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EXHIBIT 10.59
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AGENTED LOAN AND SECURITY AGREEMENT BANKBOSTON, N.A.
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April 30, 1998
THIS AGREEMENT is made by and between
BANKBOSTON, N.A. (hereinafter, the "LENDER"), a national
banking association with offices at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and,
PolyMedica Corporation (hereinafter, "PolyMedica"), a
Massachusetts corporation with its principal executive offices at ▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ and,
LIBERTY MEDICAL SUPPLY, INC. (hereinafter, "Liberty"), a
Florida corporation with its principal executive offices at ▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ Business Park, Palm City, Florida and,
PolyMedica Healthcare, Inc. (hereinafter, "Healthcare"), a
Delaware corporation with its principal executive offices at ▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ and,
PolyMedica Securities, Inc. (hereinafter, "Securities"), a
Massachusetts corporation with its principal executive offices at ▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ and,
(hereinafter, PolyMedica, Liberty, Healthcare, and Securities are referred to
collectively as the "PRINCIPAL BORROWERS" and each individually as a "PRINCIPAL
BORROWER" and PolyMedica is also referred to in the capacity of the "AGENT
BORROWER")
with all representations, covenants, warranties, defaults, rights, remedies,
powers, privileges, and discretions applicable to each Principal Borrower.
WHEREAS, each Principal Borrower has requested that the Lender
establish the loan arrangement (hereinafter, the "LOAN ARRANGEMENT") as set
forth in Article 2 herein, to be cross-guaranteed by each of the Principal
Borrowers;
WHEREAS, each Principal Borrower acknowledges and agrees that the Loan
Arrangement is in the best interest and financial well-being of each Principal
Borrower and that they shall each be liable for any and all loans made under the
Loan Arrangement (whether or not the proceeds of any such loan are received by
that Principal Borrower) both as a Principal Borrower and as a Guarantor
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and that the Lender is relying on this representation as a material inducement
to establish the Loan Arrangement;
WHEREAS, each Principal Borrower requests that as a convenience to the
Principal Borrowers, such loans as may be made under the Loan Arrangement be
directed to the Agent Borrower which will, in turn, distribute the proceeds
thereof to the respective Principal Borrowers;
NOW THEREFORE, as an additional inducement for the Lender to establish
the Loan Arrangement and to direct such loans as may be made hereunder to the
Agent Borrower, as described above, each Principal Borrower covenants and agrees
as follows, and that all loans and advances made under the Revolving Credit
(defined below) are payable as provided herein.
WITNESSETH:
ARTICLE 1 - AGENTED BORROWINGS
1-1. DESIGNATION OF AGENT BORROWER. Each Principal Borrower hereby
designates the Agent Borrower as the agent of that Principal Borrower to
discharge the duties and responsibilities of the Agent Borrower as provided
herein.
1-2. OPERATION OF LOAN ARRANGEMENT. (a) Except as otherwise
provided in this Article, loans and advances under the Loan Arrangement shall be
requested solely by the Agent Borrower as agent for each Principal Borrower.
(b) To the extent permitted by law, confirmatory assignments
of accounts and accounts receivable and remittances on accounts and accounts
receivable of the respective Principal Borrowers shall be provided to the Lender
or otherwise directed in accordance with the Lender's instructions given from
time to time to the Agent Borrower.
(c) Any advance which may be made by the Lender under the Loan
Arrangement and which is directed to the Agent Borrower is received by the Agent
Borrower in trust for that or those of the Principal Borrowers who are intended
to receive such advance; shall be held by the Agent Borrower in an account
separate from all other funds of the Agent Borrower; and shall not be commingled
with any other funds of the Agent Borrower. The Agent Borrower shall distribute
the proceeds of any such advances solely to the Principal Borrowers. Each
Principal Borrower shall be directly indebted to the Lender for each advance
distributed to that Principal Borrower by the Agent Borrower, together with all
accrued interest thereon, as if that amount had been advanced directly
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by the Lender to that Principal Borrower (whether or not the subject advance was
based upon the accounts and/or inventory or other assets of the Principal
Borrower which actually received such distribution), in addition to which each
Principal Borrower shall be obligated to the Lender in that amount on account of
that Principal Borrower's respectively having guaranteed the Obligations.
(d) The Lender shall have no responsibility to inquire as to
the distribution of loans and advances made by the Lender through the Agent
Borrower as described herein.
1-3. CONTINUATION OF AUTHORITY OF AGENT BORROWER. The authority of
the Agent Borrower to request loans on behalf of, and to bind, the Principal
Borrowers, shall continue unless and until the Lender actually receives
(a) written notice of: (i) the termination of such authority,
and (ii) the subsequent appointment of a successor Agent Borrower,
which notice is signed by the respective Presidents of each Principal
Borrower (other than the President of the Agent Borrower being
replaced) then eligible for borrowing under the within Agreement; and
(b) written notice from such successive Agent Borrower (i)
accepting such appointment; (ii) acknowledging that such removal and
appointment has been effected by the respective Presidents of such
Principal Borrowers eligible for borrowing under the within Agreement;
and (iii) acknowledging that from and after the date of such
appointment, the newly appointed Agent Borrower shall be bound by the
terms hereof, and that as used herein, the term "Agent Borrower" shall
mean and include the newly appointed Agent Borrower.
1-4. INDEMNIFICATION. The Agent Borrower and each Principal
Borrower respectively hereby indemnify, defend, and save and hold the Lender
harmless from and against any liabilities, claims, demands, expenses, or losses
made against or suffered by the Lender on account of, or arising out of, the
Loan Arrangement, the Lender's reliance upon loan requests made by the Agent
Borrower, or any other action taken by the Lender hereunder or under any of the
Lender's various agreements with the Agent Borrower and/or any Principal
Borrower and/or any other person arising under the loan arrangement contemplated
herein except for any liability, claim, demand, expense, or loss as to which a
final judicial determination is made and from which no appeal is available (in a
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proceeding in which the Lender has had an opportunity to be heard) that the
Lender had acted in a grossly negligent manner or with willful misconduct.
ARTICLE 2 - THE REVOLVING CREDIT.
2-1. ESTABLISHMENT OF REVOLVING CREDIT. (a) The Lender hereby
establishes a revolving line of credit (hereinafter, the "REVOLVING CREDIT") in
the Principal Borrowers' respective favor pursuant to which the Lender, subject
to, and in accordance with, the within Agreement, shall make loans and advances
and otherwise provide financial accommodations to and for the account of the
Principal Borrowers as provided herein. The amount available for any new loan or
advance requested hereunder shall be determined by the Lender by reference to
Availability (as defined below), as determined by the Lender from time to time
hereafter. All loans made by the Lender under this Agreement, and all of the
Principal Borrowers' other Obligations (as defined below) to the Lender under or
pursuant to this Agreement, are payable as set forth herein.
(b) As used herein, the term "AVAILABILITY" refers at any
time to the lesser of (i) or (ii), below:
(i) Up to the result of the following:
(A) Seven Million Five Hundred Thousand
Dollars and No Cents
($7,500,000.00).
MINUS
(B) The then unpaid principal balance
of the Loan Account.
MINUS
(C) The aggregate principal amounts
then undrawn on all outstanding
L/C's issued or incurred, or caused
to be issued or incurred, by the
Lender for the account and/or the
benefit of any Principal Borrower.
(ii) Up to the result of the following:
(A) 75% of the face amount of each of
the Principal Borrower's Acceptable
Accounts (as defined below).
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PLUS
(B) 50% of the value of the Acceptable
Inventory of each Principal Borrower, as defined
below (Acceptable Inventory being valued at the lower
of cost or market after deducting all transportation,
processing, handling charges, and all "soft" costs
and expenses, subject to such inventory reserves as
the Lender may establish from time to time ).
MINUS
(C) The then unpaid principal balance
of the Loan Account.
MINUS
(D) The aggregate principal amounts
then undrawn on all outstanding
L/C's issued or incurred, or caused
to be issued or incurred, by the
Lender for the account and/or the
benefit of any Principal Borrower.
(c) Availability shall be based upon Borrowing Base
Certificates furnished as provided in Section 2-3(a), below.
(d) The proceeds of borrowings under the Revolving Credit
shall be used solely for working capital purposes of the Principal Borrowers and
for such other purposes as may be permitted by the Lender. The Principal
Borrowers acknowledge and agree that each of them shall remain liable to the
Lender for the payment and performance of all Obligations under all
circumstances, which payment and performance shall continue to be secured by all
collateral security granted by the Principal Borrowers to the Lender.
2-2. ADVANCES IN EXCESS OF MAXIMUM LOAN EXPOSURE/RISKS OF VALUE.
(a) The Lender does not have any obligation to make any loan or advance, or
otherwise to provide any credit for the benefit of any of the Principal
Borrowers such that the outstanding principal balance of the Loan Account
(defined below) and the aggregate Stated Amount would exceed Maximum Loan
Exposure. The making of loans, advances, and credits and the providing of
financial accommodations by the Lender in excess of Maximum Loan Exposure is for
the benefit of the Principal Borrowers and does not affect the obligations of
the Principal Borrowers hereunder; such loans constitute Obligations.
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The making of any such loans, advances, and credits and the providing of
financial accommodations in excess of Maximum Loan Exposure on any one occasion
shall not obligate the Lender to make any such loans, credits, or advances or to
provide any financial accommodation on any other occasion nor to permit such
loans, credits, or advances to remain outstanding.
(b) The Lender's reference to a given asset for
monitoring concerning the Lender's making of loans, credits, and advances and
the providing of financial accommodations under the Revolving Credit shall not
be deemed a determination by the Lender relative to the actual value of the
asset in question. All risks of the creditworthiness of all Accounts and
Accounts Receivable are and remain upon the Principal Borrowers. Reference by
the Lender to a particular Account owed by a particular Account Debtor for
guidance and/or monitoring shall not obligate the Lender to rely upon any other
Account owed by the same Account Debtor to be acceptable for lending or to
continue to rely upon that account. All risks of the saleability of any of the
Principal Borrower's Inventory are and remain upon the Principal Borrowers. All
Collateral (defined below) secures the prompt, punctual, and faithful
performance of the Obligations whether or not relied upon by the Lender in
connection with the making of loans, credits, and advances and the providing of
financial accommodations under the Revolving Credit.
2-3. PROCEDURES UNDER REVOLVING CREDIT.(a) The Agent Borrower may
request loans and advances under the Revolving Credit from time to time, in each
instance in accordance with such procedures as may from time to time be
acceptable to the Lender, each of which request will be accompanied by a
Borrowing Base Certificate furnished to the Lender setting forth the
Availability with particularity acceptable to the Lender in its reasonable
discretion.
(b) The Lender, subject to the terms and conditions of
the within Agreement, will provide the Agent Borrower with the loan so
requested, as follows:
(i) With respect to a Domestic Rate Loan
(defined below), if such request is received by 1:00 PM on a Business
Day (defined below), by the end of business on that Business Day. If
such request is received after 1:00 PM on a Business Day, by the end of
the then next Business Day. The Lender may revise the above schedule by
which loans shall be made from time to time.
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(ii) With respect to a Libor Rate Loan (defined
below), if such request is received on any Business Day, by the end of
second Business Day thereafter. The Lender may revise the above
schedule by which loans shall be made, from time to time.
(iii) Provided that there is sufficient
Availability to support the same, (but subject, however, to Subsection 2-3(e),
below (which deals with the effect of a Suspension Event)), a loan or advance
under the Revolving Credit so requested by the Agent Borrower shall be made by
the transfer of the proceeds of such loan or advance to an account maintained by
the Agent Borrower with the Lender or as otherwise instructed by the Agent
Borrower.
(iv) A loan or advance shall be deemed to have
been made under the Revolving Credit upon the charging of the amount of such
loan to the Loan Account and the distribution of the proceeds thereof in
accordance with ss.2.3(b)(iii).
(v) There shall not be any recourse to, nor
liability of, the Lender (except due to its own gross negligence or willful
misconduct) on account of any of the following:
(A) Any reasonable delay in the Lender's
making of any loan or advance requested under the Revolving Credit.
(B) Any reasonable delay in the proceeds
of any such loan or advance constituting collected funds.
(C) Any reasonable delay in the receipt,
and/or any loss, of funds which constitute a loan or advance under the
Revolving Credit, the wire transfer of which was properly initiated by
the Lender in accordance with wire instructions provided to the Lender
by the Agent Borrower.
(vi) The Lender may rely on any request for a
loan or advance or financial accommodation which the Lender, in good faith,
believes to have been made by a person duly authorized to act on behalf of the
Agent Borrower and may decline to make any such requested loan or advance or to
provide any such financial accommodation pending the Lender's being furnished
with such documentation concerning that person's authority to act as may be
satisfactory to the Lender.
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(c) A request by the Agent Borrower for any financial
accommodation under the Revolving Credit or of the issuance of an L/C shall be
irrevocable and shall constitute certification by the Borrower that as of the
date of such request, each of the following is true and correct:
(i) There has been no material adverse
change in any Principal Borrowers' financial condition from the most
recent financial information furnished the Lender pursuant to this
Agreement (except as permitted hereunder).
(ii) Each Principal Borrower is in
compliance with, and has not breached any of, its covenants contained
in this Agreement.
(iii) Each representation which is made
herein or in any of the Loan Documents (defined below) is then true and
complete as of and as if made on the date of such request (except those
made as of a specific date or which are inaccurate due to transactions
permitted hereunder).
(iv) No Suspension Event (defined herein)
is then extant.
(d) All Principal Borrowers shall immediately become
indebted to the Lender for the amount of all loans under or pursuant to this
Agreement when such loan is deemed to have been made.
(e) Upon the occurrence from time to time of any
Suspension Event, the Lender may suspend the Revolving Credit immediately and
shall not be obligated, during such suspension, to make any loans or to provide
any financial accommodation hereunder.
(f) (i) The Agent Borrower may request that the
Lender issue L/C's for the account of a Principal Borrower. Each such request
shall be in such manner as may from time to time be acceptable to the Lender,
and which may include, without limitation, (A) telephone notice to such person
as may be designated by the Lender or (B) written notice.
(ii) The Lender will issue any L/C so requested
by the Agent Borrower, provided that the aggregate Stated Amount, following the
requested issuance thereof, would not exceed the Availability and provided that
the L/C (if so issued) is in form satisfactory to the Lender.
(iii) The Agent Borrower and Principal Borrower
shall execute such documentation to apply for and support the issuance of an L/C
as may be required by the Lender
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provided that, notwithstanding any integration clauses in such L/C
documentation, the terms of this Agreement shall govern any conflict with such
L/C documentation.
(g) After notice to the Agent Borrower, the Lender,
without the request of the Agent Borrower, may advance under the Revolving
Credit any amount which any Principal Borrower is obligated to pay to the Lender
or for which any Principal Borrower or the Lender becomes obligated on account
of, or in respect to, any L/C. Such advance shall be made whether or not a
Suspension Event is then extant and even if such advance would result in the
Availability being exceeded. Such action on the part of the Lender shall not
constitute a waiver of the Lender's rights under Section 2-6(b), below.
2-4. THE LOAN ACCOUNT. (a) An account (hereinafter, the "LOAN
ACCOUNT") shall be opened on the books of the Lender, in which Loan Account a
record shall be kept of all loans made by the Lender to the Agent Borrower or
any Principal Borrower under or pursuant to this Agreement and of all payments
thereon.
(b) The Lender shall also keep a record (either in the
Loan Account or elsewhere, as the Lender may from time to time elect) of all
interest, fees, service charges, costs, expenses, and other debits owed the
Lender on account of the Obligations and of all credits against such amounts so
owed.
(c) All credits against the Obligations shall be
conditional upon final payment to the Lender of the items giving rise to such
credits. The amount of any item credited against the Obligations which is
charged back against the Lender for any reason or is not so paid shall be a
Obligation and shall be added to the Loan Account, whether or not the item so
charged back or not so paid is returned.
(d) Except as otherwise provided herein, all fees,
service charges, costs, and expenses for which any Principal Borrower is
obligated hereunder are payable on demand.
(e) The Lender, without the request of the Agent Borrower
but after notice, may advance under the Revolving Credit any interest, fee,
service charge, or other payment to which the Lender is entitled from any
Principal Borrower pursuant hereto which is not paid when due or within any
grace period and may charge the same to the Loan Account notwithstanding that
such amount
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so advanced may result in Availability's being exceeded. Such action on the part
of the Lender shall not constitute a waiver of the Lender's rights under Section
2-6(b), below. Any amount which is added to the principal balance of the Loan
Account as provided in this Subsection shall bear interest at the interest rate
applicable from time to time to the unpaid principal balance of the Loan
Account.
(f) Any written statement rendered by the Lender to the
Agent Borrower concerning the Obligations shall be presumed correct and shall be
presumptively binding upon each of them unless the Agent Borrower provides the
Lender with written objection thereto within sixty (60) days from the receipt by
Agent Borrower of such statement, which written objection shall indicate, with
particularity, the reason for such objection. The Loan Account and the Lender's
books and records concerning the loan arrangement contemplated herein and the
Principal Borrowers' Obligations shall be prima facie evidence and proof of the
items described therein.
2-5. THE MASTER NOTE. The obligation to repay loans and advances
under the Revolving Credit, with interest as provided herein, shall be evidenced
by a note (hereinafter, the "MASTER NOTE") in the form of EXHIBIT 2-5, annexed
hereto, executed by the Agent Borrower and Principal Borrowers. Neither the
original nor a copy of the Master Note shall be required, however, to establish
or prove any Obligation. In the event that the Master Note is ever lost,
mutilated, or destroyed, the Agent Borrower and each Principal Borrower shall
upon written request certifying that the Master Note was lost, mutilated or
destroyed execute a replacement thereof and deliver such replacement to the
Lender.
2-6. PAYMENT OF LOAN ACCOUNT. (a) The Principal Borrowers may repay
all or any portion of the principal balance of the Loan Account from time to
time until the sooner of termination of the Revolving Credit (as to which, see
Article 13, below) or demand.
(b) The Principal Borrowers, without notice or demand
from the Lender, shall pay the Lender that amount, from time to time, which is
necessary so that the principal balance of the Loan Account does not exceed
Availability. The Lender shall furnish the Agent Borrower with three (3)
Business Days notice of any such payment which may be required resulting from
the Lender's
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calculation of "Acceptable Accounts" based upon the exclusion set forth in
Section b(ii) of the definition of "Acceptable Accounts" contained in Article 4.
(c) The Principal Borrowers shall repay the then entire
unpaid balance of the Loan Account upon the Termination Date.
2-7. INTEREST. (a) The unpaid principal balance of the Loan Account
shall bear interest, and shall be repaid, as set forth in Exhibit 2-7 annexed
hereto.
(b) The Agent Borrower shall have such rights as are set
forth in EXHIBIT 2-7 to select and, as applicable, Convert Loans from one Type
of Loan to another Type of Loan.
(c) (i) Upon the occurrence of an Event of Default,
at the Lender's option, the Revolving Credit and all other amounts payable
hereunder or under any of the other Loan Documents shall bear interest payable
on demand at a rate per annum equal to four percent (4%) above the then
applicable highest rate of interest hereunder until such amount shall be paid in
full (after as well as before judgment) (the "Default Rate").
(ii) In addition to other charges described in
the Loan Documents, and without derogating from the right of the Lender to
accelerate the Obligations upon the occurrence of an Event of Default, the
Principal Borrowers shall pay to the Lender a late charge equal to three (3%)
percent of any payment due under the Note which is not paid within ten (10) days
of the due date thereof.
2-8. CLOSING AND ADMINISTRATIVE FEES. (a) As compensation for the
Lender's commitment included herein to make loans and advances hereunder and as
compensation for the Lender's maintenance of sufficient funds available for such
purpose, the Lender shall have earned a CLOSING FEE (so referred to herein) of
$18,750.00, which fee shall be paid with the proceeds of the first advance made
under the Revolving Credit.
(b) As additional compensation for the Lender's
commitment included herein to make loans and advances hereunder and as
compensation for the Lender's maintenance of sufficient funds available for such
purpose, the Principal Borrowers shall pay to Lender on the first (1st) Business
Day of each fiscal quarter of the Agent Borrower for the prior fiscal quarter
commencing April 1,
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1998, a nonrefundable fee of three eighths percent (.375%) per annum
(hereinafter, the "Unused Line Fee") of the amount, if any, by which the average
daily Commitment for the quarterly period (or, in the case of the first such
payment, the period from the closing date such payment is due, and in the case
of the last such payment, the period from the last date such payment was due to
the Termination Date) then existing exceeds the average daily outstanding
principal balances of the aggregate of the Loan Account plus the Stated Amount
of L/C's over the quarterly period then ending.
(c) The Principal Borrowers shall not be entitled to any
credit, rebate or repayment of any Closing Fee or Unused Line Fee previously
earned by the Lender pursuant to this Section notwithstanding any termination of
the within Agreement or suspension or termination of the Lender's obligation to
make loans and advances hereunder.
2-9. LENDER'S DISCRETION. Each reference in the Loan Documents to
the Lender's exercise of discretion or the like shall be to the Lender's
exercise of its judgment, in good faith (which shall be presumed).
2-10. FEES FOR L/C'S. (a) Prior to the issuance of any L/C, the
Principal Borrowers shall pay to the Lender a fee on account of such L/C based
upon the Lender's then current fee schedule for like L/C's.
(b) In addition to the fee to be paid as provided in
Subsection (a), above, the Principal Borrowers shall pay to the Lender, on
demand, all issuance, processing, negotiation, amendment, and administrative
fees and other amounts on account of, or in respect to, each L/C, customarily
charged by the Lender.
2-11. CONCERNING L/C'S. (a) No L/C shall have an expiry which is
later than the Termination Date, without the prior written consent of the
Lender.
(b) None of the Lender, the Lender's correspondents, or
any advising, negotiating, or paying bank with respect to any L/C shall be
responsible in any way for:
(i) the performance by any beneficiary under any
L/C of that beneficiary's obligations to any Principal Borrower; or
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(ii) the form, sufficiency, correctness,
genuineness, authority of any person signing; falsification; or the
legal effect of; any documents called for under any L/C if (with
respect to the foregoing) such documents on their face and in Lender's
good faith and reasonable belief appear to be in order.
(c) The Lender may honor, as complying with the terms of
any L/C and of any drawing thereunder, any drafts or other documents otherwise
in order, but signed or issued and in Lender's good faith, reasonable belief by
an administrator, executor, conservator, trustee in bankruptcy, debtor in
possession, assignee for the benefit of creditors, liquidator, receiver, or
other legal representative of the party authorized under such L/C to draw or
issue such drafts or other documents.
(d) Unless otherwise agreed to, in the particular
instance, each of the Principal Borrowers hereby authorize any Lender to (i)
select an advising bank, if any; (ii) select a paying bank, if any; and (iii)
select a negotiating bank.
(e) All directions, correspondence, and funds transfers
relating to any L/C are at the risk of the Principal Borrowers. The Lender shall
have discharged the Lender's obligations under any L/C which, or the drawing
under which, includes payment instructions, by the initiation of the method of
payment called for in, and in accordance with, such instructions (or by any
other commercially reasonable and comparable method). The Lender shall not have
any responsibility for any inaccuracy, interruption, error, or delay in
transmission or delivery by post, telegraph or cable, or for any inaccuracy of
translation, except due to its own gross negligence or willful misconduct.
(f) The Lender's rights, powers, privileges and
immunities specified in or arising under this Agreement are in addition to any
heretofore or at any time hereafter otherwise created or arising, whether by
statute or rule of law or contract.
(g) Except to the extent otherwise expressly provided
hereunder or agreed to in writing by the Lender and any of the Principal
Borrowers, the L/C will be governed by the Uniform Customs and Practice for
Documentary Credits, International Chamber of Commerce, Publication No. 500, and
any subsequent revisions thereof.
(h) If after the date hereof any change in any law,
executive order or regulation, or any directive of any administrative or
governmental authority (whether or not having the force of
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law), or in the interpretation thereof by any court or administrative or
governmental authority charged with the administration thereof, shall either:
(i) impose, modify or deem applicable any
reserve, special deposit or similar requirements against letters of
credit heretofore or hereafter issued by the Lender or with respect to
which the Lender has an obligation to lend to fund drawings under any
L/C; or
(ii) impose on the Lender any other condition or
requirements relating to any such letters of credit;
and the result of any event referred to in Subsection (i) or (ii), above, shall
be to increase the cost to the Lender of issuing or maintaining any L/C (which
increase in cost shall be the result of the Lender's reasonable allocation among
the Lender's letter of credit customers of the aggregate of such cost increases
resulting from such events), then, upon demand by the Lender and delivery by the
Lender to a Principal Borrower of a certificate of an officer of the subject
Lender describing such change in law, executive order, regulation, directive, or
interpretation thereof, its effect on the Lender, and the basis for determining
such increased costs and their allocation, the Principal Borrowers shall
immediately pay to the Lender, from time to time as specified by the Lender,
such amounts as shall be sufficient to compensate such Lender for such increased
cost. Any determination by the Lender of costs incurred under Subsection (i) or
(ii) above, and the allocation, if any, of such costs among the Principal
Borrowers and other letter of credit customers of the Lender, if done in good
faith and made on an equitable basis and in accordance with the officer's
certificate, shall be conclusive and binding on the Principal Borrowers subject
to manifest error.
(i) The obligations of the Principal Borrowers under the
within Agreement with respect to L/C's are absolute, unconditional, and
irrevocable and shall be performed in accordance with the terms hereof under all
circumstances, whatsoever including, without limitation, the following:
(i) Any lack of validity or enforceability or
restriction, restraint, or stay in the enforcement of the within
Agreement, any L/C, or any other agreement or instrument relating
thereto.
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(ii) Any amendment or waiver of, or consent to
the departure from, any L/C.
(iii) The existence of any claim, set-off,
defense, or other right which the Borrower may have at any time against
the beneficiary of any L/C.
(iv) Any honoring of a drawing under any L/C,
which drawing possibly could have been dishonored based upon a strict
construction of the terms of the L/C.
2-12. CHARGING OF THE PRINCIPAL BORROWERS' ACCOUNTS. In addition to
the Lender's rights set forth in Section 2-4, above, and the Lender's right of
set off set forth in Section 14-14, below, each Principal Borrower authorizes
the Lender, after notice (except after Event of Default when no such notice is
required), to charge any account which any Principal Borrower maintains with the
Lender for any payments due from the Principal Borrowers to the Lender on
account of the Obligations.
2-13. ADDITIONAL COSTS, ETC. If any change after the date hereof of
any present or adoption of any future applicable law, which expression, as used
herein, includes statutes, rules and regulations thereunder and interpretations
thereof by any competent court or by any governmental or other regulatory body
or official charged with the administration or the interpretation thereof and
requests, directives, instructions and notices at any time or from time to time
hereafter made upon or otherwise issued to the Lender by any central bank or
other fiscal, monetary or other authority (whether or not having the force of
law), shall:
(a) subject the Lender to any tax, levy, impost, duty,
charge, fee, deduction or withholding of any nature with respect to
this Agreement, the other Loan Documents, or the Loans (other than
taxes based upon or measured by the income or profits of the Lender),
or
(b) materially change the basis of taxation (except for
changes in taxes on income or profits) of payments to the Lender of the
principal of or the interest on any Loans or any other amounts payable
to the Lender under this Agreement or the other Loan Documents, or
(c) impose or increase or render applicable (other than
to the extent specifically provided for elsewhere in this Agreement)
any special deposit, reserve, assessment, liquidity, capital adequacy
or other similar requirements (whether or not having the force of law)
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against assets held by, or deposits in or for the account of, or loans
by, or commitments of an office of the Lender, or
(d) impose on the Lender any other conditions or
requirements with respect to this Agreement, the other Loan Documents,
the Loan, or any class of loans or commitments of which any Loan forms
a part;
and the result of any of the foregoing is
(i) to increase the cost to the Lender of making,
funding, issuing, renewing, extending or maintaining any of the Loans, or
(ii) to reduce the amount of principal, interest or other
amount payable to the Lender hereunder on account of any of the Loans, or
(iii) to require the Lender to make any payment or to
forego any interest or other sum payable hereunder, the amount of which
payment or foregone interest or other sum is calculated by reference to
the gross amount of any sum receivable or deemed received by the Lender
from the Principal Borrowers hereunder,
then, and in each such case, the Principal Borrowers will, upon demand made by
the Lender at any time and from time to time and as often as the occasion
therefor may arise, pay to the Lender such additional amounts as will be
sufficient to compensate the Lender for such additional cost, reduction, payment
or foregone interest or other sum incurred by Lender with respect to this
Agreement.
2-14. CAPITAL ADEQUACY. If the Lender shall have determined that the
adoption after the date hereof of any applicable law, rule, regulation,
guideline, directive or request (whether or not having force of law) regarding
capital requirements, or the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the Lender with any
of the foregoing imposes or increases a requirement by the Lender to allocate
capital resources to the Loans made, or to be made, hereunder, which has or
would have the effect of reducing the return on the Lender's capital to a level
below that which the Lender could have achieved (taking into consideration the
Lender's then existing policies with respect to capital adequacy and assuming
full utilization of the Lender's capital) but for such adoption, change or
compliance, by any amount deemed by the Lender to be
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material: (i) the Lender shall promptly after its determination of such
occurrence give notice thereof to the Agent Borrower; and (ii) the Principal
Borrowers shall pay to the Lender as an additional fee from time-to-time on
demand such amount as the Lender certifies to be the amount that will compensate
it for such reduction absent manifest error. In determining such amounts, the
Lender may use any reasonable averaging and attribution methods.
ARTICLE 3 - GRANT OF SECURITY INTEREST
3-1. GRANT OF SECURITY INTEREST. To secure the respective prompt,
punctual, and faithful performance of all and each of the Obligations of each
Principal Borrower, each Principal Borrower hereby grants to the Lender a
continuing security interest in and to, and assigns to the Lender, the
following, and each item thereof, whether now owned or now due, or in which that
Principal Borrower has an interest, or hereafter acquired, arising, or to become
due, or in which that Principal Borrower obtains an interest, and all products,
Proceeds, substitutions, and accessions of or to any of the following (all of
which, together with any other property in which the Lender may in the future be
granted a security interest, is referred to herein as the "COLLATERAL"):
(a) All Accounts and Accounts Receivable.
(b) All Inventory.
(c) All General Intangibles.
(d) All Equipment.
(e) All Goods.
(f) All Fixtures.
(g) All Chattel Paper.
(h) All books, records, and information relating to the
Collateral and/or to the operation of each of the
Principal Borrowers' business, and all rights of
access to such books, records, and information, and
all property in which such books, records, and
information are stored, recorded, and maintained.
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(i) All Instruments, Documents of Title, Documents,
policies and certificates of insurance, Securities,
deposits, deposit accounts, impressed accounts,
compensating balances, money, cash, or other
property;
(j) All federal, state, and local tax refunds and/or
abatements to which any of the Principal Borrowers
are, or become entitled, no matter how or when
arising, including, but not limited to any loss
carryback tax refunds;
(k) All trade secrets, computer programs, customer lists,
assignments of patents and patents pending,
developmental ideas and concepts, and all papers,
drawings, blueprints, sketches, and documents
relating to all of the foregoing and/or relating to
the operation of any of the Principal Borrowers'
business and/or the Collateral;
(l) All insurance proceeds, refunds, and premium rebates,
including, without limitation, proceeds of fire and
credit insurance, whether any of such proceeds,
refunds, and premium rebates arise out of any of the
foregoing or otherwise.
(m) All liens, guaranties, rights, remedies, and
privileges pertaining to any of the foregoing
including the right of stoppage in transit.
3-2. EXTENT AND DURATION OF SECURITY INTEREST. The within grant of
a security interest is in addition to, and supplemental of, any security
interest granted by the Principal Borrowers to the Lender and shall continue in
full force and effect applicable to all Obligations until all Obligations have
been paid and/or satisfied in full.
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ARTICLE 4 - DEFINITIONS.
As herein used, the following terms have the following meanings or are
defined in the section of the within Agreement so indicated:
"ACCEPTABLE ACCOUNTS": (a) Such of the Principal Borrowers' Accounts
and Accounts Receivable (as defined below) as arise in the
ordinary course of the Principal Borrowers' business for goods
sold and/or services rendered by the Principal Borrowers,
which Accounts and Accounts Receivable have been determined by
the Lender to be satisfactory and have been earned by
performance and are owed to a Principal Borrower by such of
the Principal Borrowers' trade customers as the Lender
determines to be satisfactory, in the Lender's reasonable
discretion in each instance, and are subject to a perfected
security interest in favor of the Lender which is prior and
superior to all security interests, claims and Encumbrances.
(b) The following is a partial listing of those types
of accounts or accounts receivable which are not Acceptable
Accounts:
(i) Any which is more than ninety (90) days old as shown
on the agings of the Principal Borrowers' accounts receivable
furnished the Lender from time to time (each of which agings
shall be prepared in accordance with generally accepted
auditing standards).
(ii) Any which is owed by any Account Debtor (as defined
herein) liable on any account described in Subsection (b)(i),
above unless the Lender is furnished with satisfactory
evidence evidencing the creditworthiness of the Account Debtor
and the collectibility of such Account (the Lender will not
require the Principal Borrowers to provide the Lender with a
specific itemization to address this subsection).
(iii) Any which, when aggregated with all of the accounts
of that Account Debtor, exceeds twenty (20%) percent of the
then aggregate of Acceptable Accounts.
(iv) Any which arises out of the sale by a Principal
Borrower of goods consigned or delivered to the Principal
Borrower or to the Account Debtor on sale or return
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terms (whether or not compliance has been made with Section
2-326 of the Uniform Commercial Code).
(v) Any which arises out of any sale made on a basis
other than upon terms usual to that Principal Borrower and its
customers.
(vi) Any which arises out of any sale made on a "▇▇▇▇ and
hold," dating, or delayed shipping basis.
(vii) Any which is owed by any Account Debtor whose
principal place of business is not within the continental
United States or the District of Columbia.
(viii) Any which is owed by any Related Entity.
(ix) Any as to which the Account Debtor holds or is
entitled to any claim, counterclaim, set off, or chargeback
(but only to the extent of such claim, counterclaim, setoff or
chargeback).
(x) Any which is evidenced by a promissory note.
(xi) Any which is owed by any person employed by, or a
salesperson of, the Borrower.
(xii) Any which is unbilled.
(xiii) Any which the Lender in its reasonable discretion
considers unacceptable and so notifies the Agent Borrower.
"ACCEPTABLE INVENTORY": such of the Principal Borrowers' Inventory, at
such locations, and of such types, character, qualities and
quantities, (net of inventory reserves) as the Lender in its
reasonable discretion from time to time determines to be
acceptable for borrowing, as to which Inventory, the Lender
has a perfected security interest which is prior and superior
to all security interests, claims, and Encumbrances.
"ACCOUNTS" and "ACCOUNTS RECEIVABLE" include, without limitation,
"accounts" as defined in the UCC, and also all: accounts,
accounts receivable, credit card receivables, notes, drafts,
acceptances, and other forms of obligations and receivables
and rights to payment for credit extended and for goods sold
or leased, or services rendered,
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whether or not yet earned by performance; all "contract
rights" as formerly defined in the UCC; all Inventory which
gave rise thereto, and all rights associated with such
Inventory, including the right of stoppage in transit; all
reclaimed, returned, rejected or repossessed Inventory (if
any) the sale of which gave rise to any Account.
"ACCOUNT DEBTOR": has the meaning given that term in the UCC.
"AFFILIATE": means, with respect to any two Persons, a relationship in
which (a) one holds, directly or indirectly, not less than
Twenty Five Percent (25%) of the capital stock, beneficial
interests, partnership interests, or other equity interests of
the other; or (b) one has, directly or indirectly, Control of
the other; or (c) not less than Twenty Five Percent (25%) of
their respective ownership is directly or indirectly held by
the same third Person.
"AVAILABILITY": is defined in Section 2-1(b).
"BANKRUPTCY CODE": Title 11, U.S.C., as amended from time to time.
"BORROWING BASE CERTIFICATE": See Section 9-3.
"BUSINESS DAY": any day other than (a) a Saturday, Sunday; (b) a day on
which the Lender is not open to the general public to conduct
business; or (c) a day on which banks in Woburn, Massachusetts
generally are not open to the general public for the purpose
of conducting commercial banking business.
"CAPITAL LEASE": any lease which may be capitalized in accordance with
GAAP.
"CHATTEL PAPER": has the meaning given that term in the UCC.
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"CLOSING FEE": is defined in Section 2-8(a).
"COLLATERAL": is defined in Section 3-1.
"CONTROL": Person(s) shall be deemed to Control another Person if such
Person(s) directly or indirectly possess the power to direct
or cause the direction of the management and policies of such
other Person, whether through ownership of voting securities,
by contract, or otherwise.
"COSTS OF COLLECTION" includes, without limitation, all attorneys'
reasonable fees and reasonable out-of-pocket expenses incurred
by the Lender's attorneys, and all reasonable costs incurred
by the Lender in the administration of the Obligations and/or
the Loan Documents, including, without limitation, reasonable
costs and expenses associated with travel on behalf of the
Lender, which costs and expenses are directly or indirectly
related to or in respect of the Lender's: administration and
management of the Obligations; negotiation, documentation, and
amendment of any Loan Document; or reasonable efforts to
preserve, protect, collect, or enforce the Collateral, the
Obligations, and/or the Lender's Rights and Remedies and/or
any of the Lender's rights and remedies against or in respect
of any guarantor or other person liable in respect of the
Obligations (whether or not suit is instituted in connection
with such efforts). The Costs of Collection are Obligations,
and at the Lender's option may bear interest at the highest
rate which the Lender may charge any Principal Borrower
hereunder as if such had been lent, advanced, and credited by
the Lender to, or for the benefit of, any Principal Borrower.
"DEBT SERVICE": shall mean, for any period of testing, the aggregate of
all interest and principal payments required to be made.
"DOCUMENTS": has the meaning given that term in the UCC.
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"DOCUMENTS OF TITLE": has the meaning given that term in the UCC.
"DOMESTIC RATE LOAN": is defined in Exhibit 2-7.
"EBITDA": earnings from continuing operations, before interest, taxes,
depreciation, and amortization, each as determined in
accordance with GAAP.
"EMPLOYEE BENEFIT PLAN": as defined in ERISA.
"ENCUMBRANCE": each of the following:
(a) security interest, mortgage, pledge,
hypothecation, lien, attachment, or charge of any kind
(including any agreement to give any of the foregoing); the
interest of a lessor under a Capital Lease; conditional sale
or other title retention agreement; sale of accounts
receivable or chattel paper; or other arrangement pursuant to
which any Person is entitled to any preference or priority
with respect to the property or assets of another Person or
the income or profits of such other Person or which
constitutes an interest in property to secure an obligation;
each of the foregoing whether consensual or non-consensual and
whether arising by way of agreement, operation of law, legal
process or otherwise.
(b) The filing of any financing statement under the
UCC or comparable law of any jurisdiction.
"ENVIRONMENTAL LAWS": (a) any and all federal, state, local or
municipal laws, rules, orders, regulations, statutes,
ordinances, codes, decrees or requirements which regulates or
relates to, or imposes any standard of conduct or liability on
account of or in respect to environmental protection matters,
including, without limitation, Hazardous Materials, as is now
or hereafter in effect; and (b) the common law relating to
damage to Persons or property from Hazardous Materials.
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"EQUIPMENT" includes, without limitation, "equipment" as defined in the
UCC, and also all motor vehicles, rolling stock, machinery,
office equipment, plant equipment, tools, dies, molds, store
fixtures, furniture, and other goods, property, and assets
which are used and/or were purchased for use in the operation
or furtherance of the Borrower's business, and any and all
accessions, additions thereto, and substitutions therefor.
"ERISA": the Employee Retirement Security Act of 1974, as amended.
"ERISA AFFILIATE": any Person which is under common control with the
Borrower within the meaning of Section 4001 of ERISA or is
part of a group which includes the Borrower and which would be
treated as a single employer under Section 414 of the Internal
Revenue Code of 1986, as amended.
"EVENTS OF DEFAULT": is defined in Article 10.
"FIXTURES": has the meaning given that term in the UCC.
"FUNDED DEBT: means all interest bearing Indebtedness of any Person.
"GAAP": principles which are consistent with those promulgated or
adopted by the Financial Accounting Standards Board and its
predecessors (or successors) in effect and applicable to that
accounting period in respect of which reference to GAAP is
being made.
"GENERAL INTANGIBLES" includes, without limitation, "general
intangibles" as defined in the UCC; and also all: rights to
payment for credit extended; deposits; amounts due to any
Principal Borrower; credit memoranda in favor of any Principal
Borrower; warranty claims; tax refunds and abatements;
insurance refunds and premium rebates; all means and vehicles
of investment or hedging, including, without
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limitation, options, warrants, and futures contracts; records;
customer lists; telephone numbers; goodwill; causes of action;
judgments; payments under any settlement or other agreement;
literary rights; rights to performance; royalties; license
and/or franchise fees; rights of admission; licenses;
franchises; license agreements, including all rights of any
Principal Borrower to enforce same; permits, certificates of
convenience and necessity, and similar rights granted by any
governmental authority; patents, patent applications, patents
pending, and other intellectual property; developmental ideas
and concepts; proprietary processes; blueprints, drawings,
designs, diagrams, plans, reports, and charts; catalogs;
manuals; technical data; computer software programs (including
the source and object codes therefor), computer records,
computer software, rights of access to computer record service
bureaus, service bureau computer contracts, and computer data;
tapes, disks, semi-conductors chips and printouts; trade
secrets rights, copyrights, mask work rights and interests,
and derivative works and interests; user, technical reference,
and other manuals and materials; trade names, trademarks,
service marks, and all good will relating thereto;
applications for registration of the foregoing; and all other
general intangible property of any Principal Borrower in the
nature of intellectual property; proposals; cost estimates,
and reproductions on paper, or otherwise, of any and all
concepts or ideas, and any matter related to, or connected
with, the design, development, manufacture, sale, marketing,
leasing, or use of any or all property produced, sold, or
leased, by any Principal Borrower or credit extended or
services performed, by any Principal Borrower, whether
intended for an individual customer or the general business of
any Principal Borrower, or used or useful in connection with
research by any Principal Borrower.
"GOODS": has the meaning given that term in the UCC.
"GUARANTY": shall mean any instrument of guaranty executed by a
Guarantor.
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"GUARANTORS" shall mean, individually and collectively, PolyMedica
Corporation, Liberty Medical Supply, Inc., PolyMedica
Healthcare, Inc., PolyMedica Securities, Inc.
"HAZARDOUS MATERIALS:" any (a) hazardous materials, hazardous waste,
hazardous or toxic substances, petroleum products, which (as
to any of the foregoing) are defined or regulated as a
hazardous material in or under any Environmental Law and (b)
oil in any physical state.
"INDEBTEDNESS": all indebtedness and obligations of or assumed by any
Person: (i) in respect of money borrowed (including any
indebtedness which is non-recourse to the credit of such
Person but which is secured by an Encumbrance on any asset of
such Person) or evidenced by a promissory note, bond,
debenture or other written obligation to pay money; (ii) for
the payment, deferred for more than thirty (30) days, of the
purchase price of goods or services (other than current trade
liabilities of such Person incurred in the ordinary course of
business and payable in accordance with customary practices);
(iii) in connection with any letter of credit or acceptance
transaction (including, without limitation, the face amount of
all letters of credit and acceptances issued for the account
of such Person or reimbursement on account of which such
Person would be obligated); (iv) in connection with the sale
or discount of accounts receivable or chattel paper; (v) on
account of deposits or advances; and (vi) as lessee under
Capital Leases. "Indebtedness" of any Person shall also
include: (x) Indebtedness of others secured by an Encumbrance
on any asset of such Person, whether or not such Indebtedness
is assumed by such Person; (y) Any guaranty, endorsement,
suretyship or other undertaking pursuant to which that Person
may be liable on account of any obligation of any third party;
and (z) the Indebtedness of a partnership or joint venture in
which such Person is a general partner or joint venturer.
"INDEMNIFIED PERSON": is defined in Section 14-11.
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"INSTRUMENTS": has the meaning given that term in the UCC.
"INVENTORY" includes, without limitation, "inventory" as defined in the
UCC and also all: packaging, advertising, and shipping
materials related to any of the foregoing, and all names or
marks affixed or to be affixed thereto for identifying or
selling the same; Goods held for sale or lease or furnished or
to be furnished under a contract or contracts of sale or
service by any Principal Borrower, or used or consumed or to
be used or consumed in any Principal Borrowers' business;
Goods of said description in transit: returned, repossessed
and rejected Goods of said description; and all documents
(whether or not negotiable) which represent any of the
foregoing.
"L/C": any letter of credit, the issuance of which is procured by the
Lender for the account of any Principal Borrower and any
acceptance made on account of such letter of credit.
"LEASE": any lease or other agreement, no matter how styled or
structured, pursuant to which any Principal Borrower is
entitled to the use or occupancy of any space.
"LENDER": is defined in Preamble.
"LENDER'S RIGHTS AND REMEDIES": is defined in Section 11-6.
"LIBOR RATE LOAN": is defined in Exhibit 2-7.
"LOAN ACCOUNT": is defined in Section 2-4.
"LOAN DOCUMENTS": the within Agreement, each instrument and document
executed and/or delivered as contemplated by Article 5, below,
and each other instrument or
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document from time to time executed and/or delivered in
connection with the arrangements contemplated hereby, as each
may be amended from time to time.
"MASTER NOTE": is defined in Section 2-6.
"MAXIMUM LOAN EXPOSURE": the lesser, on any day, of the following, in
each instance determined net of the unpaid principal balance of the Loan Account
on that day: (a) the amount determined in accordance with Section 2-1(b)(i) or
(b) the amount determined in accordance with Section 2-1(b)(ii), above.
"OBLIGATIONS": any amounts owed by any Principal Borrower under or
pursuant to any Loan Document.
"OPERATING CASH FLOW": means, for any fiscal period, an amount equal to
the sum of (a) EBITDA, MINUS (b) (i) cash income taxes, (ii)
capital expenditures, and (iii) capitalized direct response
advertising expenditures.
"PERSON": any natural person, and any corporation, trust, partnership,
joint venture, or other enterprise or entity.
"PROCEEDS": include, without limitation, "Proceeds" as defined in the
UCC (defined below), and each type of property described in
Sections 3-1, above.
"RECEIVABLES COLLATERAL": refers to that portion of the Collateral
which consists of any Principal Borrower's Accounts, Accounts
Receivable, contract rights, General Intangibles, Chattel
Paper, Instruments, Documents of Title, Documents, Securities,
letters of credit for the benefit of any Principal Borrower,
and bankers' acceptances held by any Principal Borrower, and
any rights to payment.
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"RELATED ENTITY": refers to any corporation, trust, partnership, joint
venture, or other enterprise which: is a parent,
brother-sister, subsidiary, or affiliate, of any Principal
Borrower; could have such enterprise's tax returns or
financial statements consolidated with any Principal
Borrowers'; could be a member of the same controlled group of
corporations (within the meaning of Section 1563(a)(1), (2)
and (3) of the Internal Revenue Code of 1986, as amended from
time to time) of which any Principal Borrower is a member;
Controls or is Controlled by any Principal Borrower.
"REQUIREMENT OF LAW": as to any Person: (a)(i) all statutes, rules,
regulations, orders, or other requirements having the force of
law and (ii) all court orders and injunctions, arbitrator's
decisions, and/or similar rulings, in each instance ((i) and
(ii)) of or by any federal, state, municipal, and other
governmental authority, or court, tribunal, panel, or other
body which has or claims jurisdiction over such Person, or any
property of such Person, or of any other Person for whose
conduct such Person would be responsible; (b) that Person's
charter, certificate of incorporation, articles of
organization, and/or other organizational documents, as
applicable; and (c) that Person's by-laws and/or other
instruments which deal with corporate or similar governance,
as applicable.
"REVOLVING CREDIT": is defined in Section 2-1.
"SECURITIES": has the meaning given that term in the UCC.
"STATED AMOUNT": the maximum undrawn amount for which an L/C may be
honored.
"SUSPENSION EVENT": any occurrence, circumstance, or state of facts
which is continuing and (a) is an Event of Default; or (b)
would become an Event of Default if any requisite notice were
given and/or any requisite period of time were to run and such
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occurrence, circumstance, or state of facts were not
absolutely cured within any applicable grace period.
"TERMINATION DATE": The earliest of (a) February 28, 2001 or (b) the
occurrence of any Event of Default.
"TOTAL DEBT SERVICE": means, for any period of testing, the aggregate
of (a) interest expense plus (b) any payments of long term
Indebtedness paid or scheduled to be paid during the testing
period, as determined in accordance with GAAP.
"UCC": the Uniform Commercial Code as presently in effect in
Massachusetts (Mass. Gen. Laws, Ch. 106).
"UNUSED LINE FEE": is defined in Section 2-8(b).
ARTICLE 5 - CONDITIONS PRECEDENT.
Precedent to the effectiveness of this Agreement, the establishment of
the financing arrangements contemplated hereby, and the making of the first loan
under the Revolving Credit, the documents respectively described in Sections 5-1
through and including 5-7, each in form and substance reasonably satisfactory to
the Lender shall have been delivered to the Lender, and the conditions
respectively described in Sections 5-8 through and including 5-10, shall have
been satisfied:
5-1. CORPORATE DUE DILIGENCE. (a) A Certificate of corporate good
standing issued by the Secretary(s) of State at each State of incorporation with
respect to each of the Principal Borrowers.
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(b) Certificates of due qualification and good standing,
issued by the Secretary(s) of State of each State in which the nature of each
Principal Borrowers' business conducted or assets owned could require such
qualification.
(c) Certificate of each of the Principal Borrowers' Secretary
of the due adoption, continued effectiveness, and setting forth the texts of,
each corporate resolution adopted in connection with the establishment of the
loan arrangement contemplated by the Loan Documents and attesting to the true
signatures of each Person authorized as a signatory to any of the Loan
Documents.
5-2. OPINION. An opinion of counsel to each of the Principal
Borrowers in form and substance satisfactory to the Lender.
5-3. LANDLORD'S WAIVERS. Waivers (each in form reasonably
satisfactory to the Lender) by each of the Principal Borrowers' landlords,
unless otherwise consented to by the Lender in writing.
5-4. GUARANTIES. Instruments of Unconditional Guaranty executed by
each of the Guarantors.
5-5. ADDITIONAL DOCUMENTS. Such additional instruments and
documents as the Lender or its counsel reasonably may require or request.
5-6. OFFICER'S CERTIFICATES. Certificates executed by the
Presidents and the Treasurers of the Principal Borrowers and stating that the
representations and warranties made by the Principal Borrowers to the Lender in
the Loan Documents are true and complete as of the date of such Certificate, and
that no event has occurred which is or which, solely with the giving of notice
or passage of time (or both) would be an Event of Default.
5-7. COMPLIANCE CERTIFICATE. A Compliance Certificate in form and
substance satisfactory to the Lender.
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5-8. REPRESENTATIONS AND WARRANTIES. Each of the representations
made by or on behalf of the Principal Borrowers in this Agreement or in any of
the other Loan Documents or in any other report, statement, document, or paper
provided by any or on behalf of each of the Principal Borrowers shall be true
and complete as of the date as of which such representation or warranty was
made.
5-9. NO EVENT OF DEFAULT. No event shall have occurred, or failed
to occur, which occurrence or which failure constitutes, or which, solely with
the passage of time or the giving of notice (or both) could constitute, an Event
of Default.
5-10. NO ADVERSE CHANGE. No event shall have occurred or failed to
occur, which occurrence or failure is or could have a materially adverse effect
upon any of the Principal Borrowers' financial condition, operating results, or
cash flows from the Principal Borrowers' financial condition set forth in the
most recent financial statements delivered to the Lender.
ARTICLE 6 - GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS
.
To induce the Lender to establish the loan arrangement contemplated
herein and to make loans and advances and to provide financial accommodations
under the Revolving Credit (each of which loans shall be deemed to have been
made in reliance thereupon ) the Principal Borrowers, in addition to all other
representations, warranties, and covenants made by the Principal Borrowers in
any other Loan Document, make those representations, warranties, and covenants
included in the within Agreement.
6-1. PAYMENT AND PERFORMANCE OF OBLIGATIONS. The Principal
Borrowers shall pay each Obligation when due (or when demanded if payable on
demand) and shall promptly, punctually, and faithfully perform each other
Obligation.
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6-2. DUE ORGANIZATION - CORPORATE AUTHORIZATION - NO CONFLICTS. (a)
Each Principal Borrower presently is and shall hereafter remain in good standing
in their respective state of incorporation and shall hereafter remain duly
qualified and in good standing in every other State in which, by reason of the
nature or location of the Principal Borrowers' assets or operation of the
Principal Borrowers' business, such qualification may be necessary.
(b) Each Related Entity is listed on EXHIBIT 6-2, annexed
hereto. Each Related Entity is and shall hereafter remain in good standing in
the State in which incorporated and is and shall hereafter remain duly qualified
in which other State in which, by reason of that entity's assets or the
operation of such entity's business, such qualification may be necessary. The
Agent Borrower shall provide the Lender with prior written notice of any
entity's becoming or ceasing to be a Related Entity.
(c) The Principal Borrowers have all requisite corporate
power and authority to execute and deliver to the Lender each of the Loan
Documents to which the Principal Borrowers are a party and have and will
hereafter retain all requisite corporate power to perform all and singular the
Obligations.
(d) The execution and delivery by the Principal Borrowers
of each Loan Document to which they are a party; the Principal Borrowers'
consummation of the transactions contemplated by such Loan Documents (including,
without limitation, the creation of security and mortgage interests by the
Principal Borrowers as contemplated hereby) ; and the Principal Borrowers'
performance under those of the Loan Documents to which it is a party; the
borrowings hereunder; and the use of the proceeds thereof:
(i) Have been duly authorized by all necessary
corporate action.
(ii) Do not, and will not, contravene in any
material respect any provision of any Requirement of Law or obligation
of any Principal Borrower.
(iii) Will not result in the creation or
imposition of, or the obligation to create or impose, any Encumbrance
upon any assets of any Principal Borrower pursuant to any Requirement
of Law or obligation, except pursuant to the Loan Documents.
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(e) The Loan Documents have been duly executed and
delivered by the Principal Borrowers and are the legal, valid and binding
obligations of each Principal Borrower, enforceable against each Principal
Borrower in accordance with their respective terms.
6-3. MAINTAIN ACCOUNTS. To permit the Lender to monitor the
Principal Borrowers' financial performance and condition, the Principal
Borrowers shall maintain depository accounts with the Lender.
6-4. TRADE NAMES. (a) EXHIBIT 6-4, annexed hereto, is a listing of:
(i) All names under which the Principal Borrowers ever
conducted business.
(ii) All entities and/or persons with whom the Principal
Borrowers ever consolidated or merged, or from whom the Principal
Borrowers ever acquired in a single transaction or in a series of
related transactions substantially all of such entity's or person's
assets.
(b) Except (i) upon not less than twenty-one (21) days
prior written notice given the Lender, and (ii) in compliance with all other
provisions of the within Agreement, the Principal Borrowers will not undertake
or commit to undertake any action such that the results of that action, if
undertaken prior to the date of this Agreement, would have been reflected on
EXHIBIT 6-4.
(c) To the best of their knowledge, the conduct by the
Principal Borrowers of the Principal Borrowers' business does not infringe on
the patents, industrial designs, trademarks, trade names, trade styles, brand
names, service marks, logos, copyrights, trade secrets, know-how, confidential
information, or other intellectual or proprietary property of any third Person.
(d) The Principal Borrowers own and possess, or have the
right to use all patents, industrial designs, trademarks, trade names, trade
styles, brand names, service marks, logos, copyrights, trade secrets, know-how,
confidential information, and other intellectual or proprietary property of any
third Person necessary for the Principal Borrowers' conduct of the Principal
Borrowers' business as is of the date hereof.
6-5. LOCATIONS. The Collateral, and the books, records, and papers
of each Principal Borrower pertaining thereto, are kept and maintained solely at
the chief executive offices of the
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Principal Borrowers stated in the Preamble of this Agreement, and at those
locations which are listed on EXHIBIT 6-5, annexed hereto, which EXHIBIT
includes the names and addresses of each of the Principal Borrowers' landlords.
Except (i) to accomplish sales of Inventory in the ordinary course of business
or (ii) to utilize such of the Collateral as is removed from such locations in
the ordinary course of business (such as motor vehicles), the Principal
Borrowers shall not remove any Collateral from said chief executive offices or
those locations listed on EXHIBIT 6-5.
6-6. TITLE TO ASSETS. Each Principal Borrower is, and shall
hereafter remain, the owner of the all of its present and future assets free and
clear of all Encumbrances except for the following:
(a) The security interest created herein.
(b) Those Encumbrances (if any) listed on
EXHIBIT 6-6, annexed hereto.
(c) Purchase money security interests in
Equipment to secure Indebtedness otherwise permitted hereby.
No Principal Borrower has and shall not have possession of any property
on consignment to that Principal Borrower.
6-7. INDEBTEDNESS. No Principal Borrower has and shall not
hereafter have any Indebtedness with the exceptions of:
(a) Any Indebtedness to the Lender.
(b) The Indebtedness (if any) listed on EXHIBIT 6-7,
annexed hereto.
(c) Ordinary trade indebtedness incurred in the normal
course of that Principal Borrower's business.
(d) Indebtedness otherwise associated with the
acquisition of Equipment.
(e) Other Indebtedness not to exceed $500,000.00 in the
aggregate outstanding at any one time.
6-8. INSURANCE POLICIES. (a) EXHIBIT 6-8, annexed hereto, is a
schedule of all insurance policies owned by the Principal Borrowers or under
which the Principal Borrowers are the named
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insured. Each of such policies is in full force and effect. Neither the issuer
of any such policy nor any Principal Borrower is in default or violation of any
such policy.
(b) Each Principal Borrower shall have and maintain at
all times insurance covering such risks, in such amounts, containing such terms,
in such form, for such periods, and written by such companies as may be
satisfactory to the Lender. All insurance carried by the Principal Borrowers
shall provide for a minimum of thirty (30) days' written notice of cancellation
to the Lender and all such insurance which covers the Collateral shall include
an endorsement in favor of the Lender, which endorsement shall include a
standard "New York" lender's loss payable endorsement. In the event of the
failure by any Principal Borrower to maintain insurance as required herein, the
Lender, at its option, may obtain such insurance, provided, however, the
Lender's obtaining of such insurance shall not constitute a cure or waiver of
any Event of Default occasioned by that Principal Borrower's failure to have
maintained such insurance. Each Principal Borrower shall furnish to the Lender
certificates or other evidence satisfactory to the Lender regarding compliance
by Principal Borrower with the foregoing insurance provisions.
(c) The Agent Borrower shall advise the Lender of each
claim made by any Principal Borrower under any policy of insurance in excess of
$100,000.00 which covers the Collateral and will permit the Lender, at the
Lender's option in each instance, to the exclusion of the Principal Borrower, to
conduct the adjustment of each such claim (and of all claims following the
occurrence of any Suspension Event). Each Principal Borrower hereby appoints the
Lender as that Principal Borrower's attorney in fact to obtain, adjust, settle,
and cancel any insurance described in this subsection and to endorse in favor of
the Lender any and all drafts and other instruments with respect to such
insurance. The within appointment, being coupled with an interest, is
irrevocable until this Agreement is terminated by a written instrument executed
by a duly authorized officer of the Lender. The Lender shall not be liable on
account of any exercise pursuant to said power except for any exercise in actual
willful misconduct and bad faith. The Lender may apply any proceeds of such
insurance against the Obligations, whether or not such have matured, in such
order of application as the Lender may determine.
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6-9. LICENSES. EXHIBIT 6-9, annexed hereto, is a schedule of all
material license agreements issued to, or to which any Principal Borrower is a
party. Each of such agreements is in full force and effect. No Principal
Borrower, and to the knowledge of the Principal Borrowers, no other party to any
such agreement, is in default or violation of any such agreement and no Borrower
has received any notice or threat of cancellation of any such agreement.
6-10. LEASES. EXHIBIT 6-10, annexed hereto, is a schedule of all
presently effective Leases and Capital Leases. Each of such Leases and Capital
Leases is in full force and effect. No Principal Borrower, and to the knowledge
of the Principal Borrowers, no other party to any such Lease, or Capital Lease,
is in default or violation of any such Lease or Capital Lease and no Principal
Borrower has received any notice or threat of cancellation of any such Lease or
Capital Lease. The Principal Borrowers hereby authorize upon prior written
notice for the Lender at any time and from time to time to contact any of the
Principal Borrowers' landlords in order to confirm the Principal Borrowers'
continued compliance with the terms and conditions of the Lease(s) between any
Principal Borrower and that landlord and to discuss such issues, concerning the
Borrower's occupancy under such Lease(s), as the Lender may reasonably
determine.
6-11. REQUIREMENTS OF LAW. Each Principal Borrower is in compliance
with, and shall hereafter comply with and use its assets in material compliance
with, all Requirements of Law. No Principal Borrower has received any notice of
any violation of any Requirement of Law (whether or not such violation is
material), which violation has not been cured or otherwise remedied.
6-12. MAINTAIN PROPERTIES. Each Principal Borrower shall:
(a) Keep the Collateral in good order and repair (ordinary
reasonable wear and tear and insured casualty excepted).
(b) Not suffer or cause the waste or destruction of any material
part of the Collateral.
(c) Not use any of the Collateral in violation of any policy of
insurance thereon.
(d) Not sell, lease, or otherwise dispose of any of the
Collateral, other than the following:
(i) In the ordinary course of business.
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(ii) The disposal of Equipment which is obsolete, worn
out, or damaged beyond repair.
6-13. PAY TAXES. (a)(i) The federal income tax returns of each
Principal Borrower have been filed with the Internal Revenue Service (or closed
by applicable statutes) for all fiscal years through and including each
Principal Borrower's taxable year 1996 and no Principal Borrower has received
notice of any deficiencies, assessments, and other amounts due. No agreement is
extant which waives or extends any statute of limitations applicable to the
right of the Internal Revenue Service to assert a deficiency or make any other
claim for or in respect to federal income taxes. No issue has been raised in any
such examination which, by application of similar principles, reasonably could
be expected to result in the assertion of a deficiency for any fiscal year open
for examination, assessment, or claim by the Internal Revenue Service.
(ii) All returns of each Principal Borrower for
state and local income, excise, sales, and other taxes have been filed for all
fiscal years through and including each Principal Borrower's taxable year 1996
and any deficiencies, assessments, and other amounts asserted in connection with
any examinations have been fully paid or settled. No agreement is extant which
waives or extends any statute of limitations applicable to the right of any
state taxing authority to assert a deficiency or make any other claim for or in
respect to any such state taxes. No issue has been raised in any such
examination which, by application of similar principles, reasonably could be
expected to result in the assertion of a deficiency for any fiscal year open for
examination, assessment, or claim by any state or local taxing authority.
(iii) There are no examinations of or with respect
to any Principal Borrower presently being conducted by the Internal Revenue
Service or any state taxing authority.
(b) Each Principal Borrower has, and hereafter shall:
pay, as they become due and payable, all taxes and unemployment contributions
and other charges of any kind or nature levied, assessed or claimed against any
Principal Borrower or the Collateral by any person or entity whose claim would
result in an Encumbrance upon any asset of any Principal Borrower or by any
governmental authority, unless being contested in good faith by that Principal
Borrower and adequate reserves having been made therefor; properly exercise any
trust responsibilities imposed upon each
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Principal Borrower by reason of withholding from employees' pay; timely make all
contributions and other payments as may be required pursuant to any Employee
Benefit Plan now or hereafter established by any Principal Borrower; and timely
file all tax and other returns and other reports with each governmental
authority to whom each Principal Borrower is obligated to so file.
(c) At its option, the Lender may, after the occurrence
of and during continuance of an Event of Default, but shall not be obligated to,
pay any taxes, unemployment contributions, and any and all other charges levied
or assessed upon any Principal Borrower or the Collateral by any person or
entity or governmental authority, and make any contributions or other payments
on account of any Principal Borrower's Employee Benefit Plan as the Lender, in
the Lender's discretion, may deem necessary or desirable, to protect, maintain,
preserve, collect, or realize upon any or all of the Collateral or the value
thereof or any right or remedy pertaining thereto, provided, however, the
Lender's making of any such payment shall not constitute a cure or waiver of any
Event of Default occasioned by any Principal Borrower's failure to have made
such payment.
6-14. NO MARGIN STOCK. No Principal Borrower is engaged in the
business of extending credit for the purpose of purchasing or carrying any
margin stock (within the meaning of Regulations G, U, T, and X. of the Board
of Governors of the Federal Reserve System of the United States). No part of
the proceeds of any borrowing from the Lender will be used at any time to
purchase or carry any such margin stock or to extend credit to others for the
purpose of purchasing or carrying any such margin stock.
6-15. ERISA. Neither any Principal Borrower nor to the best of its
knowledge any ERISA Affiliate ever has or hereafter shall have any of the
following occur which would have a material adverse effect on the assets or
financial conditions of the Principal Borrowers:
(a) Violate or fail to be in full compliance with the
Borrower's Employee Benefit Plan.
(b) Fail timely to file all reports and filings required
by ERISA to be filed by the Borrower.
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(c) Engage in any "prohibited transactions" or
"reportable events" (respectively as described in ERISA).
(d) Engage in, or commit, any act such that a tax or
penalty could be imposed upon the Borrower on account thereof pursuant
to ERISA.
(e) Accumulate any material funding deficiency within the
meaning of ERISA.
(f) Terminate any Employee Benefit Plan such that a lien
could be asserted against any assets of any Principal Borrower on
account thereof pursuant to ERISA.
(g) Be a member of, contribute to, or have any obligation
under any Employee Benefit Plan which is a multiemployer plan within
the meaning of Section 4001(a) of ERISA.
6-16. HAZARDOUS MATERIALS. (a) No Principal Borrower has ever:
(i) been determined by a court to be legally responsible for any release or
threat of release of any Hazardous Material or (ii) received notification of any
release or threat of release of any Hazardous Material from any site or vessel
occupied or operated by any Principal Borrower and/or of the incurrence of any
expense or loss in connection with the assessment, containment, or removal of
any release or threat of release of any Hazardous Material from any such site or
vessel.
(b) Each Principal Borrower shall: (i) dispose of any
Hazardous Material only in compliance with all Environmental Laws and (ii) not
store on any site or vessel occupied or operated by any Principal Borrower and
not transport or arrange for the transport of any Hazardous Material, except if
such storage or transport is in the ordinary course of the Borrower's business
and is in compliance with all Environmental Laws.
(c) Each Principal Borrower shall provide the Lender with
written notice upon any Principal Borrower's obtaining knowledge of any
incurrence of any material expense or loss by any governmental authority or
other Person in connection with the assessment, containment, or removal of any
Hazardous Material, for which expense or loss any Principal Borrower may be
liable.
6-17. LITIGATION. There is not presently pending or threatened by or
against any Principal Borrower any suit, action, proceeding, or investigation
which, if determined adversely to any
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Principal Borrower, would have a material adverse effect upon the financial
condition or ability to conduct its business of any Principal Borrower party
thereto, as such business is presently conducted.
6-18. DIVIDENDS OR INVESTMENTS. No Principal Borrower shall without
consent of Lender, which consent shall not be unreasonably withheld
(a) Pay any cash dividend or make any cash other
distribution in respect of any class of that Principal Borrower's capital stock
without the prior written consent of the Lender.
(b) Own, redeem, retire, purchase, or acquire any of that
Principal Borrower's capital stock.
(c) Invest in or purchase any stock or securities or
rights to purchase any such stock or securities, of any corporation or
other entity.
(d) Merge or consolidate or be merged or consolidated
with or into any other corporation or other entity.
(e) Consolidate any of that Principal Borrower's
operations with those of any other corporation or other entity except
any Affiliate, provided such surviving entity shall be liable under the
Loan Documents as a Principal Borrower and shall execute all documents
as the Lender may reasonably require to confirm same.
(f) Organize or create any Related Entity which will not
be obligated hereunder.
(g) Subordinate any debts or obligations owed to that
Principal Borrower by any third party to any other debts owed by such
third party to any other Person.
6-19. LOANS. No Principal Borrower shall make any loans or advances
to, nor acquire the Indebtedness of, any Person, provided, however, the
foregoing does not prohibit any of the following:
(a) Advance payments made to that Principal Borrower's
suppliers in the ordinary course.
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(b) Advances to that Principal Borrower's officers,
employees, and salespersons with respect to reasonable expenses to be
incurred by such officers, employees, and salespersons for the benefit
of that Principal Borrower, which expenses are properly substantiated
by the person seeking such advance and properly reimbursable by that
Principal Borrower.
(c) Loans to any other Principal Borrower with the prior
written consent of the Lender or which may be otherwise permitted under
Section 6-22.
6-20. PROTECTION OF ASSETS. The Lender, at the Lender's discretion,
and from time to time, may discharge any tax or Encumbrance on any of the
Collateral, or take any other action that the Lender may deem necessary or
desirable to repair, insure, maintain, preserve, collect, or realize upon any of
the Collateral. The Lender shall not have any obligation to undertake any of the
foregoing and shall have no liability on account of any action so undertaken
except where there is a specific finding in a judicial proceeding (in which the
Lender has had an opportunity to be heard), from which finding no further appeal
is available, that Lender had acted in actual bad faith or in a grossly
negligent manner. Each Principal Borrower shall pay to the Lender, on demand, or
the Lender, in its discretion, may add to the Loan Account, all amounts paid or
incurred by the Lender pursuant to this section. The obligation of each
Principal Borrower to pay such amounts is an Obligation.
6-21. LINE OF BUSINESS. No Principal Borrower shall engage in any
business other than the business in which it is currently engaged or a business
reasonably related thereto.
6-22. AFFILIATE TRANSACTIONS. No Principal Borrower shall make any
payment, nor give any value to any Related Entity except as permitted hereunder,
or for goods and services actually purchased by that Principal Borrower from, or
sold by that Principal Borrower to, such Related Entity for a price which shall
(a) be competitive and fully deductible as an "ordinary
and necessary business expense" and/or fully depreciable under the
Internal Revenue Code of 1986 and the Treasury Regulations, each as
amended; or
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(b) not differ from that which would have been charged in
an arms length transaction.
6-23. ADDITIONAL ASSURANCES. (a) No Principal Borrower is the owner
of, nor has it any interest in, any property or asset which, immediately upon
the satisfaction of the conditions precedent to the effectiveness of the loan
arrangement contemplated hereby (Article 5), will be not be subject to a
perfected security interest in favor of the Lender (subject only to those
Encumbrances (if any) described on EXHIBIT 6-6, annexed hereto or to the extent
prohibited by law) to secure the Obligations and will not hereafter acquire any
asset or any interest in property which is not, immediately upon such
acquisition, subject to such a perfected security interest in favor of the
Lender to secure the Obligations (subject only to Encumbrances (if any)
permitted pursuant to Section 6-6, above).
(b) Each Principal Borrower shall execute and deliver to
the Lender such instruments, documents, and papers, and shall do all such things
from time to time hereafter as the Lender may reasonably request to carry into
effect the provisions and intent of this Agreement; to protect and perfect the
Lender's security interest in the Collateral; and to comply with all applicable
statutes and laws. Each Principal Borrower shall execute all such instruments as
may be required by the Lender with respect to the recordation and/or perfection
of the security interests created herein. A carbon, photographic, or other
reproduction of this Agreement or of any financing statement or other instrument
executed pursuant to this Section shall be sufficient for filing to perfect the
security interests granted herein.
6-24. ADEQUACY OF DISCLOSURE. (a) All financial statements furnished
to the Lender by any Principal Borrower have been prepared in accordance with
GAAP consistently applied and present fairly the condition of that Principal
Borrower at the date(s) thereof and the results of operations and cash flows for
the period(s) covered subject to footnotes and year end adjustments. There has
been no change in the financial condition, results of operations, or cash flows
of the Principal Borrower since the date(s) of such financial statements, other
than changes in the ordinary course of business, which changes have not been
materially adverse, either singularly or in the aggregate.
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(b) No Principal Borrower has any contingent obligations
or obligation under any Lease or Capital Lease which is not noted in that
Principal Borrower's financial statements furnished to the Lender prior to the
execution of the within Agreement.
(c) No document, instrument, agreement, or paper now or hereafter
given the Lender by or on behalf of any Principal Borrower or any guarantor of
the Obligations in connection with the Lender's execution of the within
Agreement contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact necessary in order to make the
statements therein not misleading. There is no fact known to any Principal
Borrower which has, or which, in the foreseeable future could have, a material
adverse effect on the financial condition of any Principal Borrower or any such
guarantor which has not been disclosed in writing to the Lender or in
PolyMedica's periodic reports filed pursuant to the requirements of the
Securities Exchange Act of 1934, as amended, which have been provided to Lender.
6-25. OTHER COVENANTS. No Principal Borrower shall indirectly do or
cause to be done any act which, if done directly by any of the Principal
Borrowers, would breach any covenant contained in this Agreement.
ARTICLE 7 - USE AND COLLECTION OF COLLATERAL.
7-1. ADJUSTMENTS AND ALLOWANCES. Each Principal Borrower may grant
such allowances or other adjustments to that Principal Borrower's Account
Debtors as that Principal Borrower may reasonably deem to accord with sound
business practice, provided, however the authority granted each Principal
Borrower pursuant to this Section may be limited or terminated by the Lender at
any time in the Lender's discretion while an Event of Default is continuing.
7-2. VALIDITY OF ACCOUNTS. (a) To the best knowledge of the
Principal Borrowers, the amount of each Account shown on the books, records, and
invoices of a Principal Borrower represented as owing by each Account Debtor is
and will be the correct amount actually owing by such Account Debtor and shall
have been fully earned by performance by that Principal Borrower.
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(b) The Lender, from time to time (at the expense of the
Principal Borrowers in each instance), may upon prior written or telephonic or
facsimile notice to the Agent Borrower (with no notice required if Event of
Default has occurred and is continuing) verify the validity, amount, and all
other matters with respect to the Receivables Collateral directly with Account
Debtors (including without limitation, by forwarding balance verification
requests to each Principal Borrower's Account Debtors), and with each Principal
Borrower's accountants, collection agents, and computer service bureaus (each of
which is hereby authorized and directed to cooperate in full with the Lender and
to provide the Lender with such information and materials as the Lender may
request.
(c) No Principal Borrower has knowledge of any impairment
of the validity or collectibility of any of the Accounts and shall notify the
Lender of any such fact immediately after any Principal Borrower becomes aware
of any such impairment.
(d) No Principal Borrower shall, other than in the
ordinary course of business, post any bond to secure that Principal Borrower's
performance under any agreement to which that Principal Borrower is a party nor
cause any surety, guarantor, or other third party obligee to become liable to
perform any obligation of that Principal Borrower (other than to the Lender) in
the event of that Principal Borrower's failure so to perform.
7-3. NOTIFICATION TO ACCOUNT DEBTORS. The Lender shall have the
right at any time after an Event of Default has occurred to notify any of the
Principal Borrowers' Account Debtors to make payment directly to the Lender and
to collect all amounts due on account of the Collateral.
7-4. INVENTORY QUALITY. All Inventory now owned or hereafter
acquired by any Principal Borrower is and will be of good and merchantable
quality and free from defects (other than defects within customary trade
tolerances). No tangible personal property of any Principal Borrower is or will
be stored or entrusted with a bailee or other third party.
7-5. USE OF INVENTORY COLLATERAL. (a) No Principal Borrower shall
engage in any sale of the Inventory other than for fair consideration in the
conduct of that Principal Borrower's business in the ordinary course and shall
not engage in sales or other dispositions to creditors; sales or other
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dispositions in bulk; and any use of any of the Inventory in breach of any
provision of this Agreement.
(b) No sale of Inventory shall be on
consignment, approval, or under any other circumstances such that, such
Inventory may be returned to the Principal Borrowers without the consent of the
Lender.
7-6. RETURNED INVENTORY. (a) Each Principal Borrower will provide
the Lender with written notice promptly upon the occurrence of any event
described in Subsection 7-6(b), below.
(b) Subsection (a) of this Section relates to any of the following
Inventory to the extent the value of such Inventory exceeds $100,00.00 for any
single transaction:
(i) Any which is returned by any Account Debtor to a
Principal Borrower (whether or not such return has been agreed to by
that Principal Borrower) and is not in turn returned by that Principal
Borrower to such Account Debtor.
(ii) Any which is repossessed by any Principal Borrower.
(iii) Any which is downgraded in quality or has its
marketability otherwise affected.
(iv) Any which is detained from, or refused entry into, or
required to be removed from the United States by the appropriate
governmental authorities.
ARTICLE 8 - LENDER AS BORROWER'S ATTORNEY-IN-FACT.
8-1. APPOINTMENT AS ATTORNEY-IN-FACT. Following and during the
continuance of an Event of Default, each Borrower hereby irrevocably constitutes
and appoints the Lender as that Principal Borrower's true and lawful attorney,
with full power of substitution, to convert the Collateral into cash at the sole
risk, cost, and expense of the Principal Borrowers, but for the sole benefit of
the Lender. The rights and powers granted the Lender by the within appointment
include but are not limited to the right and power to:
(a) prosecute, defend, compromise, or release any action
relating to the Collateral.
(b) sign change of address forms to change the address to
which any Principal Borrowers' mail is to be sent to such address as
the Lender shall designate; receive and open
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the mail of any Principal Borrower; remove any Receivables Collateral
and Proceeds of Collateral therefrom and turn over the balance of such
mail either to the Agent Borrower or to any trustee in bankruptcy,
receiver, assignee for the benefit of creditors of any Principal
Borrower, or other legal representative of any Principal Borrower whom
the Lender determines to be the appropriate person to whom to so turn
over such mail.
(c) endorse the name of any Principal Borrower in favor
of the Lender upon any and all checks, drafts, notes, acceptances, or
other items or instruments; sign and endorse the name of any Principal
Borrower on, and receive as secured party, any of the Collateral, any
invoices, schedules of Collateral, freight or express receipts, or
bills of lading, storage receipts, warehouse receipts, or other
documents of title respectively relating to the Collateral.
(d) sign the name of any Principal Borrower on any notice
to any Principal Borrowers' Account Debtors or verification of the
Receivables Collateral; sign any Principal Borrowers' name on any Proof
of Claim in Bankruptcy against Account Debtors, and on notices of lien,
claims of mechanic's liens, or assignments or releases of mechanic's
liens securing the Accounts.
(e) take all such action as may be necessary to obtain
the payment of any letter of credit and/or banker's acceptance of which
any Principal Borrower is a beneficiary.
(f) repair, manufacture, assemble, complete, package,
deliver, alter or supply goods, if any, necessary to fulfill in whole
or in part the purchase order of any customer of any Principal
Borrower.
(g) use, license or transfer any or all General
Intangibles of any Principal Borrower.
(h) Sign and file or record any financing or other
statements in order to perfect or protect the Lender's security
interest in the Collateral.
8-2. NO OBLIGATION TO ACT. The Lender shall not be obligated to do
any of the acts or to exercise any of the powers authorized by Section 8-1
herein, but if the Lender elects to do any such act or to exercise any of such
powers, it shall not be accountable for more than it actually receives
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as a result of such exercise of power, and shall not be responsible to the Agent
Borrower or any Principal Borrower for any act or omission to act except for any
act or omission to act as to which there is a final determination made in a
judicial proceeding (in which proceeding the Lender has had an opportunity to be
heard) which determination includes a specific finding that the subject act or
omission to act had been grossly negligent or in actual bad faith.
ARTICLE 9 - FINANCIAL AND OTHER REPORTING REQUIREMENTS/FINANCIAL COVENANTS.
9-1. MAINTAIN RECORDS. Each Principal Borrower shall at all times,
consistent with current practices,
(a) Keep proper books of account, in which full, true,
and accurate entries shall be made of all of that Principal Borrower's
transactions, all in accordance with GAAP applied consistently with
prior periods to fairly reflect the financial condition of that
Principal Borrower at the close of, and its results of operations for,
the periods in question.
(b) Keep accurate current records of the Collateral.
(c) Retain independent certified public accountants who
are reasonably satisfactory to the Lender and
instruct such accountants to fully cooperate with, and be available to,
the Lender to discuss that Principal Borrower's financial performance,
financial condition, operating results, controls, and such other
matters, within the scope of the retention of such accountants, as may
be raised by the Lender.
(d) Not change any Principal Borrower's fiscal year.
(e) Not change any Principal Borrower's taxpayer
identification number.
9-2. ACCESS TO RECORDS. (a) Upon prior notice and at times so as
not to interfere with Principal Borrower's business, each Principal Borrower
shall accord the Lender and the Lender's representatives with access from time
to time as the Lender and such representatives may require to all properties
owned by or over which that Principal Borrower has control. The Lender, and the
Lender's representatives, shall have the right, and each Principal Borrower will
permit the Lender and such representatives from time to time as the Lender and
such representatives may request, to
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examine, inspect, copy, and make extracts from any and all of that Principal
Borrower's books, records, electronically stored data, papers, and files. Each
Principal Borrower shall make all of that Principal Borrower's copying
facilities available to the Lender.
(b) Each Principal Borrower hereby authorizes the Lender
and the Lender's representatives to upon prior notice to Principal Borrowers and
at such times in accordance with ss.9- 2(a):
(i) Inspect, copy, duplicate, review, cause to
be reduced to hard copy, run off, draw off, and otherwise use any and
all computer or electronically stored information or data which relates
to that Principal Borrower, which information or data is in the
possession of that Principal Borrower or any service bureau,
contractor, accountant, or other person, and directs any such service
bureau, contractor, accountant, or other person fully to cooperate with
the Lender and the Lender's representatives with respect thereto.
(ii) Verify at any time the Collateral or any
portion thereof, including verification with Account Debtors, and/or
with any Principal Borrower's computer billing companies, collection
agencies, and accountants and to sign the name of any Principal
Borrower on any notice to the Account Debtors or verification of the
Collateral.
9-3. BORROWING BASE CERTIFICATE. At such intervals as the Lender
may from time to time specify (monthly, and in accordance with Section 2-3(a),
unless notice to the contrary is so given), the Agent Borrower shall provide the
Lender with a Borrowing Base Certificate (in the form of EXHIBIT 9-3, annexed
hereto and in such form as the Lender may hereafter specify from time to time),
which Certificate shall include a Schedule of all Receivables Collateral and
Inventory which has come into existence since the date of such Schedule then
most recently provided to the Lender.
9-4. QUARTERLY REPORTS. Quarterly, within forty five (45) days
following the end of each of the Agent Borrower's first three (3) fiscal
quarters, the Agent Borrower shall provide the Lender with an unaudited
financial statement of each of the Principal Borrowers and Related Entities on a
consolidated and consolidating basis for the period from the beginning of the
Agent Borrower's then current fiscal year through the end of the subject
quarter, with comparative information for the same
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period of the previous fiscal year, which statement shall include, at a minimum,
a balance sheet, income statement, and cash flows and comparisons for the
corresponding quarter of the then immediately previous year, as well as to any
projections provided to the Lender.
9-5. ANNUAL REPORTS. (a) Annually, within ninety (90) days
following the end of the Agent Borrowers' fiscal year, the Agent Borrower shall
furnish the Lender with a copy of each Principal Borrower's annual financial
statement on a consolidated and consolidating basis, which statement shall have
been prepared by, and bearing the unqualified opinion of, each Principal
Borrower's and Related Entity's independent certified public accountants (i.e.
said statement shall be "certified" by such accountants). Such annual statement
shall include, at a minimum (with comparative information for the then prior
fiscal year) a balance sheet, income statement, statement of changes in
shareholders' equity and cash flows for each Principal Borrower with comparative
information for the prior corresponding period.
(b) Annually, no later than thirty (30) days prior to the
end of the Agent Borrower's fiscal year, the Agent Borrower shall furnish the
Lender with financial projections for the Principal Borrowers and Related
Entities for the next succeeding fiscal year, including, at a minimum, a
projected balance sheet, income statement and statement of cash flows.
(c) Each annual statement shall be accompanied by such
accountant's Certificate indicating that to the best knowledge of such
accountant, no event has occurred which is or which, solely with the passage of
time or the giving of notice (or both) would be, an Event of Default.
9-6. OFFICER'S CERTIFICATES. Each of the Principal Borrowers shall
cause that Principal Borrower's Presidents and Treasurers respectively to
provide such Person's Certificate with those quarterly, and annual statements to
be furnished pursuant to this Agreement, which Certificate shall:
(a) Indicate that the subject statement was prepared in
accordance with GAAP consistently applied, and presents fairly the
financial condition of the Borrower at the close of, and the results of
that Principal Borrower's operations and cash flows for, the period(s)
covered, subject, however (with the exception of the Certificate which
accompanies such annual statement) to usual year end adjustments and
footnotes.
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(b) Indicate either that (i) no Suspension Event has
occurred or (ii) if such an event has occurred, its nature (in
reasonable detail) and the steps (if any) being taken or contemplated
by that Principal Borrower to be taken on account thereof.
(c) Include calculations concerning that Principal
Borrower's compliance (or failure to comply) at the date of the subject
statement with each of the financial performance covenants included in
Section 9-8, below.
9-7. ADDITIONAL FINANCIAL INFORMATION. In addition to the
foregoing, the Agent Borrower promptly shall provide the Lender, with such other
and additional information concerning the Principal Borrower, the Collateral,
the operation of each Principal Borrower's business, and each Principal
Borrower's and Related Entity's financial condition, including original
counterparts of financial reports and statements, as the Lender may from time to
time request.
9-8. FINANCIAL PERFORMANCE COVENANTS. The Principal Borrowers shall
observe and comply with those financial performance covenants set forth on
EXHIBIT 9-8, annexed hereto.
9-9. AUDITS AND APPRAISALS. (a) The Lender may from time to time
conduct commercial finance audits of any Principal Borrower's books and records
(in each event, at the expense of the Principal Borrowers) in accordance with
the Bank's customary practices.
(b) (i) The Lender, at the expense of the Principal
Borrowers, may participate in and/or observe each physical count and/or
inventory of so much of the Collateral as consists of Inventory which is
undertaken on behalf of any Principal Borrower.
(ii) Upon the Lender's request from time to time,
each Principal Borrower shall obtain, or shall permit the Lender to obtain (in
all events, at the Principal Borrowers' expense) physical counts and/or
inventories of the Collateral in form and substance and by such inventory takers
as are satisfactory to the Lender, each of which physical counts/inventories
shall be observed by any Principal Borrowers' accountants.
(iii) Upon the Lender's request from time to time,
each Principal Borrower shall permit the Lender to obtain appraisals of any
Principal Borrower's assets in accordance with
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the Bank's customary practices (in all events, at the Principal Borrowers'
expense) conducted by such appraisers as are satisfactory to the Lender.
ARTICLE 10 - EVENTS OF DEFAULT.
Nothing contained in this Article 10 or elsewhere in the within
Agreement or in any Loan Document shall affect the demand nature of such
Obligations that are payable on Demand (it being noted that the payment of any
principal or interest under the Revolving Credit prior to occurrence of Event of
Default are not demand obligations). The occurrence of an Event of Default is
not a prerequisite to the Lender's making of demand on such Obligations.
The occurrence of any event described in this Article 10 respectively
shall constitute an "EVENT OF DEFAULT" herein. Upon the occurrence of any Event
of Default described in Section 10-10, any and all Obligations shall become due
and payable without any further act on the part of the Lender. Upon the Lender's
demand (after giving of any required notice and expiration of any applicable
grace periods) under the Revolving Credit and/or the occurrence of any other
Event of Default, any and all Obligations of the Principal Borrowers to the
Lender shall become immediately due and payable, at the option of the Lender and
without any further notice or demand. The occurrence of any Event of Default
shall also constitute, without notice or demand, a default under all other Loan
Documents between the Lender and each Principal Borrower and instruments and
papers given the Lender by any Principal Borrower, whether such agreements,
instruments, or papers now exist or hereafter arise, in connection herewith.
10-1. FAILURE TO PAY REVOLVING CREDIT. The failure by the Agent
Borrower or any Principal Borrower to pay any amount when due under the
Revolving Credit.
10-2. FAILURE TO MAKE OTHER PAYMENTS. The failure by the Agent
Borrower or any Principal Borrower to pay to Lender when due (or upon demand, if
payable on demand) any payment obligation other than under the Revolving Credit.
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10-3. FAILURE TO PERFORM COVENANT OR OBLIGATION . The failure by the
Agent Borrower or any Principal Borrower to promptly, punctually, faithfully and
timely perform or discharge, or to comply with, any covenant to or with the
Lender or any Obligation hereunder or in connection herewith.
10-4. MISREPRESENTATION. The determination by the Lender that any
representation or warranty at any time made by the Agent Borrower or any
Principal Borrower to the Lender under any Loan Document, was not true or
complete in any material respect (except due to transactions permitted
hereunder) when given.
10-5. ACCELERATION OF OTHER DEBT. BREACH OF LEASE. The occurrence of
any event such that any material Indebtedness of any Principal Borrower to any
creditor other than the Lender could be accelerated or any material Lease could
be terminated (whether or not the subject creditor or lessor takes any action on
account of such occurrence) and which is not waived or cured.
10-6. CASUALTY LOSS. The occurrence of any uninsured loss, theft,
damage, or destruction of or to any material portion of the Collateral.
10-7. JUDGMENT. RESTRAINT OF BUSINESS. (a) The service of process
upon the Lender or any Participant seeking to attach, by trustee, mesne, or
other process, any funds of any Principal Borrower on deposit with, or assets of
any Principal Borrower in the possession of, the Lender.
(b) The entry of any judgment against any Principal
Borrower, which judgment is not satisfied (if a money judgment) or appealed from
(with execution or similar process stayed) within thirty (30) days of its entry.
(c) The entry of any order or the imposition of any other
process having the force of law, the effect of which is to restrain in any
material way the conduct by any Principal Borrower of its business in the
ordinary course not stayed or discharged within thirty (30) days.
10-8. BUSINESS FAILURE. Any act by, against, or relating to any
Principal Borrower, or its property or assets, which act constitutes the
application for, consent to, or sufferance of the
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appointment of a receiver, trustee, or other person, pursuant to court action or
otherwise, over all, or any part of any Principal Borrower's property; the
granting of any trust mortgage or execution of an assignment for the benefit of
the creditors of any Principal Borrower, or the occurrence of any other
voluntary or involuntary liquidation or extension of debt agreement for any
Principal Borrower; or the offering by or entering into by any Principal
Borrower of any composition, extension, or any other arrangement seeking relief
from or extension of the debts of any Principal Borrower, or the initiation of
any other judicial or non-judicial proceeding or agreement by, against, or
including any Principal Borrower which seeks or intends to accomplish a
reorganization or arrangement with creditors provided any involuntary proceeding
commenced against any Principal Borrower is not stayed or dismissed within sixty
(60) days.
10-9. BANKRUPTCY. The failure by any Principal Borrower to generally
pay the debts of that Principal Borrower as they mature; adjudication of
bankruptcy or insolvency relative to any Principal Borrower; the entry of an
order for relief or similar order with respect to any Principal Borrower in any
proceeding pursuant to The Bankruptcy Code or any other federal bankruptcy law;
the filing of any complaint, application, or petition by or against any
Principal Borrower initiating any matter in which any Principal Borrower is or
may be granted any relief from the debts of any Principal Borrower pursuant to
the Bankruptcy Code or any other insolvency statute or procedure provided any
involuntary proceeding commenced against any Principal Borrower is not stayed or
dismissed within sixty (60) days.
10-10. INDICTMENT - FORFEITURE. The indictment of, or institution of
any legal process or proceeding against, any Principal Borrower, under any
federal, state, municipal, and other civil or criminal statute, rule,
regulation, order, or other requirement having the force of law where the
relief, penalties, or remedies sought include the forfeiture of any material
property of any Principal Borrower and/or the imposition of any stay or other
order, the effect of which could be to restrain in any material way the conduct
by any Principal Borrower of its business in the ordinary course.
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10-11. DEFAULT BY GUARANTOR. The occurrence of any of the foregoing
Events of Default with respect to any Guarantor, or the occurrence of any of the
foregoing Events of Default with respect to any parent, subsidiary, or Related
Entity, as if such Guarantor, parent, or Related Entity were the "Borrower"
described therein.
10-12. TERMINATION OF GUARANTY. The termination or attempted
termination of any Guaranty by any Guarantor of the Obligations except by its
terms or with the express written consent of Lender.
10-13. CHALLENGE TO LOAN DOCUMENTS. (a) Any challenge by or on behalf
of any Principal Borrower to the validity of any Loan Document or the
applicability or enforceability of any Loan Document strictly in accordance with
the subject Loan Document's terms or which seeks to void, avoid, limit, or
otherwise adversely affect any security interest created by or in any Loan
Document or any payment made pursuant thereto.
(b) Any determination by any court or any other judicial
or government authority that any Loan Document is not enforceable strictly in
accordance with the subject Loan Document's terms or which voids, avoids,
limits, or otherwise adversely affects any security interest created by any Loan
Document or any payment made pursuant thereto.
10-14. EXECUTIVE MANAGEMENT. A change in the identity of two (2) or
more of the Chief Executive Officer, President, and chief financial officer of
PolyMedica or the president of Liberty from that existing as of the date of the
execution of the within Agreement, without the prior written consent of the
Lender which consent shall not be unreasonably withheld.
10-15. CHANGE IN CONTROL. Any change in the ownership of the capital
stock of any Principal Borrower such that those Persons who, at the execution of
the within Agreement, Control any Principal Borrower, no longer so Control that
Principal Borrower.
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ARTICLE 11 - RIGHTS AND REMEDIES UPON DEFAULT
In addition to all of the rights, remedies, powers, privileges, and
discretions which the Lender is provided prior to the occurrence of an Event of
Default, the Lender shall have the following rights and remedies upon the
occurrence of any Event of Default and at any time thereafter.
11-1. RIGHTS OF ENFORCEMENT. The Lender shall have all of the rights
and remedies of a secured party upon default under the UCC, in addition to which
the Lender shall have all and each of the following rights and remedies:
(a) To collect the Receivables Collateral with or without
the taking of possession of any of the Collateral.
(b) To apply the Receivables Collateral or the proceeds
of the Collateral towards (but not necessarily in
complete satisfaction of) the Obligations.
(c) To take possession of all or any portion of the
Collateral.
(d) To sell, lease, or otherwise dispose of any or all of
the Collateral, in its then condition or following
such preparation or processing as the Lender deems
advisable and with or without the taking of
possession of any of the Collateral.
(e) To exercise all or any of the rights, remedies,
powers, privileges, and discretions under all or any
of the Loan Documents.
11-2. SALE OF COLLATERAL. (a) Any sale or other disposition of the
Collateral may be at public or private sale upon such terms and in such manner
as the Lender deems advisable, having due regard to compliance with any statute
or regulation which might affect, limit, or apply to the Lender's disposition of
the Collateral.
(b) Unless the Collateral is perishable or threatens to
decline speedily in value, or is of a type customarily sold on a recognized
market (in which event the Lender shall provide the Agent Borrower with such
notice as may be practicable under the circumstances), the Lender shall give the
Agent Borrower at least ten (10) days prior written notice of the date, time,
and place of any proposed public sale, and of the date after which any private
sale or other disposition of the
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Collateral may be made. The Agent Borrower and Principal Borrowers agree that
such written notice shall satisfy all requirements for notice to the Agent
Borrower and Principal Borrowers which are imposed under the UCC or other
applicable law with respect to the Lender's exercise of the Lender's rights and
remedies upon default.
(c) The Lender may purchase the Collateral, or any
portion of it at any sale held under this Article.
(d) The Lender shall apply the proceeds of any exercise
of the Lender's Rights and Remedies under this Article 11 towards the
Obligations in such manner, and with such frequency, as the Lender determines.
11-3. OCCUPATION OF BUSINESS LOCATION. In connection with the
Lender's exercise of the Lender's rights under this Article, the Lender may
enter upon, occupy, and use any premises owned or occupied by any Principal
Borrower, and may exclude each Principal Borrower from such premises or portion
thereof as may have been so entered upon, occupied, or used by the Lender. The
Lender shall not be required to remove any of the Collateral from any such
premises upon the Lender's taking possession thereof, and may render any
Collateral unusable to each Principal Borrower. In no event shall the Lender be
liable to any Principal Borrower for use or occupancy by the Lender of any
premises pursuant to this Article, nor for any charge (such as wages for any
Principal Borrower's employees and utilities) incurred in connection with the
Lender's exercise of the Lender's Rights and Remedies.
11-4. GRANT OF NONEXCLUSIVE LICENSE. Each Principal Borrower hereby
grants to the Lender upon and during the continuance of an Event of Default, a
royalty free nonexclusive irrevocable license to use, apply, and affix any
trademark, tradename, logo, or the like in which that Principal Borrower now or
hereafter has rights, such license being with respect to the Lender's exercise
of the rights hereunder including, without limitation, in connection with any
completion of the manufacture of Inventory or sale or other disposition of
Inventory.
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11-5. ASSEMBLY OF COLLATERAL. The Lender may require each Principal
Borrower to assemble the Collateral and make it available to the Lender at the
sole risk and expense of the Principal Borrowers at a place or places which are
reasonably convenient to both the Lender and the subject Principal Borrower.
11-6. RIGHTS AND REMEDIES. The rights, remedies, powers, privileges,
and discretions of the Lender hereunder (herein, the "LENDER'S RIGHTS AND
REMEDIES") shall be cumulative and not exclusive of any rights or remedies which
it would otherwise have. No delay or omission by the Lender in exercising or
enforcing any of the Lender's Rights and Remedies shall operate as, or
constitute, a waiver thereof. No waiver by the Lender of any Event of Default or
of any default under any other agreement shall operate as a waiver of any other
default hereunder or under any other agreement. No single or partial exercise of
any of the Lender's Rights or Remedies, and no express or implied agreement or
transaction of whatever nature entered into between the Lender and any person,
at any time, shall preclude the other or further exercise of the Lender's Rights
and Remedies. No waiver by the Lender of any of the Lender's Rights and Remedies
on any one occasion shall be deemed a waiver on any subsequent occasion, nor
shall it be deemed a continuing waiver. All of the Lender's Rights and Remedies
and all of the Lender's rights, remedies, powers, privileges, and discretions
under any other agreement or transaction are cumulative, and not alternative or
exclusive, and may be exercised by the Lender at such time or times and in such
order of preference as the Lender in its sole discretion may determine. The
Lender's Rights and Remedies may be exercised without resort or regard to any
other source of satisfaction of the Obligations.
ARTICLE 12 - NOTICES.
12-1. NOTICE ADDRESSES. All notices, demands, and other
communications made in respect of this Agreement (other than a request for a
loan or advance or other financial accommodation under the Revolving Credit)
shall be made to the following addresses, each of which may be changed upon
seven (7) days written notice to all others given by certified mail, return
receipt requested:
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If to the Lender: BankBoston, N.A.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Mail Stop ▇▇. ▇▇-▇▇-▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Vice President
AND
Division Executive
Fax: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esquire
Fax: ▇▇▇ ▇▇▇-▇▇▇▇
If to the Agent Borrower
OR Principal Borrowers: PolyMedica Corporation
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Chief
Financial Officer and Treasurer
Fax: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇ and ▇▇▇▇, LLP
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇, III, Esquire
Fax: ▇▇▇-▇▇▇-▇▇▇▇
12-2. NOTICE GIVEN. (a) Notices shall be deemed given at the sooner
of when actually received or (i) if by mail: Three (3) days following deposit in
the United States mail, postage prepaid; (ii) By overnight express delivery: the
Business Day following the day when sent; (iii) By hand: If delivered on a
Business Day after 9:00 AM and no later than Three (3) hours prior to the close
of customary business hours of the recipient, when delivered (otherwise, at the
opening of the then next Business Day); and (iv) By Facsimile transmission: If
sent on a Business Day after 9:00 AM and no later than Three (3) hours prior to
the close of customary business hours of the recipient, one (1) hour after being
sent (otherwise, at the opening of the then next Business Day).
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(b) Rejection or refusal to accept delivery and inability
to deliver because of a changed address or Facsimile Number for which no due
notice was given shall each be deemed receipt of the notice sent.
ARTICLE 13 - TERM OF AGREEMENT.
13-1. TERMINATION OF REVOLVING CREDIT AND AGREEMENT. The Revolving
Credit shall be terminated upon the sooner of
(a) the occurrence of an Event of Default;
(b) upon payment in full of all Obligations and five (5)
Business Days written notice from the Agent Borrower and Principal
Borrowers received by the Lender of their determination to terminate
the Revolving Credit and the within Agreement;
(c) March 31, 2001.
The within Agreement shall continue in full force and effect applicable to all
Obligations until all Obligations have been paid and/or satisfied in full and
the within Agreement is specifically terminated in writing by a duly authorized
officer of the Lender.
ARTICLE 14 - GENERAL.
14-1. PROTECTION OF COLLATERAL. The Lender shall have no duty as to
the collection or protection of the Collateral beyond the safe custody of such
of the Collateral as may come into the possession of the Lender and shall have
no duty as to the preservation of rights against prior parties or any other
rights pertaining thereto.
14-2. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
the Agent Borrower, each Principal Borrower and their respective
representatives, successors, and assigns and shall enure to the benefit of the
Lender and the Lender's successors and assigns provided, however, no trustee or
other fiduciary appointed with respect to any Principal Borrower shall have any
rights hereunder. In the event that the Lender assigns or transfers its rights
under this Agreement, the assignee shall thereupon succeed to and become vested
with all rights, powers, privileges, and duties of the Lender
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hereunder and the Lender shall thereupon be discharged and relieved from its
duties and obligations hereunder.
14-3. SEVERABILITY. Any determination that any provision of this
Agreement or any application thereof is invalid, illegal, or unenforceable in
any respect in any instance shall not affect the validity, legality, or
enforceability of such provision in any other instance, or the validity,
legality, or enforceability of any other provision of this Agreement.
14-4. AMENDMENTS. COURSE OF DEALING. (a) This Agreement and the
other Loan Documents incorporate all discussions and negotiations between the
Agent Borrower, each Principal Borrower and the Lender, either express or
implied, concerning the matters included herein and in such other instruments,
any custom, usage, or course of dealings to the contrary notwithstanding. No
such discussions, negotiations, custom, usage, or course of dealings shall
limit, modify, or otherwise affect the provisions thereof. No failure by the
Lender to give notice to the Agent Borrower or Principal Borrower or either of
them having failed to observe and comply with any warranty or covenant included
in any Loan Document shall constitute a waiver of such warranty or covenant or
the amendment of the subject Loan Document.
(b) No consent, modification, amendment, or waiver of any
provision of any Loan Document shall be effective unless executed in writing by
or on behalf of the party to be charged with such modification, amendment, or
waiver (and if such party is the Lender, then by a duly authorized officer
thereof). Any modification, amendment, or waiver provided by the Lender shall be
in reliance upon all representations and warranties theretofore made to the
Lender by or on behalf of the Principal Borrowers (and any guarantor, endorser,
or surety of the Obligations) and consequently may be rescinded by the Lender in
the event that any of such representations or warranties was not true and
complete in all material respects when given.
14-5. POWER OF ATTORNEY. Upon and during continuance of an Event of
Default, in connection with all powers of attorney included in this Agreement,
each Principal Borrower hereby grants unto the Lender full power to do any and
all things necessary or appropriate in connection
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with the exercise of such powers as fully and effectually as that Principal
Borrower might or could do, hereby ratifying all that said attorney shall do or
cause to be done by virtue of this Agreement. No power of attorney set forth in
this Agreement shall be affected by any disability or incapacity suffered by any
Principal Borrower and each shall survive the same. All powers conferred upon
the Lender by this Agreement, being coupled with an interest, shall be
irrevocable until this Agreement is terminated by a written instrument executed
by a duly authorized officer of the Lender.
14-6. APPLICATION OF PROCEEDS. The proceeds of any collection, sale,
or disposition of the Collateral, or of any other payments received hereunder,
shall be applied toward the Obligations in such order and manner as the Lender
determines in its sole discretion. Each Principal Borrower shall remain liable
to the Lender for any deficiency remaining following such application.
14-7. LENDER'S COSTS AND EXPENSES. Each Principal Borrower shall pay
on demand all Costs of Collection and all reasonable expenses of the Lender in
connection with the preparation, execution, and delivery of this Agreement and
of any other Loan Documents, whether now existing or hereafter arising, and all
other reasonable expenses which may be incurred by the Lender in preparing or
amending this Agreement and all other agreements, instruments, and documents
related thereto, or otherwise incurred with respect to the Obligations. Upon
prior notice to the Principal Borrowers, each Principal Borrower specifically
authorizes the Lender to pay all such fees and expenses and in the Lender's
discretion, to add such fees and expenses to the Loan Account.
14-8. COPIES AND FACSIMILES. This Agreement and all documents which
relate thereto, which have been or may be hereinafter furnished the Lender may
be reproduced by the Lender by any photographic, microfilm, xerographic, digital
imaging, or other process, and the Lender may destroy any document so
reproduced. Any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding (whether or not the
original is in existence and whether or not such reproduction was made in the
regular course of business). Any facsimile which bears proof of transmission
shall be binding on the party which or on whose behalf such
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transmission was initiated and likewise shall be so admissible in evidence as if
the original of such facsimile had been delivered to the party which or on whose
behalf such transmission was received.
14-9. MASSACHUSETTS LAW. This Agreement and all rights and
obligations hereunder, including matters of construction, validity, and
performance, shall be governed by the laws of The Commonwealth of Massachusetts
(except with respect to its conflicts of laws).
14-10. CONSENT TO JURISDICTION. (a) The Agent Borrower and each of
the Principal Borrowers agree that any legal action, proceeding, case, or
controversy against the Agent Borrower or any Principal Borrower with respect to
any Loan Document may be brought in the Superior Court of Suffolk County
Massachusetts or in the United States District Court, District of Massachusetts,
sitting in Boston, Massachusetts, as the Lender may elect in the Lender's sole
discretion. By execution and delivery of this Agreement, the Agent Borrower and
each Principal Borrower, for itself and in respect of its property, accepts,
submits, and consents generally and unconditionally, to the jurisdiction of the
aforesaid courts.
(b) The Agent Borrower and each of the Principal
Borrowers WAIVES personal service of any and all process upon them, and
irrevocably consents to the service of process out of any of the aforementioned
courts in any such action or proceeding by the mailing of copies thereof by
certified mail, postage prepaid, to the Agent Borrower or any Principal Borrower
at the address for notices as specified herein, such service to become effective
five (5) Business Days after such mailing.
(c) The Agent Borrower and each of the Principal
Borrowers WAIVES, at the option of Lender, any objection based on FORUM NON
CONVENIENS and any objection to venue of any action or proceeding instituted
under any of the Loan Documents and consents to the granting of such legal or
equitable remedy as is deemed appropriate by the Court.
(d) Nothing herein shall affect the right of the Lender
to bring legal actions or proceedings in any other competent jurisdiction.
(e) The Agent Borrower and each of the Principal
Borrowers agrees that any action commenced by the Agent Borrower and any
Principal Borrower asserting any claim or
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counterclaim arising under or in connection with this Agreement or any other
Loan Document shall be brought in the Superior Court of Suffolk County
Massachusetts or in the United States District Court, District of Massachusetts,
sitting in Boston, Massachusetts, and that such Courts shall have exclusive
jurisdiction with respect to any such action.
14-11. INDEMNIFICATION. The Principal Borrowers hereby indemnify,
defend, and hold the Lender and any employee, officer, or agent of the Lender
(each, an "INDEMNIFIED PERSON") harmless of and from any claim brought or
threatened against any Indemnified Person by any Person (as well as from
attorneys' reasonable fees and expenses in connection therewith) on account of
the Lender's relationship with the Agent Borrower, any Principal Borrower or any
other guarantor or endorser of the Obligations (each of which may be defended,
compromised, settled, or pursued by the Indemnified Person with counsel of the
Lender's selection, but at the expense of each Principal Borrower) other than
any claim as to which a final determination is made in a judicial proceeding (in
which the Lender and any other Indemnified Person has had an opportunity to be
heard), which determination includes a specific finding that the Indemnified
Person seeking indemnification had (i) acted in a grossly negligent manner or
(ii) acted with willful misconduct or (iii) been due to Lender's breach
hereunder resulting from the Lender's gross negligence or willful misconduct.
The within indemnification shall survive payment of the Obligations and/or any
termination, release, or discharge executed by the Lender in favor of the Agent
Borrower and any Principal Borrower.
14-12. RULES OF CONSTRUCTION. (a) The following rules of construction
shall be applied in the interpretation, construction, and enforcement of this
Agreement and of the other Loan Documents:
(i) Words in the singular include the plural and
words in the plural include the singular.
(ii) Headings (indicated by being UNDERLINED) and
the Table of Contents are solely for convenience of reference and do
not constitute a part of the instrument in which included and do not
affect such instrument's meaning, construction, or effect.
(iii) The words "includes" and "including" are not
limiting.
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(iv) The words "may not" are prohibitive and not
permissive.
(v) The word "or" is not exclusive.
(vi) Terms which are defined in one section of an
instrument are used with such definition throughout the instrument in
which so defined.
(vii) The symbol "$" refers to United States
Dollars.
(viii) References to "herein", "hereof", and
"within" are to this entire Loan Agreement and not merely the provision
in which such reference is included.
(ix) Except as otherwise specifically provided,
all references to time are to Boston time.
(x) In the determination of any notice, grace,
or other period of time prescribed or allowed hereunder, unless
otherwise provided (A) the day of the act, event, or default from which
the designated period of time begins to run shall not be included and
the last day of the period so computed shall be included unless such
last day is not a Business Day, in which event the last day of the
relevant period shall be the then next Business Day and (B) the period
so computed shall end at 5:00 PM on the relevant Business Day. (b) The
Loan Documents shall be construed and interpreted in a harmonious
manner,
provided, however, in the event of any inconsistency between the provisions of
the within Agreement and any other Loan Document, the provisions of the within
Agreement shall govern and control.
14-13. INTENT. It is intended that
(a) This Agreement take effect as a sealed instrument.
(b) The security interests created by this Agreement
secure all Obligations, now existing or hereafter arising;
(c) All reasonable costs and expenses incurred by the
Lender in connection with the Lender's relationship(s) with the Agent
Borrower and each Principal Borrower shall be borne by each of the
Principal Borrowers.
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(d) The Lender's consent to any action of the Agent
Borrower or any Principal Borrower which is prohibited unless such
consent is given may be given or refused by the Lender in its sole
discretion.
14-14. RIGHT OF SET-OFF. Following and during the continuance of an
Event of Default any and all deposits or other sums at any time credited by or
due to any Principal Borrower from the Lender and any cash, securities,
instruments or other property of the undersigned in the possession of the
Lender, whether for safekeeping or otherwise (regardless of the reason the
Lender or the Participant had received the same) shall at all times constitute
security for all Obligations and for any and all obligations of the undersigned
to the Lender, and may be applied or set off against the Obligations and against
the obligations of the undersigned to the Lender including, without limitation,
those arising hereunder, at any time while an Event of Default is then existing,
whether or not such are then due and whether or not other collateral is then
available to the Lender.
14-15. MAXIMUM INTEREST RATE. Regardless of any provision of any Loan
Document, the Lender shall never be entitled to contract for, charge, receive,
collect, or apply as interest on any Obligation, any amount in excess of the
maximum rate imposed by applicable law. Any payment which is made which, if
treated as interest on an Obligation would result in such interest's exceeding
such maximum rate shall be held, to the extent of such excess, as additional
collateral for the Obligations as if such excess were "Collateral."
14-16. FEDERAL RESERVE BANK PLEDGE. The Lender may at any time pledge
or assign all or any portion of the Lender's rights under this Agreement and the
other Loan Documents to a Federal Reserve Bank; provided, however, that no such
pledge or assignment shall release the Lender from the Lender's obligations
hereunder or under any other Loan Document.
14-17. WAIVERS. (a) The Agent Borrower and each of the Principal
Borrowers (and all guarantors, endorsers, and sureties of the Obligations) make
each of the waivers included in Subsection (b), below, knowingly, voluntarily,
and intentionally, and understands that the Lender,
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in entering into the financial arrangements contemplated hereby and in providing
loans and other financial accommodations to or for the account of any and each
of the Principal Borrowers as provided herein, whether not or in the future, is
relying on such waivers.
(b) THE AGENT BORROWER, THE PRINCIPAL BORROWERS, AND EACH
SUCH GUARANTOR, ENDORSER, AND SURETY RESPECTIVELY WAIVES THE FOLLOWING:
(i) Except as otherwise specifically required
hereby, notice of non-payment, demand, presentment, protest and all
forms of demand and notice, both with respect to the Obligations and
the Collateral (except as provided in any Loan Document).
(ii) Except as otherwise specifically required by
any Loan Document, the right to notice and/or hearing prior to the
Lender's exercising of the Lender's rights upon default.
(iii) THE RIGHT TO A JURY IN ANY TRIAL OF ANY CASE
OR CONTROVERSY IN WHICH THE LENDER IS OR BECOMES A PARTY (WHETHER SUCH
CASE OR CONTROVERSY IS INITIATED BY OR AGAINST THE LENDER OR IN WHICH
THE LENDER IS JOINED AS A PARTY LITIGANT), WHICH CASE OR CONTROVERSY
ARISES OUT OF OR IS IN RESPECT OF, ANY RELATIONSHIP AMONGST OR BETWEEN
THE AGENT BORROWER, ANY PRINCIPAL BORROWER OR ANY OTHER PERSON AND THE
LENDER (AND THE LENDER LIKEWISE WAIVES THE RIGHT TO A JURY IN ANY TRIAL
OF ANY SUCH CASE OR CONTROVERSY).
(iv) Any defense, counterclaim, set-off,
recoupment, or other basis on which the amount of any Obligation, as
stated on the books and records of the Lender, could be reduced or
claimed to be paid otherwise than in accordance with the tenor of and
written terms of such Obligation except this does not limit any right
of any Principal Borrower or the Agent Borrower to obtain any
affirmative recovery from Lender.
(v) Any claim to consequential, special, or
punitive damages.
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"PRINCIPAL BORROWERS"
POLYMEDICA CORPORATION POLYMEDICA HEALTHCARE, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
------------------------------- ---------------------------------
Title: CFO and Treasurer Title: President
---------------------------- ------------------------------
POLYMEDICA SECURITIES, INC. LIBERTY MEDICAL SUPPLY, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------------------- ---------------------------------
Title: Treasurer Title: President
---------------------------- ------------------------------
"AGENT BORROWER"
POLYMEDICA CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------
Title: CFO AND TREASURER
---------------------
"LENDER"
BANKBOSTON, N.A.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------
Title: VICE PRESIDENT
---------------------
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Exhibits
Exhibit 2-5 Master Note
Exhibit 2-7 Interest Provisions
Exhibit 6-2 Related Entity
Exhibit 6-4 Trade Names
Exhibit 6-5 Locations
Exhibit 6-6 Encumbrances
Exhibit 6-7 Indebtedness
Exhibit 6-8 Insurance Policies
Exhibit 6-9 Licenses
Exhibit 6-10 Leases
Exhibit 9-3 Borrowing Base Certificate
Exhibit 9-8 Performance Covenants
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