1
EXHIBIT 10.4
CREDIT AGREEMENT
THIS CREDIT AGREEMENT (this "Agreement"), is entered into as of September
23, 1998, by and between CENTURY MEDICAL, INC., a Japanese corporation
("Century"), as lender, and MICRO THERAPEUTICS, INC., a Delaware corporation
(the "Company"), as borrower.
W I T N E S S E T H:
WHEREAS, Century has purchased from the Company, and the Company has sold
to Century, a certain 5% Convertible Subordinated Note, due September 30, 2003,
in the principal aggregate amount of Three Million Dollars ($3,000,000) (the
"Note") pursuant to the terms and conditions of that certain Convertible
Subordinated Note Agreement, dated as of September 23, 1998, by and between
Century and the Company (the "Note Agreement"); and
WHEREAS, pursuant to Section 6 of the Note Agreement, the Company and
Century agreed to enter into this Credit Agreement, which provides that Century,
as lender, shall loan to the Company, as borrower, at the Company's request upon
the Company achieving certain milestones provided herein, an amount not to
exceed an aggregate of Two Million Dollars ($2,000,000).
NOW, THEREFORE, in consideration of the premises and of the mutual
provisions, agreements and covenants contained herein, the Company and Century
hereby agree as follows:
1. DEFINITIONS. In addition to any terms defined elsewhere in this
Agreement, the following terms have the meanings indicated for purposes of this
Agreement (such definitions being equally applicable to the singular and plural
forms of the defined term):
"Acceleration" means that the Loan (i) shall not have been paid at the
Maturity Date, or (ii) shall have become due and payable prior to its stated
maturity pursuant to Section 7.2 hereof.
"Business Day" shall mean any day other than a Saturday, Sunday, legal
holiday or other day on which commercial banks located in San Francisco,
California or New York, New York are authorized or required by law to be closed.
"Disbursement Date" means any date on or prior to September 30, 1999 on
which a disbursement of the Loan is made. Each Disbursement Date shall be on the
date designated in a written notice from the Company to Century; provided,
however, that (a) Century shall not be required to make any disbursement if the
conditions hereto and the Note Agreement are not satisfied, and (b) Century
shall in no event be required to make any disbursement after September 30, 1999.
"Maturity" means any date on which the Loan or any portion thereof becomes
due and payable, whether as stated or by virtue of mandatory prepayment, by
acceleration or otherwise.
"Maturity Date" means September 23, 2003.
"Obligations" means all loans, advances, debts, liabilities, obligations,
covenants and duties owing to Century by the Company, of any kind or nature,
present or future, whether or not evidenced by any note, guaranty or other
instrument, arising under this Agreement.
2
Each accounting term not defined herein and each accounting term partly
defined herein to the extent not defined shall have the meaning given to it
under generally accepted accounting principles.
2. LOAN.
2.1 PROCEDURE FOR LOAN. Subject to all of the terms and conditions of
this Agreement and the Note Agreement and following the Company's obtaining a CE
xxxx for its Embolyx(TM)product in Europe, which fact the Company shall document
to Century's reasonable satisfaction, Century agrees to make periodic loans (the
"Loan") prior to September 30, 1999 to the Company in an aggregate principal
amount not to exceed Two Million Dollars ($2,000,000) to be governed by the
terms and conditions of, and repaid in accordance with, this Agreement and the
Note Agreement. The Company shall provide Century with thirty (30) Business Days
written notice of a requested disbursement. Disbursement amounts shall be in
multiples of One Million Dollars ($1,000,000). Subject to the satisfaction of
the terms and conditions set forth in this Agreement and the Note Agreement,
Century shall so disburse up to Two Million Dollars ($2,000,000) to the Company
at the Company's request. Amounts repaid may not be reborrowed.
2.2 INTEREST.
(a) INTEREST. The Loan shall bear interest from the date of
disbursement on the unpaid principal amount thereof until the earlier of an
Event of Default or the date upon which such amount shall become due and payable
(whether upon Maturity, by Acceleration or otherwise) at a rate per annum equal
to five percent (5%).
(b) ACCRUAL AND COMPUTATION OF INTEREST. Interest shall accrue
daily and shall be computed on the basis of a year of 365 days for the actual
number of days elapsed.
2.3 MAXIMUM INTEREST RATE. Nothing in this Agreement shall require
the Company to pay interest at a rate exceeding the maximum amount permitted by
applicable law to be charged by Century; provided, that in any event the Company
shall pay the lesser of such maximum permissible rate and the rate provided
herein.
2.4 REPAYMENT.
(a) INTEREST PAYMENTS. On the last day of each quarter payable
in arrears on January 31, April 30, July 31 and October 31, commencing with the
quarter of the first Disbursement Date until the Maturity Date, and on the
Maturity Date, the Company shall pay Century all interest then accrued.
(b) LOAN PAYMENT. The Company shall repay the entire outstanding
principal amount of the Loan in full on the Maturity Date.
(c) OPTIONAL PREPAYMENT. The Company may at any time prepay the
entire outstanding principal amount of the Loan or any portion thereof without
penalty.
2.5 POST-MATURITY AND PENALTY INTEREST. After the earlier of an Event
of Default or Maturity (whether by Acceleration or otherwise) of the Loan, the
Loan, including accrued
2
3
but unpaid interest, shall bear interest, payable on demand, at a rate per annum
equal to ten percent (10%), subject to Section 2.3 hereof. This rate shall also
apply to each overdue payment of interest.
2.6 CREDIT FACILITY NOTE. The Loan made by Century pursuant hereto
shall be evidenced by a promissory note (the "Credit Facility Note") of the
Company in the form of Annex 1 hereto, payable to the order of Century on the
Maturity Date in the principal amount requested by the Company in accordance
with Section 2.1 hereof. The Company hereby authorizes Century to indicate upon
a schedule attached to the Credit Facility Note all disbursements made by
Century pursuant to this Agreement and all payments of principal and interest
thereon. Absent manifest error, such notations shall be presumptive as to the
aggregate unpaid principal amount of the Loan, and interest due thereon, but the
failure by Century to make such notations or the inaccuracy or incompleteness of
any such notations shall not affect the obligations of the Company hereunder or
under the Credit Facility Note.
2.7 DELIVERY OF CREDIT FACILITY NOTE; CLOSING. The delivery of each
Credit Facility Note shall occur at the offices of O'Melveny & Xxxxx LLP,
Citicorp Center, 000 Xxxx 00xx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx
00000-0000, at 11:00 a.m., Eastern Daylight Time, on each Disbursement Date. The
Credit Facility Note delivered to Century on each Disbursement Date will be
delivered to Century in the form of a single note in the form attached hereto as
Annex 1 in a principal amount equal to the full amount of the relevant Loan,
against delivery by Century to the Company or its order of immediately available
funds in the amount of such Loan therefor by wire transfer of immediately
available funds for the account of the Company to account number FNC-00000000-75
at FC-Silicon Valley Bank, 0000 Xxxxxx Xxxxx, Xxxxx Xxxxx, Xxxxxxxxxx, 00000,
XXX, ABA No. \\FW:000000000 (correspondent bank via SWIFT: Chase Manhattan Bank,
New York, New York, USA, SWIFT Advice CHASEUS33).
2.8 PLACE OF PAYMENT. Subject to Section 2.9, payments of principal
and interest becoming due and payable on any Credit Facility Note shall be made
in the State of California at the principal office of the Company in such
jurisdiction. The Company may at any time, by notice to Century, change the
place of payment of such Credit Facility Note so long as the place of payment
shall be either the principal office of the Company in such jurisdiction or the
principal office of a bank or trust company in such jurisdiction.
2.9 HOME OFFICE PAYMENT. Notwithstanding Section 2.8, so long as
Century is the holder of any Credit Facility Note, the Company shall pay all
sums becoming due on such Credit Facility Note for principal and interest by
wire transfer of immediately available funds for the account of Century to
account number 232811 at The Sumitomo Bank, Ltd., Shibuya Branch, 0-0-0
Xxxxxxxxx, Xxxxxxx-xx, Xxxxx 000-0000, Xxxxx, or by such other method or at such
other location as Century shall specify from time to time in writing to the
Company, without presentation or surrender of such Credit Facility Note or the
making of any notation thereon. The Company shall afford the benefits of this
Section 2.9 to any Holder that is the direct or indirect transferee of any
Credit Facility Note pursuant to the terms of this Agreement.
3
4
3. CONVERSION OF CREDIT FACILITY NOTE.
3.1 CONVERSION PRIVILEGE AND CONVERSION PRICE.
(a) Subject to and upon compliance with the provisions of this
Section 3, at the option of the Company at any time and at the Company's sole
discretion without regard to the price of the Common Stock (except as set forth
in Section 3.1(b)) or the Conversion Price (as defined herein), the Credit
Facility Note or any portion of the principal amount thereof which is One
Million Dollars ($1,000,000) or an integral multiple of One Million Dollars
($1,000,000) (a "$1,000,000 Integral Multiple") may be converted at the
principal amount thereof, or of such portion thereof, into fully paid and
nonassessable shares of Common Stock at the Conversion Price, in effect at the
time of conversion. Such conversion right shall expire at the close of business
on the Maturity Date. The price at which shares of Common Stock shall be
delivered upon conversion (the "Conversion Price") shall be the Fair Market
Value of such Common Stock as of the date of issuance of the Note multiplied
times 1.5, unless the Conversion Price shall be adjusted in certain instances as
provided in this Section 3.
(b) The Company shall not have the option to convert the Credit
Facility Note into shares of Common Stock to the extent that such shares of
Common Stock, together with the shares of Common Stock then beneficially owned
by Century, would exceed 19% of the then outstanding shares of Common Stock of
the Company (giving effect to such issuance upon conversion to Century).
(c) Notwithstanding the foregoing, in no event shall the Company have
the right to convert the Credit Facility Note to Common Stock, and any such
conversion of the Credit Facility Note shall be void: (i) unless the Fair Market
Value (as defined below) per share of Common Stock as of the Business Day
immediately preceding the date of the proposed conversion is equal to or greater
than Eighty Percent (80%) of the Conversion Price; or (ii) for so long as any of
the conditions specified in Section 9.9 of the Note Agreement have occurred and
remain in effect.
"Fair Market Value" of the Common Stock as of any date of determination
means the arithmetic mean of the reported last sale price of the Common Stock
regular way on each of the 20 trading days preceding such date of determination
or, if no such sale takes place on any of such days, the average of the reported
closing bid and asked prices regular way, in each case on the principal national
securities exchange on which the security is listed or admitted to trading, or,
if the security is not listed or admitted to trading on any national securities
exchange, the closing sales prices, or, if there are no closing sales prices on
any such days, the average of the closing bid and asked prices, in the Nasdaq
Stock Market or other over-the-counter market as reported by the National
Association of Securities Dealers Automated Quotation System, or, if not so
reported, the fair market value of the security as estimated by a nationally
recognized investment banking firm selected by Century and acceptable to the
Company in the exercise of its reasonable discretion, which estimate shall be
prepared at the expense of the Company.
3.2 EXERCISE OF CONVERSION PRIVILEGE. Upon receipt of written notice
of conversion (pursuant to Section 8.1 hereof) in the form attached to Annex 1,
Century shall immediately surrender the Credit Facility Note duly endorsed or
assigned to the Company or in blank, at any office or agency of the Company
maintained for that purpose; provided, that in the case
4
5
of any partial conversion of the Credit Facility Note, such endorsement and
surrender by Century shall be conditioned upon the issuance by the Company of a
new Credit Facility Note for the remaining aggregate principal amount (as set
forth below). No payment or adjustment shall be made upon any conversion on
account of any interest accrued on the Credit Facility Note surrendered for
conversion or on account of any dividends on the Common Stock issued upon
conversion; provided, that in no event shall conversion of the Credit Facility
Note be deemed to relieve the Company of any obligation to pay to Century
accrued but unpaid interest on all or any portion of the Credit Facility Note,
or to pay any penalty incurred thereon, as otherwise provided for herein.
The Credit Facility Note shall be deemed to have been converted immediately
prior to the close of business on the day of mailing of the written notice of
conversion (pursuant to Section 8.1 hereof) by the Company, and at such time the
rights of Century to such Credit Facility Note, subject to Century's rights to
any new Credit Facility Note(s) to be issued pursuant to this Section 3.2, shall
cease, and the Person or Persons entitled to receive the Common Stock issuable
upon conversion shall be treated for all purposes as the record holder or
holders of such Common Stock at such time. As promptly as practicable on or
after the conversion date, the Company shall issue and shall deliver at such
office or agency a certificate or certificates for the number of duly
authorized, validly issued, fully paid and nonassessable shares of Common Stock
issuable upon conversion, together with payment in lieu of any fraction of a
share, as provided in Section 3.3 hereof.
In the case of any Credit Facility Note which is converted in part only,
upon such conversion, the Company shall execute and deliver to Century, at the
expense of the Company, a new Credit Facility Note or Credit Facility Notes of
authorized denominations in the aggregate principal amount equal to the
unconverted portion of the principal amount of the Credit Facility Note which
new Credit Facility Note(s), other than with respect to the stated principal
amount(s), shall be identical in all material respects to Annex 1.
3.3 FRACTIONS OF SHARES. No fractional shares of Common Stock shall
be issued upon conversion of the Credit Facility Note or $1,000,000 Integral
Multiple thereof. Instead of any fractional share of Common Stock which would
otherwise be issuable upon the conversion of the Credit Facility Note or the
$1,000,000 Integral Multiple thereof, the Company shall pay a cash adjustment in
respect of such fraction of a share of Common Stock in an amount equal to the
remaining amount which is not converted by reason of this Section 3.3.
3.4 ADJUSTMENT OF CONVERSION PRICE. The Conversion Price shall be
adjusted upon the occurrence of any events below occurring after the date of the
issuance of the Credit Facility Note.
(a) In case the Company shall pay or make a dividend or other
distribution on any class of capital stock of the Company in Common Stock, the
Conversion Price in effect at the opening of business on the day following the
date fixed for the determination of stockholders entitled to receive such
dividend or other distribution shall be reduced by multiplying such Conversion
Price by a fraction the numerator of which shall be the number of shares of
Common Stock outstanding at the close of business on the date fixed for such
determination and the denominator shall be the sum of such number of shares and
the total number of shares constituting such dividend or other distribution,
such reduction to become effective immediately after the opening of business on
the day following the date fixed for such determination. For the purposes of
5
6
this Section 3.4(a), the number of shares of Common Stock at any time
outstanding shall not include shares held in the treasury of the Company but
shall include shares issuable in respect of scrip certificates issued in lieu of
fractions of shares of Common Stock. The Company will not pay any dividend or
make any distribution on shares of Common Stock held in the treasury of the
Company.
(b) In case the Company shall issue rights, options or warrants
to all holders of its Common Stock (not being available on an equivalent basis
to Century upon conversion) entitling them to subscribe for or purchase shares
of Common Stock at a price per share less than the current market price per
share of the Common Stock (determined as provided in Section 3.4(h) hereof) on
the date fixed for the determination of stockholders entitled to receive such
rights, options or warrants (other than pursuant to a dividend reinvestment
plan), the Conversion Price in effect at the opening of business on the day
following the date fixed for such determination shall be reduced to a price
(calculated to the nearest cent) determined by multiplying such Conversion Price
by a fraction the numerator of which shall be the number of shares of Common
Stock outstanding at the close of business on the date fixed for such
determination plus the number of shares of Common Stock which the aggregate
consideration received by the Company for the total number of additional shares
of Common Stock so offered for subscription or purchase would purchase at such
Conversion Price in effect immediately prior to the date fixed for such
determination and the denominator of which shall be the number of shares of
Common Stock outstanding at the close of business on the date fixed for such
determination plus the number of shares of Common Stock so offered for
subscription or purchase, such reduction to become effective immediately after
the opening of business on the day following the date fixed for such
determination. For purposes of calculating the Conversion Price in this Section
3.4(b), the number of shares of Common Stock outstanding immediately prior to
the date fixed for such determination of rights, options or warrants shall be
calculated as if all shares had been fully converted into shares of Common
Stock. Also, for the purposes of this Section 3.4(b), the number of shares of
Common Stock at any time outstanding shall not include shares held in the
treasury of the Company but shall include shares issuable in respect of scrip
certificates issued in lieu of fractions of shares of Common Stock. The Company
will not issue any rights, options or warrants in respect of shares of Common
Stock held in the treasury of the Company.
(c) In case outstanding shares of Common Stock shall be
subdivided into a greater number of shares of Common Stock, the Conversion Price
in effect at the opening of business on the day following the day upon which
such subdivision becomes effective shall be proportionately reduced, and,
conversely, in case outstanding shares of Common Stock shall each be combined
into a smaller number of shares of Common Stock, the Conversion Price in effect
at the opening of business on the day following the day upon which such
combination becomes effective shall be proportionately increased, such reduction
or increase, as the case may be, to become effective immediately after the
opening of business on the day following the day upon which such subdivision or
combination becomes effective.
(d) In case the Company shall, by dividend or otherwise,
distribute to all holders of its Common Stock evidences of its indebtedness or
assets (including securities, but excluding any rights, options or warrants
referred to in Section 3.4(b) hereof, any dividend or distribution paid
exclusively in cash and any dividend or distribution referred to in Section
3.4), the Conversion Price shall be adjusted so that the same shall equal the
price determined by multiplying the Conversion Price in effect immediately prior
to the close of business on the date fixed for the
6
7
determination of stockholders entitled to receive such distribution by a
fraction the numerator of which shall be the current market price per share
(determined as provided in Section 3.4(h)) of the Common Stock on the date fixed
for such determination less the then fair market value (as determined by an
independent majority of the Board of Directors, whose determination shall be
conclusive and described in a board resolution) of the portion of the assets or
evidences of indebtedness so distributed applicable to one share of Common Stock
and the denominator shall be such current market price per share of the Common
Stock, such adjustment to become effective immediately prior to the opening of
business on the day following the date fixed for the determination of
stockholders entitled to receive such distribution. In any case in which this
Section 3.4(d) is applicable, Section 3.4(b) hereof shall not be applicable.
(e) In case the Company shall, by dividend or otherwise,
distribute to all holders of its Common Stock cash (excluding any cash that is
distributed upon a merger or consolidation to which Section 3.10 hereof applies
or as part of a distribution referred to in paragraph (d) of this Section 3.4)
in an aggregate amount that, combined together with (i) the aggregate amount of
any other distributions to all holders of its Common Stock made exclusively in
cash within the twelve (12) months preceding the date of payment of such
distribution and in respect of which no adjustment pursuant to this paragraph
(e) has been made and (ii) the aggregate of any cash plus the fair market value
(as determined by an independent majority of the Board of Directors, whose
determination shall be conclusive and described in a Board Resolution) of
consideration payable in respect of any tender offer by the Company or any of
its Subsidiaries for all or any portion of the Common Stock concluded within the
twelve (12) months preceding the date of payment of such distribution and in
respect of which no adjustment pursuant to paragraph (f) of this Section 3.4 has
been made, exceeds ten percent (10%) of the product of the current market price
per share of the Common Stock on the date for the determination of holders of
shares of Common Stock entitled to receive such distribution multiplied by the
number of shares of Common Stock outstanding on such date, then, and in each
such case, immediately after the close of business on such date for
determination, the Conversion Price shall be reduced so that the same shall
equal the price determined by multiplying the Conversion Price in effect
immediately prior to the close of business on the date fixed for determination
of the stockholders entitled to receive such distribution by a fraction (A) the
numerator of which shall be equal to the current market price per share of the
Common Stock (determined as provided in paragraph (h) of this Section 3.4) on
the date fixed for such determination less an amount equal to the quotient of
(x) the excess of such combined amount over such ten percent (10%) and (y) the
number of shares of Common Stock outstanding on such date for determination and
(B) the denominator of which shall be equal to the current market price per
share of the Common Stock (determined as provided in paragraph (h) of this
Section 3.4) on such date for determination.
(f) In case a tender offer made by the Company or any Subsidiary
for all or any portion of the Common Stock shall expire and such tender offer
(as amended upon the expiration thereof) shall require the payment to
stockholders (based on the acceptance (up to any maximum specified in the terms
of the tender offer) of Purchased Shares (as defined herein)) of an aggregate
consideration having a fair market value (as determined by an independent
majority of the Board of Directors, whose determination shall be conclusive and
described in a board resolution) that combined together with (i) the aggregate
of the cash plus the fair market value (as determined by an independent majority
of the Board of Directors, whose determination shall be conclusive and described
in a board resolution), as of the expiration of such tender offer, of
consideration payable in
7
8
respect of any other tender offer, by the Company or any Subsidiary for all or
any portion of the Common Stock expiring within the twelve (12) months preceding
the expiration of such tender offer and in respect of which no adjustment
pursuant to this paragraph (f) has been made and (ii) the aggregate amount of
any distributions to all holders of the Common Stock made exclusively in cash
within twelve (12) months preceding the expiration of such tender offer and in
respect of which no adjustment pursuant to paragraph (e) of this Section 3.4 has
been made, exceeds ten percent (10%) of the product of the current market price
per share of the Common Stock (determined as provided in paragraph (h) of this
Section 3.4) as of the last time (the "Expiration Time") tenders could have been
made pursuant to such tender offer (as it may be amended) multiplied by the
number of shares of Common Stock outstanding (including any tendered shares) on
the Expiration Time, then, and in each such case, immediately prior to the
opening of business on the day after the date of the Expiration Time, the
Conversion Price shall be adjusted so that the same shall equal the price
determined by multiplying the Conversion Price in effect immediately prior to
the close of business on the date of the Expiration Time by a fraction (A) the
numerator of which shall be equal to (1) the product of (a) the current market
price per share of the Common Stock (determined as provided in paragraph (h) of
this Section 3.4) on the date of the Expiration Time and (b) the number of
shares of Common Stock outstanding (including any tendered shares) on the
Expiration Time, less (2) the amount of cash plus the fair market value
(determined as aforesaid) of the aggregate consideration payable to stockholders
based on the acceptance (up to any maximum specified in the terms of the tender
offer) of Purchased Shares, and (B) the denominator of which shall be equal to
the product of (1) the current market price per share of the Common Stock
(determined as provided in paragraph (h) of this Section 3.4) as of the
Expiration Time and (2) the number of shares of Common Stock outstanding
(including any tendered shares) as of the Expiration Time less the number of all
shares validly tendered and not withdrawn as of the Expiration Time (the shares
deemed so accepted up to any such maximum, being referred to as the "Purchased
Shares").
(g) The reclassification of Common Stock into securities
including securities other than Common Stock (other than any reclassification
upon a consolidation or merger to which Section 3.10 hereof applies) shall be
deemed to involve (i) a distribution of such securities other than Common Stock
to all holders of Common Stock (and the effective date of such reclassification
shall be deemed to be "the date fixed for the determination of stockholders
entitled to receive such distribution" and the "date fixed for such
determination" within the meaning of paragraph (d) of this Section 3.4), and
(ii) a subdivision or combination, as the case may be, of the number of shares
of Common Stock outstanding immediately prior to such reclassification into the
number of shares of Common Stock outstanding immediately thereafter (and the
effective date of such reclassification shall be deemed to be "the day upon
which such subdivision becomes effective" or "the day upon which such
combination becomes effective," as the case may be, and "the day upon which such
subdivision or combination becomes effective" within the meaning of paragraph
(c) of this Section 3.4).
(h) For the purpose of any computation under paragraphs (d), (e)
and (f) of this Section 3.4, the current market price per share of Common Stock
on any date shall be deemed to be the average of the daily Closing Prices for
the five (5) consecutive trading days selected by the Company commencing not
more than twenty (20) trading days before, and ending not later than, the
earlier of the day in question and the day before the "ex" date with respect to
the issuance or distribution requiring such computation. The "Closing Price" for
each trading day shall be the reported last sale price regular way or, in case
no such reported sale takes place on such day, the
8
9
average of the reported closing bid and asked prices regular way, in either case
on the principal national securities exchange on which the Common Stock is
listed or admitted to trading or, if not listed or admitted to trading on any
national securities exchange, on the National Association of Securities Dealers
Automated Quotations system ("Nasdaq") National Market System ("Nasdaq National
Market") or, if not listed or admitted to trading on Nasdaq National Market, on
Nasdaq, or, if the Common Stock is not listed or admitted to trading on any
national securities exchange or Nasdaq National Market or quoted on Nasdaq, the
average of the closing bid and asked prices in the over-the-counter market as
furnished by any New York Stock Exchange member firm selected from time to time
by the Company for that purpose, or, if the Common Stock does not have any
closing bid and asked prices in the over-the-counter market during the relevant
period of time, the fair market value per share as determined by an independent
majority of the Board of Directors as of the most recent available month-end
determined pursuant to GAAP. For purposes of this paragraph, the term "`ex'
date," when used with respect to any issuance or distribution, shall mean the
first date on which the Common Stock trades regular way on such exchange or in
such market without the right to receive such issuance or distribution.
(i) No adjustment in the Conversion Price shall be required
unless such adjustment (plus any adjustments not previously made by reason of
this paragraph (i)) would require an increase or decrease of at least one
percent (1%) in such price; provided, however, that any adjustments which by
reason of this paragraph (i) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this paragraph (i) shall be made to the nearest cent.
(j) The Company may make such reductions in the Conversion
Price, in addition to those required by paragraphs (a), (b), (c), (d), (e) and
(f) of this Section 3.4, as it considers to be advisable in order to avoid or
diminish any income tax to any holders of shares of Common Stock resulting from
any dividend or distribution of stock or issuance of rights or warrants to
purchase or subscribe for stock or from any event treated as such for federal
income tax purposes or for any other reasons. An independent majority of the
Board of Directors shall have the power to resolve any ambiguity or correct any
error in this Section 3.4 and its actions in so doing shall be final and
conclusive.
3.5 NOTICE OF ADJUSTMENTS OF CONVERSION PRICE. Whenever the
Conversion Price is adjusted as herein provided:
(a) the Company shall compute the adjusted Conversion Price in
accordance with Section 3.4 hereof and shall prepare a certificate signed by the
Chief Financial Officer of the Company setting forth the adjusted Conversion
Price and showing in reasonable detail the facts upon which such adjustment is
based, and such certificate shall forthwith be filed at the offices of the
Company.
(b) a notice stating that the Conversion Price has been adjusted
and setting forth the adjusted Conversion Price shall forthwith be required, and
as soon as practicable after it is required, such notice shall be mailed by the
Company to the Holder in accordance with the terms of Section 8.1 herein.
9
10
3.6 NOTICE OF CERTAIN CORPORATE ACTION. In case:
(a) the Company shall declare a dividend (or any other
distribution) on its Common Stock payable otherwise than in cash out of its
earned surplus; or
(b) the Company shall authorize the granting to the holders of
its Common Stock of rights or warrants to subscribe for or purchase any shares
of capital stock of any class or of any other rights; or
(c) of any reclassification of the Common Stock of the Company
(other than a subdivision or combination of its outstanding shares of Common
Stock), or of any consolidation, merger or share exchange to which the Company
is a party and for which approval of any stockholders of the Company is
required, or of the sale or transfer of all or substantially all of the assets
of the Company; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company; then the Company shall cause to be filed at the
offices of the Company, and shall cause to be mailed to the Holder at its last
addresses as it shall appear in the Note Register, at least twenty (20) days (or
ten (10) days in any case specified in clause (a) or (b) of this Section 3.6)
prior to the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, rights or warrants, or, if a record is not to be taken,
the date as of which the holders of Common Stock of record to be entitled to
such dividend, distribution, rights or warrants are to be determined, or (y) the
date on which such reclassification, consolidation, merger, share exchange,
sale, transfer, dissolution, liquidation or winding up is expected to become
effective, and the date as of which it is expected that holders of Common Stock
of record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, share exchange, sale, transfer, dissolution, liquidation
or winding up. Neither the failure to give such notice nor any defect therein
shall affect the legality or validity of the proceedings described in clauses
(a) through (d) of this Section 3.6.
3.7 COMPANY TO RESERVE COMMON STOCK. The Company shall at all times
reserve and keep available out of its authorized but unissued Common Stock, for
the purpose of effecting the conversion of the Credit Facility Note, the full
number of shares of Common Stock issuable upon the conversion of the entire
Credit Facility Note.
3.8 TAXES ON CONVERSIONS. The Company will pay any and all taxes that
may be payable in respect of the issuance or delivery of shares of Common Stock
on conversion of the Credit Facility Note pursuant hereto. The Company shall
not, however, be required to pay any tax which may be payable in respect of any
transfer involved in the issuance and delivery of shares of Common Stock in a
name other than that of Century and no such issuance or delivery shall be made
unless and until the Person requesting such issuance has paid to the Company the
amount of any such tax, or has established to the satisfaction of the Company
that such tax has been paid.
3.9 COVENANT AS TO COMMON STOCK. The Company covenants that all
shares of Common Stock which may be issued upon conversion of the Credit
Facility Note will upon issuance
10
11
be fully paid and nonassessable and, except as
provided in Section 3.8 hereof, the Company will pay all taxes, liens and
charges with respect to the issue thereof.
3.10 PROVISIONS IN CASE OF CONSOLIDATION, MERGER OR SALE OF ASSETS. In
case of any Change of Control of the Company, the Company will notify Century at
least thirty (30) days prior to the closing of the transaction that will effect
the Change of Control, and the Company shall notify Century whether the Company
elects to convert the Credit Facility Note in accordance with Section 3.1 hereof
prior to the transaction or pay the Credit Facility Note and terminate this
Agreement in accordance with Section 2.4 hereof.
3.11 TRANSFER AND EXCHANGE OF CREDIT FACILITY NOTE. The Credit
Facility Note may be freely transferred or assigned by Century without the
consent of the Company. Such transfer and assignment shall be made in accordance
with applicable federal and state securities laws. At any time and from time to
time, upon not less than ten (10) days notice to that effect given by Century
and, upon surrender of the Credit Facility Note at the Company's office by
Century, the Company will deliver in exchange therefor, without expense to
Century, except as set forth below, one Credit Facility Note for the same
aggregate principal amount as the then unpaid principal amount of the Credit
Facility Note so surrendered, provided such Credit Facility Note shall be in the
amount of the full principal amount of the Credit Facility Note and there shall
be no right to divide the Credit Facility Note, dated as of the date to which
interest has been paid on the Credit Facility Note so surrendered or, if such
surrender is prior to the payment of any interest thereon, then dated as of the
date of issue, registered in the name of such Person as may be designated by
Century, and otherwise of the same form and tenor as the Credit Facility Note so
surrendered for exchange. The Company may require the payment of a sum
sufficient to cover any stamp tax or governmental charge imposed upon such
exchange or transfer.
3.12 LOSS, THEFT, MUTILATION OR DESTRUCTION OF CREDIT FACILITY NOTE.
Upon receipt of evidence satisfactory to the Company of the loss, theft,
mutilation or destruction of the Credit Facility Note, the Company will make and
deliver without expense to Century thereof, a new Credit Facility Note, of like
tenor, in lieu of such lost, stolen, mutilated or destroyed Credit Facility
Note.
3.13 EXPENSES, STAMP TAX INDEMNITY. The Company agrees to pay
duplicating and printing costs and charges for shipping the Credit Facility
Note, adequately insured to Century's home office or at such other place as
Century may designate, and all reasonable expenses of Century (including,
without limitation, the reasonable fees and expenses of any financial advisor to
Century) relating to any proposed or actual amendment, waivers or consents
pursuant to the provisions hereof, including, without limitation, any proposed
or actual amendments, waivers, or consents resulting from any work-out,
re-negotiations or restructuring relating to the performance by the Company of
its obligations under this Agreement and the Credit Facility Note. The Company
also agrees that it will pay and hold Century harmless against any and all
liabilities with respect to stamp and other taxes, if any, which may be payable
or which may be determined to be payable in connection with the execution and
delivery of this Agreement or the Credit Facility Note, whether or not the
Credit Facility Note is then outstanding. The Company agrees to protect and
indemnify Century against any liability for any and all brokerage fees and
commissions payable or claimed to be payable to any Person (other than any
Person engaged by Century) in connection with the transactions contemplated by
this Agreement.
11
12
3.14 CANCELLATION OF CONVERTED CREDIT FACILITY NOTE. The Credit
Facility Note or $1,000,000 Integral Multiple portions thereof delivered for
conversion shall be canceled by or at the direction of the Company.
4. CONDITIONS PRECEDENT.
4.1 DISBURSEMENTS. The obligation of Century to make any disbursement
of the Loan shall be subject to the prior or contemporaneous satisfaction of
each of the following conditions:
(a) AUTHORIZATIONS. Century shall have received such instruments
or documents as Century may reasonably request relating to the existence and
good standing of the Company or the authority for execution, delivery and
performance of this Agreement, dated and in full force and effect on the
Disbursement Date.
(b) NO EXISTING DEFAULT. No Event of Default (as defined in
Section 7.1) or event which, upon the lapse of time or the giving of notice or
both, would constitute an Event of Default by the Company (an "Incipient
Default") shall exist on the Disbursement Date.
(c) REPRESENTATIONS AND WARRANTIES CORRECT. Each of the
representations and warranties made by the Company in the Note Agreement and as
incorporated by reference herein shall be true and correct in all material
respects on the Disbursement Date with the same effect as though made on and as
of such date; and the Company shall have performed and complied with all
agreements, covenants and conditions required by this Agreement and the Note
Agreement to be performed and complied with by the Company on or prior to the
Disbursement Date.
(d) OTHER AGREEMENTS. The Distribution Agreement and the Note
Agreement shall be in full force and effect, and the Company shall not be in
breach or default of any material covenant, condition or other provision thereof
beyond the applicable grace period, if any, specified therein.
(e) OFFICER'S CERTIFICATE. The Company shall have delivered to
Century a certificate signed by the Chief Executive Officer of the Company and
dated as of the Disbursement Date certifying that the conditions specified in
Sections 4.1(b) and (c) of this Agreement and Section 9.9 of the Note Agreement
have been satisfied.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company and its
subsidiaries represent and warrant to Century as of the date hereof that the
representations and warranties as made by the Company in Section 3 of the Note
Agreement are true and correct in all material respects with the same effect as
though made on and as of the Disbursement Date, subject to delivery of an
updated Disclosure Schedule. The representations and warranties as made by the
Company in Section 3 of the Note Agreement are incorporated by reference in
their entirety herein.
6. COVENANTS AND AGREEMENTS OF THE COMPANY. The Company has performed and
complied with all of the covenants and agreements of the Company in Section 5
and Section 8 of the Note Agreement and further covenants and agrees to perform
and comply with such provisions. The
12
13
covenants and agreements of the Company in Section 5 and Section 8 of the Note
Agreement are incorporated by reference in their entirety herein.
7. EVENTS OF DEFAULT.
7.1 EVENTS OF DEFAULT. The following shall constitute "Events of
Default": (a) an Event of Default as defined in Section 9 of the Note Agreement
(which is hereby incorporated by reference in its entirety herein); (b) default
by the Company in the payment of any amount under this Agreement or the Note; or
(c) any representation or warranties by the Company set forth in this Agreement
or the Note Agreement shall not be true and correct in all material respects as
and when made.
7.2 TERMINATION OF COMMITMENT AND ACCELERATION. If any Event of
Default described in Section 7.1 hereof shall occur, Century shall have no
obligation to make disbursements hereunder and may declare all Obligations to be
due and payable, whereupon all Obligations shall immediately become due and
payable, all as so declared by Century and without presentment, demand, protest
or other notice of any kind. Any such declaration made pursuant to this Section
7.2 may be rescinded by Century.
7.3 OTHER REMEDIES. If any Event of Default shall occur and be
continuing, Century shall have, in addition to the remedies set forth in Section
7.2 hereof, all other remedies otherwise available at law.
8. MISCELLANEOUS.
8.1 NOTICES. Except as otherwise expressly provided herein, any
notice, consent or document required or permitted hereunder shall be given in
writing and it or any certificates or other documents delivered hereunder shall
be deemed effectively given or delivered (as the case may be) upon personal
delivery (professional courier permissible) or when mailed by receipted
certified mail delivery, or five (5) business days after deposit in the mail.
Such certificates, documents or notice may be personally delivered to an
authorized representative of the Company or Century (as the case may be) at any
address where such authorized representative is present and otherwise shall be
sent to the following address:
If to the Company: Micro Therapeutics, Inc.
0000 Xxxxx Xxxxxxx #X
Xxx Xxxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxxx
Telecopy No.: (000) 000-0000
With a copy to: Stradling, Yocca, Xxxxxxx & Xxxxx
000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx Xxxxx, XX 00000
Attention: Xxxxx Xxxxxxxx
Telecopy No.: (000) 000-0000
13
14
If to Century: Century Medical, Inc.
0-0-0 Xxxxx, Xxxxxxxxx-xx
Xxxxx 000-0000 Xxxxx
Attn: Xxxxxx Xxxxxxx
Telecopy No.: (00) 0000-0000
With a copy to: O'Melveny & Xxxxx
Akasaka Twin Tower
East Building 14th Floor
17-22, Xxxxxxx 0-xxxxx
Xxxxxx-xx, Xxxxx 000-0000 Xxxxx
Attn: Xxxx X. Xxxxx
Telecopy No.: (00) 0000-0000
8.2 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the Company and its successors and assigns and shall be
binding upon and inure to the benefit of Century and its successors and assigns;
provided, however, that, except as otherwise expressly permitted herein or in
the Note Agreement, neither the Company nor Century shall assign this Agreement
or any of its rights, duties or obligations hereunder without the prior written
consent of the other party which consent shall not be unreasonably withheld,
conditioned or delayed, and provided further, that in any event Century may
assign its rights hereunder after September 30, 1999 without the Company's prior
written consent.
8.3 SURVIVAL OF COVENANTS AND REPRESENTATIONS. All covenants,
representations and warranties made by the Company herein and in any
certificates delivered pursuant hereto, whether or not in connection with the
Disbursement Date, shall survive the closing and the delivery of this Agreement
and the Credit Facility Note.
8.4 SEVERABILITY. Should any part of this Agreement for any reason be
declared invalid or unenforceable, such decision shall not affect the validity
or enforceability of any remaining portion, which remaining portion shall remain
in force and effect as if this Agreement had been executed with the invalid or
unenforceable portion thereof eliminated and it is hereby declared the intention
of the parties hereto that they would have executed the remaining portion of
this Agreement without including therein any such part, parts or portion which
may, for any reason, be hereafter declared invalid or unenforceable.
8.5 WAIVER OF CONDITIONS. If on any Disbursement Date, either party
hereto fails to fulfill each of the conditions specified in Section 4 hereof,
the other party may thereupon elect to be relieved of all further obligations
under this Agreement. Without limiting the foregoing, if the conditions
specified in Section 4 hereof have not been fulfilled, the other party may waive
compliance by such party with any such condition to such extent as such party
may in its sole discretion determine. Nothing in this Section 8.5 shall operate
to relieve either party of any obligations hereunder or to waive any of the
other party's rights against such party.
8.6 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
14
15
8.7 GOVERNING LAW. This Agreement and the Credit Facility Note issued
and sold hereunder shall be governed by and construed in accordance with the law
of the State of New York, without regard to the conflict of laws provisions
thereof.
8.8 CAPTIONS. The descriptive headings of the various sections or
parts of this Agreement are for convenience only and shall not affect the
meaning or construction of any of the provisions hereof.
8.9 DISPUTE RESOLUTION. Disputes arising under, in connection with or
as to the interpretation of this Agreement and/or any Credit Facility Note shall
be resolved as provided in Annex 2 attached hereto.
8.10 ENTIRE AGREEMENT; AMENDMENT AND MODIFICATION. This Agreement,
together with the Note Agreement, the Note and any Credit Facility Note,
constitutes the entire and final agreement between the parties hereto with
respect to the subject matter hereof and supersedes any and all prior oral or
written agreements or discussions on the subject matter hereof. Neither this
agreement nor any of the other documents or instruments delivered herewith or
executed pursuant hereto may be modified or amended in any respect except in a
writing signed by both parties expressly setting forth such modification or
amendment.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
CENTURY MEDICAL, INC.
By: /s/ M. Suzuki
------------------------------------
Its: President and CEO
------------------------------------
MICRO THERAPEUTICS, INC.
By: /s/ Xxxxxx Xxxxxxx
------------------------------------
Its: President and CEO
15
16
ANNEX 1
FORM OF CREDIT FACILITY NOTE
MICRO THERAPEUTICS, INC.
5% Convertible Credit Facility Note, due on September __, 2003.
New York, New York
No. CSN-5
In the principal amount set forth in Schedule A [Date]
Micro Therapeutics, Inc., a corporation duly organized and existing under
the laws of the State of Delaware (the "Company"), for value received, hereby
promises to pay to Century Medical, Inc. a Japanese corporation ("Century"), or
its registered assigns (Century or its assigns being the "Holder"), the
aggregate principal sum set forth in Schedule A attached hereto on September __,
2003 (the "Maturity"), and to pay interest (computed on the basis of a 365 day
year) (i) on the unpaid principal balance thereof from the date of this Credit
Facility Note at the rate of five percent (5%) per annum, payable quarterly in
arrears on January 31, April 30, July 31 and October 31 of each year (each, an
"Interest Payment Date") (commencing on the first Interest Payment Date
following the date hereof) until such unpaid principal balance shall become due
and payable (whether at Maturity, or by declaration, acceleration or otherwise)
and (ii) to the extent permitted by applicable law on each overdue payment of
principal or any overdue payment of interest, at a rate per annum equal to ten
percent (10%), payable quarterly as aforesaid.
The interest and principal payments payable with respect to this Credit
Facility Note, on any Interest Payment Date, at Maturity or by declaration,
acceleration or otherwise, pursuant to the Credit Agreement (as defined herein),
shall be paid to Century in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts. Such interest and principal payments shall be made to Century in
accordance with the provisions of the Credit Agreement.
This Credit Facility Note is the sole issue of a 5% Convertible Credit
Facility Note, due on the fifth anniversary of the date hereof, the Company
issued in an aggregate principal amount of up to Two Million Dollars
($2,000,000) pursuant to the Credit Agreement, dated September __, 1998 by and
between the Company and Century (the "Credit Agreement"). The Holder of this
Credit Facility Note is entitled to the benefits of the Credit Agreement, and
may enforce the Credit Agreement and exercise the remedies provided for thereby
or otherwise available in respect thereof.
This Credit Facility Note may be transferred or assigned as provided in the
Credit Agreement, upon surrender of this Credit Facility Note for registration
of transfer, duly endorsed, or accompanied by a written instrument of transfer
duly executed by Century or Century's attorney duly authorized in writing, a new
Credit Facility Note for a like aggregate principal amount and otherwise of
similar tenor, will be issued to, and registered in the name of, the transferee
or transferees. Prior to due presentment for registration of transfer, the
Company may treat the person in whose name this Credit Facility Note is
registered as the Holder and owner hereof for the purpose of receiving payments
and for all other purposes, and the Company shall not be affected by any notice
to the contrary.
17
In the case of an Event of Default (as defined in the Credit Agreement),
the principal of this Credit Facility Note in certain circumstances may be
declared or otherwise become due and payable in the manner and with the effect
provided in the Credit Agreement.
This Credit Facility Note is subject to conversion into Common Stock
pursuant to the terms and conditions of the Credit Agreement and conversion (in
the case of the Company) shall be evidenced by a Notice of Conversion as
attached hereto.
The indebtedness evidenced by this Credit Facility Note is, to the extent
provided in the Credit Agreement, subordinate and subject in right of payment to
the Senior Indebtedness (as defined in the Credit Agreement), and this Credit
Facility Note is issued subject to the provisions of the Credit Agreement with
respect thereto. Each Holder of this Credit Facility Note, by accepting the
same, agrees to and shall be bound by such provisions.
No reference herein to the Note Agreement or Credit Agreement and no
provision of this Credit Facility Note, the Note Agreement or the Credit
Agreement shall alter or impair the obligation of the Company, which is absolute
and unconditional, to pay the principal of (and premium, if any) and interest on
this Credit Facility Note at the times, place and rate, and in the coin or
currency, herein prescribed or to convert this Credit Facility Note as provided
in the Credit Agreement.
All terms used in this Credit Facility Note which are defined in the Credit
Agreement shall have the meanings assigned to them in the Credit Agreement.
This Credit Facility Note, the Note Agreement and the Credit Agreement are
governed by and shall be construed and enforced in accordance with and the
rights of the parties shall be governed by the law of the State of New York
excluding choice-of-law principles.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated: ___________________
MICRO THERAPEUTICS, INC.
By:
------------------------------------
Its:
------------------------------------
ATTEST:
By:
---------------------------------
Its:
--------------------------------
18
NOTICE OF CONVERSION
Micro Therapeutics, Inc. hereby irrevocably exercises the option to convert
this Credit Facility Note, or portion hereof below designated (which is One
Million Dollars ($1,000,000) or an integral multiple thereof), into shares of
Common Stock in accordance with the terms of the Credit Agreement, and
represents that the shares issuable and deliverable upon such conversion,
together with any check in payment for fractional shares and any Credit Facility
Note representing any unconverted principal amount hereof, will be issued and
delivered to the current Holder of the Credit Facility Note.
Principal amount to be converted (if less than all): $__________
MICRO THERAPEUTICS, INC.
By:
------------------------------------
Its:
------------------------------------
19
ANNEX 2
DISPUTE RESOLUTION
The parties recognize that a bona fide dispute as to certain matters may arise
from time to time during the term of this Credit Agreement which relates to
either party's rights and/or obligations under this Credit Agreement and/or any
Credit Facility Note. To have such a dispute resolved by this Alternative
Dispute Resolution ("ADR") provision, a party first must send written notice of
the dispute to the other party for attempted resolution by good faith
negotiations between their respective presidents (or their equivalents) of the
affected Subsidiaries, divisions, or business units within twenty-eight (28)
days after such notice is received (all references to "days" in this ADR
provision are to calendar days).
If the matter has not been resolved within twenty-eight (28) days of the notice
of dispute, or if the parties fail to meet within such twenty-eight (28) days,
either party may initiate an ADR proceeding as provided herein. The parties
shall have the right to be represented by counsel in such a proceeding.
1. To begin an ADR proceeding, a party shall provide written notice to the
other party of the issues to be resolved by ADR. Within fourteen (14) days
after its receipt of such notice, the other party may, by written notice to
the party initiating the ADR, add additional issues to be resolved within
the same ADR.
2. Within twenty-one (21) days following receipt of the original ADR notice,
the parties shall select a mutually acceptable neutral to preside in the
resolution of any disputes in this ADR proceeding. If the parties are
unable to agree on a mutually acceptable neutral within such period, (a) if
the arbitration is to be held in California pursuant to Paragraph 3 below,
the parties shall request that the President of the CPR Institute for
Dispute Resolution ("CPR"), 000 Xxxxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx
Xxxx, 00000, select a neutral; and (b) if the arbitration is to be held in
Japan pursuant to Paragraph 3 below, the parties shall request that the
Japan Commercial Arbitration Association ("JCAA") select a neutral.
3. No earlier than twenty-eight (28) days or later than fifty-six (56) days
after selection, the neutral shall hold a hearing to resolve each of the
issues identified by the parties. The ADR proceeding shall take place at a
location in Orange County in the State of California and proceed pursuant
to CPR rules if the ADR is initiated and brought by Century, or in Tokyo,
Japan and pursuant to JCAA rules if initiated and brought by the Company.
4. The rulings of the neutral and the allocation of fees and expenses shall be
binding, non-reviewable, and non-appealable, and may be entered as a final
judgment in any court having jurisdiction. Any arbitral award made pursuant
to the ADR shall be enforceable under the 1958 United Nations Convention on
the Recognition and Enforcement of Foreign Arbitral Awards.
5. Except as provided in paragraph 4 or as required by law, the existence of
the dispute, any settlement negotiations, the ADR hearing, any submissions
(including exhibits, testimony, proposed rulings, and briefs), and the
rulings shall be deemed Confidential Information. The neutral shall have
the authority to impose sanctions for unauthorized disclosure of
Confidential Information.
