GUARANTY AGREEMENT
GUARANTY AGREEMENT dated as of November 16, 1998 from Star Medical
Technologies, Inc., a California corporation (the "Guarantor") to Fleet National
Bank (the "Bank").
WITNESSETH:
WHEREAS, Palomar Medical Technologies, Inc., a Delaware corporation
(the "Borrower") wishes to enter into a letter agreement of even date herewith
(as same may be from time to time amended, the "Loan Agreement") with the Bank;
and
WHEREAS, pursuant to the Loan Agreement, the Bank will establish a
revolving credit facility for the Borrower and may make Revolving Loans (defined
below) to the Borrower on the terms and conditions set forth therein and may
also extend other credit facilities for the Borrower on the terms and conditions
set forth therein; and
WHEREAS, in order to induce the Bank to enter into the Loan Agreement
and to make Revolving Loans under the Loan Agreement, the Borrower has agreed to
obtain and deliver this Agreement; and
WHEREAS, the Guarantor is a Subsidiary of the Borrower and benefits
from the management, accounting and financial services provided the Borrower;
and
WHEREAS, the Bank's agreement to make Revolving Loans in accordance
with the Loan Agreement is and will be beneficial to the Guarantor inasmuch as
the Guarantor may receive certain proceeds thereof from the Borrower and will
benefit from the financial strength of the Borrower;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Guarantor hereby agrees as
follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.01. Defined Terms. As used in this Agreement, the following
terms shall have the meanings set out respectively after each:
"Agreement" - This Guaranty Agreement, as same may be from time to time
amended.
"Collateral" - As defined in the Loan Agreement.
"Event of Default" - As defined in Section 5.01 below
"Guaranteed Obligations" - Any and all indebtedness, liabilities or
obligations of the Borrower, whether joint or several, direct or indirect,
absolute or contingent, due or to become due, now existing or hereafter arising,
to or for the benefit of the Bank, including, without limitation, those now or
hereafter arising under any Loan Document.
"Guarantor's Documents" - Collectively, this Agreement, the Guarantor's
Security Agreement and the Guarantor's Intellectual Property Security
Agreements.
"Guarantor's Intellectual Property Security Agreements" - Collectively,
the collateral assignments and notices of collateral assignment from the
Guarantor to the Bank relating to the Guarantor's registered trademarks, patents
and copyrights, if any.
"Guarantor's Security Agreement" - Collectively, that certain
Inventory, Accounts Receivable and Intangibles Security Agreement and that
certain Supplementary Security Agreement - Security Interest in Good and
Chattels, each of even date herewith, from the Guarantor to the Bank.
"Guaranty" - The guaranty of the Guarantor set forth in Article II.
"Indebtedness" - As defined in the Loan Agreement.
"Intellectual Property" - As defined in Subsection 3.01(j).
"Loan Documents" - The Loan Agreement, the Revolving Note, the Security
Agreements and any other instrument, document or other agreement relating to
extension of financial accommodations or other banking services between the
Borrower and the Bank or made by the Borrower in favor of the Bank, all whether
now existing or hereafter entered into or delivered.
"Person" - As defined in the Loan Agreement.
"Prime Rate" - That variable rate of interest per annum designated by
Fleet National Bank, from time to time, as being its prime rate of interest,
with a change in the Prime Rate to take effect simultaneously with each change
in such designated rate. It is understood that such designated prime rate is
merely a reference rate and does not necessarily represent the lowest or best
rate being charged to any customer.
"Revolving Loans" - As defined in the Loan Agreement.
"Revolving Note" - As defined in the Loan Agreement.
"Security Agreements" - As defined in the Loan Agreement.
"Subsidiary" - As defined in the Loan Agreement, except that references
in such definition to the "Borrower" will be deemed, for the purposes of this
Agreement, to refer to the Guarantor.
Section 1.02. Use of Defined Terms. Any defined term used in the plural
preceded by the definite article shall be taken to encompass all members of the
relevant class. Any defined term used in the singular preceded by "any" shall be
taken to indicate any number of the members of the relevant class.
ARTICLE II
GUARANTY
Section 2.01. Guaranty. In consideration of the Bank entering into the
Loan Agreement and making Revolving Loans to the Borrower pursuant to the Loan
Agreement, the Guarantor hereby guaranties to the Bank the due and punctual
payment and performance of all of the Guaranteed Obligations, as and when the
same shall become due and payable, whether on demand or at maturity, by
declaration or otherwise, according to the terms thereof, and all losses, costs,
expenses and reasonable attorneys' fees and disbursements incurred by reason of
a default under any of said Guaranteed Obligations. In case of failure by the
Borrower punctually to pay any of the Guaranteed Obligations, the Guarantor
unconditionally agrees to cause such payment to be made punctually as and when
the same shall become due and payable, whether at maturity or by declaration or
otherwise, and as if such payment were made by the Borrower. This Guaranty is an
absolute, unconditional, unlimited and continuing guaranty of the full and
punctual payment and performance by the Borrower of the Guaranteed Obligations
and not merely of their collectibility and is in no way conditioned upon any
requirement that the Bank first collect or attempt to collect the Guaranteed
Obligations or any portion thereof from the Borrower or from any other guarantor
of any of same or resort to any security or other means of obtaining payment of
any of the Guaranteed Obligations which the Bank now has or may acquire after
the date hereof, or upon any other contingency whatsoever. Upon and during the
continuance of any Event of Default (as defined herein), all liabilities and
obligations of the Guarantor to the Bank, hereunder or otherwise, shall at the
option of the Bank, become forthwith due and payable to the Bank without further
demand or notice of any nature, all of which are expressly waived by the
Guarantor. Payments by the Guarantor hereunder may be required by the Bank on
any number of occasions.
Section 2.02. Guarantor's Further Agreements to Pay. The Guarantor
further agrees, as principal obligor and not as guarantor, to pay to the Bank
forthwith upon demand, in funds immediately available to the Bank, all costs and
expenses (including court costs and reasonable attorneys' fees and
disbursements) incurred or expended by the Bank in connection with this Guaranty
and the enforcement hereof, together with interest on any sum now or hereafter
payable by the Guarantor under this Agreement, such interest to accrue from the
date of any demand for payment of such sum to the date of payment. Such interest
will be payable at the rate set forth in Section 6.04 below.
Section 2.03. Bank's Freedom to Deal with Borrower and Other Parties.
The Bank shall be at liberty, without giving notice to or obtaining the assent
of the Guarantor and without relieving the Guarantor of any liability hereunder,
to deal with the Borrower and with each other party who now is or after the date
hereof becomes liable in any manner for any of the Guaranteed Obligations in
such manner as the Bank in its sole discretion deems fit. The Bank has full
authority in its sole discretio to do any or all of the following things, none
of which shall discharge or affect the Guarantor's liability hereunder: (i)
extend credit, make loans and afford other financial accommodations to the
Borrower at such times, in such amounts and on such terms as the Bank may
approve; (ii) modify, amend, vary the terms and grant extensions or renewals of
any present or future indebtedness or of all or any of the Guaranteed
Obligations or any instrument relating to or securing same, and, without
limitation, this Guaranty shall survive payment of the Revolving Note; (iii)
grant time, waivers and other indulgences in respect thereto; (iv) vary,
exchange, release or discharge, wholly or partially, or delay or abstain from
perfecting and enforcing any security or guaranty or other means of obtaining
payment of any of the Guaranteed Obligations which the Bank now has or acquires
after the date hereof; (v) take or omit to take any of the actions referred to
in any Loan Document or other instrument evidencing, securing or relating to any
of the Guaranteed Obligations or any actions under this Guaranty; (vi) fail,
omit or delay to enforce, assert or exercise any right, power or remedy
conferred on the Bank in this Guaranty or in any other Loan Document or other
instrument evidencing, securing or relating to any of the Guaranteed Obligations
or take or refrain from taking any other action; (vii) accept partial payments
from the Borrower or any other party; (viii) release or discharge, wholly or
partially, the Borrower, any endorser or any guarantor, or accept additional
collateral for the payment of any Guaranteed Obligations; (ix) compromise or
make any settlement or other arrangement with the Borrower or any such other
party; and (x) consent to and participate in the proceeds of any assignment,
trust or mortgage for the benefit of creditors.
Section 2.04. Unenforceability of Guaranteed Obligations; Invalidity of
Security or Other Guaranties. If for any reason now or hereafter the Borrower
has no legal existence or is under no legal obligation to discharge any of the
Guaranteed Obligations undertaken or purported to be undertaken by it or on its
behalf, or if any of the moneys included in the Guaranteed Obligations have
become irrecoverable from the Borrower by operation of law or for any other
reason, this Guaranty shall nevertheless be binding on the Guarantor to the same
extent as if the Guarantor at all times had been the principal debtor on all
such Guaranteed Obligations. This Guaranty shall be in addition to any other
guaranty or other security for the Guaranteed Obligations, and it shall not be
prejudiced or rendered unenforceable by the invalidity of any such other
guaranty or security. The liability of the Guarantor under this Guaranty shall
remain in full force and effect until payment and performance in full of all of
the Guaranteed Obligations. This Guaranty shall continue to be effective or be
reinstated, as the case may be, if at any time any payment of any of the
Guaranteed Obligations is rescinded or must otherwise be restored or returned by
the Bank, upon the insolvency, bankruptcy or reorganization of the Borrower or
otherwise, all as though such payment had not been made.
Section 2.05. Waivers by Guarantor. The Guarantor waives: notice of
acceptance hereof and reliance hereon, notice of any action taken or omitted by
the Bank in reliance hereon, any requirement that the Bank be diligent or prompt
in making demands hereunder, any requirement as to any presentment, demand,
protest, giving notice of any default by the Borrower or asserting any other
right of the Bank hereunder and all demands, notices (other than any demands and
notices which are specifically provided for in the Loan Agreement) and all
suretyship defenses generally. The Guarantor also irrevocably waives, to the
fullest extent permitted by law, all defenses which at any time may be available
in respect of the Guarantor's obligations hereunder by virtue of any statute of
limitations, valuation, stay, homestead or moratorium law or other similar law
now or hereafter in effect.
Without limiting the generality of the foregoing provisions of this
Guaranty, the liability of the Guarantor shall not be released, discharged or
otherwise affected by:
(i) any extension, renewal, settlement, compromise, waiver or release
in respect of any obligation of the Borrower or any other guarantor of any of
the Guaranteed Obligations;
(ii) any change in the time, manner, amount or place of payment of any
Guaranteed Obligation or any modification or amendment of or supplement to any
Loan Document or this Agreement;
(iii) any release, non-perfection or invalidity of any direct or
indirect security for any obligation of the Borrower, the Guarantor or any other
guarantor of any of the Guaranteed Obligations;
(iv) any change in the legal existence, structure, record or beneficial
ownership or control of the Borrower or the Guarantor or any other guarantor of
any of the Guaranteed Obligations, or any insolvency, bankruptcy, reorganization
or other similar proceeding affecting any such Person or its assets;
(v) the existence of any claim, set-off or other rights which the
Guarantor may have at any time against the Borrower, the Bank or any other
guarantor of any of the Guaranteed Obligations or any other Person, whether or
not arising in connection with this Agreement;
(vi) any invalidity or unenforceability relating to or against the
Borrower or the Guarantor for any reason under any Loan Document or under this
Agreement; or any provision of applicable law or regulation purporting to
prohibit the payment by any Person of the principal of or interest on the
Revolving Note or any other amount payable under any Loan Document or this
Agreement; or
(vii) any other act or omission to act or delay of any kind by the
Borrower, the Bank or any other Person or any other circumstances whatsoever
which might, but for the provisions of this paragraph, constitute a legal or
equitable discharge of the Guarantor's obligations hereunder.
Section 2.06. Subrogation. Unless and until all of the Guaranteed
Obligations shall have been indefeasibly paid in full and all commitments for
further extensions of credit to the Borrower by the Bank shall have been
terminated, the Guarantor hereby irrevocably and unconditionally waives
enforcement of any and all rights of subrogation, contribution or similar rights
which, but for this Section 2.06, the Guarantor might otherwise have in relation
to the Borrower or any other guarantor as a result of this Agreement. No right
of subrogation, contribution or any similar right will in any event be deemed to
give the Guarantor any claim against the Bank on account of the Bank's release,
failure to perfect or other dealing or failing to deal with any collateral or
with any Person, even if the value of such subrogation, contribution or similar
rights is thereby diminished or jeopardized.
Section 2.07. No Contest with Bank. No set-off, counterclaim, reduction
or diminution of any obligation, or any claim or defense of any kind or nature
which the Guarantor has or may have against the Borrower, any other guarantor or
the Bank shall be available hereunder to the Guarantor. The Guarantor will not,
in any proceedings under the Bankruptcy Code or insolvency proceedings of any
nature, prove in competition with the Bank in respect of any payment hereunder
or be entitled to have the benefit of any counterclaim or proof of claim or
dividend or payment by or on behalf of the Borrower or the benefit of any other
security for any Guaranteed Obligation which, now or hereafter, the Guarantor
may hold in competition with the Bank.
Section 2.08. Stay of Acceleration. If acceleration of the time for
payment of any amount payable by the Borrower under any Loan Document is stayed
upon the insolvency, bankruptcy or reorganization of the Borrower, all such
amounts otherwise subject to acceleration under the terms of this Guaranty shall
nonetheless be payable by the Guarantor hereunder forthwith on demand by the
Bank.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01. General Representations and Warranties. The Guarantor
hereby represents and warrants that:
(a) The Guarantor (i) is a corporation duly incorporated, validly
existing and in good standing under the laws of California, (ii) has full
corporate power and authority to own its assets and to transact the business in
which it is now engaged, to grant the security interests contemplated by the
Guarantor's Security Agreement and the Guarantor's Intellectual Property
Security Agreements, and to enter into and perform this Agreement and the other
Guarantor's Documents, and (iii) is duly qualified to do business and in good
standing under the laws of each jurisdiction in which failure to be so qualified
could have a material adverse effect on the business, prospects or condition of
the Guarantor, all such jurisdictions being listed on item 3.01(a) of the
attached Disclosure Schedule. At the date hereof, the Guarantor has no
Subsidiaries. The Guarantor is not a member of any partnership or a joint
venture, except as shown on said item 3.01(a) of the attached Disclosure
Schedule. The Guarantor is a Subsidiary
of the Borrower and, at the date of this Agreement, is wholly-owned by the
Borrower (save for certain stock options held by officers and employees of the
Guarantor and shares issued upon the exercise of stock options).
(b) The execution, delivery and performance by the Guarantor of this
Agreement do not and will not:
(i) require any consent or approval of the Guarantor's
stockholders;
(ii) contravene its charter documents or by-laws;
(iii) violate any provision of, or require any filing,
registration, consent or approval under, any law, rule, regulation,
order, writ, judgment, injunction, decree, determination or award
presently in effect having applicability to the Guarantor;
(iv) result in a breach of or constitute a default or require
any consent under any indenture or loan or credit agreement or any
other agreement, lease or instrument to which the Guarantor is a party
or by which the Guarantor or any of the Guarantor's properties may be
bound or affected; or
(v) result in, or require, the creation or imposition of any
lien, security interest or other encumbrance (other than in favor of
the Bank) upon or with respect to any of the properties now owned or
hereafter acquired by the Guarantor.
(c) This Agreement and the other Guarantor's Documents have been duly
authorized by the Guarantor by all appropriate corporate proceedings, have been
duly executed and delivered on behalf of the Guarantor and each is a legal,
valid and binding obligation of the Guarantor, enforceable against the Guarantor
in accordance with its respective terms, except as enforceability may be limited
by laws of general application relating to bankruptcy, insolvency and the relief
of debtors and by rules of law governing specific performance, injunctive relief
and other equitable remedies.
(d) Except as described on item 3.01(d) of the attached Disclosure
Schedule, there are no actions, suits, proceedings or investigations pending or,
to the knowledge of the Guarantor, threatened by or against the Guarantor or any
Subsidiary of the Guarantor before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, which
could hinder or prevent the consummation of the transactions contemplated hereby
or call into question the validity of this Agreement or any of the other
Guarantor's Documents or any other instrument provided for or contemplated by
this Agreement or any of the other Guarantor's Documents or any action taken or
to be taken in connection with the transactions contemplated hereby or thereby
or which in any single case or in the aggregate
might result in any material adverse change in the business, prospects,
condition, affairs or operations of the Guarantor or any such Subsidiary.
(e) The Guarantor is not in violation of any term of its charter or
by-laws as now in effect. Neither the Guarantor nor any Subsidiary of the
Guarantor is in material violation of any term of any mortgage, indenture or
judgment, decree or order, or any other instrument, contract or agreement to
which it is a party or by which any of its property is bound.
(f) The Guarantor has filed (and has caused each Subsidiary of the
Guarantor to file) all federal, state and local tax returns, reports and
estimates required to be filed by the Guarantor or by any such Subsidiary. All
such filed returns, reports and estimates and have been completed in accordance
with applicable law and the Guarantor (or the Subsidiary concerned, as the case
may be) has paid all taxes, assessments, impositions, fees and other
governmental charges required to be paid in respect of the periods covered by
such returns, reports or estimates. No deficiencies for any tax, assessment or
governmental charge have been asserted or assessed, and the Guarantor knows of
no material tax liability or basis therefor.
(g) The Guarantor is in compliance with (and each Subsidiary of the
Guarantor is in compliance with) all requirements of law, federal, state and
local, and all requirements of all governmental bodies or agencies having
jurisdiction over it, the conduct of its business, the use of its properties and
assets, and all premises occupied by it, failure to comply with which could
(singly or in the aggregate with all other such failures) have a material
adverse effect upon the assets, business, financial condition or prospects of
the Guarantor or any such Subsidiary. Without limiting the foregoing, the
Guarantor has all the franchises, licenses, leases, permits, certificates and
authorizations needed for the conduct of its business and the use of its
properties and all premises occupied by it, as now conducted, owned and used and
as proposed to be conducted, owned and used.
(h) The Guarantor is a Subsidiary of the Borrower and receives
management, accounting and financial services from the Borrower and may receive
funding from the Borrower. The continued financial strength of the Borrower and,
in particular, its financing arrangements with the Bank are thus of direct and
substantial benefit to the Guarantor and the execution and delivery of this
Agreement is a substantial inducement for the Bank to continue and amend such
financing arrangements. The Guarantor has determined the execution, delivery and
performance of this Agreement to be necessary and convenient to the conduct,
promotion and attainment of the business of the Guarantor and the Borrower.
(i) The principal place of business and chief executive offices of the
Guarantor are located at 0000 Xxxxxx Xxxx, Xxxxxxxxxx, XX 00000. All of the
books and records of the Guarantor are located at said address. Except as
described on item 3.01(i) of the attached Disclosure Schedule, no assets of the
Guarantor are located at any other address. Said item 3.01(i) of the attached
Disclosure Schedule sets forth the names and addresses of the record owners of
all premises where any material amount of Collateral owned by the Guarantor is
located.
(j) The Guarantor owns or has a valid right to use all of the patents,
licenses, copyrights, trademarks, trade names and franchises ("Intellectual
Property") now being used to conduct its business, as described on item 3.01(j)
of the attached Disclosure Schedule. None of the Intellectual Property owned by
the Guarantor is represented by a registered copyright, trademark, patent or
other federal or state registration, except as shown on said item 3.01(j). To
the best knowledge of the Guarantor, the conduct of the Guarantor's business as
now operated does not conflict with valid patents, licenses, copyrights,
trademarks, trade names or franchises of others in any matter that could
materially adversely affect the business, prospects, assets or donation,
financial or otherwise, of the Guarantor.
(k) None of the executive officers or key employees of the Guarantor is
subject to any agreement in favor of anyone other than the Guarantor which
limits or restricts that person's right to engage in the type of business
activity conducted or proposed to be conducted by the Guarantor or which grants
to anyone other than the Guarantor any rights in any inventions or other ideas
susceptible to legal protection developed or conceived by any such officer or
key employee.
(l) The Guarantor is not a party to any contract or agreement which now
has or, as far as can reasonably be foreseen by the Guarantor at the date
hereof, may have a material adverse effect on the financial condition, business,
prospects or properties of the Guarantor.
(m) After giving effect to this Agreement and the transactions
contemplated hereby, the Guarantor (A) is and will be able to pay its debts as
they become due, (B) has and will have funds and capital sufficient to carry on
its business as now conducted or as contemplated to be conducted, (C) owns
property having a value both at fair valuation and at present fair saleable
value greater than the amount required to pay its debts as they become due, and
(D) is not insolvent and will not be rendered insolvent as determined by
applicable law, after taking into account the reasonable likelihood of payments
being required hereunder.
ARTICLE IV
COVENANTS
Section 4.01. Affirmative Covenants and Reporting Requirements. So long
as the Loan Agreement is in effect and/or any of the Guaranteed Obligations
remain outstanding, the Guarantor will duly and promptly perform and observe
each provision contained in Article III of the Loan Agreement which may relate
to the Guarantor as a Subsidiary of the Borrower (said Article III, together
with any related definitions, being deemed incorporated herein by this
reference). Further, and without limitation of the foregoing, so long as the
Loan Agreement is an effect and/or any of the Guaranteed Obligations remain
outstanding:
(a) The Guarantor will maintain and preserve (and will cause each
Subsidiary of the Guarantor to maintain and preserve) all of its properties in
good working order and condition,
making all necessary repairs thereto and replacements thereof. The Guarantor
will maintain, with financially sound and reputable insurers, insurance with
respect to its property and business against such liabilities, casualties and
contingencies and of such types and in such amounts as shall be reasonably
satisfactory to the Bank from time to time and in any event all such insurance
as may from time to time be customary for companies conducting a business
similar to that of the Guarantor in similar locales, with the Bank to be named
as first loss payee on all policies relating to any Collateral; provided,
however, that so long as no Event of Default under the Loan Agreement has
occurred and is continuing, (i) returned and unearned premiums may be paid
directly to and may be retained by the Guarantor and (ii) insurance proceeds
from any casualty damages totalling $50,000 or less may be paid directly to and
may be retained by the Guarantor.
(b) The Guarantor will perform and fulfill all material covenants and
agreements under any lease or real estate, agreements relating to purchase money
debt, equipment leases and other material contracts. The Guarantor will maintain
in full force and effect, and comply with the terms and conditions of, all
permits, permissions and licenses necessary or desirable for its business.
(c) The Guarantor will conduct, in the ordinary course, the business in
which it is presently engaged. The Guarantor will not, without the prior written
consent of the Bank, directly or indirectly (itself or through any Subsidiary),
enter into any other lines of business or business ventures.
(d) The Guarantor will furnish to the Bank:
(i) Promptly after receipt, a copy of all audits or reports
submitted to the Guarantor by independent public accountants in
connection with any annual, special or interim audit of the books of
the Guarantor and any "management letter" prepared by such accountants.
(ii) As soon as possible and in any event within five days of
the occurrence of any Event of Default or any event which, with the
giving of notice or passage of time or both, would constitute an Event
of Default, the statement of the Guarantor setting forth details of
such Event of Default or event and the action which the Guarantor
proposes to take with respect thereto.
(iii) Promptly (and in any event within 30 days) after service
of legal process upon the Guarantor or the Guarantor otherwise having
notice thereof, notice of all actions, suits and proceedings before any
court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, to which the Guarantor or any
Subsidiary of the Guarantor is a party; provided, however, that the
Guarantor will not be deemed required by this clause (iii) to give
notice of any such action, suit or proceeding filed against the
Guarantor or any such Subsidiary which seeks monetary damages only in
an amount of $100,000 or less.
(iv) Promptly upon applying for, or being granted, a federal
or state registration for any copyright, trademark or patent or
purchasing any registered copyright, trademark or patent, written
notice to the Bank describing same, together with all such documents as
may be required to give the Bank a fully perfected first priority
security interest in each such copyright, trademark or patent.
(v) Promptly after the Guarantor has knowledge thereof,
written notice of any development or circumstance which may reasonably
be expected to have a material adverse effect on the Guarantor or its
business, properties, assets, Subsidiaries or condition, financial or
otherwise.
(vi) Promptly upon request, such other information respecting
the financial condition, operations, receivables, inventory, machinery
or equipment of the Guarantor or any Subsidiary of the Guarantor as the
Bank may from time to time reasonably request.
(e) The Guarantor will maintain (and cause each of its Subsidiaries to
maintain) complete and fairly stated books, records and accounts which will at
all times fairly reflect all of its transactions in accordance with generally
accepted accounting principles consistently applied. The Guarantor will, at any
reasonable time and from time to time upon reasonable notice and during normal
business hours (and at any time and without any necessity for notice following
the occurrence of an Event of Default), permit the Bank, and any agents or
representatives thereof, to examine and make copies of and take abstracts from
the records and books of account of, and visit the properties of the Guarantor
and any of its Subsidiaries, and to discuss its affairs, finances and accounts
with its officers, directors and/or independent accountants, all of whom are
hereby authorized and directed to cooperate with the Bank in carrying out the
intent of this Subsection 3.01(e). Each financial statement of the Guarantor
hereafter delivered pursuant to this Agreement will be complete and will fairly
present the financial condition of the Guarantor as at the date thereof and for
the periods covered thereby.
(f) Prior to the Bank making the first Revolving Loan, the Guarantor
will obtain, and will thereafter maintain in effect at all times, waivers from
the owners of all premises in which any material amount of Collateral is
located, such waivers to be in form and substance satisfactory to the Bank.
(g) The Guarantor will review the software which it uses in its
business (and which its Subsidiaries use in their respective businesses) for
"Year 2000" compliance. The Guarantor will, on or before June 30, 1999, have
completed all steps necessary to assure that such software will continue to
function in the manner intended without interruption or other difficulty
resulting from the "Year 2000 problem". The Guarantor will, at the request of
the Bank, provide such reports and such other information as the Bank may
reasonably request in respect of the Guarantor's program to assure such Year
2000 compliance.
(h) As used herein, the term "Star Transaction" has the meaning
ascribed to that term in the Loan Agreement. The Guarantor presently intends to
complete the Star Transaction and to
receive the proceeds thereof (in the amount described in Section 3.11 of the
Loan Agreement) on or before March 31, 1999. The Bank agrees that if the Star
Transaction is consummated and such proceeds are received on or prior to March
31, 1999, the Bank will, upon the payment of so much of the Revolving Loans as
may be required so that the Aggregate Bank Liabilities (as defined in the Loan
Agreement) will not exceed the Borrowing Base (as defined in the Loan Agreement)
calculated without reference to any receivables of Star, release the Guarantor's
Security Agreement and the Guarantor's Intellectual Property Security Agreements
and terminate the within Guaranty and release any other obligations of Star to
the Bank arising under or in connection with the Loan Agreement.
Section 4.02. Negative Covenants. So long as the Loan Agreement is in
effect and/or any of the Guaranteed Obligations remain outstanding, the
Guarantor will not take or omit to take any action or suffer to exist any event
or circumstance which would be a breach of any of the provisions of Article IV
of the Loan Agreement which may relate to the Guarantor as a Subsidiary of the
Borrower (said Article IV, together with any related definitions, being deemed
incorporated herein by this reference). Further, and without limitation of the
foregoing, so long as the Loan Agreement is in effect and/or any of the
Guaranteed Obligations remain outstanding:
(a) The Guarantor will not, without the prior written consent of the
Bank, form or acquire any Subsidiary or make any other acquisition of the stock
of any Person or of all or substantially all of the assets of any other Person.
The Guarantor will not become a partner in any partnership.
(b) The Guarantor will not, without the prior written consent of the
Bank, merge or consolidate with any Person or sell, lease, transfer or otherwise
dispose of any material portion of its assets (whether in one or more
transactions), other than (i) sale of inventory in the ordinary course, (ii) the
sale of the Guarantor to Coherent, Inc. pursuant to the Star Transaction on or
before March 31, 1999 and (iii) a sale or transfer of any Intellectual Property
of the Guarantor so long as (A) such sale or transfer could not have a
materially adverse effect on the business, condition or prospects of the
Guarantor and (B) the Guarantor gives the Bank not less than 20 days' prior
written notice of each such sale or transfer, in such detail as shall be
reasonably acceptable to the Bank. The Bank specifically acknowledges that this
Agreement contemplates and permits the sale of the Guarantor to Coherent, Inc.
pursuant to the Star Transaction on or before March 31, 1999, with the Bank's
security interests in the Guarantor's assets to be released under the
circumstances described in Subsection 4.01(h).
(c) The Guarantor will not, without the prior written consent of the
Bank, enter into any transaction, including, without limitation, the purchase,
sale or exchange of any property or the rendering of any service, with any
affiliate of the Guarantor, except in the ordinary course of and pursuant to the
reasonable requirements of the Guarantor's business and upon fair and reasonable
terms no less favorable to the Guarantor than would be obtained in a comparable
arms'-length transaction with any Person not an affiliate; provided that nothing
in this Subsection shall be deemed to prohibit the payment of salary or other
similar payments to any officer or director of the Guarantor at a level
consistent with the salary and other payments being paid at
the date of this Agreement, nor to prevent the hiring of additional officers at
a salary level consistent with industry practice, nor to prevent reasonable
periodic increases in salary. For the purposes of this Agreement, "affiliate"
means any Person which, directly or indirectly, controls or is controlled by or
is under common control with the Guarantor; any officer or director or former
officer or director of the Guarantor; any Person owning of record or
beneficially, directly or indirectly, 5% or more of any class of capital stock
of the Guarantor or 5% or more of any class of capital stock or other equity
interest having voting power (under ordinary circumstances) of any of the other
Persons described above; and any member of the immediate family of any of the
foregoing. "Control" means possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of any Person,
whether through ownership of voting equity, by contract or otherwise.
(d) The Guarantor will not change its name or legal structure, nor will
the Guarantor move its chief executive offices or principal place of business
from the address described in the first sentence of Subsection 3.01(i) above,
nor will the Guarantor remove any books or records from such address, nor will
the Guarantor keep any Collateral belonging to the Guarantor at any location
other than the premises described in Subsection 3.01(i) above without, in each
instance, giving the Bank at least 30 days' prior written notice and providing
all such financing statements, certificates and other documentation as the Bank
may request in order to maintain the perfection and priority of the security
interests granted or intended to be granted pursuant to the Guarantor's Security
Agreement.
(e) Except as provided below, the Guarantor will not dispose of or
suffer or permit to exist any hazardous material or oil on any site or vessel
owned, occupied or operated by the Guarantor or any Subsidiary of the Guarantor,
nor shall the Guarantor store (or permit any Subsidiary to store) on any site or
vessel owned, occupied or operated by the Guarantor or any such Subsidiary, or
transport or arrange the transport of, any hazardous material or oil (the terms
"hazardous material", "oil", site" and "vessel", respectively, being used herein
with the meanings given those terms in Mass. Gen. Laws, Ch. 21E or any
comparable terms in any comparable statute in effect in any other relevant
jurisdiction). The Guarantor shall provide the Bank with written notice of (i)
the intended storage or transport of any hazardous material or oil by the
Guarantor or any Subsidiary of the Guarantor, (ii) any known release or known
threat of release of any hazardous material or oil at or from any site or vessel
owned, occupied or operated by the Guarantor or any Subsidiary of the Guarantor,
and (iii) any incurrence of any expense or loss by any government or
governmental authority in connection with the assessment, containment or removal
of any hazardous material or oil for which expense or loss the Guarantor or any
Subsidiary of the Guarantor may be liable. Notwithstanding the foregoing, the
Guarantor and its Subsidiaries may use, store and transport, and need not notify
the Bank of the use, storage or transportation of, (x) oil in reasonable
quantities, as fuel for heating of their respective facilities or for vehicles
or machinery used in the ordinary course of their respective businesses and (y)
hazardous materials that are solvents, cleaning agents or other materials used
in the ordinary course of the respective business operations of the Guarantor
and its Subsidiaries, in reasonable quantities, as long as in any case the
Guarantor or the Subsidiary concerned (as the case may be) has obtained and
maintains in effect any necessary governmental permits, licenses
and approvals, complies with all requirements of applicable federal, state and
local law relating to such use, storage or transportation, follows the
protective and safety procedures that a prudent businessperson conducting a
business the same as or similar to that of the Guarantor or such Subsidiary (as
the case may be) would follow, and disposes of such materials (not consumed in
the ordinary course) only through licensed providers of hazardous waste removal
services.
ARTICLE V
DEFAULT AND REMEDIES
Section 5.01. Events of Default. An Event of Default will be deemed to
have occurred under this Agreement upon the occurrence of any one or more of the
following:
(i) The Guarantor shall fail to make any monetary payment hereunder
when due; or
(ii) Any representation or warranty of the Guarantor contained herein
shall at any time prove to have been incorrect in any material respect when
made; or
(iii) The Guarantor shall fail to perform or observe any obligation or
agreement under Subsection 4.01(d) or any provision of Section 4.02; or
(iv) The Guarantor shall default in the performance or observance of
any obligation or agreement under the first sentence of Section 4.01 (to the
extent that same incorporates by reference Section 3.1 and Section 3.3 of the
Loan Agreement) and such failure continues uncured for 30 days after the
Guarantor first knows of (or reasonably should know of) such default or of the
events or circumstances giving rise to such default; or
(v) The Guarantor shall fail to perform or observe any other obligation
or agreement contained herein and such failure shall continue uncured for 30
days after notice thereof shall have been given to the Guarantor; or
(vi) For any reason, the Guarantor shall cease to be 100% owned by the
Borrower, except due to the consummation of the Star Transaction under the
conditions contemplated by Subsection 4.01(h) above and except for the
above-described stock options held by officers and employees and any shares
issued upon exercise of same; or
(vii) Any "Event of Default" (as defined in the Loan Agreement) shall
occur and shall continue uncured beyond the expiration of any applicable notice
and/or grace period.
Section 5.02. Rights and Remedies Upon Default. Upon the occurrence of
any Event of Default and at any time thereafter during the continuance thereof,
in addition to any other rights and remedies available to the Bank hereunder or
otherwise, the Bank may exercise any one or more of the following rights and
remedies (all of which shall be cumulative):
(a) Enforce the provisions of this Agreement by legal proceedings for
the specific performance of any covenant or agreement contained herein or for
the enforcement of any other appropriate legal or equitable remedy, and the Bank
may recover damages caused by any breach by the Guarantor of the provisions of
this Agreement, including court costs, reasonable attorneys' fees and other
reasonable costs and expenses incurred in the enforcement of the obligations of
the Guarantor hereunder.
(b) Exercise all rights and remedies hereunder, under the Loan
Documents, and under any other agreement with the Bank, and exercise all other
rights and remedies which the Bank may have under applicable law.
Section 5.03. Set-off. In addition to any rights now or hereafter
granted under applicable law and not by way of limitation of any such rights,
upon the occurrence of any Event of Default and during the continuance thereof,
the Bank is hereby authorized at any time or from time to time, without
presentment, demand, protest or other notice of any kind to the Guarantor or to
any other Person, all of which are hereby expressly waived, to set off and to
appropriate and apply any and all deposits and any other Indebtedness at any
time held or owing by the Bank or any affiliate of the Bank to or for the credit
or the account of the Guarantor against and on account of the obligations and
liabilities of the Guarantor to the Bank, under this Agreement or otherwise,
irrespective of whether or not the Bank shall have made any demand for payment
and although said obligations, liabilities or claims, or any of them, may then
be contingent or unmatured and without regard for the availability or adequacy
of other collateral. ANY AND ALL RIGHTS TO REQUIRE THE BANK TO EXERCISE ITS
RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES ANY OF THE
GUARANTEED OBLIGATIONS PRIOR TO THE EXERCISE BY THE BANK OF ITS RIGHT OF SET-OFF
UNDER THIS SECTION ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
ARTICLE VI
MISCELLANEOUS
Section 6.01. No Waiver; Cumulative Remedies. No failure or delay on
the part of any party in exercising any right, power or remedy hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right, power or remedy preclude any other or further exercise thereof or
the exercise of any other right, power or remedy hereunder. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law or
otherwise available to the Bank. Such remedies may be exercised without resort
or regard to the other source of satisfaction of any liabilities of the
Guarantor to the Bank. The provisions of this Agreement are not limited by nor
in the limitation of any additional or inconsistent provisions contained in the
Loan Agreement or elsewhere. No right of subrogation, contribution or any
similar rights will in any event be deemed to give the Guarantor any cause of
action against the Bank or any of its officers, employees or agents for any act
or omission on the part of the Bank; the Bank may, without liability, release or
fail to perfect any security interest and may take or
omit to take any action under any of the Loan Documents, even if same would
reduce the value of the Guarantor's subrogation or similar rights.
Section 6.02. Amendments, Waivers and Consents. Neither this Agreement
nor any provision hereof may be amended, waived, discharged or terminated
orally. Any such amendment, waiver, discharge or termination must be in writing
signed by the party against whom enforcement of the amendment, waiver, discharge
or termination is sought. Any waiver or consent may be given subject to
satisfaction of conditions stated therein and any waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
Section 6.03. Addresses for Notices, etc. Except as otherwise expressly
provided in this Agreement, all notices, requests, demands and other
communications provided for hereunder shall be in writing and shall be mailed or
delivered to the applicable party at the address indicated below:
If to the Guarantor:
Star Medical Technologies, Inc.
c/o Palomar Medical Technologies, Inc.
00 Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxx, Director of Finance
with a copy so mailed or delivered to:
Palomar Medical Technologies, Inc.
00 Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: General Counsel
If to the Bank:
Fleet National Bank
High Technology Division
One Federal Street
Mail Stop: MA XX XX0X
Xxxxxx, XX 00000
Attention: Xxxxx Xxxxx, Vice President
or, as to each of the foregoing, at such other address as shall be designated by
such Person in a written notice to the other party complying as to delivery with
the terms of this Section. Except as otherwise provided herein, all such
notices, requests, demands and other communications shall be deemed delivered on
the earlier of (i) the date received or (ii) the date of delivery, refusal or
non-delivery indicated on the return receipt if deposited in the United States
mails, sent postage prepaid, registered or certified mail, return receipt
requested, postage and registration or certification charges prepaid, addressed
as aforesaid.
Section 6.04. Costs, Expenses and Taxes. The Guarantor agrees to pay on
demand all costs and expenses (including, without limitation, reasonable legal
fees) of the Bank in connection with the preparation, execution and delivery of
this Agreement and all other instruments and documents to be delivered hereunder
and any amendments or modifications of any of the foregoing, or in connection
with the examination, review or administration of any of the foregoing, as well
as the costs and expenses (including, without limitation, the reasonable fees
and expenses of legal counsel) incurred by the Bank in connection with
preserving, enforcing or exercising any rights or remedies under this Agreement
and all other instruments and documents to be delivered hereunder, all whether
or not legal action is instituted. In addition, the Guarantor shall be obligated
to pay any and all stamp and other taxes payable or determined to be payable in
connection with the execution and delivery of this Agreement and all other
instruments and documents to be delivered hereunder, and the Guarantor agrees to
save the Bank harmless from and against any and all liabilities with respect to
or resulting from any delay in paying or omission to pay such taxes. Any fees,
expenses or other charges which the Bank is entitled to receive from the
Guarantor hereunder shall bear interest from the date of demand for payment
until paid at the lesser of (i) a fluctuating rate per annum which shall at all
times be equal to the sum of four (4%) percent per annum plus the Prime Rate or
(ii) the maximum rate permitted by then applicable law.
Section 6.05. Representations and Warranties. All covenants,
agreements, representations and warranties made herein or in any other document
delivered by or on behalf of the Guarantor pursuant to or in connection with
this Agreement are material and shall be deemed to have been relied upon by the
Bank, notwithstanding any investigation heretofore or hereafter made by the Bank
and shall survive the making of the Revolving Loans as contemplated in the Loan
Agreement, and shall continue in full force and effect so long as any of the
Guaranteed Obligations remain outstanding and unpaid or any facility for the
making of loans to the Borrower remains in effect.
Section 6.06. Binding Effect; Assignment. This Agreement shall be
binding upon the Guarantor and its successors and assigns and shall inure to the
benefit of the Bank and its successors and assigns. The Guarantor may not assign
this Agreement or any rights hereunder without the express written consent of
the Bank.
Section 6.07. Reproduction of Agreement. This Agreement and all other
instruments, documents and papers which relate thereto which have been or may be
hereafter furnished to the Bank may be reproduced by the Bank by any
photographic, photostatic, micro-card, miniature photographic, xerographic or
similar process. 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 o not such reproduction was made in the
regular course of business).
Section 6.08. Consent to Jurisdiction. The Guarantor irrevocably
submits to the non-exclusive jurisdiction of any Massachusetts court or any
federal court sitting within The Commonwealth of Massachusetts over any suit,
action or proceeding arising out of or relating to this Agreement. The Guarantor
agrees that final judgment in any such suit, action or proceeding brought in
such a court shall be enforced in any court of proper jurisdiction by a suit
upon such judgment, provided that service of process in such action, suit or
proceeding shall have been effected upon the Guarantor in one of the manners
specified in the following paragraph of this Section 6.08 or as otherwise
permitted by law.
The Guarantor hereby consents to process being served in any suit,
action or proceeding of the nature referred to in the preceding paragraph of
this Section 6.08 either (i) by mailing a copy thereof by registered or
certified mail, postage prepaid, return receipt requested, to its at its address
set forth in Section 6.03 or (ii) by serving a copy thereof upon it at its
address set forth in Section 6.03. The Guarantor agrees that such service shall
(x) be deemed in every respect effective service upon such Guarantor in any such
suit, action or proceeding and (y) to the fullest extent permitted by law, be
taken and held to be valid personal service upon and personal delivery to the
Guarantor.
Section 6.09. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of The Commonwealth of Massachusetts.
Section 6.10. Severability. In the event that any provision of this
Agreement or the application thereof to any Person, property or circumstances
shall be held to any extent to be invalid or unenforceable, the remainder of
this Agreement and the application of such provision to Persons, properties or
circumstances other than those as to which it has been held invalid or
unenforceable shall not be affected thereby, and each provision of this
Agreement shall be valid and enforceable to the fullest extent permitted by law.
Section 6.11. Headings. Article and Section headings in this Agreement
are included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.
Section 6.12. WAIVER OF JURY TRIAL. THE GUARANTOR AND THE BANK HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY MUTUALLY WAIVE THE RIGHT TO A TRIAL BY
JURY IN RESPECT OF ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS AGREEMENT, THE LOAN AGREEMENT OR ANY OTHER LOAN DOCUMENTS
OR OUT OF ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR
WRITTEN) OR ACTIONS OF ANY PARTY. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT
FOR THE BANK TO ENTER INTO THE LOAN AGREEMENT AND TO MAKE LOANS TO THE BORROWER
AS CONTEMPLATED THEREIN.
Section 6.13. Guarantor's Security Agreement. (a) The Guarantor
acknowledges and agrees that the "Obligations" described in and secured by the
Guarantor's Security Agreement include, without limitation, all of the
obligations of the Guarantor under this Agreement.
(b) The Guarantor's Security Agreement is hereby modified to provide as
follows:
(i) That the "Collateral" subject thereto includes, without
limitation and in addition to the Collateral described therein, all of
the Guarantor's files, books and records (including, without
limitation, all electronically recorded data) all whether now owned or
existing or hereafter acquired, created or arising. The Guarantor
hereby grants to the Bank a security interest in all such Collateral in
order to secure the full and prompt payment and performance of all of
the aforesaid Obligations.
(ii) That, upon the occurrence of any Event of Default, the
Bank may, at any time, notify account debtors of the Guarantor that the
Collateral has been assigned to the Bank and that payments by such
account debtors shall be made directly to the Bank. At any time after
the occurrence of an Event of Default, the Bank may collect the
Guarantor's receivables, or any of same, directly from account debtors
and may charge the collection costs and expenses to the Guarantor.
IN WITNESS WHEREOF, the Guarantor has executed this Agreement, as an
instrument under seal, as of the day and year first above written.
STAR MEDICAL TECHNOLOGIES, INC.
By: /s/ Xxxxxx X. Xxxxxx
--------------------------
Name: Xxxxxx X.Xxxxxx
Title: Vice President of
Finance
DISCLOSURE SCHEDULE
Item 3.01(a) - Jurisdictions where Guarantor is qualified;
Subsidiaries; Partnerships
Star is qualified only in California.
Item 3.01(d) - Litigation
None.
Item 3.01(i) - Locations of Collateral; record owners
See Section 2.1(j) of Disclosure Schedule attached to Letter
Agreement between Palomar Medical Technologies, Inc. and Fleet
National Bank.
Item 3.01(j) - Intellectual Property
See Section 2.1(k) of Disclosure Schedule attached to Letter
Agreement between Palomar Medical Technologies, Inc. and Fleet
National Bank.
