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EXHIBIT 4.4
SECOND MODIFICATION AGREEMENT
THIS SECOND MODIFICATION AGREEMENT ("MODIFICATION") is made as of November 15,
1999, by and between PHOENIX MEDICAL TECHNOLOGY, INC., a Delaware corporation
("BORROWER") and LASALLE BUSINESS CREDIT, INC., a Delaware corporation
("LASALLE").
RECITALS
Pursuant to the terms and provisions of a Loan and Security Agreement dated
June 21, 1999 by and between the BORROWER and LASALLE, as previously amended
("LOAN AGREEMENT"), LASALLE is providing to the BORROWER certain credit
accommodations, including a revolving line of credit in the maximum principal
amount of Three Million Eight Hundred Thousand Dollars ($3,800,000.00), a term
loan in the maximum principal amount of One Million Seven Hundred Thousand
Dollars ($1,700,000.00) and a capital expenditure credit facility in the
maximum amount of Five Hundred Thousand Dollars ($500,000.00) (collectively,
"LOANS").
The BORROWER's obligations to LASALLE under the LOANS are secured by: (a) the
security interest and liens granted in the LOAN AGREEMENT; (b) the mortgage
lien granted in the Mortgage and Absolute Assignment of Rents dated June 21,
1999 from the BORROWER to LASALLE ("MORTGAGE"); (c) the Trademark Security
Agreement dated June 21, 1999 by and between the BORROWER and LASALLE
("TRADEMARK AGREEMENT"); and (d) the Patent Security Agreement dated June 21,
1999 by and between the BORROWER and LASALLE ("PATENT AGREEMENT").
In addition, the LOAN has the benefit of: (a) the Subordination Agreement dated
July 28, 1999 by and between the BORROWER and Williamsburg County, South
Carolina; and (b) the Subordination and Intercreditor Agreement dated June 21,
1999 by and between LASALLE and London International Group, Inc. (collectively,
"SUBORDINATION AGREEMENTS"). As used herein the term "LOAN DOCUMENTS") means
collectively the LOAN AGREEMENT, the MORTGAGE, the TRADEMARK AGREEMENT, the
PATENT AGREEMENT, the SUBORDINATION AGREEMENTS and all other documents
evidencing, securing or otherwise documenting the LOANS.
As of this date, the BORROWER is in violation of the covenants contained in
paragraphs 14(m)(ii) and 14(m)(iii) of the LOAN AGREEMENT (collectively,
"EXISTING COVENANT VIOLATIONS").
The BORROWER has requested that LASALLE: (a) waive its rights to declare a
default based upon the EXISTING COVENANT VIOLATIONS; and (b) modify the
financial covenants contained in the LOAN AGREEMENT. LASALLE is willing to
consent to the requests of the BORROWER subject to the terms and provisions of
this MODIFICATION.
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NOW, THEREFORE, in consideration of the premises, and other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties agree as follows:
Section 1. Recitals. The parties acknowledge the accuracy of the
Recitals and hereby incorporate the Recitals into this MODIFICATION.
Section 2. Waiver. LASALLE hereby waives its right to declare a default
under the LOAN AGREEMENT as a result of the EXISTING COVENANT VIOLATIONS. This
waiver is specifically limited to the EXISTING COVENANT VIOLATIONS as of the
date of this MODIFICATION and LASALLE hereby reserves all of its rights and
remedies which may arise as a result of any other existing defaults under the
LOAN AGREEMENT or any other LOAN DOCUMENT or as a result of any future
violation of any covenants under the LOAN AGREEMENT or any other LOAN DOCUMENT.
Section 3. Amendment To Loan Agreement. The LOAN AGREEMENT is hereby
amended as follows:
a. Paragraph 1.(a) of the LOAN AGREEMENT is hereby amended by
deleting its present language in its entirety and substituting in lieu thereof
the following:
"Debt Service Coverage Ratio" shall mean, with respect to any
period, the ratio of: (i) net income after taxes for such period
(excluding any after-tax gains or losses on the sale of assets (other
than the sale of Inventory in the ordinary course of business) and
excluding other after-tax extraordinary gains or losses), plus
deferred taxes, plus depreciation and amortization deducted in
determining net income for such period, minus Capital Expenditures for
such period not financed, minus any cash dividends paid or accrued and
cash withdrawals paid or accrued to shareholders or other Affiliates
for such period which were not calculated in determining net income
after taxes, and plus the after-tax increase in LIFO reserves or minus
the after tax decrease in LIFO reserves; to (ii) current principal
maturities of long term debt, which has not been subordinated to the
Borrower's obligations to LaSalle pursuant to a writing acceptable to
LaSalle, and capitalized leases paid or scheduled to be paid during
such period.
b. Paragraph 5.(a) of the LOAN AGREEMENT is hereby amended by
deleting its existing language in its entirety and substituting in lieu thereof
the following:
(a) Rates Of Interest. Interest accrued on all
Loans shall be due on the earliest of: (i) the first day of each month
(for the immediately preceding month), computed through the last
calendar day of the preceding month; (ii) the occurrence of an Event
of Default in consequence of which
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LaSalle elects to accelerate the maturity and payment of the
Liabilities; or (iii) termination of this Agreement pursuant to
paragraph 12 hereof. Interest shall accrue on: (A) the unpaid
principal balance of the Term Loan made to Borrower outstanding at the
end of each day at a fluctuating rate per annum equal to two and
one-quarter percent (2.25%) above the Prime Rate; (B) the unpaid
principal balance of the Capital Expenditure Loan made to Borrower
outstanding at the end of each day at a fluctuating rate per annum
equal to two and one-quarter percent (2.25%) above the Prime Rate; and
(C) the principal amount of the Revolving Loans made to Borrower
outstanding at the end of each day at a fluctuating rate per annum
equal to two percent (2.0%) above the Prime Rate. The rate of interest
payable on the Loans shall increase or decrease by an amount equal to
any increase or decrease in the Prime Rate, effective as of the
opening of business on the day that any such change in the Prime Rate
occurs. Upon and after the occurrence of an Event of Default, and
during the continuation thereof, the principal amount of all Loans
shall bear interest on demand at a rate per annum equal to the rate of
interest then in effect plus two percent (2%).
c. Paragraph 14.(m) is hereby amended by deleting its present
language in its entirety and substituting in lieu thereof the following:
(m) Borrower shall maintain and keep in full force and
effect each of the financial covenants set forth below until the
termination of this Agreement and the repayment of all Liabilities.
The calculation and determination of each such financial covenant, and
all accounting terms contained therein, shall be so calculated and
construed in accordance with GAAP, applied on a basis consistent with
the financial statements of Borrower delivered on or before the
Closing Date:
(i) Consolidated Tangible Net Worth. Borrower
and its Subsidiaries, on a consolidated basis, shall maintain as of
the end of (A) the fiscal quarter ending December 31, 1999, a Tangible
Net Worth of not less than Six Hundred Fifty Thousand Dollars
($650,000.00), and (B) each fiscal quarter commencing with March 31,
2000 and continuing until this Agreement is terminated and all of the
Liabilities have been repaid, a Tangible Net Worth of not less than
Five Hundred Seventy-Five Thousand Dollars ($575,000.00);
(ii) Consolidated Interest Coverage Ratio.
Borrower and its Subsidiaries, on a consolidated basis, shall have:
(A) as of the last day of (and for) the three (3) month period ending
March 31, 2000, a ratio of (1) EBITDA for such period minus Capital
Expenditures for such period not financed, to (2) interest expense for
such period, of not less than 0.85 to 1.0; (B) as of the last day of
(and for) the six month period ending June 30, 2000, a ratio of (1)
EBITDA for
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such period minus Capital Expenditures for such period not financed,
to (2) interest expense for such period, of not less than 1.0 to 1.0;
(C) as of the last day of (and for) the nine month period ending
September 30, 2000, a ratio of (1) EBITDA for such period minus
Capital Expenditures for such period not financed, to (2) interest
expense for such period, of not less than 1.1 to 1.0; and (D) as of
the last day of (and for) each twelve month period ending on the last
day of a fiscal quarter commencing with the quarter ending December
31, 2000, a ratio of (1) EBITDA for such period minus Capital
Expenditures for such period not financed, to (2) interest expense for
such period, of not less than 1.5 to 1.0.
(iii) Consolidated Debt Service Coverage Ratio.
Borrower and its Subsidiaries, on a consolidated basis, shall have:
(A) as of the last day of (and for) the three (3) month period ending
June 30, 2000, a Debt Service Coverage Ratio of not less than 0.90 to
1.0; (B) as of the last day of (and for) the six month period ending
September 30, 2000, a Debt Service Coverage Ratio of not less than
0.90 to 1.0; (C) as of the last day of (and for) the nine month period
ending December 31, 2000, a Debt Service Coverage Ratio of not less
than 1.10 to 1.0; and (D) as of the last day of (and for) each twelve
month period ending on the last day of a fiscal quarter commencing
with the quarter ending March 31, 2000, a Debt Service Coverage Ratio
of not less than 1.25 to 1.0.
(iv) Consolidated Capital Expenditures. Borrower
and its Subsidiaries, on a consolidated basis, shall not: (A) make
Capital Expenditures, which are not financed by term loans or capital
leases of an aggregate amount of more than (1) Two Hundred Thousand
Dollars ($200,000.00) during the period between the Closing Date and
December 31, 1999, inclusive, or (2) Two Hundred Thousand Dollars
($200,000.00) during any fiscal year of the Borrower thereafter; or
(B) make any Capital Expenditures, which are financed by term loans
(other than the Capital Expenditure Loan) or capital leases, of an
aggregate amount of more than (a) Two Hundred Thousand Dollars
($200,000.00) through the period between the Closing Date and December
31, 1999, inclusive, or (b) One Hundred Thousand Dollars ($100,000.00)
during any fiscal year of the Borrower thereafter.
(v) Consolidated EBITDA. Borrower and its
Subsidiaries, on a consolidated basis, shall have as of the last day
of (and for): (A) December, 1999, EBITDA for such period of not less
than Twenty- Five Thousand Dollars ($25,000.00); (B) the two month
period ending January 31, 2000, EBITDA for such period of not less
than Negative Sixty Thousand Dollars (-$60,000.00); (C) the three
month period ending February 29, 2000, EBITDA for such period of not
less than Negative Fifteen Thousand Dollars (- $15,000.00); (D) the
four month period ending Xxxxx 00, 0000, XXXXXX for such period of not
less than One Hundred Twenty-Four Thousand
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Dollars ($124,000.00); (E) the five month period ending April 30,
2000, EBITDA for such period of not less than One Hundred Seven
Thousand Dollars ($107,000.00); (F) the six month period ending May
31, 2000, EBITDA for such period of not less than Two Hundred
Fifty-Eight Thousand Dollars ($258,000.00); (G) the seven month period
ending June 30, 2000, EBITDA for such period of not less than Two
Hundred Seventy-Eight Thousand Dollars ($278,000.00); (H) the eight
month period ending July 31, 2000, EBITDA for such period of not less
than Three Hundred Eighty Thousand Dollars ($380,000.00); (I) the nine
month period ending August 31, 2000, EBITDA for such period of not
less than Four Hundred Eighty Thousand Dollars ($480,000.00); (J) the
ten month period ending September 30, 2000, EBITDA for such period of
not less than Five Hundred Eighty Thousand Dollars ($580,000.00); (K)
the eleven month period ending October 31, 2000, EBITDA for such
period of not less than Seven Hundred Thousand Dollars ($700,000.00);
(L) the twelve month period ending November 30, 2000, EBITDA for such
period of not less than Eight Hundred Twenty-Five Thousand Dollars
($825,000.00); and (M) each twelve month period ending on the last day
of a calendar month commencing with the twelve month period ending
December 31, 2000, EBITDA for such period of not less than Nine
Hundred Thousand Dollars ($900,000.00).
Section 4. Other Terms. Except as specifically modified herein, all
other terms and provisions of the LOAN DOCUMENTS remain in full force and
effect and are hereby ratified and confirmed. It is the specific intention of
the parties hereto that the modifications contained herein shall not constitute
a novation of any of the BORROWER's obligations to LASALLE.
Section 5. Final Agreement. This MODIFICATION and the other LOAN
DOCUMENTS, as modified herein, constitute the entire agreement between the
parties hereto with respect to the LOANS, and may not be altered, modified or
amended except by a writing executed by LASALLE and the BORROWER.
Section 6. Fees And Expenses. The BORROWER shall pay all costs and
expenses incurred by LASALLE in connection with this MODIFICATION, including,
but not limited to, all attorneys' fees.
Section 7. Binding Effect. This MODIFICATION shall inure to the benefit
of, and shall be binding upon, the parties hereto and their respective personal
representatives, successors and assigns.
Section 8. Choice Of Law. The laws of the State of Maryland (excluding,
however, conflicts of law principles) shall govern and be applied to determine
all issues relating to this MODIFICATION and the rights and obligations of the
parties hereto, including the validity, construction, interpretation, and
enforceability of this MODIFICATION and its various provisions and the
consequences and legal effect of all transactions and events which resulted in
the execution of this MODIFICATION or which occurred or were to occur
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as a direct or indirect result of this MODIFICATION having been executed.
Section 9. Consent To Jurisdiction; Agreement As To Venue. The BORROWER
irrevocably consents to the non-exclusive jurisdiction of the courts of the
State of Maryland and of the United States District Court for the District of
Maryland, if a basis for federal jurisdiction exists. In addition, the BORROWER
agrees that venue shall be proper in any circuit court of the State of Maryland
selected by LASALLE or in the United States District Court for the District of
Maryland if a basis for federal jurisdiction exists, and the BORROWER waives
any right to object to the maintenance of a suit in any of the state or federal
courts of the State of Maryland on the basis of improper venue or of
inconvenience of forum.
Section 10. Tense, Gender, Defined Terms, Captions. As used herein, the
plural shall refer to and include the singular, and the singular shall refer to
and include the plural. The use of any gender shall include and refer to any
other gender. All defined terms are completely capitalized throughout this
MODIFICATION. All captions are for the purpose of convenience only.
Section 11. Time. Time is of the essence with respect to this
MODIFICATION and all terms and conditions described herein.
Section 12. Release Of Claims. The BORROWER hereby releases, waives,
discharges and agrees to hold LASALLE and its officers, directors, agents,
attorneys, and employees harmless from any and all claims, known or unknown,
which the BORROWER may currently have against LASALLE or its officers,
directors, agents, attorneys, or employees which in any way relate, pertain, or
arise, directly or indirectly, from the LOANS (or any of them), the LOAN
DOCUMENTS, this MODIFICATION, or which otherwise relate or pertain to the
collateral securing the obligations of the BORROWER (or any of them) to
LASALLE, the transactions described in this MODIFICATION, or the conduct of the
parties with respect thereto.
Section 13. No Waiver. LASALLE, at any time or from time to time, may
waive all or any rights under this MODIFICATION or the other LOAN DOCUMENTS, as
amended, but any such waiver or indulgence by LASALLE at any time or from time
to time shall not constitute a future waiver of performance or exact
performance by the BORROWER.
Section 14. Waiver Of Jury Trial. The BORROWER and LASALLE each agree
that any suit, action, or proceeding, whether claim or counterclaim, brought or
instituted by the BORROWER or LASALLE, or any successor or assign of the
BORROWER or LASALLE, on or with respect to this MODIFICATION or any of the LOAN
DOCUMENTS, as amended pursuant to this MODIFICATION, or which in any way
relates, directly or indirectly, to the obligations of the BORROWER to LASALLE
under this MODIFICATION or any of the LOAN DOCUMENTS, as amended pursuant to
this MODIFICATION, or the dealings of the parties with respect thereto, shall
be tried only by a court and
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not by a jury. THE BORROWER AND LASALLE EACH HEREBY EXPRESSLY WAIVE ANY RIGHT
TO A TRIAL BY JURY IN ANY SUCH SUIT, ACTION, OR PROCEEDING. The BORROWER and
LASALLE acknowledge and agree that this provision is a specific and material
aspect of the agreement between the parties and that LASALLE would not enter
into this transaction with the BORROWER if this provision were not part of
their agreement.
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IN WITNESS WHEREOF, the parties have executed this MODIFICATION with the
specific intention of creating a document under seal as of the date first above
written.
WITNESS/ATTEST: BORROWER:
PHOENIX MEDICAL TECHNOLOGY, INC.
A Delaware Corporation
By: /s/ Xxxxxx X. Xxxxxxxx (SEAL)
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Name: Xxxxxx X. Xxxxxxxx
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Title: President
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LASALLE:
LASALLE BUSINESS CREDIT, INC.,
A Delaware Corporation
By: /s/ Xxxxxx X. Xxxxxxxx, Xx. (SEAL)
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Name: Xxxxxx X. Xxxxxxxx, Xx.
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Title: First Vice President
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