EXHIBIT 10.62
LOAN AND SECURITY AGREEMENT
DATED AS OF MARCH 18, 2002
BETWEEN
STANDARD FEDERAL BANK NATIONAL ASSOCIATION,
ACTING BY AND THROUGH
LASALLE BUSINESS CREDIT, INC., AS ITS AGENT,
THE LENDER,
AND
HORIZON MEDICAL PRODUCTS, INC.,
THE BORROWER
TABLE OF CONTENTS
Page
1. DEFINITIONS .................................................................................... 1
2. LOANS .......................................................................................... 10
a. Revolving Loans ........................................................................ 10
b. Term Loan .............................................................................. 11
c. Repayments ............................................................................. 11
d. Notes .................................................................................. 12
3. LETTERS OF CREDIT .............................................................................. 12
a. General Terms .......................................................................... 12
b. Requests for Letters of Credit ......................................................... 12
c. Obligations Absolute ................................................................... 13
d. Expiration Dates of Letters of Credit .................................................. 13
4. INTEREST, FEES AND CHARGES ..................................................................... 13
a. Interest Rate .......................................................................... 13
b. Fees And Charges ....................................................................... 13
c. Minimum Loan Charges ................................................................... 15
d. Maximum Interest ....................................................................... 15
5. COLLATERAL ..................................................................................... 15
▇. ▇▇▇▇▇ of Security Interest to Lender ................................................... 15
b. Other Security ......................................................................... 16
c. Possessory Collateral .................................................................. 16
d. Electronic Chattel Paper ............................................................... 16
e. Exclusion for Certain Contracts and Leases ............................................. 17
6. PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY
INTERESTS THEREIN ............................................................................... 17
7. POSSESSION OF COLLATERAL AND RELATED MATTERS ................................................... 17
8. COLLECTIONS ..................................................................................... 17
9. COLLATERAL, AVAILABILITY AND FINANCIAL REPORTS AND
SCHEDULES ................................................................................. 19
a. Daily Reports .......................................................................... 19
b. Monthly Reports ....................................................................... 19
c. Financial Statements .................................................................. 20
d. Annual Projections .................................................................... 20
e. Explanation of Budgets and Projections ................................................. 20
f. Public Reporting ...................................................................... 20
g. Other Information ...................................................................... 20
10. TERMINATION; AUTOMATIC RENEWAL ................................................................ 21
11. REPRESENTATIONS AND WARRANTIES ................................................................ 21
a. Financial Statements and Other Information ............................................. 22
b. Locations ............................................................................. 22
c. Loans by Borrower ..................................................................... 22
d. Accounts and Inventory ................................................................ 22
e. Liens .................................................................................. 22
f. Organization, Authority and No Conflict ............................................... 22
g. Litigation ............................................................................. 23
h. Compliance with Laws and Maintenance of Permits ....................................... 23
i. Affiliate Transactions ................................................................ 23
j. Names and Trade Names .................................................................. 23
k. Equipment ............................................................................. 24
l. Enforceability ........................................................................ 24
m. Solvency ............................................................................... 24
n. Indebtedness ........................................................................... 24
o. Margin Security and Use of Proceeds ................................................... 24
p. Parent, Subsidiaries and Affiliates .................................................... 24
q. No Defaults ............................................................................ 24
r. Employee Matters ....................................................................... 25
s. Intellectual Property .................................................................. 25
t. Environmental Matters .................................................................. 25
u. ERISA Matters .......................................................................... 25
12. AFFIRMATIVE COVENANTS ......................................................................... 25
a. Maintenance of Records ................................................................. 26
b. Notices ................................................................................ 26
c. Compliance with Laws and Maintenance of Permits ........................................ 27
d. Inspection and Audits .................................................................. 27
e. Insurance .............................................................................. 28
f. Collateral ............................................................................. 29
g. Use of Proceeds ........................................................................ 29
h. Taxes .................................................................................. 29
i. Intellectual Property .................................................................. 30
j. Checking Accounts ...................................................................... 30
k. Chief Operating Officer ................................................................ 30
l. Appraisals ............................................................................. 30
13. NEGATIVE COVENANTS ............................................................................. 30
a. Guaranties ............................................................................. 30
b. Indebtedness .......................................................................... 30
c. Liens ................................................................................. 31
d. Mergers, Sales, Acquisitions, Subsidiaries and Other Transactions Outside the
Ordinary Course of Business ........................................................... 31
e. Dividends and Distributions ........................................................... 31
f. Investments; Loans ..................................................................... 31
g. Fundamental Changes, Line of Business .................................................. 31
h. Equipment ............................................................................. 32
ii
i. Use of Proceeds ....................................................................... 32
j. Affiliate Transactions ................................................................. 32
k. Settling of Accounts .................................................................. 32
14. FINANCIAL COVENANTS ........................................................................... 32
15. DEFAULT ....................................................................................... 32
a. Payment ................................................................................ 32
b. Breach of this Agreement and Other Agreements .......................................... 33
c. Breaches of Other Obligations .......................................................... 33
d. Breach of Representations and Warranties ............................................... 33
e. Loss of Collateral ..................................................................... 33
▇. ▇▇▇▇, Seizure or Attachment. ., ........................................................ 33
g. Bankruptcy or Similar Proceedings ...................................................... 33
h. Appointment of Receiver ................................................................ 34
i. Judgment ............................................................................... 34
j. Reserved ............................................................................... 34
k. Default or Revocation of Guaranty ...................................................... 34
l. Criminal Proceedings ................................................................... 34
m. Change of Control ...................................................................... 34
n. Material Adverse Change ................................................................ 35
o. Default Under Subordinated Debt Documents .............................................. 35
16. REMEDIES UPON AN EVENT OF DEFAULT .............................................................. 35
17. CONDITIONS PRECEDENT ........................................................................... 36
18. INDEMNIFICATION ................................................................................ 37
19. NOTICE ........................................................................................ 38
20. CHOICE OF GOVERNING LAW; CONSTRUCTION; FORUM
SELECTION ................................................................................. 38
21. MODIFICATION AND BENEFIT OF AGREEMENT ......................................................... 39
22. HEADINGS OF SUBDIVISIONS ....................................................................... 39
23. POWER OF ATTORNEY .............................................................................. 39
24. CONFIDENTIALITY ............................................................................... 39
25. COUNTERPARTS .................................................................................. 39
26. ELECTRONIC SUBMISSIONS ......................................................................... 40
27. WAIVER OF JURY TRIAL; OTHER WAIVERS ........................................................... 40
iii
EXHIBIT A - BUSINESS AND COLLATERAL LOCATIONS
EXHIBIT B - COMPLIANCE CERTIFICATE
EXHIBIT C -COMMERCIAL TORT CLAIMS
SCHEDULE 11 (c) -LOANS
SCHEDULE 11 (g) -LITIGATION
SCHEDULE 11(i) - AFFILIATE TRANSACTIONS
SCHEDULE 110) - NAMES & TRADE NAMES
SCHEDULE 11 (n) - INDEBTEDNESS
SCHEDULE 11 (p) -PARENT, SUBSIDIARIES AND AFFILIATES
SCHEDULE 14 - FINANCIAL COVENANTS
SCHEDULE 17(a) - CLOSING DOCUMENT CHECKLIST
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LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (as amended, modified or supplemented
from time to time, this "Agreement") is made this 18' day of March, 2002, by
and between STANDARD FEDERAL BANK NATIONAL ASSOCIATION, acting by and through
LASALLE BUSINESS CREDIT, INC., a Delaware corporation, as its agent ("Lender"),
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, and HORIZON MEDICAL
PRODUCTS, INC., a Georgia corporation, having its principal place of business
at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ ("BORROWER").
WITNESSETH:
WHEREAS, Borrower may, from time to time, request Loans from Lender,
and the parties wish to provide for the terms and conditions upon which such
Loans or other financial accommodations, if made by Lender, shall be made;
NOW, THEREFORE, in consideration of any Loan (including any Loan by
renewal or extension) hereafter made to Borrower by Lender, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by Borrower, the parties agree as follows:
1. DEFINITIONS.
"ACCOUNT", "ACCOUNT DEBTOR", "CHATTEL PAPER", "COMMERCIAL
TORT CLAIMS", "DEPOSIT ACCOUNTS", "DOCUMENTS", "ELECTRONIC CHATTEL PAPER",
"EQUIPMENT", "FIXTURES", "GENERAL INTANGIBLES", "GOODS", "INSTRUMENTS",
"INVENTORY", "INVESTMENT PROPERTY", "LETTER-OF-CREDIT RIGHT", "PROCEEDS" AND
"TANGIBLE CHATTEL PAPER" shall have the respective meanings assigned to such
terms in the Georgia Uniform Commercial Code, as the same may be in effect from
time to time.
"ADDITIONAL NOTE PURCHASERS" shall have the meaning ascribed
to such term in the Note Purchase Agreement as in effect on the date hereof.
"ADDITIONAL NOTES" shall mean those certain senior
subordinated convertible notes issued by Borrower to Additional Note Purchasers
in an aggregate principal amount not to exceed $6,600,000, pursuant to the Note
Purchase Agreement as in effect on the date hereof
"AFFILIATE" shall mean any Person (i) which directly or
indirectly through one or more intermediaries controls, is controlled by, or is
under common control with, Borrower, (ii) which beneficially owns or holds five
percent (5%) or more of the voting control or equity interests of Borrower, or
(iii) five percent (5%) or more of the voting control or equity interests of
which is beneficially owned or held by Borrower.
"Average Monthly Loan Balance" shall mean the amount obtained
by adding the unpaid balance of Revolver Loans owing by Borrower to Lender at
the end of each day for each day during the month in question and by dividing
such sum by the number of days in such month.
"BofA" shall mean Bank of America, N.A., a national banking
association.
"BofA Note" shall mean that certain unsecured subordinated
Promissory Note made by ComVest to BofA in the principal amount of $2,000,000,
and assigned to and assumed by Borrower pursuant to the Contract Assignment.
Business Day" shall mean any day other than a Saturday, a
Sunday or any day that banks in Chicago, Illinois or Atlanta, Georgia are
required or permitted to close.
"Capital Expenditures" shall mean with respect to any period,
the aggregate of all expenditures (whether paid in cash or accrued as
liabilities and including expenditures for capitalized lease obligations) by
Borrower and its Subsidiaries during such period that are required by generally
accepted accounting principles, consistently applied, to be included in or
reflected by the property, plant and equipment or similar fixed asset accounts
(or intangible accounts subject to amortization) on the balance sheet of
Borrower.
"Closing Date" shall mean the date on which all of the
conditions precedent in Section 17 of this Agreement are satisfied and the
initial Loan is made under this Agreement.
"Collateral" shall mean all of the property of Borrower
described in Section 5 hereof, together with all other real or personal
property of any Obligor or any other Person now or hereafter pledged to Lender
to secure, either directly or indirectly, repayment of any of the Liabilities.
"ComVest" shall mean ComVest Venture Partners, L.P., a
Delaware limited partnership.
"COMVEST SENIOR SUBORDINATED CONVERTIBLE NOTE" shall mean
that certain Senior Subordinated Convertible Note made by Borrower to ComVest
in the original principal amount of $4,400,000, pursuant to the Note Purchase
Agreement.
"Contract Assignment" shall mean that certain Contract for
the Assignment of Note and Other Loan Documents dated February, 2002, among
ComVest, Medtronic, BofA and Borrower.
"Default" shall mean an event or condition the occurrence of
which would, with the lapse of time or the giving of notice, or both, become an
Event of Default.
"Designated Accounts" shall mean Eligible Accounts owing by
Clinical Technology, Midwest Medical, Kentec Medical, R ▇▇▇▇▇▇, ▇▇▇▇▇ &
Associates, or ▇▇▇▇▇▇▇▇ Industries, Inc.
"EBITDA" shall mean, with respect to any period, Borrower's
and its Subsidiaries' net income after taxes for such period (excluding any
after-tax gains or losses on
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the sale of assets and excluding other after-tax extraordinary gains or losses)
plus interest expense, income tax expense, depreciation and amortization for
such period, less gains and losses attributable to any fixed asset sales made
during such period, ~l or minus any other non-cash charges or gains which have
been subtracted or added in calculating net income after taxes for such period,
all on a consolidated basis.
"ELIGIBLE ACCOUNT" shall mean an Account owing to Borrower or
one of its Subsidiaries which is acceptable to Lender in its reasonable
discretion for lending purposes. Without limiting Lender's discretion, Lender
shall, in general, consider an Account to be an Eligible Account if it meets,
and so long as it continues to meet, the following requirements:
(i) it is genuine and in all respects what it purports to be;
(ii) it is owned by Borrower or one of its Subsidiaries,
Borrower or such Subsidiary has the right to subject it to a security interest
in favor of Lender or assign it to Lender and it is subject to a first priority
perfected security interest in favor of Lender and to no other claim, lien,
security interest or encumbrance whatsoever, other than Permitted Liens;
(iii) it arises from (A) the performance of services by
Borrower or one of its Subsidiaries in the ordinary course of its business, and
such services have been fully performed and acknowledged and accepted by the
Account Debtor thereunder; or (B) the sale or lease of Goods by Borrower or one
of its Subsidiaries in the ordinary course of Borrower's or such Subsidiaries'
business, and (x) such Goods have been completed in accordance with the Account
Debtor's specifications (if any) and delivered to the Account Debtor, (y) such
Account Debtor has not refused to accept, returned or offered to return, any of
the Goods which are the subject of such Account, and (z) Borrower or one of its
Subsidiaries has possession of, or Borrower or such Subsidiary has delivered to
Lender (at Lender's request) shipping and delivery receipts evidencing delivery
of such Goods;
(iv) it is evidenced by an invoice rendered to the Account
Debtor thereunder, is due and payable within thirty (30) days after the date of
the invoice and does not remain unpaid more than ninety (90) days past the
invoice date thereof (other than (x) Designated Accounts, which shall be due
and payable within thirty (30) days after the due date, not to exceed one
hundred fifty (150) days and (y) major hospital customers of ▇▇▇▇▇▇ as
determined by Lender ("Major Hospital Account"), which shall be due and payable
within one hundred fifty (150) days after the invoice date, not to exceed
$500,000 in the aggregate as to all such Major Hospital Accounts); provided,
however, that if more than twenty-five percent (25%) of the aggregate dollar
amount of invoices owing by a particular Account Debtor remain unpaid more than
ninety (90) days after the respective invoice dates thereof (or more than one
hundred fifty (150) days after the respective invoice dates thereof with
respect to any Designated Account or Major Hospital Account), then all Accounts
owing by that Account Debtor shall be deemed ineligible;
(v) it is a valid, legally enforceable and unconditional
obligation of the Account Debtor thereunder, and is not subject to setoff,
counterclaim, credit, allowance or adjustment by such Account Debtor, or to any
claim by such Account Debtor denying liability thereunder in whole or in part;
3
(vi) it does not arise out of a contract or order which fails
in any material respect to comply with the requirements of applicable law;
(vii) the Account Debtor thereunder is not a director,
officer, employee or agent of Borrower, or a Subsidiary, Parent or Affiliate;
(viii) it is not an Account with respect to which the Account
Debtor is the United States of America or any state or local government, or any
department, agency or instrumentality thereof, unless Borrower or its
Subsidiary assigns its right to payment of such Account to Lender pursuant to,
and in full compliance with, the Assignment of Claims Act of 1940, as amended,
or any comparable state or local law, as applicable;
(ix) it is not an Account with respect to which the Account
Debtor is located in a state which requires Borrower, as a precondition to
commencing or maintaining an action in the courts of that state, either to (A)
receive a certificate of authority to do business and be in good standing in
such state; or (B) file a notice of business activities report or similar
report with such state's taxing authority, unless (x) Borrower has taken one of
the actions described in clauses (A) or (B); (y) the failure to take one of the
actions described in either clause (A) or (B) may be cured retroactively by
Borrower at its election; or (z) Borrower has proven, to Lender's satisfaction,
that it is exempt from any such requirements under any such state's laws;
(x) the Account Debtor is located within the United States of
America;
(xi) it is not an Account with respect to which the Account
Debtor's obligation to pay is subject to any repurchase obligation or return
right, as with sales made on a ▇▇▇▇-and-hold, guaranteed sale, sale on
approval, sale or return or consignment basis;
(xii) it is not an Account (A) with respect to which any
representation or warranty contained in this Agreement is untrue; or (B) which
violates any of the covenants of Borrower contained in this Agreement;
(xiii) it is not an Account which, when added to a particular
Account Debtor's other indebtedness to Borrower and its Subsidiaries, exceeds
10% of all Accounts of Borrower and its Subsidiaries or a credit limit
determined by Lender in its sole discretion for that Account Debtor (except
that Accounts excluded from Eligible Accounts solely by reason of this clause
(xiii) shall be Eligible Accounts to the extent of such credit limit); and
(xiv) it is not an Account with respect to which the prospect
of payment or performance by the Account Debtor is or will be impaired, as
determined by Lender in its reasonable discretion.
"ELIGIBLE INVENTORY" shall mean Inventory of Borrower or its
Subsidiaries which is acceptable to Lender in its reasonable discretion for
lending purposes. Without limiting Lender's discretion, Lender shall, in
general, consider Inventory to be Eligible Inventory if it meets, and so long
as it continues to meet, the following requirements:
(i) it is owned by Borrower or one of its Subsidiaries,
Borrower or such Subsidiary has the right to subject it to a security interest
in favor of Lender and it is subject to a
4
first priority perfected security interest in favor of Lender and to no other
claim, lien, security interest or encumbrance whatsoever, other than Permitted
Liens;
(ii) it is located on one of the premises listed on Exhibit A
(or other locations of which Lender has been advised in writing pursuant to
subsection 12(b)(i) hereof) and is not in transit;
(iii) if held for sale or lease or furnishing under contracts
of service, it is (except as Lender may otherwise consent in writing) new and
unused and free from defects which would, in Lender's reasonable determination,
affect its market value;
(iv) it is not stored with a bailee, consignee, warehouseman,
processor or similar party unless Lender has given its prior written approval
and Borrower has caused any such bailee, consignee, warehouseman, processor or
similar party to issue and deliver to Lender, in form and substance acceptable
to Lender, such Uniform Commercial Code financing statements, warehouse
receipts, waivers, Landlord Waivers and other documents as Lender shall
require;
(v) Lender has determined, in accordance with Lender's
customary business practices, that it is not unacceptable due to age, type,
category or quantity; and
(vi) it is not Inventory (A) with respect to which any of the
representations and warranties contained in this Agreement are untrue; or (B)
which violates any of the covenants of Borrower contained in this Agreement.
"ENVIRONMENTAL LAWS" SHALL mean all federal, state, district,
local and foreign laws, rules, regulations, ordinances, and consent decrees
relating to health, safety, hazardous substances, pollution and environmental
matters, as now or at any time hereafter in effect, applicable to Borrower's
business or facilities owned or operated by Borrower, including laws relating
to emissions, discharges, releases or threatened releases of pollutants,
contamination, chemicals, or hazardous, toxic or dangerous substances,
materials or wastes into the environment (including, without limitation,
ambient air, surface water, ground water, land surface or subsurface strata) or
otherwise relating to the generation, manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous
Materials.
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended, modified or restated from time to time.
"EVENT OF DEFAULT" shall have the meaning specified in
Section 15 hereof.
"FDA" shall mean the U.S. Food and Drug Administration and
any successor thereto.
"FDC ACT" shall mean the Food, Drug and Cosmetic Act, and any
successor statute thereto and any and all regulations issued pursuant thereto
or in connection therewith.
"FISCAL YEAR" shall mean each twelve (12) month accounting
period of Borrower, which ends on December 31 of each year.
5
"Fixed Charges" shall mean for any period, without
duplication, scheduled payments of principal during the applicable period with
respect to all indebtedness of Borrower and its Subsidiaries, on a consolidated
basis, for borrowed money, plus scheduled payments of principal during the
applicable period with respect to all capitalized lease obligations of Borrower
and its Subsidiaries, on a consolidated basis, plus scheduled payments of
interest during the applicable period with respect to all indebtedness of
Borrower and its Subsidiaries, on a consolidated basis, for borrowed money
including capital lease obligations, plus unfinanced Capital Expenditures of
Borrower and its Subsidiaries, on a consolidated basis, during the applicable
period, plus payments during the applicable period in respect of income taxes
of Borrower and its Subsidiaries, on a consolidated basis.
"Guarantor" shall mean, individually and collectively,
Horizon Acquisition, Strato, ▇▇▇▇▇▇ and any other Person who now or hereafter
guarantees the payment or performance of any or all of the Liabilities.
"Guaranties" shall mean each guaranty agreement now or
hereafter executed by a Guarantor in favor of Lender with respect to any of the
Liabilities.
"HAZARDOUS MATERIALS" shall mean any hazardous, toxic or
dangerous substance, materials and wastes, including, without limitation,
hydrocarbons (including naturally occurring or man-made petroleum and
hydrocarbons), flammable explosives, asbestos, urea formaldehyde insulation,
radioactive materials, biological substances, polychlorinated biphenyls,
pesticides, herbicides and any other kind and/or type of pollutants or
contaminants (including, without limitation, materials which include hazardous
constituents), sewage, sludge, industrial slag, solvents and/or any other
similar substances, materials, or wastes and including any other substances,
materials or wastes that are or become regulated under any Environmental Law
(including, without limitation any that are or become classified as hazardous
or toxic under any Environmental Law).
"HORIZON ACQUISITION" shall mean Horizon Acquisition Corp., a
Georgia corporation.
"INDEMNIFIED PARTY" shall have the meaning specified in
Section 18 hereof.
"LANDLORD WAIVERS" shall mean an agreement duly executed in
favor of Lender, in form and content acceptable to Lender, by which an owner or
mortgagee of premises upon which any property of an Obligor is located agrees
to waive or subordinate any security interest or lien it may have with respect
to such property in favor of Lender's security interest and lien therein and to
permit Lender to enter upon such premises and to remove such property or to use
such premises to store or dispose of such property.
"LASALLE BANK" shall mean LaSalle Bank National Association,
Chicago, Illinois.
"LETTER OF CREDIT" shall mean any Letter of Credit issued on
behalf of Borrower in accordance with this Agreement.
"LETTER OF CREDIT OBLIGATIONS" shall mean, as of any date of
determination, the sum of (i) the aggregate undrawn face amount of all Letters
of Credit, and (ii) the aggregate unreimbursed amount of all drawn Letters of
Credit not already converted to Loans hereunder.
6
"LIABILITIES" shall mean any and all obligations, liabilities
and indebtedness of Borrower to Lender or to any parent, affiliate or
subsidiary of Lender of any and every kind and nature, howsoever created,
arising or evidenced and howsoever owned, held or acquired, whether now or
hereafter existing, whether now due or to become due, whether primary,
secondary, direct, indirect, absolute, contingent or otherwise (including,
without limitation, obligations of performance), whether several, joint or
joint and several, and whether arising or existing under written or oral
agreement or by operation of law.
"LOANS" shall mean all loans and advances made by Lender to
or on behalf of Borrower hereunder, including, without limitation, all
Revolving Loans and the Term Loan.
"LOCK BOX" and "LOCK BOX ACCOUNT" shall have the meanings
specified in subsection 8(a) hereof.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse
effect on the business, property, assets, prospects, operations or condition,
financial or otherwise, of (i) Borrower, (ii) ▇▇▇▇▇▇, or (iii) Borrower and its
Subsidiaries taken as a whole.
"MAXIMUM LOAN LIMIT" shall mean Twenty-Two Million and No/100
Dollars ($22,000,000).
"MAXIMUM REVOLVING LOAN LIMIT" shall have the meaning
specified in subsection 2(a) hereof.
"MEDTRONIC" shall mean Medtronic, Inc., a Delaware
corporation.
"MEDTRONIC ADDITIONAL NOTE" shall mean that certain Senior
Subordinated Convertible Note made by Borrower to Medtronic in the original
principal amount of $4,000,000, pursuant to the Note Purchase Agreement.
"MINIMUM LOAN BALANCE" shall mean $8,500,000.
"MORTGAGE" shall mean the deed to secure debt, security
agreement and assignment of rents and leases to be executed by Borrower on or
before the Closing Date in favor of Lender and by which Borrower shall grant
and convey to Lender, security title to and liens on the real property of
Borrower located at Seven North Parkway Square,4200 ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇, as security for the payment of the Liabilities.
"NOTE PURCHASE AGREEMENT" shall mean that certain Note
Purchase Agreement dated as of March 1, 2002, by and among Borrower, ComVest
and the Additional Note Purchasers.
"NOTES" shall mean the Revolver Note and the Term Note.
"OBLIGOR" shall mean Borrower, each Guarantor and each other
Person who is or shall become primarily or secondarily liable for any of the
Liabilities.
"ORIGINAL TERM" shall have the meaning specified in Section
10 hereof.
7
"OTHER AGREEMENTS" shall mean all agreements, instruments and
documents, other than this Agreement, including, without limitation, the
Guaranties, the Mortgage, the Patent Security Agreements, the Trademark
Security Agreements, the Notes, the Landlord Waivers, the Subordination
Agreements, and all other mortgages, trust deeds, pledges, powers of attorney,
consents, assignments, contracts, notices, security agreements, warrants,
warrant purchase agreements, registration rights agreements, collateral
assignments of license agreements, trademark security agreements, deposit
account control agreements, business interruption assignments, leases,
financing statements and all other writings heretofore, now or from time to
time hereafter executed by or on behalf of Borrower, any Guarantor, any other
Obligor or any other Person and delivered to Lender or to any parent, affiliate
or subsidiary of Leader in connection with the Liabilities or the transactions
contemplated hereby, as each of the same may be amended, modified or
supplemented from time to time.
"PARENT" shall mean any Person now or at any time or times
hereafter owning or controlling (alone or with any other Person) at least a
majority of the issued and outstanding equity of Borrower.
"PATENT SECURITY AGREEMENT" shall mean each Patent Security
Agreement to be executed by an Obligor in favor of Lender on or before the
Closing Date and by which such Obligor shall assign to Lender, as security for
the Liabilities, all of such Obligor's right, title and interest in and to the
patents and patent applications described therein.
"PBGC" shall have the meaning specified in subsection
12(b)(v) hereof.
"PERMITTED LIENS" shall mean (i) statutory liens of
landlords, carriers, warehousemen, processors, mechanics, materialmen or
suppliers incurred in the ordinary course of business but only if and for so
long as (x) payment in respect of any such lien is not at the time required or
the debt secured by any such lien is being properly contested in good faith by
appropriate proceedings and for which adequate reserves have been established
and such liens do not materially detract from the value of the Borrower or such
Subsidiary and do not materially impair the use thereof in the operation of
such Borrower's or such Subsidiary's business; (ii) liens or security interests
in favor of Lender; (iii) zoning restrictions and easements, licenses,
covenants and other restrictions affecting the use of real property that do not
individually or in the aggregate have a material adverse effect on Borrower's
ability to use such real property for its intended purpose in connection with
Borrower's business; (iv) liens in connection with purchase money indebtedness
and capitalized leases otherwise permitted pursuant to this Agreement,
provided, that such liens attach only to the assets the purchase of which was
financed by such purchase money indebtedness or which is the subject of such
capitalized leases; (v) liens incurred or deposits made in the ordinary course
of business of Borrower to secure the performance of tenders, bids, leases,
contracts (other than for money borrowed), provided, that, such liens are at
all times subordinate and junior to the liens upon the Collateral in favor of
Lender; and (vi) liens specifically permitted by Lender in writing.
"PERSON" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
corporation, limited liability company, institution, entity, party or foreign
or United States government (whether federal, state, county, city, municipal or
otherwise), including, without limitation, any instrumentality, division,
agency, body or department thereof.
8
"PLAN" shall have the meaning specified in subsection
12(b)(v) hereof.
"PRIME RATE" shall mean LaSalle Bank's publicly announced
prime rate (which is not intended to be LaSalle Bank's lowest or most favorable
rate in effect at any time) in effect from time to time.
"RENEWAL TERM" shall have the meaning specified in Section 10
hereof.
"REVOLVER NOTE" shall mean that certain Revolving Note dated
on or about the date hereof from Borrower to Lender in the original principal
amount of up to $20,000,000.
"REVOLVING LOAN LIMIT" shall have the meaning specified in
subsection 2(a) hereof.
"REVOLVING LOANS" shall have the meaning specified in
subsection 2(a) hereof.
"▇▇▇▇▇▇" shall mean ▇▇▇▇▇▇ Corporation, a New York
corporation.
"▇▇▇▇▇▇ NOTE" shall mean that certain unsecured promissory
note dated March 15, 2002, made by Borrower to ▇▇▇▇▇▇ in the principal amount
of $1,565,711.
"STRATO" shall mean Strato/Infusaid, Inc., a Massachusetts
corporation.
"SUBORDINATED DEBT DOCUMENTS" shall mean, (i) the Note
Purchase Agreement, (ii) the Medtronic Additional Note, (iii) the ComVest
Senior Subordinated Convertible Note, (iv) the Additional Notes, (v) the BofA
Note, and (vi) any and all other agreements, instruments or documents executed
in connection therewith or pursuant thereto.
"SUBORDINATION AGREEMENTS" shall mean any and all
subordination agreements required by Lender with any Person to evidence the
subordination to the prior payment in full of the Liabilities of any
indebtedness owing by any Obligor to such Person or the subordination of any
security interest and lien of such Person to the prior security interest and
lien of Lender in all property of any Obligor.
"SUBSIDIARY" shall mean any corporation of which more than
fifty percent (50%) of the outstanding capital stock having ordinary voting
power to elect a majority of the board of directors of such corporation
(irrespective of whether at the time stock of any other class of such
corporation shall have or might have voting power by reason of the happening of
any contingency) is at the time, directly or indirectly, owned by Borrower, or
any partnership, joint venture or limited liability company of which more than
fifty percent (50%) of the outstanding equity interests are at the time,
directly or indirectly, owned by Borrower or any partnership of which Borrower
is a general partner.
"TANGIBLE NET WORTH" shall have the meaning specified in
subsection 14(a) hereof.
"TERM LOAN" shall have the meaning specified in subsection
2(b) hereof.
9
"TERM NOTE" shall mean that certain Term Note dated on or
about the date hereof from Borrower to Lender in the original principal amount
of $2,000,000.
"TERMINATION EVENT" shall mean the failure of Medtronic,
ComVest or any Additional Holder to extend the maturity date of the Medtronic
Additional Note, the Comvest Senior Subordinated Convertible Note or any
Additional Note to at least thirty (30) days past the date of the Original Term
or any applicable Renewal Term.
"TRADEMARK SECURITY AGREEMENT" shall mean each Trademark
Security Agreement to be executed by an Obligor in favor of Lender on or before
the Closing Date and by which such Obligor shall assign to Lender, as security
for the Liabilities, all of such Obligor's right, title and interest in and to
the trademarks and trademark applications described therein.
2. LOANS.
A. REVOLVING LOANS.
Subject to the terms and conditions of this Agreement and the
Other Agreements, during the Original Term and any Renewal Term, Lender agrees
to make revolving loans and advances (the "Revolving Loans") in an amount up to
the sum of the following sublimits (the "Revolving Loan Limit"):
(i) Up to eighty-five percent (85%) of the face
amount (less maximum discounts, credits and allowances which
may be taken by or granted to Account Debtors in connection
therewith in the ordinary course of Borrower's business) of
Borrower's Eligible Accounts; plus
(ii) the lesser of: (x) up to fifty-five percent
(55%) of the lower of cost or market value of Borrower's
Eligible Inventory or up to eighty-five percent (85%) of the
net orderly liquidation value of Eligible Inventory,
whichever is less, or (y) Eleven Million and No/ 100 Dollars
($11,000,000); plus
(iii) such reserves as Lender elects, in its sole
discretion to establish from time to time;
provided, that THE REVOLVING LOAN LIMIT SHALL IN no EVENT EXCEED TWENTY MILLION
AND NO/100 DOLLARS ($20,000,000) (THE "MAXIMUM REVOLVING LOAN LIMIT").
The aggregate unpaid principal balance of the Revolving Loans
shall not at any time exceed the lesser of (i) the Revolving Loan Limit minus
the Letter of Credit Obligations and (ii) the Maximum Revolving Loan Limit
minus the Letter of Credit Obligations. If at any time the outstanding
Revolving Loans exceeds either the Revolving Loan Limit or the Maximum
Revolving Loan Limit, in each case minus the Letter of Credit Obligations, or
any portion of the Revolving Loans and Letter of Credit Obligations exceeds any
applicable sublimits under subsections (i) and (ii) above within the Revolving
Loan Limit, Borrower shall immediately, and without the necessity of demand by
Lender, pay to Lender such amount as may be necessary to eliminate such excess
and Lender shall apply such payment to the Revolving Loans in such order as
Lender shall determine in its sole discretion.
10
Borrower hereby authorizes Lender, (but without any obligation
or duty of Lender to do so) to charge any of Borrower's accounts or advance
Revolving Loans to make any payments of principal, interest, fees, costs or
expenses required to be made under this Agreement or the Other Agreements.
A request for a Revolving Loan shall be made or shall be
deemed to be made, each in the following manner: Borrower shall give Lender same
day notice, no later than 10:30 A.M. (Chicago time) for such day, of its request
for a Revolving Loan. In the event that Borrower maintains a controlled
disbursement account at LaSalle Bank, each check presented for payment against
such controlled disbursement account and any other charge or request for payment
against such controlled disbursement account shall constitute a request for a
Revolving Loan. As an accommodation to Borrower, Lender may permit telephone
requests for Revolving Loans and electronic transmittal of instructions,
authorizations, agreements or reports to Lender by Borrower. Unless Borrower
specifically directs Lender in writing not to accept or act upon telephonic or
electronic communications from Borrower, Lender shall have no liability to
Borrower for any loss or damage suffered by Borrower as a result of Lender's
honoring of any requests, execution of any instructions, authorizations or
agreements or reliance on any reports communicated to it telephonically or
electronically and purporting to have been sent to Lender by Borrower and Lender
shall have no duty to verify the origin of any such communication or the
authority of the Person sending it.
Borrower hereby irrevocably authorizes Lender to disburse the
proceeds of each Revolving Loan requested by Borrower, or deemed to be requested
by Borrower, as follows: (i) the proceeds of each Revolving Loan requested under
Section 2(a) shall be disbursed by Lender in lawful money of the United States
of America in immediately available funds, in the case of the initial borrowing,
in accordance with the terms of the written disbursement letter from Borrower,
and (ii) in the case of each subsequent borrowing, by wire transfer or Automated
Clearing House (ACH) transfer to such bank account as may be agreed upon by
Borrower and Lender from time to time, or elsewhere if pursuant to a written
direction from Borrower.
B. TERM LOAN.
Subject to the terms and conditions of this Agreement and the
Other Agreements, on the Closing Date, Lender shall make a term loan to Borrower
in an amount equal to Two Million and No/100 Dollars ($2,000,000) (the "Term
Loan").
C. REPAYMENTS.
The Liabilities shall be repaid as follows:
(i) Repayment of Revolving Loans. The Revolving
Loans and all other Liabilities (other than
the Term Loan) shall be repaid on the last
day of the Original Term or any Renewal Term
if this Agreement is renewed pursuant to
Section 10 hereof.
(ii) Repayment of Term Loan. The Term Loan shall
be repaid in thirty-six (36) equal monthly
installments of Fifty-Five Thousand Five
Hundred Fifty-Six and No/Dollars ($55,556)
payable on the first day of each month;
provided, that any remaining outstanding
principal balance of the Term Loan shall be
repaid at the end of the Original Term or
any Renewal Term if this Agreement
11
is renewed pursuant to Section 10 hereof. If
any such payment due date is not a Business
Day, then such payment may be made on the
next succeeding Business Day and such
extension of time shall be included in the
computation of the amount of interest and
fees due hereunder.
(iii) Mandatory Prepayments of the Term Loan. Upon
receipt of the proceeds of the sale or other
disposition of any Equipment or real
property of Borrower which is subject to a
Mortgage in favor of Lender, or if any of
the Equipment or real property subject to
such Mortgage is damaged, destroyed or taken
by condemnation in whole or in part, the
proceeds thereof shall be paid by Borrower
to Lender as a mandatory prepayment of the
Term Loan, such payment to be applied
against the remaining installments of
principal in the inverse order of their
maturities until repaid in full, and then
against the other Liabilities, as determined
by Lender, in its sole discretion.
D. NOTES.
The Loans shall, in Lender's sole discretion, be evidenced by
the Notes in form and substance satisfactory to Lender. However, if such Loans
are not so evidenced, such Loans may be evidenced solely by entries upon the
books and records maintained by Lender.
3. LETTERS OF CREDIT.
A. GENERAL TERMS.
Subject to the terms and conditions of the Agreement and the
Other Agreements, during the Original Term or any Renewal Term, Lender may, in
its sole discretion, from time to time cause to be issued and co-sign for or
otherwise guarantee, upon Borrower's request, commercial and/or standby Letters
of Credit; provided, that the aggregate undrawn face amount of all such Letters
of Credit shall at no time exceed Two Million and No/100 Dollars ($2,000,000).
Payments made by Lender to any Person on account of any Letter of Credit shall
constitute Loans hereunder and Borrower agrees that each payment made by the
issuer of a Letter of Credit in respect of a Letter of Credit shall constitute a
request by Borrower for a Loan to reimburse such issuer. Borrower shall remit to
Lender a Letter of Credit fee equal to one quarter of one percent (0.25%) per
month on the aggregate undrawn face amount of all Letters of Credit outstanding,
which fee shall be payable monthly in arrears on the last Business Day of each
month. Borrower shall also pay ON DEMAND the normal and customary administrative
charges of the issuer of the Letter of Credit for issuance, amendment,
negotiation, renewal or extension of any Letter of Credit.
B. REQUESTS FOR LETTERS OF CREDIT.
Borrower shall make requests for Letters of Credit in writing
at least two (2) Business Days prior to the date such Letter of Credit is to be
issued. Each such request shall specify the date such Letter of Credit is to be
issued, the amount thereof, the name and address of the beneficiary thereof and
a description of the transaction to be supported thereby. Any such notice shall
be accompanied by the form of Letter of Credit requested and any application or
reimbursement agreement required by the issuer of such Letter of Credit. If any
term of such application or reimbursement agreement is inconsistent with this
Agreement, then the provisions of this Agreement shall control to the extent of
such inconsistency.
12
C. OBLIGATIONS ABSOLUTE.
Borrower shall be obligated to reimburse the issuer of any
Letter of Credit, or Lender if Lender has reimbursed such issuer on Borrower's
behalf, for any payments made in respect of any Letter of Credit, which
obligation shall be unconditional and irrevocable and shall be paid regardless
of: (i) any lack of validity or enforceability of any Letter of Credit, (ii) any
amendment or waiver of or consent or departure from all or any provisions of any
Letter of Credit, this Agreement or any Other Agreement, (iii) the existence of
any claim, set off, defense or other right which Borrower or any other Person
may have against any beneficiary of any Letter of Credit, Lender or the issuer
of the Letter of Credit, (iv) any draft or other document presented under any
Letter of Credit proving to be forged, fraudulent, invalid, or insufficient in
any respect or any statement therein being untrue or inaccurate in any respect,
(v) any payment under any Letter of Credit against presentation of a draft or
other document that does not comply with the terms of such Letter of Credit, and
(vi) any other act or omission to act or delay of any kind of the issuer of such
Letter of Credit, the Lender or any other Person or any other event or
circumstance that might otherwise constitute a legal or equitable discharge of
Borrower's obligations hereunder. It is understood and agreed by Borrower that
the issuer of any Letter of Credit may accept documents that appear on their
face to be in order without further investigation or inquiry, regardless of any
notice or information to the contrary.
D. EXPIRATION DATES OF LETTERS OF CREDIT.
The expiration date of each Letter of Credit shall be no later
than the earlier of (i) one (1) year from the date of issuance and (ii) the
thirtieth (30th) day prior to the end of the Original Term or any Renewal Term.
Notwithstanding the foregoing, a Letter of Credit may provide for automatic
extensions of its expiration date for one or more one (1) year periods, so long
as the issuer thereof has the right to terminate the Letter of Credit at the end
of each one (1) year period and no extension period extends past the thirtieth
(30th) day prior to the end of the Original Term or any Renewal Term.
4. INTEREST, FEES AND CHARGES.
A. INTEREST RATE.
Each Revolving Loan shall bear interest at the rate of two percent (2.00%) per
annum in excess of the Prime Rate in effect from time to time and the Term Loan
shall bear interest at the rate of two percent (2.00%) per annum in excess of
the Prime Rate, all such interest to be, payable on the first Business Day of
each month in arrears. Said rates of interest shall increase or decrease by an
amount equal to each increase or decrease in the Prime Rate effective on the
effective date of each such change in the Prime Rate. Upon the occurrence of an
Event of Default and during the continuance thereof, each Loan shall bear
interest at the rate of two percent (2.00%) per annum in excess of the interest
rate otherwise payable thereon, which interest shall be payable ON DEMAND. All
interest shall be calculated on the basis of a 360-day year.
B. FEES AND CHARGES.
(i) Closing Fee: Borrower shall pay to Lender a
closing fee of Five Hundred Forty Thousand
and No/100 Dollars ($540,000), which fee
shall be fully earned and payable on the
date of disbursement of the initial Loans
hereunder.
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(ii) Unused Line Fee: Borrower shall pay to
Lender an unused line fee of three quarters
of one percent (0.75%) of the difference
between the Maximum Revolving Loan Limit and
the average daily balance of the Revolving
Loans plus the Letter of Credit Obligations
for each month, which fee shall be fully
earned by Lender and payable monthly in
arrears on the first Business Day of each
month. Said fee shall be calculated on the
basis of a 360 day year.
(iii) Costs and Expenses: Borrower shall reimburse
Lender for all costs and expenses,
including, without limitation, legal
expenses and reasonable attorneys' fees,
incurred by Lender or any participant in
connection with the (i) documentation and
consummation of this transaction and any
other transactions between Borrower and
Lender, including, without limitation,
Uniform Commercial Code and other public
record searches and filings, overnight
courier or other express or messenger
delivery, appraisal costs, surveys, title
insurance and environmental audit or review
costs; (ii) collection, protection or
enforcement of any rights in or to the
Collateral; (iii) collection of any
Liabilities; and (iv) administration and
enforcement of any of Lender's or any
participant's rights under this Agreement.
Borrower also shall pay all normal service
charges with respect to all accounts
maintained by Borrower with Lender and
LaSalle Bank and any additional services
requested by Borrower from Lender and
LaSalle Bank. All such costs, expenses and
charges shall, if owed to LaSalle Bank, be
reimbursed by Lender and in such event or in
the event such costs and expenses are owed
to Lender, constitute Liabilities hereunder,
shall be payable by Borrower to Lender on
demand, and, until paid, shall bear interest
at the highest rate then applicable to Loans
hereunder.
(iv) Capital Adequacy Charge. If Lender shall
have determined that the adoption of any
law, rule or regulation regarding capital
adequacy, or any change therein or in the
interpretation or application thereof, or
compliance by Lender with any request or
directive regarding capital adequacy
(whether or not having the force of law)
from any central bank or governmental
authority enacted after the date hereof,
does or shall have the effect of reducing
the rate of return on such party's capital
as a consequence of its obligations
hereunder to a level below that which Lender
could have achieved but for such adoption,
change or compliance (taking into
consideration Lender's policies with respect
to capital adequacy) by a material amount,
then from time to time, after submission by
Lender to Borrower of a written demand
therefor ("Capital Adequacy Demand")
together with the certificate described
below, Borrower shall pay to Lender such
additional amount or amounts ("Capital
Adequacy Charge") as will compensate Lender
for such reduction, such Capital Adequacy
Demand to be made with reasonable promptness
following such determination. A certificate
of Lender claiming entitlement to payment as
set forth above shall be conclusive in the
absence of manifest error. Such certificate
shall set forth the nature of the occurrence
giving rise to such reduction, the amount of
the Capital Adequacy Charge to be paid to
Lender, and the method by which such amount
was determined. In determining such amount,
Lender may use any reasonable averaging and
attribution method, applied on a
non-discriminatory basis.
14
C. MINIMUM LOAN CHARGES.
Borrower acknowledges that the administrative costs associated
with the financing to be extended to Borrower under this Agreement are such that
Lender cannot continue to finance Borrower at a level of profitability at the
rates provided for herein in the event that the Average Monthly Loan Balance is
less than the Minimum Loan Balance. Accordingly, Borrower agrees to pay to
Lender each month interest on the greater of the Minimum Loan Balance or the
Average Monthly Loan Balance for such month. In no event, however, shall
Borrower be obligated to pay interest on the Minimum Loan Balance if the Average
Monthly Loan Balance is less than the Minimum Loan Balance to the extent the
assessment or collection of such interest together with all other amounts deemed
interest hereunder, would exceed the maximum rate permitted by applicable law.
D. MAXIMUM INTEREST.
It is the intent of the parties that the rate of interest and
other charges to Borrower under this Agreement and the Other Agreements shall be
lawful; therefore, if for any reason the interest or other charges payable under
this Agreement are found by a court of competent jurisdiction, in a final
determination, to exceed the limit which Lender may lawfully charge Borrower,
then the obligation to pay interest and other charges shall automatically be
reduced to such limit and, if any amount in excess of such limit shall have been
paid, then such amount shall be refunded to Borrower.
5. COLLATERAL.
▇. ▇▇▇▇▇ OF SECURITY INTEREST TO LENDER.
As security for the payment of all Loans now or in the future
made by Lender to Borrower hereunder and for the payment or other satisfaction
of all other Liabilities, Borrower hereby assigns to Lender and grants to Lender
a continuing security interest in the following property of Borrower, whether
now or hereafter owned, existing, acquired or arising and wherever now or
hereafter located: (a) all Accounts (whether or not Eligible Accounts) and all
Goods whose sale, lease or other disposition by Borrower has given rise to
Accounts and have been returned to, or repossessed or stopped in transit by,
Borrower; (b) all Chattel Paper, Instruments, Documents and General Intangibles
(including, without limitation, all patents, patent applications, trademarks,
trademark applications, trade names, trade secrets, goodwill, copyrights,
copyright applications, registrations, licenses, software, franchises, customer
lists, tax refund claims, claims against carriers and shippers, guarantee
claims, contract rights, payment intangibles, security interests, security
deposits and rights to indemnification); (c) all Inventory (whether or not
Eligible Inventory); (d) all Goods (other than Inventory), including, without
limitation, Equipment, vehicles and Fixtures; (e) all Investment Property; (f)
all Deposit Accounts, bank accounts, deposits and cash; (g) all Letter-of-Credit
Rights; (h) Commercial Tort Claims listed on Exhibit C hereto (i) any other
property of Borrower now or hereafter in the possession, custody or control of
Lender or any agent or any parent, affiliate or subsidiary of Lender or any
participant with Lender in the Loans, for any purpose (whether for safekeeping,
deposit, collection, custody, pledge, transmission or otherwise) and (j) all
additions and accessions to, substitutions for, and replacements, products and
Proceeds of the foregoing property, including, without limitation, proceeds of
all insurance policies insuring the foregoing property, and all of Borrower's
books and records relating to any of the foregoing and to Borrower's business.
15
B. OTHER SECURITY.
Lender, in its sole discretion, without waiving or releasing
any obligation, liability or duty of Borrower under this Agreement or the Other
Agreements or any Event of Default, may at any time or times hereafter, but
shall not be obligated to, pay, acquire or accept an assignment of any security
interest, lien, encumbrance or claim asserted by any Person in, upon or against
the Collateral. All sums paid by Lender in respect thereof and all costs, fees
and expenses including, without limitation, reasonable attorney fees, all court
costs and all other charges relating thereto actually incurred by Lender shall
constitute Liabilities, payable by Borrower to Lender on demand and, until paid,
shall bear interest at the highest rate then applicable to Loans hereunder.
C. POSSESSORY COLLATERAL.
Immediately upon Borrower's receipt of any portion of the
Collateral evidenced by an agreement, Instrument or Document, including, without
limitation, any Tangible Chattel Paper and any Investment Property consisting of
certificated securities, Borrower shall deliver the original thereof to Lender
together with an appropriate endorsement or other specific evidence of
assignment thereof to Lender (in form and substance acceptable to Lender). If an
endorsement or assignment of any such items shall not be made for any reason,
Lender is hereby irrevocably authorized, as Borrower's attorney and
agent-in-fact, to endorse or assign the same on Borrower's behalf.
D. ELECTRONIC CHATTEL PAPER.
To the extent that Borrower obtains or maintains any
Electronic Chattel Paper, Borrower shall create, store and assign the record or
records comprising the Electronic Chattel Paper in such a manner that (i) a
single authoritative copy of the record or records exists which is unique,
identifiable and except as otherwise provided in clauses (iv), (v) and (vi)
below, unalterable, (ii) the authoritative copy identifies Lender as the
assignee of the record or records, (iii) the authoritative copy is communicated
to and maintained by the Lender or its designated custodian, (iv) copies or
revisions that add or change an identified assignee of the authoritative copy
can only be made with the participation of Lender, (v) each copy of the
authoritative copy and any copy of a copy is readily identifiable as a copy that
is not the authoritative copy and (vi) any revision of the authoritative copy is
readily identifiable as an authorized or unauthorized revision.
E. EXCLUSION FOR CERTAIN CONTRACTS AND LEASES.
Notwithstanding anything to the contrary set forth in
Section 5(a) above, the types or items of Collateral
described in such Section shall not include any
rights or interests in any contract, lease, permit,
license, charter or license agreement covering real
or personal property, as such, if under the terms of
such contract, lease, permit, license, charter or
license agreement, or applicable law with respect
thereto, the valid grant of a security interest or
lien therein to Lender is prohibited and such
prohibition has not been or is not waived or the
consent of the other party to such contract, lease,
permit, license, charter or license agreement has not
been or is not otherwise obtained or under applicable
law such prohibition cannot be waived, provided that
the foregoing exclusion shall in no way be construed
(a) to apply if any such prohibition is unenforceable
under the UCC or other applicable law or (b) so as to
limit, impair or otherwise affect Lender's
unconditional continuing security interests in and
liens upon any rights or interests of Borrower in or
to monies
16
due or to become due under any such contract, lease,
permit, license, charter or license agreement
(including any Accounts).
6. PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY
INTERESTS THEREIN.
Borrower shall, at Lender's request, at any time and from time
to time, authenticate, execute and deliver to Lender such financing statements,
documents and other agreements and instruments (and pay the cost of filing or
recording the same in all public offices deemed necessary or desirable by
Lender) and do such other acts and things or cause third parties to do such
other acts and things as Lender may deem necessary or desirable in its sole
discretion in order to establish and maintain a valid, attached and perfected
security interest in the Collateral in favor of Lender (free and clear of all
other liens, claims, encumbrances and rights of third parties whatsoever,
whether voluntarily or involuntarily created, except Permitted Liens) to secure
payment of the Liabilities, and in order to facilitate the collection of the
Collateral. Borrower irrevocably hereby makes, constitutes and appoints Lender
(and all Persons designated by Lender for that purpose) as Borrower's true and
lawful attorney and agent-in-fact to execute and file such financing statements,
documents and other agreements and instruments and do such other acts and things
as may be necessary to preserve and perfect Lender's security interest in the
Collateral. Borrower further agrees that a carbon, photographic, photostatic or
other reproduction of this Agreement or of a financing statement shall be
sufficient as a financing statement. Borrower further ratifies and confirms the
prior filing by Lender of any and all financing statements which identify the
Borrower as debtor, Lender as secured party and any or all Collateral as
collateral.
7. POSSESSION OF COLLATERAL AND RELATED MATTERS.
Until an Event of Default has occurred, Borrower shall have
the right, except as otherwise provided in this Agreement, in the ordinary
course of Borrower's business, to (a) sell, lease or furnish under contracts of
service any of Borrower's Inventory normally held by Borrower for any such
purpose; (b) use and consume any raw materials, work in process or other
materials normally held by Borrower for such purpose; and (c) disposition of
Equipment that is damaged or obsolete not to exceed $75,000 per year and so long
as the proceeds arising from any such disposition are remitted to Lender for
application to the Liabilities; provided, however, that a sale in the ordinary
course of business shall not include any transfer or sale in satisfaction,
partial or complete, of a debt owed by Borrower.
8. COLLECTIONS.
a. Borrower shall direct all of its Account Debtors to
make all payments on the Accounts directly to a post
office box (the "Lock Box") designated by, and under
the exclusive control of, Lender, at a financial
institution acceptable to Lender. Borrower shall
establish an account (the "Lock Box Account") in
Lender's name with a financial institution acceptable
to Lender, into which all payments received in the
Lock Box shall be deposited, and into which Borrower
will immediately deposit all payments received by
Borrower on Accounts in the identical form in which
such payments were received, whether by cash or
check. At closing, such Lockbox and Lockbox Account
shall be maintained with BofA but within fifteen (15)
days after the Closing Date, Borrower shall cause
such Lockbox and Lockbox Account to be established
and maintained with LaSalle Bank. If Borrower, any
Affiliate or Subsidiary, any shareholder, officer,
director, employee or agent of Borrower or any
Affiliate or Subsidiary, or
17
any other Person acting for or in concert with
Borrower shall receive any monies, checks, notes,
drafts or other payments relating to or as Proceeds
of Accounts or other Collateral, Borrower and each
such Person shall receive all such items in trust
for, and as the sole and exclusive property of,
Lender and, immediately upon receipt thereof, shall
remit the same (or cause the same to be remitted) in
kind to the Lock Box Account. The financial
institution with which the Lock Box Account is
established shall acknowledge and agree, in a manner
satisfactory to Lender, that the amounts on deposit
in such Lock Box Account are subject to the lien of
Lender therein, that such financial institution will
follow the instructions of Lender with respect to
disposition of funds in the Lock Box and Lock Box
Account without further consent from Borrower, that
such financial institution has no right to setoff
against the Lock Box Account or against any other
account maintained by such financial institution into
which the contents of the Lock Box Account are
transferred, and that such financial institution
shall wire, or otherwise transfer in immediately
available funds to Lender in a manner satisfactory to
Lender, funds deposited in the Lock Box Account on a
daily basis as such funds are collected. Borrower
agrees that all payments made to such Lock Box
Account or otherwise received by Lender, whether in
respect of the Accounts or as Proceeds of other
Collateral or otherwise, will be applied on account
of the Liabilities in accordance with the terms of
this Agreement. Borrower agrees to pay all fees,
costs and expenses in connection with opening and
maintaining the Lock Box and Lockbox Account. All of
such fees, costs and expenses if not paid by
Borrower, may be paid by Lender and in such event all
amounts paid by Lender shall constitute Liabilities
hereunder, shall be payable to Lender by Borrower
upon demand, and, until paid, shall bear interest at
the highest rate then applicable to Loans hereunder.
All checks, drafts, instruments and other items of
payment or Proceeds of Collateral shall be endorsed
by Borrower to Lender, and, if that endorsement of
any such item shall not be made for any reason,
Lender is hereby irrevocably authorized to endorse
the same on Borrower's behalf. For the purpose of
this section, Borrower irrevocably hereby makes,
constitutes and appoints Lender (and all Persons
designated by Lender for that purpose) as Borrower's
true and lawful attorney and agent-in-fact (i) to
endorse Borrower's name upon said items of payment
and/or Proceeds of Collateral and upon any Chattel
Paper, Document, Instrument, invoice or similar
document or agreement relating to any Account of
Borrower or Goods pertaining thereto; (ii) to take
control in any manner of any item of payment or
Proceeds thereof and (iii) to have access to any lock
box or postal box into which any of Borrower's mail
is deposited, and open and process all mail addressed
to Borrower and deposited therein.
b. Lender may, at any time and from time to time,
whether before or after notification to any Account
Debtor and whether before or after the maturity of
any of the Liabilities, (i) enforce collection of any
of Borrower's Accounts or other amounts owed to
Borrower by suit or otherwise; (ii) exercise all of
Borrower's rights and remedies with respect to
proceedings brought to collect any Accounts or other
amounts owed to Borrower; (iii) surrender, release or
exchange all or any part of any Accounts or other
amounts owed to Borrower, or compromise or extend or
renew for any period (whether or not longer than the
original period) any indebtedness thereunder; (iv)
sell or assign any Account of Borrower or other
amount owed to Borrower upon such terms, for such
amount and at such time or times as Lender deems
advisable; (v) prepare, file and sign Borrower's name
on any proof of claim in bankruptcy or other similar
document against any Account Debtor or other Person
obligated to Borrower; and (vi) do all other acts and
things which are necessary, in Lender's sole
discretion, to fulfill Borrower's obligations under
this Agreement and the Other Agreements and to allow
Lender to collect the Accounts or other amounts owed
to Borrower. In addition to any other provision
hereof, Lender may at any time, whether before or
after the occurrence of an Event of Default, at
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Borrower's expense, notify any parties obligated on any of the Accounts to make
payment directly to Lender of any amounts due or to become due thereunder.
c. For purposes of calculating interest and fees, Lender
shall, within one (1) Business Day after receipt by
Lender at its office in Chicago, Illinois of (i)
checks and (ii) cash or other immediately available
funds from collections of items of payment and
Proceeds of any Collateral, apply the whole or any
part of such collections or Proceeds against the
Liabilities in such order as Lender shall determine
in its sole discretion. For purposes of determining
the amount of Loans available for borrowing purposes,
checks and cash or other immediately available funds
from collections of items of payment and Proceeds of
any Collateral shall be applied in whole or in part
against the Liabilities, in such order as Lender
shall determine in its sole discretion, on the day of
receipt, subject to actual collection.
d. On a monthly basis, Lender shall deliver to Borrower
an account statement showing all Loans, charges and
payments, which shall be deemed final, binding and
conclusive upon Borrower unless Borrower notifies
Lender in writing, specifying any error therein,
within thirty (30) days of the date such account
statement is sent to Borrower and any such notice
shall only constitute an objection to the items
specifically identified.
9. COLLATERAL, AVAILABILITY AND FINANCIAL REPORTS AND SCHEDULES.
A. DAILY REPORTS.
Borrower shall deliver to Lender an executed daily loan report
and certificate in Lender's then current form on each day on which Borrower
requests a Revolving Loan, and in any event at least once each week, which shall
be accompanied by copies of Borrower's sales journal, cash receipts journal and
credit memo journal for the relevant period. Such report shall reflect the
activity of Borrower with respect to Accounts for the immediately preceding
week, and shall be in a form and with such specificity as is satisfactory to
Lender and shall contain such additional information concerning Accounts and
Inventory as may be requested by Lender including, without limitation, but only
if specifically requested by Lender, copies of all invoices prepared in
connection with such Accounts.
B. MONTHLY REPORTS.
Borrower shall deliver to Lender, in addition to any other
reports, as soon as practicable and in any event: (i) within ten (10) days after
the end of each month, (A) a detailed trial balance of Borrower's Accounts aged
per invoice date, in form and substance reasonably satisfactory to Lender
including, without limitation, the names and addresses of all Account Debtors of
Borrower, and (B) a summary and detail of accounts payable (such Accounts and
accounts payable divided into such time intervals as Lender may require in its
sole discretion), including a listing of any held checks; and (ii) within ten
(10) days after the end of each month, the general ledger inventory account
balance, a perpetual inventory report and Lender's standard form of Inventory
report then in effect or the form most recently requested from Borrower by
Lender, for Borrower by each category of Inventory, together with a description
of the monthly change in each category of Inventory.
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C. FINANCIAL STATEMENTS.
Borrower shall deliver to Lender the following financial
information, all of which shall be prepared in accordance with generally
accepted accounting principles consistently applied, and shall be accompanied by
a compliance certificate in the form of Exhibit B hereto, which compliance
certificate shall include a calculation of all financial covenants contained in
this Agreement: (i) no later than thirty (30) days after each calendar month,
copies of internally prepared financial statements, including, without
limitation, balance sheets and statements of income, retained earnings and cash
flow of Borrower, certified by the Chief Financial Officer of Borrower; (ii) no
later than forty-five (45) days after the end of each of the first three
quarters of Borrower's Fiscal Year, copies of internally prepared financial
statements including, without limitation, balance sheets, statements of income,
retained earnings, cash flows and reconciliation of surplus, certified by the
Chief Financial Officer of Borrower and (iii) no later than ninety (90) days
after the end of each of Borrower's Fiscal Years, audited annual financial
statements with an unqualified opinion by independent certified public
accountants selected by Borrower and reasonably satisfactory to Lender, which
financial statements shall be accompanied by copies of any management letters
sent to the Borrower by such accountants;
D. ANNUAL PROJECTIONS.
As soon as practicable and in any event prior to the beginning
of each Fiscal Year, Borrower shall deliver to Lender projected balance sheets,
statements of income and cash flow for Borrower, for each of the twelve (12)
months during such Fiscal Year, which shall include the assumptions used
therein, together with appropriate supporting details as reasonably requested by
Lender.
E. EXPLANATION OF BUDGETS AND PROJECTIONS.
In conjunction with the delivery of the annual presentation of
projections or budgets referred to in subsection 9(d) above, Borrower shall
deliver a letter signed by the President or a Vice President of Borrower and by
the Treasurer or Chief Financial Officer of Borrower, describing, comparing and
analyzing, in detail, all changes and developments between the anticipated
financial results included in such projections or budgets and the historical
financial statements of Borrower.
F. PUBLIC REPORTING.
Promptly upon the filing thereof, Borrower shall deliver to
Lender copies of all registration statements and annual, quarterly, monthly or
other regular reports which Borrower or any of its Subsidiaries files with the
Securities and Exchange Commission, as well as promptly providing to Lender
copies of any reports and proxy statements delivered to its shareholders.
G. OTHER INFORMATION.
Promptly following request therefor by Lender, such other
business or financial data, reports, appraisals and projections as Lender may
reasonably request.
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10. TERMINATION; AUTOMATIC RENEWAL.
THIS AGREEMENT SHALL BE IN EFFECT FROM THE DATE HEREOF UNTIL
MARCH 17, 2005 (THE "ORIGINAL TERM") AND SHALL AUTOMATICALLY RENEW ITSELF FROM
YEAR TO YEAR THEREAFTER (EACH SUCH ONE-YEAR RENEWAL BEING REFERRED TO HEREIN AS
A "RENEWAL TERM") UNLESS (A) LENDER MAKES DEMAND FOR REPAYMENT PRIOR TO THE END
OF THE ORIGINAL TERM OR THE THEN CURRENT RENEWAL TERM; (B) THE DUE DATE OF THE
LIABILITIES IS ACCELERATED PURSUANT TO SECTION 16 HEREOF; (C) BORROWER ELECTS TO
TERMINATE THIS AGREEMENT AT THE END OF THE ORIGINAL TERM OR AT THE END OF ANY
RENEWAL TERM BY GIVING LENDER WRITTEN NOTICE OF SUCH ELECTION AT LEAST NINETY
(90) DAYS PRIOR TO THE END OF THE ORIGINAL TERM OR THE THEN CURRENT RENEWAL TERM
AND BY PAYING ALL OF THE LIABILITIES IN FULL ON THE LAST DAY OF SUCH TERM; OR
(C) LENDER ELECTS TO TERMINATE THIS AGREEMENT ON OR AFTER FEBRUARY 1, 2004, AS A
RESULT OF A TERMINATION EVENT. If one or more of the events specified in clauses
(a), (b) and (c) occurs, then (i) Lender shall not make any additional Loans on
or after the date identified as the date on which the Liabilities are to be
repaid; and (ii) this Agreement shall terminate on the date thereafter that the
Liabilities are paid in full. At such time as Borrower has repaid all of the
Liabilities and this Agreement has terminated, Borrower shall deliver to Lender
a release, in form and substance satisfactory to Lender, of all obligations and
liabilities of Lender and its officers, directors, employees, agents, parents,
subsidiaries and affiliates to Borrower, and if Borrower is obtaining new
financing from another lender, Borrower shall deliver such lender's
indemnification of Lender, in form and substance satisfactory to Lender, for
checks which Lender has credited to Borrower's account, but which subsequently
are dishonored for any reason or for automatic clearinghouse or wire transfers
not yet posted to Borrower's account. If, during the term of this Agreement,
Borrower prepays all of the Liabilities from any source other than income from
the ordinary course operations of Borrower's business and this Agreement is
terminated, Borrower agrees to pay to Lender as a prepayment fee, in addition to
the payment of all other Liabilities, an amount equal to (i) three percent (3%)
of the Maximum Loan Limit if such prepayment occurs two (2) years or more prior
to the end of the Original Term, (ii) two percent (2%) of the Maximum Loan Limit
if such prepayment occurs less than two (2) years, but at least one (1) year
prior to the end of the Original Term, or (iii) one percent (1%) of the Maximum
Loan Limit if such prepayment occurs less than one (1) year prior to the end of
the Original Term or any then current Renewal Term.
11. REPRESENTATIONS AND WARRANTIES.
Borrower hereby represents and warrants to Lender, which
representations and warranties (whether appearing in this Section 11 or
elsewhere) shall be true at the time of Borrower's execution hereof and the
closing of the transactions described herein or related hereto, shall remain
true until the repayment in full and satisfaction of all the Liabilities and
termination of this Agreement, and shall be remade by Borrower at the time each
Loan is made pursuant to this Agreement.
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A. FINANCIAL STATEMENTS AND OTHER INFORMATION.
The financial statements and other information delivered or to
be delivered by Borrower to Lender at or prior to the date of this Agreement
accurately reflect the financial condition of Borrower and its Subsidiaries as
of the date of such statements, and there has been no material adverse change in
the financial condition, the operations or any other status of Borrower or any
of its Subsidiaries since the date of the financial statements delivered to
Lender most recently prior to the date of this Agreement. All written
information now or heretofore furnished by Borrower and its Subsidiaries to
Lender is true and correct as of the date with respect to which such information
was furnished.
B. LOCATIONS.
The office where Borrower and its Subsidiaries keep their
books, records and accounts (or copies thereof) concerning the Collateral,
Borrower's and its Subsidiaries' principal place of business and all of
Borrower's and its Subsidiaries' other places of business, locations of
Collateral and post office boxes and locations of bank accounts are as set forth
in Exhibit A and at other locations within the continental United States of
which Lender has been advised by Borrower and its Subsidiaries in accordance
with subsection 12(b)(i). The Collateral, including, without limitation, the
Equipment (except any part thereof which Borrower shall have advised Lender in
writing consists of Collateral normally used in more than one state) is kept,
or, in the case of vehicles, based, only at the addresses set forth on Exhibit
A, and at other locations within the continental United States of which Lender
has been advised by Borrower in writing in accordance with subsection 12(b)(i)
hereof.
C. LOANS BY BORROWER.
Neither Borrower nor any of its Subsidiaries has made any
loans or advances to any Affiliate or other Person except for (i) advances
authorized hereunder to employees, officers and directors of Borrower and its
Subsidiaries for travel and other expenses arising in the ordinary course of
Borrower's and such Subsidiaries' businesses, and (ii) loans described on
Schedule 11(c) attached hereto.
D. ACCOUNTS AND INVENTORY.
Each Account or item of Inventory which Borrower shall,
expressly or by implication, request Lender to classify as an Eligible Account
or as Eligible Inventory, respectively, shall, as of the time when such request
is made, conform in all respects to the requirements of such classification as
set forth in the respective definitions of "Eligible Account" and "Eligible
Inventory" as set forth herein and as otherwise established by Lender from time
to time.
E. LIENS.
Borrower is the lawful owner of all Collateral now purportedly
owned or hereafter purportedly acquired by Borrower, free from all liens,
claims, security interests and encumbrances whatsoever, whether voluntarily or
involuntarily created and whether or not perfected, other than the Permitted
Liens.
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F. ORGANIZATION, AUTHORITY AND NO CONFLICT.
Borrower is duly organized, validly existing and in good
standing in the State of Georgia, its state organizational identification number
is K003014, and Borrower is duly qualified and in good standing in all states
where the nature and extent of the business transacted by it or the ownership of
its assets makes such qualification necessary. Borrower has the right and power
and is duly authorized and empowered to enter into, execute and deliver this
Agreement and the Other Agreements and perform its obligations hereunder and
thereunder. Borrower's execution, delivery and performance of this Agreement and
the Other Agreements does not conflict with the provisions of the organizational
documents of Borrower, any statute, regulation, ordinance or rule of law, or any
agreement, contract or other document which may now or hereafter be binding on
Borrower, and Borrower's execution, delivery and performance of this Agreement
and the Other Agreements shall not result in the imposition of any lien or other
encumbrance upon any of Borrower's property under any existing indenture,
mortgage, deed of trust, loan or credit agreement or other agreement or
instrument by which Borrower or any of its property may be bound or affected.
G. LITIGATION.
Except as set forth in Schedule 11(g), there are no actions or
proceedings which are pending or threatened against Borrower or any of its
Subsidiaries which might have a Material Adverse Effect, and Borrower shall,
promptly upon becoming aware of any such pending or threatened action or
proceeding, give written notice thereof to Lender. Neither Borrower nor any of
its Subsidiaries has any Commercial Tort Claims pending other than those set
forth on Exhibit C hereto as Exhibit C may be amended from time to time.
H. COMPLIANCE WITH LAWS AND MAINTENANCE OF PERMITS.
Borrower and each of its Subsidiaries has obtained all
governmental consents, franchises, certificates, licenses, authorizations,
approvals and permits, the lack of which would have a Material Adverse Effect.
Borrower and each of its Subsidiaries is in compliance in all material respects
with all applicable federal, state, local and foreign statutes, orders,
regulations, rules and ordinances (including, without limitation, Environmental
Laws and statutes, orders, regulations, rules and ordinances relating to taxes,
employer and employee contributions and similar items, securities, ERISA or
employee health and safety) the failure to comply with which would have a
Material Adverse Effect.
I. AFFILIATE TRANSACTIONS.
Except as set forth on Schedule 11(i) hereto or as permitted
pursuant to subsection 11(c) hereof, neither Borrower nor any of its
Subsidiaries is conducting, permitting or suffering to be conducted,
transactions with any Affiliate other than transactions with Affiliates for the
purchase or sale of Inventory or services in the ordinary course of business
pursuant to terms that are no less favorable to Borrower or such Subsidiary than
the terms upon which such transfers or transactions would have been made had
they been made to or with a Person that is not an Affiliate.
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J. NAMES AND TRADE NAMES.
Borrower's name has always been as set forth on the first page
of this Agreement and Borrower uses no trade names, assumed names, fictitious
names or division names in the operation of its business, except as set forth on
Schedule 11(j) hereto.
K. EQUIPMENT.
Borrower has good and indefeasible and merchantable title to
and ownership of all Equipment. No Equipment is (i) a Fixture to real estate
unless (x) such real estate is owned by Borrower and is subject to a mortgage in
favor of Lender or (y) if such real estate is leased, Lender has received a duly
executed Landlord Waiver with respect thereto, in form and substance
satisfactory to Lender in all respects, or (ii) an accession to other personal
property unless such personal property is subject to a first priority lien in
favor of Lender.
L. ENFORCEABILITY.
This Agreement and the Other Agreements to which Borrower is a
party are the legal, valid and binding obligations of Borrower and are
enforceable against Borrower in accordance with their respective terms.
M. SOLVENCY.
Borrower is, after giving effect to the transactions
contemplated hereby, solvent, able to pay its debts as they become due, has
capital sufficient to carry on its business, now owns property having a value
both at fair valuation and at present fair saleable value greater than the
amount required to pay its debts, and will not be rendered insolvent by the
execution and delivery of this Agreement or any of the Other Agreements or by
completion of the transactions contemplated hereunder or thereunder.
N. INDEBTEDNESS.
Except as set forth on Schedule 11(n) hereto, neither Borrower
nor any of its Subsidiaries is obligated (directly or indirectly), for any loans
or other indebtedness for borrowed money other than the Loans.
O. MARGIN SECURITY AND USE OF PROCEEDS.
Borrower does not own any margin securities, and none of the
proceeds of the Loans hereunder shall be used for the purpose of purchasing or
carrying any margin securities or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase any margin securities or
for any other purpose not permitted by Regulation U of the Board of Governors of
the Federal Reserve System as in effect from time to time.
P. PARENT, SUBSIDIARIES AND AFFILIATES.
Except as set forth on Schedule 11(p) hereto, neither Borrower
nor any of its Subsidiaries has any Parents, Subsidiaries or other Affiliates or
divisions, nor is Borrower or any of its Subsidiaries engaged in any joint
venture or partnership with any other Person.
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Q. NO DEFAULTS.
Neither Borrower nor any of its Subsidiaries is in default
under any material contract, lease or commitment to which it is a party or by
which it is bound, nor does Borrower nor any of its Subsidiaries know of any
dispute regarding any contract, lease or commitment which would have a Material
Adverse Effect.
R. EMPLOYEE MATTERS.
There are no controversies pending or threatened between
Borrower, any Subsidiary and any of their respective employees, agents or
independent contractors other than employee grievances arising in the ordinary
course of business which would not, in the aggregate, have a Material Adverse
Effect, and Borrower and each of its Subsidiaries is in compliance with all
federal and state laws respecting employment and employment terms, conditions
and practices except for such non-compliance which would not have a Material
Adverse Effect.
S. INTELLECTUAL PROPERTY.
Borrower and each of its Subsidiaries possesses all licenses,
patents, patent applications, copyrights, service marks, trademarks, trademark
applications, tradestyles and trade names to continue to conduct its business as
heretofore conducted by it.
T. ENVIRONMENTAL MATTERS.
Neither Borrower nor any of its Subsidiaries has generated,
used, stored, treated, transported, manufactured, handled, produced or disposed
of any Hazardous Materials, on or off its premises (whether or not owned by it)
in any manner which at any time violates any Environmental Law or any license,
permit, certificate, approval or similar authorization thereunder and the
operations of the Borrower comply in all material respects with all
Environmental Laws and all licenses, permits, certificates, approvals and
similar authorizations thereunder. There has been no investigation, proceeding,
complaint, order, directive, claim, citation or notice by any governmental
authority or any other Person, nor is any pending or to the best of the
Borrower's knowledge threatened with respect to any non-compliance with or
violation of the requirements of any Environmental Law by the Borrower or any
its Subsidiaries or the release, spill or discharge, threatened or actual, of
any Hazardous Materials or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Materials or any other environmental, health or safety matter, which affects the
Borrower or its business, operations or assets or any properties at which the
Borrower has transported, stored or disposed of any Hazardous Materials.
Borrower has no material liability (contingent or otherwise) in connection with
a release, spill or discharge, threatened or actual, of any Hazardous Materials
or the generation, use, storage, treatment, transportation, manufacture,
handling, production or disposal of any Hazardous Materials.
U. ERISA MATTERS.
Borrower and each of its Subsidiaries has paid and discharged
all obligations and liabilities arising under ERISA of a character which, if
unpaid or unperformed, might result in the imposition of a lien against any of
its properties or assets.
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12. AFFIRMATIVE COVENANTS.
Until payment and satisfaction in full of all Liabilities and
termination of this Agreement, unless Borrower obtains Lender's prior written
consent waiving or modifying any of Borrower's covenants hereunder in any
specific instance, Borrower covenants and agrees as follows:
A. MAINTENANCE OF RECORDS.
Borrower and each of its Subsidiaries shall at all times keep
accurate and complete books, records and accounts with respect to all of
Borrower's and each of its Subsidiaries business activities, in accordance with
sound accounting practices and generally accepted accounting principles
consistently applied, and shall keep such books, records and accounts, and any
copies thereof, only at the addresses indicated for such purpose on Exhibit A;
B. NOTICES.
Borrower shall and shall cause each of its Subsidiaries to:
(i) Locations. Promptly (but in no event less than
ten (10) days prior to the occurrence thereof) notify Lender
of the proposed opening of any new place of business or new
location of Collateral, the closing of any existing place of
business or location of Collateral, any change of in the
location of Borrower's or such Subsidiary's books, records and
accounts (or copies thereof), the opening or closing of any
post office box, the opening or closing of any bank account
or, if any of the Collateral consists of Goods of a type
normally used in more than one state, the use of any such
Goods in any state other than a state in which Borrower or
such Subsidiary has previously advised Lender that such Goods
will be used.
(ii) Eligible Accounts and Inventory. Promptly upon
becoming aware thereof, notify Lender if any Account or
Inventory identified by Borrower or any Subsidiary to Lender
as an Eligible Account or Eligible Inventory becomes
ineligible for any reason.
(iii) Litigation and Proceedings. Promptly upon
becoming aware thereof, notify Lender of any actions or
proceedings which are pending or threatened against Borrower
or any of its Subsidiaries which might have a Material Adverse
Effect and of any Commercial Tort Claims of Borrower or any of
its Subsidiaries which may arise, which notice shall
constitute Borrower's authorization to amend Exhibit C to add
such Commercial Tort Claim.
(iv) Names and Trade Names. Notify Lender within ten
(10) days of the change of its name (or any of its
Subsidiary's) or the use of any trade name, assumed name,
fictitious name or division name not previously disclosed to
Lender in writing.
(v) ERISA Matters. Promptly notify Lender of (x) the
occurrence of any "reportable event" (as defined in ERISA)
which might result in the termination by the Pension Benefit
Guaranty Corporation (the "PBGC") of any employee benefit plan
("Plan") covering any officers or employees of Borrower or any
of its
26
Subsidiaries, any benefits of which are, or are required to
be, guaranteed by the PBGC, (y) receipt of any notice from the
PBGC of its intention to seek termination of any Plan or
appointment of a trustee therefor or (z) its intention to
terminate or withdraw from any Plan.
(vi) Environmental Matters. Immediately notify Lender
upon becoming aware of any investigation, proceeding,
complaint, order, directive, claim, citation or notice with
respect to any non-compliance with or violation of the
requirements of any Environmental Law by Borrower or any of
its Subsidiaries or the generation, use, storage, treatment,
transportation, manufacture handling, production or disposal
of any Hazardous Materials or any other environmental, health
or safety matter which affects Borrower or any of its
Subsidiaries or any of their business operations or assets or
any properties at which Borrower or any of its Subsidiaries
has transported, stored or disposed of any Hazardous
Materials.
(vii) Default; Material Adverse Effect. Promptly
advise Lender of any Material Adverse Effect, the occurrence
of any Event of Default hereunder or the occurrence of any
Default.
All of the foregoing notices shall be provided by Borrower with respect to
itself and each of its Subsidiaries to Lender in writing.
C. COMPLIANCE WITH LAWS AND MAINTENANCE OF PERMITS.
Borrower and each of its Subsidiaries shall maintain all
governmental consents, franchises, certificates, licenses, authorizations,
approvals and permits, the lack of which would have a Material Adverse Effect
and Borrower and each of its Subsidiaries shall remain in compliance with all
applicable federal, state, local and foreign statutes, orders, regulations,
rules and ordinances (including, without limitation, Environmental Laws and
statutes, orders, regulations, rules and ordinances relating to taxes, employer
and employee contributions and similar items, securities, ERISA or employee
health and safety) the failure with which to comply would have a Material
Adverse Effect. Following any determination by Lender that there is non-
compliance, or any condition which requires any action by or on behalf of
Borrower and each of its Subsidiaries in order to avoid non-compliance, with any
Environmental Law, at Borrower's expense cause an independent environmental
engineer acceptable to Lender to conduct such tests of the relevant site(s) as
are appropriate and prepare and deliver a report setting forth the results of
such tests, a proposed plan for remediation and an estimate of the costs
thereof. Borrower and each of its Subsidiaries shall comply in all respects with
any and all regulations, statutes and ordinances applicable to it, including,
without limitation, the FDC and any and all rules and regulations of the FDA.
Borrower and each of its Subsidiaries shall maintain all necessary and required
registrations with the FDA and shall provide registration and listing
information to the FDA as required from time to time with respect to any
property of Borrower or any of its Subsidiaries'.
D. INSPECTION AND AUDITS.
Borrower shall permit Lender, or any Persons designated by it,
to call at Borrower's or any of its Subsidiaries' places of business at any
reasonable times, and, without hindrance or delay, to inspect the Collateral and
to inspect, audit, check and make extracts from Borrower's books, records,
journals, orders, receipts and any correspondence and other data
27
relating to Borrower's business, the Collateral or any transactions between the
parties hereto, and shall have the right to make such verification concerning
Borrower's or any of its Subsidiaries' business as Lender may consider
reasonable under the circumstances. Borrower and each of its Subsidiaries shall
furnish to Lender such information relevant to Lender's rights under this
Agreement and the Other Agreements as Lender shall at any time and from time to
time request. Lender, through its officers, employees or agents shall have the
right, at any time and from time to time, in Lender's name, to verify the
validity, amount or any other matter relating to any of Borrower's Accounts, by
mail, telephone, telecopy, electronic mail or otherwise. Borrower and each of
its Subsidiaries authorizes Lender to discuss the affairs, finances and business
of Borrower and each of its Subsidiaries with any officers, employees or
directors of Borrower and each of its Subsidiaries or with its Parent or any
Affiliate or the officers, employees or directors of its Parent or any
Affiliate, and to discuss the financial condition of Borrower and each of its
Subsidiaries with Borrower's independent public accountants. Any such
discussions shall be without liability to Lender or to Borrower's independent
public accountants. Borrower shall pay to Lender all customary fees and all
costs and out-of-pocket expenses actually incurred by Lender in the exercise of
its rights hereunder, and all of such fees, costs and expenses shall constitute
Liabilities hereunder, shall be payable on demand and, until paid, shall bear
interest at the highest rate then applicable to Loans hereunder;
E. INSURANCE.
Borrower shall and shall cause each of its Subsidiaries to:
(i) Keep the Collateral properly housed and insured
for the full insurable value thereof against loss or damage by
fire, theft, explosion, sprinklers, collision (in the case of
motor vehicles) and such other risks as are customarily
insured against by Persons engaged in businesses similar to
that of Borrower, with such companies, in such amounts, with
such deductibles, and under policies in such form, as shall be
satisfactory to Lender. Original (or certified) copies of such
policies of insurance have been or shall be, within ninety
(90) days of the date hereof, delivered to Lender, together
with evidence of payment of all premiums therefor, and shall
contain an endorsement, in form and substance acceptable to
Lender, showing loss under such insurance policies payable to
Lender. Such endorsement, or an independent instrument
furnished to Lender, shall provide that the insurance company
shall give Lender at least thirty (30) days written notice
before any such policy of insurance is altered or canceled and
that no act, whether willful or negligent, or default of
Borrower or any other Person shall affect the right of Lender
to recover under such policy of insurance in case of loss or
damage. In addition, Borrower and each of its Subsidiaries
shall cause to be executed and delivered to Lender an
assignment of proceeds of their business interruption
insurance policies. Borrower hereby directs all insurers under
all policies of insurance to pay all proceeds payable
thereunder directly to Lender. Borrower irrevocably makes,
constitutes and appoints Lender (and all officers, employees
or agents designated by Lender) as Borrower's true and lawful
attorney (and agent-in-fact) for the purpose of making,
settling and adjusting claims under such policies of
insurance, endorsing the name of Borrower on any check, draft,
instrument or other item of payment for the proceeds of such
policies of insurance and making all determinations and
decisions with respect to such policies of insurance.
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(ii) Maintain, at its expense, such public liability
and third party property damage insurance as is customary for
Persons engaged in businesses similar to that of Borrower with
such companies and in such amounts, with such deductibles and
under policies in such form as shall be satisfactory to Lender
and original (or certified) copies of such policies have been
or shall be, within ninety (90) days after the date hereof,
delivered to Lender, together with evidence of payment of all
premiums therefor; each such policy shall contain an
endorsement showing Lender as additional insured thereunder
and providing that the insurance company shall give Lender at
least thirty (30) days written notice before any such policy
shall be altered or canceled.
If Borrower at any time or times hereafter shall fail to
obtain or maintain any of the policies of insurance required above or to pay any
premium relating thereto, then Lender, without waiving or releasing any
obligation or Default by Borrower hereunder, may (but shall be under no
obligation to) obtain and maintain such policies of insurance and pay such
premiums and take such other actions with respect thereto as Lender deems
advisable. Such insurance, if obtained by Lender, may, but need not, protect
Borrower's interests or pay any claim made by or against Borrower with respect
to the Collateral. Such insurance may be more expensive than the cost of
insurance Borrower may be able to obtain on its own and may be cancelled only
upon Borrower providing evidence that it has obtained the insurance as required
above. All sums disbursed by Lender in connection with any such actions,
including, without limitation, court costs, expenses, other charges relating
thereto and reasonable attorneys' fees, shall constitute Loans hereunder, shall
be payable on demand by Borrower to Lender and, until paid, shall bear interest
at the highest rate then applicable to Loans hereunder.
F. COLLATERAL.
Borrower shall keep the Collateral in good condition, repair
and order and shall make all necessary repairs to the Equipment and replacements
thereof so that the operating efficiency and the value thereof shall at all
times be preserved and maintained. Borrower shall permit Lender to examine any
of the Collateral at any time and wherever the Collateral may be located and,
Borrower shall, immediately upon request therefor by Lender, deliver to Lender
any and all evidence of ownership of any of the Equipment including, without
limitation, certificates of title and applications of title. Borrower shall, at
the request of Lender, indicate on its records concerning the Collateral a
notation, in form satisfactory to Lender, of the security interest of Lender
hereunder.
G. USE OF PROCEEDS.
All monies and other property obtained by Borrower from Lender
pursuant to this Agreement shall be used solely for business purposes of
Borrower.
H. TAXES.
Borrower shall file all required tax returns and pay all of
its taxes when due, including, without limitation, taxes imposed by federal,
state or municipal agencies, and shall cause any liens for taxes to be promptly
released; provided, that Borrower shall have the right to contest the payment of
such taxes in good faith by appropriate proceedings so long as (i) the amount so
contested is shown on Borrower's financial statements; (ii) the contesting of
any such payment does not give rise to a lien for taxes; (iii) Borrower keeps on
deposit with Lender (such
29
deposit to be held without interest) an amount of money which, in the sole
judgment of Lender, is sufficient to pay such taxes and any interest or
penalties that may accrue thereon; and (iv) if Borrower fails to prosecute such
contest with reasonable diligence, Lender may apply the money so deposited in
payment of such taxes. If Borrower fails to pay any such taxes and in the
absence of any such contest by Borrower, Lender may (but shall be under no
obligation to) advance and pay any sums required to pay any such taxes and/or to
secure the release of any lien therefor, and any sums so advanced by Lender
shall constitute Loans hereunder, shall be payable by Borrower to Lender on
demand, and, until paid, shall bear interest at the highest rate then applicable
to Loans hereunder.
I. INTELLECTUAL PROPERTY.
Borrower and each of its Subsidiaries shall maintain all
licenses, patents, patent applications, copyrights, service marks, trademarks,
trademark applications, tradestyles and trade names to continue its business as
heretofore conducted by it or as hereafter conducted by it.
J. CHECKING ACCOUNTS.
Within fifteen (15) days after the date hereof, Borrower shall
maintain its general checking/controlled disbursement account with LaSalle Bank.
Normal charges shall be assessed thereon. Although no compensating balance is
required, Borrower must keep monthly balances in order to merit earnings credits
which will cover LaSalle Bank's service charge for demand deposit account
activities.
K. CHIEF OPERATING OFFICER.
Borrower shall employ a chief operating officer with
substantial expertise and experience in the medical products industry within
ninety (90) days after the date hereof.
L. APPRAISALS.
Lender and its agents and designees shall have the right to
conduct appraisals of the Collateral on a bi-annual basis, and Borrower shall
reimburse Lender and its agents and designees for the costs of any such
appraisals.
M. SURVEY.
Within sixty (60) days after the date hereof, Borrower shall
deliver to Lender a survey of the real property and improvements thereon located
at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Seven ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇,
in form and substance satisfactory to Lender in all respects.
13. NEGATIVE COVENANTS.
Until payment and satisfaction in full of all Liabilities and
termination of this Agreement, unless Borrower obtains Lender's prior written
consent waiving or modifying any of Borrower's covenants hereunder in any
specific instance, Borrower agrees as follows:
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A. GUARANTIES.
Neither Borrower nor any of its Subsidiaries shall assume,
guarantee or endorse, or otherwise become liable in connection with, the
obligations of any Person, except by endorsement of instruments for deposit or
collection or similar transactions in the ordinary course of business.
B. INDEBTEDNESS.
Neither Borrower nor any of its Subsidiaries shall create,
incur, assume or become obligated (directly or indirectly), for any loans or
other indebtedness of borrowed money other than the Loans, except that Borrower
may (i) borrow money from ComVest, Medtronics, BofA and the Additional
Noteholders pursuant to the ComVest Senior Subordinated Convertible Note, the
Medtronic Additional Note, the Note Purchase Agreement and the BofA Note (all as
in effect on the date hereof) on an unsecured and subordinated basis if a
Subordination Agreement in favor of Lender and in form and substance
satisfactory to Lender is executed and delivered to Lender prior thereto; (ii)
maintain its present indebtedness listed on Schedule 11(n) hereto; (iii) incur
unsecured indebtedness to trade creditors in the ordinary course of business;
(iv) incur purchase money indebtedness or capitalized lease obligations in
connection with Capital Expenditures permitted pursuant to subsection 14(h)
hereof; (v) incur operating lease obligations requiring payments not to exceed
$50,000 in the aggregate during any Fiscal Year of Borrower.
C. LIENS.
Neither Borrower nor any of its Subsidiaries shall grant or
permit to exist (voluntarily or involuntarily) any lien, claim, security
interest or other encumbrance whatsoever on any of its assets, other than
Permitted Liens.
D. MERGERS, SALES, ACQUISITIONS, SUBSIDIARIES AND OTHER
TRANSACTIONS OUTSIDE THE ORDINARY COURSE OF BUSINESS.
Neither Borrower nor any of its Subsidiaries shall (i) enter
into any merger or consolidation; (ii) change the state of its organization or
enter into any transaction which has the effect of changing its state of
organization (iii) sell, lease or otherwise dispose of any of its assets other
than in the ordinary course of business; (iv) purchase the stock, other equity
interests or all or a material portion of the assets of any Person or division
of such Person; or (v) enter into any other transaction outside the ordinary
course of its business, including, without limitation, any purchase, redemption
or retirement of any shares of any class of its stock or any other equity
interest; provided, however, Borrower shall be entitled to issue any shares of,
or warrants or other rights to receive or purchase any shares of, any class of
its stock or any other equity interest. Borrower shall not form any Subsidiaries
after the date hereof or enter into any joint ventures or partnerships with any
other Person.
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E. DIVIDENDS AND DISTRIBUTIONS.
Borrower shall not declare or pay any dividend or other
distribution (whether in cash or in kind) on any class of its stock or on
account of any equity interest in Borrower.
F. INVESTMENTS; LOANS.
Neither Borrower nor any of its Subsidiaries shall purchase or
otherwise acquire, or contract to purchase or otherwise acquire, the obligations
or stock of any Person, other than direct obligations of the United States; nor
shall Borrower or any of its Subsidiaries lend or otherwise advance funds to any
Person except for advances made to employees, officers and directors for travel
and other expenses arising in the ordinary course of business.
G. FUNDAMENTAL CHANGES, LINE OF BUSINESS.
Neither Borrower nor any of its Subsidiaries shall amend its
organizational documents or change its Fiscal Year or enter into a new line of
business materially different from Borrower's or such Subsidiaries' current
business.
h. Equipment.
Neither Borrower nor any of its Subsidiaries shall (i) permit any
Equipment to become a Fixture to real property unless (x) such real property is
owned by Borrower and is subject to a mortgage in favor of Lender or (y) if such
real estate is leased, Lender has received a duly executed Landlord Waiver with
respect thereto, in form and substance satisfactory to Lender in all respects,
or (ii) permit any Equipment to become an accession to any other personal
property unless such personal property is subject to a first priority lien in
favor of Lender.
I. USE OF PROCEEDS.
Neither Borrower nor any Affiliate shall use any portion of
the proceeds of the Loans, either directly or indirectly, for the purpose of (i)
purchasing any securities underwritten or privately placed by ABN AMRO
Securities (USA) Inc. ("AASI"), an affiliate of Lender, (ii) purchasing from
AASI any securities in which AASI makes a market, or (iii) refinancing or making
payments of principal, interest or dividends on any securities issued by
Borrower or any Affiliate, and underwritten, privately placed or dealt in by
AASI.
J. AFFILIATE TRANSACTIONS.
Except as set forth on Schedule 11(i) hereto or as permitted
pursuant to subsection 11(c) hereof, neither Borrower nor any of its
Subsidiaries shall conduct, permit or suffer to be conducted, transactions with
Affiliates for the purchase or sale of Inventory or services in the ordinary
course of business pursuant to terms that are less favorable to Borrower or such
Subsidiary than the terms upon which such transfers or transactions would have
been made had they been made to or with a Person that is not an Affiliate.
K. SETTLING OF ACCOUNTS.
Neither Borrower nor any of its Subsidiaries shall settle or
adjust any Account identified by Borrower as an Eligible Account or with respect
to which the Account Debtor is an Affiliate without the consent of Lender,
provided, that following the occurrence of an Event of
32
Default, neither Borrower nor any of its Subsidiaries shall settle or adjust any
Account without the consent of Lender.
14. FINANCIAL COVENANTS.
Borrower shall maintain and keep in full force and effect each
of the financial covenants set forth on Schedule 14 attached hereto:
15. DEFAULT.
The occurrence of any one or more of the following events
shall constitute an "Event of Default" by Borrower hereunder:
A. PAYMENT.
The failure of any Obligor to pay when due, declared due, or
demanded by Lender, any of the Liabilities.
B. BREACH OF THIS AGREEMENT AND OTHER AGREEMENTS.
(i) any Obligor shall fail or neglect to perform, keep or
observe any covenant contained in Sections 6, 7, 8, 9, 12, 13 or 14 hereof or
Schedule 14 hereto (other than the Minimum Availability Test set forth therein)
on the date that such Obligor is required to perform, keep or observe such
covenant, or (ii) Borrower shall fail to maintain the Minimum Availability Test
and such failure shall not be cured within ten (10) days after the occurrence of
such failure by a capital contribution in immediately available funds to
Borrower (provided, that such Minimum Availability Test may be cured only once
in any period of 365 days) (iii) any Obligor shall fail or neglect to perform,
keep or observe any covenant contained in this Agreement or any of the Other
Agreements (other than a covenant which is dealt with specifically elsewhere in
Section 15 hereof) and the breach of such other covenant is not cured to
Lender's satisfaction within 15 days after the sooner to occur of any senior
officer of such Obligor's receipt of notice of such breach from Lender or the
date on which such failure or neglect first becomes known to any senior officer
of any Obligor; provided, however, that such notice and opportunity to cure
shall not apply in the case of any failure to perform, keep or observe any
covenant which is not capable of being cured at all or within such 15-day period
or which is a willful and knowing breach by any Obligor.
C. BREACHES OF OTHER OBLIGATIONS.
The failure of any Obligor to perform, keep or observe any of
the covenants, conditions, promises, agreements or obligations of such Obligor
under any other agreement with any Person if such failure might have a Material
Adverse Effect on such Obligor.
D. BREACH OF REPRESENTATIONS AND WARRANTIES.
The making or furnishing by any Obligor to Lender of any
representation, warranty, certificate, schedule, report or other communication
within or in connection with this Agreement or the Other Agreements or in
connection with any other agreement between such Obligor and Lender, which is
untrue or misleading in any material respect.
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E. LOSS OF COLLATERAL.
The loss, theft, damage or destruction of, or (except as
permitted hereby) sale, lease or furnishing under a contract of service of, any
of the Collateral in excess of $50,000.
▇. ▇▇▇▇, SEIZURE OR ATTACHMENT.
The making or any attempt by any Person to make any levy,
seizure or attachment upon any of the Collateral.
G. BANKRUPTCY OR SIMILAR PROCEEDINGS.
The commencement of any proceedings in bankruptcy by or
against any Obligor or for the liquidation or reorganization of any Obligor, or
alleging that such Obligor is insolvent or unable to pay its debts as they
mature, or for the readjustment or arrangement of any Obligor's debts, whether
under the United States Bankruptcy Code or under any other law, whether state or
federal, now or hereafter existing, for the relief of debtors, or the
commencement of any analogous statutory or non-statutory proceedings involving
any Obligor; provided, however, that if such commencement of proceedings against
such Obligor is involuntary, such action shall not constitute an Event of
Default unless such proceedings are not dismissed within sixty (60) days after
the commencement of such proceedings.
H. APPOINTMENT OF RECEIVER.
The appointment of a receiver or trustee for any Obligor, for
any of the Collateral or for any substantial part of any Obligor's assets or the
institution of any proceedings for the dissolution, or the full or partial
liquidation, or the merger or consolidation, of any Obligor which is a
corporation, limited liability company or a partnership; provided, however, that
if such appointment or commencement of proceedings against such Obligor is
involuntary, such action shall not constitute an Event of Default unless such
appointment is not revoked or such proceedings are not dismissed within sixty
(60) days after the commencement of such proceedings.
I. JUDGMENT.
The entry of any judgment or order against any Obligor
involving an amount in excess of $25,000 which remains unsatisfied or
undischarged and in effect for thirty (30) days after such entry without a stay
of enforcement or execution.
J. RESERVED.
K. DEFAULT OR REVOCATION OF GUARANTY.
The occurrence of an event of default under, or the revocation
or termination of, any Guaranty or any other agreement, instrument or document
executed and delivered by any Person to Lender pursuant to which such Person has
guaranteed to Lender the payment of all or any of the Liabilities or has granted
Lender a security interest in or lien upon some or all of such Person's real
and/or personal property to secure the payment of all or any of the Liabilities.
34
L. CRIMINAL PROCEEDINGS.
The institution in any court of a criminal proceeding against
any Obligor, or the indictment of any Obligor for any crime.
M. CHANGE OF CONTROL.
The failure of Medtronic or ComVest, individually or
collectively, to own and have voting control at least twenty percent (20%) of
the issued and outstanding voting equity interests of Borrower or (ii) Borrower
to own one hundred percent (100%) of the issued and outstanding stock of Horizon
Acquisition, ▇▇▇▇▇▇ or Strato.
N. MATERIAL ADVERSE CHANGE.
There shall occur any event or condition that could have, as
determined by Lender, a Material Adverse Effect.
O. DEFAULT UNDER SUBORDINATED DEBT DOCUMENTS.
The occurrence of a default or event of default under any of
the Subordinated Debt Documents.
16. REMEDIES UPON AN EVENT OF DEFAULT.
a. Upon the occurrence of an Event of Default described
in subsection 15(g) hereof, all of the Liabilities shall immediately and
automatically become due and payable, without notice of any kind. Upon the
occurrence of any other Event of Default, all Liabilities may, at the option of
Lender, and without demand, notice or legal process of any kind, be declared,
and immediately shall become, due and payable.
b. Upon the occurrence of an Event of Default, Lender
may exercise from time to time any rights and remedies available to it under the
Uniform Commercial Code and any other applicable law in addition to, and not in
lieu of, any rights and remedies expressly granted in this Agreement or in any
of the Other Agreements and all of Lender's rights and remedies shall be
cumulative and non-exclusive to the extent permitted by law. In particular, but
not by way of limitation of the foregoing, Lender may, without notice, demand or
legal process of any kind, take possession of any or all of the Collateral (in
addition to Collateral of which it already has possession), wherever it may be
found, and for that purpose may pursue the same wherever it may be found, and
may enter onto any of Borrower's premises where any of the Collateral may be,
and search for, take possession of, remove, keep and store any of the Collateral
until the same shall be sold or otherwise disposed of, and Lender shall have the
right to store the same at any of Borrower's premises without cost to Lender. At
Lender's request, Borrower shall, at Borrower's expense, assemble the Collateral
and make it available to Lender at one or more places to be designated by Lender
and reasonably convenient to Lender and Borrower. Borrower recognizes that if
Borrower fails to perform, observe or discharge any of its Liabilities under
this Agreement or the Other Agreements, no remedy at law will provide adequate
relief to Lender, and agrees that Lender shall be entitled to temporary and
permanent injunctive relief in any such case without the necessity of proving
actual damages. Any notification of intended disposition of any of the
Collateral
35
required by law will be deemed to be a reasonable authenticated notification of
disposition if given at least ten (10) days prior to such disposition and such
notice shall (i) describe Lender and Borrower, (ii) describe the Collateral that
is the subject of the intended disposition, (iii) state the method of the
intended disposition, (iv) state that Borrower is entitled to an accounting of
the Liabilities and state the charge, if any, for an accounting and (v) state
the time and place of any public disposition or the time after which any private
sale is to be made. Lender may disclaim any warranties that might arise in
connection with the sale, lease or other disposition of the Collateral and has
no obligation to provide any warranties at such time. Any Proceeds of any
disposition by Lender of any of the Collateral may be applied by Lender to the
payment of expenses in connection with the Collateral, including, without
limitation, legal expenses and reasonable attorneys' fees, and any balance of
such Proceeds may be applied by Lender toward the payment of such of the
Liabilities, and in such order of application, as Lender may from time to time
elect.
17. CONDITIONS PRECEDENT.
The obligation of Lender to fund the Term Loan, to fund the
initial Revolving Loan, and to issue or cause to be issued the initial Letter of
Credit, is subject to the satisfaction or written waiver by Lender on or before
March 25, 2002 of the following conditions precedent:
a. Lender shall have received duly executed originals of
this Agreement, each of the other Agreements and each of the agreements,
opinions, reports, approvals, consents, certificates and other documents set
forth on the closing document list attached hereto as Schedule 17(a) (the
"Closing Document List");
b. Since December 31, 2001, no event shall have occurred
which has had or could reasonably be expected to have a Material Adverse Effect
on any Obligor, as determined by Lender in its sole discretion;
c. Lender shall have received payment in full of all
fees and expenses payable to it by Borrower or any other Person in connection
herewith, on or before disbursement of the initial Loans hereunder;
d. Lender shall have determined that immediately after
giving effect to (A) the making of the initial Loans, including without
limitation the Term Loan and the Revolving Loans, if any, requested to be made
on the Closing Date, (B) the issuance of the initial Letter of Credit, if any,
requested to be made on the Closing Date, (C) the payment of all fees due upon
the Closing Date and (D) the payment or reimbursement by Borrower of Lender for
all closing costs and expenses incurred in connection with the transactions
contemplated hereby, and assuming all of Borrower's trade payables and
outstanding debt which remain unpaid more than thirty (30) days after the due
dates thereof on the date of determination, are paid by drawing additional
Revolving Loans, on a pro forma basis, availability of Borrower to borrow
additional Revolving Loans shall not be less than Five Million and No/100
Dollars ($5,000,000); and
36
e. The Obligors shall have executed and delivered to
Lender all such other documents, instruments and agreements which Lender
determines are reasonably necessary to consummate the transactions contemplated
hereby.
f. Lender shall have reviewed and found acceptable in
all respects each of the Subordinated Debt Documents.
g. Borrower shall have received capital contributions of
not less than $15,000,000 in immediately available funds and the transactions
referenced in the Subordinated Debt Documents shall have been consummated on
terms and conditions satisfactory to Lender in all respects.
h. Lender or its designee shall have received warrants,
in form and substance satisfactory to Lender in all respects, for at least one
percent (1%) (on a fully diluted basis) of common stock of Borrower, and
Borrower shall have executed and delivered to Lender or its designee the
warrants, warrant purchase agreement and any and all other documents, agreements
or instruments requested by Lender in connection therewith.
i. Lender shall have reviewed and found acceptable in
all respects the duly executed BofA Note, and BofA shall have executed and
delivered to Lender a Subordination Agreement, in form and substance
satisfactory to Lender in all respects.
j. Lender shall have reviewed and found acceptable in
all respects the duly executed ▇▇▇▇▇▇ Note and all defaults by Borrower under
the Settlement Agreement among Borrower and the former shareholders of ▇▇▇▇▇▇
shall have been waived in writing by the former shareholders of ▇▇▇▇▇▇.
k. Lender shall have received and found acceptable fully
paid mortgagee title insurance policies (or binding commitments to issue title
insurance policies, marked to Lender's satisfaction to evidence the form of such
policies to be delivered after the Closing Date), in standard ALTA form, issued
by a title insurance company satisfactory to Lender, each in an amount equal to
not less than the fair market value of the real property, as the case may be,
subject to the Mortgage, insuring the Mortgage to create a valid lien on all
real property with no exceptions which Lender shall not have approved in
writing.
l. Lender shall have received Landlord Waivers with
respect to all premises at which any Collateral may be located.
18. INDEMNIFICATION.
Borrower agrees to defend (with counsel satisfactory to
Lender), protect, indemnify and hold harmless Lender, each affiliate or
subsidiary of Lender, and each of their respective officers, directors,
employees, attorneys and agents (each an "INDEMNIFIED PARTY") from and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, expenses and disbursements of any kind or
nature (including, without limitation, the disbursements and the reasonable fees
of counsel for each Indemnified Party in connection with any investigative,
administrative or judicial proceeding, whether or not the Indemnified Party
shall be designated a party thereto), which may be imposed on, incurred by, or
asserted against, any Indemnified Party (whether direct, indirect or
consequential and
37
whether based on any federal, state or local laws or regulations, including,
without limitation, securities laws and regulations, Environmental Laws and
commercial laws and regulations, under common law or in equity, or based on
contract or otherwise) in any manner relating to or arising out of this
Agreement or any Other Agreement, or any act, event or transaction related or
attendant thereto, the making or issuance and the management of the Loans or any
Letters of Credit or the use or intended use of the proceeds of the Loans or any
Letters of Credit; provided, however, that Borrower shall not have any
obligation hereunder to any Indemnified Party with respect to matters caused by
or resulting from the willful misconduct or gross negligence of such Indemnified
Party. To the extent that the undertaking to indemnify set forth in the
preceding sentence may be unenforceable because it is violative of any law or
public policy, Borrower shall satisfy such undertaking to the maximum extent
permitted by applicable law. Any liability, obligation, loss, damage, penalty,
cost or expense covered by this indemnity shall be paid to each Indemnified
Party on demand, and, failing prompt payment, shall, together with interest
thereon at the highest rate then applicable to Loans hereunder from the date
incurred by each Indemnified Party until paid by Borrower, be added to the
Liabilities of Borrower and be secured by the Collateral. The provisions of this
Section 18 shall survive the satisfaction and payment of the other Liabilities
and the termination of this Agreement.
19. NOTICE.
All written notices and other written communications with respect to
this Agreement shall be sent by ordinary, certified or overnight mail, by
telecopy or delivered in person, and in the case of Lender shall be sent to it
at LaSalle Business Credit, Inc., ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Vice President, Telecopier Number:
(▇▇▇) ▇▇▇-▇▇▇▇, and in the case of Borrower shall be sent to it at its principal
place of business set forth on Exhibit A hereto or as otherwise directed by
Borrower in writing. All notices shall be deemed received upon actual receipt
thereof or refusal of delivery.
20. CHOICE OF GOVERNING LAW; CONSTRUCTION; FORUM SELECTION.
This Agreement and the Other Agreements are submitted by Borrower to
Lender for Lender's acceptance or rejection at Lender's principal place of
business as an offer by Borrower to borrow monies from Lender now and from time
to time hereafter, and shall not be binding upon Lender or become effective
until accepted by Lender, in writing, at said place of business. If so accepted
by Lender, this Agreement and the Other Agreements shall be deemed to have been
made at said place of business. THIS AGREEMENT AND THE OTHER AGREEMENTS SHALL BE
GOVERNED AND CONTROLLED BY THE INTERNAL LAWS OF THE STATE OF GEORGIA AS TO
INTERPRETATION, ENFORCEMENT, VALIDITY, CONSTRUCTION, EFFECT, AND IN ALL OTHER
RESPECTS, INCLUDING, WITHOUT LIMITATION, THE LEGALITY OF THE INTEREST RATE AND
OTHER CHARGES, BUT EXCLUDING PERFECTION OF THE SECURITY INTERESTS IN COLLATERAL
LOCATED OUTSIDE OF THE STATE OF GEORGIA, WHICH SHALL BE GOVERNED AND CONTROLLED
BY THE LAWS OF THE RELEVANT JURISDICTION IN WHICH SUCH COLLATERAL IS LOCATED. If
any provision of this Agreement shall be held to be prohibited by or invalid
under applicable law, such provision shall be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or remaining provisions of this Agreement.
38
To induce Lender to accept this Agreement, Borrower irrevocably agrees
that, subject to Lender's sole and absolute election, ALL ACTIONS OR PROCEEDINGS
IN ANY WAY, MANNER OR RESPECT, ARISING OUT OF OR FROM OR RELATED TO THIS
AGREEMENT, THE OTHER AGREEMENTS OR THE COLLATERAL SHALL BE LITIGATED IN COURTS
HAVING SITUS WITHIN THE ▇▇▇▇ COUNTY, STATE OF GEORGIA. BORROWER HEREBY CONSENTS
AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURTS LOCATED
WITHIN SAID CITY AND STATE. Borrower hereby irrevocably appoints and designates
the Secretary of State of Illinois, whose address is Springfield, Illinois (or
any other person having and maintaining a place of business in such state whom
Borrower may from time to time hereafter designate upon ten (10) days written
notice to Lender and whom Lender has agreed in its sole discretion in writing is
satisfactory and who has executed an agreement in form and substance
satisfactory to Lender agreeing to act as such attorney and agent), as
Borrower's true and lawful attorney and duly authorized agent for acceptance of
service of legal process. Borrower agrees that service of such process upon such
person shall constitute personal service of such process upon Borrower. BORROWER
HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY
LITIGATION BROUGHT AGAINST BORROWER BY LENDER IN ACCORDANCE WITH THIS SECTION.
21. MODIFICATION AND BENEFIT OF AGREEMENT.
This Agreement and the Other Agreements may not be modified, altered or
amended except by an agreement in writing signed by Borrower or such other
person who is a party to such Other Agreement and Lender. Borrower may not sell,
assign or transfer this Agreement, or the Other Agreements or any portion
thereof, including, without limitation, Borrower's rights, titles, interest,
remedies, powers or duties hereunder and thereunder. Borrower hereby consents to
Lender's sale, assignment, transfer or other disposition, at any time and from
time to time hereafter, of this Agreement, or the Other Agreements, or of any
portion thereof, or participations therein, including, without limitation,
Lender's rights, titles, interest, remedies, powers and/or duties and agrees
that it shall execute and deliver such documents as Lender may request in
connection with any such sale, assignment, transfer or other disposition.
22. HEADINGS OF SUBDIVISIONS.
The headings of subdivisions in this Agreement are for convenience of
reference only, and shall not govern the interpretation of any of the provisions
of this Agreement.
23. POWER OF ATTORNEY.
Borrower acknowledges and agrees that its appointment of Lender as its
attorney and agent-in-fact for the purposes specified in this Agreement is an
appointment coupled with an interest and shall be irrevocable until all of the
Liabilities are satisfied and paid in full and this Agreement is terminated.
24. CONFIDENTIALITY.
Borrower and Lender hereby agree and acknowledge that any and all
information relating to Borrower which is (i) furnished by Borrower to Lender
(or to any affiliate of Lender); and (ii) non-public, confidential or
proprietary in nature, shall be kept confidential by Lender or such affiliate in
accordance with applicable law; provided, however, that such information and
other
39
credit information relating to Borrower may be distributed by Lender or such
affiliate to Lender's or such affiliate's directors, officers, employees,
attorneys, affiliates, assignees, participants, auditors, agents and regulators,
and upon the order of a court or other governmental agency having jurisdiction
over Lender or such affiliate, to any other party. Borrower and Lender further
agree that this provision shall survive the termination of this Agreement.
Notwithstanding the foregoing, Borrower hereby consents to Lender publishing a
tombstone or similar advertising material relating to the financing transaction
contemplated by this Agreement.
25. COUNTERPARTS.
This Agreement, any of the Other Agreements and any amendments,
waivers, consents or supplements may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which, when so
executed and delivered, shall be deemed an original, but all of which
counterparts together shall constitute but one agreement.
26. ELECTRONIC SUBMISSIONS.
Upon not less than thirty (30) days' prior written notice (the
"APPROVED ELECTRONIC FORM NOTICE"), Lender may permit or require that any of the
documents, certificates, forms, deliveries or other communications, authorized,
required or contemplated by this Agreement or the Other Agreements, be submitted
to Lender in "APPROVED ELECTRONIC FORM" (as hereafter defined), subject to any
reasonable terms, conditions and requirements in the applicable Approved
Electronic Forms Notice. For purposes hereof "ELECTRONIC FORM" means e-mail,
e-mail attachments, data submitted on web-based forms or any other communication
method that delivers machine readable data or information to Lender, and
"APPROVED ELECTRONIC FORM" means an Electronic Form that has been approved in
writing by Lender (which approval has not been revoked or modified by Lender)
and sent to Borrower in an Approved Electronic Form Notice. Except as otherwise
specifically provided in the applicable Approved Electronic Form Notice, any
submissions made in an applicable Approved Electronic Form shall have the same
force and effect that the same submissions would have had if they had been
submitted in any other applicable form authorized, required or contemplated by
this Agreement or the Other Agreements.
27. WAIVER OF JURY TRIAL; OTHER WAIVERS.
a. BORROWER AND LENDER EACH HEREBY WAIVES ALL RIGHTS TO
TRIAL BY JURY IN ANY ACTION OR PROCEEDING WHICH PERTAINS DIRECTLY OR INDIRECTLY
TO THIS AGREEMENT, ANY OF THE OTHER AGREEMENTS, THE LIABILITIES, THE COLLATERAL,
ANY ALLEGED TORTIOUS CONDUCT BY BORROWER OR LENDER OR WHICH, IN ANY WAY,
DIRECTLY OR INDIRECTLY, ARISES OUT OF OR RELATES TO THE RELATIONSHIP BETWEEN
BORROWER AND LENDER. IN NO EVENT SHALL LENDER BE LIABLE FOR LOST PROFITS OR
OTHER SPECIAL OR CONSEQUENTIAL DAMAGES.
B. Borrower hereby waives demand, presentment, protest
and notice of nonpayment, and further waives the benefit of all valuation,
appraisal and exemption laws.
C. Borrower hereby waives the benefit of any law that
would otherwise restrict or limit Lender or any affiliate of Lender in the
exercise of its right, which is hereby
40
acknowledged and agreed to, to set-off against the Liabilities, without notice
at any time hereafter, any indebtedness, matured or unmatured, owing by Lender
or such affiliate of Lender to Borrower, including, without limitation any
deposit account at Lender or such affiliate.
D. BORROWER HEREBY WAIVES ALL RIGHTS TO NOTICE AND
HEARING OF ANY KIND PRIOR TO THE EXERCISE BY LENDER OF ITS RIGHTS TO REPOSSESS
THE COLLATERAL OF BORROWER WITHOUT JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR
LEVY UPON SUCH COLLATERAL.
E. Lender's failure, at any time or times hereafter, to
require strict performance by Borrower of any provision of this Agreement or any
of the Other Agreements shall not waive, affect or diminish any right of Lender
thereafter to demand strict compliance and performance therewith. Any suspension
or waiver by Lender of an Event of Default under this Agreement or any default
under any of the Other Agreements shall not suspend, waive or affect any other
Event of Default under this Agreement or any other Default under any of the
Other Agreements, whether the same is prior or subsequent thereto and whether of
the same or of a different kind or character. No delay on the part of Lender in
the exercise of any right or remedy under this Agreement or any Other Agreement
shall preclude other or further exercise thereof or the exercise of any right or
remedy. None of the undertakings, agreements, warranties, covenants and
representations of Borrower contained in this Agreement or any of the Other
Agreements and no Event of Default under this Agreement or default under any of
the Other Agreements shall be deemed to have been suspended or waived by Lender
unless such suspension or waiver is in writing, signed by a duly authorized
officer of Lender and directed to Borrower specifying such suspension or waiver.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written above.
HORIZON MEDICAL PRODUCTS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
-----------------------------------------
Title: President
--------------------------------------
[CORPORATE SEAL]
STANDARD FEDERAL BANK NATIONAL
ASSOCIATION, ACTING BY AND THROUGH,
LASALLE BUSINESS CREDIT, INC., AS ITS
AGENT
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------------
Title: Vice President
--------------------------------------
41
EXHIBIT A - BUSINESS AND COLLATERAL LOCATIONS
Attached to and made a part of that certain Loan and Security Agreement
of even date herewith between HORIZON MEDICAL PRODUCTS, INC. ("Borrower") and
STANDARD FEDERAL BANK NATIONAL ASSOCIATION, acting by and through LASALLE
BUSINESS CREDIT, INC., as its agent ("Lender").
A. Borrower's Business Locations (please indicate which location
is the principal place of business and at which locations originals and all
copies of Borrower's books, records and accounts are kept).
1. Chief Executive Office and Principal Place of
Business:
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
2. Other Location:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Seven ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
B. Other locations of Collateral (including, without limitation,
warehouse locations, processing locations, consignment locations) and all post
office boxes of Borrower. Please indicate the relationship of such location to
Borrower (i.e. public warehouse, processor, etc.).
1. ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
(Warehouse)
2. ▇▇▇-▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
C. Bank Accounts of Borrower (other than those at LaSalle Bank
National Association):
Bank (with address) Account Number Type of Account
------------------- -------------- ---------------
1. Bank of America (formerly Nationsbank) 3750205068 Lockbox
2. ▇▇▇▇▇▇▇▇▇▇ Bank & Trust 2233010 Operating Checking
3. Bank of America-Atlanta account 003270995089 Executive Office
expenses
4. Fortis Bank-Belgium 001315869341 Expenses of
International Office
5. Bank of America ▇▇▇▇-▇▇▇▇-▇▇▇▇ Operating Checking
6. Bank of America ▇▇▇▇-▇▇▇▇-▇▇▇▇ Payroll
7. Chase Manhattan 053-028805 Lockbox
8. Bank of America ▇▇▇▇-▇▇▇▇-▇▇▇▇ Operating
9. Bank of America ▇▇▇▇-▇▇▇▇-▇▇▇▇ Payroll
10. ▇▇▇▇▇▇▇▇▇▇ Bank & Trust 135-337 Operating
EXHIBIT B - COMPLIANCE CERTIFICATE
Attached to and made a part of that certain Loan and Security
Agreement, as it may be amended in accordance with its terms from time to time,
including all exhibits attached thereto (the "Agreement") of even date herewith
between HORIZON MEDICAL PRODUCTS, INC. ("Borrower") and STANDARD FEDERAL BANK
NATIONAL ASSOCIATION, acting by and through LASALLE BUSINESS CREDIT, INC., as
its agent ("Lender").
This Certificate is submitted pursuant to subsection 9(c) of the Agreement.
The undersigned hereby certifies to Lender that as of the date of this
Certificate:
1. The undersigned is the ________________________ of Borrower.
2. There exists no event or circumstance which is or which with
the passage of time, the giving of notice, or both would constitute an Event of
Default, as that term is defined in the Agreement, or, if such an event of
circumstance exists, a writing attached hereto specifies the nature thereof, the
period of existence thereof and the action that Borrower has taken or proposes
to take with respect thereto.
3. No event or condition has occurred since [date of last
Compliance Certificate/last financial statements delivered prior to closing]
that could have a Material Adverse Effect, or, if such event or condition has
occurred, a writing attached hereto specifies the nature thereof and the action
that Borrower has taken or proposes to take with respect thereto.
4. Borrower is in compliance with the representations, warranties
and covenants in the Agreement, or, if Borrower is not in compliance with any
representations, warranties or covenants in the Agreement, a writing attached
hereto specifies the nature thereof, the period of existence thereof and the
action that Borrower has taken or proposes to take with respect thereto.
5. The financial statements of Borrower being concurrently
delivered herewith have been prepared in accordance with generally accepted
accounting principles consistently applied and there have been no material
changes in accounting policies or financial reporting practices of Borrower
since [date of the last Compliance Certificate/date of last financial statements
delivered prior to closing] or, if any such change has occurred, such changes
are set forth in a writing attached hereto.
6. Attached hereto is a true and correct calculation of the
financial covenants contained in the Agreement.
HORIZON MEDICAL PRODUCTS, INC.
By:
------------------------------------
Its:
------------------------------------
EXHIBIT C - COMMERCIAL TORT CLAIMS
None
SCHEDULE 11(c) - LOANS
[Borrower to complete]
SCHEDULE 11(g) - LITIGATION
1. Sandoval v. Norfolk Medical Products, Inc., in the United States
District Court for the District of Puerto Rico, Civil Action No.
00-2315JAF. The Borrower is represented in such action by ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇, Bank Trust Plaza, 10th Floor, ▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇. MedMarc is providing the defense for the
Borrower in this action. Norfolk Medical Products has tendered the
defense of the case to the Borrower.
2. ▇▇▇▇▇▇▇ v. Horizon Medical Products, Inc., in the State Court of ▇▇▇▇▇▇
County, Georgia, Civil Action No. 00VS008741A. The Borrower is
represented in such action by ▇▇▇▇▇▇▇▇▇ & Virgin, P.C. ▇▇▇▇▇▇▇ is
asserting a claim for alleged damages as a result of an alleged breach
of a consulting agreement between the Borrower and ▇▇▇▇▇▇▇. ▇▇▇▇▇▇▇ is
seeking damages of $21,000.00, 5% of net sales of the Pheres-Flow
product in excess of $50,000.00 per month from May 1, 1997 through
April 30, 1999, prejudgment interest, and attorney's fees. The Borrower
has denied liability and is asserting the defense that the parties
mutually rescinded the agreement after three months during its term.
3. Horizon Medical Products, Inc. v. Vascutech Acquisition, Inc. and
LeMaitre Vascular, Inc., in the Superior Court of ▇▇▇▇▇▇ County,
Georgia, Civil Action No. 2001-CV-43135. The Borrower seeks judgment
for $220,366.80 from defendants that was payable to the Borrower on
September 30, 2001. Defendants have filed a counterclaim seeking
indemnification under the Asset Purchase Agreement dated March 30, 2001
for alleged breach of representations and warranties and seeking
damages for fraud and deceit. King & Spalding is representing the
Borrower in this lawsuit.
4. Strato/Infusaid Inc. ("Strato/Infusaid") was acquired by the Borrower
in July 1997 and is a subsidiary of the Borrower. In the Purchase
Agreement dated as of June 20, 1997 (the "Purchase Agreement") by and
among Pfizer Inc., Strato/Infusaid, the Borrower, and Arrow
International, Inc., Pfizer agreed to defend and pay all amounts owed
in connection with (i) any claim asserted against Strato/Infusaid in
any litigation, arbitration, suit, or proceeding commenced on or prior
to July 15, 1997 or in any written notice delivered to Strato/Infusaid
prior to July 15, 1997, regardless of the nature of the claim,
including without limitation the claims and litigation described in
Schedule 4.1(j) to the Purchase Agreement and (ii) any claim involving
liabilities or obligations of Strato/Infusaid involving death or bodily
injury to a third party as and to the extent involving products of
Strato/Infusaid sold prior to July 15, 1997, regardless of whether such
claim was asserted prior to or following July 15, 1997. To the best
knowledge of the Borrower, Pfizer is presently defending all claims
described in the preceding sentence and has not notified
Strato/Infusaid or the Borrower that Pfizer does not intend to defend
and pay any such claims.
5. The Borrower had an agreement with ▇▇▇▇▇▇ ▇▇▇▇▇ ("▇▇▇▇▇") dated May 8,
1997 ("▇▇▇▇▇ Agreement"), pursuant to which ▇▇▇▇▇ agreed to provide
certain services for the Borrower. The description of the ▇▇▇▇▇
Agreement described in the Borrower's Registration Statement on Form
S-1, dated February 13, 1998 and the Borrower's Proxy Statement for its
2001 annual shareholders meeting is incorporated herein by reference.
The Borrower entered into a Distribution Agreement dated December 11,
1998 ("Distribution Agreement") with Possis Medical, Inc. ("Possis"),
under which the
Borrower agreed to sell and distribute vascular access grafts
manufactured by Possis. The Distribution Agreement has been terminated
by agreement between Possis and the Borrower. During 1999 and 2000, in
separate conversations with the Borrower's chief executive officer,
chief financial officer, vice president-finance, and legal counsel,
▇▇▇▇▇ stated that he believed he was entitled to a fee of $250,000.00
from the Borrower as a result of the Borrower's entering into the
Distribution Agreement. The Borrower has informed ▇▇▇▇▇, both in
writing and orally, that it does not owe any fees to ▇▇▇▇▇ in
connection with the Distribution Agreement. ▇▇▇▇▇ was a director of the
Borrower from January 1998 until his resignation in May 2001.
6 In October 1998, the Borrower acquired all of the outstanding stock of
▇▇▇▇▇▇ Corporation from its three shareholders (the "▇▇▇▇▇▇
Shareholders"). The provisions of the Stock Purchase Agreement between
the Borrower and the ▇▇▇▇▇▇ Shareholders provided for annual payments
to the ▇▇▇▇▇▇ Shareholders by the Borrower. The amount of $1,212,517.80
was payable by the Borrower to the ▇▇▇▇▇▇ Shareholders on December 15,
2000. The Borrower and the ▇▇▇▇▇▇ Shareholders entered into that
certain Second Amendment to Stock Purchase Agreement dated December 15,
2000, under which the Borrower agreed to pay the ▇▇▇▇▇▇ Shareholders a
certain amount each week commencing on December 22, 2000. Two of the
▇▇▇▇▇▇ Shareholders filed an action in state court in New York, New
York in February 2001 when the Borrower stopped paying such weekly
payments. Such lawsuit was settled in March 2001, pursuant to which the
Borrower agreed to a monthly payment schedule pursuant to the
Settlement Agreement dated March 29, 2001. Under the Settlement
Agreement, the Borrower was obligated to pay the final payment to the
two ▇▇▇▇▇▇ Shareholders on February 10, 2002, which the Borrower has
not yet paid. ____ Under the Settlement Agreement, the two ▇▇▇▇▇▇
Shareholders have the right to enter a Confession of Judgment against
the Borrower in the amount of $945,110.00 (plus interest accruing after
February 11, 2002) if the final payment is not made. The Borrower and
such two ▇▇▇▇▇▇ Shareholders have extended the February 11, 2002 due
date to March 15, 2002.
7. ▇▇▇▇▇ ▇▇▇▇▇▇▇ through his attorney has threatened to file an action to
collect outstanding amounts owed by the Borrower under a promissory
note issued by the Borrower dated October 30, 2001.
2
SCHEDULE 11(i) - AFFILIATE TRANSACTIONS
- Promissory Note, dated September 28, 1995, payable to the Company by
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇, as amended by the Amendment to Promissory Note dated
September 28, 1996 and the Amendment to Promissory Notes dated
September 24, 2001.
- Promissory Note, dated September 28, 1995, payable to the Company by
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇., as amended by the Amendment to Promissory
Note dated September 28, 1996 and the Amendment to Promissory Notes
dated September 24, 2001.
- Promissory Note, dated September 28, 1995, payable to the Company by
▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., as amended by the Amendment to Promissory Note
dated September 28, 1996.
- Promissory Note, dated October 12, 1995, payable to the Company by
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇, as amended by the Amendment to Promissory Note dated
October 12, 1996 and the Amendment to Promissory Notes dated September
24, 2001.
- Promissory Note, dated October 12, 1995, payable to the Company by
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇., as amended by the Amendment to Promissory
Note dated October 12, 1996 and the Amendment to Promissory Notes dated
September 24, 2001.
- Promissory Note, dated October 12, 1995, payable to the Company by ▇▇▇
▇. ▇▇▇▇▇▇▇, ▇▇., as amended by the Amendment to Promissory Note dated
October 12, 1996.
- Agreement regarding Dog Island property, dated December 22, 1998,
between ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇. and the Company.
This agreement generally allows the Company and its guests to use the
property for business purposes at a rate of $500 per day.
- Consulting and Services Agreement, dated as of February 1, 1996, by and
between the Company and Healthcare Alliance, Inc., as amended on
January 1, 1999.
- Agreement between the Company and ▇▇▇▇▇▇▇▇ Consulting, Inc.
- Pursuant to the terms of a July 1996 industrial revenue bond issuance
by the Development Authority of the City of Manchester for the benefit
of the Company, ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇. and ▇▇▇ ▇.
▇▇▇▇▇▇▇, ▇▇. jointly and severally guaranteed all payments due on the
bonds.
SCHEDULE 11(j) - NAMES & TRADE NAMES
Trade Names
HMP
Horizon Medical Products
Neostar Medical Technologies
Ideas for Medicine
SCHEDULE 11(n) - INDEBTEDNESS
Unsecured indebtedness owing by Borrower to ▇▇▇▇▇▇ in the principal
amount of $1,565,711, as evidenced by the ▇▇▇▇▇▇ Note as in effect on the date
hereof.
SCHEDULE 11(p) - PARENT, SUBSIDIARIES AND AFFILIATES
1. Horizon Medical Products, Inc. owns 100% of the capital stock
of each of ▇▇▇▇▇▇ Corporation, Horizon Acquisition Corp. and Strato/Infusaid,
Inc.
2. None of ▇▇▇▇▇▇ Corporation, Horizon Acquisition Corp. or
Strato/Infusaid, Inc. has any subsidiaries.
SCHEDULE 14 - FINANCIAL COVENANTS
a. Minimum Availability. Borrower shall maintain Minimum
Availability at all times of at least $4,000,000 (the "Minimum Availability
Test"). For purposes hereof, "Minimum Availability" shall mean the amount, as
determined by Lender, calculated at any time, equal to: (a) the lesser of: (i)
the Revolving Loan Limit and (ii) the Maximum Revolving Loan Limit, minus (b)
the sum of: (i) the amount of all then outstanding and unpaid Liabilities, plus
(ii) the aggregate amount of all then outstanding and unpaid trade payables and
other obligations of Borrower which are more than sixty (60) days past due as of
such time, plus (iii) the amount of checks issued by Borrower to pay trade
payables and other obligations which are more than sixty (60) days past due as
of such time, but not yet sent (but without duplication of clause (b)(ii)) and
the book overdraft of Borrower, plus (iv) $4,000,000 owing by Borrower to Arrow
International.
b. Tangible Net Worth.
Borrower's Tangible Net Worth shall not at any time be less
than the Minimum Tangible Net Worth set forth below for the period applicable
thereto:
Period Minimum Tangible Net Worth
------ --------------------------
Fiscal quarter ending December 31, 2002 $ 7,698,000
Fiscal quarter ending March 31, 2003 $ 8,522,000
Fiscal quarter ending June 30, 2003 $ 9,475,000
Fiscal quarter ending September 30, 2003 $10,544,000
Fiscal quarter ending December 31, 2003 $11,728,000
and each fiscal quarter thereafter
For purposes hereof, "Tangible Net Worth" shall mean Borrower's
shareholders' equity (including retained earnings) less the book value of all
intangible assets, any pre-paid items and non-cash items arising from the
transactions contemplated by this Agreement and the goodwill impairment changes
recorded as a result of FASB 142 as determined solely by Lender on a consistent
basis plus the amount of any LIFO reserve plus the amount of any debt
subordinated to Lender, all as determined under generally accepted accounting
principles applied on a basis consistent with the financial statement dated
December 31, 2001, except as set forth herein.
c. Fixed Charge Coverage.
Borrower shall not permit the ratio of its EBITDA to Fixed
Charges for each period set forth below to be less than the ratio set forth
below for the corresponding period set forth below:
Period Ratio
------ -----
April 1, 2002 through December 31, 2002 1.10 to 1.0
April 1, 2002 through March 30, 2003 1.20 to 1.0
Fiscal quarter ending June 30, 2003, for
the immediately preceding four fiscal quarters 1.40 to 1.0
Fiscal quarter ending September 30, 2003, for
the immediately preceding four fiscal quarters 1.50 to 1.0
and each fiscal quarter thereafter for the
immediately preceding-four fiscal quarters
d. EBITDA.
Borrower shall not permit EBITDA to be less than the amount
set forth below for the corresponding as of the date set forth below, based upon
the immediately preceding four fiscal quarters:
Period Amount
------ ------
December 31, 2002 $4,000,000
March 31, 2003 $5,437,000
June 30, 2003 $6,605,000
September 30, 2003 $7,374,000
December 31, 2003 and each fiscal
quarter thereafter based upon the
immediately preceding four
fiscal quarters $7,482,000
e. Capital Expenditure Limitations.
Borrower and its Subsidiaries shall not make any Capital
Expenditures if, after giving effect to such Capital Expenditure, the aggregate
cost of all such fixed assets purchased or otherwise acquired would exceed
$500,000 during any Fiscal Year.
2
SCHEDULE 17(a) - CLOSING DOCUMENT CHECKLIST
SCHEDULE OF CLOSING DOCUMENTS
STANDARD FEDERAL BANK NATIONAL ASSOCIATION,
acting by and through
LASALLE BUSINESS CREDIT, INC., as its agent
$22,000,000.00
Secured Revolving Credit, Term Loan and Letter of Credit Facility
to
HORIZON MEDICAL PRODUCTS, INC.
March ____, 2002
Definitions:
BORROWER - Horizon Medical Products, Inc., a Georgia corporation
LENDER - Standard Federal Bank National Association, a
national banking association, acting by and through
LaSalle Business Credit, Inc., a Delaware
corporation, as its agent
GUARANTORS - Horizon Acquisition Corp., a Georgia corporation
("Horizon Acquisition"); Strato/Infusaid, Inc., a
Massachusetts corporation ("Strato"); and ▇▇▇▇▇▇
Corporation, a New York corporation ("▇▇▇▇▇▇")
K&S - King & Spalding (Counsel to Borrower)
PHR&D - Parker, Hudson, Rainer & ▇▇▇▇▇ LLP (Counsel to
Lender)
PRIOR LENDER - Bank of America, N.A., a national banking association
INVESTORS - Medtronic, Inc., a Delaware corporation
("Medtronic"), and ComVest Venture Partners, L.P., a
Delaware limited partnership ("ComVest")
LANDLORD - Development Authority of the City of Manchester
Actions To Be Taken Prior to Closing:
Officers of Borrower will execute and deliver to Lender an Officer's
Certificate containing representations and warranties with regard to information
necessary for the preparation of closing documents and performance of lien
searches.
Personal property lien searches will be executed in all appropriate
jurisdictions. Financing Statements or appropriate forms will be filed in
advance of closing to eliminate any time gap in searches of the public records.
Actions To Be Taken at Closing:
The closing will be held on March , 2002, at the offices of Parker,
Hudson, Rainer & ▇▇▇▇▇ LLP in Atlanta, Georgia, at which time the following
closing documents will be executed and delivered:
CLOSING DOCUMENTS:
Number of
Item Document Parties Counterparts Responsibility
---- -------- ------- ------------ --------------
1. Certificates of Good Standing: Borrower 1 counterpart Borrower
(a) State of Georgia
(b) State of Florida
2. Corporate Resolutions Borrower 2 counterparts PHR&D/
Borrower
3. Secretary's Certificate Borrower 2 counterparts PHR&D/
Borrower
4. Loan and Security Agreement Borrower 2 counterparts PHR&D/
Borrower
5. Revolving Note ($20,000,000) Borrower 1 counterpart PHR&D/
Borrower
6. Term Note ($2,000,000) Borrower 1 counterpart PHR&D/
Borrower
7. Patent Security Agreement Borrower/ 2 counterparts PHR&D/
Lender Borrower
8. Trademark Security Agreement Borrower/ 2 counterparts PHR&D/
Lender Borrower
9. Collateral Assignment of Deposit Borrower 2 counterparts PHR&D/
Accounts Borrower
10. Deposit Account Control Borrower/ 2 counterparts PHR&D/
Agreement Lender Borrower
11. Collateral Assignment of Borrower 2 counterparts PHR&D/
Rights Under License Borrower
Agreement
12. Trade Style Letter Borrower 2 counterparts PHR&D/
Borrower
13. Telephone Instruction Letter Borrower 2 counterparts PHR&D/
Borrower
2
Number of
Item Document Parties Counterparts Responsibility
---- -------- ------- ------------ --------------
14. Certificate Regarding Equipment Borrower 2 counterparts PHR&D/
Borrower
15. Evidence of Casualty Insurance Borrower 2 counterparts PHR&D/
and Loss Payable Endorsement Borrower
16. [Initial Borrowing Base Borrower 2 counterparts PHR&D/
Certificate Borrower
17. Disbursement Letter Borrower 2 counterparts PHR&D/
Borrower
18. UCC Financing Statement Borrower 1 counterpart PHR&D/
Borrower
GUARANTOR DOCUMENTS
19. Certificates of Resolutions Guarantors 2 counterparts PHR&D/
Borrower
20. Incumbency Certificates Guarantors 2 counterparts PHR&D/
Borrower
21. Continuing Unconditional Guarantors 2 counterparts PHR&D/
Guaranties Borrower
(a) Horizon Acquisition
(b) Strato
(c) ▇▇▇▇▇▇
22. Security Agreements Guarantors 2 counterparts PHR&D/
(a) Horizon Acquisition Borrower
(b) Strato
(c) ▇▇▇▇▇▇
3
Number of
Item Document Parties Counterparts Responsibility
---- -------- ------- ------------ --------------
23. UCC Financing Statements Guarantors 1 counterpart PHR&D/
Borrower
REAL ESTATE DOCUMENTS
24. Georgia Deed to Secure Debt and Borrower 2 counterparts PHR&D/
Security Agreement K&S
(▇▇▇▇▇▇ County, Georgia
Property)
25. Owner's Affidavit Borrower 2 counterparts PHR&D
26. Survey (Post Closing) Borrower 2 counterparts K&S
27. Title Insurance Commitment and Borrower 2 counterparts PHR&D
Policy
28. Certificate Regarding Non-Alien Borrower 2 counterparts PHR&D
Status
LANDLORD AGREEMENTS
29. Landlord Agreements/ Landlord 2 counterparts PHR&D/
Warehouseman Agreements Borrower
(See Exhibit C)
30. Debt Subordination Agreements Borrower 2 counterparts K&S
(a) Medtronic
(b) ComVest
(c) Bank of America, N.A.
(d) Additional Noteholders
31. Certificate Regarding Borrower 2 counterparts K&S
Subordinated Debt
32. Warrant Borrower 1 counterpart Borrower/
K&S
33. Warrant Purchase Agreement Borrower 2 counterparts Borrower/
PHR&D
4
Number of
Item Document Parties Counterparts Responsibility
---- -------- ------- ------------ --------------
34. Registration Rights Agreement Borrower 2 counterparts Borrower/
PHR&D
LIEN SEARCHES, TERMINATIONS AND SATISFACTIONS
35. Lien Searches PHR&D
(see Exhibit B)
36. UCC Terminations Prior Lender 1 counterpart Borrower/
PHR&D
OPINIONS OF COUNSEL
37. Opinion Letter by Borrower's and K&S 2 counterparts K&S
Guarantors' Counsel to Lender
MISCELLANEOUS DOCUMENTS
38. Assignments of Lockbox and Lender/ 2 counterparts Lender/
Blocked Account Agreement Borrower Borrower
(a) Chase Manhattan
(b) Bank of America, N.A.
39. Payoff Letter Prior Lender 2 counterparts Borrower
40. UCC Pre-File Authorization Borrower/ 1 counterpart PHR&D/
Letter Guarantors Borrower
5
EXHIBIT A
UCC FINANCING STATEMENTS
Debtor: Horizon Medical Products, Inc.
Secured Party: Standard Federal Bank National Association, acting by and through
LaSalle Business Credit, Inc., as its agent
Filing Location File Number File Date
--------------- ----------- ---------
▇▇▇▇▇▇ County, Georgia
Debtor: Horizon Acquisition Corp.
Secured Party: Standard Federal Bank National Association, acting by and through
LaSalle Business Credit, Inc., as its agent
Filing Location File Number File Date
--------------- ----------- ---------
▇▇▇▇▇▇ County, Georgia
Debtor: Strato/Infusaid, Inc.
Secured Party: Standard Federal Bank National Association, acting by and through
LaSalle Business Credit, Inc., as its agent
Filing Location File Number File Date
--------------- ----------- ---------
Massachusetts Secretary of the Commonwealth
Debtor: ▇▇▇▇▇▇ Corporation
Secured Party: Standard Federal Bank National Association, acting by and through
LaSalle Business Credit, Inc., as its agent
Filing Location File Number File Date
--------------- ----------- ---------
New York Department of State
EXHIBIT B
LIEN SEARCHES
Name Searched Jurisdictions
------------- -------------
Horizon Medical Products, Inc. Georgia Central Index
▇▇▇▇▇▇ County, Georgia
[other locations to be provided byBorrower]
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EXHIBIT C
LANDLORDS
Leased Location Address Landlord Name and Address
----------------------- -------------------------
One Horizon Way Development Authority of the City of Manchester
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
