Exhibit A
SECURITIES EXCHANGE AGREEMENT
by and between
INAMED CORPORATION
and
THE SECURITYHOLDERS
SIGNATORY HERETO
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Dated as of October 7, 1998
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THIS SECURITIES EXCHANGE AGREEMENT is dated as of October 7, 1998, by
and between INAMED CORPORATION, a Florida corporation (the "Company"), and
the persons named on the signature pages hereof and signatory hereto (each,
a "Holder").
WHEREAS, the Company has agreed that all interested Holders of Old
Notes (as defined herein) may exchange the Old Notes for a package of new
securities consisting of (i) Exchange Notes (as defined herein) and (ii)
Exchange Warrants (as defined herein); and WHEREAS, the Company wishes to
modify certain covenants contained in the Old Notes, including among other
things, increasing the basket for senior secured debt and eliminating
certain covenants contained therein; and
WHEREAS, agreement by the Holder to the exchange of Old Notes for
Exchange Notes and Exchange Warrants under the terms described herein will
constitute consent to the proposed modifications to the Old Notes, as set
forth in Annex A attached hereto;
THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and for good and valuable consideration, the receipt of which
is hereby acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
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Section I.1 Definitions. As used in this Agreement, and unless the
context requires a different meaning, the following terms have the meanings
indicated:
"Act" means the Securities Act of 1933, as amended, and the rules and
regulations of the Commission thereunder.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct
the management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise; and
the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Additional Warrants" means the warrants to acquire up to 500,000
shares of common stock of the Company with an exercise price of $7.50 per
share.
"Agreement" means this Securities Exchange Agreement, as the same may
be amended, supplemented or modified in accordance with the terms hereof
and in effect.
"Business Day" shall mean any day other than a Saturday, Sunday, or a
day on which banking institutions in the State of New York are authorized
or obligated by law or executive order to close.
"Breast Implant Litigation" shall mean the litigation in the United
States District Court for the Northern District of Alabama, Southern
Division stylized as "Silicone Gel Breast Implant Products Liability
Litigation (MDL926).
"Capital Stock" means, in the case of the Company, any and all shares
(however designated) of the capital stock of the Company now or hereafter
outstanding.
"Capitalized Lease" shall mean, with respect to any Person, any lease
or any other agreement for the use of property which, in accordance with
generally accepted accounting principles, should be capitalized on the
lessee's or user's balance sheet.
"Capitalized Lease Obligation" of any person shall mean and include,
as of any date as of which the amount thereof is to be determined, the
amount of the liability capitalized or disclosed (or which should be
disclosed) in a balance sheet of such Person in respect of a Capitalized
Lease of such Person.
"Class Action Settlement Agreement" shall mean a Settlement Agreement,
dated April 2, 1998, which provides, among other things, for the settlement
of certain claims against the Company arising out of the Breast Implant
Litigation.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor code thereto, and any reference to the Code shall include a
reference to any successor provisions.
"Collateral Documentation" means the Subordinated Guarantee and
Security Agreement, the Subordinated Guarantee Agreements, the Subordinated
Security Agreement, the Financing Statements, the Exchange Offer
Intercreditor Agreement, the Intercompany Notes and the endorsements
thereof to the Trustee (for the benefit of the Holders) or to the Holders,
and all other deeds of trust, assignments, endorsements, pledged stock,
collateral assignments and other instruments, documents, agreements or
conveyances at any time creating or evidencing Liens or assigning Liens to
the Trustee (for the benefit of the Holders) or to the Holders, to secure
the obligations of the Company or any of its Subsidiaries hereunder and
under the Exchange Notes and the Exchange Offer Registration Rights
Agreement.
"Common Stock" means the common stock of the Company, par value $.01
per share.
"Commission" means the Securities and Exchange Commission.
"Company" means INAMED CORPORATION, a Florida corporation and any
successor to the Company, whether by contract, assumption, merger,
consolidation, operation of law or otherwise.
"Consent" means the consent of the Holders of the Old Notes to the
amendments to the Indenture set forth in Section 2.2.
"Consolidated" or "consolidated", when used with reference to any
financial term in this Agreement (but not when used with respect to any tax
return or tax liability), shall mean the aggregate for two or more Persons
of the amounts signified by such term for all such Persons, with
inter-company items eliminated and, with respect to earnings, after
eliminating the portion of earnings properly attributable to minority
interests, if any, in the capital stock of any such Person or attributable
to shares of preferred stock of any such Person not owned by any other such
Person.
"Contracts" shall mean all agreements, contracts, leases, purchase
orders, arrangements, commitments and licenses to which the Company or any
of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound.
"Copyrights" shall mean, collectively, (a) all copyrights, copyright
registrations and applications for copyright registrations, (b) all
renewals and extensions of all copyrights, copyright registrations and
applications for copyright registration and (c) all rights, now existing or
hereafter coming into existence, (i) to all income, royalties, damages and
other payments (including in respect of all past, present or future
infringements) now or hereafter due or payable under or with respect to any
of the foregoing, (ii) to ▇▇▇ for all past, present and future
infringements with respect to any of the foregoing and (iii) otherwise
accruing under or pertaining to any of the foregoing throughout the world.
"Credit Party" shall mean each of the Company and each of its Material
Subsidiaries.
"Employee Agreement" shall mean each management, employment,
severance, consulting, non-compete, confidentiality, or similar agreement
or contract between any Credit Party or any ERISA Affiliate and any
employee pursuant to which any Credit Party or any ERISA Affiliate has or
may have any liability contingent or otherwise.
"Environmental Laws" means any and all federal, state, local, and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or
governmental restrictions relating to pollution and the protection of the
environment or the release of any materials into the environment, including
but not limited to those related to hazardous substances or wastes, air
emissions and discharges to waste or public systems.
"Equity Interests" means any Capital Stock, partnership interest,
joint venture interest or other equity interest or warrants, options or
other rights to acquire any Capital Stock, partnership interest, joint
venture interest or other equity interest.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time. Section references to ERISA are to ERISA as in
effect at the Time of Exchange and any subsequent provisions of ERISA
amendatory thereof, supplemental thereto or substituted therefor.
"ERISA Affiliate" means each business or entity which is a member of a
"controlled group of corporations," under "common control" or an
"affiliated service group" with the Company within the meaning of Sections
414(b), (c) or (m) of the Code, or required to be aggregated with the
Company under Section 414(o) of the Code, or is under "common control" with
the Company, within the meaning of Section 4001(a)(14) of ERISA.
"ERISA Plan" means an employee benefit plan as such term is defined in
Section 3(3) of ERISA, with respect to which the Company or an Affiliate is
a disqualified person or a party in interest, as those terms are defined in
Section 4975 of the Code and Section 3(14) of ERISA, respectively.
"Exchange" means the exchange of the Old Notes for the Exchange Notes
and Exchange Warrants and the Consent.
"Exchange Collateral" means all real and personal property and
interests in real and personal property including, without limitation,
Intellectual Property, rights under leases and royalty rights and
agreements, now owned or hereafter acquired by the Company or its Material
Subsidiaries in or upon which a Lien is granted or made under the
Collateral Documentation.
"Exchange Notes" means the Company's 11.00% Senior Subordinated
Secured Notes due March 31, 1999 issued pursuant to the Exchange Notes
Indenture.
"Exchange Notes Indenture" means the form of indenture between the
Company and Santa ▇▇▇▇▇▇▇ Bank & Trust, as Trustee, in substantially the
form as attached hereto as Exhibit A.
"Exchange Offer Documents" shall mean the Exchange Notes, the Exchange
Warrants, the Additional Warrants, the Exchange Notes Indenture, the
Securities Exchange Agreement, the Exchange Offer Registration Rights
Agreement, the Subordinated Guarantee and Security Agreement, the
Subordinated Security Agreement, the Subordinated Guaranty Agreement and
the Exchange Offer Intercreditor Agreement.
"Exchange Offer Intercreditor Agreement" shall mean the agreement,
dated as of the date hereof, between Appaloosa Management, L.P. as the
Collateral Agent under the New Financing and the Trustee for the Exchange
Notes under the Exchange Notes Indenture.
"Exchange Offer Registration Rights Agreement" shall mean the
agreement to be entered into between the Trustee and the holders of the
Exchange Notes.
"Exchange Warrants" shall mean warrants to acquire up to 3,671,616
shares of Common Stock of the Company with an exercise price of $5.50 per
share.
"Financing Statements" means Form UCC-1 financing statements to be
filed in all jurisdictions necessary or desirable in order to perfect the
Holders' security interest in the Collateral and shall include any Form
UCC-1 financing statements assigned to the Holders and filings to be made
in the U.S. Patent and Trademark Office and the U.S. Copyright Office.
"GAAP" shall mean U.S. generally accepted accounting principles.
"Governmental Entity" shall mean any supernational, national, foreign,
federal, state or local judicial, legislative, executive, administrative or
regulatory body or authority.
"Guaranty" or "Guarantee" by any Person shall mean all obligations
(other than endorsements in the ordinary course of business of negotiable
instruments for deposit or collection) of any Person guaranteeing, or in
effect guaranteeing, any Indebtedness, dividend or other obligation of any
other Person (the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, all obligations incurred through
an agreement, contingent or otherwise, by such Person: (i) to purchase such
Indebtedness or obligation or any property or assets constituting security
therefor, (ii) to advance or supply funds (x) for the purchase or payment
of such Indebtedness or obligation, (y) to maintain working capital or
other balance sheet condition or otherwise to advance or make available
funds for the purchase or payment of such Indebtedness or obligation, (iii)
to lease property or to purchase securities or other property or services
primarily for the purpose of assuring the owner of such Indebtedness or
obligation of the ability of the primary obligor to make payment of such
Indebtedness or obligation, or (iv) otherwise to assure the owner of the
Indebtedness or obligation of the primary obligor against loss in respect
thereof. For the purposes of any computations made under this Agreement, a
Guarantee in respect of any Indebtedness for borrowed money shall be deemed
to be Indebtedness equal to the outstanding amount of the Indebtedness for
borrowed money which has been guaranteed, and a Guarantee in respect of any
other obligation or liability or any dividend shall be deemed to be
Indebtedness equal to the maximum aggregate amount of such obligation,
liability or dividend.
"Hazardous Material" means any and all pollutants, toxic or hazardous
wastes or any other substances that might pose a hazard to health or
safety, the removal of which may be required or the generation,
manufacture, refining, production, processing, treatment, storage,
handling, transportation, transfer, use, disposal, release, discharge,
spillage, seepage, or filtration of which is or shall be restricted,
prohibited or penalized by any applicable law (including, without
limitation, asbestos, urea formaldehyde foam insulation and
polycholorinated biphenyls).
"Holder" means (i) the Persons who prior to the Time of Exchange
accepts and agrees to the terms hereof as indicated by its signature on the
signature page of this Agreement and (ii) each Person, if any, on whose
behalf the Holder executes this Agreement and whose Old Notes are the
subject of any exchange hereunder.
"Indebtedness" shall mean, with respect to any Person, (i) all
obligations of such Person for borrowed money, or with respect to deposits
or advances of any kind, (ii) all obligations of such Person evidenced by
bonds, debentures, notes or similar instruments, (iii) all obligations of
such Person under conditional sale or other title retention agreements
relating to property purchased by such Person, (iv) all obligations of such
Person issued or assumed as the deferred purchase price of property or
services (other than accounts payable to suppliers and similar accrued
liabilities incurred in the ordinary course of business and paid in a
manner consistent with industry practice), (v) all Indebtedness of others
secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any lien or security
interest on property owned or acquired by such Person whether or not the
obligations secured thereby have been assumed, (vi) all Capitalized Lease
Obligations of such Person, (vii) all Guarantees of such Person, (viii) all
obligations (including but not limited to reimbursement obligations)
relating to the issuance of letters of credit for the account of such
Person, (ix) all obligations arising out of foreign exchange contracts, and
(x) all obligations arising out of interest rate and currency swap
agreements, cap, floor and collar agreements, interest rate insurance,
currency spot and forward contracts and other agreements or arrangements
designed to provide protection against fluctuations in interest or currency
exchange rates.
"Indenture" means the indenture between the Company and Santa ▇▇▇▇▇▇▇
Bank & Trust, as Trustee, dated as of January 2, 1996, as amended.
"Intellectual Property" means (a) all inventions (whether patentable
or unpatentable and whether or not reduced to practice), all improvements
thereon, and all Patents, patent applications and patent disclosures,
together with all reissuances, continuations, continuations-in-part,
revisions, extensions and reexaminations thereof, (b) all Trademarks,
service marks, trade dress, logos, trade names and corporate names,
together with all translations, adaptations, derivations and combinations
thereof and including all goodwill associated therewith, and all
applications, registrations and renewals in connection therewith, (c) all
copyrightable works, all Copyrights and all applications, registrations and
renewals in connection therewith, (d) all mask works and all applications,
registrations and renewals in connection therewith, (e) all trade secrets
and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings,
specifications, customer and supplier lists, pricing and cost information
and business and marketing plans and proposals), (f) all computer software
(including data and related documentation), (g) all other proprietary
rights, (h) all copies and tangible embodiments of the foregoing (in
whatever form or medium) and (i) all licenses or agreements in connection
with the foregoing.
"June 2, 1998 Court Order" shall mean the June 2, 1998 preliminary
court order approving the Class Action Settlement Agreement and the 3M
Agreement issued by the United States District Court for the Northern
District of Alabama.
"Knowledged", with respect to the Company, shall mean the actual
knowledge of each member of the board of directors of the Company and each
officer of the Company, and the knowledge that any of the foregoing persons
would have after due and reasonable inquiry and investigation.
"Law" shall include any foreign, federal, state, or local law,
statute, ordinance, rule, regulation, order, judgment or decree.
"Lien" means, with respect to any Person, any mortgage, lien, pledge,
charge, security interest or other encumbrance, or any interest or title of
any vendor, lessor, lender or other secured party to or of such Person
under any conditional sale or other title retention agreement or Capital
Lease, upon or with respect to any property or asset of such Person
(including in the case of stock, stockholder agreements, voting trust
agreements and all similar arrangements).
"Material" shall mean material in relation to the properties,
business, prospects, operations, earnings, assets, liabilities or condition
(financial or otherwise) of the Company and its Subsidiaries taken as a
whole, whether or not in the ordinary course of business.
"Material Adverse Effect" shall mean a material adverse effect on (a)
the property, business, prospects (including, without limitation, the
prospects for the settlement of the Breast Implant Litigation), operations,
earnings, assets, liabilities or the condition (financial or otherwise) of
the Company and its Subsidiaries taken as a whole, whether or not in the
ordinary course of business, (b) the ability of any Credit Party to perform
its obligations under any of the Exchange Offer Documents to which it is a
party, (c) the validity or enforceability of any of the Exchange Offer
Documents, (d) the rights, remedies, powers and privileges of the Holders
under any of the Exchange Offer Documents or (e) the timely payment or
performance of the Exchange Notes.
"Material Subsidiaries" at any time, shall mean any Subsidiary of the
Company, other than any Non-Significant Subsidiary of the Company.
"New Financing" means the 10% Senior Secured Notes to be issued by the
Company pursuant to the Note Purchase Agreement.
"Non-Significant Subsidiary" at any time, shall mean any Subsidiary of
the Company which at such time has total assets (including the total assets
of any Subsidiaries) that have a fair market value of, or for which the
Company or any of its Subsidiaries shall have paid (including the
assumption of Indebtedness) in connection with the acquisition of capital
stock (or other equity interests) or the total assets of such Subsidiary,
less than $100,000, provided that the total assets of all Non-Significant
Subsidiaries at any time does not exceed 5% of the total assets of the
Company and its Subsidiaries on a consolidated basis.
"Note Purchase Agreement" means the agreement dated as of September
30, 1998 between the Company, the parties listed on Exhibit A thereto and
Appaloosa Management, L.P. as Collateral Agent.
"Old Notes" means the 11% Senior Secured Convertible Notes due March
31, 1999 of the Company issued pursuant to the Indenture.
"Outstanding" or "outstanding" shall mean when used with reference to
the Notes at a particular time, all Notes theretofore issued as provided in
this Agreement, except (i) Notes theretofore reported as lost, stolen,
damaged or destroyed, or surrendered for transfer, exchange or replacement,
in respect to which replacement Notes have been issued, (ii) Notes
theretofore paid in full, and (iii) Notes therefore canceled by the
Company, except that, for the purpose of determining whether Holders of the
requisite principal amount of Notes have made or concurred in any waiver,
consent, approval, notice or other communication under this Agreement,
Notes registered in the name of, or owned beneficially by, the Company or
any of its Subsidiaries of any thereof, shall not be deemed to be
outstanding.
"Patents" shall mean, collectively, (a) all patents and patent
applications, (b) all reissues, divisions, continuations, renewals,
extensions and continuations-in-part of all patents or patent applications
and (c) all rights, now existing or hereafter coming into existence, (i) to
all income, royalties, damages, and other payments (including in respect of
all past, present and future infringements) now or hereafter due or payable
under or with respect to any of the foregoing, (ii) to ▇▇▇ for all past,
present and future infringements with respect to any of the foregoing and
(iii) otherwise accruing under or pertaining to any of the foregoing
throughout the world, including all inventions and improvements described
or discussed in all such patents and patent applications.
"Person" means any individual (including an individual when acting in
a fiduciary capacity), corporation, partnership, joint venture,
association, limited liability company, joint-stock company, trust, estate,
unincorporated organization or government or other agency or political
subdivision thereof.
"Prohibited Transaction" means a transaction described in Section
4975(e) of the Code or in Section 406 of ERISA, for which there is no
available exemption.
"Registration Rights Agreement" shall mean the Registration Rights
Agreement dated the date hereof between the Purchasers and the Company with
respect to the New Financing.
"Reincorporation Merger" shall mean the merger, if consummated, the
primary purpose of which is to effect the reincorporation of the Company in
the State of Delaware.
"Related Parties" shall mean Affiliates of the Company or any of its
Subsidiaries and directors or officers of the Company or any of its
Subsidiaries (including any family members of directors and officers).
"Releases" shall have the meaning ascribed thereto in the Recitals.
"Rights Plan" shall mean the plan (as amended) adopted by the
Company's board of directors on June 10, 1997.
"Sale-and-Leaseback Transaction" shall mean a transaction or series of
transactions pursuant to which the Company or any of its Subsidiaries shall
sell or transfer to any Person (other than the Company or a Subsidiary of
the Company) any property, whether now owned or hereafter acquired, and, as
part of the same transaction or series of transactions, the Company or any
of its Subsidiaries shall rent or lease as lessee (other than pursuant to a
Capitalized Lease), or similarly acquire the right to possession or use of,
such property or one or more properties which it intends to use for the
same purpose or purposes as such property.
"SEC" shall mean the United States Securities and Exchange Commission.
"SEC Reports" shall have the meaning ascribed thereto in Section 4.4.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any successor federal statute, and the rules and regulations of the SEC
thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Securities Act shall include reference to the
comparable section, if any, of such successor federal statute.
"Security" or "Securities" shall mean any equity or debt security of
the Company (including, without limitation, subscriptions, options,
warrants, rights, stock-based or stock-related awards or convertible or
exchangeable securities to which the Company is a party or by which the
Company may be bound of any character relating to, or obligating the
Company to issue, grant, award, transfer or sell any issued or unissued
shares of the Company's Capital Stock or other securities of the Company).
"Secured Obligations" shall mean any and all obligations of any Credit
Party at any time and from time to time for the performance of its
agreements, covenants and undertakings under or in respect of the Exchange
Offer Documents to which it is a party.
"Standstill Agreement" shall mean the agreement, dated July 8, 1998,
between the Company and ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ restricting ▇▇. ▇▇▇▇▇▇'▇
ability to vote his Common Stock.
"State" means each of the states of the United States, the District of
Columbia and the Commonwealth of Puerto Rico.
"Subordinated Guarantee Agreement" shall mean the guarantee to be made
by the Company's foreign Material Subsidiaries in favor of the holders of
the Exchange Notes.
"Subordinated Guarantee and Security Agreement" shall mean the
agreement to be entered into by the Company's domestic Material
Subsidiaries and the Trustee.
"Subordinated Security Agreement" shall mean the agreement to be
entered into by the Company and the Trustee.
"Subsidiary" means, with respect to any Person, (i) a corporation a
majority of whose capital stock with voting power, under ordinary
circumstances, to elect directors is at the time, directly or indirectly,
owned by such Person, by one or more Subsidiaries of such Person or by such
Person and one or more Subsidiaries thereof, (ii) any other Person (other
than a corporation), including without limitation a joint venture, in which
such Person, one or more Subsidiaries thereof or such Person and one or
more Subsidiaries thereof, directly or indirectly, at the date of
determination thereof, has at least majority ownership interest entitled to
vote in the election of directors, managers or trustees thereof (or other
Persons performing similar functions) or (iii) any other Person required to
be consolidated with such Person in accordance with generally accepted
accounting principles. For purposes of this definition (and for the
determination of whether or not a Subsidiary is a wholly-owned Subsidiary
of a Person), any directors' qualifying shares or investment by foreign
nationals mandated by applicable law shall be disregarded in determining
the ownership of a Subsidiary.
"Tax" and "Taxes" shall mean any federal, state, local or foreign
income, gross receipts, property, sales, use, value added, license, excise,
franchise, capital, net worth, estimated, withholding, employment, payroll,
premium, withholding, alternative or added minimum, ad valorem, inventory,
asset, gains, transfer or excise tax, or any other tax, levy, custom, duty,
impost, governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest, penalty or additions to tax,
imposed by any Governmental Authority and, including, without limitation,
any Taxes of another person owing under a contract, as transferee or
successor, under Treas. Reg. ' 1.1502-6 or analogous state, local or
foreign law, or otherwise.
"Tax Return" shall mean any return, report or similar statement
required to be filed with respect to any Tax (including any attached
schedules), including, without limitation, any information return, claim
for refund, amended return or declaration of estimated Tax.
"3M" shall mean the Minnesota Mining & Manufacturing Company.
"3M Agreement" shall mean an agreement with 3M, dated as of April 16,
1998, which provides, among other things, for the resolution of certain
indemnification claims of 3M against the Company relating to the Breast
Implant Litigation and for the Company to obtain certain releases ascribed
thereto in the Recitals.
"Time of Exchange" has the meaning provided therefor in Section 2.1 of
this Agreement.
"Trademarks" shall mean, collectively, (a) all trade names, trademarks
and service marks, logos, trademark and service ▇▇▇▇ registrations and
applications for trademark and service ▇▇▇▇ registrations, (b) all renewals
and extensions of any of the foregoing and (c) all rights, now existing or
hereafter coming into existence, (i) to all income, royalties, damages and
other payments (including in respect of all past, present and future
infringements) now or hereafter due or payable under or with respect to any
of the foregoing, (ii) to ▇▇▇ for all past, present and future
infringements with respect to any of the foregoing and (iii) otherwise
accruing under or pertaining to any of the foregoing throughout the world,
together, in each case, with the product lines and goodwill of the business
connected with the use of, or otherwise symbolized by, each such trade
name, trademark and service ▇▇▇▇.
"Trustee" means Santa ▇▇▇▇▇▇▇ Bank & Trust.
"Year 2000 Problem" shall have the meaning ascribed thereto in Section
4.28.
ARTICLE II
EXCHANGE OF SECURITIES AND CONSENT TO MODIFICATION
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Section II.1 Exchange of Securities. Subject to the terms and
conditions herein set forth, the Company agrees that it will issue the
Exchange Notes, Exchange Warrants and Additional Warrants to the Holders in
exchange for the Holders' Old Notes in such amounts as set forth on
Schedule 2.1 attached hereto, and the Holders agree that each will tender
such Holder's Old Notes to the Company in exchange for the Exchange Notes,
Exchange Warrants and Additional Warrants, at or prior to 5:00 p.m. New
York time on November 5, 1998 (the "Expiration Date"), which Old Notes, or
an Affidavit of Lost Secured Convertible Note in the event applicable,
shall be delivered to the Company, together with an executed copy of this
Agreement. The Company reserves the right to extend the Expiration Date for
receipt of Old Notes. Each Holder that does not tender such Holder's Old
Notes to the Company as set forth herein shall retain their Old Notes
subject to the terms of the Indenture, as modified hereby, and shall
receive the amount of the Additional Warrants set forth on Schedule 2.1.
The acceptance for exchange and the exchange of all outstanding Old
Notes which are validly tendered will be made promptly, but in any event
within 3 Business Days, after the Expiration Date. The Company will be
deemed to have accepted for exchange tendered Old Notes as, if and when the
Company gives oral or written notice to each Holder of its acceptance of
the tenders of such Old Notes. Any Old Notes tendered to and accepted by
the Company prior to the Expiration Date shall be exchanged as of November
5, 1998, or such other date that is the next business day after the
Expiration Date (the "Time of Exchange"). Delivery of the Exchange Notes
and Exchange Warrants in exchange for the Old Notes will be made by the
Company as soon as practicable after the Expiration Date.
The parties agree that for federal income tax purposes, the fair
market value of the Exchange Notes is $18,687,811 and the fair market value
of the Exchange Warrants is $917,904, and shall take no position
inconsistent with such valuations, except as otherwise required by law.
Section II.2 Consent. The completion and execution of this Agreement
shall also be deemed to constitute the Consent of the Holder upon the
Expiration Date to (i) the proposed modifications to the Old Notes, as
permitted by Article 7 of the Indenture, and as set forth in Annex A
contained herein, to be effective upon the Expiration Date and (ii) the
release of the Collateral (as defined in the Indenture) and the assignment
of the Collateral to Santa ▇▇▇▇▇▇▇ Bank and Trust, as Trustee of the
Exchange Notes Indenture. The Company intends to cause the execution of a
supplemental Indenture providing for the proposed modifications to occur on
or about the Expiration Date so long as Holders of at least a majority in
aggregate principal amount of the Old Notes have agreed to tender the Old
Notes under the terms of this Agreement. If the requisite Consents are
received and the supplemental indenture reflecting the proposed
modifications becomes operative, all persons who continue to hold Old Notes
thereafter will be subject to the provisions of the supplemental Indenture.
However, the Company's duty to accept Old Notes and to deliver Exchange
Notes, Exchange Warrants and Additional Warrants to Holders under the terms
of this Agreement shall not be affected by the inability of the Company to
obtain the required consents to make the proposed modifications.
Section II.3 Withdrawal. Tender of Old Notes and Consents may be
withdrawn at any time prior to the Time of Exchange. If the Exchange is
amended in any material respect, the Company will disclose such amendment
to each Holder and will extend the Exchange for a period of at least 5
Business Days to permit the Holders of the Old Notes to properly deliver or
withdraw their Old Notes and Consents. The Company may not withdraw or
otherwise revoke the Exchange, except as specifically provided herein.
Section II.4 Waiver. The completion and execution of this Agreement
shall be deemed to constitute an acknowledgement by each Holder of its
receipt of proper notice pursuant to Section 8.12 of the Indenture relating
to the proposed offering of the New Financing.
Section 2.5 Compliance with Trust Indenture Act. Unless already so
qualified, the Company agrees to (i) use its best efforts to cause the
Exchange Notes Indenture to be qualified under the Trust Indenture Act of
1939, as amended (the "TIA") in connection with the registration of the
Exchange Notes under the Exchange Offer Registration Rights Agreement, (ii)
cooperate with the Trustee to effect such changes to the Exchange Notes
Indenture as may be required for the Exchange Notes Indenture to be so
qualified in accordance with the terms of the TIA, and (iii) execute, and
use their best efforts to cause the Trustee to execute, all documents
required to be filed with the Commission to enable the Exchange Notes
Indenture to be so qualified in a timely manner.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE HOLDERS
---------------------------------------------
Section III.1(a) Representations and Warranties of the Holders. Each
Holder severally represents and warrants to, and covenants and agrees with,
the Company that the Exchange Notes and Exchange Warrants to be received by
each Holder in exchange for Old Notes pursuant to this Agreement are being
received for such Holder's own account and not for the account of any ERISA
Plan, for the purpose of investment and with no intention of distributing
or reselling the Exchange Notes or Exchange Warrants or any part thereof in
any transaction, which would be or result in a Prohibited Transaction or
would be in violation of the securities laws of the United States of
America or any State, without prejudice, however, to each Holder's rights
at all times to sell or otherwise dispose of all or any part of the
Exchange Notes or Exchange Warrants under a registration under the Act or
under an exemption from such registration available under such Act,
provided that the disposition of such Holder's property at the time of the
sale or disposition of the Exchange Notes or Exchange Warrants is within
such Holder's control. If a Holder should in the future decide to dispose
of any of the Exchange Notes or Exchange Warrants, such Holder understands
and agrees with the Company that it will do so only (i) if such disposition
will not be or result in a Prohibited Transaction; (ii) if a subsequent or
transferee Holder shall agree in writing to be bound by the representations
and warranties of this Article III; and that such Holder may do so only in
compliance with the Act, as then in effect, and that stop-transfer
instructions to that effect will be in effect with respect to the Exchange
Notes or Exchange Warrants. If a Holder should decide to dispose of any of
the Exchange Notes or Exchange Warrants, the Company must first be in
receipt of an opinion of counsel to the effect that the proposed
disposition of the Exchange Notes or Exchange Warrants would not be in
violation of the Act. Each Holder agrees to the imprinting of legends
required by law on certificates representing all of the Exchange Notes and
Exchange Warrants including but not limited to the following: "This
security has not been registered under the Securities Act of 1933, as
amended, or any state securities laws and may be reoffered and sold,
pledged or otherwise transferred only if so registered or if an exemption
from registration is available."
Each Holder also severally represents and warrants to the Company that
(i) it has received and reviewed (a) the form of the Exchange Notes
Indenture and (b) copies of all annual reports and quarterly reports, proxy
statements and other reports filed by the Company since January 1, 1998
with the Securities and Exchange Commission pursuant to the terms of the
Securities Exchange Act of 1934, as amended; (ii) it is an "accredited
investor" within the meaning of Rule 501 promulgated under the Securities
Act of 1933, as amended and has been afforded the opportunity to ask
questions and receive answers concerning the terms and conditions of the
Exchange Notes and Exchange Warrants and the transactions contemplated
hereby and has relied solely on the representations and warranties made
herein in determining to exchange the Old Notes for the Exchange Notes and
Exchange Warrants; (iii) it has all requisite corporate power and authority
(A) to execute, deliver and perform its obligations under this Agreement,
(B) to exchange the Old Notes for the Exchange Notes and Exchange Warrants
in the manner and for the purpose contemplated in this Agreement and (C) to
execute, deliver and perform its obligations under all other agreements and
instruments executed and delivered by, or to be executed and delivered by,
the Holder pursuant to or in connection with this Agreement or any of the
transactions contemplated hereby or thereby; (iv) this Agreement has been
duly and validly authorized by each Holder and this Agreement has been duly
and validly executed and delivered by each Holder and constitutes the
legal, valid and binding agreement of each Holder, enforceable in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization and other similar laws now or
hereafter in effect relating to or affecting creditors' rights generally;
and (v) the exchange of each Holder's Old Notes for the Exchange Notes and
Exchange Warrants does not violate such Holders' charter or by-laws or any
other governing documents, any material law or regulation or any court
order applicable to it.
Each Holder has relied solely on the representations made herein in
determining to exchange the Holder's Old Notes for the Exchange Notes and
Exchange Warrants pursuant hereto.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
The Company represents and warrants to each Holder as follows:
Section IV.1 Organization and Qualification. Except as set forth
on Schedule 4.1, each Credit Party is a corporation duly organized and
existing in good standing under the laws of the jurisdiction in which it is
incorporated and has the power to own its respective property and to carry
on its respective business as now being conducted. Each Credit Party is
duly qualified as a foreign corporation to do business and is in good
standing in every jurisdiction in which the nature of the respective
business conducted or property owned by it makes such qualification
necessary and where the failure to so qualify would individually or in the
aggregate have a Material Adverse Effect.
Section IV.2 Due Authorization. Each Credit Party has all right,
power and authority to enter into, deliver and perform the Exchange Offer
Documents to which it is a party and to consummate the transactions
contemplated thereby. The execution and delivery of each Exchange Offer
Document by each Credit Party thereto and the performance by such Credit
Party of the transactions contemplated thereby (including, without
limitation, the issuance and sale of the Exchange Notes, the Exchange
Warrants and the Additional Warrants by the Company) and compliance by each
such Credit Party with all the provisions of each Exchange Offer Document
(as applicable) have been duly authorized by all requisite corporate
proceedings on the part of each Credit Party. Each of the Exchange Offer
Documents has been duly executed and delivered on behalf of each Credit
Party party thereto, and each such Exchange Offer Document constitutes the
legal, valid and binding obligation of such Credit Party, enforceable
against such Credit Party in accordance with their respective terms, except
to the extent limited by applicable bankruptcy, reorganization, insolvency,
moratorium or other similar laws or by general principles of equity
relating to creditors' rights generally.
Section IV.3 Subsidiaries. (a) Schedule 4.3(a) contains (except
as noted therein) complete and correct lists (i) of the Company's Material
Subsidiaries, showing, as to each Material Subsidiary, the correct name
thereof, the jurisdiction of its organization, and the percentage of shares
of each class of its capital stock or similar equity interests outstanding
owned by the Company and each other of the Company's Subsidiaries, and (ii)
of the Company's directors and senior officers.
(b) Except as set forth in Schedule 4.3(a), all of the
outstanding shares of capital stock or similar equity interests of each
Material Subsidiary shown in Schedule 4.3(a) as being owned by the Company
and its Subsidiaries have been validly issued, are fully paid and
nonassessable and are owned by the Company or another of its Subsidiaries
free and clear of any Lien.
(c) There are no outstanding rights to purchase, options,
warrants or similar rights or agreements pursuant to which the Company or
any of its Subsidiaries may be required to issue, sell, repurchase or
redeem any of its capital stock or other equity interests in any of the
Company's Subsidiaries.
(e) Schedule 4.3(d) contains (except as noted therein) a complete
and correct list of all of the Company's Non-Significant Subsidiaries.
Section IV.4 SEC Reports Correspondence. Except as set forth in
Schedule 4.4, the Company has filed all proxy statements, reports and other
documents required to be filed by it under the Exchange Act from and after
January 1, 1995; and the Company has furnished each Purchaser true and
complete copies of all annual reports, quarterly reports, proxy statements
and other reports under the Exchange Act filed by the Company from and
after such date, each as filed with the SEC (collectively, the "SEC
Reports"). Except as set forth on Schedule 4.4, each SEC Report was in
compliance in all material respects with the requirements of its respective
report form and did not on the date of filing contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and as of the
date hereof there is no fact or facts not disclosed in the SEC Reports
which relate specifically to the Company and/or any of its Subsidiaries and
which individually or in the aggregate may have a Material Adverse Effect.
The Company has made available for inspection by each Purchaser copies of
all correspondence between the Company and the SEC from and after January
1, 1996.
Section IV.5 Financial Statements. Except as set forth in
Schedule 4.5, the financial statements (including any related schedules
and/or notes) included in the SEC Reports have been prepared in accordance
with GAAP consistently followed (except as indicated in the notes thereto)
throughout the periods involved and fairly present the consolidated
financial condition, results of operations, cash flows and changes in
stockholders' equity of the Company and its Subsidiaries as of the
respective dates thereof and for the respective periods then ended (in each
case subject, as to interim statements, to changes resulting from year-end
adjustments, none of which were material in amount or effect). Except as
set forth in Schedule 4.5 or the SEC Reports, the Company has no
liabilities or obligations, contingent or otherwise, except (i) liabilities
and obligations in the respective amounts reflected or reserved against in
the Company's balance sheet as of December 31, 1997 included in the SEC
Reports or (ii) liabilities and obligations incurred in the ordinary course
of business since December 31, 1997 which individually or in the aggregate
do not have a Material Adverse Effect. Since December 31, 1997, the Company
and its Subsidiaries have operated their respective businesses only in the
ordinary course and there has not been individually or in the aggregate any
Material Adverse Effect, other than changes disclosed in the SEC Reports or
otherwise set forth in Schedule 4.5 hereto.
Section IV.6 Litigation. (a) Except as set forth in Schedule 4.6
hereto or as disclosed in the SEC Reports, there is no action, suit,
investigation or proceeding pending or, to the Knowledge of the Company,
threatened against the Company or any of its Subsidiaries or any of their
respective properties or assets by or before any court, arbitrator or other
Governmental Entity.
(b) Except as set forth in Schedule 4.6 or as disclosed in the
SEC Reports, neither the Company nor any of its Subsidiaries is in default
under or in breach of any order of any court, arbitrator or governmental
entity, and neither the Company nor any of its Subsidiaries is subject to
or a party to any order of any court or governmental entity arising out of
any action, suit or proceeding under any Law.
Section IV.7 Title to Properties; Insurance. (a) Except as set
forth in Schedule 4.7(a), the Company and each of its Subsidiaries have
good and valid title to, or, in the case of property leased by any of them
as lessee, a valid and subsisting leasehold interest in, their respective
properties and assets, free of all Liens and encumbrances, except as sold
or otherwise disposed of in the ordinary course of business and except for
such Liens and encumbrances which would not cause a Material Adverse
Effect.
(b) Schedule 4.7(b) sets forth a complete and correct list of all
insurance coverage carried by the Company or its Subsidiaries, the carrier
and the terms and amount of coverage. All of the material assets of the
Company and the Company's Subsidiaries and all aspects of the Company's and
its Subsidiaries' businesses that are of insurable character are covered by
insurance with insurers against risks of liability, casualty and fire and
other losses and liabilities customarily obtained to cover comparable
businesses and assets in amounts, scope and coverage which are consistent
with prudent industry practice. Neither the Company nor any of its
Subsidiaries is in default with respect to its obligations under any such
insurance policy maintained by it. All such policies and other instruments
are in full force and effect and no premiums with respect thereto are past
due and owed. Except as set forth in Schedule 4.7(b), neither the Company
nor any of its Subsidiaries has failed to give any notice or present any
material claim under any such insurance policy in due and timely fashion or
as required by any of such insurance policies, neither the Company nor any
of its Subsidiaries has otherwise, through any act, omission or
non-disclosure, jeopardized or impaired full recovery of any claim under
such policies, and there are no claims by the Company or any of its
Subsidiaries under any of such policies to which any insurance company is
denying liability or defending under a reservation of rights or similar
clause. Neither the Company nor any of its Subsidiaries has received notice
of any pending or threatened termination of any of such policies or any
premium increases for the current policy period with respect to any of such
policies and the consummation of the transactions contemplated by the
Exchange Offer Documents will not result in any such termination or premium
increase. The Company does not maintain directors' and officers' insurance.
Section IV.8 Governmental Consents, etc. No Credit Party is
required to obtain any consent, approval or authorization of, or to make
any registration, declaration or filing with, any Governmental Entity or
third party as a condition to or in connection with the valid execution and
delivery of any of the Exchange Offer Documents or the valid offer, issue,
sale or delivery of the Exchange Notes, Exchange Warrants or the Additional
Warrants, or the performance by any such Credit Party of its obligations in
respect of any thereof, except for filings required pursuant to state and
federal securities laws to effect any registration of securities pursuant
to the Exchange Offer Registration Rights Agreement, the Financing
Statements, and filings to be made with the U.S. Patent and Trademark
Office or the U.S. Copyright Office to perfect the Holders' security
interest in the Intellectual Property constituting Collateral under the
Collateral Documentation, and except for the filing on Form 8K under the
Exchange Act to report the consummation of the transactions contemplated
hereby.
Section IV.9 Holding Company Act and Investment Company Act. No
Credit Party is: (i) a "public utility company" or a "holding company," or
an "affiliate" or a "subsidiary company" of a "holding company," or an
"affiliate" of such a "subsidiary company," as such terms are defined in
the Public Utility Holding Company Act of 1935, as amended, or (ii) a
"public utility," as defined in the Federal Power Act, as amended, or (iii)
an "investment company" or an "affiliated person" thereof or an "affiliated
person" of any such "affiliated person," as such terms are defined in the
Investment Company Act of 1940, as amended.
Section IV.10 Taxes. Except as set forth in Schedule 4.10:
(a) The Company and its Subsidiaries are each members of the
affiliated group (as defined in Code Section 1504) filing a consolidated
federal income Tax Return of which the Company is the common parent. The
Company and its Subsidiaries (i) have timely filed all Tax Returns
(including, but not limited to, those filed on a consolidated, combined or
unitary basis) required to have been filed by the Company or its
Subsidiaries, all of which Tax Returns are true, correct and complete in
all material respects; (ii) have within the time and manner prescribed by
Law paid all Taxes, required to be paid in respect of the periods covered
by such Tax Returns or otherwise due to any Governmental Authority; (iii)
have established and maintained on their respective books and records,
accruals and reserves that are adequate for the payment of all Taxes not
yet due and payable and attributable to any period preceding the date
hereof; and (iv) have not received notice of any deficiencies for any Tax
from any Governmental Authority against the Company or any of its
Subsidiaries, which deficiency has not been satisfied. Neither the Company
nor any of its Subsidiaries is the subject of any currently ongoing audit
or judicial or administrative proceeding relating to Taxes, nor is any such
audit pending or, to the Company's Knowledge, threatened. With respect to
any taxable period ended prior to December 31, 1992, all Tax Returns
including the Company or any of its Subsidiaries have been audited by the
Internal Revenue Service or are closed by the applicable statute of
limitations. The accruals and reserves for Taxes on the December 31, 1997
Balance Sheet are complete and adequate in all material respects to cover
the liability of the Company and its Subsidiaries for Taxes through such
date. There are no Liens with respect to Taxes upon any of the properties
or assets, real or personal, tangible or intangible, of the Company or any
of its Subsidiaries (other than Liens for Taxes not yet due). No claim has
been made or threatened in writing, and no claim has, to the Company's
Knowledge, otherwise been made or threatened, by a Governmental Authority
in a jurisdiction where the Company and its Subsidiaries do not file Tax
Returns that the Company or any of its Subsidiaries is or may be subject to
taxation by that jurisdiction. Neither the Company nor any of its
Subsidiaries has filed an election under Section 341(f) of the Code to be
treated as a consenting corporation. Neither the Company nor any of its
Subsidiaries is or has been a party to any Tax Sharing Agreement.
(b) The Company and its Subsidiaries have duly withheld or
collected all Taxes required by law to have been withheld or collected
(including Taxes required by law to be withheld or collected in connection
with amounts paid or owing to any employee, independent contractor,
creditor, stockholder or other third party) and any such amounts required
to be remitted to a Governmental Authority have been timely remitted.
Section IV.11 Compliance with ERISA. The Company has provided or
made available to each Purchaser, or has caused to be provided to each
Purchaser (i) current, accurate and complete copies of all documents
embodying or relating to each employee benefit plan (within the meaning of
Section 3(3) of ERISA) and each Employee Agreement, including all
amendments thereto, and trust or funding agreements with respect thereto
(excluding any grantor trusts established to hold assets subject to the
claims of Seller's creditors) maintained or contributed to by and Credit
Party or any ERISA Affiliate; and (ii) all summary plan descriptions and
communications of any material modifications to any employee or employees
relating to any employee benefit plan (within the meaning of Section 3(3)
of ERISA) or Employee Agreement maintained by any Credit Party or any ERISA
Affiliate. Schedule 4.11 sets forth a complete and correct list of all
employee benefit plans and Employee Agreements described in clause (i)
above.
Each employee benefit plan (within the meaning of Section 3(3) of
ERISA) maintained or contributed to by any Credit Party or any ERISA
Affiliate has been established and operated in accordance with terms
thereof and all other applicable laws, including, but not limited to the
Code and ERISA. Neither any Credit Party nor any ERISA Affiliate presently
sponsors, maintains, contributes to, or is required to contribute to, nor
has any Credit Party nor any ERISA Affiliate ever sponsored, maintained,
contributed to, or been required to contribute to, an "employee pension
benefit plan" (within the meaning of Section 3(2) of ERISA) which is
subject to Title IV of ERISA or Section 412 of the Code. Neither any Credit
Party nor any ERISA Affiliate has ever maintained or contributed to or been
required to maintain or contribute to any employee welfare benefits plan
(within the meaning of Section 3(1) of ERISA) which provides for
post-retirement medical or other welfare-type benefits and has no liability
for any such benefits to any present or former employee.
Section IV.12 Intellectual Property Rights. Except as disclosed
on Schedule 4.12 hereto, to the Company's Knowledge, (i) the Company or one
of its Subsidiaries owns or has the right to use pursuant to license,
sub-license, agreement or permission all of its Intellectual Property; and
(ii) neither the Company nor any of its Subsidiaries has interfered with,
infringed upon or misappropriated any Intellectual Property rights of third
parties, except for interferences, infringements and misappropriations
which would not individually or in the aggregate have a Material Adverse
Effect, and the Company has no Knowledge of any claim, demand or notice
alleging any such interference, infringement or misappropriation (including
any claim that it must license or refrain from using any Intellectual
Property rights of any third party). To the Company's Knowledge, no third
party has interfered with, infringed upon or misappropriated any
Intellectual Property rights of the Company or any of the Company's
Subsidiaries.
Section IV.13 Possession of Franchises, Licenses, Etc. Each
Credit Party possesses all franchises, certificates, licenses, permits and
other authorizations from Governmental Entities and other rights, free from
burdensome restrictions, that are necessary for the ownership, maintenance
and operation of their respective properties and assets, except for those
the absence of which would not individually or in the aggregate have a
Material Adverse Effect, and no Credit Party is in violation of any
thereof, except for violations which would not cause a Material Adverse
Effect.
Section IV.14 Compliance with Laws. Each Credit Party is in
compliance with all applicable Laws including, without limitation, those
relating to protection of the environment, employment opportunity and
employee safety, except where the failure to comply would not individually
or in the aggregate have a Material Adverse Effect. No injunction, order or
other decree has been issued nor any Law enacted which prevents, nor does
any Law prohibit the consummation of the transactions contemplated by any
of the Exchange Offer Documents.
Section IV.15 Conflicting Agreements and Charter Provisions.
Other than the Class Action Settlement Agreement, no Credit Party is a
party to any Contract or is subject to any charter or by-law provision or
any judgment or decree which individually or in the aggregate has or is
reasonably likely to have a Material Adverse Effect. Neither the execution
and delivery of any of the Exchange Offer Documents, nor the issuance of
the Exchange Notes, Exchange Warrants or the Additional Warrants, nor the
fulfillment of or compliance with the terms and provisions hereof or
thereof, will conflict with or result in a breach of the terms, conditions,
or provisions of, or give rise to a right of termination under, or
constitute a default under, or result in the creation of any Lien, or
result in any violation of, the charter or by-laws or other organizational
documents of any Credit Party or any Contract of any Credit Party except
where such conflict, breach, right of termination, default, Lien or
violation would not cause a Material Adverse Effect. No Credit Party is in
default under any outstanding indenture or other debt instrument or with
respect to the payment of the principal of or interest on any outstanding
obligations for borrowed money, or is in default under any of its Contracts
except, in the case of Contracts, where such default would not cause a
Material Adverse Effect.
Section IV.16 Capitalization. The authorized capital stock of the
Company consists of 20,000,000 shares of Common Stock, of which, as of the
date hereof, 10,990,290 shares were issued and outstanding. All of the
outstanding shares of Common Stock have been validly issued and are fully
paid and nonassessable. No class of Capital Stock of the Company is
entitled to preemptive rights. Except for the Old Notes and the warrants
and options listed on Schedule 4.16 hereto, there are no outstanding
options, warrants, subscription rights, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into,
shares of any class of Capital Stock of the Company, or Contracts, by which
the Company or any of its Subsidiaries is or may become bound to issue
additional shares of its Capital Stock or options, warrants or other rights
to purchase or acquire any shares of its Capital Stock. Immediately
following the consummation of the transactions contemplated hereby, the
Company's capitalization will be as set forth in Schedule 4.16. The Company
has not declared or paid any dividend or made any other distribution of
cash, stock or other property to its stockholders since January 1, 1995.
Section IV.17 Disclosure. Neither any Exchange Offer Document nor
any Schedule thereto, nor any certificate furnished to any Purchaser by or
on behalf of the Company or any of its Subsidiaries in connection with the
transactions contemplated thereby, taken as a whole, contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein and therein not misleading.
Section IV.18 Offering of Notes. Neither the Company nor any
Person acting on its behalf has offered the Exchange Notes, Exchange
Warrants or the Additional Warrants or any similar securities of the
Company for sale to, solicited any offers to buy the Exchange Notes,
Exchange Warrants or the Additional Warrants or any similar securities of
the Company from or otherwise approached or negotiated with respect to the
Company with any Person other than the Holders and other "accredited
investors" (as defined in Rule 501(a) under the Securities Act). Neither
the Company nor any Person acting on its behalf has taken or, except as
contemplated hereby will take any action (including, without limitation,
any offering of any securities of the Company under circumstances which
would require the integration of such offering with the offering of the
Exchange Notes, Exchange Warrants or the Additional Warrants under the
Securities Act) which could reasonably be expected to subject the offering,
issuance or sale of the Exchange Notes, Exchange Warrants or the Additional
Warrants to the registration requirements of Section 5 of the Securities
Act or violate the provisions of any securities, "blue sky", or similar law
of any applicable jurisdiction.
Section IV.19 Existing Indebtedness; Future Liens. (a) Schedule
4.19 sets forth a complete and correct list of all outstanding Indebtedness
of the Company and its Subsidiaries as of the date hereof. Neither the
Company nor any of its Subsidiaries is in default and no waiver of default
is currently in effect, in the payment of any principal or interest on any
such Indebtedness and no event or condition exists with respect to any such
Indebtedness that would permit (or that with notice or the lapse of time,
or both, would permit) one or more Persons to cause such Indebtedness to
become due and payable before its stated maturity or before its regularly
scheduled dates of payment. None of the Company's 4% convertible
debentures, due January 30, 2000, are outstanding.
(b) No Credit Party has agreed or consented to cause or
permit in the future (upon the happening of a contingency or otherwise) any
of its property, whether now owned or hereafter acquired, to be subject to
any Lien.
Section IV.20 Environmental Matters. No Credit Party has
Knowledge of any claim or has received any notice of any claim, and no
proceeding has been instituted raising any claim against any Credit Party or
any of its real properties now or formerly owned, leased or operated by any
of them or other assets, alleging any damage to the environment or violation
of any Environmental Laws. Except as otherwise set forth in Schedule 4.20,
(i) no Credit Party has Knowledge of any facts which would give rise to any
claim, public or private, of violation of Environmental Laws or damage to the
environment emanating from, occurring on or affecting real properties now or
formerly owned, leased or operated by any of them or to other assets or their
use; (ii) no Credit Party has stored any Hazardous Materials on real
properties now or formerly owned, leased or operated by any of them and has
not disposed of any Hazardous Materials in a manner contrary to any
Environmental Laws; and (iii) all buildings on all real properties now
owned, leased or operated by any Credit Party are in compliance with
applicable Environmental Laws; except in each case for such occurrences which
would not cause a Material Adverse Effect.
Section IV.21 Solvency. No Credit Party is, and after giving
effect to the purchase of the Notes and the application of the proceeds
therefrom will be, insolvent within the meaning of Title 11 of the United
States Code or any comparable state law provision.
Section IV.22 Labor Relations. Except as set forth in Schedule
4.22, no unfair labor practice complaint or any complaint alleging sexual
harassment or sex, age, race or other employment discrimination has been
brought during the last three years against any Credit Party before the
National Labor Relations Board, the Equal Employment Opportunity Commission
or any other Governmental Authority, nor is there any charge, investigation
(formal or informal) or complaint pending, or to the Knowledge of each
Credit Party, threatened, against any Credit Party regarding any labor or
employment matter. There have been no governmental audits of the equal
employment opportunity practices of any Credit Party and, to the Knowledge
of each Credit Party, no reasonable basis for any such audit exists. Each
Credit Party (i) is in compliance with all applicable federal, state and
local laws, rules and regulations (domestic and foreign) respecting
employment, employment practices, labor, terms and conditions of
employment, collective bargaining and wages and hours, except for such
laws, rules and regulations which would not cause a Material Adverse Effect
and (ii) has withheld all amounts required by law or by agreement to be
withheld from the wages, salaries and other payments to its employees.
Section IV.23 Security Documents. Upon proper filing of the
Financing Statements (or assignments thereof) in the offices of the
Secretary of State of Nevada with respect to the Company and upon proper
filing of the Financing Statements (or assignments thereof) in the
locations identified in the Subordinated Guarantee and Security Agreement,
with respect to the domestic Material Subsidiaries, the Liens granted under
the Exchange Offer Documents shall constitute fully perfected security
interests in all right, title and interest of the Company or such domestic
Material Subsidiary, as the case may be, in and to the personal property
therein prior to any other security interests against such property or
interests therein.
Section IV.24 Litigation Settlement. (a) Attached hereto as
Exhibits 4.24A, 4.24B and 4.24C are true and complete copies of the Class
Action Settlement Agreement, the 3M Agreement, and the June 2, 1998 Court
Order approving the Class Action Settlement Agreement and the 3M Agreement
(including the 30-day extension letter thereto).
(b) The plaintiffs in the Breast Implant Litigation have
been preliminarily certified as a Mandatory (non "opt-out" Limited Fund)
Class under Rule 23(b)(1)(B) of the Federal Rules of Civil Procedure.
(c) Except as disclosed in the Company's filing in its 1997
Form 10K, the implementation of the Class Action Settlement Agreement will
preclude further litigation by all persons who are within the scope of the
class and whose claims arise during the class period.
(d) Each Credit Party is in full compliance with all of the
terms of the Class Action Settlement Agreement, the 3M Agreement and the
June 2, 1998 Court Order. No Credit Party is in default under or in
violation of the Class Action Settlement Agreement, the 3M Agreement, or
the June 2, 1998 Court Order and all of the foregoing are in full force and
effect with respect to each Credit Party. To the Knowledge of each Credit
Party, each Person (other than a Credit Party) who is a party to the Class
Action Settlement Agreement or the 3M Agreement or who is subject to the
June 2, 1998 Court Order is in full compliance with the terms of such
agreements and such order, are not in default or in violation of such
agreements or such order, and each of the foregoing is in full force and
effect with respect to such parties.
Section IV.25 Brokers or Finders. Other than the $100,000 fee to
Libra Investments and the $200,000 fee to Appaloosa Management, L.P. to be
paid in connection with the New Financing, no agent, broker, investment
banker or other Person is or will be entitled to any broker's fee or any
other commission or similar fee from any Credit Party in connection with
any of the transactions contemplated by this Agreement.
Section IV.26 No Material Adverse Change. Except as set forth in
Schedule 4.26, since January 1, 1997, no event has occurred or failed to
occur which has had Material Adverse Effect.
Section IV.27 Related Party Transactions. (a) Except as set forth
in Schedule 4.27 or as disclosed in the SEC Reports, no Credit Party has
entered into or been a party to any transaction with any Related Party
thereof except in the ordinary course of, and pursuant to the reasonable
requirements of, such party's business and upon fair and reasonable terms
that are at least equivalent to an arms length transaction with a Person
not a Related Party of such party.
(b) Except as set forth in Schedule 4.27 or as disclosed in
the SEC Reports, no Credit Party has entered into any lending or borrowing
transaction with any director, officer or employee of the Company or any of
its Subsidiaries in excess of $10,000 in the aggregate.
Section IV.28 Year 2000. The Company reasonably believes that the
Company and its Subsidiaries will on a timely basis successfully resolve
the risk that computer applications used by the Company and its
Subsidiaries may be unable to recognize and perform properly date-sensitive
functions involving certain dates, commonly referred to as the "Year 2000
Problem", if the Company and its Subsidiaries implement the plans for such
resolution currently in place. The Company reasonably believes that the
cost to the Company and its Subsidiaries of correcting their Year 2000
Problem will not be Material. The Company and its Subsidiaries, on the
basis of inquiries made, believe that each material supplier and customer
of the Company and each of its Subsidiaries will also successfully resolve
on a timely basis the Year 2000 Problem for all of its computer
applications.
Section IV.29 Statements; Omissions. With respect to the
Exchange, the Company has provided to the Holders all material facts
relevant to the Company and the Exchange, and the Company has not made any
untrue statements of a material fact or omitted to state a material fact
necessary in order to make any statements made by the Company, in the light
of the circumstances under which they were made, not misleading
Section IV.30 No Registration Required; Trust Indenture Act.
Subject to compliance by the Holders with the representations and
warranties set forth in Article III, it is not necessary in connection with
the offer, sale and delivery of the Exchange Notes, Exchange Warrants and
Additional Warrants to the Holders and by the Holders to each subsequent
holder in the manner contemplated by this Agreement to register the
Exchange Notes, Exchange Warrants or the Additional Warrants under the Act.
This Agreement, the Exchange Notes Indenture and the transactions
contemplated hereby and thereby are in full compliance with the Trust
Indenture Act of 1939, as amended ("Trust Indenture Act").
ARTICLE V
CONDITIONS PRECEDENT
--------------------
Section V.1 Conditions Precedent to Obligations of the Company. The
obligations of the Company to issue the Exchange Notes and Exchange
Warrants in exchange for each Holder's Old Notes pursuant to this Agreement
are subject, at the Time of Exchange, to the satisfaction of the following
conditions:
(a) The representations and warranties made by each Holder
herein shall be true and correct in all material respects on and
as of the Time of Exchange with the same effect as though such
representations and warranties had been made on and as of the
Time of Exchange and each Holder shall have complied in all
material respects with all agreements and conditions set forth or
contemplated herein that are required to be performed or complied
with by such Holder at or prior to the Time of Exchange. It is
understood and agreed that the Company shall be entitled to
request and receive such certificates or opinions from the Holder
at the Time of Exchange as shall be satisfactory to the Company
to demonstrate compliance with the provisions of this Section
5.1(a)
(b) The issuance of the Exchange Notes and Exchange Warrants
by the Company in exchange for each Holder's Old Notes shall not
be enjoined (temporarily or permanently) at the Time of Exchange
under the laws of any jurisdiction to which the Company is
subject.
(c) The New Financing shall have closed and the Company
shall have received the net proceeds of such financing pursuant
to the terms thereto.
Section V.2 Conditions Precedent to Obligations of the Holders. The
obligations of the Holders to exchange the Holder's Old Notes for the
Exchange Notes and Exchange Warrants is subject, at the Time of Exchange,
to the satisfaction of the following conditions:
(a) The representations and warranties of the Company shall
be true and correct in all material respects on and as of the
Time of Exchange with the same effect as though such
representations and warranties had been made on and as of the
Time of Exchange and the Company shall have complied in all
material respects with all agreements and conditions set forth or
contemplated herein that are required to be performed or complied
with by the Company at or prior to the Time of Exchange.
(b) The issuance of the Exchange Notes and Exchange Warrants
by the Company in exchange for each Holder's Old Notes shall not
be enjoined (temporarily or permanently) at the Time of Exchange
under the laws of any jurisdiction to which the Company is
subject.
(c) The New Financing shall have closed and the Company
shall have received the net proceeds of such financing pursuant
to the terms thereto.
(d) Each Holder shall have received the opinion of the
Company's counsel in the form of Exhibit 5.2
ARTICLE VI
EXPENSES
--------
Section VI.1 Expenses. The Company agrees to pay the following
expenses relating to this Agreement:
(a) the cost of reproducing, executing and delivering this
Agreement and any other documents contemplated hereby or thereby;
(b) the cost of delivering to the Holder the Exchange Notes
and Exchange Warrants issued to the Holder at the Time of
Exchange; and
(c) all other expenses incurred by the Company.
ARTICLE VII
REGISTRATION RIGHTS
-------------------
Section VII.1 Registration Rights. Pursuant to the Exchange Warrants
and the Exchange Offer Registration Rights Agreement, the Company shall
register with the Commission (i) the shares of common stock of the Company
underlying the Exchange Warrants no later than the first anniversary of the
date hereof and (ii) upon demand by at least 50% of the holders in interest
of Exchange Notes, the Exchange Notes.
ARTICLE VIII
MISCELLANEOUS
-------------
Section VIII.1 No Waiver; Modifications in Writing; Survival. No
failure or delay on the part of the Company or a Holder in exercising any
right, power or remedy hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right, power or remedy
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy. The remedies provided for herein are cumulative and
are not exclusive of any remedies that may be available to the Company or a
Holder at law or in equity or otherwise. No waiver of or consent to any
departure by the Company or a Holder from any provision of this Agreement
shall be effective unless signed in writing by the parties hereto. Any
amendment, supplement or modification of or to any provision of this
Agreement, any waiver of any provision of this Agreement, and any consent
to any departure by the Company or a Holder from the terms of any provision
of this Agreement, shall be effective only in the specific instance and for
the specific purpose for which made or given. Except where notice is
specifically required by this Agreement, no notice to or demand on the
Company in any case shall entitle the Company to any other or further
notice or demand in similar or other circumstances. The representations,
warranties and covenants of the Company set forth herein shall survive the
Time of Exchange and shall not terminate.
Section VIII.2 Communications. All notices and other communications
provided for or permitted hereunder shall be in writing and shall be deemed
to have been duly given if delivered personally or sent by overnight
delivery service, registered or certified mail (return receipt requested),
postage prepaid, to the parties at the following addresses (or at such
other address for any party as shall be specified by like notice, provided
that notices of a change of address shall be effective only upon receipt
thereof). Notices sent by mail shall be effective two days after mailing,
notices delivered personally shall be effective upon receipt, and notices
sent by overnight delivery service guaranteeing next day delivery shall be
effective on the next business day after timely delivery to the courier:
i) if to a Holder at the most current address given by the
Holder to the Company in writing (the address set forth on the
Holder's signature page hereof to be such address initially);
ii) if to the Company at the following address:
Inamed Corporation
1120 Avenue of the ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇, Executive Vice President
with copies to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Frome & ▇▇▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Section VIII.3 Execution in Counterparts. This Agreement may be
executed in counterparts and by the parties hereto on separate
counterparts, each of which counterparts, when so executed and delivered,
shall be deemed to be an original and all of which counterparts, taken
together, shall constitute but one and the same Agreement.
Section VIII.4 Successors and Assigns. All covenants and agreements
contained herein shall bind and inure to the benefit of the parties hereto
and their respective successors and assigns (including, without limitation,
any subsequent holder of an Exchange Note or Exchange Warrant).
Section VIII.5 Governing Law. This Agreement shall be deemed to be a
contract made under the laws of the State of New York, and for all purposes
shall be construed in accordance with the laws of said State, without
regard to principles of conflict of laws.
Section VIII.6 Severability of Provisions. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
Section VIII.7 Certain Taxes. The Company shall pay any sales,
transfer, stamp, documentary or similar taxes incurred in connection with
the transactions contemplated by this Agreement.
Section VIII.8 Headings. The Article and Section headings used or
contained in this Agreement are for convenience of reference only and shall
not affect the construction of this Agreement.
SECURITIES EXCHANGE AGREEMENT SIGNATURE PAGE 1
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first above written.
INAMED CORPORATION
By: /s/▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------
Title:
Accepted and Agreed as of the
date first above written. The
completion, execution and delivery
of this Agreement constitutes a
consent to the proposed amendments
set forth in Annex A attached
hereto
▇▇▇▇ L.P.
-------------------------------------
Name of Holder (Please type or print)
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------
(Please sign)
Name:
Title:
NOTE: Please sign exactly as name appears on the Old
Note. Joint owners should each sign. When signing
as attorney, executor, administrator, trustee or
guardian, please give full title as such. When
signing on behalf of a corporation, you should be an
authorized officer of such corporation, and please
give your title as such.
Address: c/o Appaloosa Management
----------------------------
▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
----------------------------
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
----------------------------
Social Security Number or Tax I.D. Number
▇▇-▇▇▇▇▇▇▇
----------------------------------------------
Aggregate principal amount of
Old Notes to be delivered by you:
$ ALL
---------------------------------------------
SECURITIES EXCHANGE AGREEMENT SIGNATURE PAGE 1
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first above written.
INAMED CORPORATION
By: /s/▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------
Title:
Accepted and Agreed as of the
date first above written. The
completion, execution and delivery
of this Agreement constitutes a
consent to the proposed amendments
set forth in Annex A attached
hereto
Appaloosa Investment Limited Partnership I
------------------------------------------
Name of Holder (Please type or print)
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------
(Please sign)
Name:
Title:
NOTE: Please sign exactly as name appears on the Old
Note. Joint owners should each sign. When signing
as attorney, executor, administrator, trustee or
guardian, please give full title as such. When
signing on behalf of a corporation, you should be an
authorized officer of such corporation, and please
give your title as such.
Address: c/o Appaloosa Management
----------------------------
▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
----------------------------
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
----------------------------
Social Security Number or Tax I.D. Number
▇▇-▇▇▇▇▇▇▇
----------------------------------------------
Aggregate principal amount of
Old Notes to be delivered by you:
$ ALL
---------------------------------------------
SECURITIES EXCHANGE AGREEMENT SIGNATURE PAGE 1
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first above written.
INAMED CORPORATION
By: /s/▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------
Title:
Accepted and Agreed as of the
date first above written. The
completion, execution and delivery
of this Agreement constitutes a
consent to the proposed amendments
set forth in Annex A attached
hereto
Palomino Fund Ltd.
-------------------------------------
Name of Holder (Please type or print)
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------
(Please sign)
Name:
Title:
NOTE: Please sign exactly as name appears on the Old
Note. Joint owners should each sign. When signing
as attorney, executor, administrator, trustee or
guardian, please give full title as such. When
signing on behalf of a corporation, you should be an
authorized officer of such corporation, and please
give your title as such.
Address: c/o Appaloosa Management
----------------------------
▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
----------------------------
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
----------------------------
Social Security Number or Tax I.D. Number
▇▇-▇▇▇▇▇▇▇
----------------------------------------------
Aggregate principal amount of
Old Notes to be delivered by you:
$ ALL
---------------------------------------------
Schedule 2.1
PRINCIPAL
RECORD NAME OF AMOUNT OF EXCHANGE ADDITIONAL
NOTEHOLDER NOTES WARRANTS WARRANTS
-------------- ----- -------- --------
Appaloosa Investment $7,102,858 1,330,172 181,143
Ltd. Partnership I
Palamino Fund Ltd. 7,102,857 0 0
Palamino Investment 0 1,330,171 181,143
Holdings Ltd.
Ananconda Opportunity 285,714 53,506 7,286
Fund, L.P.
Atticus 171,428 32,104 4,372
International, Ltd.
Atticus Partners, 41,686 7,807 1,063
L.P.
Atticus Qualified 72,600 13,596 1,852
Partners, L.P.
RH Capital Associates 514,286 96,312 13,116
Number One
Little Wing L.P. 200,000 37,455 5,101
▇▇▇▇▇, ▇▇▇▇▇ 57,143 10,701 1,457
GSAM Oracle Fund 1,440,000 269,673 36,724
Oracle Institutional 280,000 52,436 7,141
Partners, L.P.
Oracle Partners, L.P. 1,800,000 337,091 45,905
Quasar International 480,000 89,891 12,241
Partners, C.V.
TOTAL 19,548,572 3,660,915 498,544
ANNEX A
PROPOSED MODIFICATIONS TO INDENTURE
SELECTED INDENTURE PROVISIONS
AS CURRENTLY IN EFFECT
Section 8.2 Maintenance of PROPOSED MODIFICATION
Office or Agency
Section 8.6 Payment of Taxes [DELETED IN ITS ENTIRETY]
and Other Claims
Section 8.7 Limitation on [DELETED IN ITS ENTIRETY]
Indebtedness
Section 8.8 Limitation on [DELETED IN ITS ENTIRETY]
Encumbrances
Section 8.9 Limitation on [DELETED IN ITS ENTIRETY]
Related Party Transactions
Section 8.10 Limitation on [DELETED IN ITS ENTIRETY]
Dividends
Section 8.11 Subsidiary [DELETED IN ITS ENTIRETY]
Guarantees
Section 8.12 Additional [DELETED IN ITS ENTIRETY]
Offerings of Securities
Section 8.13 Pledges of [DELETED IN ITS ENTIRETY]
Intercompany Notes
Section 8.14 Registration [DELETED IN ITS ENTIRETY]
Rights
Section 8.15 Restricted [DELETED IN ITS ENTIRETY]
Investment
Section 8.16 Operating Profit [DELETED IN ITS ENTIRETY]
Section 8.17 Tangible Assets [DELETED IN ITS ENTIRETY]
Section 8.18 Statement by [DELETED IN ITS ENTIRETY]
Officers as to Default
