Exhibit 4.1
Execution Version
________________________________________________________________________________
SENIOR NOTE AND WARRANT PURCHASE AGREEMENT
dated as of May 29, 2002
by and among
CARDIAC SCIENCE, INC.
and
THE PURCHASERS NAMED HEREIN
________________________________________________________________________________
TABLE OF CONTENTS
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I. DESCRIPTION OF SENIOR NOTES AND WARRANTS........................... 1
1.1 Description of Senior Notes ............................... 1
1.2 Security .................................................. 1
1.3 Description of the Warrants ............................... 1
1.4 Closing ................................................... 1
1.5 Closing Fee ............................................... 2
1.6 Use of Proceeds ........................................... 2
1.7 Allocation of Purchase Price .............................. 2
II. PAYMENT AND PREPAYMENT OF SENIOR NOTES ............................ 2
2.1 Principal and Interest Payments ........................... 2
2.2 Optional Prepayments ...................................... 3
2.3 Mandatory Prepayments ..................................... 3
2.4 Direct Payment ............................................ 4
2.5 Payments Payable on Business Days ......................... 4
2.6 Interest Laws ............................................. 4
III. REPRESENTATIONS AND WARRANTIES OF PURCHASER ....................... 5
3.1 Representations and Warranties of Purchaser ............... 5
IV. REPRESENTATIONS AND WARRANTIES OF THE COMPANY ..................... 6
4.1 Organization and Qualification ............................ 6
4.2 Capitalization; Listing ................................... 6
4.3 Subsidiaries .............................................. 7
4.4 SEC Filings ............................................... 8
4.5 Authority and Validity of Obligations ..................... 8
4.6 Use of Proceeds ........................................... 8
4.7 Financial Statements ...................................... 8
4.8 Absence of Certain Changes or Events ...................... 9
4.9 Full Disclosure ........................................... 9
4.10 Intellectual Property ..................................... 9
4.11 Compliance with Laws; Hazardous Substances ................ 11
4.12 Taxes ..................................................... 12
4.13 Agreements, Contracts and Commitments ..................... 12
4.14 Employee Benefit Plans .................................... 14
4.15 Governmental Authority and Licensing ...................... 15
4.16 FDA Approval .............................................. 16
4.17 Good Title; Real Property ................................. 16
4.18 Litigation ................................................ 17
4.19 Product Liability and Recalls ............................. 17
4.20 Warranties ................................................ 17
4.21 Approvals ................................................. 17
4.22 Affiliate Transactions .................................... 18
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4.23 Investment Company; Public Utility Holding Company ......... 18
4.24 Solvency ................................................... 18
4.25 Labor and Employee Matters ................................. 18
4.26 Indebtedness ............................................... 18
4.27 Brokers .................................................... 19
4.28 Insurance .................................................. 19
4.29 Minute Books ............................................... 19
4.30 First Priority Lien. ....................................... 19
V. CONDITIONS PRECEDENT TO OBLIGATIONS................................. 19
5.1 Conditions Precedent to Obligations of Purchaser ........... 19
5.2 Conditions Precedent to Obligations of the Company ......... 23
VI. AFFIRMATIVE COVENANTS .............................................. 23
6.1 Financial Statements ....................................... 23
6.2 Certificates; Other Information ............................ 25
6.3 Books and Records; Accounting System ....................... 26
6.4 Financial Disclosure ....................................... 26
6.5 Disclosure of Material Matters ............................. 26
6.6 Performance of Obligations ................................. 26
6.7 Maintenance of Business .................................... 27
6.8 Maintenance of Properties .................................. 27
6.9 Payment of Taxes and Assessments ........................... 27
6.10 Compliance with Laws ...................................... 27
6.11 Insurance .................................................. 27
6.12 Inspection Rights .......................................... 28
6.13 Notices .................................................... 28
6.14 Further Assurances ......................................... 28
6.15 Compliance with ERISA and the Code ......................... 28
6.16 Guaranties ................................................. 29
6.17 Compliance with Material Agreements ........................ 29
6.18 Formation of Subsidiaries .................................. 29
6.19 Mortgages .................................................. 29
6.20 Intellectual Property Matters .............................. 30
VII. NEGATIVE COVENANTS ................................................. 31
7.1 Indebtedness ............................................... 31
7.2 Limitation on Liens ........................................ 32
7.3 Investments; Acquisitions; Loans; Advances ................. 32
7.4 Sales ...................................................... 34
7.5 Restricted Payments ........................................ 34
7.6 Transactions with Affiliates ............................... 35
7.7 Fiscal Year ................................................ 35
7.8 Formation of Subsidiaries .................................. 35
7.9 Nature of Business ......................................... 35
7.10 No Restrictions ............................................ 35
7.11 Capital Stock of Subsidiaries .............................. 35
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7.12 Financial Covenants ....................................... 35
7.13 Capital Expenditures ...................................... 37
7.14 Use of Proceeds ........................................... 37
VIII. EVENTS OF DEFAULT AND REMEDIES THEREFOR ......................... 37
8.1 Events of Default ......................................... 37
8.2 Remedies of Holders upon Occurrence of Event of Default ... 39
8.3 Annulment of Acceleration ................................. 39
8.4 Remedies .................................................. 40
8.5 Conduct No Waiver ......................................... 40
8.6 Rights Regarding Collateral ............................... 40
IX. BOARD OF DIRECTORS MATTERS ......................................... 40
9.1 Right to Designate Directors .............................. 40
9.2 Observation Rights ........................................ 41
9.3 Indemnification and Insurance ............................. 42
X. REGISTRATION, TRANSFER AND REPLACEMENT OF SENIOR NOTES ................ 42
10.1 Senior Note Register ...................................... 42
10.2 Issuance of New Senior Note upon Exchange or Transfer ..... 42
10.3 Replacement of Senior Note ................................ 43
10.4 Legend .................................................... 43
XI.INTERPRETATION OF AGREEMENT ........................................... 44
11.1 Certain Terms Defined ..................................... 44
11.2 Accounting Terms and Definitions .......................... 53
11.3 References ................................................ 53
11.4 Other Interpretive Provisions ............................. 53
XII. MISCELLANEOUS ...................................................... 54
12.1 Survival of Representations and Warranties ................ 54
12.2 Expenses .................................................. 54
12.3 Notices ................................................... 54
12.4 Indemnification ........................................... 55
12.5 Assignment, Sale of Interest .............................. 55
12.6 Successors and Assigns .................................... 56
12.7 Publicity ................................................. 56
12.8 Headings .................................................. 56
12.9 Counterparts .............................................. 56
12.10 Governing Law ............................................. 56
12.11 Jurisdiction .............................................. 56
12.12 Severability .............................................. 56
12.13 Entire Agreement .......................................... 57
12.14 Interpretation ............................................ 57
12.15 Exhibits and Schedules .................................... 57
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SENIOR NOTE AND WARRANT PURCHASE AGREEMENT
This SENIOR NOTE AND WARRANT PURCHASE AGREEMENT (this "Agreement"),
dated as of May 29, 2002, is by and among Cardiac Science, Inc., a Delaware
corporation (the "Company") and those purchasers whose names are listed on the
signature pages hereto ("Purchasers"). Capitalized terms used in this Agreement
and not otherwise defined herein are defined in Section 11.1.
To induce Purchasers to purchase the Senior Notes and the Warrants from
the Company, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, agree as follows:
I. DESCRIPTION OF SENIOR NOTES AND WARRANTS
1.1 Description of Senior Notes. The Company will authorize the
issuance and sale of its senior notes (the "Senior Notes") Senior Notes which
shall be dated the Closing Date, shall be in the original principal amount of
$50,000,000 and shall bear interest at a fixed rate of 6.9% per annum; provided,
however, that upon the occurrence of any Event of Default, and during the
continuation thereof, the unpaid principal amount of the Senior Notes shall bear
interest at a fixed rate of 10.9% per annum. Interest on the Senior Notes shall
be computed on the basis of the actual number of days elapsed over a 360-day
year (which year shall be deemed to consist of 12 months, each of which shall be
deemed to consist of 30 days). The Senior Notes shall be substantially in the
form attached hereto as Exhibit A. The Senior Notes shall be issued by the
Company in the names of Purchasers as set forth on Annex I hereto, in principal
amounts specified opposite each Purchaser's name on such annex.
1.2 Security. The Senior Notes will be secured by the Security
Agreement, which shall be executed by the Company in favor of Purchasers.
1.3 Description of the Warrants. The Company will authorize the
issuance and sale of warrants (the "Warrants") to purchase, on the terms and
subject to the conditions thereof, (i) an aggregate of 10,000,000 shares of
Common Stock at an exercise price of $3.00 per share and (ii) an aggregate of
3,000,000 shares of Common Stock at an exercise price of $4.00 per share. The
Warrants shall be substantially in the form attached hereto as Exhibit B. The
Warrants shall be issued by the Company in the names of Purchasers as set forth
on Annex I hereto, in the denominations specified opposite each Purchaser's name
on such annex. The Warrants, in the aggregate, shall not be exercisable into
more than 438,599 additional shares of Common Stock (subject to adjustment to
reflect stock splits, stock dividends, stock combinations, recapitalizations and
like occurrences) as a result of the anti-dilution provisions set forth in
Section 4(f) therein.
1.4 Closing. The closing of the sale and purchase of the Senior Notes
and Warrants (the "Closing") shall take place at the offices of Xxxx, Weiss,
Rifkind, Xxxxxxx & Xxxxxxxx, 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx
00000, at 10:00 a.m., local time, on May 30, 2002, or at such other time, place
and date that the Company and Purchasers may agree in writing (the "Closing
Date"). Subject to the terms and conditions hereof and on the basis of the
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representations and warranties hereinafter set forth, on the Closing Date the
Company shall deliver to the Purchasers the Senior Notes and the Warrants duly
executed by the Company against delivery by the Purchasers to the Company of the
aggregate purchase price of $50,000,000 (the "Purchase Price") by wire transfer
of immediately available funds to such account or accounts as the Company shall
designate in writing. Each Purchaser shall pay a portion of the Purchase Price
equal to the principal amount of the Senior Notes to be acquired by such
Purchaser.
1.5 Closing Fee. The Company shall pay to Purchasers or their designee
a closing fee of $1,500,000 (i.e., 3.0% of the Purchase Price) (the "Closing
Fee") in immediately available funds, on the Closing Date, which Closing Fee
shall be deemed fully earned and nonrefundable on the Closing Date. Purchasers
may, at their option, deduct the amount of the Closing Fee from the Purchase
Price.
1.6 Use of Proceeds. The proceeds from the sale of the Senior Notes and
the Warrants shall be used (a) to repay the Senior Secured Promissory Notes of
the Company issued pursuant to an Indenture, dated September 26, 2001, between
the Company and BNY Western Trust Company, (b) for general corporate and working
capital purposes and (c) to pay the fees, costs and expenses payable pursuant to
this Agreement and the other Transaction Costs.
1.7 Allocation of Purchase Price. The Company shall allocate the
Purchase Price paid by the Purchasers in connection with the purchase of the
Senior Notes and the issuance of the Warrants in the manner and in the amounts
reasonably requested by the Purchasers and reasonably acceptable to the Company.
The parties agree to follow this allocation for all Tax purposes.
II. PAYMENT AND PREPAYMENT OF SENIOR NOTES
2.1 Principal and Interest Payments. Principal and interest on the
Senior Notes shall be due and payable in Dollars as follows:
(a) Unless otherwise accelerated pursuant to the terms hereof, the
entire unpaid principal amount of the Senior Notes shall be due and
payable in cash on May 30, 2007.
(b) (i) Subject to subsection (iii) of this Section 2.1(b), during
the period commencing on the Closing Date and ending on the date
immediately prior to the third anniversary thereof, accrued and unpaid
interest on the Senior Notes calculated at the rate of 6.9% per annum,
shall, at the option of the Company, (A) be due and payable in cash or
(B) accrue and be paid in kind (i.e., such interest shall be
capitalized when due and added to the principal balance of the Senior
Notes), in each case, (y) quarterly in arrears on the last Business
Day of each March, June, September and December, commencing on June
30, 2002 (each, an "Interest Payment Date") and (z) on the Termination
Date.
(ii) Subject to subsection (iii) of this Section 2.1(b), from
and after the third anniversary of the Closing Date, accrued and unpaid
interest on the Senior Notes
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calculated at the rate of 6.9% per annum shall be due and payable in
cash on (A) each Interest Payment Date and (B) the Termination Date.
(iii) Notwithstanding anything to the contrary set
forth herein, upon the occurrence and during the continuance of an
Event of Default, accrued and unpaid interest on the Senior Notes
shall be calculated at the rate of 10.9% per annum and shall be due
and payable in cash on (A) each Interest Payment Date and (B) the
Termination Date.
2.2 Optional Prepayments. At the Company's option, upon notice given
as provided below, the Company may, at any time and from time to time, prepay
all or any part of the principal amount of the Senior Notes, by payment to the
Holders of an amount equal to (a) the principal amount to be prepaid, plus (b)
any accrued and unpaid interest on the principal amount so prepaid. Each partial
prepayment under this Section 2.2 shall be in an aggregate principal amount of
not less than $1,000,000 or, if greater than $1,000,000, then in integral
multiples of $500,000. Each prepayment under this Section 2.2 shall be applied
first to accrued and unpaid interest on the principal amount so prepaid, second
to principal, and third to any expenses and/or damages to which the Holders are
entitled. The Company shall give notice of any optional prepayment to the
Holders not less than 10 days before the date for prepayment, specifying in each
such notice the date upon which such prepayment is to be made and the principal
amount to be prepaid (together with accrued and unpaid interest, if any,
thereon) on such date. Notice of prepayment having been so given, the applicable
prepayment amount shall become due and payable on the specified prepayment date.
The Company shall have no right to prepay the Senior Notes except as provided in
this Section 2.2 or in Section 2.3.
2.3 Mandatory Prepayments. Notwithstanding anything to the contrary
set forth in Section 2.2 hereof, if, after the Closing Date, a Change of Control
occurs, the Company shall offer to prepay the outstanding principal amount of
the Senior Notes, by payment to the Holders of an amount equal to (a) the
principal amount to be prepaid, plus (b) any accrued and unpaid interest on the
principal amount so prepaid, plus (c) a premium equal to the product of the
applicable Premium Percentage multiplied by the principal amount (which amount
shall include interest added to the principal balance of the Senior Notes
pursuant to Section 2.1(b)(i) hereof) of the Senior Notes so prepaid. Any
prepayment under this Section 2.3 shall be applied first to accrued interest,
second to principal, and third to any expenses and/or damages for which
Purchasers may be entitled. The Company shall give each Holder notice of a
Change of Control not later than 5 Business Days following the occurrence of a
Change in Control, specifying in each such notice the date upon which such
Change of Control occurred (or will occur), the material terms of the
transaction giving rise to such Change of Control and the principal amount
(together with accrued and unpaid interest, if any, thereon) that the Company is
offering to prepay in compliance with this Section 2.3. If any Holder elects to
demand prepayment following the occurrence of a Change of Control pursuant to
this Section 2.3, all amounts that are required to be paid to such holder
pursuant to this Section 2.3 shall be payable by the Company to such Holders
within 30 days following the date on which demand therefor is made by such
Holder, and shall bear interest until the date paid at the rate of interest then
applicable under Section 1.1.
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2.4 Direct Payment. The Company will pay all sums becoming due
hereunder to any Holder by wire transfer in U.S. Dollars of Federal Reserve
Funds or other immediately available funds, to the account specified for such
Holder on Annex I, or in such other form or at such other address as such Holder
shall have designated by written notice to the Company at least five Business
Days prior to the date of any payment, in each case without presentment and
without notations being made thereon. All payments by the Company shall be made
without set-off or counterclaim. Any wire transfer to Purchasers shall identify
such payment as "Cardiac Science, Inc. Senior Notes" and shall identify the
payment as principal, premium, interest and/or reimbursement of costs and
expenses, together with the applicable date or period to which it relates.
2.5 Payments Payable on Business Days. Payments of all amounts due
shall be made on a Business Day. Any payment due on a day that is not a Business
Day shall be made on the next Business Day, together with all interest (if any)
accrued in the interim.
2.6 Interest Laws. Notwithstanding any provision to the contrary
contained in this Agreement, the Company shall not be required to pay, and no
Holder shall be permitted to contract for, take, reserve, charge or receive, any
compensation which constitutes interest under applicable law in excess of the
maximum amount of interest permitted by law ("Excess Interest"). If any Excess
Interest is provided for or determined by a court of competent jurisdiction to
have been provided for in this Agreement or otherwise contracted for, taken,
reserved, charged or received, then in such event: (a) the provisions of this
Section 2.6 shall govern and control; (b) the Company shall not be obligated to
pay any Excess Interest; (c) any Excess Interest that the Holders may have
contracted for, taken, reserved, charged or received hereunder shall be, at the
Holders' option, (i) applied as a credit against the outstanding principal
balance of the Senior Notes or accrued and unpaid interest (not to exceed the
maximum amount permitted by law), (ii) refunded to the payor thereof, or (iii)
any combination of the foregoing; (d) the interest provided for shall be
automatically reduced to the maximum lawful rate allowed from time to time under
applicable law (the "Maximum Rate"), and this Agreement and the Other Agreements
shall be deemed to have been, and shall be, reformed and modified to reflect
such reduction; and (e) the Company shall have no action against the Holders for
any damages arising due to any Excess Interest. Notwithstanding the foregoing,
if for any period of time interest on any Senior Notes is calculated at the
Maximum Rate rather than the applicable rate under this Agreement and thereafter
such applicable rate becomes less than the Maximum Rate, the rate of interest
payable on such Senior Notes shall remain at the Maximum Rate until the Holders
shall have received the amount of interest which the Holders would have received
during such period on such Senior Notes had the rate of interest not been
limited to the Maximum Rate during such period. All sums paid or agreed to be
paid hereunder for the use, forbearance or detention of sums due shall, to the
extent permitted by applicable law, be amortized, pro-rated, allocated and
spread throughout the full term of the Senior Notes until payment in full so
that the rate or amounts of interest on account of the Senior Notes does not
exceed the Maximum Rate. The terms of this Section 2.9 shall be deemed
incorporated into each Other Agreement and any other document or instrument
directed to the Company by any Holder, whether or not specific reference to this
Section 2.9 is made.
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III. REPRESENTATIONS AND WARRANTIES OF PURCHASERS
3.1 Representations and Warranties of Purchaser. Each Purchaser,
severally and not jointly, represents and warrants to the Company as follows:
(a) Such Purchaser is duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization.
(b) Such Purchaser has the right, power and authority to enter
into, execute, deliver and perform its obligations under this
Agreement and the Other Agreements to which it is a party and its
directors, members, managers, officers or agents executing and
delivering this Agreement are duly authorized to do so. This Agreement
and the Other Agreements to which such Purchaser is a party have been
duly and validly executed and delivered and constitute the legal,
valid and binding obligation of such Purchaser, enforceable in
accordance with its terms except as enforceability may be limited by
bankruptcy, insolvency, fraudulent conveyance or similar laws
affecting creditors' rights generally and general principles of equity
(regardless of whether the application of such principles is
considered in a proceeding in equity or at law).
(c) The execution, delivery and performance by such Purchaser of
this Agreement and the Other Agreements to which it is a party will
not violate the organizational documents of such Purchaser.
(d) The execution, delivery and performance by such Purchaser of
this Agreement and the Other Agreements to which it is a party have
been or prior to the consummation of such transactions will be duly
authorized by all requisite organizational action on the part of such
Purchaser and do not and will not violate, contravene or constitute a
default under any law or any order of any court, governmental
authority or arbitrator.
(e) No authorization, approval or consent of, and no filing or
registration with, any court, governmental authority or third Person
is or will be necessary for the execution, delivery or performance by
such Purchaser of this Agreement and the Other Agreements to which it
is a party or the validity or enforceability thereof, except for such
approvals which have been obtained prior to the date of this Agreement
and remain in full force and effect.
(f) Such Purchaser (i) is an "accredited investor," as that term
is defined in Regulation D under the Securities Act of 1933, as
amended (the "Securities Act"), and (ii) has such knowledge, skill,
sophistication and experience in business and financial matters, based
on actual participation, that it is capable of evaluating the merits
and risks of the purchase of the Senior Notes and Warrants from the
Company and the suitability thereof for such Purchaser.
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(g) Such Purchaser is acquiring the Senior Notes and the Warrants
for investment for its own account and not with a view to, or resale in
connection with, any distribution thereof in violation of applicable
securities laws.
(h) Such Purchaser understands that the Senior Notes and the
Warrants have not been registered under the Securities Act and may be
resold only if registered pursuant to the provisions thereof or if an
exemption from registration is available. The Senior Notes and
Warrants will bear the appropriate legends referencing restrictions on
transfer and will not be offered, sold or transferred in the absence
of registration or exemption under applicable securities laws.
IV. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
To induce Purchasers to enter into this Agreement, the Company
represents and warrants to Purchasers that the following statements are true,
correct and complete:
4.1 Organization and Qualification. The Company is duly incorporated,
validly existing and in good standing as a corporation under the laws of the
State of Delaware and has full and adequate corporate power and authority to own
its Property and conduct its business as now conducted. The Company is duly
licensed or qualified and in good standing in each jurisdiction in which the
nature of the business conducted by it or the nature of the Property owned or
leased by it requires such licensing or qualifying, except where the failure to
do so would not have a Material Adverse Effect.
4.2 Capitalization; Listing.
(a) The authorized capital stock of the Company consists of
(i) 100,000,000 shares of common stock, par value $.001 ("Common Stock"), of
which 67,193,001 shares are issued and outstanding as of the date hereof, no
shares are held in the treasury of the Company, 9,005,500 shares are reserved
for issuance pursuant to the Company's option plans, and 1,091,101 shares are
reserved for issuance upon exercise of warrants issued by the Company (including
the Warrants); and (ii) 1,000,000 shares of preferred stock, of which no shares
are issued and outstanding.
(b) There are outstanding, under the Company option plans,
options to purchase an aggregate of 9,005,500 shares of Common Stock, and there
are outstanding warrants issued by the Company (including the Warrants) to
purchase an aggregate of 1,091,101 shares of Common Stock, all as set forth on
Schedule 4.2(b), which Schedule identifies the terms of such options and
warrants, including, without limitation, the time and price at which such
options and warrants may be exercised, converted or exchanged to acquire Common
Stock. Other than the options and warrants disclosed on Schedule 4.2(b), no
Person owns, of record or beneficially, any rights to acquire capital stock of
the Company, whether pursuant to the exercise of warrants, conversion of
securities, exercise of stock options or otherwise.
(c) All outstanding shares of capital stock of the Company have
been duly authorized and validly issued and are fully paid and nonassessable.
Except as set forth in this
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Section 4.2 and except for changes since the date hereof resulting from the
exercise of options or warrants outstanding on such date, there are outstanding
(i) no shares of capital stock or other voting securities of the Company, (ii)
no securities of the Company convertible into or exchangeable for shares of
capital stock or voting securities of the Company and (iii) no options, warrants
or other rights to acquire from the Company, and no obligation of the Company to
issue, any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of the Company (the items in
Sections 4.2(a) and (b) being referred to collectively as the "Company
Securities"). There are no outstanding obligations of the Company or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any Company Securities
or pay any dividend or make any other distribution in respect thereof.
(d) Except as set forth in Schedule 4.2(d), there are no
outstanding obligations of the Company or any Subsidiary to provide funds to, or
make any investment (in the form of a loan, capital contribution or otherwise)
in, any other Person, other than to the Company's Subsidiaries in the ordinary
course of business consistent with past practice.
(e) Except as set forth in Schedule 4.2(e), there are no
voting trusts or other agreements or understandings with respect to the capital
stock of the Company or the Subsidiaries. Neither the Company nor any Subsidiary
granted (nor is a party to any agreement granting) preemptive rights to any
Person with respect to any class of its capital stock.
(f) The Common Stock is registered pursuant to Section 12(g)
of the Exchange Act, and is listed on The Nasdaq National Market (the "Nasdaq
Stock Market"), and the Company has taken no action designed to, or reasonably
likely to have the effect of, terminating the registration of the Common Stock
under the Exchange Act or delisting the Common Stock from the Nasdaq Stock
Market.
4.3 Subsidiaries. Each Subsidiary is duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is
incorporated or organized, as the case may be, has full and adequate power to
own its Property and conduct its business as now conducted, and is duly licensed
or qualified and in good standing in each jurisdiction in which the nature of
the business conducted by it or the nature of the Property owned or leased by it
requires such licensing or qualifying, except where the failure to do so would
not have a Material Adverse Effect. As of the date hereof, Schedule 4.3 hereto
identifies each Subsidiary, the jurisdiction of its incorporation or
organization, as the case may be, the percentage of issued and outstanding
shares of each class of its capital stock or other equity interests owned by the
Company and/or the other Subsidiaries and, if such percentage is not 100%
(excluding directors' qualifying shares as required by law), a description of
each class of its authorized capital stock and other equity interests and the
number of shares of each class issued and outstanding. All of the outstanding
shares of capital stock and other equity interests of each Subsidiary are
validly issued and outstanding and fully paid and nonassessable and all such
shares and other equity interests indicated on Schedule 4.3 as owned by the
Company or another Subsidiary are owned, beneficially and of record, by the
Company or such Subsidiary free and clear of all Liens other than Permitted
Liens. There are no outstanding commitments or other obligations of any
Subsidiary to issue, and no options, warrants or other rights of any Person to
acquire, any shares of any class of capital stock or other equity interests of
any Subsidiary.
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4.4 SEC Filings. The Company has filed with the United States Securities
and Exchange Commission (the "SEC") all forms, reports, definitive proxy
statements, schedules and registration statements (the "SEC Reports") required
to be filed by it with the SEC since January 1, 1997. No Subsidiary is required
to file any report, form or document with the SEC pursuant to the Exchange Act
or the Securities Act. As of their respective filing dates or, if amended, as of
the date of the last amendment, none of the SEC Reports contained any untrue
statement of a material fact or omitted to state any material fact required to
be stated therein or necessary to make the statements made therein, in the light
of the circumstances under which they were made, not misleading. The SEC Reports
(including, without limitation, any financial statements and schedules included
therein) when filed complied in all material respects with applicable
requirements of the Securities Act and the Exchange Act. As of the date hereof,
except as set forth in Schedule 4.4, there are no amendments or modifications to
agreements, documents or other instruments which previously had been filed by
the Company with the SEC pursuant to the Securities Act or the Exchange Act or
any other agreements, documents or other instruments, which have not yet been
filed with the SEC but which are or will be required to be filed by the Company.
4.5 Authority and Validity of Obligations. The Company has full right
and authority to enter into this Agreement and the Other Agreements executed by
it, to issue the Senior Notes and to perform all of its obligations hereunder
and under the Other Agreements executed by it. Each Subsidiary has full right
and authority to enter into the Other Agreements executed by it, to guarantee
the obligations of the Company under the Senior Notes and to perform all of its
obligations under the Other Agreements executed by it. This Agreement and the
Other Agreements delivered by the Company and by each Subsidiary have been duly
authorized, executed and delivered by such Person and constitute valid and
binding obligations of such Person enforceable against it in accordance with
their terms, except as enforceability may be limited by bankruptcy, insolvency,
fraudulent conveyance or similar laws affecting creditors' rights generally and
general principles of equity (regardless of whether the application of such
principles is considered in a proceeding in equity or at law); and this
Agreement and the Other Agreements do not, nor does the performance or
observance by the Company or any Subsidiary of any of the matters and things
herein or therein provided for, (a) contravene or constitute a default under any
provision of law or any judgment, injunction, order or decree binding upon the
Company or any Subsidiary or any provision of the charter, articles of
incorporation or by-laws, articles of association or operating agreement,
partnership agreement, or other consistent document of the Company or any
Subsidiary, (b) contravene or constitute a default under any covenant, indenture
or agreement of or affecting the Company or any Subsidiary or any of their
Properties, in each case where such contravention or default, individually or in
the aggregate, could reasonably be expected to have a Material Adverse Effect,
or (c) result in the creation or imposition of any Lien on any Property of the
Company or any Subsidiary other than the Permitted Liens.
4.6 Use of Proceeds. The Company shall use the proceeds from the sale of
the Senior Notes in accordance with Section 1.6.
4.7 Financial Statements. The audited consolidated financial statements
and
9
unaudited interim financial statements included in the SEC Reports (including
any related notes and schedules) (collectively, the "Financial Statements")
comply in all material respects with the applicable accounting requirements and
the published rules and regulations of the SEC with respect thereto and have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis by the Company during the periods involved, except
as otherwise described in the notes thereto and, in the case of the unaudited
interim financial statements, subject to usual and recurring year-end
adjustments that have not been and are not expected to be material in amount.
The Financial Statements fairly present in all material respects the financial
position of the Company and its Subsidiaries taken as a whole as of the date set
forth on each of such Financial Statements and the results of operations of the
Company and its Subsidiaries for the periods indicated. Except as set forth in
Schedule 4.7 and except as set forth in the SEC Reports filed and publicly
available and except for liabilities and obligations incurred in the ordinary
course of business consistent with past practice, since the date of the most
recent Financial Statements included in the SEC Reports filed and publicly
available prior to the date hereof, neither the Company nor any of its
Subsidiaries has any liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) which are, individually or in the aggregate,
material to the business, results of operations or financial condition of the
Company and its Subsidiaries, including, without limitation, any liabilities
arising or required to be accrued as a result of the consummation of the
transactions contemplated hereby.
4.8 Absence of Certain Changes or Events. Since December 31, 2001, there
has not been, nor does the Company have reason to know of, any development
(including consummation of the transactions contemplated hereby) or threatened
development of a nature which may cause a Material Adverse Effect. Except as
specifically set forth in Schedule 4.8, since the date of the most recent
Financial Statements included in the SEC Reports filed and publicly available
prior to the date hereof, the Company and each Subsidiary has conducted its
business only in the ordinary course, consistent with past practice.
4.9 Full Disclosure. The written statements and written information
furnished to Purchasers in connection with the negotiation of this Agreement and
the Other Agreements, as supplemented from time to time prior to the Closing
Date and taken as a whole, do not contain any untrue statements of a material
fact or omit a material fact necessary to make the material statements contained
herein or therein not misleading in light of circumstances existing at the time
made, Purchasers acknowledging that as to any projections furnished to
Purchasers, the Company only represents that the same were prepared on the basis
of information and estimates the Company believed at the time to be reasonable
(it being recognized that projections are not to be viewed as fact and that
actual results may differ from projected results). As of their respective dates,
no written correspondence between the Company and the United States Food and
Drug Administration (the "FDA") respecting the Company's clinical trials or
marketing submissions provided by or on behalf of the Company to Purchasers
contained any untrue statement of a material fact or omitted to state any
material fact necessary in order to make the statements therein, in the light of
the circumstance under which they were made, not misleading.
4.10 Intellectual Property. Schedule 4.10 sets forth an accurate and
complete list of all United States and foreign Patents, Trademarks, Trade Names,
domain name registrations (to the
10
Company's Knowledge), and registered copyrights (a) licensed to or from any
third party by the Company or any Subsidiary as described thereon (other than
"shrink-wrap" software licensed to the Company or any Subsidiary), or (b)
assigned to, owned by, registered or applied for by, or in the name of, the
Company or any Subsidiary. Except as expressly set forth in Schedule 4.10, the
Company and the Subsidiaries own, on an exclusive basis, free and clear of all
Liens or any other claims, including, without limitation, any claim of ownership
or other right by any inventor on any Patent, all of the Intellectual Property,
including the Intellectual Property identified in Schedule 4.10. Except as
expressly set forth in Schedule 4.10, all assignments of Intellectual Property
that the Company or any of its Subsidiaries owns, and all change of name
documents relating to said Intellectual Property, have been duly recorded with
the appropriate government patent and trademark office, including, but not
limited to, the United States Patent and Trademark Office, copyright office, and
domain name registry. Except as expressly set forth in Schedule 4.10, neither
the Company nor any Subsidiary pays or receives any royalty from anyone with
respect to any of the Intellectual Property nor has the Company nor any
Subsidiary licensed anyone to use any of the Intellectual Property. All rights
of the Company and the Subsidiaries in and to the Intellectual Property will be
unaffected by the transactions contemplated by this Agreement and the Other
Agreements. Except as expressly set forth in Schedule 4.10, neither the Company
nor any Subsidiary has given or received any notice of any pending conflict
with, or infringement of the rights of others with respect to, any Intellectual
Property or with respect to any license of the Intellectual Property. Except as
expressly set forth in Schedule 4.10, neither the Company nor any Subsidiary is
subject to any Judgment, nor has it entered into or is a party to any contract,
agreement or understanding which restricts or impairs the use of any
Intellectual Property. To the Company's Knowledge, (i) no Intellectual Property
owned, used or under development by the Company or any Subsidiary, and no
services or Products sold by the Company or any Subsidiary, conflict with or
infringe upon any Intellectual Property of any third party (ii) neither the
Company nor any Subsidiary is infringing the rights of any Intellectual Property
owned by any third party and (iii) none of the activities presently being
conducted or planned to be conducted by the Company or any Subsidiary is
infringing or will infringe the Intellectual Property rights of any third party.
Neither the Company nor any Subsidiary has entered into any consent,
indemnification, forbearance to xxx or settlement agreement with respect to
Intellectual Property and no claims have been asserted by any Person with
respect to the validity or enforceability of, or the Company's or any
Subsidiary's ownership of or right to use, the Intellectual Property and, to the
Company's Knowledge, there is no basis for any such claim. The items of
Intellectual Property listed or required to be listed on Schedule 4.10 are
valid, have not lapsed, are enforceable, and have been properly maintained, and
no application, patent or registration relating thereto has lapsed, expired or
been abandoned or canceled or is the subject of cancellation or other
adversarial proceeding, and all pending applications are in good standing and
not opposed. Except as set forth in Schedule 4.10, no Person is infringing on or
violating the Intellectual Property. The Intellectual Property is sufficient in
all respects to permit the continued lawful conduct of the business of the
Company and its Subsidiaries in the manner now conducted. Other than as set
forth in Schedule 4.10, to the Company's Knowledge, no facts exist which could
give rise to a claim by any Person relating to the ownership, licensing,
infringement, validity, enforceability, or use of Intellectual Property.
11
4.11 Compliance with Laws; Hazardous Substances.
(a) Each of the Company and the Subsidiaries is not and has not
been in violation of, and the business of the Company and its Subsidiaries has
been and is being conducted in accordance with, all federal, state, municipal,
foreign and other laws, regulations, orders and other legal requirements
(including common law) applicable thereto (collectively, "Rules"), the failure
to comply with which could, individually or in the aggregate, have a Material
Adverse Effect, and neither the Company nor any Subsidiary is in default with
respect to any Judgment of any Governmental Authority or arbitrator.
(b) Without limiting Section 4.11(a) hereof:
(i) Each of Company and the Subsidiaries has been at all
times and is in compliance with the Resource Conservation and
Recovery Act, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended by the
Superfund Amendments and Reauthorization Act of 1986, the Federal
Water Pollution Control Act, the Clean Air Act, as amended, and
all other Rules relating to pollution or protection of public
health, welfare and the environment, including laws relating to
emissions, discharges, disposal practices, releases or threatened
releases of toxic or hazardous substances or hazardous wastes,
including asbestos and polychlorinated biphenyls, or other
pollutants, contaminants, petroleum products or chemicals
(collectively, "Hazardous Substances") into the environment
(including ambient air, indoor air, surface water, ground water,
land surface or sub-surface strata) or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Substances
(collectively the "Environmental Laws").
(ii) Except where the failure to comply would not,
individually or in the aggregate, have a Material Adverse Effect,
each of the Company and the Subsidiaries has obtained and is in
compliance with all licenses and permits that it is required to
obtain and maintain with respect to the operation of the business
of the Company and its Subsidiaries under the Environmental Laws,
all of which are in full force and effect and are listed in
Schedule 4.11(b), including those which are required (A) to
operate or install any equipment, and (B) to generate, store,
handle, transport, discharge, emit or dispose of Hazardous
Substances used or generated by the Company or its Subsidiaries.
(iii) There are no polychlorinated biphenyls or asbestos
generated, treated, stored, disposed of, or otherwise deposited
in or located on any of the Real Property and there are no above
ground or underground storage tanks located on any of the Real
Property.
(iv) There has been no "release" pursuant to the
Environmental Laws, including 42 U.S.C. Section 9603(a) or 40
C.F.R. Section 264, Subpart F or, from or under any of the Real
Property or any other property from which the business of the
Company or its Subsidiaries has been or is being conducted.
12
(v) To the Company's Knowledge, neither the Company nor any
of its Subsidiaries has any potential liability with respect to
the cleanup of any site at which Hazardous Substances have been
generated, treated, stored, discharged, emitted or disposed of,
and there are no past or present events, conditions or
circumstances which may result in a liability pursuant to
Environmental Laws or interfere with or prevent compliance or
continued compliance by the Company and its Subsidiaries with
applicable Environmental Laws.
(vi) All environmental assessment or impact reports on the
Real Property done for or on behalf of or received by the Company
or any Subsidiary within the last five years of the date of this
Agreement that are within the possession of the Company were
provided to Purchasers.
4.12 Taxes. The Company and each Subsidiary has accurately prepared
and timely filed all required federal, state, local and foreign returns,
estimates, information statements and reports ("Returns") relating to any and
all Taxes relating or attributable to the Company or its Subsidiaries or their
operations and such Returns are accurate and complete in all material respects
and have been completed in accordance with all Rules. The Company and each
Subsidiary has timely paid all Taxes required to be paid with respect to such
Returns and has withheld with respect to its employees all federal and state
income taxes, required to be withheld by it under the Federal Insurance
Contributions Act, as amended, the Federal Unemployment Tax Act, as amended, and
other Taxes it is required to withhold from amounts paid or owing to any
employee, stockholder, creditor or other third party and remitted the same to
the applicable Governmental Authority. The accruals for Taxes on the books and
records of the Company and its Subsidiaries are sufficient to discharge the
Taxes for all periods (or the portion of any period) ending on or prior to the
Closing Date. No Company or Subsidiary has been delinquent in the payment of any
Tax, there is no Tax deficiency outstanding, proposed or assessed against any
Company or such Subsidiary, nor has the Company or any Subsidiary executed any
waiver of any statute of limitations on or extending the period for the
assessment or collection of any Tax. Since January 1, 1995, neither the
Company's nor any Subsidiary's Tax Returns have ever been audited and no audit
or other examination of any Return of the Company or any Subsidiary is presently
in progress nor has the Company or any Subsidiary received notice from a
Governmental Authority indicating an intent to open any such audit or other
examination. Neither the Company nor any Subsidiary has knowledge of any basis
for the assertion of any claim which, if adversely determined, would result in
Liens on the assets of any Company relating to Taxes.
4.13 Agreements, Contracts and Commitments. Except as set forth on
Schedule 4.13, neither the Company nor any Subsidiary is a party or bound by:
(a) any employment or consulting agreement, contract or
commitment with any officer (including, without limitation, any vice
president)or member of the Company's or any Subsidiary's Board of Directors;
(b) any agreement or plan, including, without limitation, any
stock option plan, stock appreciation right plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of benefits of which
will be accelerated, by the occurrence of any of the
13
transactions contemplated by this Agreement or the Other Agreements or the value
of any of the benefits of which will be calculated on the basis of any of the
transactions contemplated by this Agreement;
(c) any agreement of indemnification or guaranty other than
indemnification agreements between the Company and its Subsidiaries and any of
their officers or directors;
(d) any agreement, contract or commitment containing any
covenant limiting the freedom of the Company or its Subsidiaries to engage in
any line of business or compete with any Person or granting any exclusive
distribution rights;
(e) any agreement, contract or commitment currently in force
relating to the disposition or acquisition of assets not in the ordinary course
of business or any ownership interest in any corporation, partnership, joint
venture or other business enterprise;
(f) any joint marketing or development agreement;
(g) any agreement, contract or commitment currently in force
to provide or receive source code for any product, service or technology except
for maintenance purposes;
(h) any agreement, contract or commitment currently in force
to license any third party to manufacture or reproduce any product, service or
technology provided by the Company or its Subsidiaries;
(i) any supply agreement involving an aggregate amount of
$250,000 or more;
(j) any distribution agreement involving an aggregate amount
of $250,000 or more;
(k) any agreement relating to the acquisition, transfer,
development, sharing or license of any asset;
(l) any agreement that contemplates or involves (i) the
payment or delivery of cash or other consideration on or after the date hereof
having a value in excess of $250,000 in the aggregate or (ii) the performance of
services on or after the date hereof having a value in excess of $250,000 in the
aggregate;
(m) (i) any agreement to which any United States federal or
foreign Governmental Authority is a party or has any rights or obligations,
other than purchase orders issued in the ordinary course of business or (ii)
under which any Governmental Authority has any non-standard indemnity or audit
obligations; and
(n) any other agreement, not otherwise identified in clauses
"(a)" through "(m)", if the Company's performance or breach of such agreement
could reasonably be expected to have a Material Adverse Effect.
14
Neither the Company nor any Subsidiary, nor to the Company's
Knowledge, any other party to a Material Contract, has breached, violated or
defaulted under, or received notice that it has breached violated or defaulted
under, any of the material terms or conditions of any of the agreements,
contracts or commitments to which the Company or any of its Subsidiaries are
parties or by which they are bound of the type described in clauses (a) through
(n) above (any such agreement, contract or commitment, a "Material Contract") in
such a manner as would permit any other party to cancel or terminate any such
Material Contract, or would permit any other party to seek damages, which would
be reasonably likely to be material to the Company and its Subsidiaries, taken
as a whole.
4.14 Employee Benefit Plans.
(a) Except as set forth on Schedule 4.14(a), neither the
Company nor any Subsidiary maintains or contributes to, or has any obligation to
maintain or contribute to, or has any direct or indirect liability, whether
contingent or otherwise, with respect to, any plan, program, arrangement,
agreement or commitment which is an employment, consulting or deferred
compensation agreement, or an executive compensation, incentive bonus or other
bonus, employee pension, profit-sharing, savings, retirement, stock option,
stock purchase, severance pay, life, health, disability or accident insurance
plan, or vacation, or other employee benefit plan, program, arrangement,
agreement or commitment, whether oral or written, including, without limitation,
any "employee benefit plan" as defined in Section 3(3) of ERISA and all similar
plans maintained outside the United States and not required by applicable law
(the arrangements set forth on Schedule 4.14(a) being referred to herein as the
"Company Plans").
(b) With respect to each Company Plan, the Company has
delivered, or made available, to Purchasers a current, accurate and complete
copy (or, to the extent no such copy exists, an accurate written description in
English) thereof and, to the extent applicable: (i) any related trust agreement
or other funding instrument; (ii) the most recent IRS determination letter, if
applicable; (iii) any summary plan description and other written communication
(or a description of any oral communications) by the Company or any Subsidiary
to their respective employees concerning the benefits provided under the Company
Plan; and (iv) for the three most recent years, the Form 5500 and attached
schedules, audited financial statements, actuarial valuation reports and any
attorney's response to any auditor's request for information.
(c) Neither the Company, any Subsidiary nor any member of a
Controlled Group maintains or contributes to, or has within the preceding six
years maintained or contributed to, or has had during such period the obligation
to maintain or contribute to, or may have any liability with respect to, whether
contingent or otherwise, with respect to any plan or arrangement subject to
Title IV of ERISA or Section 412 of the Code or any "multiple employer plan"
within the meaning of the Code or ERISA. Neither the Company, any Subsidiary nor
any member of a Controlled Group has at any time contributed to a "multiemployer
plan" (as defined in Section 3(37) of ERISA.
(d) No claim with respect to any Company Plan (other than
routine claims for benefits) is pending.
15
(e) Except where the failure to comply would not, individually
or in the aggregate, have a Material Adverse Effect, each Company Plan has been
established and maintained in compliance with its terms and the requirements
prescribed by any and all applicable statutes, orders, rules and regulations.
(f) All required contributions (including all employer
contributions and employee salary reduction contributions) to each Company Plan
have been paid to such Company Plan or properly accrued on the Company's
financial statements.
(g) Each Company Plan that is intended to be qualified under
Section 401(a) of the Code is so qualified and has been so qualified during the
period since its adoption and each trust created under any such Company Plan is
exempt from tax under Section 501(a) of the Code and has been so exempt since
its creation.
(h) To the Company's Knowledge, no event has occurred in
connection with which the Company, any Subsidiary or any Company Plan, directly
or indirectly, could be subject to any material liability under ERISA, the Code
or any other law, regulation or governmental order applicable to any Company
Plan, or under any agreement, instrument, statute, rule of law or regulation
pursuant to or under which the Company or any Subsidiary has agreed to indemnify
any person against liability incurred under, or for a violation or failure to
satisfy the requirement of, any such statute, regulation or order.
(i) Neither the Company nor any Subsidiary has any obligations
to provide or any direct or indirect liability, whether contingent or otherwise,
with respect to the provision of health or death benefits to or in respect of
any former employee, except as may be required pursuant to Section 4980B of the
Code or other applicable law.
(j) The consummation of the transactions contemplated by this
Agreement and the Other Agreements will not (i) accelerate the time of the
payment or vesting of, or increase the amount of, compensation due to any
employee of the Company or any Subsidiary; (ii) reasonably be expected to result
in any "excess parachute payment" under section 280G of the Code; or (iii)
result in any liability to any present or former employee of the Company or any
Subsidiary. The consummation of any transaction entered into by the Company or
any of its Subsidiaries during the preceding two years did not result in any
"excess parachute payment" under section 280G of the Code.
(k) There are no unfunded obligations under any Company Plan
which are not fully reflected on the Financial Statements in accordance with
GAAP. The Company has no liability, whether absolute or contingent, including
any obligations under any Company Plan, with respect to any misclassification of
any person as an independent contractor rather than as an employee.
4.15 Governmental Authority and Licensing. The Company and its
Subsidiaries have received all licenses, permits, and approvals of all federal,
state, local, and foreign Governmental Authorities necessary to conduct their
businesses, in each case where the failure to obtain or
16
maintain the same could reasonably be expected to have a Material Adverse
Effect. No investigation or proceeding which, if adversely determined, could
reasonably be expected to result in revocation or denial of any material
license, permit, or approval is pending or, to the Company's Knowledge,
threatened.
4.16 FDA Approval. Except as expressly set forth in Schedule 4.16, to
the Company's Knowledge, (i) no Governmental Authority, including, but not
limited to, the FDA, will ultimately prohibit the marketing, sale, distribution,
license or use in the United States or elsewhere of any product that is produced
or marketed, or is proposed to be developed, produced or marketed by the Company
or its Subsidiaries or with third parties (each, a "Product"), (ii) the FDA has
not prohibited any product or process from being marketed or used in the United
States which product or process is substantially similar to any Product in
function or composition, and (iii) neither the Company nor any Subsidiary has
reason to believe that the FDA will ultimately restrict the current intended use
of any Product. Except as expressly set forth in Schedule 4.16, (i) neither the
Company nor any Subsidiary has any Product on clinical hold or for which the FDA
or an institutional review board ("IRB") has withdrawn approval for a clinical
investigation or, to the Company's Knowledge, any reason to expect that any
Product is reasonably likely to be placed on clinical hold or have approval for
an investigation be withdrawn or suspended by the FDA or IRB, (ii) none of the
Company or its Subsidiaries or, to the Company's Knowledge, its employees or
agents, has ever been sanctioned, formally or otherwise, by the FDA, including,
but not limited to, implementation of the FDA integrity policy, (iii) there has
not been any suspensions or debarments by the FDA or other federal departments
and state regulatory bodies against the Company or its Subsidiaries, or to the
Company's Knowledge, any current or former employee of the Company, or to
Company's Knowledge, any current or former clinical investigator participating
in clinical investigations of any Product of the Company or its Subsidiaries,
and (iv) the Company has made available to Purchasers all submissions to the FDA
and the FDA responses (and other material correspondence received from or
submitted to the FDA), including, but not limited to, all FDA warning letters,
regulatory letters, notice of adverse finding letters, and untitled compliance
letters and the relevant responses, received by the Company, any Subsidiary or
any agent thereof relative to the development, marketing or distribution of its
Products
4.17 Good Title; Real Property.
(a) The Company and its Subsidiaries have good and defensible
title (or valid leasehold interests) to their assets as reflected on the balance
sheet set forth in the most recent Financial Statements included in the SEC
Reports filed and publicly available prior to the date hereof (except for sales
of assets in the ordinary course of business or in accordance with this
Agreement), subject to no Liens other than Permitted Liens.
(b) Schedule 4.17 sets forth a complete list and location of all
of the real property owned by the Company or its Subsidiaries (the "Real
Estate"). The Company or the relevant Subsidiary, as applicable, holds fee
simple title to the Real Estate. True and complete copies of (i) all deeds,
title insurance policies and surveys relating to the Real Estate and (ii) all
documents evidencing all Liens upon the Real Estate have been made available to
Purchasers. Schedule 4.17 lists all real property leased, subleased or used by
the Company or its Subsidiaries
17
(the "Leased Real Property"). The Real Estate and Leased Real Property
constitutes all real property and improvements currently owned, leased or used
by the by the Company or its Subsidiaries. The Company has have received no
written notice of, and to the Company's Knowledge, there exists no, material
non-compliance of the Real Estate and Leased Real Property with any applicable
laws, including without limitation, all sanitation, fire, zoning and building
laws and ordinances.
4.18 Litigation. Except as expressly set forth in Schedule 4.18, there
is no action, suit, proceeding, claim, arbitration or investigation pending, or
to the Company's Knowledge threatened, against the Company or any Subsidiary,
nor has the Company or any Subsidiary received any notice of assertion of any
threatened or unasserted action, suit, proceeding, claim, arbitration or
investigation against the Company or any Subsidiary that, if resolved adversely
to the Company or Subsidiary in question, would be likely to have a Material
Adverse Effect in terms of monetary, injunctive or other relief granted against
the Company or its Subsidiary. Except as expressly set forth in Schedule 4.18,
to the Company's Knowledge there is no basis for any action, suit, proceeding,
claim, arbitration or proceeding of the type described in the preceding
sentence.
4.19 Product Liability and Recalls.
(a) Except as disclosed in Schedule 4.19, to the Company's
Knowledge there is no action, suit, proceeding, claim, arbitration or
investigation against the Company, any of its Subsidiaries, or any of their
customers, based on any claim for injury to person or damage to property
resulting in whole or in part from the sale, use or performance of any Product
of, or the performance of any service provided by, the Company or its
Subsidiaries, including, without limitation, any action, suit, proceeding,
claim, arbitration or investigation arising out of the allegedly defective,
unsafe or ineffective manufacture, design, warnings, performance or other
similar characteristics of the Products or services of the Company or its
Subsidiaries.
(b) There is no pending or, to the Company's Knowledge,
threatened recall or investigation of any Product sold by the Company (other
than the T8 recall).
(c) Neither the Company nor any of its Subsidiaries has any
present intent, plan, artifice, scheme or strategy (whether partial or fully
developed) to modify any of its Products in order to prevent a recall or
investigation of such Products.
4.20 Warranties. To the Company's Knowledge, all Products, and all
services provided, by the Company or any Subsidiary have complied, and are in
compliance, in all material respects with all contractual requirements,
warranties, representations or covenants, express or implied, applicable
thereto, and with all applicable governmental, trade association or regulatory
standards and specifications therefor or applicable thereto, including, to the
extent applicable, FDA Good Manufacturing Practices.
4.21 Approvals. No authorization, consent, license, or exemption from,
or filing or registration with, any Governmental Authority, nor any approval or
consent of the stockholders of the Company or any Subsidiary, or any other
Person, is or will be necessary to the valid
18
execution, delivery or performance by the Company or any Subsidiary of this
Agreement or any Other Agreement, except for such approvals which have been
obtained prior to the date of this Agreement and remain in full force and
effect.
4.22 Affiliate Transactions. Neither the Company nor any Subsidiary is
a party to any contracts or agreements with any of its Affiliates on terms and
conditions which are less favorable to the Company or such Subsidiary than would
be usual and customary in similar contracts or agreements between Persons not
affiliated with each other.
4.23 Investment Company; Public Utility Holding Company. Neither the
Company nor any Subsidiary is an "investment company" or a company "controlled"
by an "investment company" within the meaning of the Investment Company Act of
1940, as amended, or a "public utility holding company" within the meaning of
the Public Utility Holding Company Act of 1935, as amended.
4.24 Solvency. Upon receiving the proceeds from the sale of the Senior
Notes as contemplated in this Agreement, the Company and its Subsidiaries, taken
as a whole, will be solvent, will be able to pay their debts as they become due,
and, will have sufficient capital to carry on their business and all businesses
in which they are about to engage.
4.25 Labor and Employee Matters. Except as set forth in Schedule 4.25,
(i) neither the Company nor any Subsidiary is a party to or otherwise bound by
any collective bargaining agreement or any other agreement with any labor
organization applicable to employees of or Persons providing services to the
Company or any Subsidiary (a "Labor Agreement"), and (ii) no current union
representation questions involving employees or independent contractors of the
Company or any Subsidiary are outstanding. There is no actual or, to the
Company's Knowledge, threatened activity or proceeding of any labor organization
(or representative thereof) to organize any unorganized employees of the Company
or any Subsidiary. During the past five years, neither the Company nor any
Subsidiary has experienced any material work stoppage, and no labor dispute,
grievance, slowdown, lockout, strike, work stoppage or other collective labor
action is in effect, pending or, to Company's Knowledge, threatened against or
affecting the business of the Company or the Subsidiaries. Neither the Company
nor any Subsidiary has materially violated any provision of federal or state law
or any governmental rule or regulation, or any order, decree, judgment
arbitration award of any court, arbitrator or any government agency regarding
the terms and conditions of employment of employees, former employees or
prospective employees or other labor related matters, including, without
limitation, laws, rules, regulations, orders, rulings, decrees, judgments and
awards relating to discrimination, fair labor standards and occupational health
and safety, wrongful discharge or violation of the personal rights of employees,
former employees or prospective employees. There has been no mass lay-off, plant
closure, employment loss or other event covered by the Worker Adjustment and
Retraining Notification Act within the last year. During the past year, the
Company has not terminated more than 30 employees at any single location
(excluding any employees terminated for cause within the meaning of applicable
law).
4.26 Indebtedness. Neither the Company nor any of its Subsidiaries has
any Indebtedness other than as set forth on Schedule 4.26 and (except for the
transactions
19
contemplated by this Agreement and the Other Documents) neither the Company nor
any Subsidiary has agreed to create or incur any additional or other
Indebtedness.
4.27 Brokers. Neither the Company nor any of its Subsidiaries is under
any obligation to pay any broker's, finder's or agent's fee or commission in
connection with the transactions referenced in or contemplated by this
Agreement, in each case, except as set forth on Schedule 4.27.
4.28 Insurance. The amount and types of insurance carried by each of
the Company and its Subsidiaries, and the terms and conditions thereof, are
substantially similar to the coverage maintained by companies in the same or
similar business as the Company and its Subsidiaries, respectively and similarly
situated, and include, without limitation, property and casualty insurance,
products liability insurance, general liability insurance, business interruption
insurance and other insurance in the amounts and of the types described in
Section 6.11 hereof.
4.29 Minute Books. The minute books of the Company and the
Subsidiaries, as previously made available to Purchasers, contain, in all
material respects, complete and accurate records of all meetings of and
corporate actions or written consents by the shareholders, Boards of Directors,
and committees of the Boards of Directors of the Company and the Subsidiaries.
4.30 First Priority Lien. Upon execution of the Security Agreement and
the completion of the filings to be made by the Company pursuant thereto, and
the repayment of the Senior Secured Promissory Notes of the Company issued
pursuant to an Indenture, dated September 26, 2001 as referenced in Section
5.1(a)(iv) below, the Holders will have a first priority Lien on, and a security
interest in, the Collateral, subject only to Permitted Liens.
V. CONDITIONS PRECEDENT TO OBLIGATIONS
5.1 Conditions Precedent to Obligations of Purchasers. Purchasers'
obligations hereunder shall be subject to the satisfaction of the following
conditions on or before the Closing Date (subject to any waiver of any such
condition by Purchasers):
(a) Documents. Purchasers shall have received the following,
each in form and substance satisfactory to Purchasers:
(i) Senior Notes. The Senior Notes, duly issued by the
Company in the names of Purchasers as set forth on Annex I
hereto, in principal amounts specified opposite each Purchaser's
name on such annex;
(ii) Warrants. The Warrants, duly issued by the Company in
the names of Purchasers as set forth on Annex I hereto, in the
denominations specified opposite each Purchaser's name on such
annex;
(iii) This Agreement and Other Agreements. This Agreement
and all Other Agreements (including the Registration Rights
Agreement, the Security
20
Agreement and the Guaranty executed by each Subsidiary of the
Company), duly executed by the Company, if applicable;
(iv) Repayment of Senior Secured Promissory Notes. The
Company shall have entered into a written agreement to repay the
Senior Secured Promissory Notes of the Company issued pursuant to
an Indenture, dated August 26, 2001, between the Company and BNY
Western Trust, on terms reasonably acceptable to Purchasers, and
shall have repaid such notes in full in accordance with the terms
of such agreement on the Closing Date (it being agreed by the
parties hereto that the repayment of such notes shall be deemed
to have occurred simultaneously with the closing of the
transactions contemplated hereby and in the Other Agreements);
(v) Opinions of Counsel. Purchasers shall have received
the written legal opinion of Xxxxxxxxx Xxxxx Xxxxxxx & Xxxxx,
counsel to the Company, relating to the transactions contemplated
in form, scope and substance reasonably acceptable to Purchasers;
(vi) General Certificate of the Company's Secretary. A
certificate of the Secretary of the Company together with true,
correct and complete copies of the following:
(A) Certificate of Incorporation. The Certificate of
Incorporation of the Company, including all amendments
thereto, certified by the Secretary of State or appropriate
authority of the jurisdiction of its incorporation and dated
within 10 days prior to the Closing Date;
(B) Bylaws. The Bylaws of the Company, including all
amendments thereto;
(C) Resolutions. The resolutions of the Board of
Directors authorizing the execution, delivery and
performance of this Agreement and the Other Agreement and
authorizing the issuance of the Common Stock issuable upon
the exercise of the Warrants;
(D) Existence and Good Standing Certificates.
Certificates of the appropriate government officials of the
jurisdiction of incorporation of the Company as to its
existence and good standing, and certificates of the
appropriate government officials in each jurisdiction where
the Company does business and where failure to qualify as a
foreign corporation could reasonably be expected to have a
Material Adverse Effect, as to its good standing and due
qualification to do business in such state or, if
applicable, foreign jurisdiction, each dated within 10 days
prior to the Closing Date; and
21
(viii) General Certificate of each Subsidiary's Secretary. A
certificate of the Secretary of each Subsidiary together with true,
correct and complete copies of the following:
(A) Articles or Certificate of Incorporation. The
Articles or Certificate of Incorporation (or analogous document)
of such Subsidiary, including all amendments thereto, certified
by the Secretary of State of the state of its incorporation or
organization and dated within 10 days prior to the Closing Date;
(B) Bylaws. The Bylaws (or analogous document) of such
Subsidiary, including all amendments thereto;
(C) Resolutions. The resolutions of the board of
directors of such Subsidiary authorizing the execution, delivery
and performance of the Guaranty to which such Subsidiary is a
party; and
(D) Existence and Good Standing Certificates.
Certificates of the appropriate government officials of the state
of incorporation of such Subsidiary as to its existence and good
standing, and certificates of the appropriate government
officials in each state where such Subsidiary does business and
where failure to qualify as a foreign corporation could
reasonably be expected to have a Material Adverse Effect, as to
its good standing and due qualification to do business in such
state or, if applicable, foreign jurisdiction, each dated within
10 days prior to the Closing Date;
(ix) Closing Certificate. A certificate executed on behalf of
the Company by its Chief Financial Officer to the effect that (i) all
representations and warranties of the Company contained in this
Agreement shall be true and correct in all material respects (without
duplication of any other applicable materiality qualification) as of
the date hereof, and are true and correct in all material respects
(without duplication of any other applicable materiality
qualification) as of the time of the Closing, as if again made by the
Company at such time; (ii) the Company has performed in all material
respects all of its covenants under this Agreement to be performed by
it on or prior to the Closing Date; and (iii) for the period from
December 31, 2001 to the Closing Date, there shall have been no
occurrence or event which has had or could reasonably be expected to
have a Material Adverse Effect; and
(ix) Additional Information, Other Documents and Agreements.
Such other information, documents, agreements, commitments and
undertakings as Purchasers or their counsel shall reasonably request.
(b) No Material Adverse Effect. For the period from December 31, 2001
to the Closing Date, there shall have been no occurrence or event which has
had or could reasonably be expected to have a Material Adverse Effect.
22
(c) Fees. The Closing Fee, in the amount set forth in Section 1.5
hereof, shall be paid to Purchasers at the Closing. All other fees then
payable pursuant to this Agreement which are due on the Closing Date
(including the fees, expenses and disbursements of Purchasers' counsel,
accountants and other advisers that have been billed at least one Business
Day prior to the Closing Date) shall be paid to Purchasers (or such
counsel, as applicable) at the Closing.
(d) Representations and Warranties. All representations and
warranties of the Company contained in this Agreement shall be true and
correct in all material respects (without duplication of any other
applicable materiality qualification) on the date hereof and on the Closing
Date, as if again made by the Company on such date.
(e) No Litigation; Consummation of Transactions. No injunction,
preliminary injunction, or temporary restraining order shall be threatened
or shall exist which prohibits or could reasonably be expected to prohibit
the transactions contemplated herein or any other related transaction, and
no litigation or similar proceeding (including, without limitation, any
litigation or other proceeding seeking injunctive or similar relief) shall
be threatened or shall exist with respect to the transactions contemplated
herein, which could in the judgment of Purchasers reasonably be expected to
have a Material Adverse Effect.
(f) Compliance with this Agreement. The Company shall have performed
and complied in all material respects with all of its agreements and
conditions set forth or contemplated herein that are required to be
performed or complied with by the Company on or before the Closing Date.
(g) Issuance Permitted by Requirement of Laws. The issuance of the
Senior Notes hereunder and the Warrants, and the consummation of the
transactions contemplated hereby shall not be prohibited by any law or
regulation or any order of any court, governmental authority or arbitrator.
(h) Consents and Approvals. All consents, exemptions, authorizations
or other actions by, notices to, or filings with, governmental authorities
and other Persons required in connection with the execution, delivery or
performance by the Company (or, if applicable, any Subsidiary) of this
Agreement or the Other Agreements have been obtained and are in full force
and effect.
(i) Board of Directors Matters. One member of the Company's Board of
Directors shall have resigned, and Xxx X. Xxxxxx shall have been duly elected by
the remaining directors to the Company's Board of Directors.
(j) Environmental Investigation. The environmental investigation of
the property leased by a Subsidiary of the Company located at 0000 Xxxxx Xxxx,
Xxxxxxxxxx, Xxxxxxxxx conducted on behalf of Purchasers shall not have
uncovered, or led to the discovery
23
of, any fact, circumstance, event or other matter, which, individually or in the
aggregate, may result in a Material Adverse Effect.
5.2 Conditions Precedent to Obligations of the Company. The Company's
obligations hereunder shall be subject to the satisfaction of the following
conditions on or before the Closing Date (subject to any waiver of any such
condition by the Company):
(a) Representations and Warranties. All representations and
warranties of Purchasers contained in this Agreement and the Other
Agreements shall be true and correct in all material respects (without
duplication of any other applicable materiality qualification) on the
Closing Date.
(b) Compliance with this Agreement. Purchasers shall have performed
and complied in all material respects with all of its agreements and
conditions set forth or contemplated herein that are required to be
performed or complied with by Purchasers on or before the Closing Date.
(c) Consents and Approvals. All consents, exemptions, authorizations
or other actions by, notices to, or filings with, governmental authorities
and other Persons required in connection with the execution, delivery or
performance by Purchasers have been obtained and are in full force and
effect.
(d) Closing Certificate. A certificate executed on behalf of each
Purchaser by its authorized officer to the effect that (i) all
representations and warranties of such Purchaser contained in this
Agreement shall be true and correct in all material respects (without
duplication of any other applicable materiality qualification) as of the
date hereof, and are true and correct in all material respects (without
duplication of any other applicable materiality qualification) as of the
time of the Closing, as if again made by the Company at such time; and (ii)
such Purchaser has performed in all material respects all of its covenants
under this Agreement to be performed by it on or prior to the Closing Date.
VI. AFFIRMATIVE COVENANTS
The Company covenants and agrees that, from the date hereof and until the
Senior Notes have been finally and irrevocably paid in full in accordance with
the terms hereof and thereof:
6.1 Financial Statements. The Company will furnish to each Purchaser:
(a) As soon as available, and in any event within 90 days after the
close of each Fiscal Year of the Company, a copy of the consolidated and
consolidating balance sheet of the Company and its Subsidiaries as of the
last day of the Fiscal Year then ended and the consolidated and
consolidating statements of income, retained earnings and cash flows of the
Company and its Subsidiaries for the Fiscal Year then ended, and
accompanying notes thereto, each in reasonable detail showing in
comparative form the figures for the previous Fiscal Year, accompanied in
the case of the consolidated
24
financial statements by an unqualified opinion of an independent public
accounting firm of recognized national standing, to the effect that the
consolidated financial statements have been prepared in accordance with
GAAP and present fairly in accordance with GAAP the consolidated financial
condition of the Company and its Subsidiaries as of the close of such
Fiscal Year and the results of their operations and cash flows for the
Fiscal Year then ended and that an examination of such accounts in
connection with such financial statements has been made in accordance with
generally accepted auditing standards and, accordingly, such examination
included such tests of the accounting records and such other auditing
procedures as were considered necessary in the circumstances.
(b) As soon as available, and in any event within 30 days after the
last day of each calendar month, a copy of the consolidated and
consolidating balance sheet of the Company and its Subsidiaries as of the
last day of such month and the consolidated and consolidating statements of
income, retained earnings and cash flows of the Company and its
Subsidiaries for the month and for the Fiscal Year-to-date period then
ended, each in reasonable detail showing in comparative form the figures
for the corresponding date and period in the previous fiscal year, prepared
by the Company in accordance with GAAP (subject to the absence of footnote
disclosures and year-end audit adjustments) and certified to by its chief
financial officer or another officer of the Company reasonably acceptable
to Purchasers, along with a monthly operating review, a monthly product
sales backlog report, and a comparison of the actual results for such
period to those originally budgeted by the Company and/or its Subsidiaries,
all in reasonable detail, and all other available financial information
relating to the Company or its Subsidiaries prepared for use by the
Company's directors and /or officers.
(c) Simultaneously with the delivery of financial information
pursuant to Section 6.1(b) in respect of any month which is the last month
of any Fiscal Quarter, an analysis (in reasonable detail) of variances
between the results for the portion of the current Fiscal Year ended on the
last day of such Fiscal Quarter and the corresponding period of the
preceding Fiscal Year.
(d) As soon as available, but in any event prior to the end of each
Fiscal Year of the Company and its Subsidiaries, a copy of the Company's
consolidated and consolidating annual budget or business plan for the
following Fiscal Year approved by the Board of Directors and the board of
directors of each of its Subsidiaries, including a projected consolidated
and consolidating revenues, expenses and balance sheet, on a
quarter-by-quarter/month-by-month basis, and any underlying assumptions,
and, promptly during each Fiscal Year, all revisions thereto approved by
the Board of Directors.
(e) As soon as available (unless restricted by applicable
professional standards), copies of all final reports, letters or other
detailed information submitted to the Company and each of its Subsidiaries
by its independent certified public accountants in connection with any
significant aspect of the Company's or any Subsidiary's operations and
financial affairs or each annual, interim or special audit of the financial
25
statements of the Company and its Subsidiaries made by such
accountants, including, without limitation, an executed copy of any
management report (or if any such report is prepared but not executed,
the final draft thereof), and the Company and each of its Subsidiaries
agrees to obtain such a report in connection with each of the annual
audits and, as soon as available and in any event within the period
provided in Section 6.1(a) above, the written statement of the
accountants who certified the audit report thereby required that in the
course of their audit they have obtained no knowledge of any Default or
Event of Default, or, if such accountants have obtained knowledge of
any Event of Default, they shall disclose in such statement the nature
and period of the existence thereof;
(f) As soon as possible after receipt thereof, a copy of each
audit made by any regulatory agency of the books and records of the
Company or any Subsidiary or of notice of any material noncompliance
with any applicable law, regulation or guideline relating to the
Company or any Subsidiary, or its business; and
(h) Promptly after knowledge thereof shall have come to the
attention of any responsible officer of the Company, written notice of
(i) any threatened or pending litigation or governmental proceeding or
labor controversy against the Company or any Subsidiary that, if
resolved adversely to the Company or Subsidiary in question, would be
likely to be material to the Company and its Subsidiaries, taken as a
whole, in terms of monetary, injunctive or other relief granted against
the Company or its Subsidiary or (ii) of the occurrence of an Event of
Default hereunder.
6.2 Certificates; Other Information. The Company will furnish to
each Purchaser all of the following:
(a) Concurrently with the delivery of each of the financial
statements referred to in Section 6.1(a) and Section 6.1(b), a
certificate signed by the chief executive officer or another officer of
the Company and of each of the Subsidiaries reasonably acceptable to
Purchasers (i) stating that no Potential Default or Event of Default
has occurred and is continuing or, if such officer has knowledge of a
Potential Default or Event of Default, the nature thereof and
specifying the steps taken or proposed to remedy such matter, (ii)
showing in reasonable detail the calculations showing compliance with
Sections 7.12 and 7.13, and (iii) stating that the financial statements
attached have been prepared in accordance with GAAP and fairly and
accurately present (subject to year-end audit adjustments, for the
annual certificates) the financial condition and results of operations
of the Company and each of its Subsidiaries at the date and for the
period indicated therein.
(b) As soon as available, (i) a copy of each financial
statement, report, notice or proxy statement sent by the Company to its
security holders generally or by any Subsidiary of the Company to its
security holders other than Company or another Subsidiary of Company,
(ii) a copy of each regular, periodic or special report, registration
statement, or prospectus filed by the Company or any Subsidiary with
any securities exchange or the SEC or any successor agency, and (iii)
copies of all press releases and
26
other statements made available generally by the Company and each of
its Subsidiaries to the public generally concerning material
developments in the Company's or any Subsidiary's business.
(c) Such additional information concerning the Company or any
Subsidiary as Purchasers may reasonably request.
6.3 Books and Records; Accounting System. The Company and its
Subsidiaries will keep (a) proper books of record and account in which full,
true and correct entries will be made of all dealings or transactions of or in
relation to its business and affairs; (b) set up on its books accruals with
respect to all Taxes, assessments, charges, levies and claims; and (c) on a
reasonably current basis set up on its books from its earnings allowances
against doubtful receivables, advances and investments and all other proper
accruals (including, without limitation, by reason of enumeration, accruals for
premiums, if any, due on required payments and accruals for depreciation,
obsolescence, or amortization of properties), which should be set aside from
such earnings in connection with its business. All determinations pursuant to
this subsection shall be made in accordance with, or as required by, GAAP
consistently applied. The Company will maintain and will cause each of its
Subsidiaries to maintain, a modern system of accounting established and
administered in accordance with sound business practices to permit preparation
of consolidated financial statements in conformity with GAAP.
6.4 Financial Disclosure. Each of the Company and its Subsidiaries
hereby irrevocably authorizes and directs its independent public accountants at
any time during the term of this Agreement to exhibit and deliver to each Holder
copies of any of the Company's or any of its Subsidiaries' financial statements,
trial balances or other accounting records of any sort in the accountant's or
auditor's possession, and to disclose to each Holder any information they may
have concerning the Company's or any of its Subsidiaries' financial status and
business operations.
6.5 Disclosure of Material Matters. The Company will, and will cause
each of its Subsidiaries to, immediately upon learning thereof, report to
Purchasers (a) all matters materially affecting the value, enforceability or
collectability of any material portion of its assets including, without
limitation, changes to significant contracts, changes of significant equipment
or real property, the reclamation or repossession of, or the return to the
Company or any of its Subsidiaries of, a material amount of goods and material
claims or disputes asserted by any customer or other obligor, in each case which
matters could reasonably be expected to have a Material Adverse Effect, and (b)
any material adverse change in the relationship between the Company and any of
its suppliers or customers or its Subsidiaries and any of their respective
suppliers or customers which could reasonably be expected to have a Material
Adverse Effect.
6.6 Performance of Obligations. The Company will, and will cause each
of its Subsidiaries to, duly and punctually pay and perform its obligations
under this Agreement and the Other Agreements to which it is a party (including,
without limitation, Section 4.16 of the Security Agreement).
27
6.7 Maintenance of Business. The Company shall, and shall cause each
Subsidiary to, preserve and maintain its existence, except as otherwise provided
in Section 7.4 hereof. The Company shall, and shall cause each Subsidiary to,
preserve and keep in force and effect all licenses, permits, franchises,
approvals, patents, trademarks, trade names, trade styles, copyrights and other
proprietary rights necessary to the proper conduct of its business where the
failure to do so could not reasonably be expected to have a Material Adverse
Effect.
6.8 Maintenance of Properties. The Company shall, and shall cause each
Subsidiary to, maintain, preserve and keep its property, plant and equipment in
good repair, working order and condition (ordinary wear and tear excepted) and
shall from time to time make all needful and proper repairs, renewals,
replacements, additions and betterments thereto so that at all times the
efficiency thereof shall be fully preserved and maintained, except in each case
to the extent that, in the reasonable business judgment of such Person, any such
Property is no longer necessary for the proper conduct of the business of such
Person. The Company will, and will cause each of its Subsidiaries to, at all
times maintain the Intellectual Property in full force and effect, and will
defend and protect the Intellectual Property against all adverse claims, except
to the extent that the failure to so maintain, defend or protect such
Intellectual Property could not reasonably be expected to have a Material
Adverse Effect.
6.9 Payment of Taxes and Assessments. The Company shall duly pay and
discharge, and shall cause each Subsidiary to duly pay and discharge, (a) all
material Taxes, rates, assessments, fees and governmental charges upon or
against it or its Property and (b) all lawful claims for labor, material, and
supplies, which, if unpaid, might become a Lien upon any of its property, in
each case before the same become delinquent and before penalties accrue thereon,
unless and to the extent that the same are being contested in good faith and by
appropriate proceedings which prevent enforcement of the matter under contest
and adequate reserves are provided therefor.
6.10 Compliance with Laws. The Company shall, and shall cause each
Subsidiary to, comply in all respects with the requirements of all federal,
state, local and foreign laws, rules, regulations, ordinances and orders
applicable to or pertaining to its Property or business operations, except where
any such non-compliance, individually or in the aggregate, could not reasonably
be expected to have a Material Adverse Effect or result in a Lien upon any
Property.
6.11 Insurance. The Company shall insure and keep insured, and shall
cause each Subsidiary to insure and keep insured, with good and responsible
insurance companies with a general policyholder service rating of not less than
A+ as rated in the most current available Best's Insurance Report, all insurable
Property owned by it which is of a character usually insured by Persons
similarly situated and operating like Properties against loss or damage from
such hazards and risks, and in such amounts, as are insured by Persons similarly
situated and operating like Properties; and the Company shall insure, and shall
cause each Subsidiary to insure, such other hazards and risks (including,
without limitation, products liability, employers' and public liability risks)
with good and responsible insurance companies with a general policyholder
service rating of not less than A1 as rated in the most current available Best's
Insurance Report as and to the extent usually insured by Persons similarly
situated and conducting similar businesses. The Company shall, upon the request
of Purchasers, furnish to
28
Purchasers a certificate setting forth in summary form the nature and extent of
the insurance maintained pursuant to this Section 6.11.
6.12 Inspection Rights. The Company shall, and shall cause each
Subsidiary to, permit each Purchaser and each of their duly authorized
representatives and agents to visit and inspect any of its Property, corporate
books and financial records, to examine and make copies of its books of accounts
and other financial records, and to discuss its affairs, finances and accounts
with, and to be advised as to the same by, its officers and employees at such
reasonable times and intervals as Purchasers may designate and, so long as no
Potential Default or Event of Default exists, with reasonable prior notice to
the Company. The Company will, and will cause each of its Subsidiaries to, with
reasonable promptness, reimburse Purchasers for all reasonable and documented
expenses incurred by representatives of Purchasers in connection with such
inspections up to $25,000 per year in the aggregate (the "Inspection
Reimbursement Cap"); provided, however, that upon the occurrence of a Potential
Default or an Event of Default, the Inspection Reimbursement Cap shall not
apply, and the Purchasers shall be reimbursed for all such reasonable and
documented expenses.
6.13 Notices. The Company will, and will cause each of its Subsidiaries
to, promptly, but in any event within five Business Days after first becoming
aware thereof, notify each of the Purchasers in writing of:
(a) any matter (including without limitation the commencement
of any action, suit, or proceeding against the Company or its
Subsidiaries), other than general economic conditions and conditions of
the industry in which the Company and its Subsidiaries operate,
generally that has had or could reasonably be expected to have a
Material Adverse Effect, which notice shall specify the nature of such
event and what action the Company or any of it Subsidiaries has taken
or is taking or proposes to take with respect thereto; or
(b) the occurrence of a Potential Default or an Event of
Default, which notice shall specify the nature of such event, condition
or default and what action the Company or any of its Subsidiaries has
taken or is taking or proposes to take with respect thereto.
6.14 Further Assurances. The Company will, and will cause each of its
Subsidiaries to, promptly execute and deliver to Purchasers, from time to time,
upon the request of Purchasers, such supplemental agreements, statements,
assignments and transfers, or instructions on documents as Purchasers may
request in order that the full intent of this Agreement and the Other Agreements
may be carried into effect. In addition, the Company shall, at its own expense,
from time to time do, execute, acknowledge and deliver all further acts, deeds,
conveyances, transfers and assurances, and all financing and continuation
statements and similar notices, reasonably necessary or proper for the
perfection of the security interest being herein provided for in the Collateral,
whether now owned or hereafter acquired.
6.15 Compliance with ERISA and the Code. The Company shall, and shall
cause each Subsidiary to, promptly pay and discharge all obligations and
liabilities arising under ERISA of a character which if unpaid or unperformed
could reasonably be expected to result in the imposition of a Lien against any
of its Property. The Company shall, and shall cause each
29
Subsidiary to, promptly notify each of the Purchasers of: (a) the occurrence of
any reportable event (as defined in ERISA) with respect to a Company Plan, (b)
receipt of any notice from the PBGC of its intention to seek termination of any
Company Plan or appointment of a trustee therefor, (c) its intention to
terminate or withdraw from any Company Plan, and (d) the occurrence of any event
with respect to any Company Plan which would result in the incurrence by the
Company or any Subsidiary of any material liability, fine or penalty, or any
material increase in the contingent liability of the Company or any Subsidiary
with respect to any post-retirement Welfare Plan benefit.
6.16 Guaranties. The Company shall cause each of its Subsidiaries to
execute a Guaranty in substantially the form attached as Exhibit C hereto and
the Security Agreement.
6.17 Compliance with Material Agreements. The Company shall, and shall
cause each Subsidiary to, comply with all material provisions of all material
agreements, indentures, mortgages, deeds of trust or other agreements binding on
it or affecting its properties or business (after giving effect to applicable
grace periods contained therein, if any) where the failure to so comply would
have a Material Adverse Effect.
6.18 Formation of Subsidiaries. Promptly upon the formation or
acquisition of any Subsidiary, the Company shall provide each Purchaser notice
thereof and shall cause each Subsidiary to execute and deliver a Subsidiary
Guaranty and the Security Agreement.
6.19 Mortgages.
(a) The Company shall use its best efforts to deliver to
Purchasers as promptly as possible within 120 days of the Closing Date:
(i) Fully executed and acknowledged counterparts of
Mortgages, in the form of Exhibit E in the case of a leasehold
mortgage or in the form of Exhibit F in the case of a mortgage on
the Denmark Owned Real Property, which Mortgages shall cover such
of the Real Property or Leased Real Property as Purchasers may
require (the "Mortgaged Properties"), together with evidence that
counterparts of each of the Mortgages have been delivered to the
title company insuring the Liens of the Mortgages for recording
in all places to the extent necessary or desirable, in the
judgment of Purchasers, to effectively create a valid or
enforceable first priority mortgage lien (subject only to
Permitted Encumbrances relating thereto) on the Mortgaged
Properties in favor of Purchasers (or such other trustee as may
be required or desired under local law) and for the benefit of
Purchasers, together with the payment of any recording taxes or
charges required by law.
(ii) Mortgage Policies insuring the lien of the Mortgages
issued by a title insurance company reasonably satisfactory to
Purchasers and in amounts satisfactory to Purchasers and assuring
Purchasers that each of the Mortgages is a valid and enforceable
first priority mortgage lien on the applicable Mortgaged
Properties, free and clear of all defects and encumbrances except
for Permitted
30
Encumbrances, and such Mortgage Policies shall otherwise be in
form and substance reasonably satisfactory to Purchasers and
shall include endorsements for any matter that Purchasers in
their discretion may reasonably request, shall not include an
exception for mechanics' liens and shall provide for affirmative
insurance and such reinsurance as Purchasers may reasonably
request.
(iii) Surveys of the Mortgaged Properties that are also Real
Estate, in form and substance reasonably satisfactory to
Purchasers, certified by a licensed professional surveyor
reasonably satisfactory to Purchasers and of a date reasonably
acceptable to Purchasers.
(iv) The opinions of counsel in the jurisdiction in which
the Mortgaged Properties are respectively located relating to the
creation and enforceability of the security interests created by
the Mortgages and the other matters and in form, scope and
substance reasonably acceptable to Purchasers.
(v) Any other documents that are reasonably requested by
Purchasers and are required to create a valid and enforceable
first priority mortgage lien on the Mortgaged Properties.
(b) The Company shall use its reasonable best efforts to deliver
to Purchasers a fully executed Landlord's Consent to Mortgage and Leasehold
Mortgagee Protection Agreement in substantially the form attached hereto as
Exhibit G for each property making up the Leased Real Estate, together with a
fully executed Memorandum of Lease in form required by applicable law and
otherwise satisfactory to Purchasers in their reasonable discretion for each
property making up the Leased Real Estate. Such Memorandum of Lease shall be
recorded in the recorder's office in the jurisdiction in which the Mortgaged
Property is located for property in the United States or in the comparable local
equivalent if the Mortgaged Property is not located in the United States.
6.20 Intellectual Property Matters . Within sixty days of Closing, the
Company and/or the Subsidiaries (i) shall file and/or record with the United
States Patent and Trademark Office ("PTO") and each appropriate foreign
governmental patent and trademark office and domain name registry, all change of
name documents, assignments, and other documentation as necessary to ensure that
the chain of title for all Intellectual Property is accurate and complete,
including, but not limited to: (a) the filing of change of name documents for
Intellectual Property that is currently in the name of Survivalink Corporation
to reflect, as appropriate, the change of name from Surviva Link Corporation to
SurVivaLink Corporation, and from SurVivaLink Corporation to Survivalink
Corporation; (ii) shall file with the PTO and, as necessary, with each
appropriate foreign governmental patent and trademark office, a "Confirmation of
Ownership, Assignment and Release" that (a) confirms that the Company was and is
the owner of the trademarks that were the subject of the April 28, 1992
Trademark Collateral Assignment and Security Agreement to which the Company and
Cytocare, Inc. were parties, (b) releases the security interest granted to
Cytocare, Inc. under said agreement, and (c) assigns to the Company any rights
that Cytocare, Inc. might be deemed to have had in said trademarks; (iii) shall
record in the PTO the assignments of United States Patent Numbers 6,083,246,
6,366,809, and 5,909,138 to Survivalink Corporation and (iv) shall provide to
the Purchasers evidence that is
31
satisfactory to the Purchasers that the Company and/or Subsidiaries has complied
with all of the obligations set forth in this Section 6.20.
Upon compliance with the obligations of the preceding paragraph to the
satisfaction of Purchasers, but not later than 60 days after the Closing, the
Company 1) shall file and/or record, or cause to be filed and/or recorded, with
the PTO and each appropriate foreign governmental patent and trademark office
and domain name registry, the Notice of Grant of Security Interest in
Trademarks, attached as Exhibit H hereto and 2) shall file and/or record, or
cause to be filed and/or recorded, with the PTO, each appropriate foreign
governmental patent and trademark office and domain name registry, and any other
relevant Governmental Authority the Notice of Grant of Security Interest in
Patents, attached as attached as Exhibit I hereto and the Security Agreement, or
the Security Agreement alone (provided that if only the Security Agreement is
filed at the PTO, a foreign governmental patent and trademark office, domain
name registry, or other relevant Governmental Authority in respect of Patents,
it shall be deemed the Notice of Security Interests in Patents hereunder).
Failure to comply with any terms or condition of this Section 6.20
shall constitute an Event of Default.
VII. NEGATIVE COVENANTS
The Company covenants and agrees that from the date hereof until the
Senior Notes have been finally and irrevocably paid in full in accordance with
the terms hereof and thereof:
7.1 Indebtedness. The Company shall not, nor shall it permit any
Subsidiary to, issue, incur, assume, create or have outstanding any
Indebtedness; provided, however, that the foregoing shall not restrict nor
operate to prevent:
(a)(i) Indebtedness in favor of Purchasers under this Agreement
and the Other Agreements; (ii) obligations of the Company arising out
of Interest Rate Agreements and Currency Agreements (which constitute
Hedge Agreements) entered into with financial institutions in the
ordinary course of business; (iii) endorsement of items for deposit or
collection of commercial paper received in the ordinary course of
business; (iv) Indebtedness from time to time owing by any Subsidiary
to the Company or owing by the Company to any Subsidiary in the
ordinary course of business; (vi) Indebtedness listed on Schedule 7.1
hereof; (vii) Indebtedness pursuant to a revolving line of credit to
finance working capital needs (if obtained by the Company) on terms
reasonably satisfactory to Purchasers in an amount not to exceed
$5,000,000 and (viii) purchase money Indebtedness, Capitalized Lease
Obligations, Indebtedness subordinated to the Senior Notes and
unsecured Indebtedness of the Company and its Subsidiaries not
otherwise permitted by this section in an amount not to exceed
$10,000,000 in the aggregate at any one time outstanding
(collectively, "Permitted Indebtedness"); and
(b) any extension, renewal, refinancing, refunding, or
replacement (each a "refinancing") of any Permitted Indebtedness on
such terms and conditions as are, on the whole, not materially more
onerous to the Company than the terms and conditions of
32
such Permitted Indebtedness on the date of such refinancing (including
that the principal amount of such refinancing Indebtedness does not
exceed the principal amount of, plus the amount of accrued and unpaid
interest on, the Indebtedness so refinanced (plus the amount of
reasonable premium and fees and expenses incurred in connection
therewith)).
7.2 Limitation on Liens. The Company shall not, nor shall it permit
any Subsidiary to, create, incur or permit to exist any Lien of any kind on any
Property owned by any such Person; provided, however, that the foregoing shall
not apply to nor operate to prevent: (a) Liens arising by statute in connection
with worker's compensation, unemployment insurance, old age benefits, social
security obligations, taxes, assessments, statutory obligations or other similar
charges (other then Liens arising under ERISA), good faith cash deposits in
connection with tenders, contracts or leases to which the Company or any
Subsidiary is a party or other cash deposits required to be made in the ordinary
course of business, provided in each case that the obligation is not for
borrowed money and that the obligation secured is not overdue or, if overdue, is
being contested in good faith by appropriate proceedings which prevent
enforcement of the matter under contest and adequate reserves have been
established therefor; (b) mechanics', workmen's, materialmen's, landlords',
carriers', or other similar Liens arising in the ordinary course of business
with respect to obligations which are not due or which are being contested in
good faith by appropriate proceedings which prevent enforcement of the matter
under contest; (c) the pledge of assets (other than the Intellectual Property of
the Company or any Subsidiary) for the purpose of securing an appeal, stay or
discharge in the course of any legal proceeding, provided that the aggregate
amount of liabilities of the Company and its Subsidiaries secured by a pledge of
assets permitted under this subsection, including interest and penalties
thereon, if any, shall not be in excess of $250,000 at any one time outstanding;
(d) any interest or title of a lessor under any operating lease; (e) easements,
rights-of-way, restrictions and other similar encumbrances against real property
incurred in the ordinary course of business which, in the aggregate, are not
substantial in amount and which do not materially detract from the value of the
Property subject thereto or materially interfere with the ordinary conduct of
the business of the Company or any Subsidiary; (f) the Liens identified on
Schedule 7.2; (g) Liens on cash deposited with account debtors to secure
performance by the Company or any Subsidiary in the ordinary course of business
subject to customary and reasonable terms; (h) set-off rights of depository
institutions; and (i) Liens created by the Security Agreement (collectively,
"Permitted Liens").
7.3 Investments; Acquisitions; Loans; Advances. The Company shall
not, nor shall it permit any Subsidiary to, directly or indirectly, make, retain
or have outstanding any investments (whether through purchase of stock or
obligations, merger, consolidation or otherwise) in, or loans or advances to,
any other Person, or acquire all or any substantial part of the assets or
business of any other Person or division thereof (each, an "Investment");
provided, however, that the foregoing shall not apply to nor operate to prevent
the following (collectively, "Permitted Investments"):
(a) Investments in direct obligations of the United States of
America or of any agency or instrumentality thereof whose obligations
constitute full faith and credit obligations of the United States of
America, provided that any such obligations shall mature within one
year of the date of issuance thereof;
33
(b) Investments in commercial paper rated at least P-1 by Xxxxx'x
and at least A-1 by S&P maturing within one year of the date of
issuance thereof;
(c) Investments in demand deposit accounts, checking accounts and
certificates of deposit issued by any United States commercial bank,
in each case having capital and surplus of not less than $1 billion
which have a maturity of one year or less;
(d) Investments in repurchase obligations with a term of not more
than seven days for underlying securities of the types described in
clause (a) above entered into with any bank meeting the qualifications
specified in clause (c) above, provided that all such agreements
require physical delivery of the securities securing such repurchase
agreement, except those delivered through the Federal Reserve Book
Entry System;
(e) Investments in money market funds that invest solely, and
which are restricted by their respective charters to invest solely, in
investments of the type described in the immediately preceding clauses
(a), (b), (c), and (d) above;
(f) Intercompany advances made from time to time from the Company
to any one or more Subsidiaries in the ordinary course of business
consistent with past practice to finance working capital needs;
provided, that the aggregate amount of all such intercompany advances
to Subsidiaries organized outside of the United States of America
shall not exceed $3,000,000 (net of any funds repatriated by the
Company from such Subsidiaries);
(g) The Acquisitions set forth on Schedule 7.3;
(h) Other Acquisitions; provided, that (i) no Potential Default
or Event of Default exists or would exist after giving effect to such
Acquisition, (ii) the aggregate consideration (including all
liabilities assumed) paid in connection with all such Acquisitions in
any trailing 12-month period shall not exceed $45,000,000, (iii) the
aggregate consideration (including all liabilities assumed) paid in
connection with any single Acquisition (or a series of related
Acquisitions) shall not exceed $30,000,000; and (iv) any purchase
agreement or similar document executed in connection with such
Acquisition must provide that any "earn-out" payments, if any, may
only be made if immediately prior to such payment and after giving
effect thereto, no Event of Default hereunder shall have occurred and
be continuing;
(i) Investments to the extent permitted by Section 7.1;
(k) Investments in existence on the date hereof and described on
Schedule 7.3;
(l) Loans to officers of the Company in existence on the date
hereof and described on Schedule 7.3, and to any officer or employee
of the Company or any Subsidiary in an amount not to exceed $250,000
in the aggregate at any one time
34
outstanding, but only, in the case of loans (or related loans) in
excess of $10,000, as approved by the Board of Directors of the
Company;
(m) Investments in Interest Rate Agreements and Currency
Agreements constituting Hedge Agreements not otherwise prohibited
under this Agreement; and
(n) Investments in the form of deposits with suppliers in the
ordinary course of business subject to reasonable and customary terms.
In determining the amount of Investments permitted under this Section 7.3,
Investments shall always be taken at the original cost thereof (regardless of
any subsequent appreciation or depreciation therein), and loans and advances
(which constitute Investments) shall be taken at the principal amount thereof
then remaining unpaid.
7.4 Sales. Upon the sale, transfer, lease or other disposition of all
or any part of the Property of the Company or its Subsidiaries (other than
Products (including, without limitation, any disposition of such Property as
part of a sale and leaseback transaction), the Company shall first apply all
sums received from such the sale, transfer, lease or other disposition toward
prepaying the principal amount on the Senior Notes and any accrued and unpaid
interest thereon pursuant to the terms of this Agreement; provided, however,
that this Section 7.4 shall not apply to the following:
(a) The sale, transfer, lease or other disposition of Property
of the Company and its Subsidiaries organized in the United States of
America to one another in the ordinary course of business, and to
Subsidiaries organized outside of the United States of America in
compliance with Schedule 7.4;
(b) The sale of delinquent notes or accounts receivable in the
ordinary course of business for purposes of collection only (and not
for the purpose of any bulk sale or securitization transaction);
(c) The sale, transfer, lease or other disposition of Products
in the ordinary course of business;
(c) The sale, transfer, or other disposition of any tangible
personal property that, in the reasonable business judgment of the
Company or its Subsidiary, has become uneconomical, obsolete, surplus,
or worn out, and which is disposed of in the ordinary course of
business; and
(d) Sales described on Schedule 7.4.
7.5 Restricted Payments. The Company shall not, nor shall it permit
any Subsidiary to, (a) declare or pay any dividends on or make any other
distributions in respect of any class or series of its capital stock, (b)
directly or indirectly purchase, redeem, or otherwise acquire or retire any of
its capital stock or any warrant, option or other right to acquire its capital
stock for a purchase price in excess of $250,000 in the aggregate for all such
transactions from and after the
35
Closing Date, (c) make any payment or distribution on account of any
Indebtedness of the Company or any of its Subsidiaries other than the Senior
Notes in excess of $250,000 in the aggregate during any trailing 12-month
period; provided, however, that the foregoing shall not operate to prevent the
making of dividends or distributions by any wholly-owned Subsidiary of the
Company to its parent corporation in the ordinary course of business.
7.6 Transactions with Affiliates. Except as permitted by this
Agreement, the Company shall not, nor shall it permit any Subsidiary to, enter
into any contract, agreement or business arrangement with any of its Affiliates
(other than with Wholly-owned Subsidiaries, but in strict compliance with the
restrictions set forth in Sections 7.3 and 7.4 hereof) on terms and conditions
which are less favorable to the Company or such Subsidiary than would be usual
and customary in similar contracts, agreements or business arrangements between
Persons not affiliated with each other.
7.7 Fiscal Year. The Company shall not, nor shall it permit any
Subsidiary to, change its fiscal year from its present basis.
7.8 Formation of Subsidiaries. The Company will not, and will not
cause or permit any of its Subsidiaries to, form, acquire or permit the
existence of any, without causing such Subsidiary to execute a Guaranty.
7.9 Nature of Business. The Company shall not, nor shall it permit
any Subsidiary to, engage in any business or activity if as a result the general
nature of the business of the Company or any Subsidiary would be changed in any
material respect from the general nature of the business engaged in by it as of
the Closing Date.
7.10 No Restrictions. Except as provided in this Agreement or the
Other Agreements, the Company shall not permit any Subsidiary to, directly or
indirectly create or otherwise cause or suffer to exist or become effective any
consensual encumbrance or restriction of any kind on the ability of any
Subsidiary to: (a) pay dividends or make any other distribution on any
Subsidiary's capital stock or other equity interests owned by the Company or any
other Subsidiary, (b) pay any indebtedness owed to the Company or any other
Subsidiary, (c) make loans or advances to the Company or any other Subsidiary,
(d) transfer any of its Property to the Company or any other Subsidiary, or (e)
guarantee the Senior Notes.
7.11 Capital Stock of Subsidiaries. The Company shall not permit any
Subsidiary to issue or sell, or obligate itself to issue or sell, except to the
Company or any wholly owned Subsidiary of the Company, any capital stock of such
subsidiary.
7.12 Financial Covenants.
(a) Debt Service Coverage Multiple.
(i) From and including the last day of the full fiscal
quarter that occurs immediately following the first anniversary of the Closing
Date, as of the last day of each Fiscal Month of the Company, the Company shall
ensure that the quotient obtained by dividing (a)
36
EBITDA for the three Fiscal Months of the Company then ended minus Capital
Expenditures for the same three Fiscal Months then ended by (b) Fixed Charges
for the same three Fiscal Months then ended, shall be not less than 0.8.
(ii) From and including the second anniversary of the
Closing Date, as of the last day of each Fiscal Month of the Company, the
Company shall ensure that the quotient obtained by dividing (a) EBITDA for the
twelve Fiscal Months of the Company then ended minus Capital Expenditures for
the same twelve Fiscal Months then ended by (b) Fixed Charges for the same
twelve Fiscal Months then ended, during the periods specified below, shall be
not less than:
(i) EBITDA for the twelve
Fiscal Months of the
Company then ended minus
Capital Expenditures for
the same twelve Fiscal
Months then ended divided
by (ii) Fixed Charges for
the same twelve Fiscal
Months then ended, shall
From and Including To and Including be not less than:
May 30, 2004 June 30, 2005 1.5
July 1, 2005 June 30, 2006 3
July 1, 2006 Thereafter 4
(b) Debt to Capitalization Ratio. The Company shall not as of
the last day of each Fiscal Month of the Company ending during the
periods specified below, permit the ratio of Total Funded Debt to (y)
Total Capitalization plus (z) interest expense resulting solely from
the amortization of the Warrants in accordance with GAAP (the "Funded
Debt to Capitalization Ratio") to be more than:
Funded Debt to
Capitalization Ratio
From and Including To and Including shall not be more than
Closing Date June 30, 2003 45%
July 1, 2003 Thereafter 50%
(c) Leverage Multiple. From and including the second anniversary
of the Closing Date, the Company shall not permit the Leverage
Multiple as of the last day of each Fiscal Month of the Company during
the periods specified below to be more than:
37
Leverage Multiple
From and Including To and Including shall not be more than
May 30, 2004 June 30, 2005 9
July 1, 2005 June 30, 2006 5
July 1, 2006 Thereafter 3.5
(d) Minimum EBITDA. The Company shall not permit EBITDA during any
trailing 12-months period ended during the periods specified below to be less
than:
Any Trailing 12-
Month Period Ended EBITDA shall not be less
From and Including To and Including than
January 1, 2003 December 31, 2003 $ 4 million
January 1, 2004 December 31, 2004 $10 million
January 1, 2005 December 31, 2005 $20 million
January 1, 2006 December 31, 2006 $25 million
January 1, 2007 Thereafter $30 million
7.13 Capital Expenditures. The Company shall not, nor shall it permit any
of its Subsidiaries to, incur Capital Expenditures net of the Net Cash Proceeds
of the sale of any equipment previously accounted for as a Capital Expenditure
in the aggregate during any 12-month period then ended in excess of (i) $500,000
per transaction (or a series of related transactions) or (ii) $2,500,000 during
any trailing 12-month period.
7.14 Use of Proceeds. The Company will not use the proceeds of the sale of
the Senior Notes for any purpose except as set forth in Section 1.6.
VIII. EVENTS OF DEFAULT AND REMEDIES THEREFOR
---------------------------------------
8.1 Events of Default. The occurrence of any one or more of the following
events shall constitute an "Event of Default":
(a) The Company shall default in the payment of the principal of any
Senior Note, when and as the same shall become due and payable, whether at
maturity or at a date fixed for prepayment or by acceleration or otherwise;
(b) The Company shall default in the payment of any installment of
interest or premium on any Senior Note according to the terms thereof, when and
as the same shall become due and payable and such default shall continue for a
period of five days;
38
(c) The Company or any Subsidiary shall fail to pay when due (following
the expiration of applicable notice and cure periods, if any), whether upon
acceleration or otherwise, any Indebtedness, individually or in the aggregate,
having an unpaid principal amount in excess of $250,000;
(d) The Company shall fail (i) to comply with any covenant set forth in
Section 6.7 or Article VII (other than Section 7.5), (ii) to comply with Article
IX; provided, that the failure of the Company to deliver a Board Notice in
accordance with the terms of Section 9.2(b) shall not constitute an Event of
Default in the event that the Designee actually attends the meeting of the Board
of Directors that was the subject of the Board Notice, (iii) to comply with any
covenant set forth in the penultimate sentence of Section 2.3, or in Sections
6.1, 6.2, 6.13, 6.14 or 7.5, which failure continues for a period of 10 days, or
(iv) to pay, perform or observe any other obligations, agreement, covenant, term
or condition contained in this Agreement (other than Section 6.20), the Senior
Notes, the Warrants, the Registration Rights Agreement, each Guaranty, each
Subsidiary Guaranty Agreement or the Security Agreement (except for a failure
covered by Sections 8.1(a) and (b) or clauses (i), (ii) or (iii) of this Section
8.1(d)), which failure continues for a period of 30 days after the earlier of
(A) the date on which such failure shall first become known to any officer of
the Company or (B) written notice thereof is given to the Company by any Holder;
(e) The Company or any Subsidiary shall fail to comply (following the
expiration of applicable notice and cure periods, if any) with any indenture,
mortgage, deed of trust, or other agreement binding on it or affecting its
properties or business involving Indebtedness of such Person having an aggregate
principal or contractual payment amount in excess of $250,000, if the effect of
such failure is to cause, or permit any other party to such agreement to cause,
such Indebtedness to become due prior to its stated maturity;
(f) Any representation or warranty made by the Company in this
Agreement or in any certificate furnished to Purchasers pursuant hereto, was
incorrect in any material respect, when made;
(g) The Company or any Subsidiary shall become subject to an Event of
Bankruptcy;
(h) Any judgment or order for payment of money involving in the
aggregate at any time an amount in excess of $1,000,000 in excess of any
applicable insurance coverage shall be entered against the Company or any
Subsidiary or any of their assets, and which remains undischarged, unvacated,
unbonded or unstayed for a period of 45 days;
(i) Any Subsidiary shall revoke or attempt to revoke its Guaranty, or
shall terminate or repudiate its liability thereunder or shall fail to make any
payment when due thereunder;
39
(j) The Company shall fail to repay in full the Senior Secured
Promissory Notes of the Company issued pursuant to an Indenture, dated August
26, 2001, between the Company and BNY Western Trust on the Closing Day; or
(k) The Company shall fail to comply with the terms and conditions of
Section 6.20 hereof.
8.2 Remedies of Holders upon Occurrence of Event of Default. When (a) any
Event of Default described in Sections 8.1(a) and (b) above has occurred and is
continuing, any Holder or Holders, individually or collectively, holding an
aggregate principal amount of the Senior Notes equal to or greater than
$20,000,000, may, in addition to any other right, power or remedy permitted by
law, declare the entire amount of such Holder's or Holders' Senior Notes,
including, without limitation, the entire principal, all accrued interest and
any premiums then outstanding under such Holder's or Holders' Senior Notes, to
be, and the same shall thereupon become, forthwith due and payable, without any
presentment, demand, protest, notice of default, notice of intention to
accelerate, notice of acceleration or other notice of any kind, all of which are
hereby expressly waived, and in such event the Company forthwith pay to such
Holder or Holders an amount equal to 100% of the amount thereof, (b) any other
Event of Default (i.e., any Event of Default not described in clause (a)
preceding), other than any Event of Default described in Section 8.1(g) above,
has occurred and is continuing, Requisite Holders may, in addition to any other
right, power or remedy permitted by law, declare the entire amount of the Senior
Notes, including, without limitation, the entire principal, premium (if any) and
any and all accrued interest then outstanding under the Senior Notes, to be, and
the same shall thereupon become, forthwith due and payable, without presentment,
demand, protest, notice of default, notice of intention to accelerate, notice of
acceleration or other notice of any kind, all of which are expressly waived, and
in such event the Company shall forthwith pay to each Holder an amount equal to
its pro rata share of the total amount thereof, and (c) any Event of Default
described in Section 8.1(g) above shall occur, all of the Senior Notes,
including, without limitation, the entire principal, and all accrued interest
then outstanding under the Senior Notes, shall thereupon be forthwith due and
payable, without any presentment, demand, protest, notice of default, notice of
intention to accelerate, notice of acceleration or other notice of any kind
(including any notice by the Holders of the Senior Notes), all of which are
hereby expressly waived by the Company, and the Company will forthwith pay to
each Holder an amount equal to its pro rata share of the total amount thereof.
8.3 Annulment of Acceleration. The provisions of the foregoing Section 8.2
are subject to the condition that, if all or any part of the Senior Notes have
been declared or have otherwise become immediately due and payable by reason of
the occurrence of any Event of Default, the accelerating Holder (in the event of
an acceleration under either Section 8.1(a). (b) or (c)) or Requisite Holders
(in the event of an acceleration under Section 8.1(d)) may, by written
instrument delivered to the Company (an "Annulment Notice"), rescind and annul
such declaration and the consequences thereof as to the applicable Senior Notes,
provided, that (a) at the time such Annulment Notice is delivered no judgment or
decree has been entered for the payment of any monies due pursuant to such
Senior Notes in connection therewith, and (b) all arrears of interest and all
other sums payable on such Senior Notes in connection therewith (except any
principal or interest which has become due and payable solely by reason of such
40
declaration under Section 8.2 hereof) shall have been duly paid or deferred by
the Holder of the Senior Notes agreeing to such rescission and annulment; and
provided further, that no such rescission and annulment shall extend to or
affect any subsequent Potential Default or Event of Default or impair any right
consequent thereto, and shall not be deemed a waiver of the Event of Default
giving rise to the acceleration unless specifically waived in writing by the
Requisite Holders.
8.4 Remedies. If any Event of Default shall occur and be continuing, the
Requisite Holders on behalf of all Holders may exercise any right or remedy they
have at law, in equity or under this Agreement. No right or remedy conferred
upon or reserved to any Holder or Holders under this Agreement is intended to be
exclusive of any other right or remedy, and every right and remedy shall be
cumulative and in addition to every other right or remedy given hereunder or now
or hereafter existing under any applicable law. Every right and remedy given by
this Agreement or by applicable law to any Holder or Holders may be exercised
from time to time and as often as may be deemed expedient by such Holder or
Holders, as the case may be.
8.5 Conduct No Waiver. No course of dealing on the part of any Holder, nor
any delay or failure on the part of any Holder to exercise any of its rights,
shall operate as a waiver of such right or otherwise prejudice any Holder's
rights, powers and remedies.
8.6 Rights Regarding Collateral. The Company agrees that when any Event of
Default has occurred and is continuing, in addition to the rights set forth
above, Purchasers shall have the rights, options, duties and remedies of a
secured party as permitted by law, and as set forth in the Security Agreement.
IX. BOARD OF DIRECTORS MATTERS
9.1 Right to Designate Directors.
(a) The Company shall take all necessary actions within its control
(including, without limitation, calling special board and stockholder meetings),
so that:
(i) So long as Purchasers continue to own at least 50% of the
Warrant Shares, Purchasers shall have the right, but not the obligation, at the
direction of Purchasers holding 51% or more of the Warrant Shares then owned by
Purchasers, to designate two directors to the Company's Board of Directors; and
(ii) So long as Purchasers continue to own at least 25% of the
Warrant Shares, Purchasers shall have the right, but not the obligation, at the
direction of Purchasers holding 51% or more of the Warrant Shares then owned by
Purchasers, to designate one director to the Company's Board of Directors.
(b) Up to two directors designated by Purchasers pursuant to Section
9.1(a) hereof shall have the right, upon request, to serve on (a) each committee
of the Board of Directors of the Company and (b) the Board of Directors of each
material Subsidiary.
41
(c) So long as Purchasers are entitled to designate at least one
director to the Company's Board of Directors pursuant to Section 9.1(a) hereof,
the Company shall not increase the size of its Board of Directors to above seven
members.
(d) So long as Purchasers are entitled to designate a director to the
Company's Board of Directors pursuant to Section 9.1(a) hereof and such director
has not been so designated, when requested by Purchasers holding 51% or more of
the Warrant Shares then owned by the Purchasers, the Company shall, as promptly
as possible, cause a member of the Company's Board of Directors not designated
by Purchasers to resign from the Board of Directors, and the remaining directors
shall then fill such vacancy by as promptly as possible electing the individual
designated by Purchasers to the Company's Board of Directors pursuant to Section
9.1(a) hereof. The Company shall not, by amendment of its Certificate of
Incorporation or By-laws, by entering into any contract, agreement or
understanding with any Person or any other voluntary action, avoid or seek to
avoid the carrying out of all the provisions of this Section 9.1(d) with the
tenor and purpose of such section.
(e) Each Purchaser and the Company agrees that, so long as Purchasers
are entitled to designate two directors to the Company's Board of Directors
pursuant to Section 9.1(a) hereof: (i) as long as Perseus Market Opportunity
Fund, L.P. (the "Market Opportunity Fund") continues to own 90% of the Warrant
Shares purchased by it at the Closing, the Market Opportunity Fund shall have
the right, but not the obligation, to select one director that the Purchasers
are so entitled to designate and (ii) as long as Cardiac Science Co-Investment,
L.P. (the "Co-Investment Fund") continues to own 90% of the Warrant Shares
purchased by it at the Closing, the Co-Investment Fund shall have the right, but
not the obligation, to select one director that the Purchasers are so entitled
to designate.
9.2 Observation Rights. When Purchasers are no longer entitled to designate
Directors to the Company's Board of Directors pursuant to pursuant to Section
9.1(a) hereof, but so long as Purchasers continue to own at least 25% of the
Senior Notes issued to Purchasers, the Company:
(a) will permit the Requisite Holders to designate, by written notice
to the Company, two individuals (the "Designees") to attend and observe all
meetings of the Board of Directors of the Company;
(b) provide the Designees notice of all meetings or actions to be taken
without a meeting of the Board of Directors of the Company at the same time
notice is given to the members of the Board of Directors of the Company;
(c) provide to such Designees a copy of all materials distributed at
such meetings meeting of the Board of Directors of the Company or in connection
with actions taken without a meeting;
(d) permit such Designees to participate in discussions at such meeting
of the Board of Directors of the Company in a reasonable manner; and
42
(e) permit such Designees to consult with and advise the directors and
executive officers of the Company in a reasonable manner;
provided that, any such Designee, prior to participating or receiving any
information relating to any proceedings of the Board of Directors of the
Company, will enter into a confidentiality agreement reasonably satisfactory to
the Company and such Designee.
9.3 Indemnification and Insurance.
(a) The Company agrees to indemnify and hold harmless the members of
the Company's and any Subsidiary's Board of Directors who were designated by
Purchasers (the "Covered Parties") against any losses, claims, damages,
judgments, settlements, liabilities, costs or expenses (including without
limitation attorneys' fees and disbursements) incurred in connection with any
claim, action, suit proceeding or investigation arising out of or pertaining to
acts or omissions, or alleged acts or omissions, by them in their capacities as
directors of the Company or any Subsidiary to the fullest extent permitted under
applicable Delaware law.
(b) From and after the Closing, the Company shall maintain in effect
its current directors' and officers' liability insurance policy (the "Policy"),
and such Policy shall cover the Covered Parties. Promptly (but not later than 60
days following the Closing), the Company shall evaluate its directors' and
officers' liability insurance coverage and enter into an endorsement or
amendment to its current Policy or purchase a new Policy covering the Covered
Parties, in either case, in form and substance reasonably satisfactory to
Purchasers, so that the current Policy as so endorsed or amended or such new
Policy shall be of the type and in an amount customarily maintained by other
companies with comparable assets and operations and engaged in comparable
businesses as the Company.
X. REGISTRATION, TRANSFER AND REPLACEMENT OF SENIOR NOTES
10.1 Senior Note Register. The Company shall cause to be kept at its
principal business office a register for the registration and registration of
transfer of the Senior Notes. The names and addresses of the Holders of the
Senior Notes, the transfer thereof and the name and address of the transferee of
the Senior Notes shall be recorded in such register. Prior to due presentment
for registration of transfer, the Holder in whose name the Senior Notes is
registered shall be deemed and treated as the owner and holder thereof for all
purposes under this Agreement, and the Company shall not be affected by any
notice or knowledge to the contrary.
10.2 Issuance of New Senior Note upon Exchange or Transfer. Upon surrender
for exchange or registration of transfer of any Senior Note at the office of the
Company designated for notices in accordance with Section 12.3 hereof, the
Company shall execute and deliver, at its expense, one or more new Senior Notes
of any authorized denomination requested by the Holder of, and in exchange for,
the surrendered Senior Note, each dated the date to which interest has been paid
on the Senior Note so surrendered (or, if no interest has been paid, the date of
the surrendered Senior Note), but in the same aggregate unpaid principal amount
as the surrendered Senior Note, and registered in the name of such Person or
Persons as shall be designated in writing by such Holder; provided, that the
Company may require payment of a sum sufficient to pay all Taxes in connection
with any transfer or exchange pursuant to this Section 10.3. Every
43
Senior Note surrendered for registration of transfer shall be duly endorsed, or
be accompanied by a written instrument of transfer duly executed, by the Holder
of such Senior Note or by such Holder's attorney duly authorized in writing and
shall be accompanied by the address for notices for each transferee.
10.3 Replacement of Senior Note. Upon receipt of evidence satisfactory
to the Company of the ownership of and the loss, theft, mutilation or
destruction of any Senior Note and, in the case of any such loss, theft or
destruction, upon delivery of a bond of indemnity in such form and amount as
shall be reasonably satisfactory to the Company or, in the event of such
mutilation upon surrender and cancellation of such Senior Note, the Company,
without charge to the Holder thereof, will make and deliver a new Senior Note of
like tenor and the same series in lieu of such lost, stolen, destroyed or
mutilated Senior Note. If any such lost, stolen or destroyed Senior Note is
owned by (i) Purchasers, then the affidavit of an authorized officer of such
owner setting forth the fact of loss, theft or destruction and of its ownership
of the Senior Note at the time of such loss, theft or destruction shall be
accepted as satisfactory evidence thereof, and (ii) any other Holder (i.e., any
Holder that is not a Purchaser) whose net worth is at least $100,000,000 or
whose credit is otherwise satisfactory to the Company, then such Holder's own
unsecured agreement of indemnity shall be deemed to be satisfactory and, in
either case, no further indemnity shall be required as a condition to the
execution and delivery of a new Senior Note.
10.4 Legend. The Senior Notes, and any new or replacement Senior Note
therefor, shall bear the following legend:
"THIS NOTE HAS BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR
FOR SALE IN CONNECTION WITH, THE DISTRIBUTION THEREOF. THIS NOTE HAS
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE SECURITIES LAWS, AND MAY NOT BE PLEDGED, SOLD, OFFERED FOR
SALE, TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
REGISTRATION UNDER OR EXEMPTION FROM SUCH ACT AND ALL APPLICABLE STATE
SECURITIES LAWS."
"THIS NOTE IS SUBJECT TO THE TERMS AND PROVISIONS OF A SENIOR NOTE AND
WARRANT PURCHASE AGREEMENT, DATED AS OF MAY 29, 2002, BY AND AMONG
CARDIAC SCIENCE INC. (THE "COMPANY") AND THE PURCHASERS NAMED THEREIN.
COPIES OF SUCH AGREEMENT ARE AVAILABLE AT THE EXECUTIVE OFFICES OF THE
COMPANY."
44
XI. INTERPRETATION OF AGREEMENT
11.1 Certain Terms Defined. When used in this Agreement, the terms set
forth below are defined as follows:
"Acquisition" means any transaction or any series of related
transactions, consummated after the date of this Agreement, by which
the Company or any Subsidiary (a) acquires any on-going business or any
assets of any firm, corporation or division thereof, whether through
purchase of assets, merger or otherwise, or (b) directly or indirectly
acquires (in one transaction or as the most recent transaction in a
series of transactions) the voting securities in any Person.
"Affiliate" means any Person directly or indirectly controlling or
controlled by, or under direct or indirect common control with, another
Person. A Person shall be deemed to control another Person for the
purposes of this definition if such Person possesses, directly or
indirectly, the power to direct, or cause the direction of, the
management and policies of the other Person, whether through the
ownership of voting securities, common directors, trustees or officers,
by contract or otherwise; provided, that, in any event for purposes of
this definition, any Person that owns, directly or indirectly, 10% or
more of the securities having the ordinary voting power for the
election of directors or governing body of a corporation or 10% or more
of the partnership or other ownership interest of any other Person
(other than as a limited partner of such other Person) will be deemed
to control such corporation or other Person.
"Board of Directors" shall mean the Board of Directors of the Company.
"Business Day" means each day of the week except Saturdays, Sundays,
and days on which banking institutions are authorized by law to close
in the State of New York or California.
"Capital Expenditures" means, with respect to the Company and its
Subsidiaries for any period, the aggregate amount of all expenditures
(whether paid in cash or accrued as a liability) by the Company and its
Subsidiaries during that period during which, in accordance with GAAP,
are or should be included as "additions to property, plant or
equipment" or similar items reflected in the statement of cash flows of
the Company and its Subsidiaries.
"Capital Lease" means any lease of any Property which, in accordance
with GAAP, is required to be capitalized on the balance sheet of the
lessee.
"Capitalized Lease Obligations" means, for any Person, the amount of
the liability shown on the balance sheet of such Person in respect of a
Capital Lease determined in accordance with GAAP.
"Cash" means money, currency or credit balance in a Deposit Account.
45
"Cash Flow" means, with reference to any period, Net Income for such period
plus the sum of all amounts deducted in arriving at such Net Income amount
in respect of all charges for (a) depreciation and amortization for such
period, (b) deferred Taxes for such period, and (c) all other non-cash
items to Net Income for such period.
"Change of Control" means (a)(i) the merger or consolidation of the Company
into or with one or more Persons, (ii) the merger or consolidation of one
or more Persons into or with the Company, or (iii) a tender offer or other
business combination if, in the case of (i), (ii) or (iii), the
securityholders of the Company prior to such merger or consolidation do not
retain at least a majority of the voting power of the surviving Person or
(b) the voluntary sale, conveyance, exchange or transfer (each, a "Sale")
to another Person of (i) the voting capital stock of the Company if, after
such Sale the securityholders of the Company prior to such Sale do not
retain at least a majority of the voting power of the Company or (ii) more
than 50% of the assets of the Company and its Subsidiaries on a
consolidated basis (determined by reference to either book value (in
accordance with GAAP) or fair market value of such assets).
"Code" means the Internal Revenue Code of 1986, as amended and in effect
from time to time, and the regulations promulgated thereunder.
"Collateral" is defined in the Security Agreement.
"Common Stock" is defined in Section 4.2.
"Company's Knowledge" means, with respect to any fact, circumstance, event
or other matter in question, the actual knowledge of such fact,
circumstance, event or other matter, after due inquiry by individuals
charged with administrative or operational responsibility for such matters,
by any individual set forth on Schedule 11.1.
"Controlled Group" means all members of a controlled group of corporations
and all trades or businesses (whether or not incorporated) under common
control which, together with the Company, are treated as a single employer
under Section 414 of the Code.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement, futures contract, option contract, synthetic cap or other
similar agreement or arrangement to which Company or any of its
Subsidiaries is a party.
"Copyright" means all works of authorship to which copyright rights attach,
whether or not registered.
"Denmark Owned Real Property" means the property owned by Cardiac Science
International A/S, located at Xxxxxxxxxx 0, Xxxxxxx, Xxxxxxx.
"Designee" is defined in Section 9.2.
46
"Deposit Account" means a demand, time, savings, passbook or like account
with a bank, savings and loan association, credit union or like
organization, other than an account evidenced by a negotiable certificate
of deposit.
"Disposition" means the sale, lease, conveyance, or other disposition of
Property, other than sales or other dispositions expressly permitted under
Section 7.4(a), (b), (e) or (f) hereof.
"Dollars" and the sign "$" mean the lawful money of the United States of
America.
"EBITDA" means, with reference to any period, Net Income for such period
plus the sum of all amounts deducted in arriving at such Net Income amount
in respect of (a) Interest Expense for such period, (b) foreign, federal,
state and local income Taxes (whether paid or deferred) for such period,
(c) depreciation and amortization for such period, and (d) the aggregate
amount of write-offs of expenses arising in connection with (i) prior
issuances of debt or equity, (ii) accretion expense with respect to options
or rights to acquire capital stock of the Company or any Subsidiary and
(iii) non-cash dividend payments required to be recorded.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor thereto.
"Event of Bankruptcy" means any of (a) the filing by a Person of a
voluntary petition in bankruptcy under any provision of any bankruptcy law
or a petition to take advantage of any insolvency act, (b) the admission in
writing by the Company of its inability to pay its debts generally as they
become due, (c) the appointment of a receiver or receivers for all or a
material part of a Person's assets with the consent of such Person, (d) the
filing of any bankruptcy, arrangement or reorganization petition by or,
with the consent of a Person, against such Person under any provision of
any bankruptcy law, (e) a receiver, liquidator or trustee of a Person or a
substantial part of its assets shall be appointed pursuant to the Federal
Bankruptcy Code by the order of a court of competent jurisdiction which
shall not be dismissed or stayed within 60 days, or (f) an involuntary
petition to reorganize or liquidate a Person pursuant to the Federal
Bankruptcy Code shall be filed against such Person and shall not be
dismissed or stayed within 60 days.
"Event of Default" is defined in Section 8.1.
"Event of Loss" means, with respect to any Property, any of the following:
(a) any loss, destruction or damage of such Property or (b) any
condemnation, seizure, or taking, by exercise of the power of eminent
domain or otherwise, of such Property, or confiscation of such Property or
the requisition of the use of such Property.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder.
"FDA" is defined in Section 4.9.
47
"Financial Statement" is defined in Section 4.7.
"Fiscal Month" means a fiscal month of any Fiscal Year.
"Fiscal Quarter" means a fiscal quarter of any Fiscal Year.
"Fiscal Year" means the fiscal year of the Company and its Subsidiaries
ending on December 31 of each calendar year.
"Fixed Charges" means, with reference to any period, the sum of (a) all
scheduled payments of principal made within the past twelve calendar months
with respect to Indebtedness of the Company and its Subsidiaries, plus (b)
Interest Expense for such period (except for the interest expense resulting
solely from the amortization of the Warrants in accordance with GAAP), plus
(c) payments pursuant to Capital Leases for such period.
"GAAP" means generally accepted accounting principles, applied on a
consistent basis, as set forth in Opinions of the Accounting Principles
Board of the American Institute of Certified Public Accountants and/or in
statements of the Financial Accounting Standards Board and/or their
respective successors and which are applicable in the circumstances as of
the date in question. Accounting principles are applied on a "consistent
basis" when the accounting principles observed in a current period are
comparable in all material respects to those accounting principles applied
in a preceding period.
"Governmental Authority" shall mean foreign, domestic, federal,
territorial, state, provincial, local or municipal governmental authority,
quasi-governmental authority, instrumentality, court, government or
self-regulatory organization, commission, tribunal or organization or any
regulatory, administrative or other agency, or any political or other
subdivision, department, bureau, official or branch of any of the
foregoing.
"Guaranty" means any guaranty agreement executed in favor of Purchasers
with respect to payment and performance of the Senior Notes, in form and
substance satisfactory to Requisite Holder, including any Subsidiary
Guaranty Agreement.
"Hedge Agreement" means an Interest Rate Agreement or a Currency Agreement
designed to hedge against fluctuations in interest rates or currency
values, respectively.
"Holder" when used in reference to the Senior Notes, means the Person or
Persons who, at the time of determination, is the lawful owner of all or a
portion of the Senior Notes. Unless otherwise provided in this Agreement,
in each instance that the Holders are required to request or consent to an
action, the Holders will be deemed to have requested or consented to such
action if the Requisite Holders so request or consent.
"Indebtedness" means for any Person (without duplication) (a) all
indebtedness of such Person for borrowed money, whether current or funded,
or secured or unsecured, (b) all indebtedness for the deferred purchase
price of Property or services, (c) all indebtedness
48
created or arising under any conditional sale or other title retention
agreement with respect to Property acquired by such Person (even though the
rights and remedies of the seller or lender under such agreement in the
event of a default are limited to repossession or sale of such Property),
(d) all indebtedness secured by a purchase money mortgage or other Lien to
secure all or part of the purchase price of Property subject to such
mortgage or Lien, (e) all obligations under leases which shall have been or
must be, in accordance with GAAP, recorded as Capital Leases in respect of
which such Person is liable as lessee, (f) any liability in respect of
banker's acceptances or letters of credit, (g) any indebtedness, whether or
not assumed, secured by Liens on Property acquired by such Person at the
time of acquisition thereof, and (h) all indebtedness referred to in clause
(a), (b), (c), (d), (e), (f) or (g) above which is directly or indirectly
guaranteed by such Person or which such Person has agreed (contingently or
otherwise) to purchase or otherwise acquire or in respect of which any of
them have otherwise assured a creditor against loss, it being understood
that the term "Indebtedness" shall not include (x) trade payables arising
in the ordinary course of business, (y) operating leases, or (z) employment
agreements and earn-out agreements (other than any cash payments thereunder
that are in the nature of a deferred purchase price for an Acquisition in
accordance with GAAP).
"Institutional Investor" means any bank, trust company, savings and loan
association or other financial institution, any pension plan, any
investment company, any insurance company, any broker or dealer, or any
other similar financial institution or entity, regardless of legal form.
"Intellectual Property" means all (i) Patents, (ii) Trademarks, (iii) Trade
Names, (iv) Know-how, (v) web sites, (vi) domain names, (vii) proprietary
rights in trade dress and packaging, and (viii) shop rights, copyrights,
inventions, trade secrets, service marks and all other intellectual
property rights of the Company or and Subsidiaries, in each case whether
registered or not and in each case wherever such rights exist throughout
the world, and including the right to recover for any past infringement.
"Interest Expense" means, with reference to any period, the sum of all cash
interest charges net of interest income (including imputed interest charges
with respect to Capitalized Lease Obligations and all amortization of debt
discount and expense, but excluding paid-in-kind interest and dividends) of
the Company and its Subsidiaries for such period determined on a
consolidated basis in accordance with GAAP. Interest Expense shall give
effect to any net payments made or received by the Company or any of its
Subsidiaries with respect to any Hedge Agreements in effect during the
applicable period (or any portion thereof).
"Interest Rate Agreement" means any interest rate swap agreement, interest
rate cap agreement, interest rate collar agreement or other similar
agreement or arrangement to which Company or any of its Subsidiaries is a
party.
"Investment" is defined in Section 7.3.
49
"Judgment" shall mean any order, decree, writ, injunction, award or
judgment or any court or other Governmental Authority or any
arbitrator.
"Leased Real Property" is defined in Section 4.17(b).
"Leverage Multiple" means, as of the last day of any Fiscal Month of
the Company, the quotient obtained by dividing (i) Total Funded Debt of
the Company and its Subsidiaries as of the last day of such Fiscal
Month by (ii) EBITDA of the Company and its Subsidiaries for the period
of twelve Fiscal Months then ended.
"Lien" means any lien, mortgage, security interest, tax lien, pledge,
encumbrance, financing statement, or conditional sale or title
retention agreement, or any other interest in property designed to
secure the repayment of Indebtedness or any other obligation, whether
arising by agreement, operation of law, or otherwise.
"Material Adverse Effect" means (a) a material adverse effect upon the
business, operations, properties, assets prospects or condition
(financial or otherwise) of the Company individually, or the Company
and its Subsidiaries taken as a whole or (b) the material impairment of
the ability of the Company or any Subsidiary to perform its obligations
under this Agreement or any of the Other Agreements to which it is a
party or of Purchasers to enforce or collect any of the Senior Notes.
In determining whether any individual event would have a Material
Adverse Effect, notwithstanding that such event does not of itself have
such effect, a Material Adverse Effect shall be deemed to have occurred
if the cumulative effect of such event and all other then existing
events would have a Material Adverse Effect.
"Mortgage" shall mean a mortgage, leasehold mortgage, deed of trust,
leasehold deed of trust, deed to secure debt, leasehold deed to secure
debt or similar security interest granted as security to guarantee the
performance of the obligations of the Company under the Senior Notes
and performance of all of its obligations under the Agreement and Other
Agreements executed by it.
"Mortgaged Properties" is defined in Section 6.19(a).
"Mortgage Policies" shall mean each of the title insurance policies
delivered with respect to one or more of the Mortgages and Mortgaged
Property.
"Net Cash Proceeds" means, as applicable, (a) with respect to any
Disposition by a Person, cash and cash equivalent proceeds received by
or for such Person's account, net of (i) reasonable direct costs, fees
and expenses relating to such Disposition, (ii) sale, use or other
Taxes paid or payable by such Person as a direct result of such
Disposition and (iii) any repayments by the Company or any of its
Subsidiaries of Indebtedness to the extent that (A) such Indebtedness
is secured by a Lien on the Property that is the subject of such
Disposition or (B) the transferee of (or holder or a Lien on) such
Property requires (or such transferee's lender requires) that such
Indebtedness be repaid as a condition to the purchase of such Property,
(b) with respect to any Event of Loss of a
50
Person, cash and cash equivalent proceeds received by or for such
Person's account (whether as a result of payments made under any
applicable insurance policy therefor or in connection with condemnation
proceedings or otherwise), net of reasonable direct costs incurred in
connection with the collection of such proceeds, awards or other
payments; and (c) with respect to any offering of equity securities of
a Person or the issuance of any Indebtedness by a Person, cash and cash
equivalent proceeds received by or for such Person's account, net of
reasonable legal, underwriting, and other fees and expenses incurred as
a direct result thereof.
"Net Income" means, with reference to any period, the net income (or
net loss) of the Company and its Subsidiaries for such period computed
on a consolidated basis in accordance with GAAP.
"Operating Lease" means, as applied to any Person, any lease
(including, without limitation, leases that may be terminated by the
lessee at any time) of any property (whether real, personal or mixed)
that is not a Capital Lease other than any such lease under which that
Person is the lessor.
"Other Agreements" means the Senior Notes, the Warrants, the
Registration Rights Agreement, the Security Agreement, each Guaranty to
be executed by the Subsidiaries and all other agreements, instruments
and documents, and all renewals, modifications and extensions thereof,
whether heretofore, now or hereafter executed by or on behalf of the
Company or any Subsidiary and delivered to and for the benefit of
Purchasers or any Person participating with Purchasers in the Senior
Notes with respect to this Agreement or any of the transactions
contemplated by this Agreement.
"Patents" means all United States and foreign patents (including all
reissues, reexaminations, divisions, continuations,
continuations-in-part and extensions thereof), utility models, patent
applications and disclosures docketed.
"PBGC" means the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA.
"Permitted Encumbrances" shall mean, with respect to any Mortgaged
Property, such exceptions to title as are set forth in the Mortgage
Policy delivered with respect thereto, all of which exceptions must be
acceptable to Purchasers in their sole discretion.
"Permitted Indebtedness" is defined in Section 7.1.
"Permitted Investments" is defined in Section 7.3.
"Permitted Liens" is defined in Section 7.2.
"Person" means any individual, sole proprietorship, corporation,
business trust, unincorporated organization, association, company,
partnership, joint venture, limited liability company, governmental
authority (whether a national, federal, state, provincial,
51
county, municipality or otherwise, and shall include without limitation
any instrumentality, division, agency, body or department thereof), or
other entity.
"Potential Default" means the occurrence of any condition or event
which, with the passage of time or giving of notice or both, would
constitute an Event of Default.
"Premium Percentage" means, with respect to any payment or prepayment
made or required of the Company under Section 2.3, the premium
percentage set forth below which corresponds to the earliest date set
forth below upon which such payment or prepayment, as the case may be,
is made or required pursuant to such section of the Agreement:
Premium
Percentage
Closing Date through May 30, 2004 5%
May 31, 2004 through May 30, 2005 3%
May 31, 2005 through May 30, 2006 1%
May 31, 2006 and thereafter 0%
"Product" is defined in Section 4.16.
"Property" means, as to any Person, all types of real, personal,
tangible, intangible or mixed property owned by such Person whether or
not included in the most recent balance sheet of such Person and its
subsidiaries under GAAP.
"Purchasers" has the meaning set forth in the preamble, and includes
all of Purchasers' transferees, successors and permitted assigns of all
or any portion of the Senior Notes and any nominees on whose behalf any
of the foregoing purchase or otherwise acquire any of such Indebtedness
of the Company, and shall include, but not be limited to, each and
every "Holder" as defined herein. With respect to any right or action
to be taken by Purchasers under this Agreement, unless otherwise
specified the term Purchasers means Requisite Holders.
"Real Estate" is defined in Section 4.17(b).
"Real Property" means Real Estate and Leased Real Property.
"Registration Rights Agreement" means the agreement entered into
between the Company and Purchasers on the date hereof in respect of
registration of the Warrant Shares.
"Requisite Holders" means Holders which, as of the date of
determination, own Senior Notes having an aggregate principal amount
equal to 51% or more of the then outstanding principal amount of all
Senior Notes.
52
"Restricted Payment" is defined in Section 7.5.
"Rules" is defined in 4.11(a).
"SEC" is defined in Section 4.4.
"SEC Reports" is defined in Section 4.4.
"Securities Act" is defined in Section 3.1(f).
"Security Agreement" means the Security Agreement in the form attached
hereto as Exhibit D.
"subsidiary" means, as to any particular parent corporation or
organization, any other corporation or organization more than 50% of
the outstanding Voting Stock of which is at the time directly or
indirectly owned by such parent corporation or organization or by any
one or more other entities which are themselves subsidiaries of such
parent corporation or organization. The term "Subsidiary" means a
subsidiary of the Company or of any of its direct or indirect
Subsidiaries.
"Subsidiary Guaranty Agreement" means any guaranty agreement executed
by a newly created Subsidiary pursuant to Section 6.16 hereto, in favor
of Purchasers with respect to payment and performance of the Senior
Notes, in form and substance satisfactory to Requisite Holder.
"Tax" or "Taxes" means any present or future tax, levy, impost, duty,
charge, fee, deduction or withholding of any nature and whatever
called, by whomsoever, on whomsoever and wherever imposed, levied,
collected, withheld or assessed.
"Termination Date" means the earliest to occur of (a) May 30, 2007, (b)
the date on which the Senior Notes are accelerated pursuant to Article
VIII (which acceleration has not been annulled), or (c) the date on
which the Senior Notes are paid in full.
"Total Capitalization" means, at any time the same is to be determined,
the sum of Total Funded Debt plus Net Worth.
"Total Funded Debt" means, at any time the same is to be determined,
the aggregate of all Indebtedness of the Company and its Subsidiaries
at such time.
"Trade Names" means (i) trade names, (ii) brand names, and (iii) logos
and all other names and slogans used in the business of the Company and
its Subsidiaries.
"Trademarks" mean trademarks, service marks, brand marks, registrations
thereof, pending applications for registration thereof, and such
unregistered rights which are used in the business the Company and its
Subsidiaries.
53
"Transaction Costs" means the fees, costs and expenses payable by the
Company and its Subsidiaries in connection with the transactions
contemplated by this Agreement and the Other Agreements.
"Transfer" is defined in Section 12.5 hereof.
"Transferee" means any Person to whom a Transfer is made.
"Warrant Shares" means shares of Common Stock issued or issuable upon
the exercise of the Warrants.
"Welfare Plan" means a "welfare plan" as defined in Section 3(1) of
ERISA.
Terms which are defined in other Sections of this Agreement shall have the
meanings specified therein. All other terms contained in this Agreement shall
have, when the context so indicates, the meanings provided for by the Uniform
Commercial Code as adopted and in force in the State of New York, as from time
to time in effect.
11.2 Accounting Terms and Definitions. Except as otherwise expressly
provided in this Agreement, all accounting terms not otherwise defined herein
shall have the meanings assigned to them in conformity with GAAP. Financial
statements and other information required to be delivered by Company to
Purchasers under this Agreement shall be prepared in accordance with GAAP as in
effect at the time of such preparation. Calculations in connection with the
definitions, covenants and other provisions of this Agreement shall utilize
accounting principles and policies in conformity with GAAP as in effect on the
date of the financial statements referred to in Section 4.5. If at any time any
change in GAAP would affect the computation of any financial ratio or
requirement set forth in this Agreement, and either Company or the Requisite
Holders shall so request, the Company and the Requisite Holders shall negotiate
in good faith to amend such ratio or requirement to reflect such change in GAAP,
provided, that, until so amended, (a) such ratio or requirement shall continue
to be computed in accordance with GAAP prior to such change therein and (b) the
Company shall provide to Purchasers financial statements and other documents
required under this Agreement or as reasonably requested hereunder setting forth
a reconciliation between calculations of such ratio or requirement made before
and after giving effect to such change in GAAP.
11.3 References. When used in this Agreement, the words "hereof,"
"herein" and "hereunder" and words of similar import shall refer to this
Agreement as a whole and not to any particular provision of this Agreement, and
the words "Article," "Section," "subsection," "clause," "Annex," "Schedule" and
"Exhibit" refer to Articles, Sections, subsections and clauses of, and Annexes,
Schedules and Exhibits to, this Agreement unless otherwise specified.
11.4 Other Interpretive Provisions. The word "or" shall not be
exclusive; the singular includes the plural and the plural includes the
singular; and the word "including" is not limiting and means "including without
limitation." References to this Agreement or any of the Other Agreements shall
mean this Agreement or such of the Other Agreements, as the case may be, as
amended, modified, supplemented or extended from time to time and any number of
54
substitutions, renewals and replacements thereto or therefor. References to
governmental laws, statutes, ordinances, rules and regulations shall be
construed as including all amendments, consolidations and replacements thereof
or therefor.
XII. MISCELLANEOUS
12.1 Survival of Representations and Warranties. All of the
representations and warranties made herein shall survive the execution and
delivery of this Agreement, any investigation by or on behalf of Purchasers and
acceptance of the Senior Notes and Warrants and payment therefor.
12.2 Expenses. The Company agrees to pay all out-of-pocket fees, costs
and expenses Purchasers (including fees, expenses and disbursements of
Purchasers' counsel, accountants and other advisers) in connection with the
preparation and negotiation of this Agreement, the Other Agreements, any
documents executed in connection therewith and the monitoring and enforcement of
Purchasers' investment and rights thereunder. In addition, the Company agrees
pay all reasonable out-of-pocket expenses incurred by each director nominated by
Purchasers pursuant to Section 9.1(a) hereof and each Designee in connection
with attending regular and special meetings of the Board of Directors, any
Subsidiary Board of Directors and any committee thereof.
12.3 Notices. All notices, demands and other communications provided
for or permitted hereunder shall be made in writing and shall be by telecopier,
courier service or personal delivery:
(a) if to any Purchaser whose name is listed on the
signature pages hereto, to such Purchaser:
c/o Perseus, L.L.C.
000 Xxxxxxx Xxxxxx, 00/xx/ Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopier No.: 000-000-0000
Attention: Xxx X. Xxxxxx
with a copy to:
Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx
1285 Avenue of the Americas
Xxx Xxxx, Xxx Xxxx 00000-0000
Telecopier No.: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxxx, Esq.
(b) If to any other Holder, addressed to such
Holder at such address (or transmitted to such
telecopier) as such Holder may in writing
designate.
55
(c) if to the Company:
Cardiac Science, Inc.
00000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxx 00000
Telecopier No.: 000-000-0000
Attention: Xxxxxxxx xx Xxxxx
with a copy to:
Xxxxxxxxx Xxxxx Xxxxxxx & Xxxxx
000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Telecopier No.: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
All such notices and communications shall be deemed
to have been duly given: when delivered by hand, if personally delivered; when
delivered by courier, if delivered by commercial overnight courier service; five
Business Days after being deposited in the mail, postage prepaid, if mailed; and
when receipt is acknowledged, if telecopied.
12.4 Indemnification. In addition to all other sums due hereunder or
provided for in this Agreement, the Company agrees to indemnify and hold
harmless each of Purchaser and their respective Affiliates and their respective
officers, directors, agents, employees, subsidiaries, partners and controlling
persons (each, an " Indemnified Party") to the fullest extent permitted by law
from and against any and all losses, claims, damages, expenses (including,
without limitation, reasonable fees, disbursements and other charges of counsel)
or other liabilities (collectively, "Liabilities") resulting from or arising out
of any breach of any representation or warranty, covenant or agreement of the
Company in this Agreement, any Other Agreement or any legal, administrative or
other actions (including actions brought by Purchasers or the Company or any
equity holders of the Company or derivative actions brought by any Person
claiming through or in the Company's name), proceedings or investigations
(whether formal or informal), or written threats thereof, based upon, relating
to or arising out of this Agreement, any Other Agreement, or any transaction
contemplated hereby or thereby or any Purchaser Indemnified Party's role therein
or in any transaction contemplated hereby or thereby. In addition, the Company
agrees to indemnify and hold harmless each Indemnified Party from and against
all Liabilities resulting from any investigation or proceeding instituted by a
Governmental Authority or any other Person as a result of, or arising out of, or
relating to any transaction financed or to be financed in whole or in part,
directly or indirectly, with proceeds from the sale by the Company of the Senior
Notes or the Warrants, except for any such Liabilities arising on account of the
Indemnified Party's gross negligence, willful misconduct or bad faith.
12.5 Assignment, Sale of Interest. The Company may not sell, assign or
transfer this Agreement, or the Other Agreements or any portion thereof,
including, without limitation, the Company's rights, title, interests, remedies,
powers and/or duties hereunder or thereunder,
56
without the consent of all Holders. The Company hereby consents to Purchasers'
participation, sale, assignment, transfer or other disposition (collectively, a
"Transfer"), at any time or times hereafter, of this Agreement and the Senior
Notes, or of any portion hereof or thereof, to any "accredited investor," as
that term is defined in Regulation D under the Securities Act.
12.6 Successors and Assigns. This Agreement will inure to the benefit
of and be binding upon the parties hereto and their respective successors and
assigns (subject to Section 12.5).
12.7 Publicity. Except as may be required by applicable law, none of
the parties hereto shall issue a publicity release or announcement or otherwise
make any public disclosure concerning this Agreement, the Other Agreement or the
transactions contemplated hereby, without prior approval by the other parties
hereto. If any announcement is required by law to be made by any party hereto,
prior to making such announcement such party will deliver a draft of such
announcement to the other parties and shall give the other parties an
opportunity to comment thereon.
12.8 Headings. The headings of the sections and subsections of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
12.9 Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
12.10 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York, without regard to the
principles of conflicts of law of such State.
12.11 Jurisdiction. Each party to this Agreement hereby irrevocably
agrees that any legal action or proceeding arising out of or relating to this
Agreement or any agreements or transactions contemplated hereby may be brought
in the courts of the State of New York or of the United States of America for
the Southern District of New York and hereby expressly submits to the personal
jurisdiction and venue of such courts for the purposes thereof and expressly
waives any claim of improper venue and any claim that such courts are an
inconvenient forum. Each party hereby irrevocably consents to the service of
process of any of the aforementioned courts in any such suit, action or
proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to the address set forth or referred to in Section 12.3, such
service to become effective 10 days after such mailing.
12.12 Severability. If any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired, unless the provisions held
invalid, illegal or unenforceable shall substantially impair the benefits of the
remaining provisions hereof.
57
12.13 Entire Agreement. This Agreement and the Other Agreements, are
intended by the parties to be a final expression of their agreement and intended
to be a complete and exclusive statement of the agreement and understanding of
the parties hereto in respect of the subject matter contained herein and
therein. There are no restrictions, promises, warranties or undertakings other
than those set forth or referred to herein or therein. This Agreement and the
Other Agreements supersede all prior agreements and understandings between the
parties with respect to such subject matter.
12.14 Interpretation. The parties hereto have participated jointly in
the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties hereto, and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of the authorship
of any provisions of this Agreement.
12.15 Exhibits and Schedules. The Exhibits, Schedules and Annexes
attached hereto are a part of this Agreement as if fully set forth herein.
* * * * *
58
IN WITNESS WHEREOF, the parties hereto have caused this Senior Note
and Warrant Purchase Agreement to be executed and delivered as of the date first
above written.
Cardiac Science, Inc.
By_____________________________
Name:
Title:
Purchasers:
Perseus Acquisition/Recapitalization
Fund, L.L.C.
By_____________________________
Name:
Title:
Perseus Market Opportunity Fund, L.P.
By_____________________________
Name:
Title:
Cardiac Science Co-Investment, L.P.
By_____________________________
Name:
Title:
