SECOND LOAN EXTENSION AND
MODIFICATION AGREEMENT
This Second Loan Extension and Modification Agreement (this
"Agreement") is made and entered into this 2nd day of October, 1998, by and
between ZIONS FIRST NATIONAL BANK ("Lender") and MERIT MEDICAL SYSTEMS, INC.,
("Merit Medical Systems"), MERIT MEDICAL INTERNATIONAL, INC. ("Merit Medical
International"), MERIT HOLDINGS, INC. ("Merit Holdings"), and SENTIR, INC.
("Sentir"). Merit Medical Systems, Merit Medical International, Merit Holdings,
and Sentir are hereafter collectively referred to as "Borrowers").
Recitals
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A. Borrowers have a revolving line of credit (the "Line of Credit")
with Lender in the current maximum principal amount of $10,500,000.00, evidenced
and governed by the following documents, among others (collectively the "Loan
Documents"):
1. Loan Agreement dated October 10, 1995 entered into by
Merit Medical Systems (the "Loan Agreement");
2. Promissory Note dated October 10, 1995 in the
original maximum principal amount of $8,500,000.00
entered into by Merit Medical Systems (the "Note");
3. Trust Deed with Assignment of Rents dated October 10,
1995, executed by Merit Medical Systems, as Trustor,
and recorded October 18, 1995 as Entry No. 6192795 in
Book 7251 beginning at Page 0903 of the official
records of the Salt Lake County Recorder (the "Trust
Deed");
4. Security Agreement dated October 10, 1995, entered
into by Merit Medical Systems, whereby Merit Medical
Systems granted to Lender a security interest in,
among other things, all of its inventory, accounts,
general intangibles (including, without limitation,
certain patents described in the Security Agreement),
equipment, furnishings, and fixtures, all as more
particularly described in the Security Agreement (the
"Security Agreement");
5. Loan Extension and Modification Agreement dated
October 10, 1997 entered into by Merit Medical
Systems, whereby the Line of Credit was modified as
follows: (a) the maturity date of the Line of Credit
was extended to October 1, 1998, (b) the maximum
principal amount of the Line of Credit was increased
to $10,500,000.00, (c) the interest rate on the Line
of Credit was reduced by .25%, (d) the maximum amount
of raw materials and finished goods used to calculate
the limitation on advances under the Line of Credit
was increased from $3,000,000.00 to $3,500,000.00,
(e) the ratio of total liabilities to tangible net
worth was increased from [1.0 to 1.0] to [1.10 to
1.0], and (f) the maximum working capital requirement
was increased from $7,000,000.00 to $9,000,000.00;
6. Supplemental Trust Deed dated October 10, 1997
executed by Merit Medical Systems, as Trustor, and
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recorded October 21, 1997 as Entry No. 6768327 in
Book 7786 beginning at Page 0554 of the official
records of the Salt Lake County Recorder;
7. Loan Assumption Agreement dated October 10, 1997
entered into by Borrowers, whereby Merit Medical
International, Merit Holdings, and Sentir assumed the
liabilities, duties, and obligations of Merit Medical
Systems under the Loan Documents and became
additional makers of the Note, and Merit Holdings and
Sentir became additional debtors under the Security
Agreement, all without affecting the existing
liabilities of Merit Medical Systems thereunder (the
"Assumption Agreement").
B. Borrowers have requested that Lender extend the maturity date of
the Line of Credit until October 1, 1999 and modify the Line of Credit by: (a)
reducing the interest rate based on the LIBOR Rate by 1.00% and (b) increasing
the maximum amount of raw materials and finished goods used to calculate the
limitation on advances under the Line of Credit from $3,500,000.00 to
$4,000,000.00. Lender is willing to do so, subject to the terms and conditions
of this Agreement, which include not interrupting or otherwise adversely
affecting the priority of Lender's lien and security interests created under and
evidenced by the Trust Deed and the Security Agreement.
Agreement
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For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Lender and Borrowers hereby agree and modify the
Line of Credit and Loan Documents as follows:
1. Except as otherwise expressly provided herein, terms defined in the
Loan Documents shall have the same defined meanings in this Agreement.
2. The parties represent and warrant to each other that, in deciding to
enter into this Agreement, they each (a) made their own due diligence
investigation and evaluation; (b) had all of the information they needed; (c)
did not rely on any statements, acts, or omissions except as expressly set forth
in this Agreement; (d) were not acting under any duress, compulsion, or undue
influence; and (e) were (or had the opportunity to be) advised by independent
legal counsel.
3. By this Agreement, the Line of Credit and the Loan Documents are
modified as follows:
A. The maturity date of the Line of Credit is extended from
October 1, 1998 to October 1, 1999. All amounts owing on the Line of
Credit shall become immediately due and payable on October 1, 1999.
B. The interest rate based on the LIBOR Rate (as defined in
the Note) specified in the Note shall be reduced by 1.00%, or in other
words from 2.85% above the LIBOR Rate to 1.85% above the LIBOR Rate.
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C. The maximum amount of raw materials and finished goods
used to calculate the limitation on advances under the
Line of Credit are increased from $3,500,000.00 to
$4,000,000.00.
D. The following provision is hereby added to the Loan
Agreement:
Year 2000 Compliance. "Year 2000 compliant" means,
with regard to any entity, that all material software utilized
by such entity is able to fully function without causing any
error to such entity's date-sensitive data. "Providers" means
the key suppliers, vendors, and customers of Borrowers whose
business failure would, with reasonable probability, result in
a material adverse change in the financial condition or
prospects of Borrowers.
Borrower has or will soon have (i) undertaken a
detailed assessment of all areas within its initial business
and operations that could be adversely affected by the failure
of Borrowers to be Year 2000 compliant, (ii) developed and
implemented a detailed plan for becoming Year 2000 compliant
on a timely basis, and (iii) made written inquiry of each of
its Providers as to whether the Providers will be Year 2000
compliant on a timely basis. Borrowers will promptly advise
Lender in writing upon the occurrence of any of the following:
(i) Borrowers determine or Borrowers are advised by their
accountants, financial advisers, consultants, or any Provider
that Borrowers or any Provider will not be Year 2000 compliant
on a timely basis or (ii) Borrowers or any Provider
experiences data or data processing problems due to failure to
be Year 2000 compliant.
4. Contemporaneous with the execution and delivery of this Agreement,
Merit Medical Systems shall execute and deliver to Lender a Supplemental Trust
Deed, in a form acceptable to Lender, whereby the Trust Deed is supplemented to
state the extended maturity date and reduced interest rate under the Line of
Credit.
5. Except as expressly modified by this Agreement, all of the terms
and conditions of the Line of Credit and the Loan Documents shall remain in full
force and effect, and, as modified by this Agreement, the Line of Credit shall
continue to be secured as provided in the Loan Documents.
6. Representations and Warranties. Borrowers each hereby affirm and
again make the representations and warranties set forth in Article 5
Representations and Warranties of the Loan Agreement and Paragraph 5 of the
Assumption Agreement as of the date of this Agreement.
7. Authorization. Borrowers each represent and warrant that the
execution, delivery, and performance of this Agreement and all agreements,
documents, obligations, and transactions herein contemplated have been duly
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authorized by all necessary corporate action on the part of each Borrower and
are not inconsistent with the Articles of Incorporation, By-Laws, or any
resolution of the Board of Directors of any Borrower, do not and will not
contravene any provision of, or constitute a default under, any indenture,
mortgage, contract, or other instrument to which any Borrower is a party or by
which any Borrower is bound, and that upon execution and delivery hereof, this
Agreement will constitute a legal, valid, and binding agreement and obligation
of each Borrower, enforceable in accordance with its terms.
8. Conditions to Modification. This Agreement shall become valid,
binding, and enforceable only upon satisfaction of the following conditions. All
of the documents referred to below must be in a form and substance acceptable to
Lender.
a. This Agreement and all other documents requested by Lender
shall have been fully executed and delivered to Lender.
b. All of the documents requested by Lender which require
filing or recording have been properly filed and recorded so that all
of the liens and security interests granted to Lender in connection
with the Loan will be properly created and perfected and will have a
priority acceptable to Lender.
All conditions precedent set forth in this Agreement are for the sole
benefit of Lender and may be waived unilaterally by Lender.
9. Integrated Agreement; Amendment. This Agreement and the Loan
Documents, as modified by this Agreement, constitute the entire agreements and
understandings between the parties with respect to the Line of Credit, and may
not be altered or amended except by written agreement signed by the parties.
PURSUANT TO UTAH CODE SECTION 25-5-4, BORROWERS ARE NOTIFIED THAT THIS AGREEMENT
AND THE LOAN DOCUMENTS, AS MODIFIED BY THIS AGREEMENT, ARE A FINAL EXPRESSION OF
THE AGREEMENTS BETWEEN LENDER AND BORROWERS AND THESE AGREEMENTS MAY NOT BE
CONTRADICTED BY EVIDENCE OF ANY ALLEGED ORAL AGREEMENT.
10. This Agreement is made pursuant to and shall be construed in
accordance with the laws of the State of Utah.
LENDER:
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ZIONS FIRST NATIONAL BANK
By: /s/ Xxxxxxxx X. Xxxxxxxx
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Title: Asst. Relationship Manager
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BORROWERS:
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MERIT MEDICAL SYSTEMS, INC.
By: /s/ Xxxx Xxxxxxx
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Title: CFO
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MERIT MEDICAL INTERNATIONAL, INC.
By: /s/ Xxxx Xxxxxxx
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Title: V.P.
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MERIT HOLDINGS, INC.
By: /s/ Xxxx Xxxxxxx
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Title: V.P.
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SENTIR, INC.
By: /s/ Xxxx Xxxxxxx
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Title: SEC
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