EXHIBIT 2
PORTIONS OF THIS DOCUMENT HAVE BEEN OMITTED (DESIGNATED BY AN ASTERISK (*)) AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT DATED AUGUST 28, 1998
CONVERTIBLE SUBORDINATED NOTE AGREEMENT
BY AND BETWEEN
XXXXXX LABORATORIES
AND
MICRO THERAPEUTICS, INC.
DATED AS OF AUGUST 12, 1998
$5,000,000
5% CONVERTIBLE SUBORDINATED NOTE, DUE AUGUST 19, 2003
CONVERTIBLE SUBORDINATED NOTE AGREEMENT
THIS CONVERTIBLE SUBORDINATED NOTE AGREEMENT (this "Agreement"), entered into as
of the 12th day of August 1998, by and between XXXXXX LABORATORIES, an Illinois
corporation ("Abbott"), and MICRO THERAPEUTICS, INC., a Delaware corporation
(the "Company").
RECITALS
X. Xxxxxx desires to purchase from the Company, and the Company desires to
sell to Abbott, a certain 5% Convertible Subordinated Note, due August 19,
2003, in the aggregate principal amount of Five Million Dollars
($5,000,000) (the "Note") convertible into shares of the common stock, par
value $0.001 per share, of the Company (the "Common Stock"), in the form
attached hereto as Exhibit A, all as more fully described below, on the
terms and conditions set forth herein.
B. The Company and Abbott desire to enter into an Exclusive Distribution
Agreement (the "Distribution Agreement") in the form attached hereto as
Exhibit B.
C. The Company and Abbott desire to enter into a Credit Agreement (the "Credit
Agreement") in the form attached hereto as Exhibit C, which provides that
Abbott, as lender, shall loan to the Company, at the Company's sole option,
as borrower, an amount not to exceed an aggregate of Five Million Dollars
($5,000,000).
D. The Company desires to xxxxx Xxxxxx a security interest in the intellectual
property relating to the Company's peripheral blood clot infusion products
pursuant to the Security Agreement in the form attached hereto as Exhibit
D.
E. The Company and Abbott desire to make certain representations, warranties,
covenants and agreements in connection with the purchase and sale of the
Note and desire to prescribe certain conditions precedent to such purchase
and sale.
F. The Company and Abbott desire to make certain representations, warranties,
covenants and agreements in connection with entering into this Agreement
and the Credit Agreement and desire to prescribe certain conditions
precedent to such agreements.
AGREEMENT
NOW, THEREFORE, in consideration of the promises and of the mutual provisions,
agreements and covenants contained herein, the Company and Abbott hereby agree
as follows:
1. DESCRIPTION OF NOTE AND COMMITMENT.
1.1 DESCRIPTION OF NOTE. The Company has authorized the purchase and sale
of Five Million Dollars ($5,000,000) aggregate principal amount of the
Note to be dated the Closing Date of issue, to bear interest from such
date at the rate of five percent (5%) per annum, payable quarterly in
arrears on January 31, April 30, July 31 and October 31, each year
(commencing October 31, 1998) and at maturity and to bear interest on
overdue principal and premium, if any, and (to the extent legally
enforceable) on any overdue installment of interest at the rate of ten
percent (10%) per annum after the date due, whether at maturity or by
declaration, acceleration or otherwise, until paid, to be expressed to
mature on August 19, 2003, and to be substantially in the form attached
hereto as Exhibit A. The Note is not subject to redemption or
prepayment. The Note is convertible into Common Stock on the terms and
conditions set forth in Section 11 hereof.
1.2 COMMITMENT, CLOSING DATE. Subject to the terms and conditions hereof
and on the basis of the representations, warranties, covenants and
agreements set forth herein, the Company agrees to sell to Abbott, and
Abbott agrees to purchase from the Company, the Note in the respective
aggregate principal amount as set forth in Exhibit A at a purchase price
of one hundred percent (100%) of the principal amount thereof on the
Closing Date (as defined herein).
The closing of the purchase and sale of the Note will be made at the offices
of Xxxxxxxxx Xxxxx Xxxxxxx & Xxxxx, 000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 0000,
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000, against payment therefor of the purchase
price by wire transfer in immediately available funds at 1:00 p.m. Pacific
time, August 19, 1998, or such later date as shall mutually be agreed upon by
the Company and Abbott (the "Closing Date"). The Note delivered to Abbott on
the Closing Date will be delivered to Abbott in the form of a single Note in
the form attached hereto as Exhibit A for the full amount of Xxxxxx'x
purchase.
2. INTERPRETATION OF AGREEMENT; DEFINITIONS.
2.1 DEFINITIONS. Unless the context otherwise requires, the terms
hereinafter set forth when used herein shall have the following meanings and the
following definitions shall be equally applicable to both the singular and
plural forms of any of the terms herein defined:
"Affiliate" shall mean any Person (other than a Subsidiary) (i) which directly
or indirectly through one or more intermediaries controls, or is controlled by,
or is under common control with, the Company, (ii) which beneficially owns or
holds five percent (5%) or more of any class of the Voting Stock of the Company
or (iii) five percent (5%) or more of the Voting Stock (or in the case of a
Person which is not a corporation, five percent (5%) or more of the equity
interest) of which is beneficially owned or held by the Company or a Subsidiary.
The term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of Voting Stock, by contract or otherwise.
"Agreement" shall mean this Note Agreement.
"Board of Directors" shall mean either the board of directors of the Company or
any duly authorized committee thereof.
"Board Resolution" shall mean a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Company to have been duly adopted by the Board
of Directors and to be in full force and effect on the date of such
certification.
"Business Day" shall mean any day other than a Saturday, Sunday, legal holiday
or other day on which commercial banks located in San Francisco, California or
Chicago, Illinois are authorized or required by law to be closed.
"Closing Date" shall have the meaning specified in Section 1.2 hereof.
"Commission" shall mean the Securities and Exchange Commission, or successor
regulatory entity.
"Common Stock" shall mean the Common Stock, par value $0.001 per share, of the
Company.
"Company" shall mean Micro Therapeutics, Inc., a Delaware corporation, and any
Person who in accordance with the terms of this Agreement succeeds to all, or
substantially all, of the assets or business of Micro Therapeutics, Inc.
"Credit Facility Note" shall mean the 5% Convertible Credit Facility Note issued
pursuant to the Credit Facility as defined in Section 6.1 hereof.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, together with the
regulations thereunder, in each
case as in effect from time to time. References to sections of ERISA shall
be construed to also refer to any successor sections.
"Event of Default" shall have the meaning set forth in Section 9 hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"GAAP" shall mean generally accepted accounting principles at the time in the
United States.
"Holder" shall mean the registered holder of the Note, initially Abbott.
"Interest Payment Date" shall mean the Stated Maturity of an installment of
interest on the Note.
"Lien" shall mean any interest in property securing an obligation owed to, or a
claim by, a Person other than the owner of the property, whether such interest
is based on the common law, statute or contract, and including but not limited
to the security interest lien arising from a mortgage, encumbrance, pledge,
conditional sale or trust receipt or a lease, consignment or bailment for
security purposes. The term "Lien" shall include reservations, exceptions,
encroachments, easements, rights-of-way, covenants, conditions, restrictions,
leases and other title exceptions and encumbrances (including, with respect to
stock, stockholder agreements, voting trust agreements, buy-back agreements and
all similar arrangements) affecting property. For the purposes of this
Agreement, the Company or a Subsidiary shall be deemed to be the owner of any
property which it has acquired or holds subject to a conditional sale agreement,
capitalized lease or other arrangement pursuant to which title to the property
has been retained by or vested in some other Person for security purposes and
such retention or vesting shall constitute a Lien.
"Nasdaq" and "Nasdaq National Market" shall have the meanings specified in
Section 11.4(h) hereof.
"Person" shall mean an individual, partnership, corporation, limited liability
company, trust or unincorporated organization, and a government or agency or
political subdivision thereof.
"Preferred Stock" shall mean stock of the Company or a Subsidiary of any class
or series ranking prior to any other class or series of stock of the Company or
the Subsidiary with respect to the payment of dividends or the distribution of
assets upon the liquidation, dissolution or winding up of the Company or the
Subsidiary.
"Purchased Shares" shall have the meaning specified in Section 11.4(f) hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Stated Maturity," when used with respect to the Note or any installment of
interest hereon, shall mean the date specified in the Note as the fixed date on
which the principal of the Note
or any installment of interest is due and payable.
"Subsidiary" shall mean a corporation, partnership or other entity at least a
majority of whose Voting Stock is owned directly or indirectly by the Company.
"Voting Stock" shall mean securities of any class or classes, the holders of
which are ordinarily, in the absence of contingencies, entitled to elect a
majority of the corporate directors (or Persons performing similar functions).
2.2 ACCOUNTING PRINCIPLES. Where the character or amount of any asset or
liability or item of income or expense is required to be determined or any
consolidation or other accounting computation is required to be made for the
purposes of this Agreement, the same shall be done in accordance with GAAP, to
the extent applicable, except where such principles are inconsistent with the
requirements of this Agreement.
2.3 DIRECTLY OR INDIRECTLY. Where any provision in this Agreement refers to
action to be taken by any Person, or which such Person is prohibited from
taking, such provision shall be applicable whether the action in question is
taken directly or indirectly by such Person.
2.4 LEGAL HOLIDAYS. In any case where any Interest Payment Date or Stated
Maturity of the Note or the last date on which Abbott has the right to convert
the Note shall not be a Business Day, then (notwithstanding any other provision
of this Agreement or of the Note) payment of interest or principal or conversion
of the Note, as the case may be, need not be made on such date, but may be made
on the next succeeding Business Day with the same force and effect as if made on
the Interest Payment Date, or at the Stated Maturity, or on such last day for
conversion.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND ITS SUBSIDIARIES.
Except as otherwise set forth in the Disclosure Schedule attached hereto as
Exhibit E (the "Disclosure Schedule") or in any document expressly referenced in
the Disclosure Schedule, the Company and its Subsidiaries represent and warrant
to Abbott as of the date hereof as follows:
3.1 SUBSIDIARIES OF THE COMPANY. The Disclosure Schedule states the name of
each of the Subsidiaries of the Company, its jurisdiction of incorporation and
the percentage of its Voting Stock owned by the Company and/or its Subsidiaries.
The Company and each of its Subsidiaries has good and marketable title to all of
the shares it purports to own of the stock of each Subsidiary, free and clear in
each case of any Lien.
3.2 CORPORATE ORGANIZATION AND AUTHORITY. The Company, and each of its
Subsidiaries: (a) is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation; (b) has
all requisite power and authority and all necessary licenses and permits to
own and operate its properties and to carry on its business as now conducted
and as presently proposed to be conducted; and (c) is duly licensed or
qualified and is in good standing as a foreign corporation in each
jurisdiction wherein the nature of the business transacted by it or the
nature of the property owned or leased by it
makes such licensing or qualification necessary.
3.3 CAPITAL STRUCTURE. The authorized capital stock of the Company consists
of Twenty Million (20,000,000) shares of Common Stock, par value $0.001 per
share, and Five Million (5,000,000) shares of Preferred Stock, par value $0.001
per share. As of June 30, 1998, Six Million Six Hundred Eighty-Four Thousand
Four Hundred Sixty-Seven (6,684,467) shares of the Common Stock were issued and
outstanding and no shares of the Preferred Stock were issued and outstanding.
All of the outstanding Common Stock was issued in compliance with applicable
federal and state securities laws and regulations. All of the outstanding
shares of the Common Stock are, and any shares of Common Stock issuable upon
conversion of the Note and the Credit Facility Note will be, duly authorized,
validly issued, fully paid and nonassessable and not subject to preemptive
rights created by statute, the Company's Certificate of Incorporation or Bylaws,
or any agreement to which the Company is a party or is bound.
3.4 EQUITY INVESTMENTS. The Company does not own any equity stock or
interest, directly or indirectly, in any corporation, partnership, joint
venture, firm or other entity. The Company has no Subsidiaries except those set
forth in the Disclosure Schedule.
3.5 AUTHORITY. The Company has all requisite corporate power and authority
to enter into this Agreement, the Credit Agreement and the Security Agreement
and to issue the Note, and will have all requisite corporate power and authority
to issue the Credit Facility Note and, subject to satisfaction of the conditions
set forth herein and therein, to consummate the transactions contemplated hereby
and thereby. The execution and delivery of this Agreement, the Credit
Agreement, the Security Agreement and the Note and the consummation of the
transactions contemplated hereby and thereby have been, and the execution and
delivery of the Credit Facility Note and the consummation of the transactions
contemplated thereby will be, duly authorized by all necessary corporate action
on the part of the Company. This Agreement, the Credit Agreement, the Security
Agreement and the Note have been, and the Credit Facility Note will be, duly
executed and delivered by the Company, and constitute the valid and binding
obligation of the Company, enforceable in accordance with their respective
terms, subject to the effect of applicable bankruptcy, insolvency,
reorganization or other similar laws affecting the rights of creditors and the
effect or availability of rules of law governing specific performance,
injunctive relief or other equitable remedies. Provided the conditions set
forth in Section 8 hereof are satisfied, the execution and delivery of this
Agreement, the Credit Agreement, the Security Agreement, the Note and the Credit
Facility Note do not or will not, and the consummation of the transactions
contemplated hereby or thereby will not, conflict with, or result in any
violation of or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation under (a) any provision of the Certificate of Incorporation or
Bylaws of the Company, or (b) any material agreement or instrument, permit,
franchise, license, judgment or order, applicable to the Company or
its respective properties or assets.
No consent, approval, order or authorization of, or registration, declaration or
filing with, any
court, administrative agency or commission or other governmental authority (a
"Governmental Entity") or other Person or entity, is required by, or with
respect to, the Company in connection with the execution and delivery of this
Agreement, the Credit Agreement or the Security Agreement or the consummation
by the Company of the transactions contemplated hereby or thereby, except for
such consents, approvals, orders, authorizations, registrations, declarations
and filings as may be required under applicable federal and state securities
laws and the laws of any foreign country.
3.6 FINANCIAL STATEMENTS. The Company has furnished to Abbott its audited
consolidated statement of operations, statement of stockholders' equity and
statement of cash flows for the fiscal year ended December 31, 1997 and the
Company's audited consolidated balance sheet at December 31, 1997; and the
unaudited consolidated statement of operations and statement of cash flows for
the six (6) months ended June 30, 1998 and the unaudited consolidated balance
sheet at June 30, 1998. The Company will furnish to Abbott as soon as available
its audited consolidated financial statements for the fiscal year ended December
31, 1998. The balance sheet at June 30, 1998 is hereinafter referred to as the
"Company Balance Sheet," and all such financial statements are hereinafter
referred to collectively as the "Company Financial Statements." The Company
Financial Statements have been and will be prepared in accordance with GAAP
applied on a consistent basis, except for any change due to the adoption of an
accounting principle established by the FASB, AICPA, SEC or any other accounting
standard setting board, during the periods involved, and fairly present and will
present the consolidated financial position of the Company and the results of
its operations as of the date and for the periods indicated thereon. At the
date of the Company Balance Sheet (the "Company Balance Sheet Date"), neither
the Company nor its consolidated Subsidiaries had any liabilities or
obligations, secured or unsecured (whether accrued, absolute, contingent or
otherwise) not reflected on the Company Balance Sheet or the accompanying notes
thereto.
3.7 SECURITIES AND EXCHANGE COMMISSION DOCUMENTS. The Company has furnished
to Abbott a true and complete copy of the Company's Form 10-KSB for the year
ended December 31, 1997 and Form 10-QSB for each of the quarters ended March 31,
1998 and June 30, 1998 (the "Company SEC Documents"). As of their respective
filing dates, the Company SEC Documents comply in all material respects with the
requirements of the Exchange Act or the Securities Act, and none of the Company
SEC Documents contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading, except to the extent corrected by a subsequently filed
Company SEC Document.
3.8 BUSINESS CHANGES. Since June 30, 1998, except as otherwise contemplated
by this Agreement or as disclosed in writing to Abbott, the Company has
conducted its business only in the ordinary and usual course and, without
limiting the generality of the foregoing:
(a) There have been no changes in the condition (financial or otherwise),
business, net worth, assets, properties, employees, operations, obligations
or liabilities of the Company which, in the aggregate, have had or may be
reasonably expected to have a materially
adverse effect on the condition, business, net worth, assets, prospects,
properties or operations of the Company.
(b) The Company has not issued, or authorized for issuance, or entered into
any commitment to issue, any equity security, bond, note or other security of
the Company.
(c) The Company has not incurred debt for borrowed money, nor incurred any
obligation or liability except in the ordinary and usual course of business and
in any event not in excess of Fifty Thousand Dollars ($50,000) for any single
occurrence.
(d) The Company has not paid any obligation or liability, or discharged,
settled or satisfied any claim, lien or encumbrance, except for current
liabilities in the ordinary and usual course of business and in any event not in
excess of Fifty Thousand Dollars ($50,000) for any single occurrence.
(e) The Company has not declared or made any dividend, payment or other
distribution on or with respect to any share of capital stock of the Company.
(f) The Company has not purchased, redeemed or otherwise acquired or
committed itself to acquire, directly or indirectly, any share or shares of
capital stock of the Company.
(g) The Company has not mortgaged, pledged, or otherwise encumbered any of
its assets or properties, other than inventory sold in the normal course of
business or accounts receivable.
(h) The Company has not disposed of, or agreed to dispose of, by sale,
lease, license or otherwise, any asset or property, tangible or intangible,
except, in the case of such other assets and property, in the ordinary and usual
course of business, and in each case for a consideration believed to be at least
equal to the fair value of such asset or property and in any event not in excess
of Fifty Thousand Dollars ($50,000) for any single item or One Hundred Thousand
Dollars ($100,000) in the aggregate other than inventory sold or returned in the
normal course of business.
(i) The Company has not purchased or agreed to purchase or otherwise acquire
any securities of any corporation, partnership, joint venture, firm or other
entity; the Company has not made any expenditure or commitment for the purchase,
acquisition, construction or improvement of a capital asset, except in the
ordinary and usual course of business and in any event not in excess of Fifty
Thousand Dollars ($50,000) for any single item or One Hundred Thousand Dollars
($100,000) in the aggregate.
(j) The Company has not entered into any transaction or contract, or made
any commitment to do the same, except in the ordinary and usual course of
business.
(k) The Company has not sold, assigned, transferred or conveyed, or
committed itself to sell, assign, transfer or convey, any Proprietary Rights (as
defined in Section 3.15 hereof).
(l) The Company has not adopted or amended any bonus, incentive,
profit-sharing, stock option, stock purchase, pension, retirement,
deferred-compensation, severance, life insurance, medical or other benefit
plan, agreement, trust, fund or arrangement for the benefit of employees of
any kind whatsoever, nor entered into or amended any agreement relating to
employment, services as an independent contractor or consultant, or severance
or termination pay, nor agreed to do any of the foregoing.
(m) The Company has not effected or agreed to effect any change in its
directors, officers or key employees.
(n) The Company has not effected or committed itself to effect any amendment
or modification in its Certificate of Incorporation or Bylaws, except as
contemplated by this Agreement.
(o) The Company has not modified its accounting principles in any material
respect, except for those changes required by the adoption of an accounting
principle promulgated by the FASB, the AICPA, the Securities and Exchange
Commission, or any other accounting standards setting bodies.
3.9 INDEBTEDNESS. The Disclosure Schedule correctly describes all debt of
the Company and its Subsidiaries in excess of Two Hundred Fifty Thousand Dollars
($250,000) outstanding of the Closing Date.
3.10 LITIGATION. There is no claim, dispute, action, proceeding, notice,
order, suit, appeal or investigation, at law or in equity, pending against the
Company, or involving any of its assets or properties, before any court, agency,
authority, arbitration panel or other tribunal (other than those, if any, with
respect to which service of process or similar notice has not yet been made on
the Company), and none have been threatened. The Company is aware of no facts
which, if known to stockholders, customers, governmental authorities or other
Persons, would result in any such claim, dispute, action, proceeding, suit or
appeal or investigation which would have a material adverse effect on the
condition (financial or otherwise), business, net worth, assets, prospects,
properties or operations of the Company. The Company is not subject to any
order, writ, injunction or decree of any court, agency, authority, arbitration
panel or other tribunal, nor is it in default with respect to any notice, order,
writ, injunction or decree.
3.11 COMPLIANCE WITH LAW. All material licenses, franchises, permits,
clearances, consents, certificates and other evidences of authority of the
Company which are necessary to the conduct of the Company's business
("Permits") are in full force and effect and the Company is not in violation
of any Permit in any material respect. Except for possible exceptions, the
curing or non-curing of which would not have a material adverse effect on the
condition (financial or otherwise), business, net worth, assets, prospects,
properties or operations of the Company, the business of the Company has been
conducted in accordance with all applicable laws, regulations, orders and
other requirements of governmental authorities.
3.12 TITLE TO PROPERTIES. The Company and each of its Subsidiaries has good
and marketable title in fee simple (or its equivalent under applicable law) to
all material parcels of real property and has good title to all the other
material items of property it purports to own, except as sold or otherwise
disposed of in the ordinary course of business.
3.13 LICENSES, ETC. The Company and each of its Subsidiaries owns or
possesses all the material trade names, service marks, licenses, governmental
approvals, and rights with respect to the foregoing necessary for the present
conduct of its business, without any known conflict with the rights of others.
3.14 NO DEFAULT.
(a) Each of the Company's material agreements or contracts is a legal,
binding and enforceable obligation by or against the Company, subject to the
effect of applicable bankruptcy, insolvency, reorganization, moratorium or other
similar federal or state laws affecting the rights of creditors and the effect
or availability of rules of law governing specific performance, injunctive
relief or other equitable remedies (regardless of whether any such remedy is
considered in a proceeding at law or in equity). To the Company's knowledge, no
party with whom the Company has an agreement or contract is in default
thereunder or has breached any term or provision thereof which is material to
the conduct of the Company's business.
(b) The Company has performed, or is now performing, the obligations of, and
the Company is not in material default (or would by the lapse of time and/or the
giving of notice be in material default) in respect of, any contract, agreement
or commitment binding upon it or its assets or properties and material to the
conduct of its business. No third party has raised any claim, dispute or
controversy with respect to any of the contracts of the Company, whether fully
performed or currently being performed, nor has the Company received written
notice or warning of alleged nonperformance, delay in delivery or other
noncompliance by the Company with respect to its obligations under any of those
contracts, nor are there any facts which exist indicating that any of those
contracts may be totally or partially terminated or suspended by the other
parties thereto.
3.15 PROPRIETARY RIGHTS.
(a) The Company has provided Abbott with a complete list in writing of all
patents and applications for patents, trademarks, trade names, service marks,
and copyrights, and applications therefor, owned or used by the Company or in
which it has any rights or licenses, except for software used by the Company and
generally available on the commercial market. The Company has provided Abbott
with a complete and accurate list of all agreements of the Company with each
officer, employee or consultant of the Company providing the Company with title
and ownership to patents, patent applications, trade secrets and inventions
developed or used by the Company in its business. All of such agreements so
described are valid, enforceable and legally binding, subject to the effect of
applicable bankruptcy, insolvency, reorganization or other similar laws
affecting the rights of creditors or availability of rules of law governing
specific performance, injunctive relief or other equitable remedies (regardless
of whether any such remedy is considered in a proceeding at
law or in equity).
(b) The Company owns or possesses licenses or other rights to use all
patents, patent applications, trademarks, trademark applications, trade secrets,
service marks, trade names, copyrights, inventions, drawings, designs, customer
lists, proprietary know-how or information, or other rights with respect thereto
(collectively referred to as "Proprietary Rights"), used in the business of the
Company, and the same are sufficient to conduct the Company's business as it has
been and is now being conducted.
(c) The operations of the Company do not conflict with or infringe, and no
one has asserted to the Company that such operations conflict with or infringe,
on any Proprietary Rights, owned, possessed or used by any third party. There
are no claims, disputes, actions, proceedings, suits or appeals pending against
the Company with respect to any Proprietary Rights (other than those, if any,
with respect to which service of process or similar notice may not yet have been
made on the Company), and, none has been threatened against the Company. To the
knowledge of the Company, there are no facts or alleged facts which would
reasonably serve as a basis for any claim that the Company does not have the
right to use, free of any rights or claims of others, all Proprietary Rights in
the development, manufacture, use, sale or other disposition of any or all
products or services presently being used, furnished or sold in the conduct of
the business of the Company as it has been and is now being conducted.
(d) To the Company's knowledge, no employee of the Company is in violation
of any term of any employment contract, proprietary information and inventions
agreement, non-competition agreement, or any other contract or agreement
relating to the relationship of any such employee with the Company or any
previous employer.
3.16 TAXES. All tax returns required to be filed by the Company or its
Subsidiaries in any jurisdiction have, in fact, been filed, and all taxes,
assessments, fees and other governmental charges upon the Company or its
Subsidiaries or upon any of their respective properties, income or franchises,
which are shown to be due and payable in such returns have been paid. For all
taxable years ending on or before December 31, 1997, the federal income tax
liability of the Company and its Subsidiaries has been satisfied. The Company
does not know of any proposed additional tax assessment against it for which
adequate reserves have not been made on its balance sheet, and no material
controversy in respect of additional federal or state income taxes due since
said date is pending or, to the knowledge of the Company, threatened. The
reserves for taxes on the books of the Company and each of its Subsidiaries are
adequate in all material respects for all open years, and for its current fiscal
period.
3.17 USE OF PROCEEDS. The net proceeds from the sale of the Note will be
used to make an infusion of capital into the Company and for other corporate
purposes.
3.18 PRIVATE OFFERING. Neither the Company, directly or indirectly, nor
any agent on its behalf has offered or will offer the Note or any similar
security or has solicited or will solicit an offer to acquire the Note or any
similar security from or has otherwise approached or negotiated or will
approach or negotiate in respect of the Note or any similar security with
any Person other than Xxxxxx. Neither the Company, directly or indirectly,
nor any agent on its behalf has offered or will offer the Note or any similar
security or has solicited or will solicit an offer to acquire the Note or any
similar security from any Person so as to require registration of the Note
under section 5 of the Securities Act.
3.19 EMPLOYEE PLANS AND RELATIONS.
(a) Except as provided in the Company SEC Documents, the Company does not
have any: (i) employee benefit plans, multi-employer plans and employee benefit
plans (as defined in section 3(2) or section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended); (ii) bonus, deferred compensation,
incentive, restricted stock, stock purchase, stock option, stock appreciation
right, phantom stock, debenture, supplemental pension, profit-sharing, royalty
pool, commission or similar plan or arrangement; (iii) employment, consulting or
termination agreement; or (iv)other plan, program, agreement, procedure, policy,
commitment, understanding or other arrangement relating to employee benefits,
executive compensation, fringe benefits, severance pay, terms of employment or
services as a director, officer, employee or independent contractor.
(b) The Company has not been and is not a party to, or subject to, or
affected by, any collective bargaining agreement or other labor contract. The
Company has complied in all respects with all laws, rules and regulations
relating to employment, equal employment opportunity, nondiscrimination,
immigration, wages, hours, benefits, collective bargaining, the payment of
social security and similar taxes, occupational safety and health and plant
closing.
3.20 ENVIRONMENTAL MATTERS. The Company is, and at all times during the
period prior to the date hereof the Company has been, in compliance with all
applicable local, state and federal statutes, orders, rules, ordinances and
regulations relating to pollution or protection of the environment, including,
without limitation, laws relating to zoning and land use and to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
hazardous or toxic materials or wastes into or on land, ambient air, surface
water, ground water, personal property or structures (including the protection,
cleanup, removal, remediation or damage thereof), or otherwise related to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, discharge or handling of pollutants, contaminants or hazardous or
toxic substances, materials or wastes.
3.21 BROKERS OR FINDERS. The Company has not dealt with any broker or finder
in connection with the transactions contemplated by this Agreement. The Company
has not incurred, and shall not incur, directly or indirectly, any liability for
any brokerage or finders' fees or agents' commissions or any similar charges in
connection with this Agreement or any transaction contemplated hereby.
3.22 FULL DISCLOSURE. Neither the Company Financial Statements referred to
in Section 3.6 hereof nor this Agreement, or any other written statement
furnished by the Company to Xxxxxx in connection with the negotiation of the
sale of the Note, contains any untrue statement of a material fact or omits a
material fact necessary to make the statements contained herein or therein
not misleading. There is no fact peculiar to the Company or the Subsidiaries
which the Company has not disclosed to Xxxxxx in writing which materially
adversely affects nor, so far as the Company can now foresee, will materially
adversely affect, the properties, business, profits or condition (financial
or otherwise) of the Company and the Subsidiaries, taken as a whole.
4. REPRESENTATIONS AND WARRANTIES OF XXXXXX. Except as contemplated by
this Agreement, Xxxxxx represents and warrants to the Company as of the date
hereof as follows:
4.1 CORPORATE ORGANIZATION. Xxxxxx is a corporation duly incorporated,
validly existing and in good standing under the laws of Illinois. Xxxxxx is
duly qualified to do business and is in good standing in its state of
incorporation and in each other jurisdiction in which it owns or leases property
or conducts business, except where the failure to be so qualified would not have
a material adverse effect on the business of Xxxxxx. Xxxxxx has all requisite
power and authority to own, lease and operate its properties and to carry on its
business as now being conducted, and possesses all licenses, franchises, rights
and privileges material to the conduct of its business.
4.2 AUTHORITY. Xxxxxx has all requisite corporate power and authority to
enter into this Agreement and the related agreements contemplated herein, and,
subject to satisfaction of the conditions set forth herein, to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Xxxxxx. This
Agreement has been duly executed and delivered by Xxxxxx and constitutes the
valid and binding obligation of Xxxxxx enforceable in accordance with its terms,
subject to the effect of applicable bankruptcy, insolvency, reorganization or
other similar federal or state laws affecting the rights of creditors and the
effect or availability of rules of law governing specific performance,
injunctive relief or other equitable remedies. Provided the conditions set
forth in Section 8 are satisfied, the execution and delivery of this Agreement
do not, and the consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation of or default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation under (a) any provision of the
Certificate of Incorporation or Bylaws of Xxxxxx, or (b) any material agreement
or instrument, permit, license, judgment, order, statute, law, ordinance, rule
or regulation applicable to Xxxxxx or its properties or assets, other than any
such conflicts, violations, defaults, terminations, cancellations or
accelerations which individually or in the aggregate would not have a material
adverse effect on Xxxxxx.
No consent, approval, order or authorization of, or registration, declaration or
filing with, any governmental authority is required by or with respect to Xxxxxx
in connection with the execution and delivery of this Agreement by Xxxxxx or the
consummation by Xxxxxx of the transactions contemplated hereby or thereby.
4.3 RESTRICTED NOTE. Xxxxxx represents and agrees, and in entering into
this Agreement the Company understands, that (a) Xxxxxx is acquiring the Note
for Xxxxxx'x own account, and for the purpose of investment and not with a
view to the distribution thereof, and that Xxxxxx has no present intention of
selling, negotiating or otherwise disposing of the Note; it being understood,
however, that the disposition of Xxxxxx'x property shall at all times be and
remain within its control, and (b) the Note has not been registered under
section 5 of the Securities Act and that Xxxxxx will only re-offer or resell
the Note purchased by Xxxxxx under this Agreement pursuant to an effective
registration statement under the Securities Act or in accordance with an
available exemption from the requirements of section 5 of the Securities Act.
4.4 NO CONFLICT. The execution and delivery of this Agreement by Xxxxxx
and the performance of Xxxxxx'x obligations hereunder, (a) are not in
violation or breach of, and will not conflict with or constitute a default
under, any of the terms of the Certificate of Incorporation or Bylaws of
Xxxxxx or any of its Subsidiaries, or any material contract, agreement or
commitment binding upon Xxxxxx or any of its assets or properties; (b) will
not result in the creation or imposition of any lien, encumbrance, equity or
restriction in favor of any third party upon any of the assets or properties
of Xxxxxx; and (c) will not conflict with or violate any applicable law,
rule, regulation, judgment, order or decree of any government, governmental
instrumentality or court having jurisdiction over Xxxxxx or any of its assets
or properties.
4.5 BROKERS OR FINDERS. Xxxxxx has not dealt with any broker or finder in
connection with the transactions contemplated by this Agreement. Xxxxxx has not
incurred, and shall not incur, directly or indirectly, any liability for any
brokerage or finders' fees or agents commissions or any similar charges in
connection with this Agreement or any transaction contemplated hereby.
5. COVENANTS OF THE COMPANY. From and after the Closing Date and
continuing so long as any amount remains unpaid on the Note, the Company and its
Subsidiaries covenant and agree with Xxxxxx that:
5.1 CORPORATE EXISTENCE. The Company shall do or cause to be done all
things necessary to preserve and keep in full force and effect the existence,
rights and franchises of the Company and its Subsidiaries.
5.2 CONDUCT OF BUSINESS IN NORMAL COURSE. The Company and its Subsidiaries
shall carry on the business and their activities diligently and in the ordinary
course and shall not make or institute any unusual or novel methods of purchase,
sale, lease, management, accounting or operation that will vary materially from
the methods used by the Company as of June 30, 1998. The Company and its
Subsidiaries shall maintain the business and their activities in a normal and
customary manner consistent with prior practice.
5.3 MAINTENANCE. The Company will maintain, preserve and keep, and will
cause each of its Subsidiaries to maintain, preserve and keep, its material
properties which are used or useful in the conduct of its business (whether
owned in fee or a leasehold interest) in good repair and working order and from
time to time will make all necessary repairs, replacements, renewals and
additions so that at all times the efficiency thereof shall be maintained in all
material respects.
5.4 PRESERVATION OF BUSINESS AND RELATIONSHIPS. Neither the Company nor
any of its
Subsidiaries will engage in any business if, as a result, the general nature
of the business, taken on a consolidated basis, which would then be engaged
in by the Company and its Subsidiaries would be substantially changed from
the general nature of the business engaged in by the Company and its
Subsidiaries on the date of this Agreement.
5.5 MERGER; ACQUISITIONS. Except with contemporaneous notice to Xxxxxx, the
Company shall not (a) consolidate with or merge into any other Person, (b)
acquire or agree to acquire by merging or consolidating with, or by purchasing a
substantial portion of the assets of, or by any other manner, any business or
any Person or division thereof, or (c) otherwise acquire or agree to acquire any
assets which are material to the Company except in the ordinary course of
business consistent with prior practice.
5.6 SALE OR LEASE OF ASSETS; DISPOSITIONS. Except with contemporaneous
notice to Xxxxxx, the Company shall not sell, lease, transfer or otherwise
dispose of any of its assets (other than the sale of inventory in the ordinary
course of business), except in the ordinary course of business consistent with
prior practice.
5.7 INDEBTEDNESS. Except with contemporaneous notice to Xxxxxx, the Company
shall not incur any indebtedness for borrowed money other than customary Senior
Indebtedness (as defined herein) or guarantee any such indebtedness or issue or
sell any debt securities of the Company or guarantee any debt securities of
others except in connection with the purchase of inventory pursuant to the
existing bank line of credit.
5.8 INSURANCE. The Company shall at all times during the term of this
Agreement maintain product liability insurance covering the products with
minimum annual limits of Two Million Dollars ($2,000,000) per occurrence and
Two Million Dollars ($2,000,000) in the aggregate. The Company shall maintain
such insurance for a minimum of five (5) years after termination of this
Agreement. Within thirty (30) days of the Closing Date, the Company shall
deliver to Xxxxxx a certificate of insurance evidencing such insurance and
stating that the policy will not be canceled or modified without at least thirty
(30) days prior written notice to Xxxxxx.
5.9 TAXES, CLAIMS FOR LABOR AND MATERIALS, COMPLIANCE WITH LAWS. The
Company will promptly pay and discharge, and will cause each of its Subsidiaries
promptly to pay and discharge, all lawful taxes, assessments and governmental
charges or levies imposed upon the Company or such Subsidiary, respectively, or
upon or in respect of all or any part of the property or business of the Company
or such Subsidiary, all trade accounts payable in accordance with usual and
customary business terms, and all claims for work, labor or materials, which if
unpaid might become a Lien upon any property of the Company or such Subsidiary;
provided, however, that the Company or such Subsidiary shall not be required to
pay any such tax, assessment, charge, levy, account payable or claim if (a) the
validity, applicability or amount thereof is being contested in good faith by
appropriate actions or proceedings which will prevent the forfeiture or sale of
any property of the Company or such Subsidiary or any material interference with
the use thereof by the Company or such Subsidiary, and (b) the Company or such
Subsidiary shall set aside, in accordance with GAAP, on its books, reserves
deemed by it to be adequate with respect thereto. The
Company will promptly comply and will cause each of its Subsidiaries to
comply with all laws, ordinances or governmental rules and regulations to
which it is subject including, without limitation, the Occupational Safety
and Health Act of 1970, as amended, ERISA and all laws, ordinances,
governmental rules and regulations relating to environmental protection in
all applicable jurisdictions, the violation of which could materially and
adversely affect the properties, business, profits or condition of the
Company and its Subsidiaries, taken as a whole.
5.10 NOTICE OF CLAIMS AND LITIGATION. The Company will give prompt notice to
Xxxxxx of any claim or action at law or in equity, or before any governmental,
administrative or regulatory body or arbitration panel instituted against the
Company or its Subsidiaries, or disputes that have a high probability of
resulting in a suit of significance against the Company or its Subsidiaries
involving a claim against the Company or its Subsidiaries, for damages in excess
of Two Hundred Fifty Thousand Dollars ($250,000) or which, if concluded
adversely to the Company or its Subsidiaries, would materially and adversely
affect the business or assets of the Company or its Subsidiaries.
5.11 DISPOSAL OF SHARES OF A SUBSIDIARY. Neither the Company nor its
Subsidiaries will sell, pledge or otherwise dispose of any shares of the stock
(including as "stock" for the purposes of this Section 5.11 any options or
warrants to purchase stock or other Securities exchangeable for or convertible
into stock) of a Subsidiary, nor will any Subsidiary issue, sell, pledge,
encumber or otherwise dispose of any shares of its own stock, if the effect of
the transaction would be to reduce the proportionate interest of the Company and
its other Subsidiaries in the outstanding stock of a Subsidiary whose shares are
the subject of the transaction, nor will its Subsidiary issue, sell, pledge,
encumber or dispose of any shares of its own Preferred Stock.
5.12 TRANSACTIONS WITH AFFILIATES. Except for transactions and arrangements
with employee Affiliates, the Company will not, and will not permit its
Subsidiaries to, enter into or be a party to any material transaction or
arrangement with any Affiliate (including, without limitation, the purchase
from, sale to or exchange of property with, or the rendering of any service by
or for, any Affiliate), except pursuant to the reasonable requirements of the
Company's or its Subsidiaries' business and upon fair and reasonable terms no
less favorable to the Company or its Subsidiaries than would be obtained in a
comparable arm's-length transaction with a Person other than an Affiliate. To
the best knowledge of the Company, the Company has properly disclosed all
affiliate transactions in the Company's filings with the Securities and Exchange
Commission.
5.13 REPORTS AND ACCESS TO INFORMATION. Not more than once during any twelve
(12) month period, the Company shall afford to Xxxxxx and shall cause its
independent accountants to afford to Xxxxxx, and its accountants, counsel and
other representatives, reasonable access during normal business hours to the
Company's properties, books, contracts, commitments and records and to the
independent accountants reasonable access to the audit work papers and other
records of the Company's accountants. The Company shall furnish promptly to
Xxxxxx (a) a copy of each report, schedule and other document filed or received
by the Company during such period pursuant to the requirements of federal and
state securities laws and (b) all other material information concerning the
business, properties and personnel of the Company and any other materials as
Xxxxxx may reasonably request. Xxxxxx will not use such information for
purposes other than this Agreement and will otherwise hold all confidential
material contained in such information in confidence (and Xxxxxx will cause its
consultants and advisors to also hold such information in confidence).
5.14 RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the Commission which may permit the sale of the
restricted Common Stock to the public without registration, as long as a public
market exists for the Common Stock, the Company agrees to use its best efforts
to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act;
(b) File with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
(c) So long as a Holder owns any restricted Common Stock, furnish to the
Holder forthwith upon request a written statement by the Company as to its
compliance with the reporting requirements of Rule 144, and of the Securities
Act and the Exchange Act, a copy of the most recent annual or quarterly report
of the Company, and such other reports and documents of the Company and other
information in the possession of or reasonably obtainable by the Company as a
Holder may reasonably request in availing itself of any rule or regulation of
the Commission allowing a Holder to sell any such securities without
registration.
6. CREDIT AGREEMENT.
6.1 CREDIT AGREEMENT. Concurrently herewith, the Company and Xxxxxx shall
enter into the Credit Agreement in the form attached hereto as Exhibit C.
Pursuant to the Credit Agreement, at the Company's sole discretion, the Company
may require Xxxxxx, as lender, to loan to the Company, as borrower, an amount
not to exceed an aggregate of Five Million Dollars ($5,000,000) (the "Credit
Facility").
6.2 TERMINATION OF THE CREDIT AGREEMENT. The Company's option to require
Xxxxxx to loan money pursuant to the Credit Agreement shall terminate upon the
earlier of (a) July 31, 1999, (b) the termination of the Distribution Agreement
pursuant to its terms (except for termination of the Distribution Agreement by
Xxxxxx without cause) or otherwise resulting from a material breach or default
by the Company of any covenant, condition or other provision thereof, or
(c) notice from Xxxxxx following an Event of Default.
6.3 DEFAULT AND CROSS DEFAULTS. If an Event of Default occurs, the
Company shall not borrow pursuant to the Credit Facility during the time of
the Event of Default, and Xxxxxx shall have the right to terminate the Credit
Facility upon written notice to the Company. If Xxxxxx does not exercise its
right to terminate the Credit Facility during the Event of Default,
thirty (30) days after such Event of Default is cured or remedied, the
Company may borrow pursuant to the Credit Facility unless the Credit Facility
has terminated in accordance with Section 6.2 hereof.
7. ADDITIONAL AGREEMENTS. Notwithstanding the covenants and agreements
of the Company set forth in Section 5 hereof, the Company and Xxxxxx further
agree that no such covenants and agreements shall prevent any sale,
disposition, spin-off, spin-out, license or any other transfer of the
Company's or any Subsidiary's assets and technology outside the Field (as
such term is defined in the Distribution Agreement).
8. CONDITIONS PRECEDENT.
8.1 CONDITIONS TO OBLIGATIONS OF XXXXXX. The obligations of Xxxxxx to
consummate this Agreement are subject to the satisfaction on or prior to the
Closing Date of the following conditions, unless waived by Xxxxxx:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
the Company and its Subsidiaries set forth in this Agreement shall be true and
correct in all material respects as of the date of this Agreement and as if made
at and as of the Closing Date, except as otherwise contemplated by this
Agreement, and Xxxxxx shall have received a certificate or certificates signed
by the Chief Executive Officer of the Company to such effect.
(b) PERFORMANCE OF OBLIGATIONS. The Company shall have performed all
obligations required to be performed by it under this Agreement prior to the
Closing Date, and Xxxxxx shall have received a certificate signed by the Chief
Executive Officer of the Company to such effect.
(c) NO MATERIAL ADVERSE CHANGE. There shall have been no changes in the
condition (financial or otherwise), business, prospects, employees, operations,
obligations or liabilities of the Company which, in the aggregate, have had or
may be reasonably expected to have a materially adverse effect on the financial
condition, business, or operations of the Company on a consolidated basis.
(d) DISTRIBUTION AGREEMENT. The Company and Xxxxxx shall have entered into
a Distribution Agreement in the form attached hereto as Exhibit B.
(e) CREDIT AGREEMENT. The Company and Xxxxxx shall have entered into a
Credit Agreement in the form attached hereto as Exhibit C.
(f) SECURITY AGREEMENT. The Company and Xxxxxx shall have entered into a
Security Agreement in the form attached hereto as Exhibit D.
(g) NOTE. The Company shall have tendered to Xxxxxx the Note.
8.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligations of the
Company to
consummate the transactions contemplated hereby are subject to the
satisfaction on or prior to the Closing Date of the following conditions,
unless waived by the Company:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Xxxxxx set forth in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and as if made at and as of the
Closing Date, except as otherwise contemplated by this Agreement.
(b) PERFORMANCE OF OBLIGATIONS OF XXXXXX. Xxxxxx shall have performed in
all material respects all obligations required to be performed by it under this
Agreement prior to the Closing Date.
(c) DISTRIBUTION AGREEMENT. The Company and Xxxxxx shall have entered into
a Distribution Agreement in the form attached hereto as Exhibit B.
(d) CREDIT AGREEMENT. The Company and Xxxxxx shall have entered into a
Credit Agreement in the form attached hereto as Exhibit C.
(e) PAYMENT. Xxxxxx shall have tendered to the Company Five Million Dollars
($5,000,000) in exchange for the Note.
9. EVENTS OF DEFAULT. If any of the events specified in this Section 9
shall occur (herein individually referred to as an "Event of Default"), the
Holder of the then outstanding Note issued pursuant to this Agreement may, so
long as such condition exists, declare the entire principal and unpaid accrued
interest hereon immediately due and payable, by notice in writing to the
Company:
9.1 PAYMENTS. Default in the payment of the principal and unpaid accrued
interest of the Note when due and payable if such default is not cured by the
Company within ten (10) days after the Holder has given the Company written
notice of such default.
9.2 BANKRUPTCY. The institution by the Company of proceedings to be
adjudicated as bankrupt or insolvent, or the consent by it to institution of
bankruptcy or insolvency proceedings against it or the filing by it of a
petition or answer or consent seeking reorganization or release under the
federal Bankruptcy Code, or any other applicable federal or state law, or the
consent by it to the filing of any such petition or the appointment of a
receiver, liquidator, assignee, trustee or other similar official of the
Company, or of any substantial part of its property, or the making by it of an
assignment for the benefit of creditors, or the taking of corporate action by
the Company in furtherance of any such action.
9.3 COMMENCEMENT OF AN ACTION. If, within sixty (60) days after the
commencement of an action against the Company (and service of process in
connection therewith on the Company) seeking any bankruptcy, insolvency,
reorganization, liquidation, dissolution or similar relief under any present
or future statute, law or regulation, such action shall not have been
resolved in favor of the Company or all orders or proceedings thereunder
affecting the operations or the business of the Company stayed, or if the
stay of any such order or
proceeding shall thereafter be set aside, or if, within sixty (60) days after
the appointment without the consent or acquiescence of the Company of any
trustee, receiver or liquidator of the Company or of all or any substantial
part of the properties of the Company, such appointment shall not have been
vacated.
9.4 DEFAULT OF SENIOR INDEBTEDNESS. Any declared default of the Company
under any Senior Indebtedness (as defined in Section 10 hereof) that gives the
holder thereof the right to accelerate such Senior Indebtedness, and such Senior
Indebtedness is in fact accelerated by the holder.
9.5 COVENANTS AND AGREEMENTS. The Company shall default in the performance
of any of its material covenants and agreements set forth in any provision of
this Agreement and the continuance of such default for thirty (30) days after
the Holder has given the Company written notice of such default.
9.6 DEFAULT UNDER OTHER AGREEMENTS. The Company breaches or defaults on any
material covenant, condition or other provision of the Distribution Agreement
and such breach or default continues after the applicable grace period, if any,
specified therein but in no event more than thirty (30) days after the Holder
has given the Company written notice of such breach or default.
9.7 CHANGE OF CONTROL OF THE COMPANY. Any change in control of the Company
which includes any consolidation of the Company with, or merger of the Company
into, any other Person, any merger of another Person into the Company (other
than a merger which does not result in any reclassification, conversion,
exchange or cancellation of outstanding shares of Common Stock), any acquisition
of at least a majority of the Voting Stock of the Company or any sale or
transfer of all or substantially all of the business or assets of the Company (a
"Change of Control"), or Xxxxxx'x receipt of written notice from the Company
that a Change of Control will occur as described in Section 11.10 hereof.
9.8 OTHER REMEDIES. If any Event of Default shall occur and be continuing,
Xxxxxx shall have, in addition to the remedies set forth in Section 9 hereof,
all other remedies otherwise available at law and equity. In addition, if an
Event of Default shall occur and be continuing, Xxxxxx may terminate its
obligations under the Credit Facility as described in Section 6.2 hereof, and
declare the entire principal and unpaid interest due under the Credit Facility
Note, if any, immediately due and payable in accordance with the terms of the
Credit Agreement.
10. SUBORDINATION. The indebtedness evidenced by the Note is hereby
expressly subordinated except as otherwise provided in the Security Agreement
attached hereto as Exhibit D, to the extent and in the manner hereinafter set
forth, in right of payment to the prior payment in full of all the Company's
Senior Indebtedness (as defined herein).
10.1 SENIOR INDEBTEDNESS. As used in the Note, the term "Senior
Indebtedness" shall mean the principal of and unpaid accrued interest on:
(a) all indebtedness of the Company to banks, insurance companies or other
financial institutions regularly engaged in the business
of lending money, which is for money borrowed by the Company (whether or not
secured), and (b) any such indebtedness or any debentures, notes or other
evidence of indebtedness issued in exchange for such Senior Indebtedness, or
any indebtedness arising from the satisfaction of such Senior Indebtedness by
a guarantor.
10.2 DEFAULT ON SENIOR INDEBTEDNESS. If there should occur any receivership,
insolvency, assignment for the benefit of creditors, bankruptcy, reorganization
or arrangements with creditors (whether or not pursuant to bankruptcy or other
insolvency laws), sale of all or substantially all of the assets, dissolution,
liquidation or any other marshalling of the assets and liabilities of the
Company, or if the Note shall be declared due and payable upon the occurrence of
an Event of Default with respect to any Senior Indebtedness, then (a) no amount
shall be paid by the Company in respect of the principal of or interest on the
Note at the time outstanding, unless and until the principal of and interest on
the Senior Indebtedness then outstanding shall be paid in full, and (b) no claim
or proof of claim shall be filed with the Company by or on behalf of the Holder
of the Note that shall assert any right to receive any payments in respect of
the principal of and interest on the Note, except subject to the payment in full
of the principal of and interest on all of the Senior Indebtedness then
outstanding. If there occurs an Event of Default that has been declared in
writing with respect to any Senior Indebtedness, or in the instrument under
which any Senior Indebtedness is outstanding, permitting the holder of such
Senior Indebtedness to accelerate the maturity thereof, then, unless and until
such Event of Default shall have been cured or waived or shall have ceased to
exist, or all Senior Indebtedness shall have been paid in full, no payment shall
be made in respect of the principal of or interest on the Note, unless within
three (3) months after the happening of such Event of Default, the maturity of
such Senior Indebtedness shall not have been accelerated.
10.3 EFFECT OF SUBORDINATION. Subject to the rights, if any, of the holders
of Senior Indebtedness under this Section 10 to receive cash, securities or
other properties otherwise payable or deliverable to the Holder of the Note,
nothing contained in this Section 10 shall impair, as between the Company and
the Holder, the obligation of the Company, subject to the terms and conditions
hereof, to pay to the Holder the principal hereof and interest hereon as and
when the same become due and payable, or shall prevent the Holder of the Note,
upon default hereunder, from exercising all rights, powers and remedies
otherwise provided herein or by applicable law.
10.4 SUBROGATION. Subject to the payment in full of all Senior Indebtedness
and until the Note shall be paid in full, the Holder shall be subrogated to the
rights of the holders of Senior Indebtedness (to the extent of payments or
distributions previously made to such holders of Senior Indebtedness pursuant to
the provisions of Section 10.2 hereof) to receive payments or distributions of
assets of the Company applicable to the Senior Indebtedness. No such payments
or distributions applicable to the Senior Indebtedness shall, as between the
Company and its creditors, other than the holders of Senior Indebtedness and the
Holder, be deemed to be a payment by the Company to or on account of the Note;
and for the purposes of such subrogation, no payments or distributions to the
holders of Senior Indebtedness to which the Holder would be entitled except for
the provisions of this Section 10 shall, as between the Company and its
creditors, other than the holders of Senior Indebtedness and the
Holder, be deemed to be a payment by the Company to or on account of the
Senior Indebtedness.
10.5 UNDERTAKING. By its acceptance of the Note, the Holder agrees to
execute and deliver such documents as may be reasonably requested from time to
time by the Company or the lender of any Senior Indebtedness in order to
implement the foregoing provisions of this Section 10.
11. CONVERSION OF NOTE.
11.1 CONVERSION PRIVILEGE AND CONVERSION PRICE. Subject to and upon
compliance with the provisions of this Section 11, at the option of Xxxxxx at
any time and at Xxxxxx'x sole discretion without regard to the price of the
Common Stock and the Conversion Price (as defined herein), Note may be converted
at the principal amount thereof, into fully paid and nonassessable shares of
Common Stock at the Conversion Price, in effect at the time of conversion. Such
conversion right shall expire at the close of business on August 19, 2003. The
price at which shares of Common Stock shall be delivered upon conversion (the
"Conversion Price") shall be initially * per share of Common Stock. The
Conversion Price shall be adjusted in certain instances as provided in this
Section 11.
11.2 EXERCISE OF CONVERSION PRIVILEGE. In order to exercise the conversion
privilege, Xxxxxx shall surrender the Note duly endorsed or assigned to the
Company or in blank, at any office or agency of the Company maintained for that
purpose, accompanied by written notice of conversion in the form provided on the
Note (or such other notice as is acceptable to the Company) at such office or
agency that Xxxxxx elects to convert such Note. Upon conversion the Company
shall pay interest accrued but unpaid on the Note surrendered for conversion
through the date of such conversion.
The Note shall be deemed to have been converted immediately prior to the close
of business on the day of surrender of the whole portion of the principal amount
thereof for conversion in accordance with the foregoing provisions, and at such
time the rights of Xxxxxx under the Note shall cease, and the Person or Persons
entitled to receive the Common Stock issuable upon conversion shall be treated
for all purposes as the record holder or holders of such Common Stock at such
time. As promptly as practicable on or after the conversion date, the Company
shall issue and shall deliver at such office or agency a certificate or
certificates for the number of duly authorized, validly issued, fully paid and
nonassessable shares of Common Stock issuable upon conversion, together with
payment in lieu of any fraction of a share, as provided in Section 11.3 hereof.
11.3 FRACTIONS OF SHARES. No fractional shares of Common Stock shall be
issued upon conversion of the Note. Instead of any fractional share of Common
Stock which would otherwise be issuable upon the conversion of the Note, the
Company shall pay a cash adjustment in respect of such fraction of a share of
Common Stock in an amount equal to the remaining amount which is not converted
by reason of this Section 11.3.
11.4 ADJUSTMENT OF CONVERSION PRICE.
(a) In case the Company shall pay or make a dividend or other distribution
on any class of capital stock of the Company in Common Stock, the Conversion
Price in effect at the opening of business on the day following the date fixed
for the determination of stockholders entitled to receive such dividend or other
distribution shall be reduced by multiplying such Conversion Price by a fraction
the numerator of which shall be the number of shares of Common Stock outstanding
at the close of business on the date fixed for such determination and the
denominator shall be the sum of such number of shares and the total number of
shares constituting such dividend or other distribution, such reduction to
become effective immediately after the opening of business on the day following
the date fixed for such determination. For the purposes of this Section
11.4(a), the number of shares of Common Stock at any time outstanding shall not
include shares held in the treasury of the Company but shall include shares
issuable in respect of scrip certificates issued in lieu of fractions of shares
of 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
Xxxxxx upon conversion) entitling them to subscribe for or purchase shares of
Common Stock at a price per share less than the current market price per share
of the Common Stock (determined as provided in Section 11.4(h) hereof) on the
date fixed for the determination of stockholders entitled to receive such
rights, options or warrants (other than pursuant to a dividend reinvestment
plan), the Conversion Price in effect at the opening of business on the day
following the date fixed for such determination shall be reduced to a price
(calculated to the nearest cent) determined by multiplying such Conversion Price
by a fraction the numerator of which shall be the number of shares of Common
Stock outstanding at the close of business on the date fixed for such
determination plus the number of shares of Common Stock which the aggregate
consideration received by the Company for the total number of additional shares
of Common Stock so offered for subscription or purchase would purchase at such
Conversion Price in effect immediately prior to the date fixed for such
determination and the denominator of which shall be the number of shares of
Common Stock outstanding at the close of business on the date fixed for such
determination plus the number of shares of Common Stock so offered for
subscription or purchase, such reduction to become effective immediately after
the opening of business on the day following the date fixed for such
determination. For purposes of calculating the Conversion Price in this Section
11.4(b), the number of shares of Common Stock outstanding immediately prior to
the date fixed for such determination of rights, options or warrants shall be
calculated as if all shares had been fully converted into shares of Common
Stock. Also, for the purposes of this Section 11.4(b), the number of shares of
Common Stock at any time outstanding shall not include shares held in the
treasury of the Company but shall include shares issuable in respect of scrip
certificates issued in lieu of fractions of shares of Common Stock. The Company
will not issue any rights, options or warrants in respect of shares of Common
Stock held in the treasury of the Company.
(c) In case outstanding shares of Common Stock shall be subdivided into a
greater number of shares of Common Stock, the Conversion Price in effect at
the opening of
business on the day following the day upon which such subdivision becomes
effective shall be proportionately reduced, and, conversely, in case
outstanding shares of Common Stock shall each be combined into a smaller
number of shares of Common Stock, the Conversion Price in effect at the
opening of business on the day following the day upon which such combination
becomes effective shall be proportionately increased, such reduction or
increase, as the case may be, to become effective immediately after the
opening of business on the day following the day upon which such subdivision
or combination becomes effective.
(d) In case the Company shall, by dividend or otherwise, distribute to all
holders of its Common Stock evidences of its indebtedness or assets (including
securities, but excluding any rights, options or warrants referred to in Section
11.4(b) hereof, any dividend or distribution paid exclusively in cash and any
dividend or distribution referred to in Section 11.4), the Conversion Price
shall be adjusted so that the same shall equal the price determined by
multiplying the Conversion Price in effect immediately prior to the close of
business on the date fixed for the determination of stockholders entitled to
receive such distribution by a fraction the numerator of which shall be the
current market price per share (determined as provided in Section 11.4(h)) of
the Common Stock on the date fixed for such determination less the then fair
market value (as determined by an independent majority of the Board of
Directors, whose determination shall be conclusive and described in a board
resolution) of the portion of the assets or evidences of indebtedness so
distributed applicable to one share of Common Stock and the denominator shall be
such current market price per share of the Common Stock, such adjustment to
become effective immediately prior to the opening of business on the day
following the date fixed for the determination of stockholders entitled to
receive such distribution. In any case in which this Section 11.4(d) is
applicable, Section 11.4(b) hereof shall not be applicable.
(e) In case the Company shall, by dividend or otherwise, distribute to all
holders of its Common Stock cash (excluding any cash that is distributed upon
a merger or consolidation to which Section 11.10 hereof applies or as part of
a distribution referred to in paragraph (d) of this Section 11.4) in an
aggregate amount that, combined together with (i) the aggregate amount of any
other distributions to all holders of its Common Stock made exclusively in
cash within the twelve (12) months preceding the date of payment of such
distribution and in respect of which no adjustment pursuant to this paragraph
(e) has been made and (ii) the aggregate of any cash plus the fair market
value (as determined by an independent majority of the Board of Directors,
whose determination shall be conclusive and described in a Board Resolution)
of consideration payable in respect of any tender offer by the Company or any
of its Subsidiaries for all or any portion of the Common Stock concluded
within the twelve (12) months preceding the date of payment of such
distribution and in respect of which no adjustment pursuant to paragraph (f)
of this Section 11.4 has been made, exceeds ten percent (10%) of the product
of the current market price per share of the Common Stock on the date for the
determination of holders of shares of Common Stock entitled to receive such
distribution multiplied by the number of shares of Common Stock outstanding
on such date, then, and in each such case, immediately after the close of
business on such date for determination, the Conversion Price shall be
reduced so that the same shall equal the price determined by multiplying the
Conversion Price in effect immediately prior to the close of
business on the date fixed for determination of the stockholders entitled to
receive such distribution by a fraction (A) the numerator of which shall be
equal to the current market price per share of the Common Stock (determined
as provided in paragraph (h) of this Section 11.4) on the date fixed for such
determination less an amount equal to the quotient of (x) the excess of such
combined amount over such ten percent (10%) and (y) the number of shares of
Common Stock outstanding on such date for determination and (B) the
denominator of which shall be equal to the current market price per share of
the Common Stock (determined as provided in paragraph (h) of this Section
11.4) on such date for determination.
(f) In case a tender offer made by the Company or any Subsidiary for all or
any portion of the Common Stock shall expire and such tender offer (as amended
upon the expiration thereof) shall require the payment to stockholders (based on
the acceptance (up to any maximum specified in the terms of the tender offer) of
Purchased Shares (as defined herein)) of an aggregate consideration having a
fair market value (as determined by an independent majority of the Board of
Directors, whose determination shall be conclusive and described in a board
resolution) that combined together with (i) the aggregate of the cash plus the
fair market value (as determined by an independent majority of the Board of
Directors, whose determination shall be conclusive and described in a board
resolution), as of the expiration of such tender offer, of consideration payable
in respect of any other tender offer, by the Company or any Subsidiary for all
or any portion of the Common Stock expiring within the twelve (12) months
preceding the expiration of such tender offer and in respect of which no
adjustment pursuant to this paragraph (f) has been made and (ii) the aggregate
amount of any distributions to all holders of the Common Stock made exclusively
in cash within twelve (12) months preceding the expiration of such tender offer
and in respect of which no adjustment pursuant to paragraph (e) of this Section
11.4 has been made, exceeds ten percent (10%) of the product of the current
market price per share of the Common Stock (determined as provided in paragraph
(h) of this Section 11.4) as of the last time (the "Expiration Time") tenders
could have been made pursuant to such tender offer (as it may be amended)
multiplied by the number of shares of Common Stock outstanding (including any
tendered shares) on the Expiration Time, then, and in each such case,
immediately prior to the opening of business on the day after the date of the
Expiration Time, the Conversion Price shall be adjusted so that the same shall
equal the price determined by multipying the Conversion Price in effect
immediately prior to the close of business on the date of the Expiration Time by
a fraction (A) the numerator of which shall be equal to (1) the product of (a)
the current market price per share of the Common Stock (determined as provided
in paragraph (h) of this Section 11.4) on the date of the Expiration Time and
(b) the number of shares of Common Stock outstanding (including any tendered
shares) on the Expiration Time, less (2) the amount of cash plus the fair market
value (determined as aforesaid) of the aggregate consideration payable to
stockholders based on the acceptance (up to any maximum specified in the terms
of the tender offer) of Purchased Shares, and (B) the denominator of which shall
be equal to the product of (1) the current market price per share of the Common
Stock (determined as provided in paragraph (h) of this Section 11.4) as of the
Expiration Time and (2) the number of shares of Common Stock outstanding
(including any tendered shares) as of the Expiration Time less the number of all
shares validly tendered and not withdrawn as of the Expiration Time (the shares
deemed so accepted up to any such
maximum, being referred to as the "Purchased Shares").
(g) The reclassification of Common Stock into securities including
securities other than Common Stock (other than any reclassification upon a
consolidation or merger to which Section 11.10 hereof applies) shall be deemed
to involve (i) a distribution of such securities other than Common Stock to all
holders of Common Stock (and the effective date of such reclassification shall
be deemed to be "the date fixed for the determination of stockholders entitled
to receive such distribution" and the "date fixed for such determination" within
the meaning of paragraph (d) of this Section 11.4), and (ii) a subdivision or
combination, as the case may be, of the number of shares of Common Stock
outstanding immediately prior to such reclassification into the number of shares
of Common Stock outstanding immediately thereafter (and the effective date of
such reclassification shall be deemed to be "the day upon which such subdivision
becomes effective" or "the day upon which such combination becomes effective,"
as the case may be, and "the day upon which such subdivision or combination
becomes effective" within the meaning of paragraph (c) of this Section 11.4).
(h) For the purpose of any computation under paragraphs (d), (e) and (f) of
this Section 11.4, the current market price per share of Common Stock on any
date shall be deemed to be the average of the daily Closing Prices for the five
(5) consecutive trading days selected by the Company commencing not more than
twenty (20) trading days before, and ending not later than, the earlier of the
day in question and the day before the "ex" date with respect to the issuance or
distribution requiring such computation. The "Closing Price" for each trading
day shall be the reported last sale price regular way or, in case no such
reported sale takes place on such day, the average of the reported closing bid
and asked prices regular way, in either case on the principal national
securities exchange on which the Common Stock is listed or admitted to trading
or, if not listed or admitted to trading on any national securities exchange, on
the National Association of Securities Dealers Automated Quotations system
("Nasdaq") National Market System ("Nasdaq National Market") or, if not listed
or admitted to trading on Nasdaq National Market, on Nasdaq, or, if the Common
Stock is not listed or admitted to trading on any national securities exchange
or Nasdaq National Market or quoted on Nasdaq, the average of the closing bid
and asked prices in the over-the-counter market as furnished by any New York
Stock Exchange member firm selected from time to time by the Company for that
purpose, or, if the Common Stock does not have any closing bid and asked prices
in the over-the-counter market during the relevant period of time, the fair
market value per share as determined by an independent majority of the Board of
Directors as of the most recent available month-end determined pursuant to GAAP.
For purposes of this paragraph, the term "'ex' date," when used with respect to
any issuance or distribution, shall mean the first date on which the Common
Stock trades regular way on such exchange or in such market without the right to
receive such issuance or distribution.
(i) No adjustment in the Conversion Price shall be required unless such
adjustment (plus any adjustments not previously made by reason of this paragraph
(i)) would require an increase or decrease of at least one percent (1%) in such
price; provided, however, that any adjustments which by reason of this paragraph
(i) are not required to be made shall be carried forward and taken into account
in any subsequent adjustment. All calculations under this paragraph (i) shall
be made to the nearest cent.
(j) The Company may make such reductions in the Conversion Price, in
addition to those required by paragraphs (a), (b), (c), (d), (e) and (f) of this
Section 11.4, as it considers to be advisable in order to avoid or diminish any
income tax to any holders of shares of Common Stock resulting from any dividend
or distribution of stock or issuance of rights or warrants to purchase or
subscribe for stock or from any event treated as such for federal income tax
purposes or for any other reasons. An independent majority of the Board of
Directors shall have the power to resolve any ambiguity or correct any error in
this Section 11.4 and its actions in so doing shall be final and conclusive.
11.5 NOTICE OF ADJUSTMENTS OF CONVERSION PRICE. Whenever the Conversion
Price is adjusted as herein provided:
(a) the Company shall compute the adjusted Conversion Price in accordance
with Section 11.4 hereof and shall prepare a certificate signed by the Chief
Financial Officer of the Company setting forth the adjusted Conversion Price and
showing in reasonable detail the facts upon which such adjustment is based, and
such certificate shall forthwith be filed at the offices of the Company.
(b) a notice stating that the Conversion Price has been adjusted and setting
forth the adjusted Conversion Price shall forthwith be required, and as soon as
practicable after it is required, such notice shall be mailed by the Company to
the Holder in accordance with the terms of Section 14.2 herein.
11.6 NOTICE OF CERTAIN CORPORATE ACTION. In case:
(a) the Company shall declare a dividend (or any other distribution) on its
Common Stock payable otherwise than in cash out of its earned surplus; or
(b) the Company shall authorize the granting to the holders of its Common
Stock of rights or warrants to subscribe for or purchase any shares of capital
stock of any class or of any other rights; or
(c) of any reclassification of the Common Stock of the Company (other than a
subdivision or combination of its outstanding shares of Common Stock), or of any
consolidation, merger or share exchange to which the Company is a party and for
which approval of any stockholders of the Company is required, or of the sale or
transfer of all or substantially all of the assets of the Company; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then the Company shall cause to be filed at the offices of the Company, and
shall cause to be mailed to the Holder at its last addresses as it shall appear
in the Note Register, at least twenty (20) days (or ten (10) days in any case
specified in clause (a) or (b) of this Section 11.6) prior to the applicable
record or effective date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the purpose of such dividend,
distribution, rights or warrants, or, if a record is not to be taken, the
date as of which the holders of Common Stock of record to be entitled to such
dividend, distribution, rights or warrants are to be determined, or (y) the
date on which such reclassification, consolidation, merger, share exchange,
sale, transfer, dissolution, liquidation or winding up is expected to become
effective, and the date as of which it is expected that holders of Common
Stock of record shall be entitled to exchange their shares of Common Stock
for securities, cash or other property deliverable upon such
reclassification, consolidation, merger, share exchange, sale, transfer,
dissolution, liquidation or winding up. Neither the failure to give such
notice nor any defect therein shall affect the legality or validity of the
proceedings described in clauses (a) through (d) of this Section11.6.
11.7 COMPANY TO RESERVE COMMON STOCK. The Company shall at all times reserve
and keep available out of its authorized but unissued Common Stock, for the
purpose of effecting the conversion of the Note or the Credit Facility Note, the
full number of shares of Common Stock then issuable upon the conversion of the
Note or the Credit Facility Note.
11.8 TAXES ON CONVERSIONS. The Company will pay any and all taxes that may
be payable in respect of the issuance or delivery of shares of Common Stock on
conversion of the Note pursuant hereto or the Credit Facility Note pursuant to
the Credit Agreement. The Company shall not, however, be required to pay any
tax which may be payable in respect of any transfer involved in the issuance and
delivery of shares of Common Stock in a name other than that of Xxxxxx and no
such issuance or delivery shall be made unless and until the Person requesting
such issuance has paid to the Company the amount of any such tax, or has
established to the satisfaction of the Company that such tax has been paid.
11.9 COVENANT AS TO COMMON STOCK. The Company covenants that all shares of
Common Stock which may be issued upon conversion of the Note or the Credit
Facility Note will upon issuance be fully paid and nonassessable and, except as
provided in Section 11.8 hereof, the Company will pay all taxes, liens and
charges with respect to the issue thereof.
11.10 PROVISIONS IN CASE OF CONSOLIDATION, MERGER OR SALE OF ASSETS. In case
of any Change of Control of the Company, the Company will notify Xxxxxx at least
thirty (30) days prior to the closing of the transaction that will effect the
Change of Control, and Xxxxxx may convert the Note in accordance with Section 11
hereof prior to the transaction or declare an Event of Default and accelerate
the Note and terminate this Agreement in accordance with Section 11 hereof.
11.11 TRANSFER AND EXCHANGE OF NOTE. The Note may be freely transferred or
assigned by Xxxxxx 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 Xxxxxx and, upon surrender of the
Note at the Company's office by Xxxxxx, the Company will deliver in exchange
therefor, without expense to Xxxxxx, except as set forth below, one Note for
the same aggregate principal amount as the then unpaid principal amount of
the Note so surrendered, provided such Note shall be in the amount of the
full principal amount of the
Note and there shall be no right to divide the Note, dated as of the date to
which interest has been paid on the Note so surrendered or, if such surrender
is prior to the payment of any interest thereon, then dated as of the date of
issue, registered in the name of such Person as may be designated by Xxxxxx,
and otherwise of the same form and tenor as the Note so surrendered for
exchange. The Company may require the payment of a sum sufficient to cover
any stamp tax or governmental charge imposed upon such exchange or transfer.
11.12 LOSS, THEFT, MUTILATION OR DESTRUCTION OF NOTE. Upon receipt of
evidence satisfactory to the Company of the loss, theft, mutilation or
destruction of the Note, the Company will make and deliver without expense to
Xxxxxx thereof, a new Note, of like tenor, in lieu of such lost, stolen,
mutilated or destroyed Note.
11.13 EXPENSES, STAMP TAX INDEMNITY. The Company agrees to pay duplicating
and printing costs and charges for shipping the Note, adequately insured to
Xxxxxx'x home office or at such other place as Xxxxxx may designate, and all
reasonable expenses of Xxxxxx (including, without limitation, the reasonable
fees and expenses of any financial advisor to Xxxxxx) relating to any proposed
or actual amendment, waivers or consents pursuant to the provisions hereof,
including, without limitation, any proposed or actual amendments, waivers, or
consents resulting from any work-out, re-negotiations or restructuring relating
to the performance by the Company of its obligations under this Agreement and
the Note. The Company also agrees that it will pay and hold Xxxxxx harmless
against any and all liabilities with respect to stamp and other taxes, if any,
which may be payable or which may be determined to be payable in connection with
the execution and delivery of this Agreement or the Note, whether or not the
Note is then outstanding. The Company agrees to protect and indemnify Xxxxxx
against any liability for any and all brokerage fees and commissions payable or
claimed to be payable to any Person (other than any Person engaged by a
Purchaser) in connection with the transactions contemplated by this Agreement.
11.14 CANCELLATION OF CONVERTED NOTE. The Note delivered for conversion shall
be canceled by or at the direction of the Company.
12. RIGHT OF FIRST OFFER.
12.1 THE RIGHT OF FIRST OFFER. Subject to the terms and conditions specified
in this Section 12, the Company covenants not to sell or issue any New
Securities (as defined herein) without complying with the provisions of this
Section 12.
12.2 GRANT. If the Company proposes to sell or issue any New Securities to
any Person, the Company hereby grants to Xxxxxx a right of first offer to
purchase a pro rata share of New Securities that the Company may, from time to
time, propose to sell and issue. For purposes of this Section 12, Xxxxxx'x pro
rata share of New Securities is the ratio of the number of shares of Common
Stock owned by Xxxxxx (assuming full conversion of the Note and the Credit
Facility Note if issued and outstanding) immediately prior to the issuance of
New Securities to the total number of shares of Common Stock outstanding
immediately prior to the issuance of New Securities (assuming full conversion of
all convertible securities).
12.3 DEFINITION OF NEW SECURITIES. "New Securities" shall mean any capital
stock (including Common Stock) of the Company whether now authorized or not, and
rights, options or warrants to purchase capital stock of the Company, and
securities of any type whatsoever that are, or may become, convertible into
capital stock of the Company; provided, however, that the term "New Securities"
does not include (a) shares of Common Stock issued upon conversion of the Note
or the Credit Facility Note, (b)shares of Common Stock (or options therefor)
issued or sold to employees, directors, consultants or advisors of the Company
for the primary purpose of soliciting or retaining their services, provided each
such person executes an agreement, in substantially the form as approved by the
Board of Directors, (c) securities issued pursuant to the acquisition of another
Person or business segment of any such Person by the Company by merger, purchase
of substantially all the assets or other reorganization whereby the Company will
own more than fifty percent (50%) of the voting power of such business entity or
business segment, (d)any borrowings, direct or indirect, from financial
institutions or other Persons by the Company, whether or not presently
authorized, including any type of loan or payment evidenced by any type of debt
instrument, provided such borrowings do not have any equity features including
warrants, options or other rights to purchase capital stock and are not
convertible into capital stock of the Company, (e)securities issued to vendors
or customers or to other persons in similar commercial situations with the
Company if such issuance is approved by the Board of Directors, (f)securities
issued in connection with any stock split, stock dividend or recapitalization of
the Company in which all holders of Common Stock are entitled to receive their
proportionate share of such issuance, and (g)any right, option or warrant to
acquire any security convertible into the securities exempted from the
definition of New Securities pursuant to clauses (a) through f) above.
12.4 EXERCISE OF RIGHT OF FIRST OFFER. If the Company proposes to issue New
Securities, the Company shall give written notice to Xxxxxx stating (a) its bona
fide intention to offer or issue New Securities, (b) the number of such New
Securities to be offered, (c) the price and general terms upon which it proposes
to offer such New Securities, and (d) the identity of the Persons or classes of
Persons to whom such New Securities are proposed to be issued. Within twenty
(20) calendar days after receipt of such notice, Abbott may elect to purchase or
obtain, at the price and on the terms specified in the notice, up to its pro
rata share of such New Securities, as such pro rata share is calculated pursuant
to Section 12.2 hereof, in the event the Company proposes to issue such New
Securities to Persons, by giving written notice to the Company and stating
therein the quantity of New Securities to be purchased. Abbott shall retain its
right of first offer pursuant to Section 12 hereof until (i) this Agreement
terminates or (ii) upon a Change of Control described in Section 11.10 hereof
and shall not be affected in any way by any previous refusals to exercise its
right of first offer and to purchase any New Securities.
12.5 TERMINATION OF RIGHT OF FIRST OFFER. If Abbott does not fully
exercise its right to purchase or obtain all such New Securities that Abbott
has the right to purchase or obtain pursuant to Section 12.4 hereof, the
Company may, during the one hundred twenty (120) day period following the
expiration of the period provided in Section 12.4 hereof, offer the remaining
unsubscribed New Securities to the Persons or classes of Person specified in the
notice sent to Abbott pursuant to Section 12.4 hereof, at a price not less
than that, and upon terms no more favorable to the offeree than those,
specified in such notice. If the Company does not enter into an agreement
for the sale of the New Securities within such period, or if such agreement
is not consummated within one hundred twenty (120) days of the execution
thereof, the right provided hereunder shall be deemed to be revived and such
New Securities shall not be offered unless first reoffered to Abbott in
accordance herewith.
13. INDEMNIFICATION.
13.1 INDEMNIFICATION BY THE COMPANY.
(a) The Company agrees to defend and indemnify Abbott, its Subsidiaries and
their respective Affiliates, directors, officers, employees and shareholders,
and their respective successors and assigns (collectively, the "Abbott
Indemnitees"), against and hold each of them harmless from any and all losses,
liabilities, taxes, claims, suits, proceedings, demands, judgments, damages,
expenses and costs, including, without limitation, reasonable counsel fees,
costs and expenses incurred in the investigation, defense or settlement of any
claims covered by this indemnity (in this Section 13 collectively, the
"Indemnifiable Damages") which any such indemnified person may suffer or incur
by reason of (i) the inaccuracy or breach of any of the representations,
warranties and covenants of the Company contained in this Agreement or any
documents, certificate or agreement delivered pursuant hereto; or (ii) any claim
by any Person under any provision of any federal or state securities law
relating to any transaction, event, act or omission of or by the Company
occurring before or after the Closing Date; provided, however, that the total
indemnity shall not exceed the consideration received by the Company. Nothing
herein shall limit in any way Xxxxxx'x remedies in the event of breach by the
Company of any of its covenants or agreements hereunder which are not also a
representation or warranty or for willful fraud or intentionally deceptive
material misrepresentation or omission by the Company in connection herewith or
with the transactions contemplated hereby.
(b) Without limiting the generality of the foregoing, with respect to the
measurement of Indemnifiable Damages, Abbott (including its Subsidiaries and
their respective Affiliates, directors, officers, employees and shareholders)
and the Company and the Affiliates of any of them, shall have the right to be
put in the same financial position as they would have been in had each of the
representations, warranties and covenants of the Company been true and accurate
or the same said parties had not breached any such covenants or had any of the
events, claims or liabilities referred to in Section 13.1(a) not occurred or
been made or incurred.
(c) Any indemnitee under this Agreement may not seek recovery under the
indemnities set forth herein unless and until the Indemnifiable Damages of such
party are greater than Twenty-Five Thousand Dollars ($25,000) measured on an
aggregate basis for all indemnitees, at which point such indemnity shall apply
to all Indemnifiable Damages.
13.2 INDEMNIFICATION BY ABBOTT. After the Closing Date, Abbott shall, as to
those representations, warranties, covenants and agreements which are herein
made or agreed to by Abbott, indemnify and hold harmless the Company's officers
and directors and in respect of:
(a) any damage, deficiency, losses or costs incurred by the Company
resulting from any material misrepresentation or breach of warranty or any
non-fulfillment of any covenant or agreement on the part of Abbott under this
Agreement;
(b) any claim by any person under any provision of any federal or state
securities laws relating to any event, act or omission of or by Abbott in
connection with any tender offer by Abbott; and
(c) any claim, action, suit, proceeding, demand, judgment, assessment, cost
and expense, including reasonable counsel fees, incident to the foregoing;
provided that the total indemnity shall not exceed * .
Abbott shall reimburse the Company for any liabilities, damages, deficiencies,
claims, actions, suits, proceedings, demands, judgments, assessments, costs and
expenses to which this Section 13.2 relates only if a claim for indemnification
is made by the Company within the period ending at * .
13.3 INDEMNIFICATION PROCEDURE. A party seeking indemnification (the
"Indemnitee") shall use its commercially reasonable best efforts to minimize any
liabilities, damages, deficiencies, claims, judgments, assessments, costs and
expenses in respect of which indemnity may be sought under this Agreement. The
Indemnitee shall give prompt written notice to the party from whom
indemnification is sought (the "Indemnitor") of the assertion of a claim for
indemnification; provided, however, that the Indemnitee's failure to notify the
Indemnitor shall not excuse the Indemnitor's obligation to indemnify the
Indemnitee except to the extent that such failure prejudices the Indemnitor's
defense of any such claim. No such notice of assertion of a claim shall satisfy
the requirements of this Section 13 unless it describes in reasonable detail and
in good faith the facts and circumstances upon which the asserted claim for
indemnification is based. If any action or proceeding shall be brought in
connection with any liability or claim to be indemnified hereunder, the
Indemnitee shall provide the Indemnitor twenty (20) calendar days to decide
whether to defend such liability or claim. During such period, the Indemnitee
shall take all necessary steps to protect the interests of itself and the
Indemnitor, including the filing of any necessary responsive pleadings, the
seeking of emergency relief or other action necessary to maintain the status
quo, subject to reimbursement from the Indemnitor of its expenses in doing so.
The Indemnitor shall (with, if necessary, reservation of rights) defend such
action or proceeding at its expense, using counsel selected by the insurance
company insuring against any such claim and undertaking to defend such claim, or
by other counsel selected by it and approved by the Indemnitee, which approval
shall not be unreasonably withheld or delayed. The Indemnitor shall keep the
Indemnitee fully apprised at all times of the status of the defense and shall
consult with the Indemnitee prior to the settlement of any indemnified matter.
Idemnitee agrees to use reasonable efforts to cooperate with Indemnitor in
connection with its defense of indemnifiable claims. In the event the
Indemnitee has a claim or claims against any third party growing out of or
connected with the indemnified matter, then upon receipt of indemnification, the
Indemnitee shall fully assign to the Indemnitor the entire claim or claims to
the extent of the indemnification actually paid by the Indemnitor and the
Indemnitor shall thereupon be subrogated with respect to such claim or claims of
the Indemnitee.
14. MISCELLANEOUS.
14.1 POWERS AND RIGHTS NOT WAIVED; REMEDIES CUMULATIVE. No delay or failure
on the part of Abbott in the exercise of any power or right shall operate as a
waiver thereof; nor shall any single or partial exercise of the same preclude
any other or further exercise thereof, or the exercise of any other power or
right, and the rights and remedies of Abbott are cumulative to, and are not
exclusive of, any rights or remedies Abbott would otherwise have.
14.2 NOTICE. Except as otherwise expressly provided herein, any notice,
consent or document required or permitted hereunder shall be given in writing
and it or any certificates or other documents delivered hereunder shall be
deemed effectively given or delivered (as the case may be) upon personal
delivery (professional courier permissible) or when mailed by receipted United
States certified mail delivery, or five (5) business days after deposit in the
United States mail. Such certificates, documents or notice may be personally
delivered to an authorized representative of the Company or Abbott (as the case
may be) at any address where such authorized representative is present and
otherwise shall be sent to the following address:
If to the Company: Micro Therapeutics, Inc.
0000 Xxxxx Xxxxxxx #X
Xxx Xxxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxxx
Telecopy No.: (000) 000-0000
With a copy to: Xxxxxxxxx Xxxxx Xxxxxxx & Xxxxx
000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx Xxxxx, XX 00000
Attention: Xxxxx Xxxxxxxx
Telecopy No.: (000) 000-0000
If to Xxxxxx: Xxxxxx Laboratories
D-960, AP30
000 Xxxxxx Xxxx Xxxx
Xxxxxx Xxxx, XX 00000-0000
Attention: President, Hospital Products Division
Telecopy No.: (000) 000-0000
With a copy to: Xxxxxx Laboratories
Legal Division
D-322, AP6D
000 Xxxxxx Xxxx Xxxx
Xxxxxx Xxxx, XX 00000-0000
Attn: Divisional Vice President,
Domestic Legal Operations
Telecopy No.: (000) 000-0000
14.3 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure
to the benefit of the Company and its successors and assigns and shall be
binding upon and inure to the benefit of Abbott and its successors and assigns;
provided, however, that neither the Company nor Abbott shall assign this
Agreement or any of its rights, duties or obligations hereunder without the
prior written consent of the other party which consent shall not be unreasonably
withheld, and provided further, Abbott may assign its rights hereunder after
July31, 1999 without the Company's prior written consent.
14.4 SURVIVAL OF COVENANTS AND REPRESENTATIONS. All covenants,
representations and warranties made by the Company herein and in any
certificates delivered pursuant hereto, whether or not in connection with the
Closing Date, shall survive the closing and the delivery of this Agreement and
the Note.
14.5 SEVERABILITY. Should any part of this Agreement for any reason be
declared invalid or unenforceable, such decision shall not affect the validity
or enforceability of any remaining portion, which remaining portion shall remain
in force and effect as if this Agreement had been executed with the invalid or
unenforceable portion thereof eliminated and it is hereby declared the intention
of the parties hereto that they would have executed the remaining portion of
this Agreement without including therein any such part, parts or portion which
may, for any reason, be hereafter declared invalid or unenforceable.
14.6 WAIVER OF CONDITIONS. If on the Closing Date, either party hereto fails
to fulfill each of the conditions specified in Section 8 hereof, the other party
may thereupon elect to be relieved of all further obligations under this
Agreement. Without limiting the foregoing, if the conditions specified in
Section 8 have not been fulfilled, the other party may waive compliance by such
party with any such condition to such extent as such party may in its sole
discretion determine. Nothing in this Section 14.6 shall operate to relieve
either party of any obligations hereunder or to waive any of the other party's
rights against such party.
14.7 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
14.8 GOVERNING LAW. This Agreement and the Note issued and sold hereunder
shall be governed by and construed in accordance with Delaware law, without
regard to the conflict of laws provisions thereof.
14.9 CAPTIONS. The descriptive headings of the various sections or parts of
this Agreement are for convenience only and shall not affect the meaning or
construction of any of the provisions hereof.
14.10 DISPUTE RESOLUTION. Disputes shall be resolved as provided in Exhibit F
hereto.
IN WITNESS WHEREOF, the Company and Abbott by their duly authorized officers,
have each caused this Agreement to be executed as of the date first written
above.
XXXXXX:
XXXXXX LABORATORIES
By:
Title:
COMPANY:
MICRO THERAPEUTICS, INC.
By:
Title:
EXHIBIT A
FORM OF 5% CONVERTIBLE SUBORDINATED NOTE
MICRO THERAPEUTICS, INC.
5% Convertible Subordinated Note, due August 19, 0000
Xx. XXX-0 Xxx Xxxxxxxx, Xxxxxxxxxx
$5,000,000 August 19, 1998
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 Xxxxxx Laboratories, an Illinois corporation ("Abbott"), or
its registered assigns (the "Holder"), the principal sum of Five Million Dollars
($5,000,000) on August 19, 2003 (the "Maturity"), and to pay interest (i) on the
unpaid principal balance thereof from the date of this 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 October 31, 1998) until such unpaid balance shall become due and
payable (whether at Maturity, or by declaration, acceleration or otherwise) and
(ii) on each overdue payment of principal or any overdue payment of interest, at
a rate per annum equal to ten percent (10%).
The interest and principal payments payable with respect to this Note, on any
Interest Payment Date, at Maturity or by declaration, acceleration or otherwise,
pursuant to the Note Agreement (as defined herein), shall be paid to Abbott 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 Abbott in accordance with the provisions of
the Note Agreement.
This Note is the sole issue of a 5% Convertible Subordinated Note due August 19,
2003 of the Company issued in an aggregate principal amount of Five Million
Dollars ($5,000,000)
pursuant to the Convertible Subordinated Note Agreement, dated August 12,
1998, by and between the Company and Abbott (the "Note Agreement"). The
Holder of this Note is entitled to the benefits of the Note Agreement, and
may enforce the Note Agreement and exercise the remedies provided for thereby
or otherwise available in respect thereof.
This Note may be transferred or assigned by Abbott as provided in the Note
Agreement. As provided in the Note Agreement, upon surrender of this Note
for registration of transfer, duly endorsed, or accompanied by a written
instrument of transfer duly executed by Abbott or Xxxxxx'x attorney duly
authorized in writing, a new Note for a like aggregate principal amount and
otherwise of similar tenor, will be issued to, and registered in the name of,
the transferee. Prior to due presentment for registration of transfer, the
Company may treat the person in whose name this 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.
In the case of an Event of Default (as defined in the Note Agreement), the
principal of this Note in certain circumstances shall become due and payable and
in other circumstances may be declared and become due and payable in the manner
and with the effect provided in the Note Agreement.
This Note is subject to conversion into Common Stock pursuant to the terms and
conditions of the Note Agreement and conversion shall be evidenced by a Notice
of Conversion as attached hereto. This Note is not subject to prepayment or
redemption by the Company prior to its expressed Maturity.
The indebtedness evidenced by this Note is, to the extent provided in the Note
Agreement, subordinate and subject in right of payment to the prior payment in
full of all Senior Indebtedness (as defined in the Note Agreement), and this
Note is issued subject to the provisions of the Note Agreement with respect
thereto. Each Holder of this Note, by accepting the same, agrees to and shall
be bound by such provisions.
No reference herein to the Note Agreement and no provision of this Note or of
the Note 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 Note at the times, place and rate, and in the coin or currency,
herein prescribed or to convert this Note as provided in the Note Agreement.
terms used in this Note which are defined in the Note Agreement shall have the
meanings assigned to them in the Note Agreement.
This Note and the Note Agreement are governed by and construed in accordance
with the law of the State of Delaware.
IN WITNESS WHEREOF, the Company caused this instrument to be duly executed under
its corporate seal.
Dated: August 19, 1998
MICRO THERAPEUTICS, INC.
By:
Its:
ATTEST:
By:
Its:
NOTICE OF CONVERSION
The undersigned Holder of this Note hereby irrevocably exercises the option to
convert the principal amount of this Note, into shares of Common Stock in
accordance with the terms of the Note Agreement, and directs that the shares
issuable and deliverable upon such conversion, together with any check in
payment for fractional shares and any Note representing any unconverted
principal amount hereof, be issued and delivered to the undersigned unless a
different name has been indicated below. If shares or the Note 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 accompanies this Note.
Social Security or other
Taxpayer Identification Number
Dated: __________________
Signature
If shares or the Note are to be registered in the name of a Person other than
the Holder, please print such Person's name and address:
Name
Street Address
City, State and Zip Code
EXHIBIT E
DISCLOSURE SCHEDULES
OF
MICRO THERAPEUTICS, INC. (THE "COMPANY")
TO
CONVERTIBLE SUBORDINATED NOTE AGREEMENT
BY AND BETWEEN
ABBOTT CORPORATION
AND
THE COMPANY
DATED AS OF AUGUST 12, 1998
SCHEDULE 3.1
SUBSIDIARIES
The Company has no subsidiaries.
SCHEDULE 3.2
AUTHORITY
The Company is duly licensed and qualified to do business in each
jurisdiction in which its business is transacted. The Company is currently
responding to inquiries made by the State of Illinois as part of the
registration process in that state.
SCHEDULE 3.4
EQUITY INVESTMENTS
(i) The Company owns 1,002 shares of Cardiovascular Dynamics, Inc. common
stock, which is an immaterial percentage of its currently outstanding
common shares.
(ii) The Company owns 850,000 shares of Genyx Medical, Inc. common stock
which is approximately 27% of its currently outstanding common shares.
(iii) The Company owns 2,000,000 shares of Enteric Medical Technologies,
Inc. common stock which is approximately 46.5% of its currently
outstanding common shares.
For all the investments disclosed above, the Company's cost basis, and the value
at which such investments are carried on the Company's balance sheet in
conformity with generally accepted principles, are not material.
SCHEDULE 3.8
BUSINESS CHANGES
(a) None.
(b) (i) As of July 31, 1998, under the Company's 1993 and 1996
Restricted Stock Purchase, Incentive Stock Option and Non-qualified Stock
Option Plans (collectively, the "Plans"), there are currently outstanding
incentive and non-qualified stock options to purchase a total of 1,140,769
shares of the Company's common stock, of which 294,452 shares are vested. In
addition, 330,873 shares of common stock are available for issuance upon
exercise of options to be granted under the Plans.
(ii) The Company issues shares of its common stock from time to
time under its Employee Stock Purchase Plan as adopted under Section 423 of
the Internal Revenue Code. The last issue date was June 30, 1998 at which
time 13,495 shares were issued.
(iii) The Company has made a Restricted Stock commitment for 2,000
shares to a consultant pending completion of certain requirements as of
August 31, 1998.
(c) (i) The Company intends to make expenditures to various departments
and individuals within the University of California, Los Angeles, School of
Medicine ("UCLA"), averaging approximately $30,000 per month, through December
31, 1998. In addition, the Company intends to make an unrestricted gift to the
Department of Radiological Sciences at UCLA, up to a maximum of $150,000, in
support of new laboratory facilities. Of such amount, $50,000 has been remitted
through July 31, 1998.
(ii) On July 31, 1998, a signed copy of a building lease was delivered
by the Company to the building's landlord, New Goodyear, LTD. Beginning on
October 1, 1998 and expiring September 30, 2003, the five year, triple net lease
for approximately 43,538 square feet has a monthly rental of $38,313.14 plus
common area charges, subject to cost of living increases. Additionally, there
are two options to extend the lease term for three years at an increased rent
based on a cost of living index. The facility being leased is located in
Irvine, CA and the Company intends to relocate its operations from its current
facilities in San Clemente, CA to Irvine during the fourth quarter of 1998.
Under the terms of the lease, the landlord has agreed to provide $150,000 of
tenant improvements. The Company expects the total cost of such tenant
improvements to be greater.
(iii) The Company has entered into a consulting agreement with
Xxxxxxxx Associates to provide architectural services related to the new
building. Under the terms of the Consulting Agreement, fees for such services
are not to exceed $61,000.
(iv) The Company has entered into a consulting agreement with
Healthcare Documentation & Development, Inc. ("HDD") The consultant is to
provide design, development and production of training modules for an estimated
fee of $108,000, to be paid in three equal installments of $36,000.
(d) In conjunction with the signing of the building lease for the facility
in Irvine, CA (refer to Disclosure Schedule 3.8 (c)), the Company was required
to make two payments, each in the amount of $38,313.14, representing a security
deposit and the October 1998 rent.
(e) None.
(f) None.
(g) The Company is considering entering into a $1 million bank credit
facility, the proceeds of which would be used primarily for tenant improvements
for the new facility (see disclosure on Disclosure Schedule 3.8 (c) ) and other
potential future capital expenditures.
(h) None.
(i) See disclosure on Disclosure Schedule 3.8 (c) and Disclosure Schedule
3.8(k).
(j) See disclosure on Disclosure Schedule 3.8 (c) and Disclosure Schedule
3.8(k).
(k) On July 8, 1998, the Company entered into a license agreement with
Enteric Medical Technologies, Inc. ("Enteric"), pursuant to which the Company
has granted an exclusive, worldwide license to Enteric to utilize certain of the
Company's patent rights and rights under certain of the Company's patent
applications relating to the design, manufacture and method of use of
proprietary biomaterials and micro catheters, to commercially develop products
utilizing such rights in connection with applications for gastrointestinal tract
bulking, embolization or implantion procedures. The included applications for
gastrointestinal tract bulking, embolization or implantation procedures shall
mean procedures performed by access using endoscopic, open surgical,
laparoscopic surgery, percutaneous or colonscopic as well as other developed
procedures, but does not include access through the vascular, gynocological or
urological systems all of which are excluded from the "Licensed Field," as
defined in the license agreement. In connection with such license agreement, the
Company acquired 2 million shares of Enteric common stock.
(m) None.
(n) None.
(o) None
SCHEDULE 3.9
INDEBTEDNESS
On November 17, 1997, the Company entered into a Convertible Subordinated
Note Agreement with Guidant Corporation, under which the Company borrowed $5
million. The principal amount of the note is due in five years, and is
convertible, at any time, at the option of the note holder into shares of the
Company's Common Stock at a conversion price of $10.25 per share. The note
bears interest at 5% per annum, which the Company has determined is lower that
interest rates typically associated with similar debt instruments. Accordingly,
as required by generally accepted accounting principals, the Company recorded a
discount on the note of $974,328, resulting in an imputed interest over the term
of the note of 10%. Such discount had an unamortized balance of $861,149 at
July 31, 1998. Interest payments are due quarterly in arrears and commenced
January 31, 1998.
On May 28, 1998, the Company received $2.5 million from Guidant Corporation
pursuant to the achievement by the Company of a specified milestone defined in
the Convertible Subordinated Note Agreement. Of this amount, $2 million is in
the form of debt, bearing interest of 8% payable quarterly, with a maturity date
of October 31, 2002. The remaining $500,000 was used to purchase 47,637 shares
of the Company's common stock.
SCHEDULE 3.15
PROPRIETARY RIGHTS
(a) (i) Attached hereto as Schedule 3.15(a)(i) is a list of all of the
Company's patents, patent applications, trademarks, trade names, service marks
and copyrights owned or used by the Company or in which it has any rights or
licenses, except for software used by the Company and generally available on the
commercial
market, and all applications therefor.
(ii) The Company has entered into an Employee Confidential Information
Agreement with each of its employees, a form of which is attached hereto as
Schedule 3.15(a)(ii).
(iii) Pursuant to the terms of an Agreement dated June 21, 1993,
by and between the Company and Xxxxxx Xxxxx, M.D., a consultant of the Company,
the Company has acquired the rights, which include patent rights, to certain
technology relating to Valved Tip Angiographic Catheters and Thrombolytic Brush
Catheters.
(iv) Pursuant to the terms of the following Consulting Agreements, the
Consultant (as defined therein), has agreed to assign to the Company all right,
title and interest that the Consultant may have or acquire (a) in and to any
Proprietary Information (as defined therein), or (b) if not defined therein, in
and to any ideas inventions, improvements, suggestions or copyrightable
materials relating to the Consultant's work under the applicable agreement:
(1) Consulting Agreement dated November 1, 1994 and expiring June 1,
2001, between the Company and Xxxxx Xxxxxx, M.D.
(2) Consulting Agreement dated August 5, 1998 and expiring August 4,
1999 between the Company and Xxxxx Xxxxxxx
(3) Consulting Agreement dated April 30, 1996 and expiring May 1,
1999, between the Company and Xxxx Xxxxxxxx, M.D.
(4) Consulting Agreement dated August 1, 1998 and expiring July 31,
2001 between the Company and Xxxxx Xxxxxxx, M.D.
(5) Consulting Agreement dated June 2, 1998 and expiring June 2,
1999, between the Company and Xxxx Xxxxx
(6) Consulting Agreement dated September 1, 1997 and expiring August
31, 1998, between the Company and Xxxxxx Xxxxx, M.D.
(7) Consulting Agreement dated January 1, 1998 and expiring December
31, 1999, between the Company and Xxxxxx Xxxxxxxx, M.D.
(8) Consulting Agreement dated October 9, 1996 and expiring October
8, 1999, between the Company and Xxxx Xxxxxxxx, M.D.
(9) Consulting Agreement dated January 1, 1998 and expiring December
31, 1999, between the Company and Xxxx Perl, II, M.D.
(10) Consulting Agreement dated January 7, 1998 and expiring August
31, 2000, between the Company and Xxxxxx Xxxxxxxxx, M.D.
(11) Consulting Agreement dated July 7, 1998 and expiring July 6,
1999, between the Company and Xxxxxxx Xxxxx
(12) Consulting Agreement dated July 20, 1998, between the Company and
Xxxx Xxxx /Healthcare Documentation & Development
(13) Consulting Agreement dated March 1, 1998 and expiring February
28, 2000, between the Company and Xxxx Xxxxxxxxx, M.D.
(14) Consulting Agreement dated January 1, 1997 and expiring September
30, 1999, between the Company and Xxxxxx X. Xxxx, M.D.
(15) Consulting Agreement dated January 1, 1998 and expiring January
1, 2000, between the Company and Xxxx Xxxxx, M.D.
(16) Consulting Agreement dated April 1, 1998 and expiring March 31,
2000, between the Company and Xxxxxxxxx Xxxxxxxxxx, M.D.
(17) Consulting Agreement dated December 1, 1997 and expiring November
30, 1998, between the Company and Xxx Xxxxxxxx
(18) Consulting Agreement dated June 5, 1998 and expiring September 2,
1998, between the Company and Xxxxx Xxxxxxx/Healthcare
Documentation and Development
(19) Consulting Agreement dated September 1, 1996 and expiring August
31, 1999, between the Company and Xxx X. Xxxxxxx, M.D.
(20) Consulting Agreement dated February 5, 1998 and expiring March 1,
2000, between the Company and Xxxxxxx Xxxxx, M.D.
(21) Consulting Agreement dated September 1, 1996 and expiring August
31, 1998, between the Company and Xxxx Xxxxx, M.D.
(22) Consulting Agreement dated July 1, 1996 and expiring June 30,
1999, between the Company and Xxxxxx Xxxxxxx, M.D.
SCHEDULE 3.19
EMPLOYEE PLANS AND RELATIONS
(a) (i) Employment Agreement dated December 1, 1997, between the Company
and Xxxxxx X. Xxxxxxx, the Company's Chief Financial Officer, providing for a
severance payment of $150,000 in the event there occurs a change of control of
the Company prior to December 1, 1998 and his employment is terminated within
six months of such change in control.
(ii) Employment Agreement dated March 19, 1998, between the Company
and Xxxx X. Xxxx, the Company's Vice President, Research and Development,
providing for a severance payment of $150,000 in the event there occurs a change
of control of the Company prior to April 6, 1999 and his employment is
terminated as a result of such change in control.
(b) None.
MICRO THERAPEUTICS, INC.
INTELLECTUAL PROPERTY
ATTORNEYS
) Xxxxxx X. Xxxxxxxxx Infusion
Xxxxxxxxx Law Office Advanced Infusion
0000 Xxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxxx, XX 00000
(000) 000-0000 Phone
(000) 000-0000 Fax
) Xxxxxx Swiss Micro Catheters/Access
Burns, Doane, Xxxxxxx & Xxxxxx Vascular Embolization
0000 Xxxx Xxxx Xxxx
Xxxxx Xxxx, XX 00000
(000) 000-0000 Phone
(000) 000-0000 Fax
C) K. Xxxxx Xxxxxxxx, Esq. Stents
Xxxxxxxx & Fish Coatings
0000 Xxxxxxx Xxx
Xxx Xxxxxxx, XX 00000
(000) 000-0000 Phone
(000) 000-0000 Phone
(000) 000-0000 Fax
D) Xxxxxx X. Xxxxxxxxxx Trademarks
Xxxxxx X. Xxxxxxxxxx & Associates Tradenames
0000 Xxxxx Xxxxxxxxxx Xx., Xxx. 000 Xxxxxxxxxx
Xxxx Xxxxx, XX 00000
(000) 000-0000 Phone
(000) 000-0000 Phone
(000) 000-0000 Fax
Xxxxxx X. Xxxxxxxxx
Xxxxxxxxx Law Offices
1. Infusion
2. Advanced Infusion
More specifically, this intellectual property includes:
1. Valved Tip Angiographic Catheters
Patent #: 5,085,635
Issued: February 4, 1992
2. Thrombectomy Method and Apparatus
Patent #: 5,370,653
Issued: December 6, 1994 File No. 9130.01;
9130.01CAN;
File No. 9130.01EPO;
910.01JAP
3. Infusion Device with Preformed Shape (Coiled Wire)
Patent #: 5,554,114
Issued: September 10, 1996 File No. 9135.08;
9135.08PCT;
9135.08EPO; 9135.08JAP;
9135.08CAN
4. Miniaturized Brush with Hollow Lumen
Brush Body File No. 9135.20;
9135.20PCT;
Patent #: 5,681,335
Issued: October 28, 1997
5. Longitudinally Extendable Infusion Device
Patent #: 5,624,396
Issued: April 29, 1997 File No. 9135.23;
9135.23PCT;
9135.23CAN; 9135.23EPO; 9135.23JAP
Xxxxxx X. Xxxxxxxxx
Xxxxxxxxx Law Offices
(Continued)
6. Patents Pending:
a) Infusion Guidewire Having Fixed
Core and Flexible Radiopaque Marker
(Straight Wire) File No. 9135.25;
9135.25PCT
9135.36CIP;
9135.25CAN;
9135.25EPO;
9135.25JAP
b) Infusion Device for Distributing Infusate
Along an Elongated Infusion Segment File No. 9135.26;
9135.26PCT
c) Power Lysis of Thrombus in Blood Vessel File No. 9135.34;
9135.34EPO;
9135.34CAN
7. Patents In Progress
a) Miniaturized Brush with Hollow Lumen
Brush Body File No. 9135.39
8. Invention Disclosures
a) Rotatable Catheter Attachment Clip File No. 9135.40
System for Connection to Hand
Held Moor Drive Unit
b) Dynamic Seal to Protect Hand Held Motor File No. 9135.41
Drive from Patient Bleedback
9. Infringement issue
a) Genesis Medical File No. 9135.42
K. Xxxxx Xxxxxxxx, Esq.
Xxxxxxxx & Fish
1. Stents
2. Coatings
More specifically, this intellectual property includes:
1. Stent Construction of Rolled Configuration
Patent #: 5,306,294
Issued: April 26, 1994 Exclusive License for Head and
Neck
2. Method and Apparatus for Applying Vascular Grafts
Patent #: 5,366,473
Issued: November 22, 1994
Exclusive License for Head and Neck
3. Stent Assembly with Sensor
Patent #: 5,411,551
Issued: May 2, 1995
Exclusive License for Head and Neck
4. Self Expanding Vascular Endoprosthesis for Aneurysms
Patent #: 5,405,379
Issued: April 11, 1995
Exclusive License for Head and Neck
5. Lubricious Hydrophilic Composite Coated on Substrates
Patent #: 5,001,009
Issued: March, 1991
Non-exclusive license - Micro Catheters
6. Anti-thrombogenic, Anti-microbial Compositions Containing Heparin
Patent #: 5,069,899
Issued: December 3, 1991
Non-exclusive license - Micro Catheters
7. Lubricious Hydrophilic Coating, Resistant to Wet Abrasion
Patent #: 5,331,027
Issued: July 19, 1994
Non-exclusive license - Micro Catheters
K. Xxxxx Xxxxxxxx, Esq.
Xxxxxxxx & Fish
(Continued - Page Two)
8. PATENTS PENDING:
a) Intracranial Stent and Method of Use File No. 212/037;
212/046CIP
212/037PCT
b) Self Anchoring Coil for Vascular
Occulsion File No.
212/059/INACTIVE
c) Hoop Stent File No. 212/060
d) Method for Intracranial Vascular Embolotherapy
Using Self Anchoring Coils File No. 212/068
e) Expandable Stent Apparatus and Method File No. 212/070
f) Wire Frame Partial Flow Obstruction Device
for Aneurysm Treatment File No. 212/071
9. PATENTS IN PROCESS:
a) Hoop Stent File No. 212/060PCT
b) Wire Releasable Self-Expanding
Neurovascular Stent File No. 212/098
c) Control Handle for Self Expanding Stent File No. 212/106
d) Porous Rolled Sheet Stents File No. 212/109
e) Coated Aneurysm Stent File No. 212/110/INACTIVE
f) Wave Form Perforation Pattern File No. 212/117
g) Sequential Wire Pulls for Control Handle
of Self-Expanding Neurovascular
Stent Catheter File No. 212/122
h) Thin Film Sheets of Sputter Deposited
NiTi for use in Medical Devices File No. 212/124
i) Multi-Lumen Delivery File No. 212/125
K. Xxxxx Xxxxxxxx, Esq.
Xxxxxxxx & Fish
(Continued - Page Three)
9. PATENTS IN PROCESS:
j) Expandable Stent Apparatus and Method File No. 212/070PCT
k) Wire Frame Partial Flow Obstruction Device File No. 212/071PCT
for Aneurysm Treatment
l) Dynamic Coatings for Endovascular Devices File No. 212/128
m) Dual Pull Wire Proximal Handle File No. 212/129
Xxxxxx X. Xxxxxxxxxx
Xxxxxx X. Xxxxxxxxxx & Associates
1. Trademarks
2. Tradenames
3. Copyrights
More specifically, this intellectual property includes:
1. Xxxxxx File No. MITH-301
TM Registration No. 1,936,938
2. ProStream File No. MITH-
TM Registration No. 2,035,778
3. Micromewi File No. MITH-303
4. Trademarks Pending:
a) Patency Inactive
b) Easy Rider File No. MITH-304
c) Embolyx File No. MITH-
305/INACTIVE
d) Mewi-5 File No. MITHj-306
Xxxxxx Swiss
Burns, Doane, Xxxxxxx & Xxxxxx
MTI MATTERS
1. Micro Catheters/Access
2. Vascular Embolization
More specifically, this intellectual property included:
1. Novel Compositions for Use in Embolizing
Blood Vessels File No. 18413-
002; 18413-021PCT
Patent #: 5,667,767 18413-031CIP;
18413-052EPO
Issued: September 16, 1997
18413-053CAN; 18413-054JAP
2. Cellulose Diacetate Composition for Use in Embolizing File No. 18413
-003; 18413-020PCT;
Blood Vessels 18413-055EPO;
18413-056CAN;
Patent #: 5,580,568 18413-057JAP;
18413-058(PCT/US)
Issued: December 3, 1996
3. Method for Embolizing Blood Vessels
Patent #: 5,702,361
Issued: December 30, 1997 File No. 18413-
009; 18413-025PCT
4. Novel Embolizing Compositions
Patent #: 5,695,480
Issued: December 9, 1997 File No. 18413-017
5. PATENTS PENDING:
a) Methods for Embolizing Blood Vessels
(Embolic with Lattice Support) 18413-048DIV
b) Novel Compositions for Use in Embolizing
Blood Vessels (Other Polymers) File No. 18413-010; 18413-
030/CIP
18413-035PCT; 18413-078DIV
c) Contoured Syringe and Novel Luer Hub and
Methods for Embolizing Blood Vessels File Xx. 00000-000
Xxxxxx Xxxxx
Burns, Doane, Xxxxxxx & Xxxxxx
(Continued)
5. PATENTS PENDING (Cont'd):
d) Novel Embolizing Compositions
(Radiopaque Particle Size and Kit) 18413-018PCT; 18413-059EPO
18413-060CAN; 18413-061JAP
e) Novel Methods for Embolizing File No. 18413-019;
18413-037PCT
f) Use of Radioactive Embolizing Compositions File No. 18413-023
g) Ethyl Lactate Composition Comprising a
Biocompatible Polymer and a
Contrast Agent File No. 18413-038
h) Gynecologic Endovascular Embolotherapy File No. 18413-046
Methods
i) Method and Apparatus for
Intravascular Embolization File No. 18413-070;
18413-071PCT
j) Catheter for Combined Injection of
Liquid Embolic and Embolic
Solidification Agent File No. 18413-073
k) Single Segment Microcatheter
(Transferred from Xxxxxxxx) File No. 18413-083;
18413-114CIP
l) Balloon Catheter for Occluding
Aneurysms or Branch Vessels
(Transferred from Xxxxxxxxx) File No. 18413-084;
18413-085CAN; 18413-086EPO;
18413-092JAP
m) Microcatheter
(Transferred from Xxxxxx) File No. 18413-098;
18413-107PCT 18413-119EPO; 18413-
120CAN;
n) Flow Directed Cerebral Vascular Catheter File Xx. 00000-000
Xxxxxx Xxxxx
Burns, Doane, Xxxxxxx & Xxxxxx
(Continued)
5. PATENTS PENDING (Cont'd):
o) Novel Methods for Embolizing Vascular
Sites with an Embolizing Composition
Comprising Dimethysulfoxide File No. 18413-131
(DIV of 018413-019)
6. PATENTS IN PROCESS:
a) Drug Carrier Site Specific Treatment File No. 18413-011/Inactive
b) Liquid Embolic Composition to Necrose
Blood Vessels File No. 18413-033/Inactive
c) Embolic Compositions for Use in
Plastic Surgery File No. 18413-039
d) Treatment of Ruptured Spinal Disks by
Use of an Embolic File No. 18413-040
e) Protection of Aneurysm Neck During
Embolic Injection File No. 18413-041
f) Nidus Catheter for Forming "Pearl"
Embolic Agent File No. 18413-042
g) Containment of Liquid Embolic File No. 18413-043
h) Chemical Detachment of Embolic File No. 18413-045
i) Novel Embolizing Compositions File No. 18413-104CHI
j) Method to Treat Aneurysms Neck to
Prevent Aneurysm Regrowth File No. 18413-067
k) Novel Devices Which Improve The Venous
Blood Return or Drainage File Xx. 00000-000
Xxxxxx Xxxxx
Burns, Doane, Xxxxxxx & Xxxxxx
(Continued)
6. PATENTS IN PROCESS (CONT'D):
l) Invention Disclosures (Ttransferred from
Xxxxxxxxx'x office)
Vascular Occlusion Catheter File No. 18413-087
Balloon Catheters File No. 18413-088
Devices for Improved Venous
Blood Return
File No. 18413-089
m) Infringement study U.S. Patent No. 5,358,493
(Transferred from Xxxxxxxxx'x office / BDSM
to provide original) File Nos. 18413-90; 18413-091
n) Study U.S. Patent 4,739,768 and 5,336,205
(Transferred from Xxxxxxxxx'x office) File Nos. 18413-
93; 18413-094
o) Echogenic Agent for Implantable Composition File No. 18413-096
p) Radiation Delivery System with Unique Over
the Wire File No. 18413-097
q) Catheters and Syringes to Form Abrupt
Interface Between Liquid Embolic
and Barrier Fluid File No. 18413-099
r) Rapid Exchange Microcatheter & Tip
Deflecting Microcatheter File No. 18413-100
s) Patent Study Re: Fas Tracker 10 by Target File No. 18413-101
t) Spring-Loaded Syringe Assembly for Repetitive,
Low Volume, High-Pressure Injections File Xx. 00000-000
Xxxxxx Xxxxx
Burns, Doane, Xxxxxxx & Xxxxxx
(Continued)
6. PATENTS IN PROCESS (CONT'D):
u) Infringement Study of 4,739,768
(Transferred from Xxxxxxxxx'x office) File No. 18413-108
v) Vascular Vessel Dilation Catheter File No. 18413-109
w) Endovascular Aneurysm Clip and Method File No. 18413-111
x) DMSO Compatible Microcatheter File No. 18413-112
/INACTIVE
y) Single Segment Microcatheter File No. 18413-128PCT
z) Embolization Particle Methods of
Manufacture File No. 00000-000
xx) Microcatheter File No. 18413-130
(CIP of 018413-098)
bb) Transluminal Solidification of Embolyx
for Aneurysm Embolization File Xx. 00000-000
Xxxxxx Xxxxx
Burns, Doane, Xxxxxxx & Xxxxxx
(Continued)
7. TRADEMARKS PENDING:
a) EMBOLYX File No. 18413-064
b) LES File No. 18413-065
c) FLOW RIDER File No. 18413-076
8. TRADEMARKS IN PROCESS:
a) Even Flow File No. 18413-095/INACTIVE
b) Xxxxxxxxx Over-the-Wire File No. 18413-125
c) Focused Infusion Catheters File No. 18413-126
d) Silver Streak File No. 18413-139
e) Equinox File Xx. 00000-
Xxxxxx Xxxxx
Burns, Doane, Xxxxxxx & Xxxxxx
1. Non-Vascular
Patents Pending:
a) Methods for Treating Urinary Incontinence File No. 18413-006;
18413-047/DIV.;
18413-081PCT
b) Methods for Sterilizing Male Mammals File No. 18413-007;
18413-034PCT;
18413-029/CIP
c) Methods for Sterilizing Female Mammals File No. 18413-014;
18413-036PCT;
18413-027CIP
d) Method for Treating Urinary Reflux File No. 18413-026;
18413-082PCT
e) Gynecologic Embolotherapy Methods File No. 032016-005
MICRO THERAPEUTICS, INC.
EMPLOYEE CONFIDENTIAL INFORMATION AGREEMENT
In consideration and as a condition of my employment, or continued
employment, by MICRO THERAPEUTICS, INC. and/or by companies which it owns,
controls, or is affiliated with, or their successors in business (hereafter
referred to as "the Company), and the compensation paid therefore:
1. CONFIDENTIALITY
I agree to keep confidential, except as the Company may otherwise consent
in writing, and not to disclose or make any use of except for the benefit of the
Company, at any time, either during or subsequent to my employment, any trade
secrets, confidential information, knowledge, data or other information of the
Company relating to products, processes, know-how, designs, formulas, test data,
customer lists, business plans, marketing plans and strategies, pricing
strategies or other subject matter pertaining to any business of the Company or
any of its clients, customers, consultants, licensees or affiliates, which I may
produce, obtain or otherwise acquire during the course of my employment, except
as herein provided. I further agree not to deliver, reproduce or in any way
allow any such trade secrets, confidential information, knowledge, data or other
information, or any documentation relating thereto, to be delivered or used by
any third parties without specific direction or consent of a duly authorized
representative of the Company.
2. CONFLICTING EMPLOYMENT/RETURN OF CONFIDENTIAL MATERIAL
I agree that during my employment with the Company, I will not engage in
any other employment, occupation, consulting or other activity relating to the
business in which the Company is now or may hereafter become engaged or which
would otherwise conflict with my obligations to the Company. In the event of my
termination of employment with the Company for any reason whatsoever, I agree to
promptly surrender and deliver to the Company all records, materials, equipment,
drawings, documents and data of any nature pertaining to any invention, trade
secret or confidential information of the Company or to my employment, and I
will not take with me any description containing or pertaining to any
confidential information, knowledge or data of the Company which I may produce
or obtain during the course of my employment. In the event of the termination
of my employment for any reason whatsoever, I agree to sign and deliver the
"Termination Certificate" attached hereto as Exhibit A.
3. NON SOLICITATION
I agree that during my employment and for the two year period following my
employment I will not solicit or induce any employee or consultant of the
Company to quit their employment, cease doing business with the Company or
accept employment with any entity that I am then involved with, unless I am
specifically authorized to do so by the Company. In addition, during my
employment and for the two year period following my employment I will not
solicit or induce any customer of the Company to cease doing business with
the Company.
4. ASSIGNMENT OF INVENTIONS
I agree that all computer programs, documentation and other copyrightable
materials to which I contribute during my employment shall be considered "works
for hire" and shall be the sole property of the Company. I hereby assign and
transfer to the Company my entire right, title and interest in and to all
inventions (as used in the Agreement, "inventions" shall include but not be
limited to ideas, improvements, designs and discoveries) whether or not
patentable and whether or not reduced to practice, made or conceived by me
(whether made solely by me or jointly with others) during the period of my
employment with the Company, which relate in any manner to the actual or
demonstrably anticipated business, work or research and development of the
Company or its subsidiaries, or result from or are suggested by any task
assigned to me or any work performed by me for or on behalf of the Company or
its subsidiaries. I agree that all such inventions are the sole property of the
Company provided, however, that this Agreement does not require assignment of an
invention which qualifies fully for protection under Section 2870 of the
California Labor Code (hereafter referred to as "Section 2870"). A copy of
Section 2870 is attached as Exhibit B.
5. DISCLOSURE OF INVENTIONS AND PATENTS
I agree that in connection with any "invention" as defined in Paragraph 3
above:
a)I will disclose such invention promptly in writing to my immediate superior
at the Company, with a copy to the president, regardless of whether I believe
the invention is protected by Section 2870, in order to permit the Company to
claim rights to which it may be entitled under this Agreement. Such
disclosure shall be received in confidence by the Company.
b)I will, at the Company's request, promptly execute a written assignment of
title to the Company for any invention required to be assigned by Paragraph 3
("assignable invention"), and I will preserve any such assignable invention
as confidential information of the Company.
c)Upon request, I agree to assist the Company or its nominee (at its expense)
during and at any time subsequent to my employment in every reasonable way to
obtain for its own benefit patents and copyrights for such assignable
inventions in any and all countries, which inventions shall be and remain the
sole and exclusive property of the Company or its nominee whether or not
patented or copyrighted. I agree to execute such papers and perform such
lawful acts as the Company deems to be necessary to allow it to exercise all
right, title and interest in such patents and copyrights.
6. EXECUTION OF DOCUMENTS
In connection with Paragraph 4(c), I further agree to execute,
acknowledge and deliver to the Company or its nominee upon request and at its
expense all such documents, including applications for patents and copyrights
and assignments of inventions, patents and copyrights to be issued therefore,
as the Company may determine necessary or desirable to apply for and obtain
letters, patents and copyrights on such assignable inventions in any and all
countries and/or to protect the interest of the Company or its nominee in
such inventions, patents and copyrights, and to vest title thereto in the
Company or its nominee.
7. MAINTENANCE OF RECORDS
I agree to keep and maintain adequate and current written records of all
inventions made by me (in the form of notes, sketches, drawings and as may be
specified by the Company), which records shall be available to and remain the
sole property of the Company at all times.
8. PRIOR INVENTIONS
It is understood that all inventions if any, patented or unpatented, which
I made prior to my employment by the Company are excluded from the scope of this
Agreement. To preclude any possible uncertainty, I have set forth on Exhibit C
attached hereto a complete list of all my prior inventions, including numbers of
all patents and patent applications, and a brief description of all unpatented
inventions which are not the property of a previous employer. I represent and
covenant that the list is complete and that, if no items are on the list, I have
no such prior inventions. I agree to notify the Company in writing before I
make any disclosure or perform any work on behalf of the Company which appears
to threaten or conflict with proprietary rights I claim in any invention or
idea. In the event of my failure to give such notice, I agree that I will make
no claim against the Company with respect to any such inventions or ideas.
9. OTHER OBLIGATIONS
I acknowledge that the Company from time to time may have agreements with
other persons or with the U.S. Government or governments of other countries, or
agencies thereof, which impose obligations or restrictions on the
Company regarding inventions made during the course of work thereunder or
regarding the confidential nature of such work. I agree to be bound by all
such obligations and restrictions and to take all action necessary to
discharge the obligations of the Company thereunder.
10. TRADE SECRETS OF OTHERS
I represent that my performance of all the terms of this Agreement and as
an employee of the Company does not and will not breach any agreement to keep in
confidence proprietary information, knowledge or data acquired by me in
confidence or in trust prior to my employment with the Company, and I will not
disclose to the Company or induce the Company to use any confidential or
proprietary information or material belonging to any previous employer or
others. I agree not to enter into any agreement either written or oral in
conflict herewith.
11. MODIFICATIONS
This Agreement may not be changed, modified, released, discharged,
abandoned or otherwise amended, in whole or in part, except by an instrument in
writing, signed by me and the Company. I agree that any subsequent change or
changes in my duties, salary, or compensation shall not affect the validity or
scope of this Agreement.
12. ENTIRE AGREEMENT
I acknowledge receipt of this Agreement and agree that with respect to the
subject matter thereof it is my entire agreement with the Company, superseding
any previous oral or written communications, representations, understandings or
agreements with the Company or any officers or representative thereof.
13. SEVERABILITY
In the event that any paragraph or provision of this Agreement shall be
held to be illegal or unenforceable in any jurisdiction, such paragraph or
provision shall, as to that jurisdiction, be adjusted and reformed, if possible,
in order to achieve the intent of the parties, and if such paragraph or
provision cannot be adjusted and reformed, such paragraph or provision shall,
for the purposes of that jurisdiction be voided and severed from this Agreement,
and the entire Agreement shall not fail on account thereof but shall otherwise
remain in full force and effect.
14. SUCCESSORS AND ASSIGNS
This Agreement shall be binding upon my heirs, executors, administrators or
other legal representative and is for the benefit of the Company, its
successors and assigns.
15. GOVERNING LAW
This Agreement shall be governed by the laws of the location of the
Company's corporate headquarters, which is presently located in the State of
California; provided, however, that in the event this provision is deemed to
be unenforceable by a local judicial authority or governmental agency, then
the laws of the location of my employment shall apply.
16. COUNTERPARTS
This Agreement may be signed in two counterparts, each shall be deemed an
original and both of which shall together constitute one agreement.
EMPLOYEE
____________________________________
(EMPLOYEE'S SIGNATURE)
____________________________________
(PRINT NAME)
Date:________________________________
MICRO THERAPEUTICS, INC.
By:__________________________________
Xxxxxx Xxxxxxx, President
Date:________________________________
EXHIBIT A
TERMINATION CERTIFICATE
This is to certify that I do not have in my possession, nor have I failed
to return, any records, documents, data, specifications, drawings, blueprints,
reproductions, sketches, notes, reports, proposals or copies of them, or
other documents or materials, equipment, or other property belonging to the
Company, its successors and assigns (hereafter referred to as the "Company").
I further certify that I have complied with and will continue to comply
with all the terms of the Employee Proprietary Information Agreement signed by
me with the Company, including the reporting of any inventions (as defined
therein) conceived or made by me covered by the Agreement.
I further agree that in compliance with the Employee Proprietary and
Confidential Information Agreement, I will preserve as confidential all trade
secrets, confidential information, knowledge, data, or other information
relating to products, processes, know-how, designs, formulas, test data,
customer lists, or other subject matter pertaining to any business of the
Company or any of its clients, customers, consultants, licensees, or affiliates.
_____________________________________
Employee's Signature
_____________________________________
Print Name
_____________________________________
Date
EXHIBIT B
SECTION 2870
CALIFORNIA LABOR CODE
Any provision in an employment agreement which provides that an employee
shall assign or offer to assign any of his or her rights in an invention to his
or her employer shall not apply to an invention for which no equipment,
supplies, facility, or trade secret information of the employer was used, and
which was developed entirely on the employee's own time, and:
a) which does not relate to the business of the employer or to the
employer's actual or demonstrably anticipated research or development, or
b) which does not result from any work performed by the employee for the
employer.
Any provision which purports to apply to such an invention is to that
extent against the public policy of this state and is to that extent void and
unenforceable.
EXHIBIT C
LIST OF PRIOR INVENTIONS
Identifying Number or
Title Date Brief Description
----- ---- -----------------
