EXHIBIT 10.5
AMENDMENT NO. 1
TO
SUBORDINATED NOTE
AND
COMMON STOCK PURCHASE AGREEMENT
by and among
NITINOL MEDICAL TECHNOLOGIES, INC.,
WHITNEY SUBORDINATED DEBT FUND, L.P.
and, for certain purposes
X.X. XXXXXXX & CO.
__________________
April 14, 1999
__________________
AMENDMENT NO. 1 TO
SUBORDINATED NOTE AND COMMON STOCK
PURCHASE AGREEMENT
AMENDMENT NO. 1 SUBORDINATED NOTE AND COMMON STOCK PURCHASE AGREEMENT
(this "Amendment"), dated as of April 14, 1999, by and among Nitinol Medical
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Technologies, Inc., a Delaware corporation, Whitney Subordinated Debt Fund,
L.P., and X.X. Xxxxxxx & Co.
WHEREAS, on July 8, 1998, the parties hereto entered into the
Subordinated Note and Common Stock Purchase Agreement (the "Initial Agreement")
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that is being amended hereby;
WHEREAS, the Company has requested that the Purchaser waive compliance
with certain of the covenants contained in the Initial Agreement;
WHEREAS, in connection with the waiver referred to above the parties
to the Initial Agreement desire to amend and restate Section 9.8 of the Initial
Agreement in its entirety to modify the financial covenants contained therein as
well as include an additional financial covenant and make certain other
amendments to the Initial Agreement;
NOW THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and for other good and valuable consideration (including the
issuance of certain stock purchase warrants concurrently herewith), the receipt
and adequacy of which is acknowledged, the parties to the Initial Agreement
mutually agree as follows:
1. Definitions. Capitalized terms used herein and not otherwise
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defined have the same meanings attributed to them in the Initial Agreement.
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2. Amendment to Section 8.1(f) of the Initial Agreement. The second
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sentence of Section 8.1(f) of the Initial Agreement is hereby amended and
restated as follows:
"As soon as available and in any event within thirty (30) days after
the end of the fiscal year of the Company, the Company shall deliver a plan of
operation covering the current and next two succeeding fiscal years of the
Company, prepared on a monthly basis for the current fiscal year and on a
quarterly basis for the two succeeding fiscal years, and otherwise in form and
substance reasonably satisfactory to the Purchaser."
3. Amendment to Section 9.8 of the Initial Agreement. Section 9.8
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of the Initial Agreement is hereby amended and restated as set forth below;
provided, however, that notwithstanding such amendment and restatement,
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compliance by the Company with the financial covenants contained in the Initial
Agreement as of March 31, 1999 shall be determined without giving effect to this
amendment and restatement:
9.8 Financial Covenants. The Company covenants and agrees that until
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payment in full of all Indebtedness hereunder and under the Note, the Company
shall comply with and shall cause each of its Subsidiaries to comply with all
covenants in this Section 9.8 applicable to such Person.
(a) Interest Coverage. The Company shall not permit Interest
Coverage for any twelve (12) month period ending on the last business day of a
month during any of the periods set forth below, to be less than the ratio set
forth below for such period:
Period Ratio
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April, 1999 3.42:1.00
May, 1999 3.17:1.00
June, 1999 3.69:1.00
July, 1999 3.50:1.00
August, 1999 3.43:1.00
September, 1999 4.03:1.00
October, 1999 4.47:1.00
November, 1999 4.21:1.00
December, 1999 and thereafter 5.00:1.00
"Interest Coverage" will be calculated as illustrated on Exhibit H.
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Notwithstanding anything to the contrary contained herein or in Exhibit H
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hereto, the determination of
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Interest Coverage for the periods ended April 30, 1999 and May 31, 1999 shall
not be calculated for a twelve month period, but rather shall be calculated for
the 10 month and 11 month periods, respectively, ending on the last day of each
such month.
(b) Total Leverage Test. The Company shall not permit the ratio of
Net Funded Indebtedness as of the last business day of any month during any of
the periods set forth below to Adjusted Operating Cash Flow for the twelve (12)
month period ending on the last day of such month to be greater than the ratio
set forth below for such period:
Period Ratio
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April, 1999 5.76:1.00
May, 1999 6.23:1.00
June, 1999 4.88:1.00
July, 1999 5.01:1.00
August, 1999 4.99:1.00
September, 1999 3.87:1.00
October, 1999 3.42:1.00
November, 1999 3.64:1.00
December, 1999 and thereafter 3.00:1.00
"Net Funded Indebtedness" and "Adjusted Operating Cash Flow" will be calculated
as illustrated on Exhibit H. Notwithstanding anything contained herein or in
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Exhibit H hereto, (x)(i) the determination of EBITDA for the period ended April
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30, 1999 shall be calculated by multiplying the EBITDA of the Company and its
Subsidiaries for the ten months then ended by 1.2; and (ii) the determination of
EBITDA for the period ended May 30, 1999 shall be calculated by multiplying the
EBITDA of the Company and its Subsidiaries for the eleven months then ended by
1.0909 and (y) any calculation of this covenant requiring reference to the
Adjusted Operating Cash Flow of the Company for any of the periods ended on or
before June 30, 1999, shall be calculated assuming that the Capital Expenditures
of the Company for the relevant period are equal to the lesser of the actual
annualized Unfinanced Capital Expenditures for such period or $2,300,000.
(c) Fixed Charge Coverage. The Company shall not permit Fixed Charge
Coverage for any twelve (12) month period ending on the last business day of a
month during any of the periods set forth below to be less than the ratio set
forth below for such period:
Period Ratio
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April, 1999 1.85:1.00
May, 1999 1.81:1.00
June, 1999 1.92:1.00
July, 1999 1.81:1.00
August, 1999 1.90:1.00
September, 1999 1.84:1.00
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Period Ratio
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October, 1999 1.98:1.00
November, 1999 1.83:1.00
December, 1999 and thereafter 1.95:1.00
"Fixed Charge Coverage" will be calculated as illustrated on Exhibit H.
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Notwithstanding anything to the contrary contained herein or in Exhibit H
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hereto, the determination of Fixed Charge Coverage for the periods ended April
30, 1999 and May 31, 1999 shall not be calculated for a twelve month period, but
rather shall be calculated for the 10 month and 11 month periods, respectively,
ending on the last day of each such month.
(d) Capital Expenditures. The Company shall not permit Capital
Expenditures in any fiscal period to exceed the amounts set forth below for each
corresponding period.
Period Amount
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July 1, 1998 through June 30, 1999 $2,300,000
July 1, 1999 through June 30, 2000 $1,900,000
July 1 through June 30 for each annual period
commencing July 1, 2000 and thereafter $1,000,000
(e) Funded Debt to Cash and Cash Equivalents. The Company shall not
permit the ratio of Funded Debt of the Company and its Subsidiaries on a
consolidated basis to the sum of the cash and Cash Equivalents of the Company
and its Subsidiaries on a consolidated basis to be greater than the ratio set
forth below for the corresponding period; provided, however, that this Section
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9.8(e) shall be of no further force or effect at such time as (x) the ratio of
Net Funded Indebtedness to Adjusted Operating Cash Flow, as determined in
accordance with Section 9.8(b) of this Agreement without regard to the last
sentence thereof, is less than 3.0:1 for four consecutive fiscal quarters and
(y) no default under Section 6 of the Note shall have occurred within the
preceding period of 12 months.
Period Ratio
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April, 1999 2.60:1.00
May, 1999 2.61:1.00
June, 1999 2.63:1.00
July, 1999 2.84:1.00
August, 1999 2.71:1.00
September, 1999 2.53:1.00
October, 1999 2.65:1.00
November, 1999 2.49:1.00
December, 1999 and thereafter 2.05:1.00
(f) Current Ratio. The Company shall not permit the ratio of Current
Assets less cash and Cash Equivalents to Current Liabilities as of the last
business day of any calendar quarter during any of the periods set forth below
to be
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less than the ratio set forth below for such period; provided, however,
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that this Section 9.8(f) shall be of no further force or effect at such time as
the ratio of Net Funded Indebtedness to Adjusted Operating Cash Flow, as
determined in accordance with Section 9.8(b) of this Agreement without regard to
the last sentence thereof, is less than 4.0:1.0 for four consecutive fiscal
quarters.
Period Ratio
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September 30, 1998 to and including December 31, 1999 1.50:1:00
March 31, 2000 and thereafter 1.75:1:00
(g) Cumulative EBITDA. The Company shall not permit the EBITDA of
the Company and its Subsidiaries for any twelve month period ending on the last
business day of a month during any of the periods set forth below, to be less
than the amount set forth below for such period:
Period Amount
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April, 1999 $4,483,000
May, 1999 $4,593,000
June, 1999 $5,870,000
July, 1999 $5,748,000
August, 1999 $5,679,000
September, 1999 $6,802,000
October, 1999 $7,574,000
November, 1999 $7,120,000
December, 1999 and thereafter $8,500,000
Notwithstanding anything to the contrary contained herein, the determination of
EBITDA for the periods ended April 30, 1999 and May 31, 1999 shall not be
calculated for a twelve month period, but rather shall be calculated for the 10
month and 11 month periods, respectively, ending on the last day of each such
month.
4. Amendment to Exhibit H of the Initial Agreement. Exhibit H,
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Financial Covenant Calculations, Calculation of Interest Coverage as set forth
in Section 9.8(a) of the Initial Agreement, is hereby amended and restated as
set forth below; provided, however, that notwithstanding such amendment and
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restatement, compliance by the Company with the Financial Covenant Calculations
contained in the Initial Agreement as of March 31, 1999 shall be determined
without giving effect to this amendment and restatement:
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1. Calculation of Interest Coverage as set forth in Section 9.8(a).
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EBITDA:
Net income (or loss) of the Company and its Subsidiaries, for the period in
question, on a consolidated basis determined in accordance with GAAP, but
excluding: (a) the income (or loss) of any Person (other than Subsidiaries of
the Company) in which the Company or any of its Subsidiaries has an ownership
interest, unless received by the Company or its Subsidiaries in a cash
distribution; (b) the income (or loss) of any Person accrued prior to the date
it became a Subsidiary of the Company or is merged into or consolidated with
the Company; and (c) any extraordinary gains and any insurance proceeds
received by the Company or any of its Subsidiaries. $__________
Plus: Any provision for (or less any benefit from) income and franchise Taxes
included in the determination of net income __________
Interest Expense (as defined in the Agreement) net of interest income,
deducted in the determination of net income __________
Depreciation deducted in the determination of net income __________
Amortization deducted in determining net income __________
Losses (or less gains) from Asset Dispositions (as defined in the
Agreement) or other non-cash items included in the determination of net
income (excluding sales, expenses or losses related to current assets) __________
Expenses of the transactions completed pursuant to the Transaction
Documents and the Acquisition Documents included in the determination
of net income provided that such expenses were included in the Pro
Forma Balance Sheet, or disclosed in the notes thereto __________
Expenses, which must be approved in advance by Whitney, related to any
write-down of the Company's investment in ITC __________
One time charges consistent in nature with those set forth on Schedule H,
and previously approved by Whitney, reflecting certain one time charges
to be taken by the Company in the 12 months following the consummation of
the Acquisition and in an amount not to exceed $650,000 in the aggregate __________
Less: Extraordinary gains without duplication, as defined under GAAP.
EBITDA $__________
Interest Coverage:
Interest Expense (as defined in the Agreement), net of interest income, included
in the determination of net income of the Company and its Subsidiaries on a
consolidated basis __________
Less: Amortization of capitalized fees and expenses incurred with respect to the
Transaction Documents and the Acquisition Documents included in interest
expense __________
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Interest paid in kind (PIK) and included in interest expense __________
Interest Expenses $__________
Actual Interest Coverage (EBITDA divided by Interest Expense) __________
Required Interest Coverage __________
In Compliance __________
Yes/No
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5. Security Interests. The Company hereby acknowledges and agrees
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that it has not completed the filing of security interests in certain patents
and licenses in three previously identified countries. These filings are
required by the terms of the Guarantee and Collateral Agreement and the failure
to complete these filings before April 30, 1999 will result in an Event of
Default under Section 6(a)(iv) of the Notes. Accordingly, the Company hereby
covenants and agrees to complete such filings before April 30, 1999. In
addition, the Company acknowledges and agrees that the Purchaser may in the
future, at its option, require the Company to make additional security interest
filings.
6. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED
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IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICT OF LAWS OF SUCH STATE.
7. Counterparts. This Amendment may be executed in one or more
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counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8. Continuing Effect. Except as expressly amended by this
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Amendment, the Initial Agreement shall continue in full force and effect in
accordance with the terms thereof.
9. No Presumption Against Drafter. Each of the parties hereto has
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jointly participated in the negotiation and drafting of this Amendment. In the
event of any ambiguity or a question of intent or interpretation arises, this
Amendment shall
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be construed as if drafted jointly by all of the parties hereto and no
presumptions or burdens of proof shall arise favoring any party by virtue of the
authorship of any of the provisions of this Amendment.
10. Certain Expenses. The Company will pay all expenses of the
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Purchaser (including, without limitation, reasonable fees, charges and
disbursements of counsel) in connection with this Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be signed by their respective duly authorized officers as of the date first
above written.
NITINOL MEDICAL TECHNOLOGIES, INC.
By: /s/ Xxxxxx X. Xxxxx
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Name: Xxxxxx X. Xxxxx
Title: President and CEO
WHITNEY SUBORDINATED DEBT FUND, L.P.
By: /s/ Xxxxxx X. X'Xxxxx
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Name: Xxxxxx X. X'Xxxxx
Title: A General Partner
X.X. XXXXXXX & CO.
By: Xxxxxx X. X'Xxxxx
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Name: Xxxxxx X. X'Xxxxx
Title: A General Partner
