2 C
Inamed B.V. NETH
Inamed B.V. Rep. Ofc. RUS
Russia (R.O.R.)
Inamed B.V.B.A. BEL 800 C
Inamed do Brasil Ltd. BZL
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Name of Subsidiary Jurisdiction in Number of Number and Class Name of Number of Shares of
which shares of of Shares Issued Stockholders or Stock Owned by
Incorporated or Authorized and Outstanding Other Equity Each Stockholder (or
Organized Capital Stock Owners amount of equity
owned by each
equity owner)
<S> <C> <C> <C> <C> <C>
Inamed GmbH GER 100,000 C
Inamed Ltd. UK
Inamed Marketing Group JP
Inamed S.A. SPA
Inamed S.R.L. ITY
Inamed S.A.R.L. FR
McGhan Limited IRE
McGhan Medical HK
Asia/Pacific
Medisyn Technologies IRE
Ltd.
</TABLE>
<PAGE>
EXHIBIT A
FORM OF SECURITY
<PAGE>
EXHIBIT B
FORM OF OPINION OF NIDA & MALONEY
<PAGE>
INAMED CORPORATION
Issuer
----------------------
$35,000,000
Secured Convertible Notes due 1999
------------------------
INDENTURE
Dated as of January 2, 1996
------------------------
SANTA BARBARA BANK & TRUST
Trustee
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE 1
DEFINITIONS
SECTION 1.1 Definitions. . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2
THE SECURITIES
SECTION 2.1 Form and Dating. . . . . . . . . . . . . . . . . . . 13
SECTION 2.2 Title and Terms. . . . . . . . . . . . . . . . . . . 13
SECTION 2.3 Denominations. . . . . . . . . . . . . . . . . . . . 14
SECTION 2.4 Execution, Authentication and Delivery . . . . . . . 14
SECTION 2.5 Temporary Securities . . . . . . . . . . . . . . . . 15
SECTION 2.6 Registrar and Paying Agent . . . . . . . . . . . . . 15
SECTION 2.7 Paying Agent to Hold Money in Trust. . . . . . . . . 16
SECTION 2.8 Securityholder Lists . . . . . . . . . . . . . . . . 17
SECTION 2.9. Transfer and Exchange. . . . . . . . . . . . . . . . 17
SECTION 2.10 Replacement Securities . . . . . . . . . . . . . . . 18
SECTION 2.11 Treasury Securities. . . . . . . . . . . . . . . . . 18
SECTION 2.12 Payment of Interest; Interest Rights Preserved . . . 19
SECTION 2.13 Persons Deemed Owners. . . . . . . . . . . . . . . . 20
SECTION 2.14 Cancellation . . . . . . . . . . . . . . . . . . . . 21
SECTION 2.15 Computation of Interest. . . . . . . . . . . . . . . 21
ARTICLE 3
SATISFACTION, DISCHARGE AND DEFEASANCE
SECTION 3.1 Satisfaction and Discharge of Indenture. . . . . . . 21
SECTION 3.2 Application of Trust Money.. . . . . . . . . . . . . 22
SECTION 3.3 Reinstatement. . . . . . . . . . . . . . . . . . . . 23
SECTION 3.4 Defeasance.. . . . . . . . . . . . . . . . . . . . . 23
SECTION 3.5 Conditions to Defeasance . . . . . . . . . . . . . . 24
SECTION 3.6 Deposited Money and U.S. Government
Obligations to be Held in Trust;
-i-
<PAGE>
PAGE
Other Miscellaneous Provisions . . . . . . . . . . . 28
SECTION 3.7 Reinstatement. . . . . . . . . . . . . . . . . . . . 29
ARTICLE 4
REMEDIES
SECTION 4.1 Events of Default. . . . . . . . . . . . . . . . . . 29
SECTION 4.2 Acceleration of Maturity; Rescission
and Annulment. . . . . . . . . . . . . . . . . . . . 31
SECTION 4.3 Other Remedies . . . . . . . . . . . . . . . . . . . 32
SECTION 4.4 Waiver of Past Defaults. . . . . . . . . . . . . . . 32
SECTION 4.5 Control by Majority. . . . . . . . . . . . . . . . . 32
SECTION 4.6 Limitation on Suits. . . . . . . . . . . . . . . . . 32
SECTION 4.7 Rights of Holders to Receive Payment . . . . . . . . 33
SECTION 4.8 Collection Suit by Trustee . . . . . . . . . . . . . 33
SECTION 4.9 Trustee May File Proofs of Claim . . . . . . . . . . 33
SECTION 4.10 Priorities . . . . . . . . . . . . . . . . . . . . . 34
SECTION 4.11 Undertaking for Costs. . . . . . . . . . . . . . . . 34
SECTION 4.12 Rights and Remedies Cumulative . . . . . . . . . . . 35
SECTION 4.13 Delay or Omission Not Waiver . . . . . . . . . . . . 35
SECTION 4.14 Waiver of Stay or Extension Laws . . . . . . . . . . 35
ARTICLE 5
THE TRUSTEE
SECTION 5.1 Certain Duties and Responsibilities. . . . . . . . . 36
SECTION 5.2 Rights of Trustee. . . . . . . . . . . . . . . . . . 39
SECTION 5.3 Individual Rights of Trustee . . . . . . . . . . . . 40
SECTION 5.4 Trustee's Disclaimer . . . . . . . . . . . . . . . . 40
SECTION 5.5 Notice of Defaults . . . . . . . . . . . . . . . . . 40
SECTION 5.6 Reports by Trustee to Holders. . . . . . . . . . . . 40
SECTION 5.7 Compensation and Indemnity . . . . . . . . . . . . . 41
SECTION 5.8 Replacement of Trustee . . . . . . . . . . . . . . . 42
SECTION 5.9 Successor Trustee by Merger, etc . . . . . . . . . . 43
SECTION 5.10 Eligibility; Disqualification. . . . . . . . . . . . 43
SECTION 5.11 Preferential Collection of Claims
Against Company. . . . . . . . . . . . . . . . . . . 43
-ii-
<PAGE>
PAGE
SECTION 5.12 Appointment of Authenticating Agent. . . . . . . . . 43
ARTICLE 6
CONSOLIDATION, MERGER, CONVEYANCE,TRANSFER OR LEASE
SECTION 6.1 Company May Consolidate, Etc., Only
on Certain Terms . . . . . . . . . . . . . . . . . . 45
SECTION 6.2 Successor Substituted. . . . . . . . . . . . . . . . 46
ARTICLE 7
AMENDMENTS
SECTION 7.1 Without Consent of Holders . . . . . . . . . . . . . 47
SECTION 7.2 With Consent of Holders. . . . . . . . . . . . . . . 47
SECTION 7.3 Compliance with Trust Indenture Act. . . . . . . . . 49
SECTION 7.4 Revocation and Effect of Consents. . . . . . . . . . 49
SECTION 7.5 Notation on or Exchange of Securities. . . . . . . . 50
SECTION 7.6 Trustee Protected. . . . . . . . . . . . . . . . . . 50
ARTICLE 8
COVENANTS
SECTION 8.1 Payment of Principal and Interest. . . . . . . . . . 50
SECTION 8.2 Maintenance of Office or Agency. . . . . . . . . . . 50
SECTION 8.3 Money for Security Payments to Be Held
in Trust . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 8.4 Existence. . . . . . . . . . . . . . . . . . . . . . 52
SECTION 8.5 Maintenance of Properties. . . . . . . . . . . . . . 53
SECTION 8.6 Payment of Taxes and Other Claims. . . . . . . . . . 53
SECTION 8.7 Limitation on Indebtedness . . . . . . . . . . . . . 53
SECTION 8.8 Limitation on Encumbrances . . . . . . . . . . . . . 54
SECTION 8.9 Limitation on Related Party Transactions . . . . . . 54
SECTION 8.10 Limitation on Dividends. . . . . . . . . . . . . . . 55
SECTION 8.11 Subsidiary Guarantees. . . . . . . . . . . . . . . . 55
SECTION 8.12 Additional Offerings of Securities . . . . . . . . . 56
SECTION 8.13 Pledges of Intercompany Notes. . . . . . . . . . . . 56
-iii-
<PAGE>
PAGE
SECTION 8.14 Registration Rights. . . . . . . . . . . . . . . . . 57
SECTION 8.15 Restricted Investments . . . . . . . . . . . . . . . 58
SECTION 8.16 Operating Profit.. . . . . . . . . . . . . . . . . . 58
SECTION 8.17 Tangible Assets. . . . . . . . . . . . . . . . . . . 58
SECTION 8.18 Statement by Officers as to Default. . . . . . . . . 59
SECTION 8.19 Waiver of Certain Covenants. . . . . . . . . . . . . 59
ARTICLE 9
REDEMPTION OF SECURITIES
SECTION 9.1 No Right of Redemption . . . . . . . . . . . . . . . 59
SECTION 9.2 Automatic Mandatory Redemption.. . . . . . . . . . . 60
SECTION 9.3 Selection of Securities to Be Redeemed.. . . . . . . 60
SECTION 9.4 Notice of Redemption.. . . . . . . . . . . . . . . . 61
SECTION 9.5 Effect of Termination Date.. . . . . . . . . . . . . 61
SECTION 9.6 Securities Redeemed in Part. . . . . . . . . . . . . 61
SECTION 9.7 Interest Accrued.. . . . . . . . . . . . . . . . . . 62
ARTICLE 10
CONVERSION OF SECURITIES
SECTION 10.1 Right To Convert . . . . . . . . . . . . . . . . . . 62
SECTION 10.2 Exercise of Conversion Privilege;
Issuance of Common Stock on Conversion;
No Adjustment for Interest.. . . . . . . . . . . . . 63
SECTION 10.3 Cash Payments in Lieu of Fractional Shares . . . . . 64
SECTION 10.4 Conversion Price . . . . . . . . . . . . . . . . . . 65
SECTION 10.5 Adjustment of Conversion Price . . . . . . . . . . . 65
SECTION 10.6 Effect of Reclassification, Consolidation,
Merger or Sale . . . . . . . . . . . . . . . . . . . 71
SECTION 10.7 Automatic Conversion.. . . . . . . . . . . . . . . . 73
SECTION 10.8 Taxes on Shares Issued.. . . . . . . . . . . . . . . 74
SECTION 10.9 Reservation of Shares; Shares To Be
Fully Paid; Listing of Common Stock. . . . . . . . . 74
SECTION 10.10 Responsibility of Trustee. . . . . . . . . . . . . . 75
SECTION 10.11 Notices to Holders . . . . . . . . . . . . . . . . . 76
-iv-
<PAGE>
PAGE
ARTICLE 11
SUBORDINATION
SECTION 11.1 Agreement to Subordinate . . . . . . . . . . . . . . 77
SECTION 11.2 Certain Definitions. . . . . . . . . . . . . . . . . 77
SECTION 11.3 Liquidations; Dissolution; Bankruptcy. . . . . . . . 77
SECTION 11.4 Default on Designated Senior Indebtedness. . . . . . 77
SECTION 11.5 Acceleration of Securities.. . . . . . . . . . . . . 79
SECTION 11.6 When Distribution Must Be Paid Over. . . . . . . . . 79
SECTION 11.7 Notice by Company. . . . . . . . . . . . . . . . . . 79
SECTION 11.8 Subrogation. . . . . . . . . . . . . . . . . . . . . 79
SECTION 11.9 Relative Rights. . . . . . . . . . . . . . . . . . . 80
SECTION 11.10 Subordination May Not be Impaired
by Company.. . . . . . . . . . . . . . . . . . . . . 80
SECTION 11.11 Distribution or Notice to Representative . . . . . . 81
SECTION 11.12 Rights of Trustee and Paying Agent.. . . . . . . . . 81
SECTION 11.13 Authorization to Effect Subordination. . . . . . . . 81
SECTION 11.14 Trustee Not Fiduciary for Holders of
Senior Indebtedness. . . . . . . . . . . . . . . . . 82
SECTION 11.15 Rights of Trustee as Holder of Senior Indebtedness;
Preservation of Trustee's Rights.. . . . . . . . . . 82
SECTION 11.16 Article Applicable to Paying Agents. . . . . . . . . 82
SECTION 11.17 Certain Conversions Deemed Payment.. . . . . . . . . 82
SECTION 11.18 Amendment. . . . . . . . . . . . . . . . . . . . . . 83
ARTICLE 12
SECURITY
SECTION 12.1 Security . . . . . . . . . . . . . . . . . . . . . . 83
SECTION 12.2 Recording, etc . . . . . . . . . . . . . . . . . . . 84
SECTION 12.3 Disposition of Certain Collateral Without
Requesting Release . . . . . . . . . . . . . . . . . 85
SECTION 12.4 Requesting Release of Collateral . . . . . . . . . . 87
SECTION 12.5 Substitute Collateral Other Than Cash Collateral . . 88
SECTION 12.6 Substitution of Cash Collateral. . . . . . . . . . . 89
SECTION 12.7 Reliance on Opinion of Counsel . . . . . . . . . . . 89
SECTION 12.8 Purchaser May Rely . . . . . . . . . . . . . . . . . 89
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PAGE
SECTION 12.9 Payment of Expenses. . . . . . . . . . . . . . . . . 89
SECTION 12.10 Suits to Protect the Collateral. . . . . . . . . . . 90
SECTION 12.11 Trustee's Duties . . . . . . . . . . . . . . . . . . 90
ARTICLE 13
MISCELLANEOUS
SECTION 13.1 Trust Indenture Act. . . . . . . . . . . . . . . . . 91
SECTION 13.2 Compliance Certificates and Opinions . . . . . . . . 91
SECTION 13.3 Form of Documents Delivered to Trustee . . . . . . . 92
SECTION 13.4 Acts of Holders. . . . . . . . . . . . . . . . . . . 92
SECTION 13.5 Notices, Etc., to Trustee and Company. . . . . . . . 93
SECTION 13.6 Notice to Holders; Waiver. . . . . . . . . . . . . . 94
SECTION 13.7 Rules by Trustee and Agents. . . . . . . . . . . . . 94
SECTION 13.8 Effect of Headings and Table of Contents . . . . . . 94
SECTION 13.9 No Recourse Against Others.. . . . . . . . . . . . . 94
SECTION 13.10 Successors and Assigns . . . . . . . . . . . . . . . 95
SECTION 13.11 Separability Clause. . . . . . . . . . . . . . . . . 95
SECTION 13.12 Benefits of Indenture. . . . . . . . . . . . . . . . 95
SECTION 13.13 Governing Law. . . . . . . . . . . . . . . . . . . . 95
SECTION 13.14 Legal Holidays . . . . . . . . . . . . . . . . . . . 95
SECTION 13.15 Counterparts.. . . . . . . . . . . . . . . . . . . . 95
SECTION 13.16 No Adverse Interpretation of Other Agreements. . . . 96
SECTION 13.17 Table of Contents, Headings, etc . . . . . . . . . . 96
SECTION 13.18 Consent to Jurisdiction and Service of Process . . . 96
SECTION 13.19 Waiver of Jury Trial . . . . . . . . . . . . . . . . 97
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<PAGE>
INDENTURE, dated as of January 2, 1996 between Inamed
Corporation, a corporation duly organized and existing under the laws of the
State of Florida (the "Company"), having its principal office at 3800 Howard
Hughes Parkway, Suite 900, Las Vegas, Nevada and Santa Barbara Bank & Trust, a
bank duly organized and existing under the laws of the State of California, as
Trustee (the "Trustee").
Each party agrees as follows for the benefit of the other
parties and for the equal and ratable benefit of the Holders of the Company's
11% Secured Convertible Notes due 1999 (the "Securities"):
ARTICLE 1
DEFINITIONS
SECTION 1.1 Definitions.
For all purposes of this Indenture, except as otherwise
expressly provided or unless the context otherwise requires:
(1) the terms defined in this Article have the
meanings assigned to them in this Article and include the plural as well
as the singular;
(2) all other terms used herein which are defined in
the Trust Indenture Act, either directly or by reference therein, have
the meanings assigned to them therein;
(3) all accounting terms not otherwise defined
herein have the meanings assigned to them in accordance with generally
accepted accounting principles, and, except as otherwise herein
expressly provided, the term "generally accepted accounting principles"
with respect to any computation required or permitted hereunder shall
mean such accounting principles as are generally accepted at the date of
this instrument; and
(4) the words "herein", "hereof" and "hereunder" and
other words of similar import refer to this Indenture as a whole and not
to any particular Article, Section or other subdivision.
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Certain terms, used principally in Article 10, are defined in that
Article.
"Act" when used with respect to any Holder, has the meaning
specified in Section 13.4.
"Acquired Indebtedness" means Indebtedness of a person (1)
existing at the time such person becomes a Subsidiary or (ii) assumed in
connection with the acquisition of assets from a person, other than Indebtedness
incurred in connection with, or in contemplation of, such person becoming a
Subsidiary or such acquisition, as the case may be. Acquired Indebtedness shall
be deemed to have been incurred on the date of the related acquisition of assets
from any person or the date the acquired person becomes a Subsidiary.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control" (including, with correlative meanings, the terms "controlled by" and
"under common control with"), as used with respect to any specified Person means
the power to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities or by agreement or
otherwise.
"Agent" means any Registrar, Paying Agent, Conversion Agent,
Authenticating Agent or co-registrar.
"Automatic Conversion" has the meaning specified in Section
10.7.
"Authenticating Agent" means any Person authorized by the
Trustee to act on behalf of the Trustee to authenticate Securities.
"Bankruptcy Law" means Title 11, United States Code, or any
similar federal or state law for the relief of debtors.
"Board of Directors" means either the board of directors of the
Company or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
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"Business Day" means each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in California or
Nevada are authorized or obligated by law or executive order to close.
"Capital Stock" means any and all shares, interests,
participations or other equivalents (however designated) of corporate stock.
"Collateral" means all real and personal property and interests
in real and personal property now owned or hereafter acquired by the Company or
the Guarantors in or upon which a Lien is granted or made under the Collateral
Documentation.
"Collateral Documentation" means the Guarantee and Security
Agreements, the Financing Statements, the Intercompany Notes and the
endorsements thereof to the Trustee, and all other deeds of trust, assignments,
endorsements, collateral assignments and other instruments, documents,
agreements or conveyances at any time creating or evidencing Liens or assigning
Liens to the Trustee, to secure the obligations of the Company or any Guarantor
under the Documents.
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Securities Exchange Act of
1934, or, if at any time after the execution of this instrument such Commission
is not existing and performing the duties now assigned to it under the Trust
Indenture Act, then the body performing such duties at such time.
"Common Stock" includes any stock of any class of the Company
which has no preference in respect of dividends or of amounts payable in the
event of any voluntary or involuntary liquidation, dissolution or winding up of
the Company and which is not subject to redemption by the Company. However,
subject to the provisions of Section 10.6, shares issuable on conversion of
Securities shall include only shares of the class designated as Common Stock of
the Company at the date of this instrument or shares of any class or classes
resulting from any reclassification or reclassifications thereof and which have
no preference in respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the Company
and which are not subject to redemption by the Company; provided that if at any
time there shall be more than one such resulting class, the shares of each such
class then so issuable shall be substantially in the proportion which the total
number of shares of such class resulting from all such reclassifications bears
to the total number of shares of all such classes resulting from all such
reclassifications.
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<PAGE>
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request or
order signed in the name of the Company by its Chairman of the Board, its
President or a Vice President, and by its Treasurer, an Assistant Treasurer, its
Secretary or an Assistant Secretary, and delivered to the Trustee.
"Consolidated Tangible Assets" shall mean, as at any date for
any Person, the sum for such Person and its Subsidiaries (determined on a
consolidated basis without duplication in accordance with GAAP), of the
following:
(a) the book value of all assets of the Company as reflected
on its most recent balance sheet, MINUS
(b) the sum of the following: the book value of all assets
which should be classified as intangibles, including goodwill, minority
interests, research and development costs, trademarks, trade names, copyrights,
patents and franchises, unamortized debt discount and expense, all reserves and
any write-up in the book value of assets resulting from a revaluation of such
assets subsequent to December 31, 1995.
"Conversion Date," has the meaning specified in Section 10.2.
"Conversion Notice" has the meaning specified in Section 10.2.
"Conversion Price" has the meaning specified in Section 10.4.
"Corporate Trust Office" means the principal office of the
Trustee in Santa Barbara, California at which at any particular time its
corporate trust business shall be administered.
"Corporation" means a corporation, association, company, joint-
stock company or business trust.
"Custodian" means any receiver, trustee, assignee, liquidator
or similar official under any Bankruptcy Law.
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"Default" means an event that with notice or lapse of time or
both would become an Event of Default.
"Defaulted Interest" has the meaning specified in Section 2.12.
"Documents" means the Note Purchase Agreement, the Indenture,
the Securities, the Collateral Documentation, the Guarantee Agreement and all
other security agreements, mortgages, deeds of trust, financing statements,
lease assignments, guaranties and other agreements and instruments, together
with any assignments, endorsements of, exhibits, schedules or other attachments
to all of the foregoing, delivered in connection with the transactions
contemplated hereby or thereby, all as amended, supplemented or otherwise
modified from time to time.
"Domestic Guarantors" means the Subsidiaries of the Company that
shall have issued to the Trustee for the benefit of the Holders Guarantee and
Security Agreements relating to the Company's obligations under this Indenture
and the Securities.
"Environmental Laws" means any and all present and future
governmental laws, rules, regulations, orders, approvals or the like relating to
the regulation or protection of human or animal health or safety or of the
environment or to emissions, discharges, releases or threatened releases of
pollutants, contaminants, chemicals or toxic or hazardous substances, materials
or wastes into the indoor or outdoor environment, including ambient air, soil,
surface water, ground water, wetlands, land or subsurface strata, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants, chemicals or toxic
or hazardous substances or wastes.
"Equity Interests" means any Capital Stock, partnership
interest, joint venture interest or other equity interest or warrants, options
or other rights to acquire any Capital Stock, partnership interest, joint
venture interest or other equity interest.
"Escrow Agreements" means the Escrow Agreements entered into
between the Company and Santa Barbara Bank & Trust pursuant to which up to
$10,000,000 and $5,000,000, respectively, of the proceeds of the offering of the
Securities will be placed in escrow.
"Event of Default" has the meaning specified in Section 4.1.
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<PAGE>
"Financing Statements" means Form UCC-1 financing statements to
be filed in all jurisdictions necessary or desirable in order to perfect the
Trustee's security interest in the Collateral and shall include any Form UCC-1
financing statements assigned to the Trustee.
"Foreign Guarantors" means the Subsidiaries or Affiliates of the
Company who execute and deliver Guarantee Agreements.
"GAAP" means generally accepted accounting principles set forth
in the opinions and pronouncements of the Accounting Principles Board and the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board, or in such other
statements by such other entity as may be in general use by significant segments
of the accounting profession, which are applicable to the circumstances as of
the date of determination.
"Guarantors" means Domestic Guarantors and Foreign Guarantors.
"Guarantee Agreements" means the Guarantee Agreements of even
date herewith in the form of Exhibit D executed by certain Subsidiaries of the
Company issuing guarantees of the Company's obligation under the Documents, as
the same may be amended modified or supplemented from time to time in accordance
with their terms, including with respect to Subsidiaries that become Guarantors
thereunder in accordance with the terms of the Note Purchase Agreement.
"Guarantee and Security Agreements" means the Security Agreement
of even date herewith in the form of Exhibit B executed by the Company and the
Guarantee and Security Agreements of even date herewith in the form of Exhibit C
executed by the Guarantors issuing guarantees and/or granting Liens on certain
of the Collateral as partial security for their respective obligations under the
Documents, as the same may be amended, modified or supplemented from time to
time in accordance with their terms, including with respect to Subsidiaries that
become Guarantors thereunder in accordance with the terms of the Note Purchase
Agreement.
"Holder" means a Person in whose name a Security is registered
in the Security Register.
"Indebtedness" means, with respect to any Person, any
indebtedness, contingent or otherwise, in respect of borrowed money (whether or
not the recourse of the lender is to the whole of the assets of such person or
only to
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<PAGE>
a portion thereof and including any indebtedness issued in exchange for
indebtedness for borrowed money), or evidenced by bonds, notes, debentures or
similar instrument or representing the balance deferred and unpaid of the
purchase price of any property, if and to the extent any of the foregoing
indebtedness would appear as a liability upon a balance sheet of such person
prepared on a consolidated basis in accordance with GAAP consistently applied
and letters of credit (or reimbursement obligations related thereto); provided,
however, that (a) "Indebtedness" shall not include accounts payable to trade
creditors or other indebtedness for goods or services crated or assumed in the
ordinary course of business and (b) Indebtedness shall include only the
principal component of any obligations described above. "Indebtedness" shall
also include the principal component of any capital lease obligations (which
shall be the capitalized amount determined in accordance with GAAP); obligations
secured by a Lien to which any property or asset owned or held by such Person is
subject, whether or not the obligations secured thereby shall have been assumed;
and guaranties of items that would be included within this definition
(regardless of whether such items would appear upon such balance sheet);
provided that for purposes of computing Indebtedness outstanding at any time,
such items shall be excluded to the extent that they would otherwise be
eliminated as intercompany items in consolidation. Any reference in this
Indenture to any Indebtedness shall be deemed to include any renewals,
extensions, refundings, amendments and modifications of any such Indebtedness.
"Indenture" means this instrument as originally executed or as
it may from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof.
"Intercompany Notes" means the notes from Subsidiaries or
Affiliates of the Company in favor of the Company in the form of Exhibit E, as
the same may be amended, modified or supplemented from time to time in
accordance with their terms, and all other promissory notes or other instruments
evidencing Indebtedness of Affiliates or Subsidiaries of the Company to the
Company between the Company and its Affiliates.
"Interest Payment Date" means the Stated Maturity of an
installment of interest on the Securities.
"Lien" means any mortgage, charge, pledge, lien, privilege,
security interest or encumbrance of any kind.
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<PAGE>
"Mandatory Conversion" has the meaning specified in the form of
Security.
"Material Adverse Change" means a material adverse change in the
condition of the property, business, operations, financial condition,
liabilities or capitalization of the Company and its Subsidiaries taken as a
whole.
"Maturity" means used with respect to any Security, means the
date on which the principal of such Security becomes due and payable as therein
or herein provided, whether at the Stated Maturity or by declaration of
acceleration or otherwise.
"Officers' Certificate" means a certificate signed by any two
officers of the Company, one of whom must be the Chairman of the Board, the
President, the Chief Executive Officer, the Treasurer or a Vice President of the
Company.
"Opinion of Counsel" means a written opinion of counsel, who may
be counsel for the Company, and who shall be acceptable to the Trustee.
"Outstanding," when used with respect to Securities, means, as
of the date of determination, all Securities theretofore authenticated and
delivered under this Indenture, except:
(i) Securities theretofore canceled by the Trustee
or delivered to the Trustee for cancellation.
(ii) Securities for whose payment money in the
necessary amount has been theretofore deposited with the Trustee or any
Paying Agent (other than the Company) in trust or set aside and
segregated in trust by the Company (if the Company shall act as its own
Paying Agent) for the Holders of such Securities;
(iii) Securities which have been considered paid
pursuant to Section 8.1 or in exchange for or in lieu of which other
Securities have been authenticated and delivered pursuant to this
Indenture, other than any such Securities in respect of which there
shall have been presented to the Trustee proof satisfactory to it that
such Securities are held by a bona fide purchaser in whose hands such
Securities are valid obligations of the Company; and
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<PAGE>
(iv) Securities which have been converted pursuant to
Section 10.1 or for which a Conversion Notice has been tendered pursuant
to Section 10.2.
"Paying Agent" means any Person authorized by the Company to pay
the principal of or interest on any Securities on behalf of the Company.
"Permitted Indebtedness" means, without duplication, any of the
following Indebtedness of the Company or any Guarantor, as the case may be:
(i) the Senior Indebtedness;
(ii) indebtedness incurred to purchase personal
property secured by purchase money mortgagees in an amount not to exceed
$20 million in the aggregate at any one time outstanding;
(iii) any guaranty by a Guarantor or other Subsidiary
or Affiliate of the Company of the Indebtedness under subparagraph (i)
above;
(iv) Indebtedness and obligations under the
Securities;
(v) any Indebtedness and obligations outstanding on
the date of this Indenture as reflected in the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1995 or as set
forth on SCHEDULE 2 of this Indenture;
(vi) Indebtedness of a Guarantor to the Company or
another Guarantor;
(vii) Indebtedness that is expressly subordinated in
right of payment to the Indebtedness under the Securities.
"Permitted Liens" means (i) Liens securing Senior Indebtedness;
(ii) Liens that are subordinate to the Lien of the Security Documents; (iii)
Liens (other than any Lien imposed under the Employee Retirement Income Security
Act of 1974, as amended from time to time, or any successor statute ("ERISA"),
or any Environmental Laws) for taxes, assessments or charges of any governmental
authority for claims not yet due or which are being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted, and with
respect to which adequate reserves or other appropriate provisions are being
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maintained in accordance with the provisions of GAAP and enforcement thereof is
stayed; (iv) Liens of landlords, carriers, warehousemen, mechanics, materialmen
and other Liens (other than any Lien imposed under ERISA) not voluntarily
granted for amounts not yet due or which are being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted, and with
respect to which adequate reserves or other appropriate provisions are being
maintained in accordance with the provisions of GAAP, and enforcement thereof is
stayed; (v) Liens (other than any Lien imposed under ERISA), incurred or
deposited made in the ordinary course of business, including without limitation,
surety bonds and appeal bonds, in connection with workers' compensation,
unemployment insurance and other types of social security benefits or to secure
the performance of tenders, bids, leases, contracts (other than for the
repayment of indebtedness), statutory obligations and other similar obligations
or arising as a result of progress payments under government contracts; (vi)
easements (including without limitation reciprocal easement agreements and
utility agreements), rights-of-way, covenants, consents, reservations,
encroachments, variations and other similar restrictions, charges or
encumbrances (whether or not recorded) and other Liens incurred in the ordinary
course of business, which do not secure indebtedness or the deferred purchase
price of any asset and which do not interfere materially with the ordinary
conduct of the business of the Company and which do not materially detract from
the value of the property to which they attach or materially impair the use
thereof to the Company; (vii) building restrictions, zoning laws and other
statutes, laws, rules, regulations, ordinances and restrictions, and any
amendments thereto, now or at any time hereafter adopted by any governmental
authority having jurisdiction; (viii) purchase money liens including Liens
securing Acquired Indebtedness (to the extent they do not cover assets other
than those acquired) and (ix) the Liens set forth on SCHEDULE 1 of this
Indenture.
"Permitted Investments" shall mean (a) direct obligations of the
United States of America, or of any of its agencies, or obligations guaranteed
as to principal and interest by the United States of America, or of any of its
agencies, in either case maturing not more than 90 days from the date of
acquisition of such obligation; (b) deposit accounts in, and certificates of
deposit, repurchase agreements or bankers acceptances of any bank or trust
company organized under the laws of the United States of America or any state or
licensed to conduct a banking or trust business in the United States of America
or any state and having capital, surplus and undivided profits of at least
$35,000,000, maturing not more than 90 days from the date of acquisition; (c)
commercial paper rated A-1 or better or P-1 by Standard & Poor's Corporation or
Moody's Investors Services, Inc., respectively, maturing not more than 90 days
from the date of acquisition; and (d)
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money market funds sponsored by commercial or investment banks unaffiliated with
the Obligor.
"Person" or "person" means any individual, corporation, company,
partnership, joint venture, trust, unincorporated organization or government or
any agency or political subdivision thereof.
"Predecessor Security" of any particular Security means every
previous Security evidencing all or a portion of the same debt as that evidenced
by such particular Security; and, for the purposes of this definition, any
Security authenticated and delivered under Section 3.6 in exchange for or in
lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to
evidence the same debt as the mutilated, destroyed, lost or stolen Security.
"Qualified Capital Stock" means any Capital Stock of the Company
that is not and would not be, by its terms, or by the terms of any security into
which it is convertible or exchangeable, or upon the happening of an event,
required to be repurchased, including at the option of the holder, in whole or
in part, and that does not and will not have, upon the happening of an event, a
redemption or similar payment due, on or prior to the Stated Maturity of the
Securities.
"Redemption Date" when used with respect to any of the
Securities means the Termination Date under the Escrow Agreements.
"Regular Record Date" for the interest payable on any Interest
Payment Date means the March 15, June 15, September 15 or December 15 (whether
or not a Business Day), as the case may be, next preceding such Interest Payment
Date.
"Responsible Officer" when used with respect to the Trustee,
means the chairman or any vice-chairman of the board of directors, the chairman
or any vice-chairman of the executive committee of the board of directors, the
chairman of the trust committee, the president, any vice president, the
secretary, any assistant secretary, the treasurer, any assistant treasurer, the
cashier, any assistant cashier, any trust officer or assistant trust officer,
the controller or any assistant controller or any other officer of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred because of his
knowledge of and familiarity with the particular subject.
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"Security Register" and "Registrar" have the respective meanings
specified in Section 2.6.
"Senior Indebtedness" means (i) the principal of, premium, if
any, and interest on, and any other Indebtedness of the Company to any bank(s)
or institutional lender(s) with principal not exceeding $5,000,000 in aggregate,
plus interest and customary expenses with respect to such Senior Indebtedness
and (ii) refinancings, deferrals, refundings, replacements, extensions and
renewals of or amendments, modifications or supplements to the Senior
Indebtedness, not to exceed $5,000,000 in principal amount (excluding
capitalized interest) in aggregate.
"Special Record Date" for the payment of any Defaulted Interest
means a date fixed by the Trustee pursuant to Section 2.12.
"Stated Maturity" when used with respect to any Security or any
instalment of interest thereon, means the date specified in such Security as the
fixed date on which the principal of such Security or such instalment of
interest is due and payable.
"Subsidiary" means a person a majority of the total voting power
of the voting stock of which is at the time owned, directly or indirectly, by
the Company or by one or more Subsidiaries of the Company.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Trust Indenture Act" means the Trust Indenture Act of 1939 (15
U.S. Code Sections 77aaa-77bbbb), as amended, as in effect on the date of this
Indenture, unless and until such time as this Indenture is qualified under the
Trust Indenture Act, and thereafter as in effect on the date on which this
Indenture is qualified under the Trust Indenture Act, except as otherwise
provided in Section 7.3.
"U.S. Government Obligations" means securities that are (x)
direct obligations of the United States of America for the timely payment of
which its full faith and credit is pledged or (y) obligations of a Person
controlled or supervised by and acting as an agency or instrumentality of the
United States of America the timely payment of which is unconditionally
guaranteed as a full faith and credit obligation by the United States of
America, which, in either case, are not callable or redeemable at the option of
the issuer thereof, and shall also include a depository
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receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act of
1933, as amended), as custodian with respect to any such U.S. Government
Obligation or a specific payment of principal of or interest on any such U.S.
Government Obligation held by such custodian for the account of the holder of
such depository receipt; PROVIDED that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depository receipt from any amount received by the custodian in
respect of the U.S. Government Obligation or the specific payment of principal
of or interest on the U.S. Government Obligation evidenced by such depository
receipt
"U.S. Legal Tender" means such coin or currency of the United
States of America as at the time of payment shall be legal tender for the
payment of public and private debts.
"Vice President" when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president."
ARTICLE 2
THE SECURITIES
SECTION 2.1 FORM AND DATING.
The Securities shall be substantially in the form of Exhibit A,
which is part of this Indenture. The Securities may have notations, legends or
endorsements required by law, stock exchange rule or usage. Each Security shall
be dated the date of its authentication.
The terms and provisions contained in the Securities shall
constitute, and are hereby expressly made, a part of this Indenture, and to the
extent applicable, the Company, the Guarantors and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such terms and
provisions and to be bound thereby.
SECTION 2.2 TITLE AND TERMS.
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is limited to $35,000,000.00,
except for Securities authenticated and delivered upon registration of transfer
of, or
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in exchange for, or in lieu of, other Securities pursuant to Sections 2.5, 2.9,
2.10, 7.5 or 10.2.
The Securities shall be known and designated as the "11% Secured
Convertible Notes due 1999" of the Company. Their Stated Maturity shall be
March 31, 1999, and, except as provided in paragraphs 1 and 6 of the Securities
and Section 8.14, they shall bear interest at the rate of 11% per annum, from
the date of this Indenture or from the most recent Interest Payment Date to
which interest has been paid or duly provided for, as the case may be, payable
quarterly on March 31, June 30, September 30 and December 31, commencing March
31, 1996, until the principal thereof is paid or made available for payment.
The principal of and interest on the Securities shall be payable
at the office or agency of the Company in Las Vegas, Nevada maintained for such
purpose and at any other office or agency maintained by the Company for such
purpose; PROVIDED, HOWEVER, that payment of interest shall be made by check
mailed to the address of the Person entitled thereto as such address shall
appear in the Security Register.
The Securities shall be redeemable prior to their maturity as
provided in Article 9.
The Securities shall be convertible as provided in Article 10.
The Securities shall be subordinated in right of payment to
Senior Indebtedness as provided in Article 11.
SECTION 2.3 DENOMINATIONS.
The Securities shall be issuable only in registered form without
coupons and only in denominations of $100,000 and any integral multiple of
$25,000 in excess thereof.
SECTION 2.4 EXECUTION, AUTHENTICATION AND DELIVERY.
The Securities shall be executed on behalf of the Company by its
Chairman of the Board, its President, its Chief Executive Officer or one of its
Vice Presidents, under its corporate seal reproduced thereon attested by its
Secretary or one of its Assistant Secretaries. The signature of any of these
officers on the Securities may be manual or facsimile.
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Securities bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall bind
the Company, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Securities or
did not hold such offices at the date of such Securities.
At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Securities executed by the
Company to the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities; and the Trustee in accordance
with such Company Order shall authenticate and deliver such Securities as in
this Indenture provided and not otherwise.
No Security shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose unless there appears on such
Security a certificate of authentication substantially in the form provided for
herein executed by the Trustee by manual signature, and such certificate upon
any Security shall be conclusive evidence, and the only evidence, that such
Security has been duly authenticated and delivered hereunder.
SECTION 2.5 TEMPORARY SECURITIES.
Pending the preparation of definitive Securities, the Company
may execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Securities may determine, as evidenced by their
execution of such Securities.
If temporary Securities are issued, the Company will cause
definitive Securities to be prepared without unreasonable delay. After the
preparation of definitive Securities, the temporary Securities shall be
exchangeable for definitive Securities upon surrender of the temporary
Securities at any office or agency of the Company designated pursuant to Section
8.2, without charge to the Holder. Upon surrender for cancellation of any one
or more temporary Securities the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor a like principal amount of
definitive Securities of authorized definitions. Until so exchanged the
temporary Securities shall in all respects be entitled to the same benefits
under this Indenture as definitive Securities.
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SECTION 2.6 REGISTRAR AND PAYING AGENT.
The Company shall maintain or cause to be maintained in such
locations as it shall determine, which may be the Corporate Trust Office, an
office or agency: (i) where Securities may be presented for registration of
transfer or for exchange ("Registrar"); (ii) where Securities may be presented
for payment ("Paying Agent"); (iii) where Securities may be presented for
conversion (the "Conversion Agent"); and (iv) where notices and demands to or
upon the Company in respect of Securities and this Indenture may be served by
the Holders of the Securities. The Registrar shall keep a register of the
Securities and of their transfer and exchange (the "Security Register"). The
Company may appoint one or more co-registrars, one or more additional paying
agents and one or more additional conversion agents. The term "Paying Agent"
includes any additional paying agent and the term "Conversion Agent" includes
any additional Conversion Agent. The Company may change any Paying Agent,
Registrar, Conversion Agent or co-registrar without prior notice. The Company
shall notify the Trustee of the name and address of any Agent not a party to
this Indenture and shall enter into an appropriate agency agreement with any
Registrar, Paying Agent, Conversion Agent or co-registrar not a party to this
Indenture. The agreement shall implement the provisions of this Indenture that
relate to such Agent. The Company or any of its subsidiaries may act as Paying
Agent, Registrar, Conversion Agent or co-registrar. If the Company fails to
appoint or maintain another entity as Registrar, Paying Agent or Conversion
Agent, or fails to notify the Trustee of such person, the Trustee shall act as
such, and the Trustee shall be entitled to appropriate compensation in
accordance with Section 5.7.
The Company initially appoints the Company as Registrar, Paying
Agent, Conversion Agent and agent for service of notices and demands in
connection with the Securities.
SECTION 2.7 PAYING AGENT TO HOLD MONEY IN TRUST.
Not later than each due date of the principal of and interest on
any Securities, the Company shall deposit with the Paying Agent money sufficient
to pay such principal and interest so becoming due.
The Company shall require each Paying Agent other than the
Trustee to agree in writing that the Paying Agent will hold in trust for the
benefit of Holders or the Trustee all money held by the Paying Agent for the
payment of principal or interest on the Securities (whether such money has been
paid to it by the Company, the Guarantors or any other obligor on the Securities
or any other
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Person), and will notify the Trustee of any default by the Company (or the
Guarantors or any other obligor on the Securities or any other Person) in making
any such payment. While any such default continues, the Trustee may require a
Paying Agent to pay all money held by it to the Trustee. The Company at any
time may require a Paying Agent to pay all money held by it to the Trustee.
Upon payment over to the Trustee, the Paying Agent (if other than the Company or
a Subsidiary) shall have no further liability for the money. If the Company or
a Subsidiary acts as Paying Agent, it shall segregate and hold in a separate
trust fund for the benefit of the Holders all money held by it as Paying Agent.
SECTION 2.8 SECURITYHOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders and, in the event and so long as this Indenture is qualified under the
Trust Indenture Act, shall otherwise comply with Section 312(a) of the Trust
Indenture Act. If the Trustee is not the Registrar, the Company, the
Guarantors, the Foreign Guarantors and any other obligor shall furnish to the
Trustee on or before each Interest Payment Date and at such other times as the
Trustee may request in writing, but in any event at least quarterly, a list in
such form and as of such date as the Trustee may reasonably require of the names
and addresses of Holders and, in the event and so long as this Indenture is
qualified under the Trust Indenture Act, the Company shall otherwise comply with
Section 312(a) of the Trust Indenture Act.
SECTION 2.9. TRANSFER AND EXCHANGE.
(a) When Securities are presented to the Registrar or a
co-registrar with a request to register a transfer or to exchange them for an
equal principal amount of securities of other denominations, the Registrar shall
register the transfer or make the exchange if its requirements for such
transactions are met (including, if required by the Company, an opinion of
counsel to the Holder requesting transfer that an exemption from registration
under the Securities Act of 1933, as amended, is available for such transfer).
To permit registrations of transfer and exchanges, the Company shall issue and
the Trustee shall authenticate Securities at the Registrar's request. No
service charge shall be made to the Holder for any registration of transfer or
exchange (except as otherwise expressly permitted herein), but the Company may
require payment of a sum sufficient to cover any transfer tax or similar
governmental charge payable in connection therewith (other than any such
transfer tax or similar governmental charge payable upon exchanges pursuant to
Section 2.5, 7.5 or 10.2).
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(b) The Company shall not be required (i) to issue, register
the transfer of or exchange Securities following (A) the effective date with
respect to an Automatic Conversion or (B) the Redemption Date, except the
unredeemed portion of any Security being redeemed in part or (ii) to register
the transfer or exchange of any Security for which a Conversion Notice has been
tendered to the Registrar in whole or in part, except the unconverted portion of
any Security being converted in part.
SECTION 2.10 REPLACEMENT SECURITIES.
If the Holder of a Security claims that the Security has been
mutilated, destroyed, lost or stolen, then, in the absence of notice to the
Company or Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall issue and the Trustee shall authenticate a
replacement Security if the Trustee's requirements are met. In case any
Security which has matured or is about to mature, or has been called for
redemption pursuant to Section 9 or is about to be converted into Common Stock
shall become mutilated or be destroyed, lost or stolen, the Company may, instead
of issuing a substitute Security, pay or authorize the payment of or convert or
authorize the conversion of the same (without surrender thereof except in the
case of a mutilated Security), as the case may be, if the applicant for such
payment or conversion shall furnish to the Company, to the Trustee and, if
applicable, to the Authenticating Agent such security or indemnity as may be
required by them to save each of them harmless for any loss, liability, cost or
expense caused by or connected with such substitution, and, in case of
destruction, loss or theft, evidence satisfactory to the Company, the Trustee
and, if applicable, any Paying Agent or Conversion Agent of the destruction,
loss or theft of such Security and of the ownership thereof. If required by the
Trustee or the Company, an indemnity bond must be provided which is sufficient
in the judgment of both to protect the Company, the Trustee, any Agent or any
Authenticating Agent from any loss which any of them may suffer if a Security is
replaced. Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every replacement Security is an additional obligation of the
Company, whether or not the mutilated, destroyed, lost or stolen Security shall
be at any time enforceable by anyone, and shall be entitled to all the benefits
of this Indenture equally and proportionately with any and all other Securities
duly issued hereunder.
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The provisions of this Section are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 2.11 TREASURY SECURITIES.
In determining whether the Holders of the required principal
amount of Securities have concurred in any direction, waiver or consent,
Securities owned by the Company, the Guarantors or any other obligor or an
Affiliate of the Company, shall be considered as though they are not
Outstanding, except that for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Securities which the Trustee knows are so owned shall be so disregarded.
Securities so owned which have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Securities and that the pledgee
is not the Company or any other obligor upon the Securities or any Affiliate of
the Company or of such other obligor.
SECTION 2.12 PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED.
Interest on any Security which is payable, and is punctually
paid or duly provided for, on any Interest Payment Date shall be paid to the
Person in whose name that Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest.
Any interest on any Security which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the Holder
on the relevant Regular Record Date by virtue of having been such Holder, and
such Defaulted Interest may be paid by the Company, at its election in each
case, as provided in Clause (1) or (2) below:
(1) The Company may elect to make payment of any
Defaulted Interest to the Persons in whose names the Securities (or
their respective Predecessor Securities) are registered at the close of
business on a Special Record Date for the payment of such Defaulted
Interest, which shall be fixed in the following manner. The Company
shall notify the Trustee in writing of the amount of Defaulted Interest
proposed to be paid on each Security and the date of the proposed
payment, and at the same time the Company shall deposit with the Trustee
an amount of money equal to the aggregate amount proposed to be paid in
respect of such Defaulted
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Interest or shall make arrangements satisfactory to the Trustee for such
deposit prior to the date of the proposed payment, such money when
deposited to be held in trust for the benefit of the Persons entitled to
such Defaulted Interest as in this Clause provided. Thereupon the
Trustee shall fix a Special Record Date for the payment of such Defaulted
Interest which shall be not more than 15 days and not less than 10 days
prior to the date of the proposed payment and not less than 10 days after
the receipt by the Trustee of the notice of the proposed payment. The
Trustee shall promptly notify the Company of such Special Record Date
and, in the name and at the expense of the Company, shall cause notice of
the proposed payment of such Defaulted Interest and the Special Record
Date therefor to be mailed, first-class postage prepaid, to each Holder
at his address as it appears in the Security Register, not less than 10
days prior to such Special Record Date. Notice of the proposed payment of
such Defaulted Interest and the Special Record Date therefor having been
so mailed, such Defaulted Interest shall be paid to the Persons in whose
names the Securities (or their respective Predecessor Securities) are
registered at the close of business on such Special Record Date and shall
no longer be payable pursuant to the following Clause (2).
(2) The Company may make payment of any Defaulted
Interest in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Securities may be
listed, and upon such notice as may be required by such exchange, if,
after notice given by the Company to the Trustee of the proposed payment
pursuant to this Clause, such manner of payment shall be deemed
practicable by the Trustee.
Subject to the foregoing provisions of this Section, each
Security delivered under this Indenture upon registration of transfer of or in
exchange for in lieu of any other Security shall carry the rights to interest
accrued and unpaid, and to accrue, which were carried by such other Security.
In the case of any Security which is converted after any Regular
Record Date and on or prior to the next succeeding Interest Payment Date (other
than any Security whose Maturity is prior to such Interest Payment Date),
interest whose Stated Maturity is on such Interest Payment Date shall be payable
on such Interest Payment Date notwithstanding such conversion, and such interest
(whether or not punctually paid or duly provided or) shall be paid to the Person
in whose name that Security (or one or more Predecessor Securities) is
registered at the close of business on such Regular Record Date. Except as
otherwise expressly provided
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in the immediately preceding sentence, in the case of any Security which is
converted, interest whose Stated Maturity is after the date of conversion of
such Security shall not be payable.
SECTION 2.13 PERSONS DEEMED OWNERS.
Prior to the presentment of a Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name such Security is registered as the owner of
such Security for the purpose of receiving payment of principal of and (subject
to Section 2.12) interest on such Security and for all other purposes
whatsoever, whether or not such Security be overdue, and neither the Company,
the Trustee nor any agent of the Company or the Trustee shall be affected by
notice to the contrary.
SECTION 2.14 CANCELLATION.
All Securities surrendered for payment, redemption, registration
of transfer or exchange or conversion shall, if surrendered to any Person other
than the Trustee, be delivered to the Trustee and shall be promptly canceled by
it. The Company may at any time deliver to the Trustee for cancellation any
Securities previously authenticated and delivered hereunder which the Company
may have acquired in any manner whatsoever, and all Securities so delivered
shall be promptly canceled by the Trustee. No Securities shall be authenticated
in lieu of or in exchange for any Securities canceled as provided in this
Section, except as expressly permitted by this Indenture. All canceled
Securities held by the Trustee shall be disposed of as directed by a Company
Order.
SECTION 2.15 COMPUTATION OF INTEREST.
Interest on the Securities shall be computed on the basis of a
year of twelve 30-day months.
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ARTICLE 3
SATISFACTION, DISCHARGE AND DEFEASANCE
SECTION 3.1 SATISFACTION AND DISCHARGE OF INDENTURE.
This Indenture shall cease to be of further effect (except as to
any surviving rights of conversion, registration of transfer or exchange of
Securities herein expressly provided for and except as provided in Section 3.3),
and the Trustee, on demand of and at the expense of the Company, shall execute
proper instruments acknowledging satisfaction and discharge of this Indenture,
when:
(1) either
(A) all Securities theretofore authenticated
and delivered (other than (i) Securities which have been
mutilated, destroyed, lost or stolen and which have been
replaced or paid as provided in Section 2.10 and (ii) Securities
for whose payment money has theretofore been deposited in trust
or segregated and held in trust by the Company and thereafter
repaid to the Company or discharged from such trust, pursuant to
the terms of this Indenture have been delivered to the Trustee
for cancellation; or
(B) all such Securities not theretofore
delivered to the Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at
their Stated Maturity within one year,
and the Company, in the case of (i) or (ii) above, has deposited
or caused to be deposited with the Trustee as trust funds in
trust for the purpose an amount sufficient to pay and discharge
the entire indebtedness on such Securities not theretofore
delivered to the Trustee for cancellation, for principal and
interest to the date of such deposit (in the case of Securities
which have become due and payable) or to the Stated Maturity;
(2) the Company has paid or caused to be paid all
other sums payable hereunder by the Company; and
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(3) the Company has delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent herein provided for relating to the satisfaction
and discharge of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 5.7, the obligations of
the Trustee to any Authenticating Agent under Section 5.12 and, if money shall
have been deposited with the Trustee pursuant to subclause (B) of clause (1) of
this Section, the obligations of the Trustee under Section 3.2 and the last
paragraph of Section 8.3 shall survive.
SECTION 3.2 APPLICATION OF TRUST MONEY.
Subject to the provisions of the last paragraph of Section 8.3,
all money deposited with the Trustee pursuant to Section 3.1 shall be held in
trust and applied by it, in accordance with the provisions of the Securities and
this Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal and interest for
whose payment such money has been deposited with the Trustee. All moneys
deposited with the Trustee pursuant to Section 3.1 (and held by it or any Paying
Agent) for the payment of Securities subsequently converted shall be returned to
the Company upon Company Request.
SECTION 3.3 REINSTATEMENT.
If (i) the Trustee or Paying Agent is unable to apply any money
in accordance with Section 3.2 by reason of any order or judgment of any court
or governmental authority enjoining, restraining or otherwise prohibiting such
application and (ii) the Holders of at least a majority in principal amount of
Outstanding Securities so request by written notice to the Trustee, the
Company's and the Guarantors' obligations under this Indenture and the
Securities shall be revived and reinstated as though no deposit had occurred
pursuant to Section 3.1 until such time as the Trustee or Paying Agent is
permitted to apply all such money in accordance with Section 3.2.
SECTION 3.4 DEFEASANCE.
Subject to Section 3.7, the Company may, at its option by Board
Resolution, at any time, elect to have either paragraph (a) or (b) below applied
to
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the Outstanding Securities upon compliance with the conditions set forth in
Section 3.5 below.
(a) Upon exercise of the option applicable to this
paragraph (a), the Company and the Guarantors shall be deemed to
have been released and discharged from their obligations with
respect to the Outstanding Securities on the date the conditions
set forth below are satisfied (hereinafter, "legal defeasance").
For this purpose, the Company shall be deemed to have paid and
discharged the entire indebtedness represented by the
Outstanding Securities, which shall thereafter be deemed to be
"Outstanding" only for the purposes of Section 3.7 and the other
Sections of this Indenture referred to in clauses (i) and (ii)
below, and the Company and the Guarantors shall be deemed to
have satisfied all their other obligations under such Securities
and this Indenture (and the Trustee, on demand of and at the
expense of the Company, shall execute proper instruments
acknowledging the same), except for the following which shall
survive until otherwise terminated or discharged hereunder: (i)
the rights of Holders of Outstanding Securities to receive
solely from the trust fund described in Section 3.5 and as more
fully set forth in such Section, payments in respect of the
principal of and interest on such Securities when such payments
are due, (ii) the Company's and the Guarantors' obligations with
respect to such Securities under Sections 2.5, 2.9, 2.10, 8.2,
8.3 and 8.14, (iii) the rights, powers, trusts, duties and
immunities of the Trustee hereunder and the Companies'
obligations in connection therewith and (iv) this Article 3.
(b) Upon exercise of the option applicable to this
paragraph (b), the Company and the Guarantors shall be released
and discharged from their obligations under any covenant
contained in Article 6 and in Sections 8.03 through 8.13 and
8.15 with respect to the Outstanding Securities on and after the
date the conditions set forth below are satisfied (hereinafter,
"covenant defeasance"), and the Securities shall thereafter be
deemed to be not "Outstanding" for the purpose of any direction,
waiver, consent or declaration or act of Holders of Securities
(and the consequences of any thereof) in connection with such
covenants, but shall continue to be deemed "Outstanding" for all
other purposes hereunder. For this purpose, such covenant
defeasance means that, with respect to the Outstanding
Securities, the Company and the Guarantors may omit
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to comply with and shall have no liability in respect of any
term, condition or limitation set forth in any such covenant,
whether directly or indirectly, by reason of any reference
elsewhere herein to any such covenant or by reason of any
reference in any such covenant to any other provision herein or
in any other document and such omission to comply shall not
constitute a Default or an Event of Default under Section 4.1,
but, except as specified above, the remainder of this Indenture
and such Securities shall be unaffected thereby.
SECTION 3.5 CONDITIONS TO DEFEASANCE.
The following shall be the conditions to application of either
paragraph (a) or (b) of Section 3.4 to the Outstanding Securities:
(1) The Company shall irrevocably have deposited or
caused to be deposited with the Trustee (or another trustee
satisfying the requirements of Section 5.9 who shall agree to
comply with the provisions of this Article 3 applicable to it)
as trust funds in trust for the purpose of making the following
payments, specifically pledged as security for, and dedicated
solely to, the benefit of the Holders of such Securities, (A)
cash in U.S. Legal Tender in an amount, (B) U.S. Government
Obligations which through the scheduled payment of principal and
interest in respect thereof in accordance with their terms will
provide, not later than one day before the due date of any
payment, cash in U.S. Legal Tender in an amount, or (C) a
combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent
public accountants expressed in a written certification thereof
delivered to the Trustee, to pay and discharge and which shall
be applied by the Trustee (or other qualifying trustee) to pay
and discharge the principal of (and premium, if any) and
interest on the Outstanding Securities on the Stated Maturity of
such principal or installment of interest or upon redemption on
the day on which such payments are due and payable in accordance
with the terms of this Indenture and of such Securities;
PROVIDED that the Trustee shall have been irrevocably instructed
to apply such money or the proceeds of such U.S. Government
Obligations to said payments with respect to the Securities;
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(2) In the case of an election under paragraph (a) of
Section 3.4 hereof, the Company shall have delivered to the
Trustee an Opinion of Counsel stating that (x) the Company has
received from, or there has been published by, the Internal
Revenue Service a ruling or (y) since the date hereof there has
been a change in the applicable federal income tax law, in
either case to the effect that, and based thereon such opinion
shall confirm that, the Holders of the Outstanding Securities
will not recognize income, gain or loss for federal income tax
purposes as a result of such legal defeasance and will be
subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such
legal defeasance had not occurred;
(3) In the case of an election under paragraph (b) of
Section 3.4 above, the Company shall have delivered to the
Trustee an Opinion of Counsel to the effect that the Holders of
the outstanding Securities will not recognize income, gain or
loss for federal income tax purposes as a result of such
covenant defeasance and will be subject to federal income tax on
the same amounts in the same manner and at the same times as
would have been the case if such covenant defeasance had not
occurred;
(4) No Default or Event of Default with respect to the
Securities shall have occurred and be continuing on the date of
such deposit or, insofar as Subsection 4.1(6) or 4.1(7) is
concerned, at any time during the period ending on the 91st day
after the date of such deposit (it being understood that this
condition shall not be deemed satisfied until the expiration of
such period);
(5) Such defeasance shall not result in a breach or
violation of, or constitute a default under, this Indenture or
any other material agreement or instrument to which any of the
Company or the Guarantors is a party or by which they are bound;
(6) The Company and the Guarantors shall have delivered
to the Trustee an Officers' Certificate and an Opinion of
Counsel, each stating that all conditions precedent relating to
the defeasance under Section 3.4 have been complied with; and
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(7) (a) The Collateral Documentation shall not be
discharged as a result of such irrevocable deposit under Section
3.5 unless the Company shall have delivered to the Trustee an
Opinion of Counsel, subject to customary exclusions and
exceptions reasonably acceptable to the Trustee, to the effect
that (i) the Company has authorization to establish such
irrevocable trust in favor of the Trustee for the benefit of the
Holders under applicable law and the action in establishing the
irrevocable trust has been duly and properly authorized by the
Company and such authorization has not been revoked, (ii) to
their knowledge, the Trustee is an independent trustee with
respect to the irrevocable trust, (iii) a valid trust is created
at the time of such irrevocable deposit and (iv) the Holders of
the Securities will have the sole beneficial ownership interest
under applicable law in the money or U.S. Government Obligations
so deposited in such trust. The Opinion of Counsel so referred
to in this paragraph may contain a qualification that in the
event that a court of competent jurisdiction were to determine
that the trust funds remained owned by the Company after such
deposit, the Holders of the Securities will have a non-avoidable
first-priority perfected security interest under applicable law
in the money or U.S. Government Obligations so deposited (for
the limited purpose of the Opinion of Counsel referred to in
this paragraph, such opinion may contain an assumption that the
conclusions contained in a customary solvency letter by a
nationally recognized appraisal firm, dated as of the date of
the deposit and taking into account such deposit, or a customary
alternative certificate reasonably acceptable to the Trustee,
are accurate, PROVIDED that such solvency letter or certificate
is also addressed and delivered to the Trustee).
(b) It is the intention of the parties hereto that a
valid trust for the benefit of the Holders of the Securities be
created at the time that the Company makes the deposit pursuant
to Section 3.5. The security interest in such deposit that is
granted herein to the Trustee for the benefit of the Holders of
the Securities is intended solely as protection for the Holders
of the Securities in the event that a court of competent
jurisdiction were to determine either that (i) such trust had
not been validly created or (ii) such trust is not enforceable.
The Company hereby grants to the Trustee for the benefit of the
Holders a security interest in all money, funds, investments or
other property deposited with the Trustee pursuant to Section
3.5 to
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secure the Company's obligations under the Indenture and the
Securities.
(c) The Company shall take any and all acts necessary to
create, perfect and maintain, in favor of the Holders of the
Securities, a first-priority security interest in the money and
U.S. Government Obligations so deposited and shall take any
other action and execute and deliver any other documents that
may reasonably be requested by the Trustee to effectuate or
evidence such security interest, and shall do all of the above
at such appropriate time so that such security interest shall
attach to the deposit at the time such deposit is made and shall
at all times be perfected.
(d) Notwithstanding the foregoing, prior to the end of
the 91-day period following the irrevocable deposit referred to
above, none of the obligations of the Company or the Guarantors
under this Indenture or the Collateral Documentation shall be
discharged, unless and until the Company shall have delivered to
the Trustee a Current Appraisal as of a date no more than 60
days prior to the date of such irrevocable deposit reflecting
the Appraised Fair Market Value of the Collateral in an amount
not less than 120% of the amount of such irrevocable deposit and
an Opinion of Counsel, subject to customary exclusions and
exceptions, to the effect that based on such Current Appraisal,
the irrevocable deposit will not be subject to avoidance as a
preferential transfer under 11 U.S.C. Section 547, as it may be
amended from time to time.
SECTION 3.6 DEPOSITED MONEY AND U.S. GOVERNMENT OBLIGATIONS TO BE HELD IN
TRUST; OTHER MISCELLANEOUS PROVISIONS.
Subject to the provisions of the last paragraph of Section 8.3,
all money and U.S. Government Obligations (including the proceeds thereof)
deposited with the Trustee (or other qualifying trustee, collectively for
purposes of this Section 3.6, the "Trustee") pursuant to Section 3.5 in respect
of the Outstanding Securities shall be held in trust and applied by the Trustee,
in accordance with the provisions of such Securities and this Indenture, to the
payment, either directly or through any Paying Agent (including the Company or
any of its Subsidiaries acting as its own Paying Agent) as the Trustee may
determine, to the Holders of such Securities of all sums due and to become due
thereon in respect of principal (and premium, if
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any) and interest, but such money need not be segregated from other funds except
to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax,
fee or other charge imposed on or assessed against the cash or U.S. Government
Obligations deposited pursuant to Section 3.5 or the principal and interest
received in respect thereof other than any such tax, fee or other charge which
by law is for the account of the Holders of the Outstanding Securities.
Anything in this Article 3 to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon Company
Request any money or U.S. Government Obligations held by it as provided in
Section 3.5 which, in the opinion of a nationally recognized firm of independent
public accountants expressed in a written certification thereof delivered to the
Trustee (which may be the opinion delivered under Section 3.5(l)), are in excess
of the amount thereof which would then be required to be deposited to effect an
equivalent defeasance or covenant defeasance.
The Trustee and the Paying Agent shall pay to the Company upon
request any money held by them for the payment of principal or interest on the
Securities that remains unclaimed for two years; PROVIDED that the Company shall
have first caused notice of such payment to be published one in a newspaper of
general circulation in the City of New York or mailed to each Holder entitled
thereto no less than 30 days prior to such repayment. After that, Holders
entitled to the money must look to the Company for payment as general creditors
unless otherwise provided by law.
SECTION 3.7 REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any money in
accordance with Section 3.4 by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Companies' obligations under this Indenture and the
Securities shall be revived and reinstated as though no deposit had occurred
pursuant to Section 3.4 until such time as the Trustee or Paying Agent is
permitted to apply all such money in accordance with Section 3.4; PROVIDED,
HOWEVER, that, if the Company makes any payment of principal of (or premium, if
any) or interest on any Security following the reinstatement of its obligations,
the Company shall be subrogated to the rights of the Holders of such Securities
to receive such payment from the money held by the Trustee or Paying Agent.
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ARTICLE 4
REMEDIES
SECTION 4.1 EVENTS OF DEFAULT.
"Event of Default," wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
(1) default in the payment of any interest upon any
Security when it becomes due and payable, and continuance of such
default for a period of 10 days; or
(2) default in the payment of the principal of any
Security at its Maturity; or
(3) default in the performance of any agreement or
covenant in, or provision of, the Securities, or the other documents
executed and delivered in connection with this Indenture (including any
Document) and to which the Company or a Guarantor is a party (other than
a covenant a default in whose performance is elsewhere in this Section
specifically dealt with), or any representation or warranty made in any
document executed and delivered in connection with this Indenture
(including any Document) was false in any material respect on the date
as of which made or deemed made, and continuance, except with respect to
the covenants contained in Sections 8.7, 8.8, 8.9, 8.10 and 8.15 and
with respect to Sections 8.16 and 8.17 for which there shall be 30-day
cure periods for which there shall be no cure period, of such default,
breach or misrepresentation for a period of 20 days after there has been
given, by registered or certified mail, to the Company by the Trustee or
to the Company and the Trustee by the Holders of at least 10% in
principal amount of the outstanding Securities a written notice
specifying such default, breach or misrepresentation and requiring it to
be remedied and stating that such notice is a "Notice of Default"
hereunder, or
(4) a default under any mortgage, indenture,
instrument or agreement other than under clause (3) above under which
there may be issued or by which there may be secured or evidenced any
Indebtedness of
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the Company or any Guarantor, whether such Indebtedness now exists or
shall be created hereafter, if the holder or holders of at least
$750,000 in principal amount of such Indebtedness cause such $750,000
(or more) on principal amount of Indebtedness to become due and payable
prior to its stated maturity; or
(5) a final judgment or judgments for the payment of
money are entered by a court or courts of competent jurisdiction against
the Company or any Guarantor and such remains undischarged for a period
(during which execution shall not effectively be stayed) of 60 days,
provided that the aggregate of all such judgments that are not covered
by insurance under which the Company is a beneficiary exceeds
$1,000,000; or
(6) the Company or any Guarantor pursuant to or
within the meaning of any Bankruptcy Law: (a) commences a voluntary
case; (b) consents to the entry of an order for relief against it in an
involuntary case; (c) consents to the appointment of a Custodian of it
or all or substantially all of its property; (d) makes a general
assignment for the benefit of its creditors; or (e) admits in writing
its inability to generally to pay its debts as the same become due; or
(7) the entry by a court having jurisdiction in the
premises of an order or decree under any Bankruptcy Law that: (a) is
for relief against the Company or any Guarantor in an involuntary case;
(b) appoints a Custodian of the Company or any Guarantor or for all or
substantially all of the property of the Company or any Guarantor; or
(c) orders the liquidation of any of the Company or any Guarantor and
the order or decree remains unstayed and in effect for 60 days; or
(8) a court of competent jurisdiction enters a final
judgment holding any of the documents delivered in connection with this
Indenture (including any Document) to be invalid or unenforceable and
such judgment remains unstayed and in effect for a period of 20
consecutive days; or the Company shall assert, in any pleading filed in
such a court, that any of the documents delivered n connection with this
Indenture are invalid or unenforceable; or
(9) the Company or any Guarantor defaults in the
payment of any amounts due pursuant to the terms of any document
executed and delivered by the Company or such Guarantor in connection
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with this Indenture (other than payments elsewhere in this Section
specifically dealt with).
SECTION 4.2 ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.
If an Event of Default (other than an Event of Default specified
in clause (6) or (7) of Section 4.1 with respect to the Company) occurs and is
continuing, the Trustee by notice to the Company, or the Holders of at least a
majority in principal amount of the then Outstanding Securities by notice to the
Company and the Trustee, may declare the unpaid principal of and any accrued
interest on all the Securities to be due and payable. Upon such declaration,
the principal and interest shall be due and payable immediately. If an Event of
Default specified in clause (6) or (7) of Section 4.1 occurs with respect to the
Company, such an amount shall IPSO FACTO become and be immediately due and
payable without any declaration or other act on the part of the Trustee or any
Holder. The Holders of a majority in principal amount of the then outstanding
Securities by notice to the Trustee may rescind an acceleration and its
consequences if the rescission would not conflict with any judgment or decree
and 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. No such rescission shall affect any subsequent default or impair
any right consequent thereon.
SECTION 4.3 OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy to collect the payment of principal or interest on
the Securities or to enforce the performance of any provision of the Securities,
the Guarantee and Security Agreements, this Indenture or the other Documents, or
to realize upon any Collateral.
The Trustee may maintain a proceeding even if it does not
possess any of the Securities or does not produce any of them in the proceeding.
SECTION 4.4 WAIVER OF PAST DEFAULTS.
The Holders of a majority in principal amount of Outstanding
Securities by notice to the Trustee may waive an existing Default or Event of
Default and its consequences except a continuing Default or Event of Default in
the payment of the principal of or interest on any Security or in respect of a
covenant or provision of this Indenture that cannot be modified or amended
without the consent of all Holders. Upon such waiver, such default shall cease
to exist, and any
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Event of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
SECTION 4.5 CONTROL BY MAJORITY.
The Holders of a majority in principal amount of Outstanding
Securities may direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee or exercising any trust or power
conferred on it. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture, that is unduly prejudicial to the rights
of other Holders, or would involve the Trustee in personal liability.
SECTION 4.6 LIMITATION ON SUITS.
A Holder may pursue a remedy with respect to this Indenture or
the Securities only if:
(1) the Holder gives to the Trustee notice of a
continuing Event of Default;
(2) the Holders of at least 25% in principal amount
of the then outstanding Securities make a written request to the Trustee
to pursue the remedy;
(3) such Holder or Holders offer to the Trustee
indemnity satisfactory to the Trustee against any loss, liability or
expense;
(4) the Trustee does not comply with the request
within 30 days after receipt of the request and the offer of indemnity;
and
(5) during such 30-day period the Holders of a
majority in principal amount of the then Outstanding Securities do not
give the Trustee a direction inconsistent with the request.
A Holder may not use this Indenture to prejudice the rights of another Holder or
to obtain a preference or priority over another Holder.
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SECTION 4.7 RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right
of any Holder of a Security to receive payment of principal and interest on the
Security, on or after the respective due dates expressed in the Security, or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of such Holder.
SECTION 4.8 COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 4.1(1) or (2) occurs
and is continuing, the Trustee may recover judgment in its own name and as
trustee of an express trust against the Company, the Guarantors or any other
obligor on the Securities for the whole amount of principal and interest
remaining unpaid on the Securities and interest on overdue principal and
interest and such further amount as shall be sufficient to cover the costs and,
to the extent lawful, expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel.
SECTION 4.9 TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee and the Holders allowed in any judicial proceedings relative to the
Company, the Guarantors or any other obligor or their respective creditors or
property. Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
SECTION 4.10 PRIORITIES.
If the Trustee collects any money pursuant to this Article or by
exercise of its remedies under the Documents, it shall pay out the money in the
following order and, in case of the distribution of such money on account of
principal or interest, upon presentation of the Securities and the notation
thereon of the payment if only partially paid and upon surrender thereof if
fully paid:
First: to the Trustee for amounts due under Section
5.7;
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Second: to the Holders of Senior Debt to the extent
required by Article 11; and
Third: to Holders for amounts due and unpaid on the
Securities for principal and interest ratably,
without preference or priority of any kind,
according to the amounts due and payable on the
Securities for principal and interest,
respectively; and
Fourth: to the Company, the Guarantors or any other
obligors on the Securities, as their interests
may appear, or as a court of competent
jurisdiction may direct.
The Trustee may fix a record date and payment date for any
payment to Holders.
SECTION 4.11 UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for any action taken or
omitted by it as a Trustee, a court in its discretion may require the filing by
any party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Section does not apply to any suit instituted by the Company or
by the Trustee, a suit by a Holder for the enforcement of the payment of the
principal of or interest on any Security on or after the respective Stated
Maturities expressed in such Security or for the enforcement of the right to
convert any Security in accordance with Article 10, or a suit by Holders of more
than 10% in principal amount of the then outstanding Securities.
SECTION 4.12 RIGHTS AND REMEDIES CUMULATIVE.
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in the last paragraph
of Section 2.10, no right or remedy herein conferred upon or reserved to the
Trustee or to the Holders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter
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existing at law or in equity otherwise. The assertion or employment of any
right or remedy hereunder or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 4.13 DELAY OR OMISSION NOT WAIVER.
No delay or omission of the Trustee or of any Holder of any
Security to exercise any right or remedy accruing upon any Event of Default
shall impair any such right or remedy or constitute a waiver of any such Event
of Default or an acquiescence therein. Every right and remedy given by this
Article or by law to the Trustee or to the Holders may be exercised from time to
time, and as often as may be deemed expedient, by the Trustee or by the Holders,
as the case may be.
SECTION 4.14 WAIVER OF STAY OR EXTENSION LAWS.
The Company covenants (to the extent that it may lawfully do so)
that it will not at any time insist upon, or plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay or extension law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law has been enacted.
ARTICLE 5
THE TRUSTEE
SECTION 5.1 CERTAIN DUTIES AND RESPONSIBILITIES.
(a) Except during the continuance of an Event of
Default,
(1) the Trustee undertakes to perform such
duties and only such duties as are specifically set forth in
this Indenture, and no implied covenants or obligations shall be
read into this Indenture against the Trustee; and
(2) in the absence of bad faith on its part,
the Trustee may conclusively rely, as to the truth of the
statements and
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the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Trustee and conforming
to the requirements of this Indenture; but in the case of any
such certificates or opinions which by any provision hereof are
specifically required to be furnished to the Trustee, the
Trustee shall be under a duty to examine the same to determine
whether or not they conform to the requirements of this
Indenture.
(b) In case an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and powers
vested in it by Indenture, and use the same degree of care and skill in
their exercise, prudent person would exercise or use under the
circumstances in the conducting its own affairs.
(c) No provision of this Indenture shall be
construed to relieve the Trustee from liability for its own negligent
action, its own negligent failure to act, or its own wilful misconduct,
except that
(1) this Subsection shall not be construed to
limit the effect of Subsection (a) of this Section;
(2) the Trustee shall not be liable for any
error of judgment made in good faith by a Responsible Officer,
unless it shall be proved that the Trustee was negligent in
ascertaining the pertinent facts;
(3) the Trustee shall not be liable with
respect to any action taken or omitted to be taken by it in good
faith in accordance with the direction of the Holders of a
majority in principal amount of the Outstanding Securities
relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, under
this Indenture;
(4) no provision of this Indenture shall
require the Trustee to expend or risk its own funds or otherwise
incur any financial liability in the performance of any of its
duties hereunder;
(5) the Trustee may refuse to perform any duty
or exercise any right or power unless it receives indemnity
satisfactory to it against any loss, liability or expense; and
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(6) the Trustee shall not be liable for
interest on any money received by it except as the Trustee may
agree in writing with the Company and the Guarantors. Money
held in trust by the Trustee need not be segregated from other
funds except to the extent required by law.
(d) Whether or not therein expressly so provided,
every provision of this Indenture relating to the conduct or affecting
the liability of or affording protection to the Trustee shall be subject
to the provisions of this Section.
(e) The Trustee is authorized and directed on behalf
of the Holders to acquire as Trustee and using proceeds of the offering
of the Securities, all right title and interest of First Interstate Bank
of California and its Affiliates in and to all loans made by such
Persons to the Company or its Affiliates, including all security
agreements and financing statements related thereto pursuant to the
terms of the Loan Purchase Agreement, in the form attached hereto as
EXHIBIT F. The Company shall cause to be segregated from the proceeds
of the offering of Securities sufficient funds to effect such
acquisition. The Trustee is expressly authorized to execute such
documents and take such other action as it deems reasonable to effect
the foregoing. The Company and the Trustee agree and the Holders by
acquisition of the Securities agree that upon its acquisition by the
Trustee, the terms of such loan shall be automatically modified without
further act of any Person to provide that the principal of such loan
shall become an undivided portion of the principal of all of the
Securities issued hereunder (and each Holder shall have a proportionate
interest in such principal amount) and that the provisions of such loan
documents and agreements relating to any payments due or performance
required of the Company or any of its Affiliates relating to such loan
shall be modified to become, and shall be fully discharged by
performance of the Company under, the terms and conditions of this
Indenture and the Securities. In no event shall the Trustee be
obligated or entitled to enforce (or subject to liability for failure to
enforce) any term or condition of such loan documents other than the
enforcement of any security interests granted thereunder upon and during
the occurrence and continuation of a Default or Event of Default under
the Documents (other than such loan documentation). Upon such purchase,
rights, powers, title and remedies of the First Interstate Bank of
California under such loan documentation shall be vested in the Trustee.
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(f) The Company and the Trustee acknowledge and
agree and the Holders by acquisition of the Securities acknowledge and
agree that (1) in order to enforce some of the rights and duties of the
Trustee under this Indenture, it may be necessary for the Trustee to act
or cause others to take actions in jurisdictions in which Trustee
currently is not or in the future may not be authorized to transact
business as a fiduciary or otherwise, (2) the parties do not expect the
Trustee to become so qualified to transact business in such
jurisdictions, and (3) consequently it is recognized that in the event
of litigation under this Indenture, and in particular in the event of
enforcement of the rights of the Trustee following an Event of Default,
or in the case the Trustee deems that by reason of any present or future
law of any jurisdiction it may not exercise any of the powers, rights or
remedies herein granted to the Trustee or act as Trustee hereunder in
any jurisdiction, or take any action that may be desirable or necessary
in connection therewith, it may be necessary that the Trustee (and the
Trustee is hereby authorized to) appoint an additional individual or
institution as a separate Trustee or co-Trustee.
If the Trustee appoints any such individual or
institution as a separate co-Trustee, then each and every remedy, power,
right, claim, demand, cause of action, immunity, estate, title, interest
and lien expressed or intended by this Indenture to be exercised by or
vested in or conveyed to the Trustee with respect thereto shall be
exercisable by and vest in such separate or co-Trustee but only to the
extent necessary to enable such separate or co-Trustee to exercise such
powers, rights and remedies, and every covenant and obligation necessary
to the exercise thereof by such separate or co-Trustee shall run to and
be enforceable by either of them.
Upon request of the Trustee, the Company shall make,
execute, acknowledge and deliver such documents as may be necessary or
appropriate to perfect or clarify the authority of such separate or
co-Trustee and confirm to it such rights, powers, duties and obligations
as the Trustee determines to be appropriate and as are consistent with
the rights, powers, duties and obligations of the Trustee under this
Indenture.
The Company and the Trustee acknowledge and the Holders
by acquisition of the Securities acknowledge that Trustee is acting not
only as trustee under this Indenture, but also as Escrow Agent pursuant
to the Escrow Agreements executed by Trustee (as Escrow Agent) and the
Company with respect to deposits of $10,000,000, and $5,000,000,
respectively. The Trustee shall not have any liability to any person
solely
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by reason of any actual or potential conflict between its duties as
Trustee under this Indenture and its duties as Escrow Agent under the
Escrow Agreement.
SECTION 5.2 RIGHTS OF TRUSTEE.
(a) The Trustee may rely on any document believed by it to
be genuine and to have been signed or presented by the proper Person.
The Trustee need not investigate any fact or matter stated in the
document.
(b) Before the Trustee acts or refrains from
acting, it may require an Officers' Certificate or an Opinion of
Counsel, or both. The Trustee shall not be liable for any action it
takes or omits to take in good faith in reliance on such Officers'
Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not
be responsible for the misconduct or negligence of any agent appointed
with due care.
(d) Subject to Section 5.1, the Trustee shall not be
liable for any action it takes or omits to take in good faith which it
believes to be authorized or within its rights or powers.
SECTION 5.3 INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become
the owner or pledgee of Securities and may otherwise deal with the Company, the
Guarantors or an Affiliate of any of them with the same rights it would have if
it were not Trustee. Any Agent may do the same with like rights. However, the
Trustee is subject to Sections 5.10 and 5.11.
SECTION 5.4 TRUSTEE'S DISCLAIMER.
The Trustee makes no representation or warranty concerning, and shall
have no liability with regard to (a) the accuracy or reliability or completeness
of any statement, representation or warranty, or of any disclosures (whether
oral or written) made by the Company or the Guarantors in connection with the
sale of the Securities, including in any offering memorandum or circular
distributed in connection with the sale of the Securities, (b) the Company's
compliance with applicable securities rules governing the sale of the
Securities, (c) the validity,
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adequacy or enforceability of this Indenture, the Securities, the Guarantee and
Security Agreements or any other Document, (d) the Company's use of the proceeds
from the sale of the Securities, (e) the perfection or priority of any lien
created or intended to be created by the Guarantee and Security Agreements or
any other Document, or (f) any recitation of facts or alleged facts in this
Indenture or any Document.
SECTION 5.5 NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if
it is known to the Trustee, the Trustee shall, as soon as practicable thereafter
and in any event within 10 days after it occurs, mail to Holders a notice of the
Default or Event of Default. For purposes of this Indenture, the Trustee shall
not be deemed to "know" or "have knowledge" or "be aware" or otherwise be
charged with knowing any fact or circumstance unless either (i) a person who is
an executive officer of the Trustee (as determined by the Trustee's Board of
Directors for the period for which such determination is being made) has actual
knowledge of such fact or circumstance or (ii) written notice of such fact or
circumstance is sent to the Trustee in accordance with Section 13.5(1), below.
SECTION 5.6 REPORTS BY TRUSTEE TO HOLDERS.
In the event and so long as this Indenture is qualified under
the Trust Indenture Act, within 60 days after each January 1 beginning on the
January 1 following the date of this Indenture, the Trustee shall mail to
Holders a brief report dated as of such reporting date that complies with Trust
Indenture Act Section 313(a). Whether or not this Indenture is qualified under
the Trust Indenture Act, within 60 days after each January 1 beginning on the
January 1 following the date of this Indenture, the Trustee shall mail to
Holders a brief report dated as of such reporting date that complies with Trust
Indenture Act Section 313(a)(3), (7) and (8). In the event and so long as this
Indenture is qualified under the Trust Indenture Act, the Trustee also shall
comply with Trust Indenture Act Section 313(b)(1) and Trust Indenture Act
Section 313(b)(2) and the Trustee shall transmit by mail all reports as required
by Trust Indenture Act Section 313(c).
Commencing at the time and so long as this Indenture is
qualified under the Trust Indenture Act, a copy of each report at the time of
its mailing to Holders shall be filed with the Commission and each stock
exchange on which the Securities are listed. The Company shall notify the
Trustee when the Securities are listed on any securities exchange.
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SECTION 5.7 COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time
reasonable compensation for its services hereunder. The Trustee's compensation
shall not be limited by any law on compensation of a trustee of an express
trust. The Company shall reimburse the Trustee upon request for all reasonable
out-of-pocket expenses incurred by it. Such expenses shall include the
reasonable compensation and out-of-pocket expenses of the Trustee's agents and
counsel.
The Company shall indemnify the Trustee against any loss or
liability incurred by it except as set forth in the next paragraph. The Trustee
shall notify the Company promptly of any claim for which it may seek indemnity.
The Company shall defend the claim and the Trustee shall cooperate in the
defense. The Trustee may have separate counsel, and the Company shall pay the
reasonable fees and expenses of such counsel. The Company need not pay for any
settlement made without its consent, which consent shall not be unreasonably
withheld.
The Company need not reimburse any expense or indemnify against
any loss or liability incurred by the Trustee through negligence or bad faith.
To secure the Company's payment obligations in this Section, the
Trustee shall have a lien prior to the Securities on all money or property held
or collected by the Trustee, except that held in trust to pay principal and
interest on particular Securities and except for moneys held pursuant to the
Escrow Agreements.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 4.1(6) or (7) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
SECTION 5.8 REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
The Trustee may resign by so notifying the Company. The Holders
of a majority in principal amount of the then outstanding Securities may remove
the Trustee by so notifying the Trustee and the Company. The Company may remove
the Trustee if:
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(1) the Trustee fails to comply with Section 5.10;
(2) the Trustee is adjudged a bankrupt or an
insolvent or an order for relief is entered with respect to the Trustee
under any Bankruptcy Law;
(3) a Custodian or public officer takes charge of
the Trustee or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company and any other obligor shall
promptly appoint a successor Trustee. Within one year after the successor
Trustee takes office, the Holders of a majority in principal amount of
Outstanding Securities may appoint a successor Trustee to replace the successor
Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after
the retiring Trustee resigns or is removed, the retiring Trustee (at the expense
of the Company), the Company or the Holders of at least 10% in principal amount
of Outstanding Securities may petition any court of competent jurisdiction for
the appointment of a successor Trustee.
If the Trustee fails to comply with Section 5.10, any Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, subject to the lien
provided for in Section 5.7. Notwithstanding replacement of the Trustee
pursuant to this Section 5.8, the Company's obligations under Section 5.7 hereof
shall continue for the benefit of the retiring Trustee with respect to expenses
and liabilities incurred by it prior to such replacement.
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SECTION 5.9 SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Trustee.
SECTION 5.10 ELIGIBILITY; DISQUALIFICATION.
This Indenture shall always have a Trustee who satisfies the
requirements of Trust Indenture Act Section 310(a)(1). The Trustee shall always
have a combined capital and surplus of not less than $35,000,000. In the event
and so long as this Indenture is qualified under the Trust Indenture Act, the
Trustee shall be subject to Trust Indenture Act Section 310(b), including the
optional provision permitted by the second sentence of Trust Indenture Act
Section 310(b)(9).
SECTION 5.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee shall be subject to Trust Indenture Act Section
311(a), excluding any creditor relationship listed in Trust Indenture Act
Section 311(b). A Trustee who has resigned or been removed shall be subject to
Trust Indenture Act Section 311(a) to the extent indicated therein.
SECTION 5.12 APPOINTMENT OF AUTHENTICATING AGENT.
The Trustee may appoint an Authenticating Agent or Agents which
shall be authorized to act on behalf of the Trustee to authenticate Securities
issued upon original issue and upon exchange, registration of transfer or
partial conversion or pursuant to Section 2.10, and Securities so authenticated
shall be entitled to the benefits of this Indenture and shall be valid and
obligatory for all purposes as if authenticated by the Trustee hereunder.
Wherever reference is made in this Indenture to the authentication and delivery
of Securities by the Trustee or the Trustee's certificate of authentication,
such reference shall be deemed to include authentication and delivery on behalf
of the Trustee by an Authenticating Agent and a certificate of authentication
executed on behalf of the Trustee by an Authenticating Agent. Each
Authenticating Agent shall be acceptable to the Company and shall at all times
be a corporation organized and doing business under the laws of the United
States of America, any State thereof or the District of Columbia, authorized
under such laws to act as Authenticating Agent, having a combined capital and
surplus required of a Trustee hereunder and subject to supervision or
examination by Federal or State authority. If at any time an Authenticating
Agent shall cease to be
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eligible in accordance with the provisions of this Section, such Authenticating
Agent shall resign immediately in the manner and with the effect specified in
this Section.
Any corporation into which an Authenticating Agent may be merged
or converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or any further
act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee and to the Company. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice thereof
to such Authenticating Agent and to the Company. Upon receiving such a notice
of resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall mail written notice of
such appointment by first-class mail, postage prepaid, to all Holders as their
names and addresses appear in the Security Register. Any successor
Authenticating Agent upon acceptance of its appointment hereunder shall become
vested with all the rights, powers and duties of its predecessor hereunder, with
like effect as if originally named as an Authenticating Agent. No successor
Authenticating Agent shall be appointed unless eligible under the provisions of
this Section.
The Trustee agrees to pay to each Authenticating Agent from time
to time reasonable compensation for its services under this Section, and the
Trustee shall be entitled to be reimbursed for such payments, subject to the
provisions of Section 5.7.
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ARTICLE 6
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 6.1 COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS.
Neither the Company nor any Guarantor shall consolidate or merge
with or into any other Person, or sell, assign, convey, transfer, lease or
otherwise dispose of all or substantially all of its respective properties and
assets to any Person or group of affiliated Persons unless at the time and after
giving effect thereto:
(1) either (a) the Company or any Guarantor shall be the
continuing corporation or (b) the Person formed by or surviving any such
consolidation or merger (if other than the Company or a Guarantor, as the case
may be), or to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made, is a corporation organized and existing under
the laws of the United States, any State thereof or the District of Columbia;
(2) the corporation formed by or surviving any such
consolidation or merger (if other than the Company or a Guarantor, as the case
may be), or to which such sale, transfer, lease, conveyance or other disposition
shall have been made, assumes by supplemental indenture and any other Documents
necessary or desirable in the opinion of Trustee's counsel, in form and
substance satisfactory to the Trustee, all the obligations of the Company or
such Guarantor, as the case may be, under the Securities, the Guarantee and
Security Agreements, this Indenture and the other Documents to which such Person
was a party immediately preceding such transaction;
(3) immediately prior to such transaction and immediately
after giving effect to such transaction on a pro forma basis no Default or Event
of Default shall have occurred and be continuing;
(4) immediately after giving effect to such transaction on a
pro forma basis, the Company (or the surviving Person if the Company is not to
be the continuing obligor under this Indenture) could incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) under this Indenture;
(5) immediately after giving effect to such transaction on a
pro forma basis, the consolidated net worth of the Company (or the surviving
Person if the Company is not to be the continuing obligor under this Indenture)
is at least
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equal to the consolidated net worth of the Company immediately before such
transaction; and
(6) the Lien of the Collateral Documentation and the rights
of the Trustee and the Holders thereunder and under the Indenture have not been
impaired.
The Company shall deliver or cause to be delivered to the
Trustee prior to the consummation of the proposed transaction an Officers'
Certificate and an Opinion of Counsel, each in form and substance reasonably
satisfactory to the Trustee and stating that such transaction and the
supplemental indenture in respect thereof comply with the provisions of this
Indenture and that all conditions precedent provided in this Section relating to
such transaction have been complied with and that the Lien of the Collateral
Documentation and the rights of the Trustee and the Holders thereunder and under
the Indenture have not been impaired.
SECTION 6.2 SUCCESSOR SUBSTITUTED.
Upon any consolidation of the Company or any Guarantor with, or
merger of the Company or any Guarantor into, any other Person or any conveyance,
transfer or lease of the properties and assets of the Company substantially as
an entirety in accordance with Section 6.1, the successor Person formed by such
consolidation or into which the Company is merged or to which such conveyance,
transfer or lease is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under this Indenture with the
same effect as if such successor Person had been named as the Company herein,
and thereafter, except in the case of a lease, the predecessor Person shall be
relieved of all obligations and covenants under this Indenture and the
Securities.
ARTICLE 7
AMENDMENTS
SECTION 7.1 WITHOUT CONSENT OF HOLDERS.
The Company, the Guarantors and the Trustee may amend this
Indenture, the Securities or the other Documents without the consent of any
Holder:
(1) to cure any ambiguity, defect or inconsistency;
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(2) to provide for uncertificated Securities in
addition to certificated Securities;
(3) to provide for the assumption of the Company's
obligations to Holders of Securities in a transaction governed by
Article 6;
(4) to provide for conversion rights of Holders of
Securities identical to the conversion rights contained on this
Indenture as modified under Article 10 upon the merger, consolidation or
sale of all or substantially all of the assets of the Company in
accordance with Article 6;
(5) to reduce the Conversion Price;
(6) to make any change that would provide additional
rights to or benefits to the Holders or that does not adversely affect
the legal rights hereunder of any Holder; and
(7) to comply with any requirements of the
Commission in connection with the qualification or requalification of
this Indenture under the Trust Indenture Act.
SECTION 7.2 WITH CONSENT OF HOLDERS.
Subject to Section 4.7, the Company and the Trustee may amend
this Indenture, the Securities or any other Document with the written consent of
the Holders of at least a majority in principal amount of Outstanding
Securities. Subject to Sections 4.4 and 4.7, the Holders of a majority in
principal amount of the Securities then outstanding may also waive compliance in
a particular instance by the Company or the Guarantors with any provision of
this Indenture or the Securities or any other Document.
However, without the consent of each Holder affected, an
amendment or waiver under this Section may not:
(1) reduce the amount of Securities whose Holders
must consent to an amendment or waiver;
(2) reduce the rate of or change the time for
payment of interest on any Security;
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(3) reduce the principal of or change the fixed
maturity of any Security or alter the redemption provisions with respect
thereto;
(4) make any Security payable in money other than
that stated in the Security;
(5) make any change in Section 4.4, 4.7 or 7.2 (this
sentence); or
(6) waive a default in the payment of the principal
of, or interest on, any Security.
The Holders of at least 66-2/3% in principal amount of
Outstanding Securities may release any portion of the Collateral, whether
constituting less than or all or substantially all of the Collateral, from
the Liens granted under the Collateral Documentation, without compliance with
the requirements of the last paragraph of Section 12.2 of this Indenture,
unless this Indenture previously has been qualified under the Trust Indenture
Act and the Trust Indenture Act prohibits such a release. It is the intent
of the parties that any release of Collateral consented to by the Holders of
at least 66-2/3% in principal amount of Outstanding Securities shall not be
in contravention of the provisions of the Indenture within the meaning of
Section 314(d) of the Trust Indenture Act in the event it is applicable to
this Indenture.
To secure a consent of the Holders under this Section it shall
not be necessary for the Holders to approve the particular form of any proposed
amendment or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment or waiver under this Section becomes
effective, the Company shall mail to Holders a notice briefly describing the
amendment or waiver.
SECTION 7.3 COMPLIANCE WITH TRUST INDENTURE ACT.
From the date on which this Indenture is qualified under the
Trust Indenture Act, every amendment, waiver or supplement under this Indenture
or the Securities shall comply with the Trust Indenture Act as then in effect.
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SECTION 7.4 REVOCATION AND EFFECT OF CONSENTS.
Until an amendment or waiver becomes effective, a consent to it
by a Holder of a Security is a continuing consent by the Holder and every
subsequent Holder of a Security or portion of a Security that evidences the same
debt as the consenting Holder's Security, even if notation of the consent is not
made on any Security. However, any such Holder or subsequent Holder may revoke
the consent as to his Security or portion of a Security if the Trustee receives
notice of revocation before the date on which the Trustee receives an Officers'
Certificate certifying that the Holders of the requisite principal amount of
Securities have consented to the amendment or waiver (or before such later date
as may be required by law or securities exchange rule).
The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Holders entitled to consent to any
amendment or waiver. If a record date is fixed, then notwithstanding the
provisions of the immediately preceding paragraph, those Persons who were
Holders at such record date (or their duly designated proxies), and only those
Persons, shall be entitled to consent to such amendment or waiver or to revoke
any consent previously given, whether or not such Persons continue to be Holders
after such record date. No consent shall be valid or effective for more than 90
days after such record date unless consents from Holders of the principal amount
of Securities required hereunder for such amendment or waiver to be effective
shall have also been given and not revoked within such 90-day period.
After an amendment or waiver becomes effective it shall bind
every Holder, unless it is of the type described in any of clauses (1) through
(6) of Section 7.2. In such case, the amendment or waiver shall bind each
Holder of a Security who has consented to it and every subsequent Holder of a
Security that evidences the same debt as the consenting Holder's Security.
SECTION 7.5 NOTATION ON OR EXCHANGE OF SECURITIES.
The Trustee may place an appropriate notation about an amendment
or waiver on any Security thereafter authenticated. The Company in exchange for
all Securities may issue and the Trustee shall authenticate new Securities that
reflect the amendment or waiver.
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SECTION 7.6 TRUSTEE PROTECTED.
The Trustee shall sign all supplemental indentures, except that
the Trustee need not sign any supplemental indenture that adversely affects its
rights. The Trustee may request an Opinion of Counsel and an Officers'
Certificate stating that such supplemental indenture is permitted hereunder and
all conditions precedent have been complied with.
ARTICLE 8
COVENANTS
SECTION 8.1 PAYMENT OF PRINCIPAL AND INTEREST.
The Company shall pay the principal of and interest on
Securities on the dates and in the manner provided in the Securities and in
accordance with the terms hereof. An installment of principal of or interest on
the Securities shall be considered paid on the date it is due if the Trustee or
Paying Agent (other than the Company or an Affiliate of the Company) holds in
trust on that date U.S. Legal Tender designated for and sufficient to pay the
installment; provided, however, that U.S. Legal Tender held by the Trustee after
receipt of notice provided for in Section 11.12 below and for the benefit of
holders of Senior Indebtedness pursuant to the provisions of Article 11 hereof
shall not be considered to be designated for the payment of any installment of
principal of or interest on the Securities within the meaning of this Section
8.1.
SECTION 8.2 MAINTENANCE OF OFFICE OR AGENCY.
The Company will maintain in Las Vegas, Nevada an office or
agency where Securities may be presented or surrendered for payment, where
Securities may be surrendered for registration of transfer or exchange, where
Securities may be surrendered for conversion and where notices and demands to or
upon the Company in respect of the Securities and this Indenture may be served.
The Company will give prompt written notice to the Trustee of the location, and
any change in the location, of such office or agency. If at any time the
Company shall fail to maintain any such required office or agency or shall fail
to furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee, and the Company hereby appoints the Trustee as its agent to receive all
such presentations, surrenders, notices and demands.
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The Company may also from time to time designate one or more
other offices or agencies (in or outside Nevada) where the Securities may be
presented or surrendered for any or all such purposes and may from time to time
rescind such designations, PROVIDED, HOWEVER, that no such designation or
rescission shall in any manner relieve the Company of its obligation to maintain
an office or agency in Las Vegas, Nevada) for such purposes. The Company will
give prompt written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other office or agency.
SECTION 8.3 MONEY FOR SECURITY PAYMENTS TO BE HELD IN TRUST.
If the Company shall at any time act as its own Paying Agent, it
will, on or before each due date of the principal of or interest on any of the
Securities, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal or interest so becoming due until
such sums shall be paid to such Persons or otherwise disposed of as herein
provided and will promptly notify the Trustee of its action or failure so to
act.
Whenever the Company shall have one or more Paying Agents, it
will, prior to each due date of the principal of or interest on any Securities,
deposit with a Paying Agent a sum sufficient to pay the principal or interest so
becoming due, such sum to be held in trust for the benefit of the Persons
entitled to such principal or interest, and (unless such Paying Agent is the
Trustee) the Company will promptly notify the Trustee of its action or failure
so to act.
The Company will cause each Paying Agent other than the Trustee
to execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will:
(1) hold all sums held by it for the payment of the
principal of or interest on Securities in trust for the benefit of the
Persons entitled thereto until such sums shall be paid to such Persons
or otherwise disposed of as herein provided.
(2) give the Trustee notice of any default by the
Company (or any other obligor upon the Securities) in the making of any
payment of principal or interest; and
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(3) at any time during the continuance of any such
default, upon the written request of the Trustee, forthwith pay to the
Trustee all sums so held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the principal of or
interest on any Security and remaining unclaimed for two years after such
principal or interest has become due and payable shall be paid to the Company on
Company Request, or (if then held by the Company) shall be discharged from such
trust; and the Holder of such Security shall thereafter, as an unsecured general
creditor, look only to the Company for payment thereof, and all liability of the
Trustee or such Paying Agent with respect to such trust money, and all liability
of the Company as trustee thereof, shall thereupon cease, PROVIDED, HOWEVER,
that the Company shall attempt, not less than twice prior to the termination of
such two-year period, to contact the Holder at its last known address in the
Security Register or any other address provided by such Holder to the Company or
the Trustee for such purpose and PROVIDED FURTHER that the Trustee or such
Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in a newspaper published in
the English language, customarily published on each Business Day and of general
circulation in New York, New York, notice that such money remains unclaimed and
that after a date specified therein, which shall not be less than 30 days from
the date of such publication, any unclaimed balance of such money then remaining
will be repaid to the Company.
SECTION 8.4 EXISTENCE.
Subject to Article 6, the Company will do or cause to be done
all things necessary to preserve and keep in full force and effect its
existence, material rights (charter and statutory) and franchises and the
material rights and franchises of all Guarantors.
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SECTION 8.5 MAINTENANCE OF PROPERTIES.
The Company will cause all properties used or useful in the
conduct of its business or the business of any Subsidiary to be maintained and
kept in good condition, repair and working order and supplied with all necessary
equipment and will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
the Company may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times; PROVIDED,
HOWEVER, that nothing in this Section shall prevent the Company from
discontinuing the operation or maintenance of any of such if such discontinuance
is, in the reasonable, good faith judgment of the Company, desirable in the
conduct of its business or the business of any Subsidiary and not
disadvantageous in any material respect to the Holders.
SECTION 8.6 PAYMENT OF TAXES AND OTHER CLAIMS.
The Company will pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (1) all taxes, assessments
and governmental charges levied or imposed upon the Company or any Subsidiary or
upon the income, profits or property of the Company or any Subsidiary, and (2)
all lawful claims for labor, materials and supplies which, if unpaid, might by
law become a Lien upon the property of the Company or any Subsidiary; PROVIDED,
HOWEVER, that the Company shall not be required to pay or discharge or cause to
be paid or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings.
SECTION 8.7 LIMITATION ON INDEBTEDNESS.
The Company will not, and will not permit any Guarantor to,
create, incur, assume or directly or indirectly guarantee or in any other manner
become directly or indirectly liable for the payment of (collectively, "incur")
any Indebtedness (excluding Permitted Indebtedness and Acquired Indebtedness and
Indebtedness which is a Guaranty of an Indebtedness of the Company or a
subsidiary that is otherwise Permitted Indebtedness).
SECTION 8.8 LIMITATION ON ENCUMBRANCES.
The Company will not, and will not permit any Guarantor to,
directly or indirectly, create, incur, assume or otherwise suffer to exist or
cause or otherwise suffer to become effective any Lien in or on any right, title
or interest to any property (real or personal) that constitutes all or any
portion of the Collateral
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(a "Restricted Encumbrance," which term excludes the Lien created in favor of
the Trustee for the benefit of the holders of the Notes and any Lien in favor of
a holder of Senior Indebtedness) unless (i) such Restricted Encumbrance is a
Permitted Lien; or (ii) such Restricted Encumbrance ranks junior to the Lien of
the Security Documents and is granted to secure Indebtedness which, together
with all other Indebtedness secured pursuant to this clause (ii), is in an
aggregate principal amount not to exceed the sum (without duplication) of (A)
the original principal amount of the Securities (less the principal amount of
the Outstanding Securities at the time of any calculation), (B) the amount
available under the bank credit facility described in clause (i) of Permitted
Indebtedness and (C) $50 million in subordinated Indebtedness.
Notwithstanding the foregoing, the Company or any Guarantor may
create or incur or permit to exist purchase money Restricted Encumbrances upon
any personal property acquired by such person provided that no such purchase
money Restricted Encumbrance upon any personal property acquired after the date
of this Indenture shall extend to or cover any other property or, at the time
incurred, secure Indebtedness in excess of 90% of the lesser of the cost or fair
market value of the property subject to such purchase money Restricted
Encumbrance. Restricted Encumbrances permitted by this paragraph plus the
aggregate amount of all leases on personal property comprising the Collateral
and secured by such Restricted Encumbrances shall not, at any time, exceed $20
million.
SECTION 8.9 LIMITATION ON RELATED PARTY TRANSACTIONS.
The Company will not and will not permit any Guarantor to enter
into any transaction with a related party (any officer, director or 10% or more
shareholder of the Company, or any Affiliate thereof, including family members
of such related party), unless such transaction is on terms which are not less
favorable than those terms which would be obtained in a comparable arms-length
transaction with an unaffiliated party.
SECTION 8.10 LIMITATION ON DIVIDENDS.
The Company shall not, directly or indirectly: (1) declare or
pay any dividend on, or make any distribution to the holders (as such) of, any
shares of its Capital Stock (other than dividends or distributions payable
solely in shares of Qualified Capital Stock or rights or warrants of the type
described in Section 10.5(d)); or (2) purchase, redeem or otherwise acquire or
retire for value any Equity Interests of the Company.
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SECTION 8.11 SUBSIDIARY GUARANTEES.
The Company shall cause its existing and future wholly-owned
direct and indirect Subsidiaries organized under the laws of any state of the
United States (or the District of Columbia) to jointly and severally guarantee
the obligations of the Company under the Securities and this Indenture pursuant
to a Guarantee and Security Agreement. The Company shall cause such guarantees
to be executed and delivered by all of the Domestic Guarantors in existence on
the date of the Indenture concurrently with the execution and delivery of this
Indenture. To the extent that the Company establishes or acquires direct and
indirect Subsidiaries which are organized under the laws of a state of the
United States and doing business in the United States after the date of this
Indenture, the Company shall use its best efforts to cause such Subsidiary to
jointly and severally guarantee the obligations of the Company under the
Securities and the Indenture pursuant to a Guarantee and Security Agreement. To
the extent that any U.S. Subsidiary of the Company is not required to execute
and deliver a guarantee as contemplated above, such Subsidiary shall comply with
Section 8.15 and not engage in any new business activities and the Company shall
cause any such Subsidiary to become a Domestic Guarantor upon the terms and
conditions provided in this Section 8.11 upon such Subsidiary having assets with
an aggregate fair market value of $100,000 or more.
The Company shall cause its existing and future direct and
indirect Subsidiaries organized under the laws of any jurisdiction other than
any state of the United States or the District of Columbia to jointly and
severally guarantee the obligations of the Company under the Securities and this
Indenture pursuant to a Guarantee Agreement. The Company shall cause such
Guarantee Agreements to be executed, delivered and approved by all of such
Foreign Guarantors in existence on the date of the Closing within sixty (60)
days after the Closing. The Company shall comply with Section 8.15 with respect
to any such Subsidiary that does not become a Guarantor.
Notwithstanding the foregoing, a Subsidiary of the Company shall
not be required to become a Guarantor under this Indenture to the extent that
such Subsidiary either (i) is prohibited under applicable law (but not by the
terms of any contract) from becoming a Guarantor and compliance with any such
law would be materially burdensome to such Subsidiary or (ii) has assets with an
aggregate fair market value of less than $100,000 supporting that entity.
In the event of a sale or other disposition of all of the assets of any
Guarantor, by way of merger, consolidation or otherwise, or a sale or other
disposition of all of the Capital Stock of any Guarantor, then such Guarantor
(in the
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event of a sale or other disposition, by way of such a merger, consolidation or
otherwise, of all of the Capital Stock of such Guarantor) or the person
acquiring the property (in the event of a sale or other disposition of all of
the assets of such Guarantor) will be released and relieved of any obligations
under its guarantee, provided that Article 6 is complied with and the proceeds
of such sale or other disposition are subject to the security interests in favor
of the Trustee or are otherwise applied in accordance with the provisions of
this Indenture.
SECTION 8.12 ADDITIONAL OFFERINGS OF SECURITIES.
The Company hereby grants to each of the Holders, exercisable so
long as such Person is a Holder, a preemptive right to subscribe for any
additional offering of securities (other than rights referred to in Section
10.5(d)), on a pro rata basis based upon the principal amount of Securities
Outstanding. So long as Securities are Outstanding, the Company will provide
notice to each Holder of each proposed offering of securities, which notice
shall be provided not later than 15 days prior to the proposed closing of such
offering. Such notice shall include a description of the material terms of such
offering, the proposed closing date and the principal amount of Securities then
Outstanding. Each Holder shall have the right, exercisable by delivery to the
Company of notice of such exercise within 10 days of the date of the Company's
notice, to purchase its pro rata share of the securities offered. Delivery of
any such notice shall constitute an irrevocable offer by such Holder to purchase
the securities proposed to be offered by the Company on the terms generally
applicable to all offerees in such offering, including the purchase price,
securities terms and closing conditions and procedures of such offering.
SECTION 8.13 PLEDGES OF INTERCOMPANY NOTES.
The Company shall promptly pledge all Intercompany Notes (and all
security agreements and documents relating thereto) to the Trustee as Collateral
under the Collateral Documentation. To the extent that, on or after the date
hereof, the Company makes any cash investment in any of its subsidiaries (in
accordance with Section 8.15) which are organized under the laws of and doing
business in the United States, such investment shall be required to be made in
the form of a loan, which shall be evidenced by an Intercompany Note. All
Intercompany Notes shall be pledged by the Company to the Trustee as Collateral.
SECTION 8.14 REGISTRATION RIGHTS.
The Company shall: (i) use its best efforts to file as or
before March 31, 1996 (the "Filing Deadline") with the Commission, and shall use
its best
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efforts to cause to become effective, a registration statement on Form S-3 with
respect to the shares of the Company's Common Stock issuable upon the conversion
of the Securities. In the event the Commission or its staff determines that the
Company is not eligible to register the shares of the Company's Common Stock
issuable upon the conversion of the Securities on Form S-3, then the Company
shall use its best efforts to file with the Commission by the Filing Deadline
and shall use its best efforts to cause to become effective a registration
statement on Form S-1 or another appropriate form of the Commission. The
Company shall keep such registration statement on Form S-3 effective as long as
permissible under the securities laws and shall keep any such registration
statement on Form S-1 (or other form) effective until thirty (30) days following
the earlier of: (A) Mandatory Conversion of the Securities or (B) the Stated
Maturity of the Securities. If any such registration statement is not filed
with the Commission on or before the Filing Deadline, then the Company shall pay
as liquidated damages additional interest on the principal amount of the
Securities, payable in cash and equal to one-half of one percent (1/2%) per
annum, to Holders of the Securities. If a registration statement with respect
to the shares of the Company's Common Stock issuable upon conversion of the
Securities is not declared effective by the Commission within 90 days of the
Filing Deadline, then the Company shall pay as liquidated damages additional
interest on the principal amount of the Securities, payable in cash and equal to
one-half of one percent (1/2%) per annum, to Holders of the Securities. The
amount of the liquidated damages (and the additional interest payable on the
principal amount of the Securities) will increase by an additional one-half of
one percent (1/2%) per annum with respect to each subsequent 90-day period until
a registration statement with respect to the shares of the Company's Common
Stock issuable upon conversion of the Securities is declared effective by the
Commission, up to a maximum amount of liquidated damages (additional interest)
of five percent (5%) per annum. Such additional interest as liquidated damages
with respect to the filing of a registration statement shall accrue until such
time as the registration statement is filed with the Commission and such
additional interest as liquidated damages with respect to the effectiveness of a
registration statement shall accrue until such time as a registration statement
complying with this Section 8.14 is declared effective by the Commission. The
payment of such interest shall not excuse the Company from its obligations to
use its best efforts to register such shares of the Company's Common Stock
issuable upon the conversion of the Securities.
SECTION 8.15 RESTRICTED INVESTMENTS.
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The Company shall not, directly or indirectly, make or cause or
permit, or permit any of its Subsidiaries to make or cause or permit, any direct
or indirect advance, loan or other extension of credit to, or guarantee of any
Indebtedness of, capital contribution to, or purchase or other acquisition of
any Equity Interests in, any Subsidiary that is not a Guarantor or in any other
Person, in each case other than Permitted Investments.
SECTION 8.16 OPERATING PROFIT.
The Company's consolidated earnings before interest and taxes
and before any charges relating to the Bristol, Baxter, 3M, McGhan and Union
Carbide Revised Settlement Program, the mandatory class referred to in clause
(i) of the first sentence of Section 10.7 or any other administration,
settlement or discharge of products liability litigation ("Operating Profit")
shall be greater than $10 million for the twelve month period ending December
31, 1996 and each twelve month period thereafter ending on each March 31, June
30, September 30 and December 31 (I.E., rolling 12-month periods). Operating
Profit shall also exceed $2.0 million, $2.5 million and $2.75 million for the
quarters ended March 31, June 30 September 30 1996, respectively, and shall also
exceed $1.5 million for each of the quarters ended March 31, June 30, September
30 and December 31 of each quarter thereafter. Notwithstanding the foregoing,
in the event of non-compliance with the financial covenant contained in this
Section 8.16 for any period, the Company may within 30 days of the date for
issuance of any Officers' Certificate with respect to compliance for such period
cure the Default by raising cash through the issuance of any securities junior
in right of payment to the Securities in an amount which if added to Operating
Profit would have made the Company in compliance with the covenant for such
period.
SECTION 8.17 TANGIBLE ASSETS.
The Company's Consolidated Tangible Assets shall exceed $50
million on March 31, 1996 and each quarter thereafter; PROVIDED, HOWEVER, that
in the event of non-compliance with the financial covenant contained in this
Section 8.17 for any period, the Company may within 30 days of the date for
issuance of any Officers' Certificate with respect to compliance for such period
cure the Default by raising cash through the issuance of any securities junior
in right of payment to the Securities in an amount which if added to
Consolidated Tangible Assets would have made the Company in compliance with the
covenant for such period.
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SECTION 8.18 STATEMENT BY OFFICERS AS TO DEFAULT.
The Company will deliver to the Trustee, within 120 days after
the end of each fiscal year of the Company ending after the date hereof or, with
respect to compliance with the covenants contained in Sections 8.16 and 8.17,
within 30 days of the end of any quarterly period other than one ending at the
end of the fiscal year of the Company, an Officers' Certificate, stating whether
or not to the best knowledge of the signers thereof the Company is in default in
the performance and observance of any of the terms, provisions and conditions of
Sections 8.4 to 8.17, inclusive, and if the Company shall be in default,
specifying all such defaults and the nature and status thereof of which they may
have knowledge.
SECTION 8.19 WAIVER OF CERTAIN COVENANTS.
The Company may omit in any particular instance to comply with
any covenant or condition set forth in Sections 8.4 to 8.17, inclusive, if
before the time for such compliance the Holders of at least a majority in
principal amount of the Outstanding Securities shall, by Act of such Holders,
either waive such compliance in such instance or generally waive compliance with
such covenant or condition, but no such waiver shall extend to or affect such
covenant or condition except to the extent so expressly waived, and, until such
waiver shall become effective, the obligations of the Company and the duties of
the Trustee in respect of any such covenant or condition shall remain in full
force and effect.
ARTICLE 9
REDEMPTION OF SECURITIES
SECTION 9.1 NO RIGHT OF REDEMPTION.
The Securities are not subject to redemption at the election of
the Company prior to their Stated Maturity. Notwithstanding the foregoing, the
Company may acquire Securities. Except as provided in this Article 9, the
Company is not required to make mandatory redemption or sinking fund payments
with respect to the Securities.
SECTION 9.2 AUTOMATIC MANDATORY REDEMPTION.
Certain of the proceeds of the sale of the Securities have been
placed in two escrow accounts with Santa Barbara Bank & Trust (the "Escrow
Agent") pursuant to the Escrow Agreements. Under the Escrow Agreements, the
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Escrow Agent shall on January 23, 1997 at 10:00 a.m. Pacific time (such date and
time, the "Termination Date"), if the Escrow Agent has not prior to the close of
business on the date immediately preceding the Termination Date received from
the Company certification that the event described in clause (i) of the first
sentence of Section 10.7 has occurred, pay over to the Holders from the escrow
funds established thereunder the amounts described in this Section 9.2. Such
payments shall be made to each Holder in a proportionate amount based on the
percentage of principal amount of Securities surrendered by each Holder partial
redemption in accordance with the provisions of this Article 9. With respect to
each Security surrendered, such redemption payment from the escrow funds shall
be equal to a percentage of the initial Escrow Amount (as defined in the Escrow
Agreements) (without accumulation of interest) equal to the quotient determined
by dividing (i) the principal amount of such Security by (ii) the aggregate
principal amount of all Securities issued under this Indenture (maximum
$35,000,000).
The Company shall notify the Trustee in writing on the
Termination Date of the Redemption Date and the principal amount of the
Securities to be redeemed and the provisions of the Securities and/or this
Indenture pursuant to which the Securities are being redeemed. The Company's
notice shall be in the form of an Officers' Certificate and shall state that
such redemption is being made in compliance with applicable provisions of the
Securities, this Indenture and the Escrow Agreements.
SECTION 9.3 SELECTION OF SECURITIES TO BE REDEEMED.
Each redemption under this Article 9 shall be pro rata among the
Securities PROVIDED, HOWEVER, that if any Securities (or part thereof) shall
have been converted prior the time of such redemption, then the Company shall be
deemed to be a Holder under Section 9.2, Section 9.7 and this Section 9.3 to the
extent of the principal amount so converted for purposes of receiving payments
from the escrow funds in redemption of Securities (and such Securities shall be
considered Outstanding for purposes of calculating the payments under Section
9.2).
SECTION 9.4 NOTICE OF REDEMPTION.
With respect to any mandatory redemption, on the Termination
Date the Company shall mail by first class mail, postage prepaid, a notice of
redemption to each Holder whose Securities are to be redeemed, and shall deliver
a copy of such notice to the Trustee.
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The notice shall identify the Securities to be redeemed and
shall state: (1) the Redemption Date; (2) the portion of the principal amount
of such Security to be redeemed and that, after the Redemption Date, upon
surrender of such Security, a new Security or Securities in principal amount
equal to the unredeemed portion will be issued; (3) the name and address of the
Paying Agent; (4) that Securities called for redemption must be surrendered to
the Paying Agent to collect the redemption price; (5) that interest on
Securities called for redemption ceases to accrue on and after the Redemption
Date; (6) that such Holder may elect to waive such mandatory redemption by
delivering notice thereof in writing to the Paying Agent and surrendering such
Security for appropriate endorsement within 20 Business Days of the Termination
Date, in which event the funds otherwise distributable to such Holder upon
mandatory redemption shall be disbursed to the Company; and (7) that payments
upon presentation of Securities shall be made as soon as practicable after
presentation to the Trustee.
At the Company's written request, the Trustee shall give the
notice of redemption in the Company's name and at its expense.
SECTION 9.5 EFFECT OF TERMINATION DATE.
Upon the occurrence of the Termination Date, if the event
described in clause (i) of the first sentence of Section 10.7 has not previously
occurred, Securities called for redemption become due and payable on the
Redemption Date at the price set forth in the Security and this Article 9.
SECTION 9.6 SECURITIES REDEEMED IN PART.
Upon surrender of a Security that is redeemed in part, the
Company shall issue and the Trustee shall authenticate for the Holder at the
expense of the Company a new Security equal in principal amount to the
unredeemed portion of the Security surrendered.
SECTION 9.7 INTEREST ACCRUED.
All interest accrued on the Escrow Amount (as defined in the
Escrow Agreements) shall be paid in a like proportion to the Holders and such
amounts shall be deemed payments of interest under the Indenture with respect to
the respective Notes. Payment of such interest shall not relieve the Company of
its obligation to pay interest on the unredeemed portion of such Securities or
the redeemed portion except to the extent of the monies actually paid to the
Holders. If such interest is in excess of the interest accrued on the redeemed
portion of any
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Security, then such excess shall be credited to the Company on the payment of
interest on the unredeemed portion of such Security to be paid on the next
succeeding Interest Payment Date. If such unredeemed portion of the Security is
converted prior to the next succeeding Interest Payment Date, then the Security
so presented for conversion shall be accompanied by funds equal to the amount,
if any, that such amount exceeds the interest accrued on such Security at such
date. If a Security is redeemed on a date which is also an Interest Payment
Date, the interest payment due on such date will be paid to the person in whose
name such Security was registered at the close of business on the respective
Regular Record Date.
ARTICLE 10
CONVERSION OF SECURITIES
SECTION 10.1 RIGHT TO CONVERT.
Subject to and upon compliance with the provisions of this
Indenture, each Holder of Securities shall have the right, at his or her option,
at any time on or after 90 days from the Closing of the offering of Securities
and prior to the close of business on the last trading day prior to the Maturity
Date (except that, with respect to any Security or portion of a Security which
is called for redemption, such right shall terminate, except as provided in the
fourth paragraph of Section 10.2, at the close of business on the last trading
day prior to the Redemption Date of such Security or portion of a Security
unless the Holder thereof fails to receive the redemption payment therefor under
the Escrow Agreement or unless such Holder elects to waive such mandatory
redemption on or prior to the close of business on the third Business Day
following the Redemption Date) to convert the principal amount of any Security
held by such Holder, or any portion of such principal amount which is $10,000
or an integral multiple of $1,000 in excess thereof, into that number of fully
paid and non assessable shares of Common Stock (as such shares shall then be
constituted) obtained by dividing the principal amount of the Security or
portion thereof surrendered for conversion by the Conversion Price in effect at
such time, by surrender of the Security so to be converted in whole or in part
in the manner provided in Section 10.2. A Holder of Securities is not entitled
to any rights of a Holder of Common Stock until such Holder of Securities has
converted his or her Securities to Common Stock, and only to the extent such
Securities are deemed to have been converted to Common Stock under this Article
10.
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SECTION 10.2 EXERCISE OF CONVERSION PRIVILEGE; ISSUANCE OF COMMON
STOCK ON CONVERSION; NO ADJUSTMENT FOR INTEREST.
To exercise, in whole or in part, the conversion privilege with
respect to any Security, the Holder of such Security shall surrender such
Security, duly endorsed, at an office or agency maintained by the Company
pursuant to Section 8.3, accompanied by the funds, if any, required by the last
paragraph of this Section 10.2 or Section 9.7, and shall give written notice of
conversion in the form provided on the Securities (or such other notice which is
acceptable to the Company) (a "Conversion Notice") to the office or agency that
the Holder of Securities elects to convert such Security or such portion thereof
specified in said notice. Such notice shall also state the name or names (with
address or addresses) in which the certificate or certificates for shares of
Common Stock which are issuable on such conversion shall be issued, and shall be
accompanied by transfer taxes, if required pursuant to Section 10.7. Each such
Security surrendered for conversion shall, unless the shares issuable on
conversion are to be issued in the same name as the registration of such
Security, be duly endorsed by, or be accompanied by instruments of transfer in
form satisfactory to the Company duly executed by, the Holder of Securities or
his or her duly authorized attorney.
As promptly as practicable after satisfaction of the
requirements for conversion set forth above the Company shall issue and shall
deliver to such Holder at the office or agency maintained by the Company for
such purpose pursuant to Section 10, a certificate or certificates for the
number of full shares of Common Stock issuable upon the conversion of such
Security or portion thereof in accordance with the provisions of this Article 10
and a check or cash in respect of any fractional interest in respect of a share
of Common Stock arising upon such conversion, as provided in Section 10.3 (which
payment, if any, shall be paid no later than five business days after
satisfaction of the requirements for conversion set forth above). In case any
Security of a denomination of an integral multiple greater than $10,000 is
surrendered for partial conversion, and subject to Section 10, the Company shall
execute, and the Trustee shall authenticate and deliver to the Holder of the
Security so surrendered, without charge to him or her, a new Security or
Securities in authorized denominations in an aggregate principal amount equal to
the unconverted portion of the surrendered Security.
Each conversion shall be deemed to have been effected as to any
such Security (or portion thereof) on the date on which the requirements set
forth above in this Section 10.2 have been satisfied as to such Security (or
portion thereof) (the "Conversion Date"), and the person in whose name any
certificate or certificates for shares of Common Stock are issuable upon such
conversion shall be
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deemed to have become on said date the Holder of record of the shares
represented thereby; PROVIDED, HOWEVER, that any such surrender on any date when
the Company's stock transfer books are closed shall constitute the person in
whose name the certificates are to be issued as the record Holder thereof for
all purposes on the next succeeding day on which such stock transfer books are
open, but such conversion shall be at the Conversion Price in effect on the date
upon which such Security is surrendered.
Any Security or portion thereof surrendered for conversion
during the period from the close of business on the record date for any interest
payment through the close of business on the trading day next preceding such
Interest Payment Date shall (unless such Security or portion thereof being
converted has been called for redemption on a date in such period) be
accompanied by payment, in funds acceptable to the Company, of an amount equal
to the per diem interest that would accrue on the principal amount of such
Security being converted from the date of such surrender to the date of such
Interest Payment Date. Interest on the amount so converted shall be paid by the
Company on such Interest Payment Date to the Holder of such Security at the
close of business on such record date. Except as provided above in this Section
10.2, no adjustment shall be made for interest accrued on any Security converted
or for dividends on any shares issued upon the conversion of such Security as
provided in this Article 10 and interest accrued on a converted Security up to
the date of conversion shall be paid to the Holder (on the date of conversion)
within 10 Business Days of such conversion.
SECTION 10.3 CASH PAYMENTS IN LIEU OF FRACTIONAL SHARES.
No fractional shares of Common Stock or scrip representing
fractional shares shall be issued upon conversion of Securities. If more than
one Security shall be surrendered for conversion at one time by the same Holder,
the number of full shares which shall be issuable upon conversion shall be
computed on the basis of the aggregate principal amount of the Securities (or
specified portions thereof to the extent permitted hereby) so surrendered for
conversion. If any fractional share of stock otherwise would be issuable upon
the conversion of any Security or Securities, the Company shall make an
adjustment therefor in cash based upon the Current Market Price of the Common
Stock on the last trading day preceding the Conversion Date.
SECTION 10.4 CONVERSION PRICE.
The "Conversion Price" shall be as specified in the form of
Security attached as Exhibit A hereto, subject to adjustment as provided in this
Article 10.
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SECTION 10.5 ADJUSTMENT OF CONVERSION PRICE.
The Conversion Price shall be adjusted from time to time by the
Company as follows:
(a) If the Company shall hereafter pay a dividend or make a
distribution to all Holders of the outstanding Common Stock in shares of Common
Stock, the Conversion Price in effect at the opening of business on the date
following the date fixed for the determination of stockholders entitled to
receive such dividend or other distribution shall be reduced by multiplying such
Conversion Price by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding at the close of business on the Record Date
(as defined in Section 10.5(e)) fixed for such determination and the denominator
shall be the sum of such number of shares and the total number of shares
constituting such dividend or other distribution, such reduction to become
effective immediately after the opening of business on the day following the
Record Date. If any dividend or distribution of the type described in this
Section 10.5(a) is declared but not so paid or made, the Conversion Price shall
again be adjusted to the Conversion Price which would then be in effect if such
dividend or distribution had not been declared.
(b) If the Company shall issue rights or warrants to all
Holders of its outstanding shares of Common Stock entitling them to subscribe
for or purchase shares of Common Stock at a price per share less than the
Conversion Price on the Record Date fixed for the determination of stockholders
entitled to receive such rights or warrants, the Conversion Price shall be
adjusted so that the same shall equal the price determined by multiplying the
Conversion Price in effect at the opening of business prior to such Record Date
by a fraction of which the numerator shall be the number of shares of Common
Stock outstanding at the close of business on the Record Date, plus the number
of shares which the aggregate offering price of the total number of shares so
offered would purchase at such Conversion Price, and of which the denominator
shall be the number of shares of Common Stock outstanding on the close of
business on the Record Date plus the total number of additional shares of Common
Stock so offered for subscription or purchase. Such adjustment shall become
effective immediately after the opening of business on the day following the
Record Date fixed for determination of stockholders entitled to receive such
rights or warrants. To the extent that shares of Common Stock are not delivered
pursuant to such rights or warrants, upon the expiration or termination of such
rights or warrants the Conversion Price shall be readjusted to the Conversion
Price which would then be in effect had the adjustments made upon the issuance
of such rights or warrants been made on the basis of delivery of only the number
of shares of Common Stock actually delivered.
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If such rights or warrants are not so issued, the Conversion Price shall again
be adjusted to be the Conversion Price which would then be in effect if such
date fixed for the determination of stockholders entitled to receive such rights
or warrants had not been fixed. In determining whether any rights or warrants
entitle the Holders to subscribe for or purchase shares of Common Stock at less
than such Conversion Price, and in determining the aggregate offering price of
such shares of Common Stock, there shall be taken into account any consideration
received for such rights or warrants, with the value of such consideration, if
other than cash, to be determined by the Board of Directors.
(c) If the outstanding shares of Common Stock shall be
subdivided into a greater number of shares of Common Stock, the Conversion Price
in effect at the opening of business on the day following the day upon which
such subdivision becomes effective shall be proportionately reduced, and,
conversely, if the outstanding shares of Common Stock shall be combined into a
smaller number of shares of Common Stock, the Conversion Price in effect at the
opening of business on the day following the day upon which such combination
becomes effective shall be proportionately increased, such reduction or
increase, as the case may be, to become effective immediately after the opening
of business on the day following the day upon which such subdivision or
combination becomes effective.
(d) If the Company shall, by dividend or otherwise,
distribute to all Holders of its Common Stock shares of any class of capital
stock of the Company (other than any dividends or distributions to which Section
10.5(a) applies) or evidences of its indebtedness, cash or other assets
(including securities, but excluding any rights or warrants of a type referred
to in Section 10.5(b) and dividends and distributions paid exclusively in cash
and excluding any capital stock, evidences of indebtedness, cash or assets
distributed upon a merger or consolidation to which Section 10.6 applies) (the
foregoing hereinafter in this Section 10.5(d) called the "Distributed
Securities"), then, in each such case, the Conversion Price shall be reduced so
that the same shall be equal to the price determined by multiplying the
Conversion Price in effect immediately prior to the close of business on the
Record Date (as defined in Section 10.5(e)) with respect to such distribution by
a fraction of which the numerator shall be the Conversion Price on such date
less the fair market value (as determined by the Board of Directors, whose
determination shall be conclusive and described in a Board Resolution) on such
date of the portion of the Distributed Securities so distributed applicable to
one share of Common Stock and the denominator shall be such Conversion Price,
such reduction to become effective immediately prior to the opening of business
on the day following the Record Date; PROVIDED, HOWEVER, that in the event the
then fair market value (as so determined) of the portion of the Distributed
Securities so distributed applicable to
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one share of Common Stock is equal to or greater than the Conversion Price on
the Record Date, in lieu of the foregoing adjustment, adequate provision shall
be made so that each Holder of Securities shall have the right to receive upon
conversion of a Security (or any portion thereof) the amount of Distributed
Securities such Holder would have received had such Holder converted such
Security (or portion thereof) immediately prior to such Record Date. If such
dividend or distribution is not so paid or made, the Conversion Price shall
again be adjusted to be the Conversion Price which would then be in effect if
such dividend or distribution had not been declared.
Rights or warrants distributed by the Company to all Holders of
Common Stock entitling the Holders thereof to subscribe for or purchase shares
of the Company's Capital Stock (either initially or under certain
circumstances), which rights or warrants, until the occurrence of a specified
event or events ("Trigger Event"): (i) are deemed to be transferred with such
shares of Common Stock; (ii) are not exercisable; and (iii) are also issued in
respect of future issuances of Common Stock, shall be deemed not to have been
distributed for purposes of this Section 10.5(d) (and no adjustment to the
Conversion Price under this Section 10.5(d) shall be required) until the
occurrence of the earliest Trigger Event, whereupon such rights and warrants
shall be deemed to have been distributed and an appropriate adjustment to the
Conversion Price under this Section 10.5(d) shall be made. If any such rights,
or warrants, including any such existing rights or warrants distributed prior to
the date of this Indenture, are subject to subsequent events, upon the
occurrence of each of which such rights or warrants shall become exercisable to
purchase different securities, evidences of indebtedness or other assets, then
the occurrence of each such event shall be deemed to be such date of issuance
and record date with respect to new rights or warrants (and a termination or
expiration of the existing rights or warrants without exercise by the Holder
thereof). In addition, in the event of any distribution (or deemed
distribution) of rights or warrants, or any Trigger Event with respect thereto,
that was counted for purposes of calculating a distribution amount for which an
adjustment to the Conversion Price under this Section 10.5 was made, (1) in the
case of any such rights or warrants which shall all have been redeemed or
repurchased without exercise by any Holders thereof, the Conversion Price shall
be readjusted upon such final redemption or repurchase to give effect to such
distribution or Trigger Event, as the case may be, as though it were a cash
distribution, equal to the per share redemption or repurchase price received by
a Holder or Holders of Common Stock with respect to such rights or warrants
(assuming such Holder had retained such rights or warrants), made to all Holders
of Common Stock as of the date of such redemption or repurchase, and (2) in the
case of such rights or warrants which shall have expired or been terminated
without exercise by any Holders thereof, the
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Conversion Price shall be readjusted as if such rights and warrants had not been
issued.
Notwithstanding any other provision of this Section 10.5(d) to
the contrary, rights, warrants, evidences of indebtedness, other securities,
cash or other assets (including, without limitation, any rights distributed
pursuant to any stockholder rights plan) shall be deemed not to have been
distributed for purposes of this Section 10.5(d) if the Company makes proper
provision so that each Holder of Securities who converts a Security or any
portion thereof) after the date fixed for determination of stockholders entitled
to receive such distribution shall be entitled to receive upon such conversion,
in addition to the shares of Common Stock issuable upon such conversion, the
amount and kind of such distributions that such Holder would have been entitled
to receive if such Holder had, immediately prior to such determination date,
converted such Security into Common Stock.
For purposes of this Section 10.5(d) and Sections 10.5(a) and
(b), any dividend or distribution to which this Section 10.5(d) is applicable
that also includes shares of Common Stock, or rights or warrants to subscribe
for or purchase shares of Common Stock to which Section 10.5(b) applies (or
both), shall be deemed instead to be (1) a dividend or distribution of the
evidences of indebtedness, assets, shares of capital stock, rights or warrants
other than such shares of Common Stock or rights or warrants to which Section
10.5(b) applies (and any Conversion Price reduction required by this Section
10.5(d) with respect to such dividend or distribution shall then be made)
immediately followed by (2) a dividend or distribution of such shares of Common
Stock or such rights or warrants (and any further Conversion Price reduction
required by Sections 10.5(a) and (b) with respect to such dividend or
distribution shall then be made), except that (a) the Record Date of such
dividend or distribution shall be substituted as "the date fixed for the
determination of stockholders entitled to receive such dividend or other
distribution", "Record Date fixed for such determination" and "Record Date"
within the meaning of Section 10.5(a) and as "the date fixed for the
determination of stockholders entitled to receive such rights or warrants", "the
Record Date fixed for the determination of the stockholders entitled to receive
such rights or warrants" and "such Record Date" within the meaning of Section
10.5(b) and (b) any shares of Common Stock included in such dividend or
distribution shall not be deemed "outstanding at the close of business on the
date fixed for such determination" within the meaning of Section 10.5(a).
(e) For purposes of Section 10.3 and this Section 10.5, the
following terms shall have the meaning indicated:
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(1) "closing price" with respect to any securities
on any day means the closing price on such day or, if no such sale takes
place on such day, or, if no such sale takes place on such day, the
average of the reported high and low prices on such day, in each case on
the Nasdaq SmallCap Market or the Pacific Stock Exchange, as applicable,
or, if such security is not listed or admitted to trading on such
national market or exchange, on the principal securities exchange or
quotation system on which such security is quoted or listed or admitted
to trading, or, if not quoted or listed or admitted to trading on any
national securities exchange or quotation system, the average of the
high and low prices of such security on the over the counter market on
the day in question as reported by the National Quotation Bureau
Incorporated, or a similar generally accepted reporting service, or, if
not so available, in such manner as furnished by any New York Stock
Exchange member firm selected from time to time by the Board of
Directors for that purpose, or a price determined in good faith by the
Board of Directors, whose determination shall be conclusive and
described in a Board Resolution.
(2) "Current Market Price" means the average of the
daily closing prices per share of Common Stock for the 10 consecutive
trading days immediately prior to the date in question.
(3) "fair market value" shall mean the amount which
a willing buyer would pay a willing seller in an arm's length
transaction.
(4) "Record Date" shall mean, with respect to any
dividend, distribution or other transaction or event in which the
Holders of Common Stock have the right to receive any cash, securities
or other property or in which the Common Stock (or other applicable
security) is exchanged for or converted into any combination of cash,
securities or other property, the date fixed for determination of
stockholders entitled to receive such cash, securities or other property
(whether such date is fixed by the Board of Directors or by statute,
contract or otherwise).
(5) "trading day" shall mean (x) if the applicable
security is listed or admitted for trading on the New York Stock
Exchange or another national securities exchange, a day on which the New
York Stock Exchange or another national securities exchange is open for
business or (y) if the applicable security is quoted on any market
controlled by The Nasdaq Stock Market, Inc., a day on which trades may
be made thereon or (z) if the applicable security is not so listed,
admitted for trading or quoted,
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any day other than a Saturday or Sunday or a day on which banking
institutions in the State of New York are authorized or obligated by law
or executive order to close.
(f) The Company may make such reductions in the Conversion
Price, in addition to those required by Sections 10.5(a), (b), (c) or (d), as
the Board of Directors considers to be advisable to avoid or diminish any income
tax to Holders of Common Stock or rights to purchase Common Stock resulting from
any dividend or distribution of stock (or rights to acquire stock) or from any
event treated as such for income tax purposes.
To the extent permitted by applicable law, the Company from time
to time may reduce the Conversion Price by any amount for any period of time if
the period is at least 20 days, the reduction is irrevocable during the period
and the Board of Directors has made a determination that such reduction would be
in the Company's best interests, which determination shall be conclusive and
described in a Board Resolution. Whenever the Conversion Price is reduced
pursuant to the preceding sentence, the Company shall mail to the Holders of
Security at his or her last address appearing on the Security Register a notice
of the reduction at least 15 days prior to the date the reduced Conversion Price
takes effect, and such notice shall state the reduced Conversion Price and the
period during which it will be in effect.
(g) No adjustment in the Conversion Price shall be required
unless such adjustment would require an increase or decrease of at least 1% in
such price; PROVIDED, HOWEVER, that any adjustments which by reason of this
Section 10.5(g) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this Article
10 shall be made by the Company and shall be made to the nearest cent or to the
nearest one hundredth of a share, as the case may be.
No adjustment need be made for a change in the par value or no
par value of the Common Stock.
(h) Whenever the Conversion Price is adjusted as herein
provided, the Company shall promptly file with the Trustee and any Conversion
Agent other than the Trustee an Officers' Certificate setting forth the
Conversion Price after such adjustment and setting forth a brief statement of
the facts requiring such adjustment. Promptly after delivery of such
certificate, the Company shall prepare a notice of such adjustment of the
Conversion Price setting forth the adjusted Conversion Price and the date on
which each adjustment becomes effective
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and shall mail such notice of such adjustment of the Conversion Price to each
Holder of Securities at his or her last address appearing on the Security
Register within 20 days of the effective date of such adjustment. Failure to
deliver such notice shall not affect the legality or validity of any such
adjustment.
(i) In any case in which this Section 10.5 provides that an
adjustment shall become effective immediately after a Record Date for an event,
the Company may defer until the occurrence of such event issuing to the Holder
of any Security converted after such Record Date and before the occurrence of
such event the additional shares of Common Stock issuable upon such conversion
by reason of the adjustment required by such event over and above the Common
Stock issuable upon such conversion before giving effect to such adjustment.
(j) For purposes of this Section 10.5, the number of shares
of Common Stock at any time outstanding shall not include shares held in the
treasury of the Company but shall include shares issuable in respect of scrip
certificates issued in lieu of fractions of shares of Common Stock. The Company
shall not pay any dividend or make any distribution on shares of Common Stock
held in the treasury of the Company.
(k) Notwithstanding anything to the contrary in this Article
10, if the Company engages in a transaction requiring an adjustment of the
Conversion Price, such conversion shall in no event result in the Holder being
in an economic position less favorable than prior to such conversion.
SECTION 10.6 EFFECT OF RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE.
If any of the following events occur: (i) any reclassification
or change of the outstanding shares of Common Stock (other than a change in par
value, or from par value to no par value, or from no par value to par value, or
as a result of a subdivision or combination), (ii) any consolidation, merger or
combination of the Company with another corporation as a result of which Holders
of Common Stock shall be entitled to receive stock, securities or other property
or assets (including cash) with respect to or in exchange for such Common Stock,
or (iii) any sale or conveyance of the properties and assets of the Company as,
or substantially as, an entirety to any other corporation as a result of which
Holders of Common Stock shall be entitled to receive stock, securities or other
property or assets (including cash) with respect to or in exchange for such
Common Stock, then the Company or the successor or purchasing corporation, as
the case may be, shall execute with the Trustee a supplemental indenture (which
shall, if this Indenture is then qualified under the Trust Indenture Act, comply
with the Trust Indenture Act
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as in force at the date of qualification of this Indenture and such supplemental
indenture if such supplemental indenture is then required to so comply)
providing that the Securities shall be convertible into the kind and amount of
shares of stock and other securities or property or assets (including cash)
receivable upon such reclassification, change, consolidation, merger,
combination, sale or conveyance by a Holder of a number of shares of Common
Stock issuable upon conversion of the Securities (assuming, for such purposes, a
sufficient number of authorized shares of Common Stock available to convert all
such Securities) immediately prior to such reclassification, change,
consolidation, merger, combination, sale or conveyance assuming such Holder of
Common Stock did not exercise his or her rights of election, if any, as to the
kind or amount of securities, cash or other property receivable upon such
consolidation, merger, statutory exchange, sale or conveyance (provided that, if
the kind or amount of securities, cash or other property receivable upon such
consolidation, merger, statutory exchange, sale or conveyance is not the same
for each share of Common Stock in respect of which such rights of election have
not been exercised ("non-electing share"), then, for the purposes of this
Section 10.6, the kind and amount of securities, cash or other property
receivable upon such consolidation, merger, statutory exchange, sale or
conveyance for each non-electing share shall be deemed to be the kind and amount
so receivable per share by a plurality of the non electing shares). Such
supplemental indenture shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Article
10. If, in the case of any such reclassification, change, consolidation,
merger, combination, sale or conveyance, the stock or other securities and
assets receivable thereupon by a Holder of shares of Common Stock includes
shares of stock or other securities and assets of a corporation other than the
successor or purchasing corporation, as the case may be, in such
reclassification, change, consolidation, merger, combination, sale or
conveyance, then such supplemental indenture shall also be executed by such
other corporation and shall contain such additional provisions to protect the
interests of the Holders of the Securities as the Board of Directors shall
reasonably consider necessary by reason of the foregoing.
The Company shall cause notice of the execution of such
supplemental indenture to be mailed to each Holder of Securities at his or her
address appearing on the register of Holders for that purpose within 20 days
after execution thereof. Failure to deliver such notice shall not affect the
legality or validity of such supplemental indenture.
The above provisions of this Section 10.6 shall similarly apply
to successive reclassifications, changes, consolidations, mergers, combinations,
sales and conveyances.
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If this Section 10.6 applies to any event or occurrence, Section
10.5 shall not apply.
SECTION 10.7 AUTOMATIC CONVERSION.
The Securities shall be automatically converted into Common
Stock at the Conversion Price upon the occurrence of all of the following: (i)
(a) the United States District Court, Northern District of Alabama, Southern
Division (or any successor court with jurisdiction over the Silicone Gel Breast
Implant Products Liability Litigation (MDL 926)) shall issue an order certifying
Inamed Corporation's Mandatory (non "opt-out" Limited Fund) Class under Rule
23(b)(1)(B) of the Federal Rules of Civil Procedure, which order shall become a
Final Order and (b) the shares of Common Stock to be issued upon conversion of
the Securities shall have been registered with the Commission under the
Securities Act of 1933, as amended, pursuant to Section 8.14 hereof and such
registration shall continue to be in effect, (ii) 60 days shall elapse from the
date of the last to occur of the events described in subclauses (a) and (b) of
clause (i), (iii) subsequent to the occurrence of the events described in
clauses (i) and (ii), the closing bid price of the Company's Common Stock as
reported on the Nasdaq SmallCap Market or any other national securities exchange
or over-the-counter market on which the Company's Common Stock is then listed or
quoted shall equal or exceed $14.00 per share for 15 consecutive trading days
and (iv) subsequent to the occurrence of the events described in clauses (i),
(ii) and (iii), the Company delivers to the Trustee an Officers' Certificate
stating that no Material Adverse Change has occurred since the filing of the
Company's Annual or Quarterly Report on Form 10-K or 10-Q filed most recently
prior to the delivery of such Officers' Certificate. "Final Order" as used in
this Section 10.7 means an order or judgment of the court with jurisdiction in
the respective matter or other court of competent jurisdiction as to which the
time to appeal, seek leave to appeal, petition for certiorari or move for
reargument or rehearing has expired and as to which no appeal, petition for
certiorari or other proceedings for reargument, rehearing or leave to appeal
shall then be pending or as to which any right to appeal, petition for
certiorari, reargue, rehear or seek leave to appeal shall have been waived in
writing in form and substance satisfactory to the Company or, in the event that
an appeal, writ of certiorari, or reargument or rehearing thereof or leave to
appeal has been motioned for or sought, such order of the court shall have been
affirmed by the highest court to which such order was appealed, or certiorari
has been denied or from which reargument or rehearing or leave to appeal was
motioned for or sought, and the time to take any further appeal, petition for
certiorari, move for reargument or rehearing or seek leave to appeal shall have
expired. The conversion of the Securities pursuant to this Section 10.7 (the
"Automatic Conversion") shall be deemed to have been effected as to any and
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all Outstanding Securities on the date of the fifteenth consecutive trading day
on which the Company's Common Stock shall have satisfied the trading
requirements specified in clause (iii) of the first sentence of this Section
10.7, and the person in whose name any certificate or certificates for shares of
Common Stock are issuable upon such conversion shall be deemed to have become on
said date the holder of record of the shares represented thereby; PROVIDED,
HOWEVER, that any such Automatic Conversion on any date when the Company's stock
transfer books are closed shall constitute the person in whose name the
certificates are to be issued as the record holder thereof for all purposes on
the next succeeding day on which such stock transfer books are open, but such
conversion shall be at the Conversion Price in effect on the date upon which the
Automatic Conversion is deemed to have been effected.
SECTION 10.8 TAXES ON SHARES ISSUED.
The issue of stock certificates on conversions of Securities
shall be made without charge to the converting Holder for any tax in respect of
the issue thereof. The Company shall not, however, be required to pay any tax
which may be payable in respect of any transfer involved in the issue and
delivery of stock in any name other than that of the Holder of any Security
converted, and the Company shall not be required to issue or deliver any such
stock certificate unless and until the person or persons requesting the issue
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
SECTION 10.9 RESERVATION OF SHARES; SHARES TO BE FULLY PAID;
LISTING OF COMMON STOCK.
The Company shall reserve, free from preemptive rights, out of
its authorized by unissued shares or shares held in treasury, sufficient shares
to provide for the conversion of the Securities from time to time as such
Securities are presented for conversion or converted pursuant to the Automatic
Conversion.
Before taking any action which would cause an adjustment
reducing the Conversion Price below the then par value, if any, of the shares of
Common Stock issuable upon conversion of the Securities, the Company shall take
all corporate action which may, in the opinion of its counsel, be necessary in
order that the Company may validly and legally issue shares of such Common Stock
at such adjusted Conversion Price.
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The Company covenants that all shares of Common Stock issued
upon conversion of Securities will be fully paid and non assessable by the
Company and free from all taxes, liens and charges with respect to the issue
thereof.
The Company further covenants that as long as the Common Stock
is quoted on the Nasdaq SmallCap Market, or its successor, all Common Stock
issuable upon conversion of the Securities shall be eligible for such quotation
and if at any time the Common Stock is listed on the Pacific Stock Exchange or
any other national securities exchange, list and keep listed, all Common Stock
issuable upon conversion of the Securities.
SECTION 10.10 RESPONSIBILITY OF TRUSTEE.
The Trustee shall not at any time be under any duty of
responsibility to any Holders of Securities to determine whether any facts exist
which may require any adjustment of the Conversion Price, or with respect to the
nature or extent or calculation of any such adjustment when made, or with
respect to the method employed, or herein or in any supplemental indenture
provided to be employed, in making the same. The Trustee shall not be
accountable with respect to the validity or value (or the kind or amount) of any
shares of Common Stock, or of any securities or property, which may at any time
be issued or delivered upon the conversion of any Security; and the Trustee
makes no representations with respect thereto. Subject to the provisions of
Section 5.1, the Trustee shall not be responsible for any failure of the Company
to issue, transfer or deliver any shares of Common Stock or stock certificates
or other securities or property or cash upon the surrender of any Security for
the purpose of conversion or to comply with any of the duties, responsibilities
or covenants of the Company contained in this Article 10. Without limiting the
generality of the foregoing, the Trustee shall not have any responsibility to
determine the correctness of any provisions contained in any supplemental
indenture entered into pursuant to Section 10.6 relating either to the kind or
amount of shares of stock or securities or property (including cash) receivable
by Holders of Securities upon the conversion of their Securities after any event
referred to in such Section 10.6 or to any adjustment to be made with respect
thereto, but, subject to the provisions of Section 5.1, may accept as conclusive
evidence of the correctness of any such provisions, and shall be protected in
relying upon, the Officers' Certificate (which the Company shall be obligated to
file with the Trustee prior to the execution of any such supplemental indenture)
with respect thereto.
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SECTION 10.11 NOTICES TO HOLDERS.
If (a) the Company declares a dividend (or any other
distribution) on its Common Stock; or (b) the Company authorizes the granting to
the Holders of its Common Stock of rights or warrants to subscribe for or
purchase any share of any class of Common Stock or any other rights or warrants;
or (c) there is any reclassification of the Common Stock (other than a
subdivision or combination of outstanding Common Stock, or a change in par
value, or from par value to no par value, or from no par value to par value), or
of any consolidation or merger to which the Company is a party and for which
approval of any stockholders of the Company is required, or of the sale or
transfer of all or substantially all of the assets of the Company; or (d) there
is any voluntary or involuntary dissolution, liquidation or winding up of the
Company, then the Company shall cause to be filed with the Trustee and to be
mailed to each Holder of Securities at his or her address appearing on the
register maintained for that purpose as promptly as possible but in any event at
least 15 days prior to the applicable date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution or rights or warrants, or, if a record is not to be
taken, the date as of which the Holders of Common Stock of record to be entitled
to such dividend, distribution or rights are to be determined, or (y) the date
on which such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up is expected to become effective or occur,
and the date as of which it is expected that Holders of Common Stock of record
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding up. Failure to give such notice,
or any defect therein, shall not affect the legality or validity of such
dividend, distribution, reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up.
ARTICLE 11
SUBORDINATION
SECTION 11.1 AGREEMENT TO SUBORDINATE
The Company agrees, and each Holder by accepting a Security
agrees, that the Indebtedness evidenced by and the obligations relating to the
Security are subordinated in right of payment, to the extent and in the manner
provided in this Article, to the prior payment in full of all Senior
Indebtedness, and that the subordination is for the benefit of the holders of
Senior Indebtedness.
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SECTION 11.2 CERTAIN DEFINITIONS
"Designated Senior Indebtedness" means the Senior Indebtedness
held by any bank or other commercial financial institution.
"Representative" means the indenture trustee or other trustee,
agent or representative for any Senior Indebtedness.
A distribution may consist of cash, securities or other
property, by set-off or otherwise.
SECTION 11.3 LIQUIDATION; DISSOLUTION; BANKRUPTCY
Upon any distribution to creditors of the Company in a
liquidation or dissolution of the Company or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding relating to the Company or its
property, in an assignment for the benefit of creditors or any marshalling of
the Company's assets and liabilities:
(1) holders of Senior Indebtedness shall receive payment in
full of all Senior Indebtedness before Holders shall be entitled to
receive any payment in respect to the Indebtedness and obligations with
respect to the Securities; and
(2) until all Senior Indebtedness (as provided in clause (1)
above) are paid in full, any distribution to which Holders would be
entitled but for this Article shall be made to holders of Senior
Indebtedness, as their interests may appear.
SECTION 11.4 DEFAULT ON DESIGNATED SENIOR INDEBTEDNESS
The Company may not make any payment or distribution to the
Trustee or any Holder in respect of Indebtedness or obligations with respect to
the Securities and may not acquire from the Trustee or any Holder any Securities
for cash or property until all principal and other Obligations with respect to
the Senior Indebtedness have been paid in full if:
(i) a default in the payment of any Senior Indebtedness
occurs and is continuing beyond any applicable grace period in the
agreement, indenture or other document governing such Senior
Indebtedness; or
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(ii) a default, other than a payment default, on Designated
Senior Indebtedness occurs and is continuing that then permits holders
of the Designated Senior Indebtedness to accelerate its maturity, and
the Trustee receives a notice of the default from a person who may give
it pursuant to Section 11.12 hereof. If the Trustee receives any such
notice, a subsequent notice received within 360 days thereafter shall
not be effective for purposes of this section. No nonpayment default
that existed or was continuing on the date of delivery of any such
notice to the Trustee shall be, or be made, the basis for a subsequent
notice unless such default shall have been waived for a period of not
less than 180 days.
The Company may and shall resume payments on and distributions
in respect of the Securities and may acquire them upon the earlier of:
(1) the date upon which the default is cured or waived, or
(2) in the case of a default referred to in Section 11.4(ii)
hereof, 60 days pass after notice is received if the maturity of such
Designated Senior Indebtedness has not been accelerated and such default
has not become the subject of judicial proceedings,
if this Article otherwise permits the payment, distribution or acquisition at
the time of such payment or acquisition.
Notwithstanding the foregoing, nothing in this Section 11.4
shall prevent the issuance of Common Stock upon conversion of the Securities
pursuant to Sections 10.2 and 10.7 and paragraph 6 of the Security.
SECTION 11.5 ACCELERATION OF SECURITIES.
If payment of the Securities is accelerated because of an Event
of Default, the Company shall promptly notify holders of Senior Indebtedness of
the acceleration.
SECTION 11.6 WHEN DISTRIBUTION MUST BE PAID OVER.
If a payment or distribution is made to the Trustee or any
Holder that because of this Article 11 should not have been made to it, the
Trustee or such Holder who receives the distribution shall hold it in trust for
the benefit of, and, upon written request, pay it over to, the holders of Senior
Indebtedness as their interests may appear, or their Representative under the
indenture or other agreement
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(if any) pursuant to which Senior Indebtedness may have been issued, as their
respective interests may appear, for application to the payment of all
Indebtedness and obligations with respect to Senior Indebtedness remaining
unpaid to the extent necessary to pay such Indebtedness and obligations in full
in accordance with their terms, after giving effect to any concurrent payment or
distribution or for the holders of Senior Indebtedness.
With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform only such obligations on the part of the Trustee as are
specifically set forth in this Article 11, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Trustee.
SECTION 11.7 NOTICE BY COMPANY.
The Company shall promptly notify the Trustee and the Paying
Agent of any facts known to the Company that would cause a payment of any
obligations with respect to the Securities to violate this Article, but failure
to give such notice shall not affect the subordination of the Securities to the
Senior Indebtedness as provided in this Article.
SECTION 11.8 SUBROGATION.
After all Senior Indebtedness is paid in full and until the
Securities are paid in full, Holders shall be subrogated (equally and ratably
with all other Indebtedness PARI PASSU with the Securities) to the rights of
holders of Senior Indebtedness to receive distributions applicable to Senior
Indebtedness to the extent that distributions otherwise payable to the Holders
have been applied to the payment of Senior Indebtedness. A distribution made
under this Article to holders of Senior Indebtedness that otherwise would have
been made to Holders is not, as between the Company and Holders, a payment by
the Company on the Securities.
SECTION 11.9 RELATIVE RIGHTS.
This Article defines the relative rights of Holders and holders
of Senior Indebtedness. Nothing in this Indenture shall:
(1) impair, as between the Company and Holders, the
obligation of the Company, which is absolute and unconditional, to pay
principal of and interest on the Securities in accordance with their
terms;
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(2) affect the relative rights of Holders and creditors of
the Company other than their rights in relation to holders of Senior
Indebtedness; or
(3) prevent the Trustee or any Holder from exercising its
available remedies upon a Default or Event of Default, subject to the
rights of holders and owners of Senior Indebtedness to receive
distributions and payments otherwise payable to Holders.
If the Company fails because of this Article to pay principal of
or interest on a Security on the due date, the failure is still a Default or
Event of Default.
SECTION 11.10 SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY.
No right of any holder of Senior Indebtedness to enforce the
subordination of the Indebtedness evidenced by the Securities shall be impaired
by any act or failure to act by the Company or any holder of Senior Indebtedness
or by the failure of the Company or any holder of Senior Indebtedness to comply
with this Indenture. The holders of Senior Indebtedness may extend, renew,
modify or amend the terms of Senior Indebtedness or any security therefor and
release, sell or exchange such security and otherwise deal freely with the
Company, all without affecting the liabilities and obligations of the parties to
the Indenture or the Holders of the Securities or the rights of such Senior
Indebtedness hereunder.
SECTION 11.11 DISTRIBUTION OR NOTICE TO REPRESENTATIVE.
Whenever a distribution is to be made or a notice given to
holders of Senior Indebtedness, the distribution may be made and the notice
given to their Representative.
Upon any payment or distribution of assets of the Company
referred to in this Article 11, the Trustee and the Holders shall be entitled to
rely upon any order or decree made by any court of competent jurisdiction or
upon any certificate of such Representative or of the liquidating trustee or
agent or other person making any distribution to the Trustee or to the Holders
for the purpose of ascertaining the persons entitled to participate in such
distribution, the holders of the Senior Indebtedness and other Indebtedness of
the Company, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this Article
11.
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SECTION 11.12 RIGHTS OF TRUSTEE AND PAYING AGENT.
Notwithstanding the provisions of this Article 11, or any other
provision of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any facts that would prohibit the making of any payment or
distribution by the Trustee, and the Trustee and the Paying Agent may continue
to make payments on the Securities, unless the Trustee shall have received at
its Corporate Trust Office at least five Business Days prior to the date of such
payment written notice of facts that would causes the payment of any obligations
with respect to the Securities to violate this Article. Only the Company or a
Representative of the Designated Senior Indebtedness may give the notice.
Nothing in this Article 11 shall impair the claims of, or payments to, the
Trustee under or pursuant to Section 5.7 hereof.
The Trustee in its individual or any other capacity may hold
Senior Indebtedness with the same rights it would have if it were not Trustee.
Any Agent may do the same with like rights.
SECTION 11.13 AUTHORIZATION TO EFFECT SUBORDINATION.
Each Holder of a Security by the Holder's acceptance thereof
authorizes and directs the Trustee on the Holder's behalf to take such action as
may be necessary or appropriate to effectuate the subordination as provided in
this Article 11, and appoints the Trustee the Holder's attorney-in-fact for any
and all such purposes. If the Trustee does not file a proper proof of claim or
proof of debt int he form required in any proceeding referred to in Article 4
hereof at least 30 days before the expiration of the time to file such claim,
the Representatives of the Designated Senior Indebtedness are hereby authorized
to file an appropriate claim for and on behalf of the Holders of the Securities.
SECTION 11.14 TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR INDEBTEDNESS.
The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness and shall not be liable to any such holders if it
shall in good faith mistakenly pay over or distribute to Holders of Securities
or to the Company or to any other Person cash, property or securities to which
any holders of Senior Indebtedness shall be entitled by virtue of this Article
or otherwise.
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SECTION 11.15 RIGHTS OF TRUSTEE AS HOLDER OF SENIOR INDEBTEDNESS; PRESERVATION
OF TRUSTEE'S RIGHTS.
The Trustee in its individual capacity shall be entitled to all
the rights set forth in this Article with respect to any Senior Indebtedness
which may at any time be held by it, to the same extent as any other holder of
Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of
any of its rights as such holder.
Nothing in this Article shall apply to claims of, or payments
to, the Trustee under or pursuant to Section 6.5.
SECTION 11.16 ARTICLE APPLICABLE TO PAYING AGENTS.
In case at any time any Paying Agent other than the Trustee
shall have been appointed by the Company and be then acting hereunder, the term
"Trustee" as used in this Article shall in such case (unless the context
otherwise requires) be construed as extending to and including such Paying Agent
within its meaning as fully for all intents and purposes as if such Paying Agent
were named in this Article in addition to or in place of the Trustee; PROVIDED,
HOWEVER, that Section 14.3 shall not apply to the Company or any Affiliate of
the Company if it or such Affiliate acts as Paying Agent.
SECTION 11.17 CERTAIN CONVERSIONS DEEMED PAYMENT.
For the purposes of this Article only, (1) the issuance and
delivery of junior securities upon conversion of Securities in accordance with
Article 10 shall not be deemed to constitute a payment or distribution on
account of the principal of or interest on Securities or on account of the
purchase or other acquisition of Securities, and (2) the payment, issuance or
delivery of cash, property or securities (other than junior securities) upon
conversion of a Security shall be deemed to constitute payment on account of the
principal of such Security. For the purposes of this Section, the term "junior
securities" means (a) shares of any stock of any class of the Company and (b)
securities of the Company which are subordinated in right of payment to all
Senior Indebtedness which may be outstanding at the time of issuance or delivery
of such securities to substantially the same extent as, or to a greater extent
than, the Securities are so subordinated as provided in this Article. Nothing
contained in this Article or elsewhere in this Indenture or in the Securities is
intended to or shall impair, as among the Company, its creditors other than
holders of Senior Indebtedness and the Holders of the Securities, the right,
which
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is absolute and unconditional, of the Holder of any Security to convert such
Security in accordance with Article 10.
SECTION 11.18 AMENDMENT.
The provisions of this Article 11 shall not be amended or
modified without the written consent of the number of holders of all Senior
Indebtedness that would be entitled to amend such subordination provisions
pursuant to the agreements governing the Senior Indebtedness.
ARTICLE 12
SECURITY
SECTION 12.1 SECURITY.
(a) In order to secure the obligations of the Company and
the Guarantors under the Indenture, the Securities and the Collateral
Documentation, the Company, the Guarantors and the Trustee, as applicable, have
entered into the Collateral Documentation in order to create the security
interests contemplated thereby. Each Holder, by accepting a Security, agrees to
all of the terms and provisions of the Collateral Documentation and the Trustee
agrees to all of the terms and provisions of the Collateral Documentation signed
by it.
(b) The Trustee and each Holder, by accepting a Security,
acknowledge that the holders of any Senior Indebtedness have or may in the
future obtain certain rights in and to the Collateral that are senior in right
to the interest of the Trustee (for the benefit of the Holders) in the
Collateral under this Indenture and the Collateral Documentation and the Trustee
agrees to be bound by such intercreditor or subordination agreements consistent
with Article 11 as shall be requested by the holders of the Senior Indebtedness
as such agreements may be in effect from time to time.
(c) As amongst the Holders, the Collateral as now or
hereafter constituted shall be held for the equal and ratable benefit of the
Holders without preference, priority or distinction of any thereof over any
other by reason of difference in series or in time of issuance, sale or
otherwise, as security for the obligations of the Company and the Guarantors
under the Indenture, the Securities and the Collateral Documentation.
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SECTION 12.2 RECORDING, ETC.
The Company will have caused or will cause this Indenture, the
Collateral Documentation and the other Documents and all amendments or
supplements to each of the foregoing to be registered, recorded and filed and/or
rerecorded, re-filed and renewed in such manner and in such place or places, if
any, as may be required by law or reasonably requested by the Trustee or the
Holders of a majority of Outstanding Securities in order fully to preserve and
protect the Lien of the Indenture, the Collateral Documentation and the other
Documents on all parts of the Collateral to effectuate and preserve the security
of the Holders and all rights of the Trustee.
The Company shall furnish, and shall cause any other obligor to
furnish, to the Trustee:
(i) promptly after the execution and delivery of the
Indenture, and promptly after the execution and delivery of any
Collateral Documentation or other instrument of further assurance or
amendment, an Opinion of Counsel, subject to customary exclusions and
exceptions reasonably acceptable to the Trustee, either (a) stating
that, in the opinion of such counsel, this Indenture, the Collateral
Documentation and all other instruments of further assurance or
amendment have been properly recorded, registered and filed to the
extent necessary to make effective the Lien intended to be created by
the Indenture and the Collateral Documentation and reciting the details
of such action or referring to prior Opinions of Counsel in which such
details are given, and stating that as to the Indenture and Collateral
Documentation and such other instruments such recording, registering and
filing are the only recordings, registerings and filings necessary to
give notice thereof and that no re-recordings, re-registerings or
re-filings are necessary to maintain such notice, and further stating
that all financing statements and continuation statements and mortgages
have been executed and filed that are necessary fully to preserve and
protect the rights of the Holders and the Trustee hereunder and under
the Collateral Documentation or (b) stating that, in the opinion of such
counsel, no such action is necessary to make such Lien and pledge
effective; and
(ii) within 60 days after January 1 in each year
beginning with January 1, 1997, an Opinion of Counsel, dated as of such
date, either (a) stating that, in the opinion of such counsel, subject
to customary exclusions and exceptions reasonably acceptable to the
Trustee,
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such action has been taken with respect to the recording, registering,
filing, re-recording, re-registering and re-filing of the Indenture and
all supplemental indentures, financing statements, continuation
statements and mortgages or other instruments of further assurance as is
necessary to maintain the Lien of the Indenture and the Collateral
Documentation and reciting the details of such action or referring to
prior opinions of Counsel in which such details are given, and stating
that all financing statements and continuation statements and mortgages
have been executed and filed that are necessary fully to preserve and
protect the rights of the Holders and the Trustee hereunder and under
the Collateral Documentation or (b) stating that, in the opinion of such
counsel, no such action is necessary to maintain such Lien.
SECTION 12.3 DISPOSITION OF CERTAIN COLLATERAL WITHOUT REQUESTING RELEASE.
(a) Notwithstanding the provisions of Sections 12.4, 12.5
and 12.6 hereof, but subject to any prohibitions or limitations contained in the
Collateral Documentation, the Company and any Guarantor may, without requesting
the release or consent of the Trustee:
(i) sell, assign, transfer, license or otherwise
dispose of, free from the Lien of this Indenture and the
Collateral Documentation, any machinery, equipment, or other
personal property constituting Collateral that has become worn
out, obsolete or unserviceable, whether or not such property is
replaced, but in the event such property is replaced, the
replacement property shall without further action become
Collateral subject to the Lien of this Indenture and the
Collateral Documentation;
(ii) (A) sell, assign, transfer, license or otherwise
dispose of, free from the Lien of this Indenture and the
Collateral Documentation, inventory or general intangibles that
at any time are part of the Collateral in the ordinary course of
the Company's or the Guarantors' business, (B) collect,
liquidate, sell, factor or otherwise dispose of, free from the
Lien of this Indenture and the Collateral Documentation,
accounts receivable or notes receivable that at any time are
Collateral in the ordinary course of the Company's or the
Guarantors' business or (C) make cash payments (including
scheduled repayments of Indebtedness permitted to be incurred
hereby) from cash that at any time is part of the Collateral
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in the ordinary course of business that are not otherwise
prohibited by this Indenture; and
(iii) abandon, sell, assign, transfer, license or
otherwise dispose of any personal property the use of which is
no longer necessary or desirable in the proper conduct of the
business of the Company or the Guarantors and the maintenance of
their respective earnings and is not material to the conduct of
the business of the Company or the Guarantors, respectively.
(b) Notwithstanding the provisions of Subsection (a) above,
(x) in the event and so long as this Indenture is qualified under the Trust
Indenture Act, neither the Company nor any Guarantor shall dispose of or
transfer (by lease, assignment, sale or otherwise), or pledge, mortgage or
otherwise encumber, Collateral pursuant to the provisions of Section 12.3(a)(ii)
or (iii) with a fair value to the obligor of 10% or more of the aggregate fair
value of all Collateral then existing (as determined in the good faith judgment
of the Company, and, if required by the Trust Indenture Act, an independent
appraiser), in any transaction or any series of related transactions without
complying with Section 12.4; and (y) the right of the Company and the Guarantors
to rely upon the provisions of Section 12.3(a)(ii) and (iii) from the date of
this Indenture to March 31, 1996 and for each quarter thereafter shall be
conditioned upon the Company delivering to the Trustee, within 60 days following
the end of such quarter (except those quarters ending on December 31, in which
case within 105 days following the end of the quarter), an Officers' Certificate
to the effect that all of such dispositions by the Company and the Guarantors
were in the ordinary course of the respective company's business and that the
proceeds therefrom were used by such companies in connection with their
respective businesses.
(c) Any disposition of Collateral made in compliance with
the provisions of this Section 12.3 shall be deemed not to impair the Lien of
this Indenture and the Collateral Documentation in contravention of the
provisions of this Indenture.
(d) Upon receipt of a Company Request, the Trustee shall
execute and deliver, within five Business Days from the receipt of the Company
Request pursuant to Section 12.4, any instruments deemed by the Company to be
necessary or appropriate to dispose of portions of the Collateral pursuant to
this Section 12.3 if the provisions of this Section 12.3 have been complied
with.
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SECTION 12.4 REQUESTING RELEASE OF COLLATERAL.
(a) Upon receipt of a Company Request, the Trustee shall
execute and deliver, within five Business Days from the receipt of such Company
Request pursuant to this Section 12.4, any instruments deemed by the Company or
a Guarantor to be necessary or appropriate to release all or a part of the
Collateral from the Lien of this Indenture and the Collateral Documentation, if
the provisions of this Section 12.4 have been complied with. Any such Company
Request shall request the Trustee to execute one or more specifically described
release instruments (which release instruments shall accompany such Company
Request) and shall certify that no Default or Event of Default has occurred and
is continuing and such Company Request shall also certify that one of the
following conditions of this Section 12.4(a) set forth below, and the conditions
of Section 12.5 or 12.6, if applicable, have been, or simultaneously with or
immediately following the release will be, fulfilled:
(i) there is a substitution of Substitute Collateral
in accordance with Section 12.5;
(ii) there is a deposit of Cash Collateral in
accordance with Section 12.6;
(iii) the Collateral to be released is insurance
proceeds and such Collateral is used for repair, replacement or
deposit as Cash Collateral; or
(iv) the Company represents in the Company Request
that the Collateral to be released is to be released in
connection with repayment of all Outstanding Securities or
defeasance of this Indenture pursuant to the provisions of this
Indenture.
(b) In the event and so long as this Indenture is qualified
under the Trust Indenture Act, as a condition to any release of Collateral under
this Section 12.4, the Company shall deliver to the Trustee any certificate or
opinion required by Trust Indenture Act Sections 314(c)(3) or 314(d) dated as of
a date not more than 60 days prior to the date of substitution or release. In
the case of the repayment of all Outstanding Securities or defeasance of this
Indenture pursuant to the provisions of this Indenture, such certificate or
opinion shall state that all of the Securities then Outstanding are to be repaid
and that all of the Collateral is to be released on or after the date of payment
or the deposit of funds or other property in accordance with the defeasance
provisions of Article 3.
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(c) Any release of Collateral made in compliance with the
provisions of this Section 12.4 shall be deemed not to impair the Lien of this
Indenture and the Collateral Documentation in contravention of the provisions of
this Indenture.
SECTION 12.5 SUBSTITUTE COLLATERAL OTHER THAN CASH COLLATERAL.
(a) The Company or any Guarantor may, at its option, obtain
a release of Collateral, by subjecting other proposed Collateral which is of the
same type currently covered by the Collateral Documentation ("Substitute
Collateral") to the Lien of this Indenture and the Collateral Documentation in
place of and in exchange for the Collateral to be released, all in accordance
with the provision and conditions of Section 12.4 and this Section 12.5 (except
that the substitution of Cash Collateral is governed by Section 12.6).
Substitute Collateral may include the proceeds of the Collateral to be released,
and Substitute Collateral may be substituted for other Substitute Collateral on
the terms set forth in this Section 12.5. Other Collateral may be released
pursuant to this Section 12.5, if, after giving effect to such release and all
previous releases under this Section 12.5, substantially all property of the
Company and the respective Guarantor would be Collateral.
(b) The Company or any Guarantor may substitute Collateral
pursuant to this Section 12.5 if all of the following conditions are met:
(i) the Company or such Guarantor, as the case may
be, complies with Section 12.4(a) and delivers a Company Request
to the Trustee stating, in addition to the other requirements of
Section 12.4, that the Company or such Guarantor, as the case
may be, intends to substitute the property specifically
described therein for the Collateral specifically described
therein;
(ii) the fair value of the proposed Substitute
Collateral (including any Cash Collateral) is at least equal to
the fair value of the Collateral to be released; and
(iii) the security interests in Substitute Collateral
are perfected pursuant to the Collateral Documentation.
SECTION 12.6 SUBSTITUTION OF CASH COLLATERAL.
The Company or any Guarantor may, at its option, obtain the
release of Collateral upon the substitution of U.S. Legal Tender or U.S.
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Government Obligations as Collateral under the Collateral Documentation ("Cash
Collateral") in accordance with the provisions and conditions of Section 12.4
and this Section 12.6 as follows. The Company or any Guarantor may obtain the
release of all or a portion of the Collateral by depositing Cash Collateral into
any deposit account of the Company or such Guarantor in which the Trustee has a
Lien or by delivering Cash Collateral to the Trustee for deposit in any
Collateral Account (as therein defined) established pursuant to the Collateral
Documentation as Collateral in place of and in exchange for the released
Collateral, in an amount such that the fair value of such Cash Collateral
(together with the fair value of any other Substitute Collateral (other than
Cash Collateral) substituted for such released Collateral pursuant to Section
12.5) is at least equal to the fair value to the obligor of the Collateral to be
released.
SECTION 12.7 RELIANCE ON OPINION OF COUNSEL.
The Trustee shall, before taking any action under this Article
12, be entitled to receive an Opinion of Counsel, stating the legal effect of
such action, and that such action will not be in contravention of the provisions
hereof, and such opinion shall be full protection to the Trustee for any action
taken or omitted to be taken in reliance thereon; PROVIDED that, in the event
and so long as this Indenture is qualified under the Trust Indenture Act, the
Trustee's action under this Article 12 shall at all times be and remain subject
to its duties under Section 315 of the Trust Indenture Act.
SECTION 12.8 PURCHASER MAY RELY.
A purchaser in good faith of the Collateral or any part thereof
or interest therein which is purported to be transferred, granted or released by
the Trustee as provided in this Article 12 shall not be bound (i) to ascertain,
and may rely on the authority of the Trustee to execute, such transfer, grant or
release, or (ii) to inquire as to the satisfaction of any conditions precedent
to the exercise of such authority, or (iii) to determine whether the application
of the purchase price therefor complies with the terms hereof.
SECTION 12.9 PAYMENT OF EXPENSES.
On demand of the Trustee, the Company forthwith shall pay or
satisfactorily provide for all reasonable expenditures incurred by the Trustee
under this Article 12, and all such sums shall be a Lien upon the Collateral and
shall be secured thereby.
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SECTION 12.10 SUITS TO PROTECT THE COLLATERAL.
To the extent permitted thereunder, the Trustee shall have power
to institute and to maintain such suits and proceedings as it may deem expedient
to prevent any impairment of the Collateral by any acts which may be unlawful or
in violation of the Collateral Documentation or this Indenture, and such suits
and proceedings as the Trustee may deem expedient to preserve or protect its
interests and the interests of the Holders in the Collateral and the Collateral
Documentation or this Indenture, and in the profits, rents, revenues and other
income arising therefrom, including power to institute and maintain suits or
proceedings to restrain the enforcement of or compliance with any legislative or
other governmental enactment, rule or order that may be unconstitutional or
otherwise invalid if the enforcement of, or compliance with, such enactment,
rule or order would impair the Collateral or be prejudicial to the interests of
the Holders or the Trustee.
SECTION 12.11 TRUSTEE'S DUTIES.
The powers conferred upon the Trustee by this Article 12 are
solely to protect the Lien of this Indenture and the Collateral Documentation
and shall not impose any duty upon the Trustee to exercise any such powers
except as expressly provided in this Indenture. The Trustee shall be under no
duty whatsoever to make or give any presentment, demand for performance, notice
of nonperformance, protest, notice of protest, notice of dishonor, or other
notice or demand in connection with any Collateral, or to take any steps
necessary to preserve any rights against prior parties except as expressly
provided in this Indenture. The Trustee shall not be liable for failure to
collect or realize upon any or all of the Collateral, or for any delay in so
doing, nor shall the Trustee be under any duty to take any action whatsoever
with regard thereto. The Trustee shall have no duty to comply with any
recording, filing or other legal requirements necessary to establish or maintain
the validity, priority or enforceability of the Lien of this Indenture and the
Collateral Documentation in, or the Trustee's rights in or to, any of the
Collateral.
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ARTICLE 13
MISCELLANEOUS
SECTION 13.1 TRUST INDENTURE ACT.
In the event and so long as this Indenture is qualified under
the Trust Indenture Act, if any provision hereof limits, qualifies or conflicts
with another provision hereof which is required to be included in this Indenture
by any of the provisions of the Trust Indenture Act, such required provision
shall control. The Company shall not qualify this Indenture under the Trust
Indenture Act without first providing the Trustee at least sixty (60) days'
advance written notice thereof.
SECTION 13.2 COMPLIANCE CERTIFICATES AND OPINIONS.
Upon any application or request by the Company to the Trustee to
take any action under any provision of this Indenture, the Company shall furnish
to the Trustee an Officers' Certificate stating that all conditions precedent,
if any, provided for in this Indenture relating to the proposed action have been
complied with and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent, if any, have been complied with, except
that in the case of any such application or request, no additional certificate
or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include
(1) a statement that each individual signing such
certificate or opinion has read such covenant or condition and the
definitions herein relating thereto;
(2) a brief statement as to the nature and scope of
the examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such
individual, he has made such examination or investigation as is
necessary to enable him to express an informed opinion as to whether or
not such covenant or condition has been complied with; and
(4) a statement as to whether, in the opinion of
each such individual, such condition or covenant has been complied with.
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SECTION 13.3 FORM OF DOCUMENTS DELIVERED TO TRUSTEE.
In any case where several matters are required to be certified
by, or covered by an opinion of, any specified Person, it is not necessary that
all such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or given an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should now, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it related to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be consolidated
and form one instrument.
SECTION 13.4 ACTS OF HOLDERS.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or taken
by Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
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Indenture and (subject to Section 5.1) conclusive in favor of the Trustee and
the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Persons of any
such instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where
such execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee deems sufficient.
(c) The ownership of Securities shall be proved by the
Security Register.
(d) Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Security shall bind every
future Holder of the same Security and the Holder of every Security issued upon
the registration of transfer thereof or in exchange therefor or in lieu thereof
in respect of anything done, omitted or suffered to be done by the Trustee or
the Company in reliance thereon, whether or not notation of such action is made
upon such Security.
SECTION 13.5 NOTICES, ETC., TO TRUSTEE AND COMPANY.
Any request, demand, authorization, direction, notice, consent,
waiver or Act of Holders or other document provided or permitted by this
Indenture to be made upon, given or furnished to, or filed with.
(1) the Trustee by any Holder or by the Company
shall be sufficient for every purpose hereunder if made, given,
furnished or filed in writing to or with the Trustee at its Corporate
Trust Office, Attention: Jay Donald Smith, Esq., or
(2) the Company by the Trustee or by any Holder
shall be sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage
prepaid to the Company addressed to it at the address of its principal
office specified in the first paragraph of this instrument or at any
other address previously furnished in writing to the Trustee by the
Company.
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SECTION 13.6 NOTICE TO HOLDERS; WAIVER.
Where this Indenture provides for notice to Holders of any
event, such notice shall be sufficiently given (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage prepaid, to
each Holder affected by such event, at its address as it appears in the Security
Register, not later than the latest date, and not earlier than the earliest
date, prescribed for the giving of such notice. In any case where notice to
Holders is given by mail, neither the failure to mail such notice, nor any
defect in any notice so mailed, to any particular Holder shall affect the
sufficiency of such notice with respect to other Holders. Where this Indenture
provides for notice in any manner, such notice may be waived in writing by the
Person entitled to receive such notice, either before or after the event, and
such waiver shall be the equivalent of such notice. Waivers of notice by
Holders shall be filed with the Trustee, but such filing shall not be a
condition precedent to the validity of any action taken in reliance upon such
waiver.
In case by reason of the suspension of regular mail service or
by reason of any other cause it shall be impracticable to give such notice by
mail, then such notification as shall be made with the approval of the Trustee
shall constitute a sufficient notification for every purpose hereunder.
SECTION 13.7 RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or a meeting
of Holders. The Registrar, Paying Agent or Conversion Agent may make reasonable
rules and set reasonable requirements for its functions.
SECTION 13.8 EFFECT OF HEADINGS AND TABLE OF CONTENTS.
The Article and Section headings herein and the Table of
Contents are for convenience only and shall not affect the construction hereof.
SECTION 13.9 NO RECOURSE AGAINST OTHERS.
No director, officer, employee or stockholder, as such, of the
Company shall have any liability for any obligations of the Company under the
Securities or the Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. Each Holder by accepting a
Security waives and releases all such liability. The waiver and release are
part of the consideration for the issue of the Securities.
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SECTION 13.10 SUCCESSORS AND ASSIGNS.
All covenants and agreements in this Indenture by the Company
shall bind its successors and assigns, whether so expressed or not.
SECTION 13.11 SEPARABILITY CLAUSE.
In case any provision in this Indenture or in the Securities
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
SECTION 13.12 BENEFITS OF INDENTURE.
Nothing in this Indenture or in the Securities, express or
implied, shall give to any Person, other than the parties hereto and their
successors hereunder, the holders of Senior Indebtedness and the Holders of
Securities, any benefit or any legal or equitable right, remedy or claim under
this Indenture.
SECTION 13.13 GOVERNING LAW.
This Indenture and the Securities shall be governed by and
construed in accordance with the laws of the State of Nevada.
SECTION 13.14 LEGAL HOLIDAYS.
In any case where any Interest Payment Date or Stated Maturity
of any Security or the last date on which a Holder has the right to convert his
Securities shall not be a Business Day, then (notwithstanding any other
provision of this Indenture or the Securities) payment of interest or principal
or conversion of the Securities need not be made on such date, but may be made
on the next succeeding Business Day with the same force and effect as if made on
the Interest Payment Date, or at the Stated Maturity, or on such last day for
conversion, PROVIDED that no interest shall accrue for the period from and after
such Interest Payment Date or Stated Maturity, as the case may be.
SECTION 13.15 COUNTERPARTS.
This Indenture 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.
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SECTION 13.16 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture,
loan or debt agreement of the Company or a Subsidiary. Any such indenture, loan
or debt agreement may not be used to interpret this Indenture.
SECTION 13.17 TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents and Headings of the Articles and Sections
of this Indenture have been inserted for convenience of reference only, are not
to be considered a part hereof, and shall in no way modify or restrict any of
the terms or provisions hereof.
SECTION 13.18 CONSENT TO JURISDICTION AND SERVICE OF PROCESS.
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST THE COMPANY OR ANY
GUARANTOR WITH RESPECT TO THIS INDENTURE, THE GUARANTIES, ANY SECURITY OR ANY
OTHER DOCUMENT MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION IN LAS VEGAS, NEVADA, AND BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, EACH OF THE COMPANY AND EACH GUARANTOR ACCEPTS, FOR ITSELF AND IN
CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY
FINAL JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS INDENTURE, THE
GUARANTIES, ANY SECURITY OR ANY OTHER DOCUMENT FROM WHICH NO APPEAL HAS BEEN
TAKEN OR IS AVAILABLE. EACH OF THE COMPANY AND EACH GUARANTOR IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY
SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR
CERTIFIED MAIL, POSTAGE PREPAID, TO THE NOTICE ADDRESS OF THE COMPANY SPECIFIED
IN SECTION 13.5 HEREOF SUCH SERVICE TO BECOME EFFECTIVE TEN (10) DAYS AFTER SUCH
MAILING. EACH OF THE COMPANY AND EACH GUARANTOR AND THE TRUSTEE IRREVOCABLY
WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING
OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH
JURISDICTION. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN
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ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE TRUSTEE OR ANY
HOLDER TO BRING PROCEEDINGS AGAINST THE COMPANY OR ANY GUARANTOR IN THE COURTS
OF ANY OTHER JURISDICTION.
SECTION 13.9 WAIVER OF JURY TRIAL.
EACH OF THE COMPANY, EACH GUARANTOR AND THE TRUSTEE AND EACH
HOLDER BY ACCEPTANCE OF A SECURITY HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
INDENTURE, ANY GUARANTY OR ANY SECURITY OR ANY OTHER DOCUMENTS OR ANY DEALINGS
BETWEEN THEM RELATING TO THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. The
scope of this waiver is intended to be all-encompassing of any and all disputes
that may be filed in any court and that relate to the subject matter of the
transactions contemplated by this Indenture and the other Documents, including
without limitation, contract claims, tort claims, breach of duty claims, and all
other common law and statutory claims. The Company, each Guarantor and the
Trustee and each Holder by acceptance of a Security each acknowledge that this
waiver is a material inducement to enter into a business relationship, that each
has already relied on the waiver in entering into this Indenture, the Guaranty
and the other Documents and in issuing and purchasing the Securities and that
each will continue to rely on the waiver in their related future dealings. The
Company, each Guarantor and the Trustee and each Holder by acceptance of a
Security further warrant and represent that each has reviewed this waiver with
its legal counsel, and that each knowingly and voluntarily waives its jury trial
rights following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE,
MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER
SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS
TO THIS INDENTURE OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE
SECURITIES. IN THE EVENT OF LITIGATION, THIS INDENTURE MAY BE FILED AS A
WRITTEN CONSENT TO A TRIAL BY THE COURT.
[signature page follows]
-98-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
INAMED CORPORATION
By: /s/ Michael D. Farney
-------------------------------
Attest:
/s/ Michael Pfau
- ------------------------------
SANTA BARBARA BANK & TRUST
By: /s/ Jay D. Smith
-------------------------------
Attest:
/s/ Theodore R. Maloney
- ------------------------------
-99-
<PAGE>
STATE OF )
----------------
)
COUNTY OF )
---------------
BE IT REMEMBERED, that on ______________, 1996, before me, the
subscriber, ___________________________ personally appeared __________________
who, being by me duly sworn on his oath, deposes and makes proof to my
satisfaction, that he is __________________________ of INAMED CORPORATION, a
Florida corporation, the corporation named in the within instrument; that
________________________ is a __________________of said corporation; that the
execution, as well as the making of this Instrument, has been duly authorized by
a proper resolution of the Board of Directors of the said Corporation; that
deponent well knows the corporate seal of said Corporation; and that the seal
affixed to said Instrument is the proper corporate seal and was thereto affixed
and said Instrument signed and delivered by said _____________________ as and
for the voluntary act and deed of said Corporation, in the presence of deponent,
who thereupon subscribed his name thereto as attesting witness.
- ------------------------------
Sworn to and subscribed before
me, the date aforesaid.
- ------------------------------
Notary Public
-100-
<PAGE>
STATE OF )
----------------
)
COUNTY OF )
---------------
BE IT REMEMBERED, that on ______________, 1996, before me, the
subscriber, ______________________ personally appeared __________________ who,
being by me duly sworn on his oath, deposes and makes proof to my satisfaction,
that he is __________________________ of SANTA BARBARA BANK & TRUST, a
California banking corporation, a corporation named in the within instrument;
that ________________________ is a __________________ of said corporation; that
the execution, as well as the making of this Instrument, has been duly
authorized by a proper resolution of the Board of Directors of the said
Corporation; that deponent well knows the corporate seal of said Corporation;
and that the seal affixed to said Instrument is the proper corporate seal and
was thereto affixed and said Instrument signed and delivered by said
_____________________ as and for the voluntary act and deed of said Corporation,
in the presence of deponent, who thereupon subscribed his name thereto as
attesting witness.
- ------------------------------
Sworn to and subscribed before
me, the date aforesaid.
- ------------------------------
Notary Public
-101-
<PAGE>
[FORM OF SECURITY]
THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
SUCH SECURITY MAY NOT BE OFFERED, SOLD OR TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SAID ACT. THE INDENTURE UNDER WHICH THIS
SECURITY IS ISSUED HAS NOT BEEN QUALIFIED UNDER THE TRUST
INDENTURE ACT OF 1939, AS AMENDED.
No. $
INAMED CORPORATION
promises to pay to
or registered assigns, the principal sum of Dollars on March 31,1999.
11.00% SECURED CONVERTIBLE NOTE DUE 1999
Interest Payment Dates: March 31, June 30, September 30, December 31
Record Dates: March 15, June 15, September 15, December 15
Dated:
INAMED CORPORATION
By:
--------------------------------------
Authenticated:
[INSERT NAME OF TRUSTEE] OR [AUTHENTICATING AGENT'S NAME]
By: By:
-------------------------------- ---------------------------------
Authorized Signature Authorized Signature
<PAGE>
INAMED CORPORATION
11.00% Secured Convertible Note due 1999
1. INTEREST AND MATURITY.
INAMED CORPORATION, a Florida corporation (the "COMPANY"), which
term includes any successor issuer under the Indenture referred to herein),
hereby promises to pay interest on the principal amount of this 11.00% Secured
Convertible Note due 1999 (this "SECURITY") at a rate per annum (the "APPLICABLE
RATE") for any Interest Period until March 31, 1999 (the "MATURITY DATE") equal
to 11.00%.
Upon the occurrence of any Event of Default (as defined in the
Indenture) except for a failure to file a registration statement as described in
the next sentence, the Applicable Rate shall be immediately increased by three
and one-half percent (3 1/2%) (initially to 14.50% per annum) (such rate as in
effect, the "DEFAULT RATE") until such Event of Default is no longer continuing,
in which case the Applicable Rate shall return to the interest rate that would
then be applicable to the Securities. As described more fully in paragraph 6
below, the interest rate on the Securities may also be increased if the Company
fails timely to file a registration statement relating to the Common Stock
issuable upon conversion of the Securities or if such registration statement is
not timely declared effective.
"INTEREST PERIOD" means the period from and including the first
day of each January, April, July and October through the next applicable
Interest Payment Date (as defined below); PROVIDED that the first "Interest
Period" shall commence on and include the date on which this Security is issued
and the last "Interest Period" shall terminate on the Maturity Date or such
earlier date as this Security is redeemed.
The Company will pay interest quarterly in arrears on March 31, June 30,
September 30 and December 31 of each year until the Maturity Date, commencing on
the first such date after issuance, or if any such date is not a Business Day,
on the next succeeding Business Day (each an "INTEREST PAYMENT DATE"). Interest
on this Security will accrue from the most recent date to which interest has
been paid or, if no interest has been paid, from the date of issuance of this
Security through the date on which interest is paid. The Company shall pay
interest on overdue principal and, to the extent lawful, on overdue installments
of interest (without regard to any applicable grace periods) at the Default
Rate. Interest will be computed on the basis of a 360-day year composed of 12
30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the
Securities (except Defaulted Interest) to the person in whose name each Security
is registered at the close of business on the March 15, June, 15, September 15
and December 15 immediately preceding the relevant Interest Payment Date (each a
"REGULAR RECORD DATE"). The Holder must surrender the Security to a Paying
Agent to collect principal payments. The Company will pay principal and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts. However, the Company may pay
principal and interest by check payable in such money, and may mail such check
to the holder's registered address.
-2-
<PAGE>
3. PAYING AGENT AND REGISTRAR. The Company will initially
act as Paying Agent and Registrar. The Company may change the Paying Agent,
Registrar or co-registrar without prior notice. Subject to certain limitations
in the Indenture, the Company or any of its Subsidiaries may act in any such
capacity.
4. INDENTURE. The Company issued the Securities under an
Indenture dated as of January 2, 1996 (the "INDENTURE") between the Company and
the Trustee. The terms of the Securities include those stated in the Indenture
and those made part of the Indenture by reference to the Trust Indenture Act of
1939 (15 U.S. Code Sections 77aaa-77bbbb as in effect on the date of the
Indenture (the "Trust Indenture Act"). The Securities are subject to, and
qualified by, all such terms, certain of which are summarized hereon, and
holders are referred to the Indenture and the Trust Indenture Act for a
statement of such terms.
The Securities are secured obligations of the Company limited to
$35,000,000 aggregate principal amount (subject to Section 2.9 of the
Indenture). The Indenture imposes certain limitations on the Company and the
Guarantors, including, subject to certain exceptions, the incurrence of
Indebtedness, the payment of dividends on, and redemption of, the Capital Stock
of the Company, the sale by the Company and certain of its Subsidiaries of
assets, transactions with certain related persons, Liens on the Collateral
securing the Securities and consolidations and mergers and transfer of all or
substantially all the Company's and certain of its Subsidiaries' assets.
As provided in the Indenture, the Securities are secured by the
Lien of the Indenture and the other Collateral Documentation in respect of the
Collateral. Each Holder, by accepting a Security, shall be bound by and
entitled to the benefits of the Collateral Documentation, as the same may be
amended from time to time pursuant to the provisions thereof and of the
Indenture. The Securities and each Holder's rights thereunder and with respect
to the Collateral are subject to the terms of the subordination in favor of all
Senior Indebtedness, including any subordination or intercreditor agreements as
may be requested by such holders of Senior Indebtedness.
5. ESCROW; REDEMPTION. This Security will be subject to
partial mandatory redemption if the event described in clause (i) of the second
subparagraph of paragraph 6 below (relating to Automatic Conversion) fails to
occur on or before January 23, 1997. In such event, this Security will be
redeemed based upon its pro rata share (based upon all originally issued
Securities) of certain escrowed amounts established in connection with the
offering of the Securities as provided in the Indenture. The Securities will
not be subject to optional prepayment prior to maturity without the consent of
the Holder.
6. CONVERSION RIGHTS. Subject to and upon compliance with
the provisions of the Indenture, the registered holder of this Security has the
right at any time after the 90th day following the final closing of the offering
of Securities and prior to the close of business on the last trading day prior
to March 31, 1999 (unless earlier converted or, in case this Security or any
portion hereof shall be called for redemption prior to such date, then on or
prior to the close of business on the last trading day preceding the Redemption
Date, unless such Holder elects to waive such mandatory redemption as provided
in the Indenture), to convert the principal amount hereof, or any portion of
such principal amount which is $10,000 or an integral multiple of $1,000 in
excess thereof, into that number of fully paid and nonassessable whole shares of
common stock of the Company ("Common Stock") obtained by dividing the principal
amount of the Security or portion thereof to be converted by the conversion
price of $10.00 per share, as adjusted from time to time as provided in the
Indenture (the "Conversion Price"), upon surrender of this Security to the
Company at the office or agency maintained for such purpose (and at such other
offices or agencies designated for such purpose by the Company), accompanied by
written notice of conversion duly executed
-3-
<PAGE>
(and if the shares of Common Stock to be issued on conversion are to be issued
in any name other than that of the registered holder of this Security) by
instruments of transfer, in form satisfactory to the Company, duly executed by
the registered holder or its duly authorized attorney) and, in case such
surrender shall be made during the period starting after the close of business
on the Regular Record Date immediately preceding any Interest Payment Date
through the close of business on the last trading day preceding such Interest
Payment Date, also accompanied by payment in funds acceptable to the Company of
an amount equal to the per diem interest that would accrue on the principal
amount of such security being converted from the date of such surrender to the
date of such Interest Payment Date, and, in the case such surrender shall be
made following a mandatory redemption under Article 9 of the Indenture,
accompanied by payment in funds acceptable to the Company of any amounts
required under Section 9.7 of the Indenture. Subject to the aforesaid
requirement for a payment in the event of conversion after the close of business
on a Regular Record Date immediately preceding an Interest Payment Date, no
payment or adjustment shall be made on conversion for interest accrued hereon or
for dividends on Common Stock delivered on conversion and interest accrued on a
converted Security up to the date of conversion shall be paid to the Holder (on
the date of conversion) within 10 Business Days of such conversion. The right
to convert this Security is subject to the provisions of the Indenture relating
to conversion rights in the case of certain consolidations, mergers, or sales or
transfers of substantially all the Company's assets.
AUTOMATIC CONVERSION. The Securities shall be automatically
converted into Common Stock at the Conversion Price upon the occurrence of all
of the following: (i) (a) the United States District Court, Northern District
of Alabama, Southern Division (or any successor court with jurisdiction over the
Silicone Gel Breast Implant Products Liability Litigation (MDL 926)) shall issue
an order certifying Inamed Corporation's Mandatory (non "opt-out" Limited Fund)
Class under Rule 23(b)(1)(B) of the Federal Rules of Civil Procedure, which
order shall become a Final Order and (b) the shares of Common Stock to be issued
upon conversion of the Securities shall have been registered with the Commission
under the Securities Act of 1933, as amended, pursuant to Section 8.14 hereof
and such registration shall continue to be in effect, (ii) 180 days shall elapse
from the date of the last to occur of the events described in subclauses (a) and
(b) of clause (i), (iii) subsequent to the occurrence of the events described in
clauses (i) and (ii), the closing bid price of the Company's Common Stock as
reported on the Nasdaq SmallCap Market or any other national securities exchange
or over-the-counter market on which the Company's Common Stock is then listed or
quoted shall equal or exceed $14.00 per share for 15 consecutive trading days
and (iv) subsequent to the occurrence of the events described in clauses (i),
(ii) and (iii), the Company delivers to the Trustee an Officers' Certificate
stating that no Material Adverse Change has occurred since the filing of the
Company's Annual or Quarterly Report on Form 10-K or 10-Q filed most recently
prior to the delivery of such Officers' Certificate. "Final Order" as used in
this paragraph, means an order or judgment of the court with jurisdiction in the
respective matter or other court of competent jurisdiction as to which the time
to appeal, seek leave to appeal, petition for certiorari or move for reargument
or rehearing has expired and as to which no appeal, petition for certiorari or
other proceedings for reargument, rehearing or leave to appeal shall then be
pending or as to which any right to appeal, petition for certiorari, reargue,
rehear or seek leave to appeal shall have been waived in writing in form and
substance satisfactory to the Company or, in the event that an appeal, writ of
certiorari, or reargument or rehearing thereof or leave to appeal has been
motioned for or sought, such order of the court shall have been affirmed by the
highest court to which such order was appealed, or certiorari has been denied or
from which reargument or rehearing or leave to appeal was motioned for or
sought, and the time to take any further appeal, petition for certiorari, move
for reargument or rehearing or seek leave to appeal shall have expired. The
conversion of the Securities pursuant to this paragraph (the "Automatic
Conversion") shall be deemed to have been effected as to any and all Outstanding
Securities on the date of the fifteenth consecutive trading day on which the
Company's Common Stock shall have satisfied the trading requirements specified
in clause (iii) of the first sentence of this paragraph, and
-4-
<PAGE>
the person in whose name any certificate or certificates for shares of Common
Stock are issuable upon such conversion shall be deemed to have become on said
date the holder of record of the shares represented thereby; PROVIDED, HOWEVER,
that any such Automatic Conversion on any date when the Company's stock transfer
books are closed shall constitute the person in whose name the certificates are
to be issued as the record holder thereof for all purposes on the next
succeeding day on which such stock transfer books are open, but such conversion
shall be at the Conversion Price in effect on the date upon which the Automatic
Conversion is deemed to have been effected.
REGISTRATION RIGHTS. The Company shall: (i) use its best
efforts to file on or before March 31, 1996 (the "Filing Deadline") with the
Commission, and shall use its best efforts to cause to become effective, a
registration statement on Form S-3 with respect to the shares of the Company's
Common Stock issuable upon the conversion of the Securities. In the event the
Commission or its staff determines that the Company is not eligible to register
the shares of the Company's Common Stock issuable upon the conversion of the
Securities on Form S-3, then the Company shall use its best efforts to file with
the Commission by the Filing Deadline and shall use its best efforts to cause to
become effective a registration statement on Form S-1 or another appropriate
form of the Commission. The Company shall keep such registration statement on
Form S-3 effective as long as permissible under the securities laws and shall
keep any such registration statement on Form S-1 (or other form) effective until
thirty (30) days following the earlier of: (A) Mandatory Conversion of the
Securities or (B) the Stated Maturity of the Securities. If any such
registration statement is not filed with the Commission on or before the Filing
Deadline, then the Company shall pay as liquidated damages additional interest
on the principal amount of the Securities, payable in cash and equal to one-half
of one percent (1/2%) per annum, to Holders of the Securities. If a
registration statement with respect to the shares of the Company's Common Stock
issuable upon conversion of the Securities is not declared effective by the
Commission within 90 days of the Filing Deadline, then the Company shall pay as
liquidated damages additional interest on the principal amount of the
Securities, payable in cash and equal to one-half of one percent (1/2%) per
annum, to Holders of the Securities. The amount of the liquidated damages (and
the additional interest payable on the principal amount of the Securities) will
increase by an additional one-half of one percent (1/2%) per annum with respect
to each subsequent 90-day period until a registration statement with respect to
the shares of the Company's Common Stock issuable upon conversion of the
Securities is declared effective by the Commission, up to a maximum amount of
liquidated damages (additional interest) of five percent (5%) per annum. Such
additional interest as liquidated damages with respect to the filing of a
registration statement shall accrue until such time as the registration
statement is filed with the Commission and such additional interest as
liquidated damages with respect to the effectiveness of a registration statement
shall accrue until such time as a registration statement complying with this
paragraph is declared effective by the Commission. The payment of such interest
shall not excuse the Company from its obligations to use its best efforts to
register such shares of the Company's Common Stock issuable upon the conversion
of the Securities.
7. DENOMINATIONS, TRANSFER, EXCHANGE. The Securities are
in registered form without coupons in denominations of $100,000 and integral
multiples of $25,000 in excess thereof. The transfer of Securities may be
registered, and the Securities may be exchanged, as provided in the Indenture.
The Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture.
8. PERSONS DEEMED OWNERS. The registered holder of a
Security shall be treated as its owner for all purposes.
-5-
<PAGE>
9. AMENDMENTS AND WAIVERS. Subject to certain exceptions,
the Indenture, the Securities and the other documents executed and delivered in
connection therewith may be amended with the consent of the Holders of at least
a majority in principal amount of the then outstanding Securities, and any
existing Default or Event of Default may be waived with the consent of the
Holders of a majority in principal amount of then outstanding Securities.
Without the consent of any Holder, the Indenture, the Securities or the other
documents delivered in connection herewith may be amended, among other things,
to cure any ambiguity, defect or inconsistency or to make any change that does
not adversely affect the rights of any Holder.
10. DEFAULTS AND REMEDIES. An Event of Default is defined
in Section 4.1 of the Indenture. If certain Events of Default occur and are
continuing, the Holders of at least a majority in principal amount of the then
outstanding Securities may declare all the Securities to be due and payable
immediately, except that, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency, all outstanding Securities become
due and payable immediately without further action or notice. Holders may not
enforce the Indenture, the Securities or the Collateral Documentation except as
provided in the Indenture. The Trustee does not have a right independent of the
instruction of a majority in principal amount of Securities then outstanding to
enforce the Indenture, the Securities or the Collateral Documentation. The
Trustee may require indemnity satisfactory to it before it enforces the
Indenture or the Securities. Subject to certain limitations, the Holders of a
majority in principal amount of the then outstanding Securities may direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee or exercising any trust or power conferred on it. The Trustee may
withhold from Holders notice of any continuing Default (except a Default in
payment of principal or interest) if it determines that withholding notice is in
their best interests. The Company must furnish an annual compliance certificate
to the Trustee.
11. TRUSTEE DEALINGS WITH THE COMPANY. Santa Barbara Bank &
Trust, the Trustee under the Indenture, in its individual or any other capacity,
may make loans to, accept deposits from and perform services for the Company or
its Affiliates, and may otherwise deal with the Company or its Affiliates, as if
it were not Trustee.
12. NO RECOURSE AGAINST OTHERS. No director, officer,
employee or stockholder, as such, of the Company or any of its Subsidiaries
(other than Company or any other Subsidiary), shall have any liability for any
obligations of the Company under the Securities or the Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. Each Holder by accepting a Security waives and releases all such
liability. The waiver and release are part of the consideration for the issue
of the Securities.
13. DISCHARGE AND DEFEASANCE. Subject to certain conditions,
the Company at any time may terminate some of or all its obligations under the
Securities and the Indenture if the Company deposits with the Trustee money or
U.S. Government Obligations for the payment of principal and interest on the
Securities to redemption or maturity, as the case may be.
14. AUTHENTICATION. This Security shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
15. ABBREVIATIONS. Customary abbreviations may be used in
the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN
ENT (= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
-6-
<PAGE>
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Request may be made to:
INAMED CORPORATION
3800 Howard Hughes Parkway, Suite 900
Las Vegas, NV 89109
Attention: Michael D. Farney
-7-
<PAGE>
FORM OF CONVERSION NOTICE
To: Inamed Corporation
The undersigned registered owner of the Security hereby irrevocably exercises
the option to convert this Security, or portion hereof (which is $10,000 or an
integral multiple of $1,000 in excess thereof) below designated, into shares of
Common Stock of Inamed Corporation in accordance with the terms of the Indenture
referred to in this Security, and directs that the shares issuable and
deliverable upon the conversion, together with any check in payment for
fractional shares and Securities representing any unconverted principal amount
hereof, be issued and delivered to the registered holder hereof unless a
different name has been indicated below. If shares or any portion of this
Security not converted are to be issued in the name of a person other than the
undersigned, the undersigned will pay all transfer taxes payable with respect
thereto. Any amount required to be paid by the undersigned on account of
interest and taxes accompanies this Security.
Principal amount to be converted
(if less than all): $
Fill in for registration of shares
if to be delivered, and Securities
if to be issued, other than to and
in the name of the registered holder
Name:
Street Address (Including City, State and zip code):
Social Security or other Taxpayer
Identification Number:
Dated: Signature(s)
-------------------------
-------------------------
Name(s):
Signature Guarantee:
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to
- ----------------------------------------------------------------------
(Insert assignee's Social Security or Tax I.D. No.)
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint(s) ______________________________ agent to transfer this
Note on the books of Inamed. The agent may substitute another to act for the
agent.
- ------------------------------------------------------------------------------
Date: Your Signature:
------------------------ ---------------------------
(Sign exactly as your name appears on the other side of this
Note)
[Signature Guarantee]
<PAGE>
Exhibit A
Form of Secured Convertible Note
<PAGE>
Exhibit B
Security Agreement
<PAGE>
Exhibit C
Guarantee and Security Agreement
<PAGE>
Exhibit D
Guarantee Agreement
<PAGE>
Exhibit E
Intercompany Note
<PAGE>
Exhibit F
Loan Purchase Agreement
<PAGE>
Schedule 1
<PAGE>
Schedule 2
<PAGE>
THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. SUCH SECURITY MAY NOT BE OFFERED,
SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SAID ACT. THE INDENTURE UNDER WHICH THIS SECURITY IS
ISSUED HAS NOT BEEN QUALIFIED UNDER THE TRUST INDENTURE ACT OF 1939, AS
AMENDED.
No. $
INAMED CORPORATION
promises to pay to
or registered assigns, the principal sum of Dollars on March 31,1999.
11.00% SECURED CONVERTIBLE NOTE DUE 1999
Interest Payment Dates: March 31, June 30, September 30, December 31
Record Dates: March 15, June 15, September 15, December 15
Dated:
INAMED CORPORATION
By:
--------------
Authenticated:
Santa Barbara Bank & Trust OR [AUTHENTICATING AGENT'S NAME]
By: By:
--------------------- -------------------------------
Authorized Signature Authorized Signature
<PAGE>
INAMED CORPORATION
11.00% Secured Convertible Note due 1999
1. INTEREST AND MATURITY.
INAMED CORPORATION, a Florida corporation (the "COMPANY"), which
term includes any successor issuer under the Indenture referred to herein),
hereby promises to pay interest on the principal amount of this 11.00% Secured
Convertible Note due 1999 (this "SECURITY") at a rate per annum (the "APPLICABLE
RATE") for any Interest Period until March 31, 1999 (the "MATURITY DATE") equal
to 11.00%.
Upon the occurrence of any Event of Default (as defined in the
Indenture) except for a failure to file a registration statement as described in
the next sentence, the Applicable Rate shall be immediately increased by three
and one-half percent (3 1/2%) (initially to 14.50% per annum) (such rate as in
effect, the "DEFAULT RATE") until such Event of Default is no longer continuing,
in which case the Applicable Rate shall return to the interest rate that would
then be applicable to the Securities. As described more fully in paragraph 6
below, the interest rate on the Securities may also be increased if the Company
fails timely to file a registration statement relating to the Common Stock
issuable upon conversion of the Securities or if such registration statement is
not timely declared effective.
"INTEREST PERIOD" means the period from and including the first
day of each January, April, July and October through the next applicable
Interest Payment Date (as defined below); PROVIDED that the first "Interest
Period" shall commence on and include the date on which this Security is issued
and the last "Interest Period" shall terminate on the Maturity Date or such
earlier date as this Security is redeemed.
The Company will pay interest quarterly in arrears on March 31, June 30,
September 30 and December 31 of each year until the Maturity Date, commencing on
the first such date after issuance, or if any such date is not a Business Day,
on the next succeeding Business Day (each an "INTEREST PAYMENT DATE"). Interest
on this Security will accrue from the most recent date to which interest has
been paid or, if no interest has been paid, from the date of issuance of this
Security through the date on which interest is paid. The Company shall pay
interest on overdue principal and, to the extent lawful, on overdue installments
of interest (without regard to any applicable grace periods) at the Default
Rate. Interest will be computed on the basis of a 360-day year composed of 12
30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the
Securities (except Defaulted Interest) to the person in whose name each Security
is registered at the close of business on the March 15, June, 15, September 15
and December 15 immediately preceding the relevant Interest Payment Date (each a
"REGULAR RECORD DATE"). The Holder must surrender the Security to a Paying
Agent to collect principal payments. The Company will pay principal and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts. However, the Company may pay
principal and interest by check payable in such money, and may mail such check
to the holder's registered address.
<PAGE>
3. PAYING AGENT AND REGISTRAR. The Company will initially
act as Paying Agent and Registrar. The Company may change the Paying Agent,
Registrar or co-registrar without prior notice. Subject to certain limitations
in the Indenture, the Company or any of its Subsidiaries may act in any such
capacity.
4. INDENTURE. The Company issued the Securities under an
Indenture dated as of January 2, 1996 (the "INDENTURE") between the Company and
the Trustee. The terms of the Securities include those stated in the Indenture
and those made part of the Indenture by reference to the Trust Indenture Act of
1939 (15 U.S. Code Sections 77aaa-77bbbb as in effect on the date of the
Indenture (the "Trust Indenture Act"). The Securities are subject to, and
qualified by, all such terms, certain of which are summarized hereon, and
holders are referred to the Indenture and the Trust Indenture Act for a
statement of such terms.
The Securities are secured obligations of the Company limited to
$35,000,000 aggregate principal amount (subject to Section 2.9 of the
Indenture). The Indenture imposes certain limitations on the Company and the
Guarantors, including, subject to certain exceptions, the incurrence of
Indebtedness, the payment of dividends on, and redemption of, the Capital Stock
of the Company, the sale by the Company and certain of its Subsidiaries of
assets, transactions with certain related persons, Liens on the Collateral
securing the Securities and consolidations and mergers and transfer of all or
substantially all the Company's and certain of its Subsidiaries' assets.
As provided in the Indenture, the Securities are secured by the
Lien of the Indenture and the other Collateral Documentation in respect of the
Collateral. Each Holder, by accepting a Security, shall be bound by and
entitled to the benefits of the Collateral Documentation, as the same may be
amended from time to time pursuant to the provisions thereof and of the
Indenture. The Securities and each Holder's rights thereunder and with respect
to the Collateral are subject to the terms of the subordination in favor of all
Senior Indebtedness, including any subordination or intercreditor agreements as
may be requested by such holders of Senior Indebtedness.
5. ESCROW; REDEMPTION. This Security will be subject to
partial mandatory redemption if the event described in clause (i) of the second
subparagraph of paragraph 6 below (relating to Automatic Conversion) fails to
occur on or before January 23, 1997. In such event, this Security will be
redeemed based upon its pro rata share (based upon all originally issued
Securities) of certain escrowed amounts established in connection with the
offering of the Securities as provided in the Indenture. The Securities will
not be subject to optional prepayment prior to maturity without the consent of
the Holder.
6. CONVERSION RIGHTS. Subject to and upon compliance with
the provisions of the Indenture, the registered holder of this Security has the
right at any time after the 90th day following the final closing of the offering
of Securities and prior to the close of business on the last trading day prior
to March 31, 1999 (unless earlier converted or, in case this Security or any
portion hereof shall be called for redemption prior to such date, then on or
prior to the close of business on the last trading day preceding the Redemption
Date, unless such Holder elects to waive such mandatory redemption as provided
in the Indenture), to convert the principal amount hereof, or any portion of
such principal amount which is $10,000 or an integral multiple of $1,000 in
excess thereof, into that number of fully paid and nonassessable whole shares of
common stock of the Company ("Common Stock") obtained by dividing the principal
amount of the Security or portion thereof to be converted by the conversion
price of $10.00 per share, as adjusted from time to time as provided in the
Indenture (the "Conversion Price"), upon surrender of this Security to the
Company at the office or agency maintained for such purpose (and at such other
offices or agencies
3
<PAGE>
designated for such purpose by the Company), accompanied by written notice of
conversion duly executed (and if the shares of Common Stock to be issued on
conversion are to be issued in any name other than that of the registered holder
of this Security) by instruments of transfer, in form satisfactory to the
Company, duly executed by the registered holder or its duly authorized attorney)
and, in case such surrender shall be made during the period starting after the
close of business on the Regular Record Date immediately preceding any Interest
Payment Date through the close of business on the last trading day preceding
such Interest Payment Date, also accompanied by payment in funds acceptable to
the Company of an amount equal to the per diem interest that would accrue on the
principal amount of such security being converted from the date of such
surrender to the date of such Interest Payment Date, and, in the case such
surrender shall be made following a mandatory redemption under Article 9 of the
Indenture, accompanied by payment in funds acceptable to the Company of any
amounts required under Section 9.7 of the Indenture. Subject to the aforesaid
requirement for a payment in the event of conversion after the close of business
on a Regular Record Date immediately preceding an Interest Payment Date, no
payment or adjustment shall be made on conversion for interest accrued hereon or
for dividends on Common Stock delivered on conversion and interest accrued on a
converted Security up to the date of conversion shall be paid to the Holder (on
the date of conversion) within 10 Business Days of such conversion. The right
to convert this Security is subject to the provisions of the Indenture relating
to conversion rights in the case of certain consolidations, mergers, or sales or
transfers of substantially all the Company's assets.
AUTOMATIC CONVERSION. The Securities shall be automatically
converted into Common Stock at the Conversion Price upon the occurrence of all
of the following: (i) (a) the United States District Court, Northern District
of Alabama, Southern Division (or any successor court with jurisdiction over the
Silicone Gel Breast Implant Products Liability Litigation (MDL 926)) shall issue
an order certifying Inamed Corporation's Mandatory (non "opt-out" Limited Fund)
Class under Rule 23(b)(1)(B) of the Federal Rules of Civil Procedure, which
order shall become a Final Order and (b) the shares of Common Stock to be issued
upon conversion of the Securities shall have been registered with the Commission
under the Securities Act of 1933, as amended, pursuant to Section 8.14 hereof
and such registration shall continue to be in effect, (ii) 180 days shall elapse
from the date of the last to occur of the events described in subclauses (a) and
(b) of clause (i), (iii) subsequent to the occurrence of the events described in
clauses (i) and (ii), the closing bid price of the Company's Common Stock as
reported on the Nasdaq SmallCap Market or any other national securities exchange
or over-the-counter market on which the Company's Common Stock is then listed or
quoted shall equal or exceed $14.00 per share for 15 consecutive trading days
and (iv) subsequent to the occurrence of the events described in clauses (i),
(ii) and (iii), the Company delivers to the Trustee an Officers' Certificate
stating that no Material Adverse Change has occurred since the filing of the
Company's Annual or Quarterly Report on Form 10-K or 10-Q filed most recently
prior to the delivery of such Officers' Certificate. "Final Order" as used in
this paragraph, means an order or judgment of the court with jurisdiction in the
respective matter or other court of competent jurisdiction as to which the time
to appeal, seek leave to appeal, petition for certiorari or move for reargument
or rehearing has expired and as to which no appeal, petition for certiorari or
other proceedings for reargument, rehearing or leave to appeal shall then be
pending or as to which any right to appeal, petition for certiorari, reargue,
rehear or seek leave to appeal shall have been waived in writing in form and
substance satisfactory to the Company or, in the event that an appeal, writ of
certiorari, or reargument or rehearing thereof or leave to appeal has been
motioned for or sought, such order of the court shall have been affirmed by the
highest court to which such order was appealed, or certiorari has been denied or
from which reargument or rehearing or leave to appeal was motioned for or
sought, and the time to take any further appeal, petition for certiorari, move
for reargument or rehearing or seek leave to appeal shall have expired. The
conversion of the Securities pursuant to this paragraph (the "Automatic
Conversion") shall be deemed to have been effected as to any and all Outstanding
4
<PAGE>
Securities on the date of the fifteenth consecutive trading day on which the
Company's Common Stock shall have satisfied the trading requirements specified
in clause (iii) of the first sentence of this paragraph, and the person in whose
name any certificate or certificates for shares of Common Stock are issuable
upon such conversion shall be deemed to have become on said date the holder of
record of the shares represented thereby; PROVIDED, HOWEVER, that any such
Automatic Conversion on any date when the Company's stock transfer books are
closed shall constitute the person in whose name the certificates are to be
issued as the record holder thereof for all purposes on the next succeeding day
on which such stock transfer books are open, but such conversion shall be at the
Conversion Price in effect on the date upon which the Automatic Conversion is
deemed to have been effected.
REGISTRATION RIGHTS. The Company shall: (i) use its best
efforts to file on or before March 31, 1996 (the "Filing Deadline") with the
Commission, and shall use its best efforts to cause to become effective, a
registration statement on Form S-3 with respect to the shares of the Company's
Common Stock issuable upon the conversion of the Securities. In the event the
Commission or its staff determines that the Company is not eligible to register
the shares of the Company's Common Stock issuable upon the conversion of the
Securities on Form S-3, then the Company shall use its best efforts to file with
the Commission by the Filing Deadline and shall use its best efforts to cause to
become effective a registration statement on Form S-1 or another appropriate
form of the Commission. The Company shall keep such registration statement on
Form S-3 effective as long as permissible under the securities laws and shall
keep any such registration statement on Form S-1 (or other form) effective until
thirty (30) days following the earlier of: (A) Mandatory Conversion of the
Securities or (B) the Stated Maturity of the Securities. If any such
registration statement is not filed with the Commission on or before the Filing
Deadline, then the Company shall pay as liquidated damages additional interest
on the principal amount of the Securities, payable in cash and equal to one-half
of one percent (1/2%) per annum, to Holders of the Securities. If a
registration statement with respect to the shares of the Company's Common Stock
issuable upon conversion of the Securities is not declared effective by the
Commission within 90 days of the Filing Deadline, then the Company shall pay as
liquidated damages additional interest on the principal amount of the
Securities, payable in cash and equal to one-half of one percent (1/2%) per
annum, to Holders of the Securities. The amount of the liquidated damages (and
the additional interest payable on the principal amount of the Securities) will
increase by an additional one-half of one percent (1/2%) per annum with respect
to each subsequent 90-day period until a registration statement with respect to
the shares of the Company's Common Stock issuable upon conversion of the
Securities is declared effective by the Commission, up to a maximum amount of
liquidated damages (additional interest) of five percent (5%) per annum. Such
additional interest as liquidated damages with respect to the filing of a
registration statement shall accrue until such time as the registration
statement is filed with the Commission and such additional interest as
liquidated damages with respect to the effectiveness of a registration statement
shall accrue until such time as a registration statement complying with this
paragraph is declared effective by the Commission. The payment of such interest
shall not excuse the Company from its obligations to use its best efforts to
register such shares of the Company's Common Stock issuable upon the conversion
of the Securities.
7. DENOMINATIONS, TRANSFER, EXCHANGE. The Securities are in
registered form without coupons in denominations of $100,000 and integral
multiples of $25,000 in excess thereof. The transfer of Securities may be
registered, and the Securities may be exchanged, as provided in the Indenture.
The Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture.
5
<PAGE>
8. PERSONS DEEMED OWNERS. The registered holder of a Security
shall be treated as its owner for all purposes.
9. AMENDMENTS AND WAIVERS. Subject to certain exceptions, the
Indenture, the Securities and the other documents executed and delivered in
connection therewith may be amended with the consent of the Holders of at least
a majority in principal amount of the then outstanding Securities, and any
existing Default or Event of Default may be waived with the consent of the
Holders of a majority in principal amount of then outstanding Securities.
Without the consent of any Holder, the Indenture, the Securities or the other
documents delivered in connection herewith may be amended, among other things,
to cure any ambiguity, defect or inconsistency or to make any change that does
not adversely affect the rights of any Holder.
10. DEFAULTS AND REMEDIES. An Event of Default is defined in
Section 4.1 of the Indenture. If certain Events of Default occur and are
continuing, the Holders of at least a majority in principal amount of the then
outstanding Securities may declare all the Securities to be due and payable
immediately, except that, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency, all outstanding Securities become
due and payable immediately without further action or notice. Holders may not
enforce the Indenture, the Securities or the Collateral Documentation except as
provided in the Indenture. The Trustee does not have a right independent of the
instruction of a majority in principal amount of Securities then outstanding to
enforce the Indenture, the Securities or the Collateral Documentation. The
Trustee may require indemnity satisfactory to it before it enforces the
Indenture or the Securities. Subject to certain limitations, the Holders of a
majority in principal amount of the then outstanding Securities may direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee or exercising any trust or power conferred on it. The Trustee may
withhold from Holders notice of any continuing Default (except a Default in
payment of principal or interest) if it determines that withholding notice is in
their best interests. The Company must furnish an annual compliance certificate
to the Trustee.
11. TRUSTEE DEALINGS WITH THE COMPANY. Santa Barbara Bank & Trust,
the Trustee under the Indenture, in its individual or any other capacity, may
make loans to, accept deposits from and perform services for the Company or its
Affiliates, and may otherwise deal with the Company or its Affiliates, as if it
were not Trustee.
12. NO RECOURSE AGAINST OTHERS. No director, officer, employee or
stockholder, as such, of the Company or any of its Subsidiaries (other than
Company or any other Subsidiary), shall have any liability for any obligations
of the Company under the Securities or the Indenture or for any claim based on,
in respect of or by reason of such obligations or their creation. Each Holder
by accepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for the issue of the Securities.
13. DISCHARGE AND DEFEASANCE. Subject to certain conditions, the
Company at any time may terminate some of or all its obligations under the
Securities and the Indenture if the Company deposits with the Trustee money or
U.S. Government Obligations for the payment of principal and interest on the
Securities to redemption or maturity, as the case may be.
14. AUTHENTICATION. This Security shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
15. ABBREVIATIONS. Customary abbreviations may be used in the name
of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint
6
<PAGE>
tenants with right of survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Request may be made to:
INAMED CORPORATION
3800 Howard Hughes Parkway, Suite 900
Las Vegas, NV 89109
Attention: Michael D. Farney
7
<PAGE>
FORM OF CONVERSION NOTICE
To: Inamed Corporation
The undersigned registered owner of the Security hereby irrevocably exercises
the option to convert this Security, or portion hereof (which is $10,000 or an
integral multiple of $1,000 in excess thereof) below designated, into shares of
Common Stock of Inamed Corporation in accordance with the terms of the Indenture
referred to in this Security, and directs that the shares issuable and
deliverable upon the conversion, together with any check in payment for
fractional shares and Securities representing any unconverted principal amount
hereof, be issued and delivered to the registered holder hereof unless a
different name has been indicated below. If shares or any portion of this
Security not converted are to be issued in the name of a person other than the
undersigned, the undersigned will pay all transfer taxes payable with respect
thereto. Any amount required to be paid by the undersigned on account of
interest and taxes accompanies this Security.
Principal amount to be converted
(if less than all): $
Fill in for registration of shares
if to be delivered, and Securities
if to be issued, other than to and
in the name of the registered holder
Name:
Street Address (Including City, State and zip code):
Social Security or other Taxpayer
Identification Number:
Dated: Signature(s)
--------------------
--------------------
Name(s):
Signature Guarantee:
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to
- ----------------------------------------------------------------------
(Insert assignee's Social Security or Tax I.D. No.)
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint(s) ______________________________ agent to transfer this
Note on the books of Inamed. The agent may substitute another to act for the
agent.
- ------------------------------------------------------------------------------
Date: Your Signature:
------------------------ ---------------------------
(Sign exactly as your name appears on the other side of this
Note)
[Signature Guarantee]
<PAGE>
*****************************************************************
SECURITY AGREEMENT
Dated as of January 2, 1996
between
Inamed Corporation
and
Santa Barbara Bank & Trust,
as Trustee
*****************************************************************
SECURITY AGREEMENT
<PAGE>
TABLE OF CONTENTS
Page
----
Section 1. Definitions and Interpretation . . . . . . . . . . . . . . . . 1
1.01 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . 1
1.02 Interpretation. . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2. Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.01 Grant . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.02 Intellectual Property . . . . . . . . . . . . . . . . . . . . 6
2.03 Perfection. . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.04 Preservation and Protection of Security Interests . . . . . . 7
2.05 Attorney-in-Fact. . . . . . . . . . . . . . . . . . . . . . . 8
2.06 Special Provisions Relating to Securities Collateral. . . . . 9
2.07 Use of Intellectual Property. . . . . . . . . . . . . . . . . 9
2.08 Instruments . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.09 Use of Collateral . . . . . . . . . . . . . . . . . . . . . . 10
2.10 Rights and Obligations. . . . . . . . . . . . . . . . . . . . 10
2.11 Release of Motor Vehicles . . . . . . . . . . . . . . . . . . 11
2.12 Termination . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3. Cash Proceeds of Collateral. . . . . . . . . . . . . . . . . . 11
3.01 Collateral Account. . . . . . . . . . . . . . . . . . . . . . 11
3.02 Certain Proceeds. . . . . . . . . . . . . . . . . . . . . . . 11
3.03 Investment of Balance in Collateral Account . . . . . . . . . 12
Section 4. Representations and Warranties . . . . . . . . . . . . . . . . 12
4.01 Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.02 Securities Collateral . . . . . . . . . . . . . . . . . . . . 12
4.03 Intellectual Property . . . . . . . . . . . . . . . . . . . . 13
4.04 Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.05 Corporate Existence . . . . . . . . . . . . . . . . . . . . . 13
4.06 Financial Condition . . . . . . . . . . . . . . . . . . . . . 13
4.07 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.08 No Breach . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.09 Corporate Action. . . . . . . . . . . . . . . . . . . . . . . 14
4.10 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.11 Certain Regulations . . . . . . . . . . . . . . . . . . . . . 14
Section 5. Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.01 Books and Records . . . . . . . . . . . . . . . . . . . . . . 14
5.02 Removals, Etc.. . . . . . . . . . . . . . . . . . . . . . . . 15
5.03 Sales and Other Liens . . . . . . . . . . . . . . . . . . . . 15
5.04 Stock Collateral. . . . . . . . . . . . . . . . . . . . . . . 15
5.05 Intellectual Property . . . . . . . . . . . . . . . . . . . . 16
5.06 Further Assurances. . . . . . . . . . . . . . . . . . . . . . 17
Section 6. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
<PAGE>
6.01 Events of Default, Etc. . . . . . . . . . . . . . . . . . . . 17
6.02 Deficiency. . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.03 Private Sale. . . . . . . . . . . . . . . . . . . . . . . . . 18
6.04 Application of Proceeds . . . . . . . . . . . . . . . . . . . 19
6.05 Security Interest Absolute. . . . . . . . . . . . . . . . . . 19
Section 7. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . 20
7.01 The Trustee . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.02 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.03 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.04 Expenses, Etc.. . . . . . . . . . . . . . . . . . . . . . . . 20
7.05 Amendments, Etc.. . . . . . . . . . . . . . . . . . . . . . . 20
7.06 Successors and Assigns. . . . . . . . . . . . . . . . . . . . 21
7.07 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.08 Agreements Superseded . . . . . . . . . . . . . . . . . . . . 21
7.09 Severability. . . . . . . . . . . . . . . . . . . . . . . . . 21
7.10 Captions. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.11 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . 21
7.12 GOVERNING LAW; SUBMISSION TO JURISDICTION . . . . . . . . . . 21
7.13 WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . . . . . . . 21
SECURITY AGREEMENT
-ii-
<PAGE>
SECURITY AGREEMENT
This SECURITY AGREEMENT (this "Agreement") dated as of January
2, 1996 is made between Inamed Corporation, a Florida corporation (the
"Obligor"), and Santa Barbara Bank & Trust, as trustee for the benefit of the
holders of the Obligor's 11% Secured Convertible Notes due 1999 (in such
capacity, the "Trustee").
The Indenture dated as of January 2, 1996 (the "Indenture")
between the Obligor and the Trustee provides, subject to its terms and
conditions, for the issuance by the Company of its 11% Secured Convertible Notes
due 1999 to the purchasers thereof (the "Purchasers") pursuant to the Note
Purchase Agreement dated as of January 2, 1996 (the "Note Purchase Agreement").
It is a condition to the purchase of the Notes by the Purchasers that the
Obligor shall have executed and delivered, and granted the Liens provided for,
in this Agreement.
To induce the Trustee to enter into the Indenture, and to induce
the Purchasers to purchase the Notes, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Obligor has agreed to pledge and grant a security interest in the Collateral as
security for the Secured Obligations. Accordingly, the Obligor agrees with the
Trustee as follows:
Section
1. Definitions and Interpretation.
1.011 Certain Defined Terms. Unless otherwise defined, all
capitalized terms used in this Agreement that are defined in the Indenture or in
the Note Purchase Agreement (including those terms incorporated therein by
reference) shall have the respective meanings assigned to them in the Indenture
or the Note Purchase Agreement, as applicable. In addition, the following terms
shall have the following meanings under this Agreement:
"Accounts" shall have the meaning assigned to that term in
Section 2.01(b).
"Casualty Event" shall mean, with respect to any property of any
Person, any loss of or damage to, or any condemnation or other taking of, such
property for which such Person or any of its Subsidiaries receives insurance
proceeds, or proceeds of a condemnation award or other compensation.
"Collateral" shall have the meaning assigned to that term in
Section 2.01.
"Collateral Account" shall have the meaning assigned to that
term in Section 3.01.
"Copyright Collateral" shall mean all Copyrights, whether now
owned or hereafter acquired by the Obligor.
"Copyrights" shall mean, collectively, (a) all copyrights,
copyright registrations and applications for copyright registrations, (b) all
renewals and extensions of all copyrights, copyright registrations and
applications for copyright registration and (c) all rights, now existing or
hereafter coming into existence, (i) to all income, royalties, damages and other
payments (including in respect of all past, present or future infringements) now
or hereafter due or payable under or with respect to any of the
SECURITY AGREEMENT
<PAGE>
foregoing, (ii) to sue for all past, present and future infringements with
respect to any of the foregoing and (iii) otherwise accruing under or
pertaining to any of the foregoing throughout the world.
"Documents" shall have the meaning assigned to that term in
Section 2.01(f).
"Equipment" shall have the meaning assigned to that term in
Section 2.01(e).
"Equity Rights" shall mean, with respect to any Person, any
outstanding subscriptions, options, warrants, commitments, preemptive rights or
agreements of any kind (including any stockholders' or voting trust agreements)
for the issuance, sale, registration or voting of, or outstanding securities
convertible into, any additional shares of capital stock of any class, or
partnership or other ownership interests of any type in, such Person.
"Indenture Documents" shall have the meaning assigned to the
term "Documents" in the Indenture.
"Instruments" shall have the meaning assigned to that term in
Section 2.01(c).
"Intellectual Property" shall mean all Copyright Collateral, all
Patent Collateral and all Trademark Collateral, together with (a) all
inventions, processes, production methods, proprietary information, know-how and
trade secrets; (b) all licenses or user or other agreements granted to the
Obligor with respect to any of the foregoing, in each case whether now or
hereafter owned or used; (c) all information, customer lists, identification of
suppliers, data, plans, blueprints, specifications, designs, drawings, recorded
knowledge, surveys, engineering reports, test reports, manuals, materials
standards, processing standards, performance standards, catalogs, computer and
automatic machinery software and programs; (d) all field repair data, sales data
and other information relating to sales or service of products now or hereafter
manufactured; (e) all accounting information and all media in which or on which
any information or knowledge or data or records may be recorded or stored and
all computer programs used for the compilation or printout of such information,
knowledge, records or data; (f) all governmental approvals now held or hereafter
obtained by the Obligor in respect of any of the foregoing; and (g) all causes
of action, claims and warranties now owned or hereafter acquired by the Obligor
in respect of any of the foregoing. It is understood that Intellectual Property
shall include all of the foregoing owned or acquired by the Obligor on a
worldwide basis.
"Inventory" shall have the meaning assigned to that term in
Section 2.01(d).
"Issuers" shall mean, collectively, each Subsidiary, directly or
indirectly, of the Company that is the issuer (as defined in the Uniform
Commercial Code) of any shares of capital stock now owned or hereafter acquired
by the Obligor.
"Material Adverse Effect" shall mean a material adverse effect
on (a) the property, business, operations, financial condition, prospects,
liabilities or capitalization of the Obligor and its Subsidiaries taken as a
whole, (b) the ability of the Obligor to perform its obligations under any of
the Indenture Documents to which it is a party, (c) the validity or
enforceability of any of the Indenture
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Documents, (d) the rights, remedies, powers and privileges of the Holders and
the Trustee under any of the Indenture Documents or (e) the timely payment of
the Secured Obligations.
"Motor Vehicles" shall mean motor vehicles, tractors, trailers
and other like property, whether or not the title to any such property is
governed by a certificate of title or ownership.
"Obligations" shall mean the principal of any Security,
interest, fees and any other amount payable by the Obligor at any time and from
time to time under any Indenture Document.
"Patent Collateral" shall mean all Patents, whether now owned or
hereafter acquired by the Obligor.
"Patents" shall mean, collectively, (a) all patents and patent
applications, (b) all reissues, divisions, continuations, renewals, extensions
and continuations-in-part of all patents or patent applications and (c) all
rights, now existing or hereafter coming into existence, (i) to all income,
royalties, damages, and other payments (including in respect of all past,
present and future infringements) now or hereafter due or payable under or with
respect to any of the foregoing, (ii) to sue for all past, present and future
infringements with respect to any of the foregoing and (iii) otherwise accruing
under or pertaining to any of the foregoing throughout the world, including all
inventions and improvements described or discussed in all such patents and
patent applications.
"Permitted Investments" shall mean (a) direct obligations of the
United States of America, or of any of its agencies, or obligations guaranteed
as to principal and interest by the United States of America, or of any of its
agencies, in either case maturing not more than 90 days from the date of
acquisition of such obligation; (b) deposit accounts in, and certificates of
deposit, repurchase agreements or bankers acceptances of any bank or trust
company organized under the laws of the United States of America or any state or
licensed to conduct a banking or trust business in the United States of America
or any state and having capital, surplus and undivided profits of at least
$35,000,000, maturing not more than 90 days from the date of acquisition; (c)
commercial paper rated A-1 or better or P-1 by Standard & Poor's Corporation or
Moody's Investors Services, Inc., respectively, maturing not more than 90 days
from the date of acquisition; and (d) money market funds sponsored by commercial
or investment banks unaffiliated with the Obligor.
"Pledged Stock" shall have the meaning assigned to that term in
Section 2.01(a).
"Secured Obligations" shall mean (a) any and all Obligations and
(b) any and all obligations of the Obligor at any time and from time to time for
the performance of its agreements, covenants and undertakings under or in
respect of the Indenture Documents.
"Securities Collateral" means the Stock Collateral and the
Pledged Debt.
"Signing Date" shall mean the date on which the Obligor shall
sign and deliver this Agreement.
"Stock Collateral" shall have the meaning assigned to that term
in Section 2.01(a).
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"Trademark Collateral" shall mean all Trademarks, whether now
owned or hereafter acquired by the Obligor. Notwithstanding the foregoing, the
Trademark Collateral shall not include any Trademark which would be rendered
invalid, abandoned, void or unenforceable by reason of its being included as
part of the Trademark Collateral.
"Trademarks" shall mean, collectively, (a) all trade names,
trademarks and service marks, logos, trademark and service mark registrations
and applications for trademark and service mark registrations, (b) all renewals
and extensions of any of the foregoing and (c) all rights, now existing or
hereafter coming into existence, (i) to all income, royalties, damages and other
payments (including in respect of all past, present and future infringements)
now or hereafter due or payable under or with respect to any of the foregoing,
(ii) to sue for all past, present and future infringements with respect to any
of the foregoing and (iii) otherwise accruing under or pertaining to any of the
foregoing throughout the world, together, in each case, with the product lines
and goodwill of the business connected with the use of, or otherwise symbolized
by, each such trade name, trademark and service mark.
"Uniform Commercial Code" shall mean the Uniform Commercial Code
as in effect in the State of California from time to time or, by reason of
mandatory application, any other applicable jurisdiction.
Section 1.012 Interpretation. In this Agreement, unless
otherwise indicated, the singular includes the plural and plural the singular;
words importing either gender include the other gender; references to statutes
or regulations are to be construed as including all statutory or regulatory
provisions consolidating, amending or replacing the statute or regulation
referred to; references to "writing" include printing, typing, lithography and
other means of reproducing words in a tangible visible form; the words
"including," "includes" and "include" shall be deemed to be followed by the
words "without limitation"; references to articles, sections (or subdivisions of
sections), exhibits, annexes or schedules are to this Agreement; references to
agreements and other contractual instruments shall be deemed to include all
subsequent amendments, extensions and other modifications to such instruments
(without, however, limiting any prohibition on any such amendments, extensions
and other modifications by the terms of any Indenture Document); and references
to Persons include their respective permitted successors and assigns and, in the
case of governmental Persons, Persons succeeding to their respective functions
and capacities.
Section 2. Collateral.
1.021 Grant. As collateral security for the prompt payment in
full when due (whether at stated maturity, by acceleration or otherwise) and
performance of the Secured Obligations, the Obligor hereby pledges and grants to
the Trustee, for the benefit of the Holders, a security interest in all of the
Obligor's right, title and interest in and to the following property, whether
now owned or hereafter acquired by the Obligor and whether now existing or
hereafter coming into existence (collectively, the "Collateral"):
(a) (i) all of the shares of capital stock of the Issuers
now owned or hereafter acquired by the Obligor, together with in each case the
certificates representing the same (collectively, the "Pledged Stock");
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(ii) all shares, securities, moneys or property
representing a dividend on, or a distribution or return of capital in respect
of, any of the Pledged Stock, resulting from a split-up, revision,
reclassification or other like change of any of the Pledged Stock or otherwise
received in exchange for any of the Pledged Stock and all Equity Rights issued
to the holders of, or otherwise in respect of, any of the Pledged Stock; and
(iii) without affecting the obligations of the Obligor
under any provision prohibiting such action under any Indenture Document, in the
event of any consolidation or merger in which any Issuer is not the surviving
corporation, all shares of each class of the capital stock of the successor
corporation (unless such successor corporation is the Company itself) formed by
or resulting from such consolidation or merger (collectively, and together with
the property described in clauses (i) and (ii) above, the "Stock Collateral");
(iv) the Indebtedness described in Annex I and issued
by the obligors named therein (the "Pledged Debt");
(v) all additional Indebtedness in excess of $100,000
for money borrowed or for the deferred purchase price of property from time to
time owed to the Obligor by any obligor of the Pledged Debt, and all additional
Indebtedness in excess of $100,000 for money borrowed or for the deferred
purchase price of property from time to time owed to the Obligor by any other
Person who, after the date of this Agreement, becomes, as a result of any
occurrence, a Subsidiary of the Obligor or an Affiliate of the Obligor (any such
Indebtedness being "Additional Debt");
(vi) all notes or other instruments evidencing the
Indebtedness referred to in clauses (iv) and (v) above;
(b) all accounts and general intangibles (each as defined in
the Uniform Commercial Code) of the Obligor constituting a right to the payment
of money, whether or not earned by performance, including all moneys due and to
become due to the Obligor in repayment of any loans or advances (including loans
and advances to Subsidiaries of the Obligor), in payment for goods (including
Inventory and Equipment) sold or leased or for services rendered, in payment of
tax refunds and in payment of any guarantee of any of the foregoing
(collectively, the "Accounts");
(c) all instruments, chattel paper or letters of credit
(each as defined in the Uniform Commercial Code) of the Obligor evidencing,
representing, arising from or existing in respect of, relating to, securing or
otherwise supporting the payment of, any of the Accounts (collectively, the
"Instruments");
(d) all inventory (as defined in the Uniform Commercial
Code) and all other goods (including Motor Vehicles) of the Obligor that are
held by the Obligor for sale, lease or furnishing under a contract of service
(including to its Subsidiaries or Affiliates), that are so leased or furnished
or that constitute raw materials, work in process or material used or consumed
in its business, including all spare parts and related supplies, all goods
obtained by the Obligor in exchange for any such goods, all products made or
processed from any such goods and all substances, if any, commingled with or
added to any such goods (collectively, the "Inventory");
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(e) all equipment (as defined in the Uniform Commercial
Code) and all other goods (including Motor Vehicles) of the Obligor that are
used or bought for use primarily in its business, including all spare parts and
related supplies, all goods obtained by the Obligor in exchange for any such
goods, all substances, if any, commingled with or added to such goods and all
upgrades and other improvements to such goods, in each case to the extent not
constituting Inventory (collectively, the "Equipment");
(f) all documents of title (as defined in the Uniform
Commercial Code) or other receipts of the Obligor covering, evidencing or
representing Inventory or Equipment (collectively, the "Documents");
(g) all contracts and other agreements of the Obligor
relating to the sale or other disposition of all or any part of the Inventory,
Equipment or Documents and all rights, warranties, claims and benefits of the
Obligor against any Person arising out of, relating to or in connection with all
or any part of the Inventory, Equipment or Documents of the Obligor, including
any such rights, warranties, claims or benefits against any Person storing or
transporting any such Inventory or Equipment or issuing any such Documents;
(h) all other accounts or general intangibles of the Obligor
not constituting Accounts, including, to the extent related to all or any part
of the other Collateral, all books, correspondence, credit files, records,
invoices, tapes, cards, computer runs and other papers and documents in the
possession or under the control of the Obligor or any computer bureau or service
company from time to time acting for the Obligor;
(i) the balance from time to time in the Collateral Account;
(j) all other tangible and intangible property of the
Obligor, including all Intellectual Property; and
(k) all proceeds and products in whatever form of all or any
part of the other Collateral, including all proceeds of insurance and all
condemnation awards and all other compensation for any Casualty Event with
respect to all or any part of the other Collateral (together with all rights to
recover and proceed with respect to the same), and all accessories to,
substitutions for and replacements of all or any part of the other Collateral.
1.022 Intellectual Property. For the purpose of enabling the
Trustee to exercise its rights, remedies, powers and privileges under Section 6
at such time or times as the Trustee shall be lawfully entitled to exercise such
rights, remedies, powers and privileges, and for no other purpose, the Obligor
hereby grants to the Trustee, to the extent assignable, an irrevocable,
nonexclusive license (exercisable without payment of royalty or other
compensation to the Obligor) to use, assign, license or sublicense any of the
Intellectual Property of the Obligor, together with reasonable access to all
media in which any of the licensed items may be recorded or stored and to all
computer programs used for the compilation or printout of such items.
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1.023 Perfection. Concurrently with the execution and
delivery of this Agreement, the Obligor shall (i) file such financing statements
and other documents in such offices as shall be necessary or as the Trustee may
request to perfect and establish the priority (subject only to Liens permitted
under Section 8.8 of the Indenture) of the Liens granted by this Agreement
(including promptly filing the Assignment for Security--Trademarks and
Patents, in the form executed on the date hereof by the Obligor, in the United
States Patent & Trademark Office), (ii) deliver and pledge to the Trustee any
and all Instruments, endorsed or accompanied by such instruments of assignment
and transfer in such form and substance as the Trustee may request, (iii) cause
the Trustee (to the extent requested by the Trustee) to be listed as the
lienholder on all certificates of title or ownership relating to Motor Vehicles
owned by such Obligor and deliver to the Trustee originals of all such
certificates of title or ownership for the Motor Vehicles, (iv) deliver to the
Trustee all certificates for the Pledged Stock and Pledged Debt, accompanied by
undated stock or bond powers, as the case may be, duly executed in blank and (v)
take all such other actions as shall be necessary or as the Trustee may request
to perfect and establish the priority (subject only to such permitted Liens) of
the Liens granted by this Agreement. The Trustee shall have the right, at any
time in its discretion and with notice to the Obligor, to transfer to or to
register in its name or in the name of any of its nominees any or all of the
Pledged Stock or Pledged Debt.
1.024 Preservation and Protection of Security Interests. The
Obligor shall:
(a) upon the acquisition after the Signing Date by the
Obligor of any Securities Collateral, promptly either (x) transfer and deliver
to the Trustee all such Stock Collateral (together with the certificates or
instruments representing such Securities Collateral securities duly endorsed in
blank or accompanied by undated powers duly executed in blank) or (y) take such
other action as the Trustee shall deem necessary or appropriate to perfect, and
establish the priority of, the Liens granted by this Agreement in such
Securities Collateral;
(b) upon the acquisition after the Signing Date by the
Obligor of any Instrument, promptly deliver and pledge to the Trustee all such
Instruments, endorsed or accompanied by such instruments of assignment and
transfer in such form and substance as the Trustee may request;
(c) upon the acquisition after the Signing Date by such
Obligor of any Equipment or Motor Vehicle covered by a certificate of title or
ownership, promptly cause the Trustee to be listed as the lienholder on such
certificate of title and within 120 days of the acquisition of such property
deliver evidence of the same to the Trustee; PROVIDED, HOWEVER, if the property
to be acquired is subject to a purchase money security interest permitted by
Section 8.8 of the Indenture, the Trustee shall be listed as a junior lienholder
to the Person holding such purchase money security interest;
(d) without limiting the obligations of the Obligor under
Section 2.04(c), upon the acquisition after the Signing Date by the Obligor of
any Equipment covered by a certificate of title or ownership, promptly cause the
Trustee to be listed as the lienholder on such certificate of title and within
120 days of the acquisition of such Equipment deliver evidence of the same to
the Trustee;
(e) upon the Obligor's acquiring, or otherwise becoming
entitled to the benefits of, any Copyright (or copyrightable material), Patent
(or patentable invention), Trademark (or associated goodwill) or other
Intellectual Property or upon or prior to the Obligor's filing, either directly
or through
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any agent, licensee or other designee, of any application with any governmental
Person for any Copyright, Patent, Trademark, or other Intellectual Property, in
each case after the Signing Date, execute and deliver such contracts, agreements
and other instruments as the Trustee may request to evidence, validate, perfect
and establish the priority (subject only to Liens permitted under Section 8.8 of
the Indenture) of the Liens granted by this Agreement in such and any related
Intellectual Property; and
(f) give, execute, deliver, file or record any and all
financing statements, notices, contracts, agreements or other instruments,
obtain any and all governmental approvals and take any and all steps that may be
necessary or as the Trustee may request to create, perfect, establish the
priority (subject only to Liens permitted under Section 8.8 of the Indenture)
of, or to preserve the validity, perfection or priority (subject only to such
permitted Liens) of, the Liens granted by this Agreement or to enable the
Trustee to exercise and enforce its rights, remedies, powers and privileges
under this Agreement with respect to such Liens, including causing any or all of
the Securities Collateral to be transferred of record into the name of the
Trustee or its nominee (and the Trustee agrees that if any Securities Collateral
is transferred into its name or the name of its nominee, the Trustee will
thereafter promptly give to the Obligor copies of any notices and communications
received by it with respect to the Securities Collateral pledged by the
Obligor), provided that notices to account debtors in respect of any Accounts or
Instruments shall be subject to the provisions of Section 3.02(b).
1.025 Attorney-in-Fact.
(a) Subject to the rights of the Obligor under Sections
2.06, 2.07, 2.08 and 2.09, the Trustee is hereby appointed the attorney-in-fact
of the Obligor for the purpose of carrying out the provisions of this Agreement
and taking any action and executing any instruments which the Trustee may deem
necessary or advisable to accomplish the purposes of this Agreement, to preserve
the validity, perfection and priority (subject only to Liens permitted under
Section 8.8 of the Indenture) of the Liens granted by this Agreement and,
following any Default, to exercise its rights, remedies, powers and privileges
under this Agreement. This appointment as attorney-in-fact is irrevocable and
coupled with an interest. Without limiting the generality of the foregoing, the
Trustee shall be entitled under this Agreement upon the occurrence and
continuation of any Event of Default (or, in respect of Section 3.02(b), any
Default) (i) to ask, demand, collect, sue for, recover, receive and give receipt
and discharge for amounts due and to become due under and in respect of all or
any part of the Collateral; (ii) to receive, endorse and collect any Instruments
or other drafts, instruments, documents and chattel paper in connection with
clause (i) above (including any draft or check representing the proceeds of
insurance or the return of unearned premiums); (iii) to file any claims or take
any action or proceeding that the Trustee may deem necessary or advisable for
the collection of all or any part of the Collateral, including the collection of
any compensation due and to become due under any contract or agreement with
respect to all or any part of the Collateral; and (iv) to execute, in connection
with any sale or disposition of the Collateral under Section 6, any
endorsements, assignments, bills of sale or other instruments of conveyance or
transfer with respect to all or any part of the Collateral. In any suit,
proceeding or action brought by the Trustee relating to any Account, contract or
Instrument for any sum owing thereunder, or to enforce any provision of any
Account, contract or Instrument, the Obligor will save, indemnify and keep the
Trustee harmless from and against all expense, loss or damage suffered by reason
of any defense, set-off, counterclaim, recoupment or reduction or liability
whatsoever of the obligor thereunder, arising out of a breach by the Obligor of
any obligation thereunder or arising out of any other agreement, Indebtedness or
liability at any time owing to,
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or in favor of, such obligor or its successors from the Obligor, and all such
obligations of the Obligor shall be and remain enforceable against and only
against the Obligor and shall not be enforceable against the Trustee.
(b) Without limiting the rights and powers of the Trustee
under Section 2.05(a), the Obligor hereby appoints the Trustee as its
attorney-in-fact, effective the Signing Date and terminating upon the
termination of this Agreement, for the purpose of (i) executing on behalf of the
Obligor title or ownership applications for filing with appropriate state
agencies to enable Motor Vehicles now owned or hereafter acquired by the Obligor
to be retitled and the Trustee to be listed as lienholder as to such Motor
Vehicles, (ii) filing such applications with such state agencies and (iii)
executing such other documents and instruments on behalf of, and taking such
other action in the name of, the Obligor as the Trustee may deem necessary or
advisable to accomplish the purposes of this Agreement (including the purpose of
creating in favor of the Trustee a perfected lien on the Motor Vehicles and
exercising the rights and remedies of the Trustee under Section 6). This
appointment as attorney-in-fact is irrevocable and coupled with an interest.
(c) Without limiting the rights and powers of the Trustee
under Section 2.05(a), the Obligor hereby appoints the Trustee as its
attorney-in-fact, effective the Signing Date and terminating upon the
termination of this Agreement, for the purpose of executing and filing all such
contracts, agreements and other documents as are contemplated by Section
2.04(e). This appointment as attorney-in-fact is irrevocable and coupled with
an interest.
1.026 Special Provisions Relating to Securities Collateral.
(a) So long as no Event of Default shall have occurred and
be continuing, the Obligor shall have the right to exercise all voting,
consensual and other powers of ownership pertaining to the Securities Collateral
for all purposes not inconsistent with the terms of any Indenture Document,
provided that the Obligor agrees that it will not vote the Securities Collateral
in any manner that is inconsistent with the terms of any Indenture Document; and
the Trustee shall, at the Obligor's expense, execute and deliver to the Obligor
or cause to be executed and delivered to the Obligor all such proxies, powers of
attorney, dividend and other orders and other instruments, without recourse, as
the Obligor may reasonably request for the purpose of enabling the Obligor to
exercise the rights and powers which it is entitled to exercise pursuant to this
Section 2.06(a).
(b) So long as no Event of Default shall have occurred and
be continuing, the Obligor shall be entitled to receive and retain any dividends
or distributions on the Securities Collateral paid in cash.
(c) If any Event of Default shall have occurred and be
continuing, and whether or not the Trustee or any Holder exercises any available
right to declare any Secured Obligation due and payable or seeks or pursues any
other right, remedy, power or privilege available to it under applicable law,
this Agreement or any other Indenture Document, all dividends and other
distributions on the Securities Collateral shall be paid directly to the Trustee
and retained by it in the Collateral Account as part of the Securities
Collateral, subject to the terms of this Agreement, and, if the Trustee shall so
request, the Obligor agrees to execute and deliver to the Trustee appropriate
additional dividend, distribution and other orders and instruments to that end,
provided that if such Event of Default is cured, any such dividend or
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distribution paid to the Trustee prior to such cure shall, upon request of the
Obligor (except to the extent applied to the Secured Obligations), be returned
by the Trustee to the Obligor.
1.027 Use of Intellectual Property. Subject to such action
not otherwise constituting a Default and so long as no Event of Default shall
have occurred and be continuing, the Obligor will be permitted to exploit, use,
enjoy, protect, license, sublicense, assign, sell, dispose of or take other
actions with respect to the Intellectual Property in the ordinary course of the
business of the Obligor. In furtherance of the foregoing, so long as no Event
of Default shall have occurred and be continuing, the Trustee shall from time to
time, upon the request of the Obligor, execute and deliver any instruments,
certificates or other documents, in the form so requested, which such Obligor
shall have certified are appropriate (in its judgment) to allow them to take any
action permitted above (including relinquishment of the license provided
pursuant to Section 2.02 as to any specific Intellectual Property). The
exercise of rights, remedies, powers and privileges under Section 6 by the
Trustee shall not terminate the rights of the holders of any licenses or
sublicenses theretofore granted by the Obligor in accordance with the first
sentence of this Section 2.07.
1.028 Instruments. So long as no Default or Event of Default
shall have occurred and be continuing, the Obligor may retain for collection in
the ordinary course of business any Instruments obtained by it in the ordinary
course of business, and the Trustee shall, promptly upon the request, and at the
expense of, the Obligor, make appropriate arrangements for making any
Instruments pledged by the Obligor available to the Obligor for purposes of
presentation, collection or renewal. Any such arrangement shall be effected, to
the extent deemed appropriate by the Trustee, against trust receipt or like
document.
1.029 Use of Collateral. So long as no Event of Default
shall have occurred and be continuing, the Obligor shall, in addition to its
rights under Sections 2.06, 2.07 and 2.08 in respect of the Collateral
contemplated in those sections, be entitled to use and possess the other
Collateral and to exercise its rights, title and interest in all contracts,
agreements, licenses and governmental approvals, subject to the rights,
remedies, powers and privileges of the Trustee under Sections 3 and 6 and to
such use, possession or exercise not otherwise constituting a Default.
2.10 Rights and Obligations.
(a) The Obligor shall remain liable to perform its duties
and obligations under the contracts and agreements included in the Collateral in
accordance with their respective terms to the same extent as if this Agreement
had not been executed and delivered. The exercise by the Trustee of any right,
remedy, power or privilege in respect of this Agreement shall not release the
Obligor from any of its duties and obligations under such contracts and
agreements and the Obligor shall save, indemnify and keep the Trustee harmless
from and against all expense, loss or damage suffered by reason of such
exercise. Neither the Trustee nor any Holder shall have any duty, obligation or
liability under such contracts and agreements or in respect to any governmental
approval included in the Collateral by reason of this Agreement or any other
Indenture Document, nor shall the Trustee or any Holder be obligated to perform
any of the duties or obligations of the Obligor under any such contract or
agreement or any such governmental approval or to take any action to collect or
enforce any claim (for payment) under any such contract or agreement or
governmental approval.
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(b) No Lien granted by this Agreement in the Obligor's
right, title and interest in any contract, agreement or governmental approval
shall be deemed to be a consent by the Trustee or any Holder to any such
contract, agreement or governmental approval.
(c) No reference in this Agreement to proceeds or to the
sale or other disposition of Collateral shall authorize the Obligor to sell or
otherwise dispose of any Collateral except to the extent otherwise expressly
permitted by the terms of any Indenture Document.
(d) Neither the Trustee nor any Holder shall be required to
take steps necessary to preserve any rights against prior parties to any part of
the Collateral.
2.11 Release of Motor Vehicles. So long as no Default shall
have occurred and be continuing, upon the request of, and as the expense of, the
Obligor, the Trustee shall execute and deliver to the Obligor such instruments
as the Obligor shall reasonably request to remove the notation of the Trustee as
lienholder on any certificate of title for any Motor Vehicle; PROVIDED that any
such instruments shall be delivered, and the release shall be effective, only
upon receipt by the Trustee of a certificate from the Obligor stating that the
Motor Vehicle the Lien on which is to be released is to be sold or has suffered
a casualty loss (with title passing to the appropriate casualty insurance
company in settlement of the claim for such loss).
2.12 Termination. When all Secured Obligations shall have
been paid in full, this Agreement shall terminate, and the Trustee shall, at the
expense of the Obligor, forthwith cause to be assigned, transferred and
delivered, against receipt but without any recourse, warranty or representation
whatsoever, any remaining Collateral and money received in respect of the
Collateral, to or on the order of the Obligor and to be released, canceled and
granted back all licenses and rights referred to in Section 2.02. The Trustee
shall also, at the expense of the Obligor, execute and deliver to the Obligor
upon such termination such Uniform Commercial Code termination statements,
certificates for terminating the Liens on the Motor Vehicles and such other
documentation as shall be reasonably requested by the Obligor to effect the
termination and release of the Liens granted by this Agreement on the
Collateral.
Section 3. Cash Proceeds of Collateral.
1.031 Collateral Account. There is hereby established with
the Trustee a cash collateral account (the "Collateral Account") in the name and
under the exclusive domain and control of the Trustee into which there shall be
deposited from time to time the cash proceeds of any of the Collateral
(including proceeds resulting from insurance or condemnation) required to be
delivered to the Trustee pursuant to this Agreement and into which the Obligor
may from time to time deposit any additional amounts which it wishes to pledge
to the Trustee as additional collateral security under this Agreement. The
balance from time to time in the Collateral Account shall constitute part of the
Collateral and shall not constitute payment of the Secured Obligations until
applied as provided in this Agreement. Except as expressly provided in the next
sentence, the Trustee shall remit the collected balance outstanding to the
credit of the Collateral Account to or upon the order of the Obligor as the
Obligor shall from time to time instruct. However, if any Event of Default
shall have occurred and be continuing, the Trustee may (and, if instructed by
the Holders as specified in Section 4.5 of the Indenture, shall) in its (or
their) discretion apply or cause to be applied (subject to collection) the
balance from time to time outstanding to the credit of the Collateral
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Account to the payment of the Secured Obligations in the manner specified in
Section 6. The balance from time to time in the Collateral Account shall be
subject to withdrawal only as provided in this Agreement.
1.032 Certain Proceeds.
(a) If any Default or Event of Default shall have occurred
and be continuing, the Obligor shall, upon request of the Trustee, promptly
notify (and the Obligor hereby authorizes the Trustee so to notify) each account
debtor in respect of any Accounts or Instruments that such Collateral has been
assigned to the Trustee under this Agreement and that any payments due or to
become due in respect of such Collateral are to be made directly to the Trustee.
All such payments made to the Trustee shall be immediately deposited in the
Collateral Account.
(b) The Obligor agrees that if the proceeds of any
Collateral (including payments made in respect of Accounts and Instruments)
shall be received by it following the occurrence and during the continuation of
a Default, the Obligor shall as promptly as possible deposit such proceeds into
the Collateral Account. Until so deposited, all such proceeds shall be held in
trust by the Obligor for and as the property of the Trustee and shall not be
commingled with any other funds or property of the Obligor.
1.033 Investment of Balance in Collateral Account. Amounts on
deposit in the Collateral Account shall be invested from time to time in such
Permitted Investments as the Obligor (or, if any Default or Event of Default
shall have occurred and be continuing, the Trustee) shall determine. All such
investments shall be held in the name and be under the control of the Trustee.
At any time after the occurrence and during the continuance of an Event of
Default, the Trustee may (and, if instructed by the Holders as specified in
Section 4.5 of the Indenture, shall) in its (or their) discretion at any time
and, from time to time elect to liquidate any such Permitted Investments and to
apply or cause to be applied the proceeds of such action to the payment of the
Secured Obligations in the manner specified in Section 6.
Section 4. Representations and Warranties. As of the Signing
Date, the Obligor represents and warrants to the Trustee for the benefit of the
Holders as follows:
1.041 Title. The Obligor is the sole beneficial owner of the
Collateral in which it purports to grant a Lien pursuant to this Agreement, and
such Collateral is free and clear of all Liens (and, with respect to the Stock
Collateral, of any Equity Right in favor of any other Person), except for Liens
permitted under Section 8.8 of the Indenture. The Liens granted by this
Agreement in favor of the Trustee for the benefit of the Trustee and the Holders
have attached and, upon filing of the appropriate financing statements in the
jurisdictions listed on Annex II, this Agreement is effective to create a
perfected security interest in all of such Collateral (other than Intellectual
Property registered or otherwise located outside of the United States of
America) prior to all other Liens (except, with respect to Collateral other than
Securities Collateral or the cash in the Collateral Account, such Permitted
Liens). With respect to the Pledged Stock, the Pledged Debt and the cash in the
Collateral Account, the pledge of such Collateral pursuant to this Agreement
creates a valid and perfected first priority security interest in such
Collateral in favor of the Trustee for the benefit of the Holders.
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1.042 Securities Collateral.
(a) The Pledged Stock presently owned by the Obligor is duly
authorized, validly existing, fully paid and nonassessable, and none of such
Pledged Stock is subject to any contractual restriction, or any restriction
under the charter or by-laws of the respective Issuer of such Pledged Stock,
upon the transfer of such Pledged Stock (except for any such restriction
contained in any Indenture Document). The Pledged Debt pledged by the Obligor
has been duly authorized, authenticated or issued and delivered, and is the
legal, valid and binding obligation of the issuers thereof, and is not in
default. The Pledged Debt constitutes all of the outstanding Indebtedness in
excess of $100,000 for money borrowed or for the deferred purchase price of
property owed to the Obligor by any of its Subsidiaries or Affiliates.
(b) The Pledged Stock pledged by the Obligor constitutes all
of the issued and outstanding shares of capital stock of any class of the
Issuers beneficially owned by the Obligor on the Signing Date (whether or not
registered in the name of the Obligor).
1.043 Intellectual Property.
(a) Except pursuant to licenses and other user agreements
entered into by the Obligor in the ordinary course of business, the Obligor owns
and possesses the right to use, and has done nothing to authorize or enable any
other Person to use, any Copyright, Patent or Trademark constituting
Intellectual Property;
(b) To the Obligor's knowledge, (i) there is no violation by
others of any right of the Obligor with respect to any Intellectual Property and
(ii) the Obligor is not infringing in any respect upon any Copyright, Patent or
Trademark of any other Person; and no proceedings have been instituted, are
pending against the Obligor or, to the Obligor's knowledge, have been threatened
against, and no claim has been received by, the Obligor, alleging any such
violation, except as may be disclosed in writing.
(c) The Obligor does not own any Trademarks registered in
the United States of America to which the last sentence of the definition of
Trademark Collateral applies.
1.044 Goods. Any goods now or hereafter manufactured or
otherwise produced by the Obligor or any of its Subsidiaries included in the
Collateral have been and will be produced in compliance with the requirements of
the Fair Labor Standards Act.
1.045 Corporate Existence. Each of the Obligor and its
Subsidiaries: (i) is a corporation, partnership or other entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation; (ii) has all requisite corporate or other power, and has all
material governmental approvals, necessary to own its assets and carry on its
business as now being or as proposed to be conducted; and (iii) is qualified to
do business in all jurisdictions in which the nature of the business conducted
by it makes such qualification necessary and where the failure so to qualify
would have a Material Adverse Effect. The issuers listed on Annex III are the
only direct Subsidiaries of the Obligor and the Obligor has no indirect
Subsidiaries except as listed on Annex IV attached hereto.
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1.046 Financial Condition. The consolidated balance sheets of
the Obligor and its consolidated Subsidiaries as at December 31, 1994 and the
related consolidated statements of income, retained earnings and cash flow of
the Obligor and its consolidated Subsidiaries for the fiscal year then ended,
together with the related opinion (in the case of such consolidated balance
sheet and statements) of Coopers & Lybrand, and the unaudited consolidated
balance sheets of the Obligor and its consolidated Subsidiaries as at September
30, 1995 and the related consolidated statements of income, retained earnings
and cash flow of the Obligor and its consolidated Subsidiaries for the nine-
month period then ended, heretofore furnished to each of the Purchasers, are
complete and correct and fairly present the consolidated financial condition of
the Obligor and its consolidated Subsidiaries as at such dates and the
consolidated results of their operations for the fiscal year and nine-month
period then ended (subject, in the case of such unaudited financial statements,
to normal year-end audit adjustments), all in accordance with generally accepted
accounting principles and practices applied on a consistent basis. Neither the
Obligor nor any of its Subsidiaries has on the Signing Date any material
contingent liabilities, liabilities for taxes, unusual forward or long-term
commitments or unrealized or anticipated losses from any unfavorable
commitments, except as expressly referred to or reflected or provided for in the
most recent balance sheet referred to above. Since September 30, 1995, there
has been no material adverse change in the financial condition, operations,
business or prospects taken as a whole of the Obligor and its consolidated
Subsidiaries from this set forth in the financial statements as at and for the
period ending on that date.
1.047 Litigation. Except as disclosed to the Purchasers in
writing prior to the Signing Date, there are no legal or arbitral proceedings by
or before any governmental Person, now pending or (to the knowledge of the
Obligor) threatened against the Obligor or its property or any of its
Subsidiaries or any of their property that, if adversely determined, could have
a Material Adverse Effect.
1.048 No Breach. None of the execution and delivery of this
Agreement, the consummation of the transactions contemplated by this Agreement
or compliance with the terms and provisions of this Agreement will conflict with
or result in a breach of, or require any consent under, the corporate charter or
by-laws of the Obligor, or any applicable governmental rule or regulation, or
any agreement or instrument to which the Obligor or any of its Subsidiaries is a
party or by which any of them is bound or to which any of them is subject, or
constitute a default under, or result in the acceleration or mandatory
prepayment of, any Indebtedness evidenced by, or termination of, any such
agreement or instrument, or result in the creation or imposition of any Lien
upon any property of the Obligor or any of its Subsidiaries pursuant to the
terms of any such agreement or instrument.
4.09 Corporate Action. The Obligor has all necessary
corporate power and authority to execute, deliver and perform its obligations
under this Agreement; the execution, delivery and performance by the Obligor of
this Agreement have been duly authorized by all necessary corporate action on
its part (including any required shareholder approvals); and this Agreement has
been duly and validly executed and delivered by the Obligor and constitutes its
legal, valid and binding obligation, enforceable in accordance with its terms.
4.10 Approvals. No governmental approvals are necessary for
the execution, delivery or performance by the Obligor of this Agreement or for
the legality, validity or enforceability of this Agreement.
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4.11 Certain Regulations. The Obligor is not (a) an
"investment company," or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940, (b) a "holding
company," or an "affiliate" of a "holding company" or a "subsidiary company" of
a "holding company," within the meaning of the Public Utility Holding Company
Act of 1935 or (c) subject to any other governmental rule or regulation
restricting its ability to incur Indebtedness or to grant Liens.
Section 5. Covenants.
1.051 Books and Records. The Obligor shall:
(a) keep full and accurate books and records relating to the
Collateral and stamp or otherwise mark such books and records in such manner as
the Trustee may reasonably require in order to reflect the Liens granted by this
Agreement;
(b) furnish to the Trustee from time to time (but, unless a
Default shall have occurred and be continuing, no more frequently than
quarterly) statements and schedules further identifying and describing the
Copyright Collateral, the Patent Collateral and the Trademark Collateral and
such other reports in connection with the Copyright Collateral, the Patent
Collateral and the Trademark Collateral, as the Trustee may reasonably request,
all in reasonable detail;
(c) prior to filing, either directly or through an agent,
licensee or other designee, any application for any Copyright, Patent or
Trademark, furnish to the Trustee prompt notice of such proposed filing; and
(d) permit representatives of the Trustee, upon reasonable
notice, at any time during normal business hours to inspect and make abstracts
from its books and records pertaining to the Collateral, permit representatives
of the Trustee to be present at such Obligor's place of business to receive
copies of all communications and remittances relating to the Collateral and
forward copies of any notices or communications received by such Obligor with
respect to the Collateral, all in such manner as the Trustee may request.
1.052 Removals, Etc. Without at least 30 days' prior written
notice to the Trustee, the Obligor shall not (i) maintain any of its books and
records with respect to the Collateral at any office or maintain its principal
place of business at any place, or permit any Inventory or Equipment to be
located anywhere, other than at the address initially indicated for notices to
it under Section 7 or at one of the other business locations presently owned or
operated by the Obligor or any of its Affiliates and identified in Annex III or
IV or in transit from one of such locations to another or (ii) change its
corporate name, or the name under which it does business, from the name shown on
the signature pages to this Agreement.
1.053 Sales and Other Liens. Except as otherwise specifically
restricted under the Indenture, the Obligor may dispose of any Collateral only
in the ordinary course of its business and the Obligor will not permit any of
its Subsidiaries to dispose of its assets except in the ordinary course of
business unless the Obligor or such Subsidiary shall dispose of such assets for
fair market value in an arms length transaction and the proceeds thereof become
Collateral hereunder; notwithstanding the foregoing, except as otherwise
permitted under Section 8.8 of the Indenture, the Obligor shall not, without the
prior
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written consent of the Trustee, create, incur, assume or suffer to exist any
Lien upon any Collateral or file or suffer to be on file or authorize to be
filed, in any jurisdiction, any financing statement or like instrument with
respect to all or any part of the Collateral in which the Trustee is not named
as the sole secured party for the benefit of the Holders.
1.054 Stock Collateral. The Obligor will cause the Stock
Collateral to constitute at all times 100% of the total number of shares of each
class of capital stock of each Issuer then outstanding. The Obligor shall cause
all such shares to be duly authorized, validly issued, fully paid and
nonassessable and to be free of any contractual restriction or any restriction
under the charter or bylaws of the respective Issuer of such Stock Collateral,
upon the transfer of such Stock Collateral (except for any such restriction
contained in any Indenture Document). The Obligor agrees that it will (i) cause
each issuer of the Pledged Stock not to issue any shares of stock or other
securities in addition to or in substitution for the Pledged Stock, except, with
the written consent of the Holders in accordance with the terms of the
Indenture, to the Obligor, (ii) pledge hereunder, immediately upon its
acquisition (directly or indirectly) thereof, any and all additional shares of
capital stock issued to the Obligor (the "Additional Stock") and any and all
Additional Debt, and (iii) promptly (and in any event within three business
days) deliver to the Trustee an amendment to this Agreement, duly executed by
the Obligor, in respect of the Additional Shares or Additional Debt, together
with all certificates, notes or other instruments representing or evidencing the
same. The Obligor agrees that all Additional Shares and Additional Debt listed
on any such amendment delivered to the Trustee shall for all purposes hereunder
constitute Pledged Stock and Pledged Debt, respectively, and (iii) is deemed to
have made, upon such delivery, the representations and warranties contained in
Section 4 hereof with respect to such Collateral.
1.055 Intellectual Property.
(a) The Obligor (either itself or through licensees) will,
for each Trademark, (i) to the extent consistent with past practice and good
business judgment, continue to use such 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 and effect free from any claim of abandonment for nonuse, (ii) maintain as
in the past the quality of products and services offered under such Trademark,
(iii) employ such Trademark with the appropriate notice of registration and (iv)
not (and not permit any licensee or sublicensee to) do any act or knowingly omit
to do any act whereby any Trademark material to the conduct of its business may
become invalidated.
(b) The Obligor (either itself or through licensees) will
not do any act or knowingly omit to do any act whereby any Patent material to
the conduct of its business may become abandoned or dedicated.
(c) The Obligor shall notify the Trustee immediately if it
knows or has reason to know that any Intellectual Property material to the
conduct of its business may become abandoned or dedicated, or of any adverse
determination or development (including the institution of, or any such
determination or development in, any proceeding before any governmental Person)
regarding the Obligor's ownership of any Intellectual Property material to its
business, its right to copyright, patent or register the same (as the case may
be), or its right to keep, use and maintain the same.
SECURITY AGREEMENT
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(d) The Obligor will take all necessary steps that are
consistent with good business practices in any proceeding before any appropriate
governmental Person to maintain and pursue each application relating to any
Intellectual Property (and to obtain the relevant registrations) and to maintain
each registration material to the conduct of its business, including payment of
maintenance fees, filing of applications for renewal, affidavits of use,
affidavits of incontestability and opposition, interference and cancellation
proceedings.
(e) In the event that any Intellectual Property material to
the conduct of its business is infringed, misappropriated or diluted by a third
party, the Obligor shall notify the Trustee within (10) days after it learns of
such event and shall, if consistent with good business practice, promptly sue
for infringement, misappropriation or dilution, seek temporary restraints and
preliminary injunctive relief to the extent practicable, seek to recover any and
all damages for such infringement, misappropriation or dilution and take such
other actions as are appropriate under the circumstances to protect such
Collateral.
(f) The Obligor shall prosecute diligently any application
for any Intellectual Property pending as of the date of this Agreement or
thereafter made until the termination of this Agreement, make application on
uncopyrighted but copyrightable material, unpatented but patentable inventions
and unregistered but registerable Trademarks and preserve and maintain all
rights in applications for any Intellectual Property; PROVIDED, HOWEVER, that
the Obligor shall have no obligation to make any such application if making such
application would be unnecessary or imprudent in the good faith business
judgment of the Obligor. Any expenses incurred in connection with such an
application shall be borne by the Obligor.
(g) The Trustee shall have the right but shall in no way be
obligated to bring suit in its own name to enforce the Copyrights, Patents and
Trademarks and any license under such Intellectual Property, in which event the
Obligor shall, at the request of the Trustee, do any and all lawful acts and
execute and deliver any and all proper documents required by the Trustee in aid
of such enforcement action.
1.056 Further Assurances. The Obligor agrees that, from time
to time upon the written request of the Trustee, the Obligor will execute and
deliver such further documents and do such other acts and things as the Trustee
may reasonably request in order fully to effect the purposes of this Agreement.
Section 6. Remedies.
1.061 Events of Default, Etc. If any Event of Default shall
have occurred and be continuing:
(a) the Trustee in its discretion may require the Obligor
to, and the Obligor shall, assemble the Collateral owned by it at such place or
places, reasonably convenient to both the Trustee and the Obligor, designated in
the Trustee's request;
(b) the Trustee in its discretion may make any reasonable
compromise or settlement it deems desirable with respect to any of the
Collateral and may extend the time of payment, arrange for payment in
installments, or otherwise modify the terms of, all or any part of the
Collateral;
SECURITY AGREEMENT
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(c) the Trustee in its discretion may, in its name or in the
name of the Obligor or otherwise, demand, sue for, collect or receive any money
or property at any time payable or receivable on account of or in exchange for
all or any part of the Collateral, but shall be under no obligation to do so;
(d) the Trustee in its discretion may, upon ten business
days' prior written notice to the Obligor of the time and place, with respect to
all or any part of the Collateral which shall then be or shall thereafter come
into the possession, custody or control of the Trustee, the Holders or any of
their respective agents, sell, lease or otherwise dispose of all or any part of
such Collateral, at such place or places as the Trustee deems best, for cash,
for credit or for future delivery (without thereby assuming any credit risk) and
at public or private sale, without demand of performance or notice of intention
to effect any such disposition or of time or place of any such sale (except such
notice as is required above or by applicable statute and cannot be waived), and
the Trustee or any Holder or any other Person may be the purchaser, lessee or
recipient of any or all of the Collateral so disposed of at any public sale (or,
to the extent permitted by law, at any private sale) and thereafter hold the
same absolutely, free from any claim or right of whatsoever kind, including any
right or equity of redemption (statutory or otherwise), of the Obligor, any such
demand, notice and right or equity being hereby expressly waived and released.
In the event of any sale, license or other disposition of any of the Trademark
Collateral, the goodwill connected with and symbolized by the Trademark
Collateral subject to such disposition shall be included, and the Obligor shall
supply to the Trustee or its designee, for inclusion in such sale, assignment or
other disposition, all Intellectual Property relating to such Trademark
Collateral. The Trustee may, without notice or publication, adjourn any public
or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for the sale, and such sale may be made
at any time or place to which the sale may be so adjourned; and
(e) the Trustee shall have, and in its discretion may
exercise, all of the rights, remedies, powers and privileges with respect to the
Collateral of a secured party under the Uniform Commercial Code (whether or not
the Uniform Commercial Code is in effect in the jurisdiction where such rights,
remedies, powers and privileges are asserted) and such additional rights,
remedies, powers and privileges to which a secured party is entitled under the
laws in effect in any jurisdiction where any rights, remedies, powers and
privileges in respect of this Agreement or the Collateral may be asserted,
including the right, to the maximum extent permitted by law, to exercise all
voting, consensual and other powers of ownership pertaining to the Collateral as
if the Trustee were the sole and absolute owner of the Collateral (and the
Obligor agrees to take all such action as may be appropriate to give effect to
such right).
The proceeds of, and other realization upon, the Collateral by virtue of the
exercise of remedies under this Section 6.01 and of the exercise of the license
granted to the Trustee in Section 2.02 shall be applied in accordance with
Section 6.04.
1.062 Deficiency. If the proceeds of, or other realization
upon, the Collateral by virtue of the exercise of remedies under Section 6.01
and of the exercise of the license granted by the Trustee in Section 2.02 are
insufficient to cover the costs and expenses (including attorneys fees) of such
exercise and the payment in full of the other Secured Obligations, the Obligor
shall remain liable for any deficiency.
SECURITY AGREEMENT
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1.063 Private Sale.
(a) The Trustee and the Holders shall incur no liability as
a result of the sale, lease or other disposition of all or any part of the
Collateral at any private sale pursuant to Section 6.01 conducted in a
commercially reasonable manner. The Obligor hereby waives any claims against
the Trustee or any Holder arising by reason of the fact that the price at which
the Collateral may have been sold at such a private sale was less than the price
which might have been obtained at a public sale or was less than the aggregate
amount of the Secured Obligations, even if the Trustee accepts the first offer
received and does not offer the Collateral to more than one offeree.
(b) The Obligor recognizes that, by reason of certain
prohibitions contained in the Securities Act of 1933 and applicable state
securities laws, the Trustee may be compelled, with respect to any sale of all
or any part of the Collateral, to limit purchasers to those who will agree,
among other things, to acquire the Collateral for their own account, for
investment and not with a view to distribution or resale. The Obligor
acknowledges that any such private sales may be at prices and on terms less
favorable to the Trustee than those obtainable through a public sale without
such restrictions, and, notwithstanding such circumstances, agree that any such
private sale shall be deemed to have been made in a commercially reasonable
manner and that the Trustee shall have no obligation to engage in public sales
and no obligation to delay the sale of any Collateral for the period of time
necessary to permit the respective Issuer of such Collateral to register it for
public sale.
1.064 Application of Proceeds. Except as otherwise expressly
provided in this Agreement and except as provided below in this Section 6.04,
the proceeds of, or other realization upon, all or any part of the Collateral by
virtue of the exercise of remedies under Section 6.01 or of the exercise of the
license granted in Section 2.02, and any other cash at the time held by the
Trustee under Section 3 or this Section 6, shall be applied by the Trustee:
First, to the payment of the costs and expenses of such exercise
of remedies, including reasonable out-of-pocket costs and expenses of the
Trustee, the fees and expenses of its agents and counsel and all other expenses
incurred and advances made by the Trustee in that connection;
Next, in accordance with Section 4.10 of the Indenture.
As used in this Section 6, "proceeds" of Collateral shall mean
cash, securities and other property realized in respect of, and distributions in
kind of, Collateral, including any property received under any bankruptcy,
reorganization or other similar proceeding as to any Obligor or any issuer of,
or account debtor or other obligor on, any of the Collateral.
1.065 Security Interest Absolute. All rights of the Trustee
and security interests hereunder, and all obligations of the Obligor hereunder,
shall be absolute and unconditional irrespective of:
1. any lack of validity or enforceability of any
provision of the Indenture or any other Indenture Document or
any other agreement or instrument relating thereto;
SECURITY AGREEMENT
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2. any change in the time, manner or place of
payment of, or in any other term of, or any increase in the
amount of, all or any of the Secured Obligations, or any other
amendment or waiver of any term of, or any consent to any
departure from any requirement of, the Indenture or any other
Indenture Document;
3. any exchange, release or non-perfection of any
Lien on any other collateral, or any release or amendment or
waiver of any term of any guaranty of, or consent to departure
from any requirement of any guaranty of, all or any of the
Secured Obligations; or
4. any other circumstance which might otherwise
constitute a defense available to, or a discharge of, an obligor
or a pledgor.
Section 7. Miscellaneous.
1.071 The Trustee. As provided in Article 12 of the
Indenture, the Trustee acts as collateral trustee for the benefit of the Holders
of the Notes for purposes of this Agreement. In such capacity, the Trustee
shall be entitled to all of the rights and benefits accorded the Trustee by
Article 5 of the Indenture. Following the payment in full of all Secured
Obligations outstanding under the Indenture and the Notes, the provisions of
Section 5.7 of the Indenture shall be deemed to continue in full force and
effect for the benefit of the Trustee under this Agreement.
1.072 Waiver. No failure on the part of the Trustee or any
Holder to exercise and no delay in exercising, and no course of dealing with
respect to, any right, remedy, power or privilege under this Agreement shall
operate as a waiver of such right, remedy, power or privilege, nor shall any
single or partial exercise of any right, remedy, power or privilege under this
Agreement preclude any other or further exercise of any such right, remedy,
power or privilege or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges provided in this
Agreement are cumulative and not exclusive of any rights, remedies, powers and
privileges provided by law.
1.073 Notices. All notices and communications to be given
under this Agreement shall be given or made in writing to the intended recipient
at the address specified below or, as to any party, at such other address as
shall be designated by such party in a notice to each other party. Except as
otherwise provided in this Agreement, all such communications shall be deemed to
have been duly given when transmitted by telecopier or personally delivered or,
in the case of a mailed notice, upon receipt, in each case, given or addressed
as provided in this Section 7.03:
To the Obligor: Inamed Corporation
3800 Howard Hughes Parkway
Suite 900
Las Vegas, Nevada 89109
Attention: Michael D. Farney
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To the Trustee: Santa Barbara Bank & Trust
1021 Anacapa Street
Santa Barbara, California 93101
Attention: Jay Donald Smith, Esq.
1.074 Expenses, Etc. The Obligor agrees to pay or to
reimburse the Trustee for all costs and expenses (including reasonable
attorney's fees and expenses) that may be incurred by the Trustee in any effort
to enforce any of the provisions of Section 6, or any of the obligations of the
Obligor in respect of the Collateral or in connection with (a) the preservation
of the Lien of, or the rights of the Trustee and the Holders under this
Agreement or (b) any actual or attempted sale, lease, disposition, exchange,
collection, compromise, settlement or other realization in respect of, or care
of, the Collateral, including all such costs and expenses (and reasonable
attorney's fees and expenses) incurred in any bankruptcy, reorganization,
workout or other similar proceeding.
1.075 Amendments, Etc. Any provision of this Agreement may be
modified, supplemented or waived only by an instrument in writing duly executed
by the Obligor and the Trustee (with the consent of the Holders as specified in
Section 7.2 of the Indenture). Any such modification, supplement or waiver
shall be for such period and subject to such conditions as shall be specified in
the instrument effecting the same and shall be binding upon the Trustee and each
Holder, and the Obligor, and any such waiver shall be effective only in the
specific instance and for the purposes for which given.
1.076 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the Obligor, the Trustee and each Holder and
their respective successors and permitted assigns.
1.077 Survival. All representations and warranties made in
this Agreement or in any certificate or other document delivered pursuant to or
in connection with this Agreement shall survive the execution and delivery of
this Agreement or such certificate or other document (as the case may be) or any
deemed repetition of any such representation or warranty.
1.078 Agreements Superseded. Except with respect to express
references to other Indenture Documents, this Agreement supersedes all prior
agreements and understandings, written or oral, among the parties with respect
to the subject matter of this Agreement.
1.079 Severability. Any provision of this Agreement that 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 of this Agreement, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
7.10 Captions. The table of contents and captions and
section headings appearing in this Agreement are included solely for convenience
of reference and are not intended to affect the interpretation of any provision
of this Agreement.
7.11 Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and any of the parties to this Agreement may execute this
Agreement by signing any such counterpart.
SECURITY AGREEMENT
-21-
<PAGE>
7.12 GOVERNING LAW; SUBMISSION TO JURISDICTION. THIS
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF CALIFORNIA. THE OBLIGOR HEREBY SUBMITS TO THE NONEXCLUSIVE
JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE CENTRAL DISTRICT OF
CALIFORNIA AND OF ANY CALIFORNIA STATE COURT SITTING IN SANTA BARBARA,
CALIFORNIA FOR THE PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. THE
OBLIGOR IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF
ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH
PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
7.13 WAIVER OF JURY TRIAL. THE OBLIGOR HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
SECURITY AGREEMENT
-22-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
INAMED CORPORATION,
a Florida corporation
By: /s/ Michael D. Farney
------------------------------
Title: Chief Executive Officer
------------------------
SANTA BARBARA BANK & TRUST
By: /s/ Jay D. Smith
------------------------------
Title:
SECURITY AGREEMENT
-23-
<PAGE>
PLEDGED DEBT ANNEX I
<TABLE>
<CAPTION>
Obligor Amount
- ------- ------
<S> <C>
McGhan Medical Corporation 9,875,293.29
CUI Corporation 4,796,849.19
Inamed Development Corporation 6,123,659.20
Bioenterics Corporation 2,002,784.53
Biodermis Corporation 552,934.70
Bioplexus Corporation 495,436.35
Medisyn Technologies Corp. 1,994,894.30
Flowmatrix Corporation 997,904.17
-------------
TOTAL* 26,839,755.73
</TABLE>
* Amounts subject to audit adjustment.
SECURITY AGREEMENT
<PAGE>
UCC FINANCING STATEMENT FILINGS ANNEX II
Nevada
SECURITY AGREEMENT
<PAGE>
DIRECT SUBSIDIARIES ANNEX III
Biodermis Corporation
Biodermis Ltd.
Bioenterics Corporation
Bioenterics Ltd.
Bioplexus Corporation
Bioplexus Ltd.
Chamfield Ltd.
CUI Corporation
Flowmatrix Corporation
Inamed B.V.
Inamed B.V. Rep. Ofc. Russia (R.O.R.)
Inamed B.V.B.A.
Inamed Development Company
Inamed do Brasel Ltd.
Inamed GmbH
Inamed Ltd.
Inamed Japan, Inc.
Inamed Marketing Group (95%)
Inamed S.A.
Inamed S.A.R.L.
Inamed S.R.L.
McGhan Limited
SECURITY AGREEMENT
<PAGE>
McGhan Medical Corporation
McGhan Medical Asia/Pacific
Medisyn Technologies Corp.
Medisyn Technologies Ltd.
<PAGE>
INDIRECT SUBSIDIARIES ANNEX IV
None
SECURITY AGREEMENT
<PAGE>
*****************************************************************
GUARANTEE
AND
SECURITY AGREEMENT
Dated as of January 2, 1996
between
Certain Subsidiaries of
Inamed Corporation
and
Santa Barbara Bank & Trust,
as Trustee
*****************************************************************
GUARANTEE AND SECURITY AGREEMENT
<PAGE>
TABLE OF CONTENTS
Page
Section 1. Definitions and Interpretation . . . . . . . . . . . . . . . . 1
1.01 Certain Defined Terms . . . . . . . . . . . . . . 1
1.02 Interpretation. . . . . . . . . . . . . . . . . . 5
Section 2. Guarantee. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.01 Guarantee . . . . . . . . . . . . . . . . . . . . 5
2.02 Acknowledgements, Waivers and Consents. . . . . . 5
2.03 Understanding With Respect to Waivers and
Consents . . . . . . . . . . . . . . . . . . . . 10
2.04 Subrogation . . . . . . . . . . . . . . . . . . . 11
2.05 Reinstatement . . . . . . . . . . . . . . . . . . 11
2.06 Remedies. . . . . . . . . . . . . . . . . . . . . 11
2.07 Subordination of Indebtedness of the Company;
Security Interest. . . . . . . . . . . . . . . . 12
2.08 Limitation on . . . . . . . . . . . . . . . . . . 12
2.09 Rights of Contribution. . . . . . . . . . . . . . 12
Section 3. Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.01 Grant . . . . . . . . . . . . . . . . . . . . . . 13
3.02 Intellectual Property . . . . . . . . . . . . . . 15
3.03 Perfection. . . . . . . . . . . . . . . . . . . . 15
3.04 Preservation and Protection of Security
Interests. . . . . . . . . . . . . . . . . . . . 16
3.05 Attorney-in-Fact. . . . . . . . . . . . . . . . . 17
3.06 Special Provisions Relating to Securities
Collateral . . . . . . . . . . . . . . . . . . . 18
3.07 Use of Intellectual Property. . . . . . . . . . . 18
3.08 Instruments . . . . . . . . . . . . . . . . . . . 19
3.09 Use of Collateral . . . . . . . . . . . . . . . . 19
3.10 Rights and Obligations. . . . . . . . . . . . . . 19
3.11 Release of Motor Vehicles . . . . . . . . . . . . 20
3.12 Termination . . . . . . . . . . . . . . . . . . . 20
Section 4. Cash Proceeds of Collateral. . . . . . . . . . . . . . . . . . 20
4.01 Collateral Account. . . . . . . . . . . . . . . . 20
4.02 Certain Proceeds. . . . . . . . . . . . . . . . . 21
4.03 Investment of Balance in Collateral Account . . . 21
Section 5. Representations and Warranties . . . . . . . . . . . . . . . . 21
5.01 Title . . . . . . . . . . . . . . . . . . . . . . 21
5.02 Securities Collateral . . . . . . . . . . . . . . 22
5.03 Intellectual Property . . . . . . . . . . . . . . 22
5.04 Goods . . . . . . . . . . . . . . . . . . . . . . 22
5.05 Corporate Existence . . . . . . . . . . . . . . . 22
5.06 Financial Condition . . . . . . . . . . . . . . . 23
<PAGE>
5.07 Litigation. . . . . . . . . . . . . . . . . . . . 23
5.08 No Breach . . . . . . . . . . . . . . . . . . . . 23
5.09 Corporate Action. . . . . . . . . . . . . . . . . 23
5.10 Approvals . . . . . . . . . . . . . . . . . . . . 24
5.11 Certain Regulations . . . . . . . . . . . . . . . 24
Section 6. Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.01 Books and Records . . . . . . . . . . . . . . . . 24
6.02 Removals, Etc.. . . . . . . . . . . . . . . . . . 24
6.03 Sales and Other Liens . . . . . . . . . . . . . . 25
6.04 Stock Collateral. . . . . . . . . . . . . . . . . 25
6.05 Intellectual Property . . . . . . . . . . . . . . 25
6.06 Further Assurances. . . . . . . . . . . . . . . . 27
6.07 Litigation. . . . . . . . . . . . . . . . . . . . 27
6.08 Corporate Existence, Etc. . . . . . . . . . . . . 27
Section 7. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.01 Events of Default, Etc. . . . . . . . . . . . . . 27
7.02 Deficiency. . . . . . . . . . . . . . . . . . . . 28
7.03 Private Sale. . . . . . . . . . . . . . . . . . . 29
7.04 Application of Proceeds . . . . . . . . . . . . . 29
Section 8. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . 30
8.01 The Trustee . . . . . . . . . . . . . . . . . . . 30
8.02 Waiver. . . . . . . . . . . . . . . . . . . . . . 30
8.03 Notices . . . . . . . . . . . . . . . . . . . . . 30
8.04 Expenses, Etc.. . . . . . . . . . . . . . . . . . 30
8.05 Amendments, Etc.. . . . . . . . . . . . . . . . . 31
8.06 Successors and Assigns. . . . . . . . . . . . . . 31
8.07 Survival. . . . . . . . . . . . . . . . . . . . . 31
8.08 Agreements Superseded . . . . . . . . . . . . . . 31
8.09 Severability. . . . . . . . . . . . . . . . . . . 31
8.10 Captions. . . . . . . . . . . . . . . . . . . . . 31
8.11 Counterparts. . . . . . . . . . . . . . . . . . . 31
8.12 GOVERNING LAW; SUBMISSION TO JURISDICTION . . . . 31
8.13 WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . 32
Exhibit A - Joinder
<PAGE>
GUARANTEE AND SECURITY AGREEMENT
This GUARANTEE AND SECURITY AGREEMENT (this "Agreement") dated
as of January 2, 1996 is made between the Subsidiaries of Inamed Corporation
listed on the signature pages hereof and who execute a Joinder hereto in the
form of Exhibit A hereto (collectively, the "Obligors") and Santa Barbara Bank &
Trust, as trustee for the benefit of the holders of Inamed Corporation's 11%
Secured Convertible Notes due 1999 (in such capacity, the "Trustee").
The Indenture dated as of January 2, 1996 (the "Indenture")
between Inamed Corporation, a Florida corporation (the "Company") and the
Trustee provides, subject to its terms and conditions, for the issuance by the
Company of its 11% Secured Convertible Notes due 1999 to the purchasers thereof
(the "Purchasers") pursuant to the Note Purchase Agreement dated as of January
2, 1996 (the "Note Purchase Agreement"). It is a condition to the purchase of
the Notes by the Purchasers that each Obligor shall have executed and delivered,
and granted the Liens provided for, in this Agreement.
To induce the Trustee to enter into the Indenture, and to induce
the Purchasers to purchase the Notes, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
each Obligor has agreed to guarantee jointly and severally the Guaranteed
Obligations and to pledge and grant a security interest in the Collateral as
security for the Secured Obligations. Accordingly, the Obligors agree with the
Trustee as follows:
Section
1. Definitions and Interpretation.
1.011 Certain Defined Terms. Unless otherwise defined, all
capitalized terms used in this Agreement that are defined in the Indenture or in
the Note Purchase Agreement (including those terms incorporated therein by
reference) shall have the respective meanings assigned to them in the Indenture
or the Note Purchase Agreement, as applicable. In addition, the following terms
shall have the following meanings under this Agreement:
"Accounts" shall have the meaning assigned to that term in
Section 3.01(b).
"Casualty Event" shall mean, with respect to any property of any
Person, any loss of or damage to, or any condemnation or other taking of, such
property for which such Person or any of its Subsidiaries receives insurance
proceeds, or proceeds of a condemnation award or other compensation.
"Collateral" shall have the meaning assigned to that term in
Section 3.01.
"Collateral Account" shall have the meaning assigned to that
term in Section 4.01.
GUARANTEE AND SECURITY AGREEMENT
<PAGE>
"Copyright Collateral" shall mean all Copyrights, whether now
owned or hereafter acquired by any Obligor.
"Copyrights" shall mean, collectively, (a) all copyrights,
copyright registrations and applications for copyright registrations, (b) all
renewals and extensions of all copyrights, copyright registrations and
applications for copyright registration and (c) all rights, now existing or
hereafter coming into existence, (i) to all income, royalties, damages and other
payments (including in respect of all past, present or future infringements) now
or hereafter due or payable under or with respect to any of the foregoing, (ii)
to sue for all past, present and future infringements with respect to any of the
foregoing and (iii) otherwise accruing under or pertaining to any of the
foregoing throughout the world.
"Documents" shall have the meaning assigned to that term in
Section 3.01(f).
"Equipment" shall have the meaning assigned to that term in
Section 3.01(e).
"Equity Rights" shall mean, with respect to any Person, any
outstanding subscriptions, options, warrants, commitments, preemptive rights or
agreements of any kind (including any stockholders' or voting trust agreements)
for the issuance, sale, registration or voting of, or outstanding securities
convertible into, any additional shares of capital stock of any class, or
partnership or other ownership interests of any type in, such Person.
"Guaranteed Obligations" means any and all Obligations and any
and all obligations of the Company for the performance by it of its agreements,
covenants and undertakings under or in respect of the Indenture Documents.
"Indenture Documents" shall have the meaning assigned to the
term "Documents" in the Indenture.
"Instruments" shall have the meaning assigned to that term in
Section 3.01(c).
"Intellectual Property" shall mean all Copyright Collateral, all
Patent Collateral and all Trademark Collateral, together with (a) all
inventions, processes, production methods, proprietary information, know-how and
trade secrets; (b) all licenses or user or other agreements granted to any
Obligor with respect to any of the foregoing, in each case whether now or
hereafter owned or used; (c) all information, customer lists, identification of
suppliers, data, plans, blueprints, specifications, designs, drawings, recorded
knowledge, surveys, engineering reports, test reports, manuals, materials
standards, processing standards, performance standards, catalogs, computer and
automatic machinery software and programs; (d) all field repair data, sales data
and other information relating to sales or service of products now or hereafter
manufactured; (e) all accounting information and all media in which or on which
any information or knowledge or data or records may be recorded or stored and
all computer programs used for the compilation or printout of such information,
knowledge, records or data; (f) all Governmental Approvals now held or hereafter
obtained by any Obligor in respect of
GUARANTEE AND SECURITY AGREEMENT
-2-
<PAGE>
any of the foregoing; and (g) all causes of action, claims and warranties now
owned or hereafter acquired by any Obligor in respect of any of the foregoing.
It is understood that Intellectual Property shall include all of the foregoing
owned or acquired by each Obligor on a worldwide basis.
"Inventory" shall have the meaning assigned to that term in
Section 3.01(d).
"Issuers" shall mean, collectively, each Subsidiary, directly or
indirectly, of the Company that is the issuer (as defined in the Uniform
Commercial Code) of any shares of capital stock now owned or hereafter acquired
by any Obligor.
"Material Adverse Effect" shall mean a material adverse effect
on (a) the property, business, operations, financial condition, prospects,
liabilities or capitalization of the Company and its Subsidiaries taken as a
whole, (b) the ability of any Obligor to perform its obligations under any of
the Indenture Documents to which it is a party, (c) the validity or
enforceability of any of the Indenture Documents, (d) the rights, remedies,
powers and privileges of the Holders and the Trustee under any of the Indenture
Documents or (e) the timely payment of the Secured Obligations.
"Motor Vehicles" shall mean motor vehicles, tractors, trailers
and other like property, whether or not the title to any such property is
governed by a certificate of title or ownership.
"Obligations" shall mean the principal of any Security,
interest, fees and any other amount payable by the Company at any time and from
time to time under any Indenture Document.
"Patent Collateral" shall mean all Patents, whether now owned or
hereafter acquired by any Obligor.
"Patents" shall mean, collectively, (a) all patents and patent
applications, (b) all reissues, divisions, continuations, renewals, extensions
and continuations-in-part of all patents or patent applications and (c) all
rights, now existing or hereafter coming into existence, (i) to all income,
royalties, damages, and other payments (including in respect of all past,
present and future infringements) now or hereafter due or payable under or with
respect to any of the foregoing, (ii) to sue for all past, present and future
infringements with respect to any of the foregoing and (iii) otherwise accruing
under or pertaining to any of the foregoing throughout the world, including all
inventions and improvements described or discussed in all such patents and
patent applications.
"Permitted Investments" shall mean (a) direct obligations of the
United States of America, or of any of its agencies, or obligations guaranteed
as to principal and interest by the United States of America, or of any of its
agencies, in either case maturing not more than 90 days from the date of
acquisition of such obligation; (b) deposit accounts in, and certificates of
deposit, repurchase agreements or bankers acceptances of any bank or trust
company organized under the laws of the United States of America or any state or
licensed to conduct a banking or trust business in the United States of America
or any state and having capital, surplus and undivided profits of at least
$35,000,000, maturing not more than 90 days from the date of acquisition; (c)
commercial paper rated
GUARANTEE AND SECURITY AGREEMENT
-3-
<PAGE>
A-1 or better or P-1 by Standard & Poor's Corporation or Moody's Investors
Services, Inc., respectively, maturing not more than 90 days from the date of
acquisition; and (d) money market funds sponsored by commercial or investment
banks unaffiliated with the Company.
"Pledged Stock" shall have the meaning assigned to that term in
Section 3.01(a).
"Secured Obligations" shall mean (a) any and all Guaranteed
Obligations and (b) any and all obligations of the Obligors at any time and from
time to time for the performance of their agreements, covenants and undertakings
under or in respect of the Indenture Documents.
"Securities Collateral" means the Stock Collateral and the
Pledged Debt.
"Signing Date" shall mean the date on which a respective Obligor
shall sign and deliver this Agreement, whether directly or through execution and
delivery of a Joinder hereto.
"Stock Collateral" shall have the meaning assigned to that term
in Section 3.01(a).
"Tangible Net Worth" shall mean, as at any date for any Person,
the sum for such Person and its Subsidiaries (determined on a consolidated basis
without duplication in accordance with GAAP), of the following:
(a) the amount of capital stock, plus
(b) the amount of surplus and retained earnings (or, in the
case of a surplus or retained earnings deficit, minus the amount of such
deficit), minus
(c) the sum of the following: the cost of treasury shares and
the book value of all assets which should be classified as intangibles (without
duplication of deductions in respect of items already deducted in arriving at
surplus and retained earnings) but in any event including goodwill, minority
interests, research and development costs, trademarks, trade names, copyrights,
patents and franchises, unamortized debt discount and expense, all reserves and
any write-up in the book value of assets resulting from a revaluation of such
assets subsequent to December 31, 1994.
"Trademark Collateral" shall mean all Trademarks, whether now
owned or hereafter acquired by any Obligor. Notwithstanding the foregoing, the
Trademark Collateral shall not include any Trademark which would be rendered
invalid, abandoned, void or unenforceable by reason of its being included as
part of the Trademark Collateral.
"Trademarks" shall mean, collectively, (a) all trade names,
trademarks and service marks, logos, trademark and service mark registrations
and applications for trademark and service mark registrations, (b) all renewals
and extensions of any of the foregoing and (c) all rights, now existing or
hereafter coming into existence, (i) to all income, royalties, damages and other
payments (including in respect of all past, present and future infringements)
now or hereafter due or payable
GUARANTEE AND SECURITY AGREEMENT
-4-
<PAGE>
under or with respect to any of the foregoing, (ii) to sue for all past, present
and future infringements with respect to any of the foregoing and (iii)
otherwise accruing under or pertaining to any of the foregoing throughout the
world, together, in each case, with the product lines and goodwill of the
business connected with the use of, or otherwise symbolized by, each such trade
name, trademark and service mark.
"Uniform Commercial Code" shall mean the Uniform Commercial Code
as in effect in the State of California from time to time or, by reason of
mandatory application, any other applicable jurisdiction.
Section 1.012 Interpretation. In this Agreement, unless
otherwise indicated, the singular includes the plural and plural the singular;
words importing either gender include the other gender; references to statutes
or regulations are to be construed as including all statutory or regulatory
provisions consolidating, amending or replacing the statute or regulation
referred to; references to "writing" include printing, typing, lithography and
other means of reproducing words in a tangible visible form; the words
"including," "includes" and "include" shall be deemed to be followed by the
words "without limitation"; references to articles, sections (or subdivisions of
sections), exhibits, annexes or schedules are to this Agreement; references to
agreements and other contractual instruments shall be deemed to include all
subsequent amendments, extensions and other modifications to such instruments
(without, however, limiting any prohibition on any such amendments, extensions
and other modifications by the terms of any Indenture Document); and references
to Persons include their respective permitted successors and assigns and, in the
case of Governmental Persons, Persons succeeding to their respective functions
and capacities.
Section 2. Guarantee.
1.021 Guarantee. Subject to the limitation set forth in
Section 2.08, the Obligors hereby jointly and severally guarantee to the Trustee
for the benefit of each Holder the timely payment in full when due (whether at
stated maturity, by acceleration or otherwise) and performance of the Guaranteed
Obligations in each case strictly in accordance with their terms. The Obligors
hereby further jointly and severally agree that if the Company shall fail to pay
in full when due (whether at stated maturity, by acceleration or otherwise) all
or any part of the Guaranteed Obligations, the Obligors will immediately pay the
same, without any demand or notice whatsoever, and that in the case of any
extension of time of payment or renewal of all or any part of the Guaranteed
Obligations, the same will be timely paid in full when due (whether at extended
maturity, by acceleration or otherwise) in accordance with the terms of such
extension or renewal. The obligations of the Obligors under this Section 2 are
irrevocable and unconditional in nature and are made with respect to any
Guaranteed Obligations now existing or in the future arising. The Obligors'
liability under this Agreement shall continue until full satisfaction of all
Guaranteed Obligations. The obligations of the Obligors constitute a guarantee
of due and punctual payment and performance and not merely a guarantee of
collection.
GUARANTEE AND SECURITY AGREEMENT
-5-
<PAGE>
1.022 Acknowledgements, Waivers and Consents. Each Obligor
acknowledges that the obligations undertaken by it under this Agreement involve
the guarantee of obligations of Persons other than such Obligor and that such
obligations of such Obligor are absolute, irrevocable and unconditional under
any and all circumstances. In full recognition and in furtherance of the
foregoing, each Obligor agrees that:
(a) Without affecting the enforceability or
effectiveness of this Agreement in accordance with its terms and without
affecting, limiting, reducing, discharging or terminating the liability of such
Obligor, or the rights, remedies, powers and privileges of the Trustee under
this Agreement, the Trustee and the Holders may, at any time and from time to
time and without notice or demand of any kind or nature whatsoever:
(i) amend, supplement, modify, extend,
renew, waive, accelerate or otherwise change the time for payment or performance
of, or the terms of, all or any part of the Guaranteed Obligations (including
any increase or decrease in the rate or rates of interest on all or any part of
the Guaranteed Obligations);
(ii) amend, supplement, modify, extend,
renew, waive or otherwise change, or enter into or give, any Indenture Document
or any agreement, security document, guarantee, approval, consent or other
instrument with respect to all or any part of the Guaranteed Obligations, any
Indenture Document or any such other instrument or any term or provision of the
foregoing;
(iii) accept or enter into new or additional
agreements, security documents, guarantees or other instruments in addition to,
in exchange for or relative to any Indenture Document, all or any part of the
Guaranteed Obligations or any collateral now or in the future serving as
security for the Guaranteed Obligations;
(iv) accept or receive (including from any
other Obligor) partial payments or performance on the Guaranteed Obligations
(whether as a result of the exercise of any right, remedy, power or privilege or
otherwise);
(v) accept, receive and hold any additional
collateral for all or any part of the Guaranteed Obligations (including from any
other Obligor);
(vi) release, reconvey, terminate, waive,
abandon, allow to lapse or expire, fail to perfect, subordinate, exchange,
substitute, transfer, foreclose upon or enforce any collateral, security
documents or guarantees (including the obligations of any other Obligor) for or
relative to all or any part of the Guaranteed Obligations;
(vii) apply any collateral or the proceeds of
any collateral or guarantee (including the obligations of any other Obligor) to
all or any part of the Guaranteed Obligations in such manner and extent as the
Trustee or any Holder may in its discretion determine;
GUARANTEE AND SECURITY AGREEMENT
-6-
<PAGE>
(viii) release any Person (including any other
Obligor) from any personal liability with respect to all or any part of the
Guaranteed Obligations;
(ix) settle, compromise, release, liquidate
or enforce upon such terms and in such manner as the Trustee or the Holders may
determine or as applicable law may dictate all or any part of the Guaranteed
Obligations or any collateral on or guarantee of all or any part of the
Guaranteed Obligations (including with any other Obligor);
(x) consent to the merger or consolidation
of, the sale of substantial assets by, or other restructuring or termination of
the corporate existence of the Company or any other Person (including any other
Obligor);
(xi) proceed against the Company, such or any
other Obligor or any other guarantor of all or any part of the Guaranteed
Obligations or any collateral provided by any Person and exercise the rights,
remedies, powers and privileges of the Trustee and the Holders under the
Indenture Documents or otherwise in such order and such manner as the Trustee or
the Holders may, in its or their discretion, determine, without any necessity to
proceed upon or against or exhaust any collateral, right, remedy, power or
privilege before proceeding to call upon or otherwise enforce this Agreement as
to any Obligor;
(xii) foreclose upon any deed of trust,
mortgage or other instrument creating or granting liens on any interest in real
property by judicial or nonjudicial sale or by deed in lieu of foreclosure, bid
any amount or make no bid in any foreclosure sale or make any other election of
remedies with respect to such liens or exercise any right of set-off;
(xiii) obtain the appointment of a receiver
with respect to any collateral for all or any part of the Guaranteed Obligations
and apply the proceeds of such receivership as the Trustee or any Holder may in
its discretion determine (it being agreed that nothing in this clause (xiii)
shall be deemed to make the Trustee or any Holder a party in possession in
contemplation of law, except at its option);
(xiv) enter into such other transactions or
business dealings with any other Obligor, the Company, any Subsidiary or
Affiliate of the Company or any other guarantor of all or any part of the
Guaranteed Obligations as the Trustee or any Holder may desire; and
(xv) do all or any combination of the actions
set forth in this Section 2.02(a).
(b) The enforceability and effectiveness of this
Agreement and the liability of the Obligors, and the rights, remedies, powers
and privileges of the Trustee and the Holders, under this Agreement shall not be
affected, limited, reduced, discharged or terminated, and each Obligor hereby
expressly waives to the fullest extent permitted by law any defense now or in
the future arising, by reason of:
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(i) the illegality, invalidity or
unenforceability of all or any part of the Guaranteed Obligations, any Indenture
Document or any agreement, security document, guarantee or other instrument
relative to all or any part of the Guaranteed Obligations;
(ii) any disability or other defense with
respect to all of any part of the Guaranteed Obligations of the Company, any
other Obligor or any other guarantor of all or any part of the Guaranteed
Obligations, including the effect of any statute of limitations that may bar the
enforcement of all or any part of the Guaranteed Obligations or the obligations
of any such other guarantor;
(iii) the illegality, invalidity or
unenforceability of any security or guarantee for all or any part of the
Guaranteed Obligations or the lack of perfection or continuing perfection or
failure of the priority of any lien on any collateral for all or any part of the
Guaranteed Obligations;
(iv) the cessation, for any cause whatsoever,
of the liability of the Company, any other Obligor or any other guarantor of all
or any part of the Guaranteed Obligations (other than, subject to Section 2.05,
by reason of the full payment and performance of all Guaranteed Obligations);
(v) any failure of the Trustee or the
Holders to marshal assets in favor of the Company or any other Person (including
any other Obligor), to exhaust any collateral for all or any part of the
Guaranteed Obligations, to pursue or exhaust any right, remedy, power or
privilege it may have against any other Obligor, the Company, any other
guarantor of all or any part of the Guaranteed Obligations or any other Person
or to take any action whatsoever to mitigate or reduce such or any other
Obligor's liability under this Agreement, neither the Trustee nor any Holder
being under any obligation to take any such action notwithstanding the fact that
all or any part of the Guaranteed Obligations may be due and payable and that
the Company may be in default of its obligations under any Indenture Document;
(vi) any failure of the Trustee or the
Holders to give notice of sale or other disposition of any Collateral (including
any notice of any judicial or nonjudicial foreclosure or sale of any interest in
real property serving as collateral for all or any part of the Guaranteed
Obligations) for all or any part of the Guaranteed Obligations to the Company,
any Obligor or any other Person or any defect in, or any failure by any Obligor
or any other Person to receive, any notice that may be given in connection with
any sale or disposition of any Collateral;
(vii) any failure of the Trustee or the
Holders to comply with applicable laws in connection with the sale or other
disposition of any Collateral for all or any part of the Guaranteed Obligations;
(viii) any judicial or nonjudicial foreclosure
or sale of, or other election of remedies with respect to, any interest in real
property or other Collateral serving as security
GUARANTEE AND SECURITY AGREEMENT
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for all or any part of the Guaranteed Obligations, even though such foreclosure,
sale or election of remedies may impair the subrogation rights of any Obligor or
may preclude any Obligor from obtaining reimbursement, contribution,
indemnification or other recovery from any other Obligor, the Company, any other
guarantor or any other Person and even though the Company may not, as a result
of such foreclosure, sale or election of remedies, be liable for any deficiency;
(ix) any benefits the Company, any Obligor or
any other guarantor may otherwise derive from the laws of any jurisdiction of
the nature of a "one-form-of-action," "anti-deficiency" or "security-first"
rule;
(x) any act or omission of the Trustee, any
Holder or any other Person that directly or indirectly results in or aids the
discharge or release of the Company or any other Obligor of all or any part of
the Guaranteed Obligations or any security or guarantee for all or any part of
the Guaranteed Obligations by operation of law or otherwise;
(xi) any law which provides that the
obligation of a surety or guarantor must neither be larger in amount nor in
other respects more burdensome than that of the principal or which reduces a
surety's or guarantor's obligation in proportion to the principal obligation;
(xii) the possibility that the obligations of
the Company to the Trustee and the Holders may at any time and from time to time
exceed the aggregate liability of the Obligors under this Agreement;
(xiii) any counterclaim, set-off or other claim
which the Company or any other Obligor has or alleges to have with respect to
all or any part of the Guaranteed Obligations;
(xiv) any failure of the Trustee or any Holder
to file or enforce a claim in any bankruptcy or other proceeding with respect to
any Person;
(xv) the election by the Trustee or any
Holder, in any bankruptcy proceeding of any Person, of the application or
nonapplication of Section 1111(b)(2) of the Bankruptcy Code;
(xvi) any extension of credit or the grant of
any Lien under Section 364 of the Bankruptcy Code;
(xvii) any use of cash collateral under Section
363 of the Bankruptcy Code;
(xviii) any agreement or stipulation with
respect to the provision of adequate protection in any bankruptcy proceeding of
any Person;
GUARANTEE AND SECURITY AGREEMENT
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(xix) the avoidance of any Lien in favor of
the Trustee or any Holder for any reason;
(xx) any bankruptcy, insolvency,
reorganization, arrangement, readjustment of debt, liquidation or dissolution
proceeding commenced by or against any Person, including any discharge of, or
bar or stay against collecting, all or any part of the Guaranteed Obligations
(or any interest on all or any part of the Guaranteed Obligations) in or as a
result of any such proceeding;
(xxi) any action taken by the Trustee or any
Holder that is authorized by this Section 2.02 or otherwise in this Agreement or
by any other provision of any Indenture Document or any omission to take any
such action; or
(xxii) any other circumstance whatsoever that
might otherwise constitute a legal or equitable discharge or defense of a surety
or guarantor.
(c) Each Obligor expressly waives, for the benefit
of the Trustee and the Holders, all set-offs and counterclaims and all
presentments, demands for payment or performance, notices of nonpayment or
nonperformance, protests, notices of protest, notices of dishonor and all other
notices or demands of any kind or nature whatsoever with respect to the
Guaranteed Obligations, and all notices of acceptance of this Agreement or of
the existence, creation, incurring or assumption of new or additional Guaranteed
Obligations. Each Obligor further expressly waives the benefit of any and all
statutes of limitation and any and all laws providing for the exemption of
property from execution or for valuation and appraisal upon foreclosure, to the
maximum extent permitted by applicable law.
(d) Each Obligor represents and warrants to the
Trustee and the Holders that it has established adequate means of obtaining
financial and other information pertaining to the business, operations and
condition (financial and otherwise) of the Company and its properties on a
continuing basis and that such Obligor is now and will in the future remain
fully familiar with the business, operations and condition (financial and
otherwise) of the Company and its properties. Each Obligor further represents
and warrants that it has reviewed and approved each of the Indenture Documents
and is fully familiar with the transaction contemplated by the Indenture
Documents and that it will in the future remain fully familiar with such
transaction and with any new Indenture Documents and the transactions
contemplated by such Indenture Documents. Each Obligor hereby expressly waives
and relinquishes any duty on the part of the Trustee or the Holders (should any
such duty exist) to disclose to such or any other Obligor any matter of fact or
other information related to the business, operations or condition (financial or
otherwise) of the Company or its properties or to any Indenture Document or the
transactions undertaken pursuant to, or contemplated by, any such Indenture
Document, whether now or in the future known by the Trustee or any Holder.
(e) Each Obligor intends that its rights and
obligations shall be those expressly set forth in this Agreement and that its
obligations shall not be affected, limited, reduced,
GUARANTEE AND SECURITY AGREEMENT
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discharged or terminated by reason of any principles or provisions of law which
conflict with the terms of this Agreement.
1.023 Understanding With Respect to Waivers and Consents.
Each Obligor warrants and agrees that each of the waivers and consents set forth
in this Agreement are made voluntarily and unconditionally after consultation
with outside legal counsel and with full knowledge of their significance and
consequences, with the understanding that events giving rise to any defense or
right waived may diminish, destroy or otherwise adversely affect rights which
such or any other Obligor otherwise may have against the Company, the Trustee,
any Holder or any other Person or against any collateral. If, notwithstanding
the intent of the parties that the terms of this Agreement shall control in any
and all circumstances, any such waivers or consents are determined to be
unenforceable under applicable law, such waivers and consents shall be effective
to the maximum extent permitted by law.
1.024 Subrogation. Each Obligor hereby agrees that, until the
payment and satisfaction in full of all of the Guaranteed Obligations under the
Indenture, it shall not exercise any right, remedy, power or privilege, such as
any right of subrogation, contribution or indemnity or related remedy, power or
privilege, arising (whether by contract or operation of law, including under the
Bankruptcy Code) against the Company, any other Obligor or any other guarantor
of all or any part of the Guaranteed Obligations or any collateral for all or
any part of the Guaranteed Obligations by reason of any payment or other
performance pursuant to the provisions of this Agreement and, if any amount
shall be paid to such Obligor on account of such rights, remedies, powers or
privileges, it shall hold such amount in trust for the benefit of, and pay the
same over to, the Trustee (for the benefit of the Holders) on account of the
Guaranteed Obligations. Each Obligor understands that the exercise by the
Trustee or any Holder of any right, remedy, power or privilege that it may have
under the Indenture Documents, any agreement, security document, guarantee or
other instrument relative to all or any part of the Guaranteed Obligations or
otherwise may affect or eliminate such or any other Obligor's right of
subrogation or similar recovery against the Company, any other Obligor, any
other guarantors or any collateral and that such and the other Obligors may
therefore incur partially or totally nonreimbursable liability under this
Agreement. Nevertheless, each Obligor hereby authorizes and empowers the
Trustee and the Holders to exercise, in its or their sole discretion, any
combination of such rights, remedies, powers and privileges.
1.025 Reinstatement. The obligations of each Obligor under
this Section 2 shall be automatically reinstated if and to the extent that for
any reason any payment by or on behalf of the Company, any other Obligor or any
other Person or any other application of funds (including the proceeds of any
collateral for all or any part of the Guaranteed Obligations) in respect of all
or any part of the Guaranteed Obligations is rescinded or must be otherwise
restored by any holder of such Guaranteed Obligations, whether as a result of
any proceedings in bankruptcy, reorganization or otherwise and the Obligors
jointly and severally agree that it will indemnify the Trustee and each Holder
on demand for all reasonable costs and expenses (including fees and expenses of
counsel) incurred by the Trustee or such Holder in connection with such
rescission or restoration.
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1.026 Remedies. The Obligors hereby jointly and severally
agree that, between each of them and the Trustee (for the benefit of the
Holders), the obligations of the Company under the Indenture and the other
Indenture Documents may be declared to be forthwith (or may become
automatically) due and payable as provided in Section 4.2 of the Indenture for
purposes of Section 2.01 notwithstanding any stay, injunction or other
prohibition preventing such declaration (or such obligations becoming due and
payable as against the Company) and that, in the event of such declaration (or
such obligation being deemed due and payable), such obligations (whether or not
due and payable by the Company) shall forthwith become due and payable for
purposes of Section 2.01.
1.027 Subordination of Indebtedness of the Company; Security
Interest.
(a) Each Obligor agrees that any indebtedness of the Company
now or in the future owed to such Obligor is hereby subordinated to the
Guaranteed Obligations. If the Trustee so requests, any such indebtedness shall
be collected, enforced and received by such Obligor as trustee for the Trustee
and shall be paid over to the Trustee (for the benefit of the Holders) in kind
on account of the Guaranteed Obligations. If, after the Trustee's request, such
Obligor fails to collect or enforce any such indebtedness or to pay the proceeds
of such indebtedness to the Trustee, the Trustee as such Obligor's
attorney-in-fact may do such acts and sign such documents in such Obligor's name
and on such Obligor's behalf as the Trustee considers necessary or desirable to
effect such collection, enforcement or payment, the Trustee being hereby
appointed such Obligor's attorney-in-fact for such purpose.
(b) Each Obligor hereby grants to the Trustee (for the
benefit of the Holders) a security interest in any indebtedness referred to in
Section 2.07(a) and in any personal property of the Company in which such
Obligor now has or in the future acquires any right, title or interest. Each
Obligor agrees that such security interest shall be additional security for the
Guaranteed Obligations and shall be superior to any right of such Obligor in
such property until the Guaranteed Obligations have been fully satisfied and
performed.
1.028 Limitation on Guarantee. In any proceeding involving
any state corporate law or any state or federal bankruptcy, insolvency,
reorganization or other law affecting the rights of creditors generally, if the
obligations of the Obligors under Section 2.01 would otherwise, taking into
account the provisions of Section 2.09, be held or determined to be void,
invalid or unenforceable or if the claims of the Trustee or the Holders in
respect of such obligations would be subordinated to the claims of any other
creditors on account of the Obligors' liability under Section 2.01, then,
notwithstanding any other provision of this Agreement to the contrary, the
amount of such liability shall, without any further action by the Obligors, any
Holder, the Trustee or any other Person, be automatically limited and reduced to
the highest amount which is valid and enforceable and not subordinated to the
claims of other creditors as determined in such action or proceeding.
1.029 Rights of Contribution. The Obligors hereby agree, as
between themselves, that if any Obligor (an "Excess Funding Obligor") shall pay
a portion of the Guaranteed Obligations in excess of the Excess Funding
Obligor's Pro Rata Share (as defined below) of the Guaranteed
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Obligations, the other Obligors shall, on demand (but subject to the next
sentence), pay to the Excess Funding Obligor an amount equal to their
respective Pro Rata Shares of such Excess Funding Obligor's payment. The
payment obligations of any Obligor under this Section 2.09 shall be
subordinate and subject in right of payment to the prior payment in full and
in cash of the obligations of such Obligor under the other provision of this
Section 2, and such Excess Funding Obligor shall not exercise any right,
remedy, power or privilege with respect to such excess until payment and
satisfaction in full of all such obligations. For the purposes of this
Section 2.09, "Pro Rata Share" shall mean, for any Obligor, a fraction (which
shall in no event exceed 1.00) the numerator of which is the excess, if any,
of the fair value of the assets of such Obligor over a fair estimate of the
liabilities of Obligor and the denominator of which is the excess (but not
less than $1.00) of the fair value of the aggregate assets (without
duplication) of all Obligors over a fair estimate of the aggregate
liabilities (without duplication) of all Obligors. All relevant calculations
shall be made as of the date such Obligor became a Obligor.
Section 3. Collateral.
1.031 Grant. As collateral security for the prompt payment in
full when due (whether at stated maturity, by acceleration or otherwise) and
performance of the Secured Obligations, each Obligor hereby pledges and grants
to the Trustee, for the benefit of the Holders, a security interest in all of
such Obligor's right, title and interest in and to the following property,
whether now owned or hereafter acquired by such Obligor and whether now existing
or hereafter coming into existence (collectively, the "Collateral"):
(a) (i) all of the shares of capital stock of the
Issuers now owned or hereafter acquired by such Obligor, together with in each
case the certificates representing the same (collectively, the "Pledged Stock");
(ii) all shares, securities, moneys or property
representing a dividend on, or a distribution or return of capital in respect
of, any of the Pledged Stock, resulting from a split-up, revision,
reclassification or other like change of any of the Pledged Stock or otherwise
received in exchange for any of the Pledged Stock and all Equity Rights issued
to the holders of, or otherwise in respect of, any of the Pledged Stock; and
(iii) without affecting the obligations of any Obligor
under any provision prohibiting such action under any Indenture Document, in the
event of any consolidation or merger in which any Issuer is not the surviving
corporation, all shares of each class of the capital stock of the successor
corporation (unless such successor corporation is the Company itself) formed by
or resulting from such consolidation or merger (collectively, and together with
the property described in clauses (i) and (ii) above, the "Stock Collateral");
(iv) the Indebtedness described in Annex I with
respect to such Obligor and issued by the obligors named therein (the "Pledged
Debt");
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(v) all additional Indebtedness in excess of
$100,000 for money borrowed or for the deferred purchase price of property from
time to time owed to such Obligor by any obligor of the Pledged Debt, and all
additional Indebtedness in excess of $100,000 for money borrowed or for the
deferred purchase price of property from time to time owed to such Obligor by
any other Person who, after the date of this Agreement, becomes, as a result of
any occurrence, a Subsidiary of such Obligor or an Affiliate of such Obligor
(any such Indebtedness being "Additional Debt");
(vi) all notes or other instruments evidencing the
Indebtedness referred to in clauses (iv) and (v) above;
(b) all accounts and general intangibles (each as defined in
the Uniform Commercial Code) of such Obligor constituting a right to the payment
of money, whether or not earned by performance, including all moneys due and to
become due to such Obligor in repayment of any loans or advances, in payment for
goods (including Inventory and Equipment) sold or leased or for services
rendered, in payment of tax refunds and in payment of any guarantee of any of
the foregoing (collectively, the "Accounts");
(c) all instruments, chattel paper or letters of credit
(each as defined in the Uniform Commercial Code) of such Obligor evidencing,
representing, arising from or existing in respect of, relating to, securing or
otherwise supporting the payment of, any of the Accounts (collectively, the
"Instruments");
(d) all inventory (as defined in the Uniform Commercial
Code) and all other goods (including Motor Vehicles) of such Obligor that are
held by such Obligor for sale, lease or furnishing under a contract of service
(including to its Subsidiaries or Affiliates), that are so leased or furnished
or that constitute raw materials, work in process or material used or consumed
in its business, including all spare parts and related supplies, all goods
obtained by such Obligor in exchange for any such goods, all products made or
processed from any such goods and all substances, if any, commingled with or
added to any such goods (collectively, the "Inventory");
(e) all equipment (as defined in the Uniform Commercial
Code) and all other goods (including Motor Vehicles) of such Obligor that are
used or bought for use primarily in its business, including all spare parts and
related supplies, all goods obtained by such Obligor in exchange for any such
goods, all substances, if any, commingled with or added to such goods and all
upgrades and other improvements to such goods, in each case to the extent not
constituting Inventory (collectively, the "Equipment");
(f) all documents of title (as defined in the Uniform
Commercial Code) or other receipts of such Obligor covering, evidencing or
representing Inventory or Equipment (collectively, the "Documents");
(g) all contracts and other agreements of such Obligor
relating to the sale or other disposition of all or any part of the Inventory,
Equipment or Documents and all rights, warranties,
GUARANTEE AND SECURITY AGREEMENT
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claims and benefits of such Obligor against any Person arising out of, relating
to or in connection with all or any part of the Inventory, Equipment or
Documents of such Obligor, including any such rights, warranties, claims or
benefits against any Person storing or transporting any such Inventory or
Equipment or issuing any such Documents;
(h) all other accounts or general intangibles of such
Obligor not constituting Accounts, including, to the extent related to all or
any part of the other Collateral, all books, correspondence, credit files,
records, invoices, tapes, cards, computer runs and other papers and documents in
the possession or under the control of such Obligor or any computer bureau or
service company from time to time acting for such Obligor;
(i) the balance from time to time in the Collateral Account;
(j) all other tangible and intangible property of such
Obligor, including all Intellectual Property; and
(k) all proceeds and products in whatever form of all or any
part of the other Collateral, including all proceeds of insurance and all
condemnation awards and all other compensation for any Casualty Event with
respect to all or any part of the other Collateral (together with all rights to
recover and proceed with respect to the same), and all accessories to,
substitutions for and replacements of all or any part of the other Collateral.
1.032 Intellectual Property. For the purpose of enabling the
Trustee to exercise its rights, remedies, powers and privileges under Section 7
at such time or times as the Trustee shall be lawfully entitled to exercise such
rights, remedies, powers and privileges, and for no other purpose, each Obligor
hereby grants to the Trustee, to the extent assignable, an irrevocable,
nonexclusive license (exercisable without payment of royalty or other
compensation to such Obligor) to use, assign, license or sublicense any of the
Intellectual Property of such Obligor, together with reasonable access to all
media in which any of the licensed items may be recorded or stored and to all
computer programs used for the compilation or printout of such items.
1.033 Perfection.
Concurrently with the execution and delivery of this Agreement,
each Obligor shall (i) file such financing statements and other documents in
such offices as shall be necessary or as the Trustee may request to perfect and
establish the priority (subject only to Liens permitted under Section 8.8 of the
Indenture) of the Liens granted by this Agreement (including promptly filing the
Assignment for Security--Trademarks and Patents, in the form executed on the
date hereof by the Obligors, in the United States Patent and Trademark Office),
(ii) deliver and pledge to the Trustee any and all Instruments, endorsed or
accompanied by such instruments of assignment and transfer in such form and
substance as the Trustee may request, (iii) cause the Trustee (to the extent
requested by the Trustee) to be listed as the lienholder on all certificates of
title or ownership relating to Motor Vehicles owned by such Obligor and deliver
to the Trustee originals of all such certificates of title or ownership
GUARANTEE AND SECURITY AGREEMENT
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for the Motor Vehicles together with the odometer statements for each respective
Motor Vehicle, (iv) deliver to the Trustee all certificates for the Pledged
Stock and Pledged Debt, accompanied by undated stock or bond powers, as the case
may be, duly executed in blank and (v) take all such other actions as shall be
necessary or as the Trustee may request to perfect and establish the priority
(subject only to such permitted Liens) of the Liens granted by this Agreement.
The Trustee shall have the right, at any time in its discretion and with notice
to the Company, to transfer to or to register in its name or in the name of any
of its nominees any or all of the Pledged Stock or Pledged Debt.
1.034 Preservation and Protection of Security Interests. Each
Obligor shall:
(a) upon the acquisition after the Signing Date by such
Obligor of any Securities Collateral, promptly either (x) transfer and deliver
to the Trustee all such Securities Collateral (together with the certificates or
instruments representing such Securities Collateral securities duly endorsed in
blank or accompanied by undated powers duly executed in blank) or (y) take such
other action as the Trustee shall deem necessary or appropriate to perfect, and
establish the priority of, the Liens granted by this Agreement in such
Securities Collateral;
(b) upon the acquisition after the Signing Date by such
Obligor of any Instrument, promptly deliver and pledge to the Trustee all such
Instruments, endorsed or accompanied by such instruments of assignment and
transfer in such form and substance as the Trustee may request;
(c) upon the acquisition after the Signing Date by such
Obligor of any Equipment or Motor Vehicle covered by a certificate of title or
ownership, promptly cause the Trustee to be listed as the lienholder on such
certificate of title and within 120 days of the acquisition of such property
deliver evidence of the same to the Trustee; PROVIDED, HOWEVER, if the property
to be acquired is subject to a purchase money security interest permitted by
Section 8.8 of the Indenture, the Trustee shall be listed as a junior lienholder
to the Person holding such purchase money security interest;
(d) upon such Obligor's acquiring, or otherwise becoming
entitled to the benefits of, any Copyright (or copyrightable material), Patent
(or patentable invention), Trademark (or associated goodwill) or other
Intellectual Property or upon or prior to such Obligor's filing, either directly
or through any agent, licensee or other designee, of any application with any
Governmental Person for any Copyright, Patent, Trademark, or other Intellectual
Property, in each case after the Signing Date, execute and deliver such
contracts, agreements and other instruments as the Trustee may request to
evidence, validate, perfect and establish the priority (subject only to Liens
permitted under Section 8.8 of the Indenture) of the Liens granted by this
Agreement in such and any related Intellectual Property.
(e) give, execute, deliver, file or record any and all
financing statements, notices, contracts, agreements or other instruments,
obtain any and all governmental approvals and take any and all steps that may be
necessary or as the Trustee may request to create, perfect, establish the
priority (subject only to Liens permitted under Section 8.8 of the Indenture)
of, or to preserve the
GUARANTEE AND SECURITY AGREEMENT
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validity, perfection or priority (subject only to such permitted Liens) of, the
Liens granted by this Agreement or to enable the Trustee to exercise and enforce
its rights, remedies, powers and privileges under this Agreement with respect to
such Liens, including causing any or all of the Securities Collateral to be
transferred of record into the name of the Trustee or its nominee (and the
Trustee agrees that if any Securities Collateral is transferred into its name or
the name of its nominee, the Trustee will thereafter promptly give to such
Obligor copies of any notices and communications received by it with respect to
the Stock Collateral pledged by such Obligor), PROVIDED that notices to account
debtors in respect of any Accounts or Instruments shall be subject to the
provisions of Section 4.02(b).
1.035 Attorney-in-Fact.
(a) Subject to the rights of such Obligor under Sections
3.06, 3.07, 3.08 and 3.09, the Trustee is hereby appointed the attorney-in-fact
of each Obligor for the purpose of carrying out the provisions of this Agreement
and taking any action and executing any instruments which the Trustee may deem
necessary or advisable to accomplish the purposes of this Agreement, to preserve
the validity, perfection and priority (subject only to Liens permitted under
Section 8.8 of the Indenture) of the Liens granted by this Agreement and,
following any Default, to exercise its rights, remedies, powers and privileges
under this Agreement. This appointment as attorney-in-fact is irrevocable and
coupled with an interest. Without limiting the generality of the foregoing, the
Trustee shall be entitled under this Agreement upon the occurrence and
continuation of any Event of Default (or, in respect of Section 4.02(b), any
Default) (i) to ask, demand, collect, sue for, recover, receive and give receipt
and discharge for amounts due and to become due under and in respect of all or
any part of the Collateral; (ii) to receive, endorse and collect any Instruments
or other drafts, instruments, documents and chattel paper in connection with
clause (i) above (including any draft or check representing the proceeds of
insurance or the return of unearned premiums); (iii) to file any claims or take
any action or proceeding that the Trustee may deem necessary or advisable for
the collection of all or any part of the Collateral, including the collection of
any compensation due and to become due under any contract or agreement with
respect to all or any part of the Collateral; and (iv) to execute, in connection
with any sale or disposition of the Collateral under Section 7, any
endorsements, assignments, bills of sale or other instruments of conveyance or
transfer with respect to all or any part of the Collateral. In any suit,
proceeding or action brought by the Trustee relating to any Account, contract or
Instrument for any sum owing thereunder, or to enforce any provision of any
Account, contract or Instrument, the Obligors, jointly and severally, will save,
indemnify and keep the Trustee harmless from and against all expense, loss or
damage suffered by reason of any defense, set-off, counterclaim, recoupment or
reduction or liability whatsoever of the obligor thereunder, arising out of a
breach by any Obligor of any obligation thereunder or arising out of any other
agreement, Indebtedness or liability at any time owing to, or in favor of, such
obligor or its successors from the Obligors, and all such obligations of the
Obligors shall be and remain enforceable against and only against the Obligors
and shall not be enforceable against the Trustee.
(b) Without limiting the rights and powers of the Trustee
under Section 3.05(a), each Obligor hereby appoints the Trustee as its
attorney-in-fact, effective the Signing Date and
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terminating upon the termination of this Agreement, for the purpose of (i)
executing on behalf of such Obligor title or ownership applications for filing
with appropriate state agencies to enable Motor Vehicles now owned or hereafter
acquired by such Obligor to be retitled and the Trustee to be listed as
lienholder as to such Motor Vehicles, (ii) filing such applications with such
state agencies and (iii) executing such other documents and instruments on
behalf of, and taking such other action in the name of, such Obligor as the
Trustee may deem necessary or advisable to accomplish the purposes of this
Agreement (including the purpose of creating in favor of the Trustee a perfected
lien on the Motor Vehicles and exercising the rights and remedies of the Trustee
under Section 7). This appointment as attorney-in-fact is irrevocable and
coupled with an interest.
(c) Without limiting the rights and powers of the Trustee
under Section 3.05(a), each Obligor hereby appoints the Trustee as its
attorney-in-fact, effective the Signing Date and terminating upon the
termination of this Agreement, for the purpose of executing and filing all such
contracts, agreements and other documents as are contemplated by Section
3.04(d). This appointment as attorney-in-fact is irrevocable and coupled with
an interest.
1.036 Special Provisions Relating to Securities Collateral.
(a) So long as no Event of Default shall have occurred and
be continuing, the Obligors shall have the right to exercise all voting,
consensual and other powers of ownership pertaining to the Securities Collateral
for all purposes not inconsistent with the terms of any Indenture Document,
PROVIDED that the Obligors jointly and severally agree that they will not vote
the Securities Collateral in any manner that is inconsistent with the terms of
any Indenture Document; and the Trustee shall, at the Obligors' expense, execute
and deliver to the Obligors or cause to be executed and delivered to the
Obligors all such proxies, powers of attorney, dividend and other orders and
other instruments, without recourse, as the Obligors may reasonably request for
the purpose of enabling the Obligors to exercise the rights and powers which
they are entitled to exercise pursuant to this Section 3.06(a).
(b) So long as no Event of Default shall have occurred and
be continuing, the Obligors shall be entitled to receive and retain any
dividends or distributions on the Securities Collateral paid in cash.
(c) If any Event of Default shall have occurred and be
continuing, and whether or not the Trustee or any Holder exercises any available
right to declare any Secured Obligation due and payable or seeks or pursues any
other right, remedy, power or privilege available to it under applicable law,
this Agreement or any other Indenture Document, all dividends and other
distributions on the Securities Collateral shall be paid directly to the Trustee
and retained by it in the Collateral Account as part of the Securities
Collateral, subject to the terms of this Agreement, and, if the Trustee shall so
request, the Obligors jointly and severally agree to execute and deliver to the
Trustee appropriate additional dividend, distribution and other orders and
instruments to that end, PROVIDED that if such Event of Default is cured, any
such dividend or distribution paid to the Trustee prior to such cure
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shall, upon request of the Obligors (except to the extent applied to the Secured
Obligations), be returned by the Trustee to the Obligors.
1.037 Use of Intellectual Property. Subject to such action
not otherwise constituting a Default and so long as no Event of Default shall
have occurred and be continuing, the Obligors will be permitted to exploit, use,
enjoy, protect, license, sublicense, assign, sell, dispose of or take other
actions with respect to the Intellectual Property in the ordinary course of the
business of the Obligors. In furtherance of the foregoing, so long as no Event
of Default shall have occurred and be continuing, the Trustee shall from time to
time, upon the request of the Obligors through the Company, execute and deliver
any instruments, certificates or other documents, in the form so requested,
which such Obligors through the Company shall have certified are appropriate (in
their judgment) to allow them to take any action permitted above (including
relinquishment of the license provided pursuant to Section 3.02 as to any
specific Intellectual Property). The exercise of rights, remedies, powers and
privileges under Section 7 by the Trustee shall not terminate the rights of the
holders of any licenses or sublicenses theretofore granted by the Obligors in
accordance with the first sentence of this Section 3.07.
1.038 Instruments. So long as no Default or Event of Default
shall have occurred and be continuing, each Obligor may retain for collection in
the ordinary course of business any Instruments obtained by it in the ordinary
course of business, and the Trustee shall, promptly upon the request, and at the
expense of, such Obligor through the Company, make appropriate arrangements for
making any Instruments pledged by the Obligors available to the respective
Obligor for purposes of presentation, collection or renewal. Any such
arrangement shall be effected, to the extent deemed appropriate by the Trustee,
against trust receipt or like document.
1.039 Use of Collateral. So long as no Event of Default
shall have occurred and be continuing, each Obligor shall, in addition to its
rights under Sections 3.06, 3.07 and 3.08 in respect of the Collateral
contemplated in those sections, be entitled to use and possess the other
Collateral and to exercise its rights, title and interest in all contracts,
agreements, licenses and governmental approvals, subject to the rights,
remedies, powers and privileges of the Trustee under Sections 4 and 7 and to
such use, possession or exercise not otherwise constituting a Default.
3.10 Rights and Obligations.
(a) Each Obligor shall remain liable to perform its
duties and obligations under the contracts and agreements included in the
Collateral in accordance with their respective terms to the same extent as if
this Agreement had not been executed and delivered. The exercise by the Trustee
of any right, remedy, power or privilege in respect of this Agreement shall not
release any Obligor from any of its duties and obligations under such contracts
and agreements and the Obligors shall save, indemnify and keep the Trustee
harmless from and against all expense, loss or damage suffered by reason of such
exercise. Neither the Trustee nor any Holder shall have any duty, obligation or
liability under such contracts and agreements or in respect to any governmental
approval included in the Collateral by reason of this Agreement or any other
Indenture Document, nor shall the
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Trustee or any Holder be obligated to perform any of the duties or
obligations of any Obligor under any such contract or agreement or any such
governmental approval or to take any action to collect or enforce any claim
(for payment) under any such contract or agreement or governmental approval.
(b) No Lien granted by this Agreement in the
Obligors' right, title and interest in any contract, agreement or governmental
approval shall be deemed to be a consent by the Trustee or any Holder to any
such contract, agreement or governmental approval.
(c) No reference in this Agreement to proceeds or to
the sale or other disposition of Collateral shall authorize any Obligor to sell
or otherwise dispose of any Collateral except to the extent otherwise expressly
permitted by the terms of any Indenture Document.
(d) Neither the Trustee nor any Holder shall be
required to take steps necessary to preserve any rights against prior parties to
any part of the Collateral.
3.11 Release of Motor Vehicles. So long as no Default shall
have occurred and be continuing, upon the request of, and as the expense of, any
Obligor, the Trustee shall execute and deliver to such Obligor such instruments
as such Obligor shall reasonably request to remove the notation of the Trustee
as lienholder on any certificate of title for any Motor Vehicle; PROVIDED that
any such instruments shall be delivered, and the release shall be effective,
only upon receipt by the Trustee of a certificate from such Obligor stating that
the Motor Vehicle the Lien on which is to be released is to be sold or has
suffered a casualty loss (with title passing to the appropriate casualty
insurance company in settlement of the claim for such loss).
3.12 Termination. When all Secured Obligations shall have
been paid in full, this Agreement shall (subject, however, to Section 2.05)
terminate, and the Trustee shall, at the expense of the respective Obligor,
forthwith cause to be assigned, transferred and delivered, against receipt but
without any recourse, warranty or representation whatsoever, any remaining
Collateral and money received in respect of the Collateral, to or on the order
of the respective Obligors and to be released, canceled and granted back all
licenses and rights referred to in Section 3.02. The Trustee shall also, at the
expense of the respective Obligor, execute and deliver to the respective
Obligors upon such termination such Uniform Commercial Code termination
statements, certificates for terminating the Liens on the Motor Vehicles and
such other documentation as shall be reasonably requested by the respective
Obligors to effect the termination and release of the Liens granted by this
Agreement on the Collateral.
Section 4. Cash Proceeds of Collateral.
1.041 Collateral Account. There is hereby established with
the Trustee a cash collateral account (the "Collateral Account") in the name and
under the exclusive domain and control of the Trustee into which there shall be
deposited from time to time the cash proceeds of any of the Collateral
(including proceeds resulting from insurance or condemnation) required to be
delivered to the Trustee pursuant to this Agreement and into which any Obligor
may from time to time deposit any
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additional amounts which it wishes to pledge to the Trustee as additional
collateral security under this Agreement. The balance from time to time in the
Collateral Account shall constitute part of the Collateral and shall not
constitute payment of the Secured Obligations until applied as provided in this
Agreement. Except as expressly provided in the next sentence, the Trustee shall
remit the collected balance outstanding to the credit of the Collateral Account
to or upon the order of the Obligors as the Obligors through the Company shall
from time to time instruct. However, if any Event of Default shall have
occurred and be continuing, the Trustee may (and, if instructed by the Holders
as specified in Section 4.5 of the Indenture, shall) in its (or their)
discretion apply or cause to be applied (subject to collection) the balance from
time to time outstanding to the credit of the Collateral Account to the payment
of the Secured Obligations in the manner specified in Section 7. The balance
from time to time in the Collateral Account shall be subject to withdrawal only
as provided in this Agreement.
1.042 Certain Proceeds.
(a) If any Default or Event of Default shall have occurred
and be continuing, each Obligor shall, upon request of the Trustee, promptly
notify (and such Obligor hereby authorizes the Trustee so to notify) each
account debtor in respect of any Accounts or Instruments that such Collateral
has been assigned to the Trustee under this Agreement and that any payments due
or to become due in respect of such Collateral are to be made directly to the
Trustee. All such payments made to the Trustee shall be immediately deposited
in the Collateral Account.
(b) Each Obligor agrees that if the proceeds of any
Collateral (including payments made in respect of Accounts and Instruments)
shall be received by it following the occurrence and during the continuation of
a Default, such Obligor shall as promptly as possible deposit such proceeds into
the Collateral Account. Until so deposited, all such proceeds shall be held in
trust by each Obligor for and as the property of the Trustee and shall not be
commingled with any other funds or property of such Obligor.
1.043 Investment of Balance in Collateral Account. Amounts on
deposit in the Collateral Account shall be invested from time to time in such
Permitted Investments as the Obligors through the Company (or, if any Default or
Event of Default shall have occurred and be continuing, the Trustee) shall
determine. All such investments shall be held in the name and be under the
control of the Trustee. At any time after the occurrence and during the
continuance of an Event of Default, the Trustee may (and, if instructed by the
Holders as specified in Section 4.5 of the Indenture, shall) in its (or their)
discretion at any time and from time to time elect to liquidate any such
investments and to apply or cause to be applied the proceeds of such action to
the payment of the Secured Obligations in the manner specified in Section 7.
Section 5. Representations and Warranties. As of the Signing
Date, each Obligor represents and warrants to the Trustee for the benefit of the
Holders as follows:
1.051 Title. Such Obligor is the sole beneficial owner of the
Collateral in which it purports to grant a Lien pursuant to this Agreement, and
such Collateral is free and clear of all Liens (and, with respect to the Stock
Collateral, of any Equity Right in favor of any other Person), except
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for Liens permitted under Section 8.8 of the Indenture. The Liens granted by
this Agreement in favor of the Trustee for the benefit of the Trustee and the
Holders have attached and, upon filing of the respective financing statements in
the jurisdictions listed on Annex II, this Agreement is effective to create a
perfected security interest in all of such Collateral (other than Intellectual
Property registered or otherwise located outside of the United States of
America) prior to all other Liens (except, with respect to Collateral other than
Securities Collateral or the cash in the Collateral account, such Permitted
Liens). With respect to the Pledged Stock, the Pledged Debt and the cash in the
Collateral Account, the pledge of such Collateral pursuant to this Agreement
creates a valid and perfected first priority security interest in such
Collateral in favor of the Trustee for the benefit of the Holders.
1.052 Securities Collateral.
(a) The Pledged Stock presently owned by such Obligor is
duly authorized, validly existing, fully paid and nonassessable, and none of
such Pledged Stock is subject to any contractual restriction, or any restriction
under the charter or by-laws of the respective Issuer of such Pledged Stock,
upon the transfer of such Pledged Stock (except for any such restriction
contained in any Indenture Document). The Pledged Debt pledged by such Obligor
has been duly authorized, authenticated or issued and delivered, and is the
legal, valid and binding obligation of the issuers thereof, and is not in
default. The pledged Debt constitutes all of the outstanding Indebtedness in
excess of $100,000 for money borrowed or for the deferred purchase price of
property owed to such Obligor by any of its Subsidiaries or Affiliates.
(b) The Pledged Stock pledged by such Obligor constitutes
all of the issued and outstanding shares of capital stock of any class of the
Issuers beneficially owned by such Obligor on the Signing Date (whether or not
registered in the name of such Obligor).
1.053 Intellectual Property.
(a) Except pursuant to licenses and other user agreements
entered into by such Obligor in the ordinary course of business, such Obligor
owns and possesses the right to use, and has done nothing to authorize or enable
any other Person to use, any Copyright, Patent or Trademark constituting
Intellectual Property.
(b) To any Obligor's knowledge, (i) except as disclosed in
writing, there is no violation by others of any right of the Obligor with
respect to any Intellectual Property and (ii) the Obligor is not infringing in
any respect upon any Copyright, Patent or Trademark of any other Person; and no
proceedings have been instituted, are pending against any Obligor or, to any
Obligor's knowledge, have been threatened against, and no claim has been
received by, any Obligor, alleging any such violation, except as may be
disclosed in writing.
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(c) No Obligor owns any Trademarks registered in the United
States of America to which the last sentence of the definition of Trademark
Collateral applies.
1.054 Goods. Any goods now or hereafter manufactured or
otherwise produced by any Obligor or any of its Subsidiaries included in the
Collateral have been and will be produced in compliance with the requirements of
the Fair Labor Standards Act.
1.055 Corporate Existence. Each of such Obligor and its
Subsidiaries: (i) is a corporation, partnership or other entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation; (ii) has all requisite corporate or other power, and has all
material governmental approvals, necessary to own its assets and carry on its
business as now being or as proposed to be conducted; and (iii) is qualified to
do business in all jurisdictions in which the nature of the business conducted
by it makes such qualification necessary and where the failure so to qualify
would have a Material Adverse Effect. The issuers listed on Annex III are the
only direct Subsidiaries of such Obligor and such Obligor has no indirect
Subsidiaries except as listed on Annex IV attached hereto.
1.056 Financial Condition. The consolidated balance sheets of
the Company and its Consolidated Subsidiaries (including such Obligor) as at
December 31, 1994 and the related consolidated statements of income, retained
earnings and cash flow of the Company and its Consolidated Subsidiaries for the
fiscal year then ended, together with the related opinion (in the case of such
consolidated balance sheet and statements) of Coopers & Lybrand, and the
unaudited consolidated balance sheets of the Company and its Consolidated
Subsidiaries as at September 30, 1995 and the related consolidated statements of
income, retained earnings and cash flow of the Company and its Consolidated
Subsidiaries for the nine-month period then ended, heretofore furnished to each
of the Purchasers, are complete and correct and fairly present the consolidated
financial condition of the Company and its Consolidated Subsidiaries as at such
dates and the consolidated results of their operations for the fiscal year and
nine-month period then ended (subject, in the case of such unaudited financial
statements, to normal year-end audit adjustments), all in accordance with
generally accepted accounting principles and practices applied on a consistent
basis. Neither such Obligor nor any of its Subsidiaries has on the Signing Date
any material contingent liabilities, liabilities for taxes, unusual forward or
long-term commitments or unrealized or anticipated losses from any unfavorable
commitments, except as expressly referred to or reflected or provided for in the
most recent balance sheet referred to above. Since September 30, 1995, there
has been no material adverse change in the financial condition, operations,
business or prospects taken as a whole of the Company and its Consolidated
Subsidiaries from this set forth in the financial statements as at and for the
period ending on that date.
1.057 Litigation. Except as disclosed to the Purchasers in
writing prior to the Signing Date, there are no legal or arbitral proceedings
by or before any governmental Person, now pending or (to the knowledge of any
Obligor) threatened against any Obligor or its property or any of its
Subsidiaries or any of their property that, if adversely determined, could
have a Material Adverse Effect.
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1.058 No Breach. None of the execution and delivery of this
Agreement, the consummation of the transactions contemplated by this Agreement
or compliance with the terms and provisions of this Agreement will conflict with
or result in a breach of, or require any consent under, the corporate charter or
by-laws of such Obligor, or any applicable governmental rule or regulation, or
any agreement or instrument to which such Obligor or any of its Subsidiaries is
a party or by which any of them is bound or to which any of them is subject, or
constitute a default under, or result in the acceleration or mandatory
prepayment of, any Indebtedness evidenced by, or termination of, any such
agreement or instrument, or result in the creation or imposition of any Lien
upon any property of such Obligor or any of its Subsidiaries pursuant to the
terms of any such agreement or instrument.
5.09 Corporate Action. Such Obligor has all necessary
corporate power and authority to execute, deliver and perform its obligations
under this Agreement; the execution, delivery and performance by such Obligor of
this Agreement have been duly authorized by all necessary corporate action on
its part (including any required shareholder approvals); and this Agreement has
been duly and validly executed and delivered by such Obligor and constitutes its
legal, valid and binding obligation, enforceable in accordance with its terms.
5.10 Approvals. No governmental approvals are necessary for
the execution, delivery or performance by such Obligor of this Agreement or for
the legality, validity or enforceability of this Agreement.
5.11 Certain Regulations. No Obligor is (a) an "investment
company," or a company "controlled" by an "investment company," within the
meaning of the Investment Company Act of 1940, (b) a "holding company," or an
"affiliate" of a "holding company" or a "subsidiary company" of a "holding
company," within the meaning of the Public Utility Holding Company Act of 1935
or (c) subject to any other governmental rule or regulation restricting its
ability to incur Indebtedness, to issue guarantees or to grant Liens.
Section 6. Covenants.
1.061 Books and Records. Each Obligor shall:
(a) keep full and accurate books and records relating to the
Collateral and stamp or otherwise mark such books and records in such manner as
the Trustee may reasonably require in order to reflect the Liens granted by this
Agreement;
(b) furnish to the Trustee from time to time (but, unless a
Default shall have occurred and be continuing, no more frequently than
quarterly) statements and schedules further identifying and describing the
Copyright Collateral, the Patent Collateral and the Trademark Collateral and
such other reports in connection with the Copyright Collateral, the Patent
Collateral and the Trademark Collateral, as the Trustee may reasonably request,
all in reasonable detail;
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(c) prior to filing, either directly or through an agent,
licensee or other designee, any application for any Copyright, Patent or
Trademark, furnish to the Trustee prompt notice of such proposed filing; and
(d) permit representatives of the Trustee, upon reasonable
notice, at any time during normal business hours to inspect and make abstracts
from its books and records pertaining to the Collateral, permit representatives
of the Trustee to be present at such Obligor's place of business to receive
copies of all communications and remittances relating to the Collateral and
forward copies of any notices or communications received by such Obligor with
respect to the Collateral, all in such manner as the Trustee may request.
1.062 Removals, Etc. Without at least 30 days' prior written
notice to the Trustee, no Obligor shall (i) maintain any of its books and
records with respect to the Collateral at any office or maintain its principal
place of business at any place, or permit any Inventory or Equipment to be other
business locations presently owned or operated by such Obligor or any of its
Affiliates and identified in Annex III or IV, or in transit from one of such
locations to another or (ii) change its corporate name, or the name under which
it does business, from the name shown on the signature pages to this Agreement.
1.063 Sales and Other Liens. Except as otherwise specifically
restricted under the Indenture, the Obligors may dispose of any Collateral only
in the ordinary course of business and such Obligor will not permit any of its
Subsidiaries to dispose of its assets except in the ordinary course of business
unless such Obligor or its Subsidiary shall dispose of such assets for fair
market value in an arms length transaction and the proceeds thereof become
Collateral hereunder; notwithstanding the foregoing, except as otherwise
permitted under Section 8.8 of the Indenture, the Obligors shall not, without
the prior written consent of the Trustee, create, incur, assume or suffer to
exist any Lien upon any Collateral or file or suffer to be on file or authorize
to be filed, in any jurisdiction, any financing statement or like instrument
with respect to all or any part of the Collateral in which the Trustee is not
named as the sole secured party for the benefit of the Holders.
1.064 Stock Collateral. The Obligors will cause the Stock
Collateral to constitute at all times 100% of the total number of shares of each
class of capital stock of each Issuer then outstanding. The Obligors shall
cause all such shares to be duly authorized, validly issued, fully paid and
nonassessable and to be free of any contractual restriction or any restriction
under the charter or bylaws of the respective Issuer of such Stock Collateral,
upon the transfer of such Stock Collateral (except for any such restriction
contained in any Indenture Document). Such Obligor agrees that it will (i)
cause each issuer of the Pledged Stock not to issue any shares of stock or other
securities in addition to or in substitution for the Pledged Stock, except, with
the written consent of the Holders in accordance with the terms of the
Indenture, to such Obligor, (ii) pledge hereunder, immediately upon its
acquisition (directly or indirectly) thereof, any and all additional shares of
capital stock issued to such Obligor (the "Additional Stock") and any and all
Additional Debt, and (iii) promptly (and in any event within three business
days) deliver to the Trustee an amendment to this Agreement, duly executed by
such Obligor, in respect of the Additional Shares or Additional Debt, together
with all
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certificates, notes or other instruments representing or evidencing the same.
Such Obligor agrees that all Additional Shares and Additional Debt listed on any
such amendment delivered to the Trustee shall for all purposes hereunder
constitute Pledged Stock and Pledged Debt, respectively, and (iii) is deemed to
have made, upon such delivery, the representations and warranties contained in
Section 4 hereof with respect to such Collateral.
1.065 Intellectual Property.
(a) Each Obligor (either itself or through licensees) will,
for each Trademark, (i) to the extent consistent with past practice and good
business judgment, continue to use such 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 and effect free from any claim of abandonment for nonuse, (ii) maintain as
in the past the quality of products and services offered under such Trademark,
(iii) employ such Trademark with the appropriate notice of registration and (iv)
not (and not permit any licensee or sublicensee to) do any act or knowingly omit
to do any act whereby any Trademark material to the conduct of its business may
become invalidated.
(b) Each Obligor (either itself or through licensees) will
not do any act or knowingly omit to do any act whereby any Patent material to
the conduct of its business may become abandoned or dedicated.
(c) Each Obligor shall notify the Trustee immediately if it
knows or has reason to know that any Intellectual Property material to the
conduct of its business may become abandoned or dedicated, or of any adverse
determination or development (including the institution of, or any such
determination or development in, any proceeding before any governmental Person)
regarding each Obligor's ownership of any Intellectual Property material to its
business, its right to copyright, patent or register the same (as the case may
be), or its right to keep, use and maintain the same.
(d) Each Obligor will take all necessary steps that are
consistent with good business practices in any proceeding before any appropriate
governmental Person to maintain and pursue each application relating to any
Intellectual Property (and to obtain the relevant registrations) and to maintain
each registration material to the conduct of its business, including payment of
maintenance fees, filing of applications for renewal, affidavits of use,
affidavits of incontestability and opposition, interference and cancellation
proceedings.
(e) In the event that any Intellectual Property material to
the conduct of its business is infringed, misappropriated or diluted by a third
party, each Obligor shall notify the Trustee within (10) days after it learns of
such event and shall, if consistent with good business practice, promptly sue
for infringement, misappropriation or dilution, seek temporary restraints and
preliminary injunctive relief to the extent practicable, seek to recover any and
all damages for such infringement, misappropriation or dilution and take such
other actions as are appropriate under the circumstances to protect such
Collateral.
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(f) Each Obligor shall prosecute diligently any application
for any Intellectual Property pending as of the date of this Agreement or
thereafter made until the termination of this Agreement, make application on
uncopyrighted but copyrightable material, unpatented but patentable inventions
and unregistered but registerable Trademarks and preserve and maintain all
rights in applications for any Intellectual Property; PROVIDED, HOWEVER, that
the Obligors shall have no obligation to make any such application if making
such application would be unnecessary or imprudent in the good faith business
judgment of the respective Obligor. Any expenses incurred in connection with
such an application shall be borne by the Obligors.
(g) The Trustee shall have the right but shall in no way be
obligated to bring suit in its own name to enforce the Copyrights, Patents and
Trademarks and any license under such Intellectual Property, in which event each
Obligor shall, at the request of the Trustee, do any and all lawful acts and
execute and deliver any and all proper documents required by the Trustee in aid
of such enforcement action.
1.066 Further Assurances. Each Obligor agrees that, from time
to time upon the written request of the Trustee, such Obligor will execute and
deliver such further documents and do such other acts and things as the Trustee
may reasonably request in order fully to effect the purposes of this Agreement.
1.067 Litigation. Such Obligor will promptly give to the
Trustee notice of all legal or arbitral proceedings by or before any
governmental Person affecting such Obligor or any of its Subsidiaries, except
proceedings that, if adversely determined, would not have a Material Adverse
Effect.
1.068 Corporate Existence, Etc. Such Obligor will, and will
cause each of its Subsidiaries to: preserve and maintain its corporate
existence and all of its material rights, privileges and franchises; comply with
the requirements of all applicable governmental rules and regulations if the
failure to comply with such requirements have a Material Adverse Effect; pay and
discharge all taxes, assessments and governmental charges or levies imposed on
it or on its income or profits or on any of its other property prior to the date
on which penalties would attach, except for any such tax, assessment, charge or
levy, the payment of which is being contested in good faith and by proper
proceedings and against which adequate reserves are being maintained; maintain
all of its properties used or useful in its business in good working order and
condition, ordinary wear and tear and disposition excepted; permit
representatives of the Trustee, during normal business hours, to examine, copy
and make extracts from its books and records, to inspect its properties, and to
discuss its business and affairs with its officers, all to the extent reasonably
requested by the Trustee; keep adequate records and books of account, in which
complete entries will be made in accordance with GAAP; and keep insured by
financially sound and reputable insurers all property of a character usually
insured by corporations engaged in the same or similar business similarly
situated against loss or damage of the kinds and in the amounts customarily
insured against by such corporations and carry such other insurance as is
usually carried by such corporations.
GUARANTEE AND SECURITY AGREEMENT
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<PAGE>
Section 7. Remedies.
1.071 Events of Default, Etc. Without limitation on the
rights, remedies, powers and privileges of the Trustee under Section 2, if any
Event of Default shall have occurred and be continuing:
(a) the Trustee in its discretion may require each Obligor
to, and each Obligor shall, assemble the Collateral owned by it at such place or
places, reasonably convenient to both the Trustee and such Obligor, designated
in the Trustee's request;
(b) the Trustee in its discretion may make any reasonable
compromise or settlement it deems desirable with respect to any of the
Collateral and may extend the time of payment, arrange for payment in
installments, or otherwise modify the terms of, all or any part of the
Collateral;
(c) the Trustee in its discretion may, in its name or in the
names of the Obligors or otherwise, demand, sue for, collect or receive any
money or property at any time payable or receivable on account of or in exchange
for all or any part of the Collateral, but shall be under no obligation to do
so;
(d) the Trustee in its discretion may, upon ten business
days' prior written notice to the Obligors of the time and place, with respect
to all or any part of the Collateral which shall then be or shall thereafter
come into the possession, custody or control of the Trustee, the Holders or any
of their respective agents, sell, lease or otherwise dispose of all or any part
of such Collateral, at such place or places as the Trustee deems best, for cash,
for credit or for future delivery (without thereby assuming any credit risk) and
at public or private sale, without demand of performance or notice of intention
to effect any such disposition or of time or place of any such sale (except such
notice as is required above or by applicable statute and cannot be waived), and
the Trustee or any Holder or any other Person may be the purchaser, lessee or
recipient of any or all of the Collateral so disposed of at any public sale (or,
to the extent permitted by law, at any private sale) and thereafter hold the
same absolutely, free from any claim or right of whatsoever kind, including any
right or equity of redemption (statutory or otherwise), of the Obligors, any
such demand, notice and right or equity being hereby expressly waived and
released. In the event of any sale, license or other disposition of any of the
Trademark Collateral, the goodwill connected with and symbolized by the
Trademark Collateral subject to such disposition shall be included, and the
Obligors shall supply to the Trustee or its designee, for inclusion in such
sale, assignment or other disposition, all Intellectual Property relating to
such Trademark Collateral. The Trustee may, without notice or publication,
adjourn any public or private sale or cause the same to be adjourned from time
to time by announcement at the time and place fixed for the sale, and such sale
may be made at any time or place to which the sale may be so adjourned; and
(e) the Trustee shall have, and in its discretion may
exercise, all of the rights, remedies, powers and privileges with respect to the
Collateral of a secured party under the Uniform Commercial Code (whether or not
the Uniform Commercial Code is in effect in the jurisdiction where
GUARANTEE AND SECURITY AGREEMENT
-28-
<PAGE>
such rights, remedies, powers and privileges are asserted) and such additional
rights, remedies, powers and privileges to which a secured party is entitled
under the laws in effect in any jurisdiction where any rights, remedies, powers
and privileges in respect of this Agreement or the Collateral may be asserted,
including the right, to the maximum extent permitted by law, to exercise all
voting, consensual and other powers of ownership pertaining to the Collateral as
if the Trustee were the sole and absolute owner of the Collateral (and each
Obligor agrees to take all such action as may be appropriate to give effect to
such right).
The proceeds of, and other realization upon, the Collateral by virtue of the
exercise of remedies under this Section 7.01 and of the exercise of the license
granted to the Trustee in Section 3.02 shall be applied in accordance with
Section 7.04.
1.072 Deficiency. If the proceeds of, or other realization
upon, the Collateral by virtue of the exercise of remedies under Section 7.01
and of the exercise of the license granted by the Trustee in Section 3.02 are
insufficient to cover the costs and expenses (including attorneys fees) of such
exercise and the payment in full of the other Secured Obligations, the Obligors
shall remain liable for any deficiency.
1.073 Private Sale.
(a) The Trustee and the Holders shall incur no liability as
a result of the sale, lease or other disposition of all or any part of the
Collateral at any private sale pursuant to Section 7.01 conducted in a
commercially reasonable manner. Each Obligor hereby waives any claims against
the Trustee or any Holder arising by reason of the fact that the price at which
the Collateral may have been sold at such a private sale was less than the price
which might have been obtained at a public sale or was less than the aggregate
amount of the Secured Obligations, even if the Trustee accepts the first offer
received and does not offer the Collateral to more than one offeree.
(b) The Obligors recognize that, by reason of certain
prohibitions contained in the Securities Act of 1933 and applicable state
securities laws, the Trustee may be compelled, with respect to any sale of all
or any part of the Collateral, to limit purchasers to those who will agree,
among other things, to acquire the Collateral for their own account, for
investment and not with a view to distribution or resale. The Obligors
acknowledge that any such private sales may be at prices and on terms less
favorable to the Trustee than those obtainable through a public sale without
such restrictions, and, notwithstanding such circumstances, agree that any such
private sale shall be deemed to have been made in a commercially reasonable
manner and that the Trustee shall have no obligation to engage in public sales
and no obligation to delay the sale of any Collateral for the period of time
necessary to permit the respective Issuer of such Collateral to register it for
public sale.
1.074 Application of Proceeds. Except as otherwise expressly
provided in this Agreement and except as provided below in this Section 7.04,
the proceeds of, or other realization upon, all or any part of the Collateral by
virtue of the exercise of remedies under Section 7.01 or of
GUARANTEE AND SECURITY AGREEMENT
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<PAGE>
the exercise of the license granted in Section 3.02, and any other cash at the
time held by the Trustee under Section 4 or this Section 7, shall be applied by
the Trustee:
First, to the payment of the costs and expenses of such exercise
of remedies, including reasonable out-of-pocket costs and expenses of the
Trustee, the fees and expenses of its agents and counsel and all other expenses
incurred and advances made by the Trustee in that connection;
Next, in accordance with Section 4.10 of the Indenture.
As used in this Section 7, "proceeds" of Collateral shall mean
cash, securities and other property realized in respect of, and distributions in
kind of, Collateral, including any property received under any bankruptcy,
reorganization or other similar proceeding as to any Obligor or any issuer of,
or account debtor or other obligor on, any of the Collateral.
Section 8. Miscellaneous.
1.081 The Trustee. As provided in Article 12 of the
Indenture, the Trustee acts as collateral trustee for the benefit of the Holders
of the Notes for purposes of this Agreement. In such capacity, the Trustee
shall be entitled to all of the rights and benefits accorded the Trustee by
Article 5 of the Indenture. Following the payment in full of all Secured
Obligations outstanding under the Indenture and the Notes, the provisions of
Section 5.7 of the Indenture shall be deemed to continue in full force and
effect for the benefit of the Trustee under this Agreement.
1.082 Waiver. No failure on the part of the Trustee or any
Holder to exercise and no delay in exercising, and no course of dealing with
respect to, any right, remedy, power or privilege under this Agreement shall
operate as a waiver of such right, remedy, power or privilege, nor shall any
single or partial exercise of any right, remedy, power or privilege under this
Agreement preclude any other or further exercise of any such right, remedy,
power or privilege or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges provided in this
Agreement are cumulative and not exclusive of any rights, remedies, powers and
privileges provided by law.
1.083 Notices. All notices and communications to be given
under this Agreement shall be given or made in writing to the intended recipient
at the address specified below or, as to any party, at such other address as
shall be designated by such party in a notice to each other party. Except as
otherwise provided in this Agreement, all such communications shall be deemed to
have been duly given when transmitted by telecopier or personally delivered or,
in the case of a mailed notice, upon receipt, in each case, given or addressed
as provided in this Section 8.03:
GUARANTEE AND SECURITY AGREEMENT
-30-
<PAGE>
To the Obligors: Inamed Corporation
3800 Howard Hughes Parkway, #900
Las Vegas, Nevada
Attention: Michael D. Farney
To the Trustee: Santa Barbara Bank & Trust
1021 Anacapa Street
Santa Barbara, California 93101
Attention: Jay Donald Smith, Esq.
1.084 Expenses, Etc. The Obligors jointly and severally agree
to pay or to reimburse the Trustee for all costs and expenses (including
reasonable attorney's fees and expenses) that may be incurred by the Trustee in
any effort to enforce any of the provisions of Section 2 or Section 7, or any of
the obligations of the Obligors in respect of the Collateral or in connection
with (a) the preservation of the Lien of, or the rights of the Trustee and the
Holders under this Agreement or (b) any actual or attempted sale, lease,
disposition, exchange, collection, compromise, settlement or other realization
in respect of, or care of, the Collateral, including all such costs and expenses
(and reasonable attorney's fees and expenses) incurred in any bankruptcy,
reorganization, workout or other similar proceeding.
1.085 Amendments, Etc. Any provision of this Agreement may be
modified, supplemented or waived only by an instrument in writing duly executed
by each Obligor and the Trustee (with the consent of the Holders as specified in
Section 7.2 of the Indenture). Any such modification, supplement or waiver
shall be for such period and subject to such conditions as shall be specified in
the instrument effecting the same and shall be binding upon the Trustee and each
Holder and each Obligor, and any such waiver shall be effective only in the
specific instance and for the purposes for which given.
1.086 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of each Obligor, the Trustee and each Holder and
their respective successors and permitted assigns.
1.087 Survival. All representations and warranties made in
this Agreement or in any certificate or other document delivered pursuant to or
in connection with this Agreement shall survive the execution and delivery of
this Agreement or such certificate or other document (as the case may be) or any
deemed repetition of any such representation or warranty.
1.088 Agreements Superseded. Except with respect to express
references to other Indenture Documents, this Agreement supersedes all prior
agreements and understandings, written or oral, among the parties with respect
to the subject matter of this Agreement.
1.089 Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such
GUARANTEE AND SECURITY AGREEMENT
-31-
<PAGE>
prohibition or unenforceability without invalidating the remaining
provisions of this Agreement, and any such prohibition or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.
8.10 Captions. The table of contents and captions and
section headings appearing in this Agreement are included solely for convenience
of reference and are not intended to affect the interpretation of any provision
of this Agreement.
8.11 Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and any of the parties to this Agreement may execute this
Agreement by signing any such counterpart.
8.12 GOVERNING LAW; SUBMISSION TO JURISDICTION. THIS
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF CALIFORNIA. EACH OBLIGOR HEREBY SUBMITS TO THE NONEXCLUSIVE
JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE CENTRAL DISTRICT OF
CALIFORNIA AND OF ANY CALIFORNIA STATE COURT SITTING IN SANTA BARBARA,
CALIFORNIA FOR THE PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH
OBLIGOR IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF
ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH
PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
8.13 WAIVER OF JURY TRIAL. EACH OBLIGOR HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
GUARANTEE AND SECURITY AGREEMENT
-32-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
BIODERMIS CORPORATION
By: /s/ Michael D. Farney
--------------------------------
Title: Chief Financial Officer
--------------------------
BIOENTERICS CORPORATION
By: /s/ Michael D. Farney
--------------------------------
Title: Chief Financial Officer
--------------------------
BIOPLEXUS CORPORATION
By: /s/ Michael D. Farney
--------------------------------
Title: Chief Financial Officer
--------------------------
CUI CORPORATION
By: /s/ Michael D. Farney
--------------------------------
Title: Chief Financial Officer
--------------------------
FLOWMATRIX CORPORATION
By: /s/ Michael D. Farney
--------------------------------
Title: Chief Financial Officer
--------------------------
INAMED DEVELOPMENT COMPANY
By: /s/ Michael D. Farney
--------------------------------
GUARANTEE AND SECURITY AGREEMENT
-33-
<PAGE>
Title: Chief Financial Officer
--------------------------
McGHAN MEDICAL CORPORATION
By: /s/ Michael D. Farney
--------------------------------
Title: Chief Financial Officer
--------------------------
MEDISYN TECHNOLOGIES CORPORATION
By: /s/ Michael D. Farney
--------------------------------
Title: Chief Financial Officer
--------------------------
SANTA BARBARA BANK & TRUST
By: /s/ Jay D. Smith
--------------------------------
Title:
GUARANTEE AND SECURITY AGREEMENT
-34-
<PAGE>
PLEDGED DEBT ANNEX I
None
GUARANTEE AND SECURITY AGREEMENT
-35-
<PAGE>
UCC FINANCING STATEMENT FILINGS ANNEX II
<TABLE>
<CAPTION>
Name of Subsidiary State of Incorporation
- ------------------ ----------------------
<S> <C>
Biodermis Corporation Nevada
Bioenterics Corporation California
Bioplexus Corporation Nevada
CUI Corporation California
Flowmatrix Corporation Nevada
Inamed Development Company California
McGhan Medical Corporation California
Medisyn Technologies Corporation Nevada
</TABLE>
GUARANTEE AND SECURITY AGREEMENT
-36-
<PAGE>
DIRECT SUBSIDIARIES ANNEX III
None
GUARANTEE AND SECURITY AGREEMENT
-37-
<PAGE>
INDIRECT SUBSIDIARIES ANNEX IV
None
GUARANTEE AND SECURITY AGREEMENT
-38-
<PAGE>
Exhibit A
to
Guarantee and Security Agreement
THIS INSTRUMENT OF JOINDER ("Joinder") is executed as of ____________,
19__, by ______________________________, a _____________________ ("Joining
Party") and delivered to Santa Barbara Bank & Trust, as Trustee, pursuant to the
Guarantee and Security Agreement dated as of January 2, 1996 made by certain
subsidiaries of Inamed Corporation (the "Company") in favor of the Trustee for
the benefit of the Holders of the Company's Secured Convertible Notes due 1999
(the "Security Agreement"). Terms used but not defined in this Joinder shall
have the meanings defined for those terms in the Guarantee and Security
Agreement or the Indenture (as defined below).
RECITALS
(a) The Guarantee and Security Agreement was made by the Obligors in favor
of the Trustee pursuant to that certain Indenture (the "Indenture") dated as of
January 2, 1996 by and among the Company and the Trustee.
(b) Joining Party is or has become a U.S. Subsidiary of the Company or one
of the Company's Subsidiaries and, as such, is required pursuant to the
Indenture to become an Obligor.
(c) Joining Party expects to realize direct and indirect benefits as a
result of the availability to the Company of the credit under the Indenture.
NOW, THEREFORE, Joining Party agrees as follows:
AGREEMENT
(1) By this Joinder, Joining Party becomes an "Obligor" under and pursuant
to the Guarantee and Security Agreement. Joining Party agrees that, upon its
execution hereof, it will become an Obligor under the Guarantee and Security
Agreement with respect to all obligations of the Company heretofore or hereafter
incurred under the Indenture or the Securities, and will be bound by all terms,
conditions and duties applicable to an Obligor under the Guarantee and Security
Agreement.
(2) The effective date of this Joinder is ________________, 199__.
"Joining Party"
------------------------------
a
----------------------------
By:
---------------------------
Name:
-------------------------
Title:
------------------------
<PAGE>
ANNEX 40 TO GUARANTEE AND SECURITY AGREEMENT
<PAGE>
*****************************************************************
GUARANTEE AGREEMENT
Dated as of January 2, 1996
between
Certain Subsidiaries of
Inamed Corporation
and
Santa Barbara Bank & Trust,
as Trustee
*****************************************************************
<PAGE>
TABLE OF CONTENTS
Page
Section 1. Definitions and Interpretation . . . . . . . . . . . . . . . . 1
1.01 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . 1
1.02 Interpretation. . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2. The Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.01 Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.02 Acknowledgements, Waivers and Consents. . . . . . . . . . . . 2
2.03 Understanding With Respect to Waivers and Consents. . . . . . 7
2.04 Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.05 Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . 8
2.06 Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.07 Subordination of Indebtedness of the Company; Security
Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.08 Limitation on . . . . . . . . . . . . . . . . . . . . . . . . 9
2.09 Rights of Contribution. . . . . . . . . . . . . . . . . . . . 9
Section 3. Representations of the Guarantors . . . . . . . . . . . . . . . 10
3.01 Corporate Existence . . . . . . . . . . . . . . . . . . . . . 10
3.02 Financial Condition . . . . . . . . . . . . . . . . . . . . . 10
3.03 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.04 No Breach . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.05 Corporate Action. . . . . . . . . . . . . . . . . . . . . . . 11
3.06 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.07 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.08 Certain Regulations . . . . . . . . . . . . . . . . . . . . . 11
Section 4. Covenants of the Guarantors . . . . . . . . . . . . . . . . . . 11
4.01 Books and Records . . . . . . . . . . . . . . . . . . . . . . 11
4.02 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.03 Corporate Existence, Etc. . . . . . . . . . . . . . . . . . . 12
Section 5. Miscellaneous Provisions . . . . . . . . . . . . . . . . . . . 12
5.01 Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.02 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.03 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.04 Expenses, Etc.. . . . . . . . . . . . . . . . . . . . . . . . 13
5.05 Amendments, Etc.. . . . . . . . . . . . . . . . . . . . . . . 13
5.06 Successors and Assigns. . . . . . . . . . . . . . . . . . . . 13
5.07 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.08 Agreements Superseded . . . . . . . . . . . . . . . . . . . . 14
5.09 Severability. . . . . . . . . . . . . . . . . . . . . . . . . 14
5.10 Captions. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
<PAGE>
5.11 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . 14
5.12 GOVERNING LAW; SUBMISSION TO JURISDICTION . . . . . . . . . . 14
5.13 WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . . . . . . . 14
Exhibit A - Joinder
GUARANTEE AGREEMENT
<PAGE>
GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT (this "Guarantee") dated as of January
2, 1996 is made between the Subsidiaries of Inamed Corporation listed on the
signature pages hereof and who execute a Joinder hereto in the form of Exhibit A
hereto (collectively, the "Guarantors") and Santa Barbara Bank & Trust, as
trustee for the benefit of the holders of Inamed Corporation's 11% Secured
Convertible Notes due 1999 (in such capacity, the "Trustee").
The Indenture dated as of January 2, 1996 (the "Indenture")
between Inamed Corporation, a Florida corporation (the "Company") and the
Trustee provides, subject to its terms and conditions, for the issuance by the
Company of its 11% Secured Convertible Notes due 1999 to the purchasers thereof
(the "Purchasers") pursuant to the Note Purchase Agreement dated as of January
2, 1996 (the "Note Purchase Agreement"). It is a condition to the purchase of
the Notes by the Purchasers that each Guarantor shall have executed and
delivered, and granted the Liens provided for, in this Guarantee.
To induce the Trustee to enter into the Indenture, and to induce
the Purchasers to purchase the Notes, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
each Guarantor has agreed to guarantee jointly and severally the Guaranteed
Obligations. Accordingly, the Guarantors agree with the Trustee as follows:
Section
1. Definitions and Interpretation.
1.011 Certain Defined Terms. Unless otherwise defined, all
capitalized terms used in this Guarantee that are defined in the Indenture or in
the Note Purchase Agreement (including those terms incorporated therein by
reference) shall have the respective meanings assigned to them in the Indenture
or the Note Purchase Agreement, as applicable. In addition, the following terms
shall have the following meanings under this Guarantee:
"Guaranteed Obligations" means any and all Obligations and any
and all obligations of the Company at any time and from time to time for the
performance by it of its agreements, covenants and undertakings under or in
respect of the Indenture Documents.
"Indenture Documents" shall have the meaning assigned to the
term "Documents" in the Indenture.
"Material Adverse Effect" shall mean a material adverse effect
on (a) the property, business, operations, financial condition, prospects,
liabilities or capitalization of the Company and its Subsidiaries taken as a
whole, (b) the ability of any Guarantor to perform its obligations under any of
the Indenture Documents to which it is a party, (c) the validity or
enforceability of any of the Indenture Documents, (d) the rights, remedies,
powers and privileges of the Holders and the Trustee under any of the Indenture
Documents or (e) the timely payment of the Guaranteed Obligations.
GUARANTEE AGREEMENT
1
<PAGE>
"Obligations" shall mean the principal of any Security,
interest, fees and any other amount payable by the Company at any time and from
time to time under any Indenture Document.
"Signing Date" shall mean the date on which a respective
Guarantor shall sign and deliver this Guarantee, whether directly or through
execution and delivery of a Joinder hereto.
1.012 Interpretation. In this Guarantee, unless otherwise
indicated, the singular includes the plural and plural the singular; words
importing any gender include the other gender; references to statutes or
regulations are to be construed as including all statutory or regulatory
provisions consolidating, amending or replacing the statute or regulation
referred to; references to "writing" include printing, typing, lithography and
other means of reproducing words in a tangible visible form; the words
"including," "includes" and "include" shall be deemed to be followed by the
words "without limitation"; references to articles, sections (or subdivisions of
sections), exhibits, annexes or schedules are to this Guarantee; references to
agreements and other contractual instruments shall be deemed to include all
subsequent amendments, extensions and other modifications to such instruments
(without, however, limiting any prohibition on any such amendments, extensions
or modifications by the terms of this Guarantee); and references to Persons
include their respective successors and permitted assigns and, in the case of
governmental Persons, Persons succeeding to their respective functions and
capacities.
Section 2. The Guarantee
1.021 Guarantee. Subject to the limitation set forth in
Section 2.08, the Guarantors hereby jointly and severally guarantee to the
Trustee for the benefit of each Holder the timely payment in full when due
(whether at stated maturity, by acceleration or otherwise) and performance of
the Guaranteed Obligations in each case strictly in accordance with their terms.
The Guarantors hereby further jointly and severally agree that if the Company
shall fail to pay in full when due (whether at stated maturity, by acceleration
or otherwise) all or any part of the Guaranteed Obligations, the Guarantors will
immediately pay the same, without any demand or notice whatsoever, and that in
the case of any extension of time of payment or renewal of all or any part of
the Guaranteed Obligations, the same will be timely paid in full when due
(whether at extended maturity, by acceleration or otherwise) in accordance with
the terms of such extension or renewal. The obligations of the Guarantors under
this Section 2 are irrevocable and unconditional in nature and are made with
respect to any Guaranteed Obligations now existing or in the future arising.
The Guarantors' liability under this Guarantee shall continue until full
satisfaction of all Guaranteed Obligations. The obligations of the Guarantors
constitute a guarantee of due and punctual payment and performance and not
merely a guarantee of collection.
1.022 Acknowledgements, Waivers and Consents. Each Guarantor
acknowledges that the obligations undertaken by it under this Guarantee involve
the guarantee of obligations of Persons other than such Guarantor and that such
obligations of such Guarantor are absolute, irrevocable and unconditional under
any and all circumstances. In full recognition and in furtherance of the
foregoing, each Guarantor agrees that:
GUARANTEE AGREEMENT
2
<PAGE>
(a) Without affecting the enforceability or
effectiveness of this Guarantee in accordance with its terms and without
affecting, limiting, reducing, discharging or terminating the liability of such
Guarantor, or the rights, remedies, powers and privileges of the Trustee under
this Guarantee, the Trustee and the Holders may, at any time and from time to
time and without notice or demand of any kind or nature whatsoever:
(i) amend, supplement, modify, extend,
renew, waive, accelerate or otherwise change the time for payment or performance
of, or the terms of, all or any part of the Guaranteed Obligations (including
any increase or decrease in the rate or rates of interest on all or any part of
the Guaranteed Obligations);
(ii) amend, supplement, modify, extend,
renew, waive or otherwise change, or enter into or give, any Indenture Document
or any agreement, security document, guarantee, approval, consent or other
instrument with respect to all or any part of the Guaranteed Obligations, any
Indenture Document or any such other instrument or any term or provision of the
foregoing;
(iii) accept or enter into new or additional
agreements, security documents, guarantees or other instruments in addition to,
in exchange for or relative to any Indenture Document, all or any part of the
Guaranteed Obligations or any collateral now or in the future serving as
security for the Guaranteed Obligations;
(iv) accept or receive (including from any
other Guarantor) partial payments or performance on the Guaranteed Obligations
(whether as a result of the exercise of any right, remedy, power or privilege or
otherwise);
(v) accept, receive and hold any additional
collateral for all or any part of the Guaranteed Obligations (including from any
other Guarantor);
(vi) release, reconvey, terminate, waive,
abandon, allow to lapse or expire, fail to perfect, subordinate, exchange,
substitute, transfer, foreclose upon or enforce any collateral, security
documents or guarantees (including the obligations of any other Guarantor) for
or relative to all or any part of the Guaranteed Obligations;
(vii) apply any collateral or the proceeds of
any collateral or guarantee (including the obligations of any other Guarantor)
to all or any part of the Guaranteed Obligations in such manner and extent as
the Trustee or any Holder may in its discretion determine;
(viii) release any Person (including any other
Guarantor) from any personal liability with respect to all or any part of the
Guaranteed Obligations;
(ix) settle, compromise, release, liquidate
or enforce upon such terms and in such manner as the Trustee or the Holders may
determine or as applicable law may dictate
GUARANTEE AGREEMENT
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all or any part of the Guaranteed Obligations or any collateral on or guarantee
of all or any part of the Guaranteed Obligations (including with any other
Guarantor);
(x) consent to the merger or consolidation
of, the sale of substantial assets by, or other restructuring or termination of
the corporate existence of the Company or any other Person (including any other
Guarantor);
(xi) proceed against the Company, such or any
other Guarantor or any other guarantor of all or any part of the Guaranteed
Obligations or any collateral provided by any Person and exercise the rights,
remedies, powers and privileges of the Trustee and the Holders under the
Indenture Documents or otherwise in such order and such manner as the Trustee or
the Holders may, in its or their discretion, determine, without any necessity to
proceed upon or against or exhaust any collateral, right, remedy, power or
privilege before proceeding to call upon or otherwise enforce this Guarantee as
to any Guarantor;
(xii) foreclose upon any deed of trust,
mortgage or other instrument creating or granting liens on any interest in real
property by judicial or nonjudicial sale or by deed in lieu of foreclosure, bid
any amount or make no bid in any foreclosure sale or make any other election of
remedies with respect to such liens or exercise any right of set-off;
(xiii) obtain the appointment of a receiver
with respect to any collateral for all or any part of the Guaranteed Obligations
and apply the proceeds of such receivership as the Trustee or any Holder may in
its discretion determine (it being agreed that nothing in this clause (xiii)
shall be deemed to make the Trustee or any Holder a party in possession in
contemplation of law, except at its option);
(xiv) enter into such other transactions or
business dealings with any other Guarantor, the Company, any Subsidiary or
Affiliate of the Company or any other guarantor of all or any part of the
Guaranteed Obligations as the Trustee or any Holder may desire; and
(xv) do all or any combination of the actions
set forth in this Section 2.02(a).
(b) The enforceability and effectiveness of this
Guarantee and the liability of the Guarantors, and the rights, remedies, powers
and privileges of the Trustee and the Holders, under this Guarantee shall not be
affected, limited, reduced, discharged or terminated, and each Guarantor hereby
expressly waives to the fullest extent permitted by law any defense now or in
the future arising, by reason of:
(i) the illegality, invalidity or
unenforceability of all or any part of the Guaranteed Obligations, any Indenture
Document or any agreement, security document, guarantee or other instrument
relative to all or any part of the Guaranteed Obligations;
GUARANTEE AGREEMENT
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(ii) any disability or other defense with
respect to all of any part of the Guaranteed Obligations of the Company, any
other Guarantor or any other guarantor of all or any part of the Guaranteed
Obligations, including the effect of any statute of limitations that may bar the
enforcement of all or any part of the Guaranteed Obligations or the obligations
of any such other guarantor;
(iii) the illegality, invalidity or
unenforceability of any security or guarantee for all or any part of the
Guaranteed Obligations or the lack of perfection or continuing perfection or
failure of the priority of any lien on any collateral for all or any part of the
Guaranteed Obligations;
(iv) the cessation, for any cause whatsoever,
of the liability of the Company, any other Guarantor or any other guarantor of
all or any part of the Guaranteed Obligations (other than, subject to
Section 2.05, by reason of the full payment and performance of all Guaranteed
Obligations);
(v) any failure of the Trustee or the
Holders to marshal assets in favor of the Company or any other Person (including
any other Guarantor), to exhaust any collateral for all or any part of the
Guaranteed Obligations, to pursue or exhaust any right, remedy, power or
privilege it may have against any other Guarantor, the Company, any other
guarantor of all or any part of the Guaranteed Obligations or any other Person
or to take any action whatsoever to mitigate or reduce such or any other
Guarantor's liability under this Guarantee, neither the Trustee nor any Holder
being under any obligation to take any such action notwithstanding the fact that
all or any part of the Guaranteed Obligations may be due and payable and that
the Company may be in default of its obligations under any Indenture Document;
(vi) any failure of the Trustee or the
Holders to give notice of sale or other disposition of any collateral (including
any notice of any judicial or nonjudicial foreclosure or sale of any interest in
real property serving as collateral for all or any part of the Guaranteed
Obligations) for all or any part of the Guaranteed Obligations to the Company,
any Guarantor or any other Person or any defect in, or any failure by any
Guarantor or any other Person to receive, any notice that may be given in
connection with any sale or disposition of any collateral;
(vii) any failure of the Trustee or the
Holders to comply with applicable laws in connection with the sale or other
disposition of any collateral for all or any part of the Guaranteed Obligations;
(viii) any judicial or nonjudicial foreclosure
or sale of, or other election of remedies with respect to, any interest in real
property or other collateral serving as security for all or any part of the
Guaranteed Obligations, even though such foreclosure, sale or election of
remedies may impair the subrogation rights of any Guarantor or may preclude any
Guarantor from obtaining reimbursement, contribution, indemnification or other
recovery from any other Guarantor, the Company, any other guarantor or any other
Person and even though the Company may not, as a result of such foreclosure,
sale or election of remedies, be liable for any deficiency;
GUARANTEE AGREEMENT
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(ix) any benefits the Company, any Guarantor
or any other guarantor may otherwise derive from the laws of any jurisdiction of
the nature of a "one-form-of-action," "anti-deficiency" or "security-first"
rule;
(x) any act or omission of the Trustee, any
Holder or any other Person that directly or indirectly results in or aids the
discharge or release of the Company or any other Guarantor of all or any part of
the Guaranteed Obligations or any security or guarantee for all or any part of
the Guaranteed Obligations by operation of law or otherwise;
(xi) any law which provides that the
obligation of a surety or guarantor must neither be larger in amount nor in
other respects more burdensome than that of the principal or which reduces a
surety's or guarantor's obligation in proportion to the principal obligation;
(xii) the possibility that the obligations of
the Company to the Trustee and the Holders may at any time and from time to time
exceed the aggregate liability of the Guarantors under this Guarantee;
(xiii) any counterclaim, set-off or other claim
which the Company or any other Guarantor has or alleges to have with respect to
all or any part of the Guaranteed Obligations;
(xiv) any failure of the Trustee or any Holder
to file or enforce a claim in any bankruptcy or other proceeding with respect to
any Person;
(xv) the election by the Trustee or any
Holder, in any bankruptcy proceeding of any Person, of the application or
nonapplication of Section 1111(b)(2) of the Bankruptcy Code;
(xvi) any extension of credit or the grant of
any Lien under Section 364 of the Bankruptcy Code;
(xvii) any use of cash collateral under Section
363 of the Bankruptcy Code;
(xviii) any agreement or stipulation with
respect to the provision of adequate protection in any bankruptcy proceeding of
any Person;
(xix) the avoidance of any Lien in favor of
the Trustee or any Holder for any reason;
(xx) any bankruptcy, insolvency,
reorganization, arrangement, readjustment of debt, liquidation or dissolution
proceeding commenced by or against any Person, including any discharge of, or
bar or stay against collecting, all or any part of the Guaranteed
GUARANTEE AGREEMENT
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Obligations (or any interest on all or any part of the Guaranteed Obligations)
in or as a result of any such proceeding;
(xxi) any action taken by the Trustee or any
Holder that is authorized by this Section 2.02 or otherwise in this Guarantee or
by any other provision of any Indenture Document or any omission to take any
such action; or
(xxii) any other circumstance whatsoever that
might otherwise constitute a legal or equitable discharge or defense of a surety
or guarantor.
(c) Each Guarantor expressly waives, for the benefit
of the Trustee and the Holders, all set-offs and counterclaims and all
presentments, demands for payment or performance, notices of nonpayment or
nonperformance, protests, notices of protest, notices of dishonor and all other
notices or demands of any kind or nature whatsoever with respect to the
Guaranteed Obligations, and all notices of acceptance of this Guarantee or of
the existence, creation, incurring or assumption of new or additional Guaranteed
Obligations. Each Guarantor further expressly waives the benefit of any and all
statutes of limitation and any and all laws providing for the exemption of
property from execution or for valuation and appraisal upon foreclosure, to the
maximum extent permitted by applicable law.
(d) Each Guarantor represents and warrants to the
Trustee and the Holders that it has established adequate means of obtaining
financial and other information pertaining to the business, operations and
condition (financial and otherwise) of the Company and its properties on a
continuing basis and that such Guarantor is now and will in the future remain
fully familiar with the business, operations and condition (financial and
otherwise) of the Company and its properties. Each Guarantor further represents
and warrants that it has reviewed and approved each of the Indenture Documents
and is fully familiar with the transaction contemplated by the Indenture
Documents and that it will in the future remain fully familiar with such
transaction and with any new Indenture Documents and the transactions
contemplated by such Indenture Documents. Each Guarantor hereby expressly
waives and relinquishes any duty on the part of the Trustee or the Holders
(should any such duty exist) to disclose to such or any other Guarantor any
matter of fact or other information related to the business, operations or
condition (financial or otherwise) of the Company or its properties or to any
Indenture Document or the transactions undertaken pursuant to, or contemplated
by, any such Indenture Document, whether now or in the future known by the
Trustee or any Holder.
(e) Each Guarantor intends that its rights and
obligations shall be those expressly set forth in this Guarantee and that its
obligations shall not be affected, limited, reduced, discharged or terminated by
reason of any principles or provisions of law which conflict with the terms of
this Guarantee.
1.023 Understanding With Respect to Waivers and Consents.
Each Guarantor warrants and agrees that each of the waivers and consents set
forth in this Guarantee are made voluntarily and unconditionally after
consultation with outside legal counsel and with full knowledge of their
significance and consequences, with the understanding that events giving rise to
any defense
GUARANTEE AGREEMENT
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or right waived may diminish, destroy or otherwise adversely affect rights which
such or any other Guarantor otherwise may have against the Company, the Trustee,
any Holder or any other Person or against any collateral. If, notwithstanding
the intent of the parties that the terms of this Guarantee shall control in any
and all circumstances, any such waivers or consents are determined to be
unenforceable under applicable law, such waivers and consents shall be effective
to the maximum extent permitted by law.
1.024 Subrogation. Each Guarantor hereby agrees that, until
the payment and satisfaction in full of all of the Guaranteed Obligations under
the Indenture, it shall not exercise any right, remedy, power or privilege, such
as any right of subrogation, contribution or indemnity or related remedy, power
or privilege, arising (whether by contract or operation of law, including under
the Bankruptcy Code) against the Company, any other Guarantor or any other
guarantor of all or any part of the Guaranteed Obligations or any collateral for
all or any part of the Guaranteed Obligations by reason of any payment or other
performance pursuant to the provisions of this Guarantee and, if any amount
shall be paid to such Guarantor on account of such rights, remedies, powers or
privileges, it shall hold such amount in trust for the benefit of, and pay the
same over to, the Trustee (for the benefit of the Holders) on account of the
Guaranteed Obligations. Each Guarantor understands that the exercise by the
Trustee or any Holder of any right, remedy, power or privilege that it may have
under the Indenture Documents, any agreement, security document, guarantee or
other instrument relative to all or any part of the Guaranteed Obligations or
otherwise may affect or eliminate such or any other Guarantor's right of
subrogation or similar recovery against the Company, any other Guarantor, any
other guarantors or any collateral and that such and the other Guarantors may
therefore incur partially or totally nonreimbursable liability under this
Guarantee. Nevertheless, each Guarantor hereby authorizes and empowers the
Trustee and the Holders to exercise, in its or their sole discretion, any
combination of such rights, remedies, powers and privileges.
1.025 Reinstatement. The obligations of each Guarantor under
this Section 2 shall be automatically reinstated if and to the extent that for
any reason any payment by or on behalf of the Company, any other Guarantor or
any other Person or any other application of funds (including the proceeds of
any collateral for all or any part of the Guaranteed Obligations) in respect of
all or any part of the Guaranteed Obligations is rescinded or must be otherwise
restored by any holder of such Guaranteed Obligations, whether as a result of
any proceedings in bankruptcy, reorganization or otherwise and the Guarantors
jointly and severally agree that it will indemnify the Trustee and each Holder
on demand for all reasonable costs and expenses (including fees and expenses of
counsel) incurred by the Trustee or such Holder in connection with such
rescission or restoration.
1.026 Remedies. The Guarantors hereby jointly and severally
agree that, between each of them and the Trustee (for the benefit of the
Holders), the obligations of the Company under the Indenture and the other
Indenture Documents may be declared to be forthwith (or may become
automatically) due and payable as provided in Section 4.2 of the Indenture for
purposes of Section 2.01 notwithstanding any stay, injunction or other
prohibition preventing such declaration (or such obligations becoming due and
payable as against the Company) and that, in the event of such declaration (or
such obligation being deemed due and payable), such obligations (whether or not
due and payable by the Company) shall forthwith become due and payable for
purposes of Section 2.01.
GUARANTEE AGREEMENT
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1.027 Subordination of Indebtedness of the Company; Security
Interest.
(a) Each Guarantor agrees that any indebtedness of the
Company now or in the future owed to such Guarantor is hereby subordinated to
the Guaranteed Obligations. If the Trustee so requests, any such indebtedness
shall be collected, enforced and received by such Guarantor as trustee for the
Trustee and shall be paid over to the Trustee (for the benefit of the Holders)
in kind on account of the Guaranteed Obligations. If, after the Trustee's
request, such Guarantor fails to collect or enforce any such indebtedness or to
pay the proceeds of such indebtedness to the Trustee, the Trustee as such
Guarantor's attorney-in-fact may do such acts and sign such documents in such
Guarantor's name and on such Guarantor's behalf as the Trustee considers
necessary or desirable to effect such collection, enforcement or payment, the
Trustee being hereby appointed such Guarantor's attorney-in-fact for such
purpose.
(b) Each Guarantor hereby grants to the Trustee (for the
benefit of the Holders) a security interest in any indebtedness referred to in
Section 2.07(a) and in any personal property of the Company in which such
Guarantor now has or in the future acquires any right, title or interest. Each
Guarantor agrees that such security interest shall be additional security for
the Guaranteed Obligations and shall be superior to any right of such Guarantor
in such property until the Guaranteed Obligations have been fully satisfied and
performed.
1.028 Limitation on Guarantee. In any proceeding involving
any state corporate law or any state or federal bankruptcy, insolvency,
reorganization or other law affecting the rights of creditors generally, if the
obligations of the Guarantors under Section 2.01 would otherwise, taking into
account the provisions of Section 2.09, be held or determined to be void,
invalid or unenforceable or if the claims of the Trustee or the Holders in
respect of such obligations would be subordinated to the claims of any other
creditors on account of the Guarantors' liability under Section 2.01, then,
notwithstanding any other provision of this Guarantee to the contrary, the
amount of such liability shall, without any further action by the Guarantors,
any Holder, the Trustee or any other Person, be automatically limited and
reduced to the highest amount which is valid and enforceable and not
subordinated to the claims of other creditors as determined in such action or
proceeding.
1.029 Rights of Contribution. The Guarantors hereby agree, as
between themselves, that if any Guarantor (an "Excess Funding Guarantor") shall
pay a portion of the Guaranteed Obligations in excess of the Excess Funding
Guarantor's Pro Rata Share (as defined below) of the Guaranteed Obligations, the
other Guarantors shall, on demand (but subject to the next sentence), pay to the
Excess Funding Guarantor an amount equal to their respective Pro Rata Shares of
such Excess Funding Guarantor's payment. The payment obligations of any
Guarantor under this Section 2.09 shall be subordinate and subject in right of
payment to the prior payment in full and in cash of the obligations of such
Guarantor under the other provision of this Section 2, and such Excess Funding
Guarantor shall not exercise any right, remedy, power or privilege with respect
to such excess until payment and satisfaction in full of all such obligations.
For the purposes of this Section 2.09, "Pro Rata Shares" shall mean, for any
Guarantor, a fraction (which shall in no event exceed 1.00) the
GUARANTEE AGREEMENT
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numerator of which is the excess, if any, of the fair value of the assets of
such Obligor over a fair estimate of the liabilities of Guarantor and the
denominator of which is the excess (but not less than $1.00) of the fair value
of the aggregate assets (without duplication) of all Guarantors over a fair
estimate of the aggregate liabilities (without duplication) of all Guarantors.
All relevant calculations shall be made as of the date such Guarantor became a
Guarantor.
Section 3. Representations of the Guarantors. As of the
Signing Date and as of the date of each extension of credit by the Holders, each
Guarantor represents to the Trustee and the Holders that:
1.031 Corporate Existence. Each of such Guarantor and its
Subsidiaries: (i) is a corporation, partnership or other entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation; (ii) has all requisite corporate or other power, and has all
material governmental approvals, necessary to own its assets and carry on its
business as now being or as proposed to be conducted; and (iii) is qualified to
do business in all jurisdictions in which the nature of the business conducted
by it makes such qualification necessary and where the failure so to qualify
would have a Material Adverse Effect.
1.032 Financial Condition. The consolidated balance sheets of
the Company and its consolidated Subsidiaries (including such Guarantor) as at
December 31, 1994 and the related consolidated statements of income, retained
earnings and cash flow of the Company and its consolidated Subsidiaries for the
fiscal year then ended, together with the related opinion (in the case of such
consolidated balance sheet and statements) of Coopers & Lybrand, and the
unaudited consolidated balance sheets of the Company and its consolidated
Subsidiaries as at September 30, 1995 and the related consolidated statements of
income, retained earnings and cash flow of the Company and its consolidated
Subsidiaries for the nine-month period then ended, heretofore furnished to each
of the Purchasers, are complete and correct and fairly present the consolidated
financial condition of the Company and its consolidated Subsidiaries as at such
dates and the consolidated results of their operations for the fiscal year and
nine-month period then ended (subject, in the case of such unaudited financial
statements, to normal year-end audit adjustments), all in accordance with
generally accepted accounting principles and practices applied on a consistent
basis. Neither such Guarantor nor any of its Subsidiaries has on the Signing
Date any material contingent liabilities, liabilities for taxes, unusual forward
or long-term commitments or unrealized or anticipated losses from any
unfavorable commitments, except as expressly referred to or reflected or
provided for in the most recent balance sheet referred to above. Since
September 30, 1995, there has been no material adverse change in the financial
condition, operations, business or prospects taken as a whole of the Company and
its consolidated Subsidiaries from this set forth in the financial statements as
at and for the period ending on that date.
1.033 Litigation. Except as disclosed to the Holders in
writing prior to the Signing Date, there are no legal or arbitral proceedings by
or before any governmental Person, now pending or (to the knowledge of such
Guarantor) threatened against such Guarantor or its property or any of its
Subsidiaries or any of their property that, if adversely determined, could have
a Material Adverse Effect.
GUARANTEE AGREEMENT
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1.034 No Breach. None of the execution and delivery of this
Guarantee, the consummation of the transactions contemplated by this Guarantee
or compliance with the terms and provisions of this Guarantee will conflict with
or result in a breach of, or require any consent under, the corporate charter or
by-laws of such Guarantor, or any applicable governmental rule or regulation, or
any agreement or instrument to which such Guarantor or any of its Subsidiaries
is a party or by which any of them is bound or to which any of them is subject,
or constitute a default under, or result in the acceleration or mandatory
prepayment of, any Indebtedness evidenced by, or termination of, any such
agreement or instrument, or result in the creation or imposition of any Lien
upon any property of such Guarantor or any of its Subsidiaries pursuant to the
terms of any such agreement or instrument.
1.035 Corporate Action. Such Guarantor has all necessary
corporate power and authority to execute, deliver and perform its obligations
under this Guarantee; the execution, delivery and performance by such Guarantor
of this Guarantee have been duly authorized by all necessary corporate action on
its part (including any required shareholder approvals); and this Guarantee has
been duly and validly executed and delivered by such Guarantor and constitutes
its legal, valid and binding obligation, enforceable in accordance with its
terms.
1.036 Approvals. No governmental approvals are necessary for
the execution, delivery or performance by such Guarantor of this Guarantee or
for the legality, validity or enforceability of this Guarantee.
1.037 Taxes. Such Guarantor and its Subsidiaries have filed
all United States Federal income tax returns and all other material tax returns
that are required to be filed by them and have paid all taxes due pursuant to
such returns or pursuant to any assessment received by such Guarantor or any of
its Subsidiaries and all other related penalties and charges. The charges,
accruals and reserves on the books of such Guarantor and its Subsidiaries in
respect of taxes and other governmental charges are, in the opinion of such
Guarantor, adequate. Such Guarantor has not given or been requested to give a
waiver of the statute of limitations relating to the payment of any Federal or
other taxes.
1.038 Certain Regulations. Such Guarantor is not (a) an
"investment company," or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940, (b) a "holding
company," or an "affiliate" of a "holding company" or a "subsidiary company" of
a "holding company," within the meaning of the Public Utility Holding Company
Act of 1935 or (c) subject to any other governmental rule or regulation
restricting its ability to incur Indebtedness or to issue guarantees.
Section 4. Covenants of the Guarantors. So long as this
Guarantee is in effect and until all of the Guaranteed Obligations have been
paid in full and the expiration and termination of the Commitments of the Holder
under the Credit Guarantee, each Guarantor agrees as follows:
1.041 Books and Records. Each Guarantor shall:
(a) keep full and accurate books and records relating to its
business; and
GUARANTEE AGREEMENT
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(b) permit representatives of the Trustee, upon reasonable
notice, at any time during normal business hours to inspect and make abstracts
from its books and records pertaining to financial matters, in such manner as
the Trustee may request.
1.042 Litigation. Such Guarantor will promptly give to the
Trustee notice of all legal or arbitral proceedings by or before any
governmental Person affecting such Guarantor or any of its Subsidiaries, except
proceedings that, if adversely determined, would not have a Material Adverse
Effect.
1.043 Corporate Existence, Etc. Such Guarantor will, and will
cause each of its Subsidiaries to: preserve and maintain its corporate
existence and all of its material rights, privileges and franchises; comply with
the requirements of all applicable governmental rules and regulations if the
failure to comply with such requirements have a Material Adverse Effect; pay and
discharge all taxes, assessments and governmental charges or levies imposed on
it or on its income or profits or on any of its other property prior to the date
on which penalties would attach, except for any such tax, assessment, charge or
levy, the payment of which is being contested in good faith and by proper
proceedings and against which adequate reserves are being maintained; maintain
all of its properties used or useful in its business in good working order and
condition, ordinary wear and tear and disposition excepted; permit
representatives of the Trustee, during normal business hours, to examine, copy
and make extracts from its books and records, to inspect its properties, and to
discuss its business and affairs with its officers, all to the extent reasonably
requested by the Trustee; keep adequate records and books of account, in which
complete entries will be made in accordance with GAAP; and keep insured by
financially sound and reputable insurers all property of a character usually
insured by corporations engaged in the same or similar business similarly
situated against loss or damage of the kinds and in the amounts customarily
insured against by such corporations and carry such other insurance as is
usually carried by such corporations.
Section 5. Miscellaneous Provisions.
1.051 Trustee. As provided in Article 12 of the Indenture,
the Trustee acts as collateral trustee for the benefit of the Holders of the
Notes for purposes of this Guarantee. In such capacity, the Trustee shall be
entitled to all of the rights and benefits accorded the Trustee by Article 5 of
the Indenture. Following the payment in full of all Guaranteed Obligations
outstanding under the Indenture and the Notes, the provisions of Section 5.7 of
the Indenture shall be deemed to continue in full force and effect for the
benefit of the Trustee under this Guarantee.
1.052 Waiver. No failure on the part of the Trustee or any
Holder to exercise and no delay in exercising, and no course of dealing with
respect to, any right, remedy, power or privilege under this Guarantee shall
operate as a waiver of such right, remedy, power or privilege, nor shall any
single or partial exercise of any right, remedy, power or privilege under this
Guarantee preclude any other or further exercise of any such right, remedy,
power or privilege or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges provided in this
Guarantee are cumulative and not exclusive of any rights, remedies, powers and
privileges provided by law.
GUARANTEE AGREEMENT
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1.053 Notices. All notices and communications to be given
under this Guarantee shall be given or made in writing to the intended recipient
at the address specified below or, as to any party, at such other address as
shall be designated by such party in a notice to each other party. Except as
otherwise provided in this Guarantee, all such communications shall be deemed to
have been duly given when transmitted by telecopier or personally delivered or,
in the case of a mailed notice, upon receipt, in each case, given or addressed
as provided in this Section 8.03:
To the Guarantors: Inamed Corporation
3800 Howard Hughes Parkway, #900
Las Vegas, Nevada
Attention: Michael D. Farney
To the Trustee: Santa Barbara Bank & Trust
20 East Carrillo Street
Santa Barbara, California 93101
Attention: Jay Donald Smith, Esq.
1.054 Expenses, Etc. The Guarantors jointly and severally
agree to pay or to reimburse the Trustee for all costs and expenses (including
reasonable attorney's fees and expenses) that may be incurred by the Trustee in
any effort to enforce any of the provisions of Section 2 or Section 7, or any of
the obligations of the Guarantors in respect of the Collateral or in connection
with (a) the preservation of the Lien of, or the rights of the Trustee and the
Holders under this Guarantee or (b) any actual or attempted sale, lease,
disposition, exchange, collection, compromise, settlement or other realization
in respect of, or care of, the Collateral, including all such costs and expenses
(and reasonable attorney's fees and expenses) incurred in any bankruptcy,
reorganization, workout or other similar proceeding.
1.055 Amendments, Etc. Any provision of this Guarantee may be
modified, supplemented or waived only by an instrument in writing duly executed
by each Guarantor and the Trustee (with the consent of the Holders as specified
in Section 7.2 of the Indenture). Any such modification, supplement or waiver
shall be for such period and subject to such conditions as shall be specified in
the instrument effecting the same and shall be binding upon the Trustee and each
Holder and each Guarantor, and any such waiver shall be effective only in the
specific instance and for the purposes for which given.
1.056 Successors and Assigns. This Guarantee shall be binding
upon and inure to the benefit of each Guarantor, the Trustee and each Holder and
their respective successors and permitted assigns.
1.057 Survival. All representations and warranties made in
this Guarantee or in any certificate or other document delivered pursuant to or
in connection with this Guarantee shall survive the execution and delivery of
this Guarantee or such certificate or other document (as the case may be) or any
deemed repetition of any such representation or warranty.
GUARANTEE AGREEMENT
13
<PAGE>
1.058 Agreements Superseded. Except with respect to express
references to other Indenture Documents, this Guarantee supersedes all prior
agreements and understandings, written or oral, among the parties with respect
to the subject matter of this Guarantee.
1.059 Severability. Any provision of this Guarantee that 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 of this Guarantee, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
5.10 Captions. The table of contents and captions and
section headings appearing in this Guarantee are included solely for convenience
of reference and are not intended to affect the interpretation of any provision
of this Guarantee.
5.11 Counterparts. This Guarantee may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and any of the parties to this Guarantee may execute this
Guarantee by signing any such counterpart.
5.12 GOVERNING LAW; SUBMISSION TO JURISDICTION. THIS
GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF CALIFORNIA. EACH GUARANTOR HEREBY SUBMITS TO THE NONEXCLUSIVE
JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE CENTRAL DISTRICT OF
CALIFORNIA AND OF ANY CALIFORNIA STATE COURT SITTING IN SANTA BARBARA,
CALIFORNIA FOR THE PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING
TO THIS GUARANTEE OR THE TRANSACTIONS CONTEMPLATED BY THIS GUARANTEE. EACH
GUARANTOR IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF
ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH
PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
5.13 WAIVER OF JURY TRIAL. EACH GUARANTOR HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
GUARANTEE OR THE TRANSACTIONS CONTEMPLATED BY THIS GUARANTEE.
GUARANTEE AGREEMENT
14
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Guarantee to be
duly executed and delivered as of the day and year first above written.
BIODERMIS LTD.
By: /s/ Michael D. Farney
--------------------------------
Title: Chief Financial Officer
--------------------------
BIOENTERICS LTD.
By: /s/ Michael D. Farney
--------------------------------
Title: Chief Financial Officer
--------------------------
CHAMFIELD LTD.
By: /s/ Michael D. Farney
--------------------------------
Title: Chief Financial Officer
--------------------------
INAMED B.V.
By: /s/ Michael D. Farney
--------------------------------
Title: Chief Financial Officer
--------------------------
INAMED B.V.B.A.
By: /s/ Michael D. Farney
--------------------------------
Title: Chief Financial Officer
--------------------------
INAMED DO BRASIL LTD.
By: /s/ Michael D. Farney
--------------------------------
Title: Chief Financial Officer
--------------------------
GUARANTEE AGREEMENT
15
<PAGE>
INAMED GmbH
By: /s/ Michael D. Farney
--------------------------------
Title: Chief Financial Officer
--------------------------
INAMED LTD.
By: /s/ Michael D. Farney
--------------------------------
Title: Chief Financial Officer
--------------------------
INAMED S.A.
By: /s/ Michael D. Farney
--------------------------------
Title: Chief Financial Officer
--------------------------
INAMED S.R.L.
By: /s/ Michael D. Farney
--------------------------------
Title: Chief Financial Officer
--------------------------
INAMED S.A.R.L.
By: /s/ Michael D. Farney
--------------------------------
Title: Chief Financial Officer
--------------------------
McGHAN LIMITED
By: /s/ Michael D. Farney
--------------------------------
Title: Chief Financial Officer
--------------------------
SANTA BARBARA BANK & TRUST
By: /s/ Jay D. Smith
--------------------------------
Title:
GUARANTEE AGREEMENT
16
<PAGE>
Exhibit A
to
Guarantee Agreement
THIS INSTRUMENT OF JOINDER ("Joinder") is executed as of ____________,
19__, by ______________________________, a _____________________ ("Joining
Party") and delivered to Santa Barbara Bank & Trust, as Trustee, pursuant to the
Guarantee Agreement dated as of January 2, 1996 made by certain subsidiaries of
Inamed Corporation (the "Company") in favor of the Trustee for the benefit of
the Holders of the Company's Secured Convertible Notes due 1999 (the "Security
Agreement"). Terms used but not defined in this Joinder shall have the meanings
defined for those terms in the Guarantee Agreement or the Indenture (as defined
below).
RECITALS
(a) The Guarantee Agreement was made by the Obligors in favor of the
Trustee pursuant to that certain Indenture (the "Indenture") dated as of January
2, 1996 by and among the Company and the Trustee.
(b) Joining Party is or has become a Subsidiary of the Company or one of
the Company's Subsidiaries and, as such, is required pursuant to the Indenture
to become an Obligor.
(c) Joining Party expects to realize direct and indirect benefits as a
result of the availability to the Company of the credit under the Indenture.
NOW, THEREFORE, Joining Party agrees as follows:
AGREEMENT
(1) By this Joinder, Joining Party becomes an "Obligor" under and pursuant
to the Guarantee Agreement. Joining Party agrees that, upon its execution
hereof, it will become an Obligor under the Guarantee Agreement with respect to
all obligations of the Company heretofore or hereafter incurred under the
Indenture or the Securities, and will be bound by all terms, conditions and
duties applicable to an Obligor under the Guarantee Agreement.
(2) The effective date of this Joinder is ________________, 199__.
"Joining Party"
----------------------------------------
a
----------------------------------------
By:
------------------------------------
Name:
----------------------------------
Title:
----------------------------------
<PAGE>
GUARANTEE AGREEMENT
18
<PAGE>
LOAN PURCHASE AGREEMENT
THIS LOAN PURCHASE AGREEMENT (the "AGREEMENT") is made and entered into
on the date hereinafter set forth by and between FIRST INTERSTATE BANK OF
CALIFORNIA (the "EXISTING LENDER") and SANTA BARBARA BANK & TRUST, as Trustee
(the "TRUSTEE") under the Indenture for the offering by Inamed Corporation
("INAMED") of up to $35,000,000 of its Secured Convertible Notes due 1999 (the
"NOTES").
WHEREAS:
A. The Existing Lender wishes to sell, and the Trustee wishes to
purchase, as trustee under the Indenture for the benefit of the Note holders
(the "HOLDERS"), the existing loan (the "INAMED LOAN") between First Interstate
Bank of California and Inamed and certain of its subsidiaries (collectively, the
"OBLIGORS"), which is more fully described in the loan documentation attached
hereto as EXHIBIT A (collectively, the "LOAN DOCUMENTATION"); and
B. Upon the completion of the purchase of the Inamed Loan, the
Existing Lender will release each Obligor and its respective subsidiaries,
directors, officers, employees, agents, guarantors, assigns and insurers, and
each Obligor will release the Existing Lender and its subsidiaries, directors,
officers, employees, agents, assigns and insurers, from and against any and all
liabilities, losses, claims and obligations with respect to the Inamed Loan.
NOW, THEREFORE, in consideration of the premises and promises, warranties
and representations herein contained, it is agreed as follows:
1. INAMED LOAN PURCHASE AND SALE. For the cash
payment of $322,475.32, plus $106.96 for each day after January 16, 1996
until the day such cash is received by the Existing Lender (the "PURCHASE
PRICE"), the Trustee does hereby purchase from the Existing Lender and
the Existing Lender hereby sells and assigns to the Trustee on behalf of
the Holders, the Inamed Loan, together with all security agreements,
financing statements on Form UCC-1 of record and any and all other
indicia and documents related to the Inamed Loan and any and all rights
thereunder. Upon such purchase, rights, powers, title and remedies of
the Existing Lender under the Loan Documentation shall be vested in the
Trustee.
2. "AS IS" SALE. This sale is being made by the
Existing Lender on an "as is" basis without recourse and without any
warranties or representations of any kind or nature, except that the
Existing Lender has not previously assigned or transferred any interest
in the Inamed Loan and the Existing Lender has the right and authority to
enter into this Agreement and to sell the Inamed Loan.
3. TRANSFER OF FINANCING STATEMENTS. The Existing
Lender will provide to the Trustee duly executed assignment forms on Form
UCC-2 (or in such other form as shall be acceptable to the Trustee)
reflecting the assignment of all security interests in the
<PAGE>
Inamed Loan from the Existing Lender to the Trustee. All such
documentation shall be prepared and recorded at Inamed's expense.
4. RELEASES. Upon the payment of the Purchase Price
by the Trustee to the Existing Lender and the transfer by the Existing
Lender of the Inamed Loan hereunder, the Existing Lender hereby releases
each Obligor and its respective subsidiaries, directors, officers,
employees, agents, guarantors, assigns and insurers, and each Obligor
hereby releases the Existing Lender and its subsidiaries, directors,
officers, employees, agents, assigns and insurers from any and all
liabilities, expenses, costs or causes of action, of any kind or nature,
related to the Inamed Loan. Each Obligor consents to the foregoing and
accepts the release, and agrees that it will remain fully and
unconditionally liable to the Trustee for the Inamed Loan, and it
ratifies and confirms the Inamed Loan as so assigned.
5. THIRD PARTY BENEFICIARIES. Except as specifically
provided herein, this Agreement is intended only for the benefit of the
parties hereto and not for the benefit of any third party beneficiary.
6. WAIVER OF DEFENSES. Each Obligor expressly waives
for the benefit of the Existing Lender any defense, setoff, claim or
other right which such Obligor may have against the Existing Lender with
respect to the Inamed Loan.
7. ENTIRE AGREEMENT. This Agreement constitutes the
sole and only agreement between the parties hereto respecting the sale
and purchase described in this Agreement, and correctly sets forth the
obligations of the parties to each other as of its date. Any agreements
or representations not expressly set forth in this Agreement are null and
void. All representations and warranties, covenants and agreements to be
performed subsequent to the close of this transaction by the parties
hereto contained in this Agreement shall survive the consummation of the
sale of the Inamed Loan contemplated hereunder.
8. ARBITRATION.
(a) BINDING ARBITRATION. Upon the demand of
any party ("PARTY/PARTIES") to a Document (as defined below), whether
made before the institution of any judicial proceeding or not more than
60 days after service of a complaint, third party complaint, cross-claim,
counterclaim or any answer thereto or any amendment to any of the above,
any Dispute (as defined below) shall be resolved by binding arbitration
in accordance with the terms of this arbitration program ("ARBITRATION
PROGRAM"). A "Dispute" shall include any action, dispute, claim or
controversy of any kind, whether founded in contract, tort, statutory or
common law, equity, or otherwise, now existing or hereafter arising
between any of the Parties arising out of, pertaining to or in connection
with any agreement, document or instrument to which this Arbitration
Program is attached or in which it appears or is referenced or any
related agreements, documents or instruments ("DOCUMENTS"). Any Party
who fails to submit to binding arbitration following a lawful demand by
another Party shall bear all costs and expenses, including reasonable
attorneys' fees (including those
2
<PAGE>
incurred in any trial, bankruptcy proceeding or on appeal), incurred by
the other Party in obtaining a stay of any pending judicial proceeding
and compelling arbitration of any Dispute. The parties agree that any
agreement, document or instrument which includes, attaches to or
incorporates this Arbitration Program represents a transaction involving
commerce as that term is used in the Federal Arbitration Act, Title 9
United States Code ("FAA"). THE PARTIES UNDERSTAND THAT BY THIS
AGREEMENT THEY HAVE DECIDED THAT THEIR DISPUTES SHALL BE RESOLVED BY
BINDING ARBITRATION RATHER THAN IN COURT AND, ONCE DECIDED BY
ARBITRATION, NO DISPUTE CAN LATER BE BROUGHT, FILED OR PURSUED IN COURT.
(b) GOVERNING RULES. Arbitrations conducted pursuant
to the Arbitration Program shall be administered by the American
Arbitration Association ("AAA"), or other mutually agreeable
administrator ("ADMINISTRATOR") in accordance with the terms of the
Arbitration Program and the Commercial Arbitration Rules of the AAA.
Proceedings hereunder shall be governed by the provisions of the FAA.
The arbitrator(s) shall resolve all Disputes in accordance with the
applicable substantive law designated in the Documents. Judgment upon
any award rendered hereunder may be entered in any court having
jurisdiction; PROVIDED, HOWEVER, that nothing herein shall be construed
to be a waiver by any Party that is a bank of the protections afforded
pursuant to 12 U.S.C. 91 or any similar applicable state law.
(c) ARBITRATOR POWERS AND QUALIFICATIONS; AWARDS. The
parties agree to select a neutral qualified arbitrator or a panel of
three qualified arbitrators to resolve any Dispute hereunder.
"Qualified" means a retired judge or practicing attorney, with not less
than 10 years practice in commercial law, licensed to practice in the
state of the applicable substantive law designated in the Documents. A
Dispute in which the claims or amounts in controversy do not exceed
$1,000,000 shall be decided by a single arbitrator. A single arbitrator
shall have authority to render an award up to, but not to exceed,
$1,000,000, including all damages of any kind whatsoever, costs, fees,
attorneys' fees and expenses. Submission to a single arbitrator shall be
a waiver of all parties' claims to recover more than $1,000,000. A
Dispute involving claims or amounts in controversy exceeding $1,000,000
shall be decided by a majority vote of a panel of three qualified
arbitrators. All three arbitrators on the arbitration panel must
actively participate in all hearings and deliberations. The
arbitrator(s) shall be empowered to, at the written request of any Party
in any Dispute, 1) to consolidate in a single proceeding any multiple
Party claims that are substantially identical or based upon the same
underlying transaction; 2) to consolidate any claims and Disputes between
other Parties which arise out of or relate to the subject matter hereof,
including all claims by or against borrowers, guarantors, sureties and/or
owners of collateral; and 3) to administer multiple arbitration claims as
class actions in accordance with Rule 23 of the Federal Rules of Civil
Procedure. In any consolidated proceeding the first arbitrator(s)
selected in any proceeding shall conduct the consolidated proceeding,
unless disqualified due to conflict of interest. The arbitrator(s) shall
be empowered to resolve any dispute regarding the terms of this
arbitration clause, including questions about the
3
<PAGE>
arbitrability of any Dispute, but shall have no power to change or alter
the terms of the Arbitration Program. The prevailing Party in any
Dispute shall be entitled to recover its reasonable attorneys' fees in
any arbitration, and the arbitrator(s) shall have the power to award such
fees. The award of the arbitrator(s) shall be in writing and shall set
forth the factual and legal basis for the award.
(d) REAL PROPERTY COLLATERAL. Notwithstanding the
provisions of Paragraphs (a) through (c), no Dispute shall be submitted
to arbitration without the consent of all Parties if, at the time of the
proposed submission, such Dispute arises from or relates to an obligation
which is secured directly or indirectly and in whole or in part by real
property collateral. If all Parties do not consent to submission of such
a Dispute to arbitration, the Dispute shall be determined as provided in
Paragraph (e).
(e) JUDICIAL REFERENCE. At the request of any Party,
a Dispute which is not submitted to arbitration as provided and limited
in Paragraphs (a) through (d) shall be determined by a reference in
accordance with California Code of Civil Procedure Section 638 ET SEQ.
If such an election is made, the Parties shall designate to the court a
referee or referees selected under the auspices of the AAA, unless
otherwise agreed to in writing by all parties. With respect to a Dispute
in which the amounts in controversy do not exceed $1,000,000, a single
referee shall be chosen and shall resolve the Dispute. The referee shall
have authority to render an award up to, but not to exceed, $1,000,000,
including all damages of any kind whatsoever, including costs, fees and
expenses. A Dispute involving amounts in controversy exceeding
$1,000,000 shall be decided by a majority vote of a panel of three
referees (a "REFEREE PANEL"), PROVIDED, HOWEVER, that all three referees
on the Referee Panel must actively participate in all hearings and
deliberations. Referees, including any Referee Panel, may grant any
remedy of relief deemed just and equitable and within the scope of the
Arbitration Program and may also grant such ancillary relief as is
necessary to make effective any award. The presiding referee of the
Referee Panel, or the referee if there is a single referee, shall be a
retired judge. Judgment upon the award rendered by such referee(s) shall
be entered in the court in which such proceeding was commenced in
accordance with California Code of Civil Procedure Sections 644 and 645.
Determinations and awards by a referee or Referee Panel shall be binding
on all Parties and shall not be subject to further review or appeal
except as allowed by applicable law.
(f) PRESERVATION OF REMEDIES. No provision of, nor
the exercise of any rights under, the Arbitration Program shall limit the
right of any Party to: (1) foreclose against and/or sale of any real or
personal property collateral or other security, or obtain a personal or
deficiency award; (2) exercise self-help remedies (including repossession
and setoff rights); (3) obtain provisional or ancillary remedies such as
injunctive relief, sequestration, attachment, replevin, garnishment or
the appointment of a receiver from a court having jurisdiction. Such
rights can be exercised at any time except to the extent such action is
contrary to a final award or decision in any arbitration proceeding. The
institution and maintenance of an action as described above shall not
constitute a waiver of the right of any Party to submit the Dispute to
arbitration, nor render inapplicable the compulsory
4
<PAGE>
arbitration provisions hereof. Any claim or dispute related to the
exercise of any self-help, auxiliary or other rights under this paragraph
shall be a Dispute hereunder.
(g) MISCELLANEOUS. All statutes of limitation
applicable to any Dispute shall apply to any proceeding in accordance
with the Arbitration Program. The Parties agree, to the maximum extent
practicable, to take any action necessary to conclude an arbitration
hereunder within 180 days of the filing of a Dispute with the
Administrator. The arbitrator(s) shall be empowered to impose sanctions
for any Party's failure to proceed within the times established herein.
Arbitrations shall be conducted in the state of the applicable
substantive law designated in the Documents. The provisions of the
Arbitration Program shall survive a termination, amendment or expiration
hereof or of the Documents, unless the Parties otherwise expressly agree
in writing. Each Party agrees to keep all Disputes and arbitration
proceedings strictly confidential, except for disclosures of information
required in the ordinary course of business of the Parties or as required
by applicable law or regulation. If any provision of the Arbitration
Program is declared invalid by any court, the remaining provisions shall
not be affected thereby and shall remain fully enforceable.
9. CALIFORNIA LAW. This Agreement will be construed
under the laws of the State of California, and any judgment on any
arbitration or judicial reference shall be entered, made or brought in
the Superior Court of the County of Santa Barbara, California.
10. ATTORNEYS' FEES. Should any litigation be
commenced between the parties to this Agreement concerning this
Agreement, any exhibit hereof or the rights or duties of either in
relation thereto, the party prevailing in such litigation shall be
entitled, in addition to such other relief as may be granted, to a
reasonable sum as and for its attorneys' fees in such litigation which
shall be determined by the court in such litigation or in a separate
action brought for that purpose.
11. AGREEMENT BINDING ON HEIRS AND ASSIGNS. This
Agreement shall inure to the benefit of, and be binding upon, the heirs,
administrators and assigns of each of the parties hereto. Words used in
this Agreement in the present tense include the future as well as the
present; words used in the masculine gender include the feminine and
neuter; the singular number includes the plural, and the plural, the
singular; and the word "person" includes a corporation as well as a
natural person.
12. NOTICES. All notices required or permitted to be
given hereunder shall be in writing and shall be sent by first class
mail, postage prepaid, deposited in the United States mail in California,
and if intended for the Existing Lender, shall be addressed as follows:
First Interstate Bank of California
707 Wilshire Boulevard, W23-14
Los Angeles, CA 90017
Attention: Razia Damji,
5
<PAGE>
Vice President
and if intended for the Trustee, shall be addressed as follows:
Santa Barbara Bank & Trust
1021 Anacapa Street
Santa Barbara, CA 93101
Attention: Jay D. Smith, Esq.
and if intended for any Obligor, shall be addressed as follows:
Inamed Corporation
3800 Howard Hughes Parkway, Suite 900
Las Vegas, NV 89109
Attention: Michael D. Farney
Either party may by written notice to the other change the address for notices
to be sent to it.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement this
19th day of January, 1996.
EXISTING LENDER:
FIRST INTERSTATE BANK OF CALIFORNIA
By: /s/ Razia Damji
--------------------------------
Title: Vice President
-----------------------------
TRUSTEE:
SANTA BARBARA BANK & TRUST,
as Trustee under the Indenture for the
Inamed Corporation Secured Convertible
Notes due 1999
By: /s/ Jay D. Smith
--------------------------------
Title: Senior Vice President
-----------------------------
OBLIGORS:
INAMED CORPORATION
By: /s/ Michael D. Farney
--------------------------------
Title: Chief Executive Officer
-----------------------------
McGHAN MEDICAL CORPORATION
By: /s/ Michael D. Farney
--------------------------------
Title: Chief Financial Officer
----------------------------
CUI CORPORATION
By: /s/ Michael D. Farney
--------------------------------
7
<PAGE>
Title: Chief Financial Officer
-----------------------------
8
<PAGE>
Exhibit A
LOAN DOCUMENTATION
<PAGE>
ESCROW AGREEMENT
ESCROW AGREEMENT, dated as of January 2, 1996 between Inamed
Corporation, a Florida corporation ("INAMED") and Santa Barbara Bank & Trust, as
escrow agent (the "ESCROW AGENT").
WHEREAS, contemporaneous with the execution and delivery of this
Agreement Inamed is conducting a private offering (the "OFFERING") of its
Secured Convertible Notes due 1999 (the "NOTES") pursuant to a Confidential
Offering Memorandum dated January 10, 1996 (as amended or supplemented, the
"COM")
WHEREAS, the Notes are issued under an Indenture (the
"INDENTURE") dated as of January 2, 1996 between Inamed and Santa Barbara Bank &
Trust, as Trustee (the "TRUSTEE") (capitalized terms not defined herein shall
have the meanings ascribed to them in the COM or in the Indenture);
WHEREAS, Inamed is a party to certain litigation (the
"LITIGATION") pending in the United States District Court for the Northern
District of Alabama, Southern Division stylized as "Silicone Gel Breast Implant
Products Liability Litigation (MDL 926)";
WHEREAS, Inamed has in the Litigation applied for an order
certifying Inamed Corporation's Mandatory (non "opt-out" Limited Fund) Class
under Rule 23(b)(1)(B) of the Federal Rules of Civil Procedure (the "CERTIFIED
CLASS"), pursuant to which Inamed would be required to deposit approximately $10
million into the limited fund thereby established (the "LIMITED FUND");
WHEREAS, Inamed has established as a condition to the Offering
that Inamed and the Escrow Agent enter into this Agreement and that Inamed
deposit certain proceeds of the Offering with the Escrow Agent to provide a fund
that will only be payable to Inamed upon certification of the Certified Class.
NOW, THEREFORE, Inamed and the Escrow Agent hereby agree as
follows:
1. APPOINTMENT OF THE ESCROW AGENT; DEPOSIT OF COM. Inamed
hereby constitutes and appoints the Escrow Agent as, and the Escrow Agent hereby
agrees to assume and perform the duties of, the escrow agent under and pursuant
to this Agreement. The Escrow Agent acknowledges receipt of a copy of the COM.
2. THE ESCROW FUND. Upon receipt by Inamed of $10,300,000 in
proceeds from the Offering and the deposit with the Escrow Agent of the next
$10,000,000 in Offering proceeds Inamed shall deposit (or cause to be deposited)
with the Escrow Agent the next $5,000,000 in Offering proceeds (the "ESCROW
AMOUNT," and the Escrow Amount together with all earnings thereon the "ESCROW
FUND"), such Escrow Fund to be held by the Escrow Agent as a trust fund on
behalf of the Limited Fund or the Subscribers, as the case may be, in a separate
account maintained
<PAGE>
for the purpose, on the terms and subject to the conditions of this Agreement.
The Escrow Fund shall not be subject to lien or attachment by any creditor of
any party hereto, shall be used solely for the purpose set forth in this
Agreement and, except under the circumstances set forth in Section 5(a) or 5(b),
shall not be an asset of Inamed. Amounts held in the Escrow Fund shall not be
available to, and shall not be used by, the Escrow Agent to set off any
obligations of Inamed owing to the Escrow Agent in any capacity, including as
Trustee under the Indenture. Concurrent with any deposit into the Escrow Fund
Inamed shall deliver or cause to be delivered to the Escrow Agent a true and
correct itemized list of funds so deposited, subscribers (the "SUBSCRIBERS") of
Notes in the Offering from whom such funds were received (and in what respective
amounts) and the Notes issued to such Subscribers (the "SUBSCRIBER LIST"). Upon
conversion of any Notes, Inamed shall deliver or cause to be delivered to the
Escrow Agent a true and correct itemized list of the Notes so converted (and if
not a Note issued to an original Subscriber, with an identification of the Note
issued to the original Subscriber, the successor of which has been converted)
and the principal amount so converted.
3. INVESTMENT OF THE ESCROW FUND; TAXES.
(a) The Escrow Agent shall invest and reinvest all cash
funds held from time to time as part of the Escrow Fund in its discretion, in
any of the following kinds of investments, or in any combination thereof: (i)
demand or time deposits in, certificates of deposit of or bankers' acceptances
issued by (A) a depository institution or trust company incorporated under the
laws of the United States of America, any State thereof or the District of
Columbia or (B) a United States branch office or agency of a foreign depository
institution or trust company if, in any such case, the depository institution,
trust company or office or agency has combined capital and surplus of not less
than fifty million dollars ($50,000,000.00) (any such institution being herein
called a "PERMITTED BANK") having maturities of not greater than 30 days (or, if
earlier, the Termination Date); or (ii) such other investments as shall be
approved by the Holders (as defined in the Indenture) of at least 66-2/3% in
principal amount of Outstanding Securities (as defined in the Indenture).
Notwithstanding the foregoing, on and after December 22, 1996 and prior to the
Termination Date, the Escrow Agent shall invest all or any part of the Escrow
Fund in a demand deposit account to be identified to the Subscribers by Inamed
maintained by the Escrow Agent on behalf of the Subscribers so that all amounts
that remain in the Escrow Fund, subject to Section 5(b) below, will be available
in immediately available funds for payment over to Inamed or the Subscribers on
the Termination Date. The Escrow Agent shall be entitled to rely on the
Subscriber List without further investigation or inquiry in paying such funds
over to Subscribers.
(b) All taxes in respect of earnings on the Escrow Fund
shall be the obligation of and shall be paid when due by Inamed who shall
indemnify and hold the Escrow Agent harmless from and against all such taxes.
-2-
<PAGE>
4. DRAW FROM THE ESCROW FUND.
(a) Concurrently with the issuance of an order that becomes
a Final Order certifying the Certified Class in the Litigation (the
"CERTIFICATION ORDER"), Inamed will deliver to the Escrow Agent: (1) a
certificate in substantially the form of Annex I attached hereto (a "CERTIFICATE
OF INSTRUCTION") duly completed and executed by Inamed; (2) an opinion of
counsel to Inamed, in form reasonably satisfactory to the Escrow Agent, that (a)
the Certificate of Instruction has been duly and properly executed and delivered
by Inamed, (b) to the best of such counsel's knowledge, the Certificate of
Instruction does not contain any untrue statement of any material fact and (c)
the Certification Order, a copy of which is attached to the Certificate of
Instruction is a Final Order (as defined below); and (3) a conformed or
certified copy of the Certification Order issued by the appropriate court having
jurisdiction over the Litigation (together with the Certificate of Instruction
and such opinion of counsel, the "CERTIFICATES"). None of the Certificates may
be delivered by Inamed after the close of business on the business day
immediately preceding the Termination Date. The Escrow Agent shall give written
notice to the Subscribers of its receipt of the Certificates not later than the
close of business on the day following the day of receipt thereof, together with
a copy of such Certificates. As used herein, a "FINAL ORDER" means an order or
judgment of the District Court or other court of competent jurisdiction over the
Litigation or the certification of the Certified Class as to which the time to
appeal, seek leave to appeal, petition for certiorari or move for reargument or
rehearing has expired and as to which no appeal, petition for certiorari or
other proceedings for reargument, rehearing or leave to appeal shall then be
pending or as to which any right to appeal, petition for certiorari, reargue,
rehear or seek leave to appeal shall have been waived in writing in form and
substance satisfactory to Inamed (based upon written advice of counsel) or, in
the event that an appeal, writ of certiorari, or reargument or rehearing thereof
or leave to appeal has been motioned for or sought, such order of the court
shall have been affirmed by the highest court to which such order was appealed,
or certiorari has been denied or from which reargument or rehearing or leave to
appeal was motioned for or sought, and the time to take any further appeal,
petition for certiorari, move for reargument or rehearing or seek leave to
appeal shall have expired. Upon receipt of the Certificates, the Escrow Agent
shall be entitled to rely conclusively upon the statements and instructions set
forth in the Certificate of Instruction and shall not have any liability for
complying with the instructions set forth therein.
(b) If the Escrow Agent shall receive all of the
Certificates before the close of business on the business day immediately
preceding the Termination Date, then the Escrow Agent shall, on or before the
second business day next following the date of the Escrow Agent's receipt of the
Certificates, pay over to Inamed from the Escrow Fund, by wire transfer of
immediately available funds or other method acceptable to the court with
jurisdiction thereof, the amount set forth in the Certificate of Instruction
(the "ESCROW FUND DRAW").
(c) Upon the payment by the Escrow Agent of the Owed Amount
referred to in the Certificate of Instruction, such Certificate of Instruction
shall be deemed satisfied and canceled.
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<PAGE>
5. RELEASE OF ESCROW FUND.
(a) If the Escrow Agent shall issue the Escrow Fund Draw to
Inamed pursuant to Section 4(b), then on or before the first business day next
following the date on which the Escrow Fund Draw is paid to the Limited Fund,
the Escrow Agent shall also pay over to Inamed from the Escrow Fund all amounts
that remain in the Escrow Fund, by wire transfer of immediately available funds
to a bank account of Inamed's designation as contained in the Certificate of
Instruction.
(b) TERMINATION DATE. The Escrow Agent shall on the earlier
of (i) January 23, 1997 at 10:00 a.m. Pacific time or (ii) 10:00 a.m. Pacific
time on the day following the date on which there occurs a declaration of the
unpaid principal of and any accrued interest on all the Securities (as defined
in the Indenture) to be due and payable pursuant to Section 4.2 of the Indenture
(either such date and time, the "TERMINATION DATE"), if the Escrow Agent has not
prior to the close of business on the date immediately preceding the Termination
Date received from Inamed the Certificates duly completed and executed, pay over
to the Subscribers from the Escrow Fund all amounts that remain in the Escrow
Fund as provided in this Section 5(b) and in Article 9 of the Indenture. Such
payments shall be made to each Subscriber in a proportionate amount based on the
percentage of principal amount of Notes surrendered by each Subscriber in
partial redemption in accordance with Article 9 of the Indenture. Upon any such
surrender and payment, a new Security or Securities in principal amount equal to
the unredeemed portion, if any, will be issued by the Trustee as provided in the
Indenture. As provided in Article 9 of the Indenture, if any Notes shall have
been converted prior the time of such payments from the Escrow Fund, then Inamed
shall be deemed to be a Subscriber under this Section 5(b) to the extent of the
principal amount so converted for purposes of receiving payments from the Escrow
Fund. Inamed shall provide evidence reasonably satisfactory to the Escrow Agent
of any such conversion and the principal amount thereof in the manner provided
in the Indenture. All interest accrued on the Escrow Amount shall be paid in a
like proportion to the Subscribers and such amounts shall be credited as
provided in the Indenture.
6. DUTIES AND OBLIGATIONS OF THE ESCROW AGENT. The duties and
obligations of the Escrow Agent shall be limited to and determined solely by the
provisions of this Agreement and the Certificates delivered in accordance
herewith, and the Escrow Agent is not charged with knowledge of or any duties or
responsibilities in respect of any other agreement or document. In furtherance
and not in limitation of the foregoing:
(i) the Escrow Agent shall not be liable for any loss of
interest sustained as a result of investments made hereunder in
accordance with the terms hereof, including any liquidation of any
investment of the Escrow Fund prior to its maturity effected in order to
make a payment required by the terms of this Agreement;
(ii) the Escrow Agent shall be fully protected in relying in
good faith upon any written certification, notice, direction, request,
waiver, consent, receipt or other document
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<PAGE>
that the Escrow Agent reasonably believes to be genuine and duly
authorized, executed and delivered;
(iii) the Escrow Agent shall not be liable for any error of
judgment, or for any act done or omitted by it, or for any mistake in
fact or law, or for anything that it may do or refrain from doing in
connection herewith in good faith and with such care, including
reasonable inquiry, as an ordinarily prudent person in like position
would use under similar circumstances; PROVIDED, HOWEVER, that,
notwithstanding any other provision of this Agreement, the Escrow Agent
shall be liable for its breach of this Agreement;
(iv) the Escrow Agent may seek the advice of legal counsel
selected with reasonable care in the event of any dispute or question as
to the construction of any of the provisions of this Agreement or its
duties hereunder, and it shall incur no liability and shall be fully
protected in respect of any action taken, omitted or suffered by it in
good faith in accordance with the opinion of such counsel;
(v) in the event that the Escrow Agent shall in any
instance, after seeking the advice of legal counsel pursuant to the
immediately preceding clause, in good faith be uncertain as to its
duties or rights hereunder, it shall be entitled to refrain from taking
any action in that instance and its sole obligation, in addition to
those of its duties hereunder as to which there is no such uncertainty,
shall be to keep safely all property held in the Escrow Fund until it
shall be directed otherwise in writing by each of (i) the Holders (as
defined in the Indenture) of at least 66-2/3% in principal amount of
Outstanding Securities (as defined in the Indenture) and (ii) Inamed or
by a final, nonappealable order of a court of competent jurisdiction;
PROVIDED, HOWEVER, in the event that the Escrow Agent has not received
such written direction or court order within sixty (60) calendar days
after requesting the same, it shall have the right to interplead Inamed
and the Subscribers in any court of competent jurisdiction and request
that such court determine its rights and duties hereunder; and
(vi) the Escrow Agent may execute any of its powers or
responsibilities hereunder and exercise any rights hereunder either
directly or by or through agents or attorneys selected with reasonable
care, nothing in this Agreement shall be deemed to impose upon the
Escrow Agent any duty to qualify to do business or to act as fiduciary
or otherwise in any jurisdiction other than the State of California and
the Escrow Agent shall not be responsible for and shall not be under a
duty to examine into or pass upon the validity, binding effect,
execution or sufficiency of this Agreement or of any agreement
amendatory or supplemental hereto.
7. COOPERATION. Inamed shall provide to the Escrow Agent all
instruments and documents within its powers necessary for the Escrow Agent to
perform its duties and responsibilities hereunder.
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<PAGE>
8. INDEMNITY; FEES AND EXPENSES.
(a) Inamed shall indemnify the Escrow Agent against and hold
the Escrow Agent harmless from any costs, damages, judgments, attorney's fees,
expenses, obligations and liabilities of any kind or nature that may be suffered
or incurred by the Escrow Agent as a result of, in connection with, or arising
from or out of the acts or omissions of the Escrow Agent in the operation,
administration, enforcement or performance of or pursuant to this Escrow
Agreement in accordance with the standards of care applicable under this
Agreement; PROVIDED, HOWEVER, that Inamed shall not be obligated to indemnify
the Escrow Agent for any costs, damages, judgments, attorney's fees, expenses,
obligations or liabilities caused by the negligence or willful misconduct of the
Escrow Agent or caused by the breach of this Agreement by the Escrow Agent. If
any controversy arises between Inamed and the Subscribers or with any third
person with respect to the subject matter of this Escrow Agreement or its terms
or conditions, the Escrow Agent shall not be required to determine the same or
take any action thereupon, but may await the settlement of any such controversy.
In such event (but subject to Section 3) the Escrow Agent shall not be liable
for interest or damages.
(b) Inamed shall pay the Escrow Agent compensation (as
payment in full) for the services to be rendered by the Escrow Agent hereunder
in the amount of $1,000.00 at the time of execution of this Escrow Agreement and
agree to reimburse the Escrow Agent for all reasonable expenses, disbursements
and advances incurred or made by the Escrow Agent in connection with the
operation, administration, enforcement and performance of this Escrow Agreement
and its obligations hereunder (including reasonable fees, expenses and
disbursements of its counsel) subject to the proviso in the first sentence of
Section 8(a).
9. RESIGNATION AND REMOVAL OF THE ESCROW AGENT.
(a) The Escrow Agent may resign as escrow agent under this
Agreement by delivering written notice thereof to Inamed at least such thirty
(30) calendar days prior to the stated effective date thereof. In addition, the
Escrow Agent may be removed and replaced on a date designated in a written
instrument signed by Inamed and delivered to the Escrow Agent. Notwithstanding
the foregoing, no such resignation or removal shall be effective until a
successor escrow agent has acknowledged its appointment as such as provided in
paragraph (c) below. In either event, upon the effective date of such
resignation or removal, the Escrow Agent shall deliver the property comprising
the Escrow Fund to such successor escrow agent, together with such records
maintained by the Escrow Agent in connection with its duties hereunder and other
information with respect to the Escrow Fund as such successor may reasonably
request.
(b) If a successor escrow agent shall not have acknowledged
its appointment as such as provided in paragraph (c) below, in the case of a
resignation, prior to the expiration of thirty (30) calendar days following the
date of a notice of resignation or, in the case of a removal, on the date
designated for the Escrow Agent's removal, as the case may be, because Inamed is
unable to
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<PAGE>
determine an appropriate successor escrow agent (which in any case shall require
the written consent of the Holders (as defined in the Indenture) of at least
66-2/3% in principal amount of Outstanding Securities (as defined in the
Indenture)), or for any other reason, the Escrow Agent may select a successor
escrow agent and any such resulting appointment shall be binding upon all of the
parties to and beneficiaries of this Agreement, PROVIDED that any such successor
selected by the Escrow Agent shall be a Permitted Bank referred to in subclause
(A) of clause (i) of paragraph (a) of Section 3.
(c) Upon written acknowledgment by a successor escrow agent
appointed in accordance with the foregoing provisions of this Section 9 of its
agreement to serve as escrow agent hereunder and the receipt of the property
then comprising the Escrow Fund, the Escrow Agent shall be fully released and
relieved of all duties, responsibilities and obligations under this Agreement,
subject to the proviso contained in clause (iii) of Section 6, and such
successor escrow agent shall for all purposes hereof be the Escrow Agent.
10. NOTICES. All notices permitted or required by this
Agreement shall be in writing and shall be deemed to be delivered and received
(a) when personally delivered, (b) on the third (3rd) business day after the
date on which deposited in the United States Mail, postage prepaid, certified or
registered mail, return receipt requested, (c) on the date on which transmitted
by facsimile or other electronic means generating a receipt evidencing a
successful transmission or (d) on the next business day after the date on which
deposited with a regulated public carrier of recognized national standing (E.G.,
Federal Express), carriage prepaid, for overnight delivery, addressed to the
party for whom intended at the address or facsimile set forth below, or such
other address, facsimile or electronic transmission address, notice of which is
provided in a manner permitted by this Section 10 (PROVIDED, HOWEVER, that,
notwithstanding the foregoing, a copy each such notice shall be provided to each
party by facsimile concurrently with delivery by any other means):
If to Inamed, to: Inamed Corporation
3800 Howard Hughes Parkway
Suite 900
Las Vegas, Nevada 89109
Attn: Michael D. Farney, Esq.
Facsimile No.: 702-791-1922
If to the Escrow
Agent, to: Santa Barbara Bank & Trust
1021 Anacapa Street
Santa Barbara, California 93101
Attention: Jay Donald Smith, Esq.
Facsimile No.: 805-564-6293
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<PAGE>
Any notice or communication directed to Subscribers shall be made in the manner
provided for communications to the Holders under the Indenture.
11. AMENDMENTS, ETC. This Agreement may only be amended or
modified, including to alter the events upon which funds may be disbursed from
the Escrow Fund or to extend the Termination Date, with the affirmative consent
of the Holders (as defined in the Indenture) of at least 66-2/3% in principal
amount of Outstanding Securities (as defined in the Indenture). No waiver by
any person or entity of any term or condition contained of this Agreement, in
any one or more instances, shall be deemed to be or construed as a waiver of the
same or any other term or condition of this Agreement on any future occasion.
12. ATTORNEYS FEES. Should any litigation be commenced
concerning this Agreement, any exhibit hereof or the rights or duties of any
person or entity in relation thereto, the party prevailing in such litigation
shall be entitled, in addition to such other relief as may be granted, to a
reasonable sum as and for its attorneys' fees in such litigation which shall be
determined by the court in such litigation or in a separate action brought for
that purpose.
13. GOVERNING LAW. GOVERNING LAW; SUBMISSION TO JURISDICTION.
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW
OF THE STATE OF CALIFORNIA. INAMED HEREBY AND EACH SUBSCRIBER AND HOLDER BY
PURCHASING NOTES SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES
DISTRICT COURT FOR THE CENTRAL DISTRICT OF CALIFORNIA AND OF ANY CALIFORNIA
STATE COURT SITTING IN SANTA BARBARA, CALIFORNIA FOR THE PURPOSES OF ALL LEGAL
PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT. INAMED AND EACH SUBSCRIBER AND HOLDER BY
PURCHASING NOTES IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT
ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM.
14. BUSINESS DAY. For all purposes of this Agreement, the term
"business day" shall mean a day other than Saturday, Sunday or any day on which
banks located in the States of Nevada, California or New York are authorized or
obligated to close.
15. MISCELLANEOUS. This Agreement is binding upon and will
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. The headings used in this Agreement have been inserted for
convenience of reference only and do not define or limit the provisions hereof.
This Agreement may be executed in any number of counterparts, each of which will
be deemed an original, but all of which together will constitute one and the
same instrument. In the event of any conflict between the terms of this
Agreement and the terms of the Indenture, the
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<PAGE>
terms of the Indenture shall control. The General Provisions of the Escrow
Agent's standard Escrow Instructions, as applicable from time to time, are
hereby incorporated by this reference.
16. THIRD-PARTY BENEFICIARIES. The Subscribers are express
third-party beneficiaries of each and all of the agreements of the parties
contained in this Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first above written.
INAMED CORPORATION, a Florida
corporation
By: /s/ Michael D. Farney
------------------------------
Name: Michael D. Farney
Title: Chief Executive Officer
SANTA BARBARA BANK & TRUST
By: /s/ Jay D. Smith
------------------------------
Name: Jay D. Smith
Title:
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<PAGE>
ANNEX I
CERTIFICATE OF INSTRUCTION
to
Santa Barbara Bank & Trust
as Escrow Agent
The undersigned, Inamed Corporation, a Florida corporation
("INAMED"), pursuant to Section 4(a) of the Escrow Agreement dated as of January
2, 1996, between Inamed and you (capitalized terms used herein shall have the
same meanings herein as in the Escrow Agreement), hereby:
(a) certifies that (i) the court having jurisdiction over the
Litigation has certified the Certified Class pursuant to an order, (ii)
the order certifying the Certified Class has become a Final Order, (iii)
attached hereto is a certified or conformed copy of the Certification
Order, (iv) the amount of $___________ ] (the "OWED AMOUNT") is payable
to Inamed, and (v) all conditions precedent or concurrent to the payment
to Inamed have been satisfied; and
(b) instructs you to pay to Inamed from the Escrow Fund the
Owed Amount, by wire transfer of immediately available funds to Inamed's
account at _____________, _________________, _______________,
______________ (Account No.:_________), together with all other amounts
in the Escrow Fund.
INAMED CORPORATION
By:
------------------------------
Name:
Title:
Dated:
------------
<PAGE>
ESCROW AGREEMENT
ESCROW AGREEMENT, dated as of January 2, 1996 between Inamed
Corporation, a Florida corporation ("INAMED") and Santa Barbara Bank & Trust, as
escrow agent (the "ESCROW AGENT").
WHEREAS, contemporaneous with the execution and delivery of this
Agreement Inamed is conducting a private offering (the "OFFERING") of its
Secured Convertible Notes due 1999 (the "NOTES") pursuant to a Confidential
Offering Memorandum dated January 10, 1996 (as amended or supplemented, the
"COM")
WHEREAS, the Notes are issued under an Indenture (the
"INDENTURE") dated as of January 2, 1996 between Inamed and Santa Barbara Bank &
Trust, as Trustee (the "TRUSTEE") (capitalized terms not defined herein shall
have the meanings ascribed to them in the COM or in the Indenture);
WHEREAS, Inamed is a party to certain litigation (the
"LITIGATION") pending in the United States District Court for the Northern
District of Alabama, Southern Division stylized as "Silicone Gel Breast Implant
Products Liability Litigation (MDL 926)";
WHEREAS, Inamed has in the Litigation applied for an order
certifying Inamed Corporation's Mandatory (non "opt-out" Limited Fund) Class
under Rule 23(b)(1)(B) of the Federal Rules of Civil Procedure (the "CERTIFIED
CLASS"), pursuant to which Inamed would be required to deposit approximately $10
million into the limited fund thereby established (the "LIMITED FUND");
WHEREAS, Inamed has established as a condition to the Offering
that Inamed and the Escrow Agent enter into this Agreement and that Inamed
deposit certain proceeds of the Offering with the Escrow Agent to provide a fund
for a payment to the Limited Fund.
NOW, THEREFORE, Inamed and the Escrow Agent hereby agree as
follows:
1. APPOINTMENT OF THE ESCROW AGENT; DEPOSIT OF COM. Inamed
hereby constitutes and appoints the Escrow Agent as, and the Escrow Agent hereby
agrees to assume and perform the duties of, the escrow agent under and pursuant
to this Agreement. The Escrow Agent acknowledges receipt of a copy of the COM.
2. THE ESCROW FUND. Upon receipt by Inamed of $10,300,000 in
proceeds from the Offering, Inamed shall deposit (or cause to be deposited) with
the Escrow Agent the next $10,000,000 in Offering proceeds (the "ESCROW AMOUNT,"
and the Escrow Amount together with all earnings thereon the "ESCROW FUND"),
such Escrow Fund to be held by the Escrow Agent as a trust fund on behalf of the
Subscribers in a separate account maintained for the purpose, on the terms and
subject to the conditions of this Agreement. The Escrow Fund shall not be
subject to lien or attachment by any creditor of any party hereto, shall be used
solely for the purpose set forth in this
<PAGE>
Agreement and, except under the circumstances set forth in Section 5(a) or 5(b),
shall not be an asset of Inamed. Amounts held in the Escrow Fund shall not be
available to, and shall not be used by, the Escrow Agent to set off any
obligations of Inamed owing to the Escrow Agent in any capacity, including as
Trustee under the Indenture. Concurrent with any deposit into the Escrow Fund
Inamed shall deliver or cause to be delivered to the Escrow Agent a true and
correct itemized list of funds so deposited, subscribers (the "SUBSCRIBERS") of
Notes in the Offering from whom such funds were received (and in what respective
amounts) and the Notes issued to such Subscribers (the "SUBSCRIBER LIST"). Upon
conversion of any Notes, Inamed shall deliver or cause to be delivered to the
Escrow Agent a true and correct itemized list of the Notes so converted (and if
not a Note issued to an original Subscriber, with an identification of the Note
issued to the original Subscriber, the successor of which has been converted)
and the principal amount so converted.
3. INVESTMENT OF THE ESCROW FUND; TAXES.
(a) The Escrow Agent shall invest and reinvest all cash
funds held from time to time as part of the Escrow Fund in its discretion, in
any of the following kinds of investments, or in any combination thereof: (i)
demand or time deposits in, certificates of deposit of or bankers' acceptances
issued by (A) a depository institution or trust company incorporated under the
laws of the United States of America, any State thereof or the District of
Columbia or (B) a United States branch office or agency of a foreign depository
institution or trust company if, in any such case, the depository institution,
trust company or office or agency has combined capital and surplus of not less
than fifty million dollars ($50,000,000.00) (any such institution being herein
called a "PERMITTED BANK") having maturities of not greater than 30 days (or, if
earlier, the Termination Date); or (ii) such other investments as shall be
approved by the Holders (as defined in the Indenture) of at least 66-2/3% in
principal amount of Outstanding Securities (as defined in the Indenture).
Notwithstanding the foregoing, on and after December 22, 1996 and prior to the
Termination Date, the Escrow Agent shall invest all or any part of the Escrow
Fund in a demand deposit account to be identified to the Subscribers by Inamed
maintained by the Escrow Agent on behalf of the Limited Fund and the Subscribers
so that all amounts that remain in the Escrow Fund, subject to Section 5(b)
below, will be available in immediately available funds for payment over to the
Limited Fund or the Subscribers on the Termination Date. The Escrow Agent shall
be entitled to rely on the Subscriber List without further investigation or
inquiry in paying such funds over to Subscribers.
(b) All taxes in respect of earnings on the Escrow Fund
shall be the obligation of and shall be paid when due by Inamed who shall
indemnify and hold the Escrow Agent harmless from and against all such taxes.
4. DRAW FROM THE ESCROW FUND.
(a) Concurrently with the issuance of an order that becomes
a Final Order (as defined below) certifying the Certified Class in the
Litigation (the "CERTIFICATION ORDER"), Inamed will deliver to the Escrow Agent:
(1) a certificate in substantially the form of Annex I attached
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<PAGE>
hereto (a "CERTIFICATE OF INSTRUCTION") duly completed and executed by Inamed;
(2) an opinion of counsel to Inamed, in form reasonably satisfactory to the
Escrow Agent, that (a) the Certificate of Instruction has been duly and properly
executed and delivered by Inamed, (b) to the best of such counsel's knowledge,
the Certificate of Instruction does not contain any untrue statement of any
material fact and (c) the Certification Order, a copy of which is attached to
the Certificate of Instruction is a Final Order; and (3) a conformed or
certified copy of the Certification Order issued by the appropriate court having
jurisdiction over the Litigation (together with the Certificate of Instruction
and such opinion of counsel, the "CERTIFICATES"). None of the Certificates may
be delivered by Inamed after the close of business on the business day
immediately preceding the Termination Date. The Escrow Agent shall give written
notice to the Subscribers of its receipt of the Certificates not later than the
close of business on the day following the day of receipt thereof, together with
a copy of such Certificates. As used herein, a "FINAL ORDER" means an order or
judgment of the District Court or other court of competent jurisdiction over the
Litigation or the certification of the Certified Class as to which the time to
appeal, seek leave to appeal, petition for certiorari or move for reargument or
rehearing has expired and as to which no appeal, petition for certiorari or
other proceedings for reargument, rehearing or leave to appeal shall then be
pending or as to which any right to appeal, petition for certiorari, reargue,
rehear or seek leave to appeal shall have been waived in writing in form and
substance satisfactory to Inamed (based upon written advice of counsel) or, in
the event that an appeal, writ of certiorari, or reargument or rehearing thereof
or leave to appeal has been motioned for or sought, such order of the court
shall have been affirmed by the highest court to which such order was appealed,
or certiorari has been denied or from which reargument or rehearing or leave to
appeal was motioned for or sought, and the time to take any further appeal,
petition for certiorari, move for reargument or rehearing or seek leave to
appeal shall have expired. Upon receipt of the Certificates, the Escrow Agent
shall be entitled to rely conclusively upon the statements and instructions set
forth in the Certificate of Instruction and shall not have any liability for
complying with the instructions set forth therein.
(b) If the Escrow Agent shall receive all of the
Certificates before the close of business on the business day immediately
preceding the Termination Date, then the Escrow Agent shall, on or before the
second business day next following the date of the Escrow Agent's receipt of the
Certificates, pay over to the Limited Fund from the Escrow Fund, by wire
transfer of immediately available funds or other method acceptable to the court
with jurisdiction thereof, the amount set forth in the Certificate of
Instruction (not to exceed $10,000,000.00) (the "ESCROW FUND DRAW").
(c) Upon the payment by the Escrow Agent of the Owed Amount
referred to in the Certificate of Instruction, such Certificate of Instruction
shall be deemed satisfied and canceled.
5. RELEASE OF ESCROW FUND.
(a) If the Escrow Agent shall issue the Escrow Fund Draw to
the Limited Fund pursuant to Section 4(b), then on or before the first business
day next following the date on which
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the Escrow Fund Draw is paid to the Limited Fund, the Escrow Agent shall pay
over to Inamed from the Escrow Fund all amounts that remain in the Escrow Fund,
by wire transfer of immediately available funds to a bank account of Inamed's
designation as contained in the Certificate of Instruction.
(b) TERMINATION DATE. The Escrow Agent shall on the earlier
of (i) January 23, 1997 at 10:00 a.m. Pacific time or (ii) 10:00 a.m. Pacific
time on the day following the date on which there occurs a declaration of the
unpaid principal of and any accrued interest on all the Securities (as defined
in the Indenture) to be due and payable pursuant to Section 4.2 of the Indenture
(either such date and time, the "TERMINATION DATE"), if the Escrow Agent has not
prior to the close of business on the date immediately preceding the Termination
Date received from Inamed the Certificates duly completed and executed, pay over
to the Subscribers from the Escrow Fund all amounts that remain in the Escrow
Fund as provided in this Section 5(b) and in Article 9 of the Indenture. Such
payments shall be made to each Subscriber in a proportionate amount based on the
percentage of principal amount of Notes surrendered by each Subscriber in
partial redemption in accordance with Article 9 of the Indenture. Upon any such
surrender and payment, a new Security or Securities in principal amount equal to
the unredeemed portion, if any, will be issued by the Trustee as provided in the
Indenture. As provided in Article 9 of the Indenture, if any Notes shall have
been converted prior the time of such payments from the Escrow Fund, then Inamed
shall be deemed to be a Subscriber under this Section 5(b) to the extent of the
principal amount so converted for purposes of receiving payments from the Escrow
Fund. Inamed shall provide evidence reasonably satisfactory to the Escrow Agent
of any such conversion and the principal amount thereof in the manner provided
in the Indenture. All interest accrued on the Escrow Amount shall be paid in a
like proportion to the Subscribers and such amounts shall be credited as
provided in the Indenture.
6. DUTIES AND OBLIGATIONS OF THE ESCROW AGENT. The duties and
obligations of the Escrow Agent shall be limited to and determined solely by the
provisions of this Agreement and the Certificates delivered in accordance
herewith, and the Escrow Agent is not charged with knowledge of or any duties or
responsibilities in respect of any other agreement or document. In furtherance
and not in limitation of the foregoing:
(i) the Escrow Agent shall not be liable for any loss of
interest sustained as a result of investments made hereunder in
accordance with the terms hereof, including any liquidation of any
investment of the Escrow Fund prior to its maturity effected in order to
make a payment required by the terms of this Agreement;
(ii) the Escrow Agent shall be fully protected in relying in
good faith upon any written certification, notice, direction, request,
waiver, consent, receipt or other document that the Escrow Agent
reasonably believes to be genuine and duly authorized, executed and
delivered;
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(iii) the Escrow Agent shall not be liable for any error of
judgment, or for any act done or omitted by it, or for any mistake in
fact or law, or for anything that it may do or refrain from doing in
connection herewith in good faith and with such care, including
reasonable inquiry, as an ordinarily prudent person in like position
would use under similar circumstances; PROVIDED, HOWEVER, that,
notwithstanding any other provision of this Agreement, the Escrow Agent
shall be liable for its breach of this Agreement;
(iv) the Escrow Agent may seek the advice of legal counsel
selected with reasonable care in the event of any dispute or question as
to the construction of any of the provisions of this Agreement or its
duties hereunder, and it shall incur no liability and shall be fully
protected in respect of any action taken, omitted or suffered by it in
good faith in accordance with the opinion of such counsel;
(v) in the event that the Escrow Agent shall in any
instance, after seeking the advice of legal counsel pursuant to the
immediately preceding clause, in good faith be uncertain as to its
duties or rights hereunder, it shall be entitled to refrain from taking
any action in that instance and its sole obligation, in addition to
those of its duties hereunder as to which there is no such uncertainty,
shall be to keep safely all property held in the Escrow Fund until it
shall be directed otherwise in writing by each of (i) the Holders (as
defined in the Indenture) of at least 66-2/3% in principal amount of
Outstanding Securities (as defined in the Indenture) and (ii) Inamed or
by a final, nonappealable order of a court of competent jurisdiction;
PROVIDED, HOWEVER, in the event that the Escrow Agent has not received
such written direction or court order within sixty (60) calendar days
after requesting the same, it shall have the right to interplead Inamed
and the Subscribers in any court of competent jurisdiction and request
that such court determine its rights and duties hereunder; and
(vi) the Escrow Agent may execute any of its powers or
responsibilities hereunder and exercise any rights hereunder either
directly or by or through agents or attorneys selected with reasonable
care, nothing in this Agreement shall be deemed to impose upon the
Escrow Agent any duty to qualify to do business or to act as fiduciary
or otherwise in any jurisdiction other than the State of California and
the Escrow Agent shall not be responsible for and shall not be under a
duty to examine into or pass upon the validity, binding effect,
execution or sufficiency of this Agreement or of any agreement
amendatory or supplemental hereto.
7. COOPERATION. Inamed shall provide to the Escrow Agent all
instruments and documents within its powers necessary for the Escrow Agent to
perform its duties and responsibilities hereunder.
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8. INDEMNITY; FEES AND EXPENSES.
(a) Inamed shall indemnify the Escrow Agent against and hold
the Escrow Agent harmless from any costs, damages, judgments, attorney's fees,
expenses, obligations and liabilities of any kind or nature that may be suffered
or incurred by the Escrow Agent as a result of, in connection with, or arising
from or out of the acts or omissions of the Escrow Agent in the operation,
administration, enforcement or performance of or pursuant to this Escrow
Agreement in accordance with the standards of care applicable under this
Agreement; PROVIDED, HOWEVER, that Inamed shall not be obligated to indemnify
the Escrow Agent for any costs, damages, judgments, attorney's fees, expenses,
obligations or liabilities caused by the negligence or willful misconduct of the
Escrow Agent or caused by the breach of this Agreement by the Escrow Agent. If
any controversy arises between Inamed and the Subscribers or with any third
person with respect to the subject matter of this Escrow Agreement or its terms
or conditions, the Escrow Agent shall not be required to determine the same or
take any action thereupon, but may await the settlement of any such controversy.
In such event (but subject to Section 3) the Escrow Agent shall not be liable
for interest or damages.
(b) Inamed shall pay the Escrow Agent compensation (as
payment in full) for the services to be rendered by the Escrow Agent hereunder
in the amount of $2,000.00 at the time of execution of this Escrow Agreement and
agree to reimburse the Escrow Agent for all reasonable expenses, disbursements
and advances incurred or made by the Escrow Agent in connection with the
operation, administration, enforcement and performance of this Escrow Agreement
and its obligations hereunder (including reasonable fees, expenses and
disbursements of its counsel) subject to the proviso in the first sentence of
Section 8(a).
9. RESIGNATION AND REMOVAL OF THE ESCROW AGENT.
(a) The Escrow Agent may resign as escrow agent under this
Agreement by delivering written notice thereof to Inamed at least such thirty
(30) calendar days prior to the stated effective date thereof. In addition, the
Escrow Agent may be removed and replaced on a date designated in a written
instrument signed by Inamed and delivered to the Escrow Agent. Notwithstanding
the foregoing, no such resignation or removal shall be effective until a
successor escrow agent has acknowledged its appointment as such as provided in
paragraph (c) below. In either event, upon the effective date of such
resignation or removal, the Escrow Agent shall deliver the property comprising
the Escrow Fund to such successor escrow agent, together with such records
maintained by the Escrow Agent in connection with its duties hereunder and other
information with respect to the Escrow Fund as such successor may reasonably
request.
(b) If a successor escrow agent shall not have acknowledged
its appointment as such as provided in paragraph (c) below, in the case of a
resignation, prior to the expiration of thirty (30) calendar days following the
date of a notice of resignation or, in the case of a removal, on the date
designated for the Escrow Agent's removal, as the case may be, because Inamed is
unable to
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determine an appropriate successor escrow agent (which in any case shall require
the written consent of the Holders (as defined in the Indenture) of at least
66-2/3% in principal amount of Outstanding Securities (as defined in the
Indenture)), or for any other reason, the Escrow Agent may select a successor
escrow agent and any such resulting appointment shall be binding upon all of the
parties to and beneficiaries of this Agreement, PROVIDED that any such successor
selected by the Escrow Agent shall be a Permitted Bank referred to in subclause
(A) of clause (i) of paragraph (a) of Section 3.
(c) Upon written acknowledgment by a successor escrow agent
appointed in accordance with the foregoing provisions of this Section 9 of its
agreement to serve as escrow agent hereunder and the receipt of the property
then comprising the Escrow Fund, the Escrow Agent shall be fully released and
relieved of all duties, responsibilities and obligations under this Agreement,
subject to the proviso contained in clause (iii) of Section 6, and such
successor escrow agent shall for all purposes hereof be the Escrow Agent.
10. NOTICES. All notices permitted or required by this
Agreement shall be in writing and shall be deemed to be delivered and received
(a) when personally delivered, (b) on the third (3rd) business day after the
date on which deposited in the United States Mail, postage prepaid, certified or
registered mail, return receipt requested, (c) on the date on which transmitted
by facsimile or other electronic means generating a receipt evidencing a
successful transmission or (d) on the next business day after the date on which
deposited with a regulated public carrier of recognized national standing (E.G.,
Federal Express), carriage prepaid, for overnight delivery, addressed to the
party for whom intended at the address or facsimile set forth below, or such
other address, facsimile or electronic transmission address, notice of which is
provided in a manner permitted by this Section 10 (PROVIDED, HOWEVER, that,
notwithstanding the foregoing, a copy each such notice shall be provided to each
party by facsimile concurrently with delivery by any other means):
If to Inamed, to: Inamed Corporation
3800 Howard Hughes Parkway
Suite 900
Las Vegas, Nevada 89109
Attn: Michael D. Farney, Esq.
Facsimile No.: 702-791-1922
If to the Escrow
Agent, to: Santa Barbara Bank & Trust
1021 Anacapa Street
Santa Barbara, California 93101
Attention: Jay Donald Smith, Esq.
Facsimile No.: 805-564-6293
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Any notice or communication directed to Subscribers shall be made in the manner
provided for communications to the Holders under the Indenture.
11. AMENDMENTS, ETC. This Agreement may only be amended or
modified, including to alter the events upon which funds may be disbursed from
the Escrow Fund or to extend the Termination Date, with the affirmative consent
of the Holders (as defined in the Indenture) of at least 66-2/3% in principal
amount of Outstanding Securities (as defined in the Indenture). No waiver by
any party of any term or condition contained of this Agreement, in any one or
more instances, shall be deemed to be or construed as a waiver of the same or
any other term or condition of this Agreement on any future occasion.
12. ATTORNEYS FEES. Should any litigation be commenced
concerning this Agreement, any exhibit hereof or the rights or duties of any
person or entity in relation thereto, the party prevailing in such litigation
shall be entitled, in addition to such other relief as may be granted, to a
reasonable sum as and for its attorneys' fees in such litigation which shall be
determined by the court in such litigation or in a separate action brought for
that purpose.
13. GOVERNING LAW. GOVERNING LAW; SUBMISSION TO JURISDICTION.
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW
OF THE STATE OF CALIFORNIA. INAMED HEREBY AND EACH SUBSCRIBER AND HOLDER BY
PURCHASING NOTES SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES
DISTRICT COURT FOR THE CENTRAL DISTRICT OF CALIFORNIA AND OF ANY CALIFORNIA
STATE COURT SITTING IN SANTA BARBARA, CALIFORNIA FOR THE PURPOSES OF ALL LEGAL
PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT. INAMED AND EACH SUBSCRIBER AND HOLDER BY
PURCHASING NOTES IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT
ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM.
14. BUSINESS DAY. For all purposes of this Agreement, the term
"business day" shall mean a day other than Saturday, Sunday or any day on which
banks located in the States of Nevada, California or New York are authorized or
obligated to close.
15. MISCELLANEOUS. This Agreement is binding upon and will
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. The headings used in this Agreement have been inserted for
convenience of reference only and do not define or limit the provisions hereof.
This Agreement may be executed in any number of counterparts, each of which will
be deemed an original, but all of which together will constitute one and the
same instrument. In the event of any conflict between the terms of this
Agreement and the terms of the Indenture, the
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terms of the Indenture shall control. The General Provisions of the Escrow
Agent's standard Escrow Instructions, as applicable from time to time, are
hereby incorporated by this reference.
16. THIRD-PARTY BENEFICIARIES. The Subscribers are express
third-party beneficiaries of each and all of the agreements of the parties
contained in this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first above written.
INAMED CORPORATION, a Florida
corporation
By: /s/ Michael D. Farney
-----------------------------------
Name: Michael D. Farney
Title: Chief Executive Officer
SANTA BARBARA BANK & TRUST
By: /s/ Jay D. Smith
-----------------------------------
Name: Jay D. Smith
Title:
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ANNEX I
CERTIFICATE OF INSTRUCTION
to
Santa Barbara Bank & Trust
as Escrow Agent
The undersigned, Inamed Corporation, a Florida corporation
("INAMED"), pursuant to Section 4(a) of the Escrow Agreement dated as of January
2, 1996, between Inamed and you (capitalized terms used herein shall have the
same meanings herein as in the Escrow Agreement), hereby:
(a) certifies that (i) the court having jurisdiction over the
Litigation has certified the Certified Class pursuant to an order, (ii)
the order certifying the Certified Class has become a Final Order, (iii)
attached hereto is a certified or conformed copy of the Certification
Order, (iv) the amount of $___________ [an amount equal to the lesser of
the Escrow Fund and $10,000,000.00] (the "OWED AMOUNT") is payable to
the Limited Fund, and (v) all conditions precedent or concurrent to the
payment to the Limited Fund have been satisfied; and
(b) instructs you to pay (i) to the Limited Fund from the
Escrow Fund the Owed Amount, by wire transfer of immediately available
funds to the Limited Fund's account at _____________, _________________,
_______________, ______________ (Account No.:_________) and (ii) to
Inamed from the Escrow Fund any funds remaining after the payment
required under the preceding clause (ii), by wire transfer of
immediately available funds to the Limited Fund's account at
_____________, _________________, _______________, ______________
(Account No.:_________).
(b) instructs you to pay to Inamed from the Escrow Fund the
Owed Amount, by wire transfer of immediately available funds to Inamed's
account at _____________, _________________, _______________,
______________ (Account No.:_________), together with all other amounts
in the Escrow Fund.
INAMED CORPORATION
By:
---------------------------
Name:
Title:
Dated:
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