1
EXHIBIT 10(nn)
1998 LOAN AGREEMENT
First Union National Bank
000 Xxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
(Hereinafter referred to as the "Bank")
Novametrix Medical Systems Inc.
0 Xxxxxxxxxx Xxxxx, X.X. Xxx 000
Xxxxxxxxxxx, Xxxxxxxxxxx 00000
NTC Technology, Inc.
0 Xxxxxxxxxx Xxxxx, X.X. Xxx 000
Xxxxxxxxxxx, Xxxxxxxxxxx 00000
(Individually and collectively "Borrower")
This 1998 Loan Agreement ("Agreement") is entered into as of August 1, 1998, by
and between Bank and Borrower, a Corporation organized under the laws of
Delaware.
Borrower has applied to Bank for a loan or loans (individually and collectively,
the "Loan") evidenced by one or more promissory notes (whether one or more, the
"Note") as follows:
LINE OF CREDIT - in the principal amount of $3,500,000.00 (the "Principal
Amount") which is evidenced by the 1998 Promissory Note dated as of even date
herewith ("Line of Credit Note"), under which Borrower may borrow, repay, and
reborrow, from time to time, so long as the total indebtedness outstanding at
any one time does not exceed the Principal Amount minus the sum of (i) the
amount available to be drawn plus (ii) the amount of unreimbursed drawings under
all letters of credit issued by Bank for the account of Borrower plus (iii) the
aggregate outstanding amount arising out of foreign exchange services provided
to the Borrower by the Bank as reasonably established by the Bank. The Loan
proceeds are to be used by Borrower solely for working capital. Bank's
obligation to advance or readvance under the Line of Credit Note shall terminate
if Borrower is in Default under the Line of Credit Note.
E-7
2
SUBLIMITS. (i) Standby Letters of Credit. The Bank shall issue standby letters
of credit for the account of the Borrower ("New Standby L/Cs") only when,
combined with any standby or commercial letters of credit outstanding and issued
by the Bank for the account of the Borrower ("Outstanding L/Cs"), the aggregate
available undrawn amount and the drawn but unreimbursed amount of the New
Standby L/Cs and Outstanding L/Cs will not exceed $200,000. The Bank shall not
issue Commercial L/Cs pursuant to this Agreement or the Line of Credit Note.
Subject to the foregoing limitations, the Bank shall issue New Standby L/Cs only
after the Borrower has executed such documentation and paid such fees as the
Bank may require. (ii) Foreign Exchange. The Borrower may utilize foreign
currency exchange services provided by the Bank up to a maximum credit exposure
of $150,000 in the aggregate to be outstanding at any time, provided, however,
that forward contracts shall be limited to $125,000 and the maximum daily
settlement limit shall be $25,000.
This Agreement amends, restates and replaces in its entirety that certain Fourth
Amended and Restated Loan Agreement dated June 16, 1994, as amended and modified
from time to time.
This Agreement applies to the Loan and all Loan Documents. The terms "Loan
Documents" and "Obligations" as used in this Agreement, are defined in the Note.
The term "Borrower" shall include its Subsidiaries and Affiliates. As used in
this Agreement as to Borrower, "Subsidiary" shall mean any corporation of which
more than 50% of the issued and outstanding voting stock is owned directly or
indirectly by Borrower. As to Borrower, "Affiliate" shall have the meaning as
defined in 11 U.S.C. Section 101, except that the term "debtor" therein shall be
substituted by the term "Borrower" herein.
Relying upon the covenants, agreements, representations and warranties contained
in this Agreement, Bank is willing to extend credit to Borrower upon the terms
and subject to the conditions set forth herein, and Bank and Borrower agree as
follows:
X-0
0
XXXXXXXXXXXXXXX. Xxxxxxxx represents that from the date of this Agreement and
until final payment in full of the Obligations: ACCURATE INFORMATION. All
information now and hereafter furnished to Bank is and will be true, correct and
complete. Any such information relating to Borrower's financial condition will
accurately reflect Borrower's financial condition as of the date(s) thereof
(including all contingent liabilities of every type), and Borrower further
represents that its financial condition has not changed materially or adversely
since the date(s) of such documents. AUTHORIZATION; NON-CONTRAVENTION. The
execution, delivery and performance by Borrower and any guarantor, as
applicable, of this Agreement and other Loan Documents to which it is a party
are within its power, have been duly authorized by all necessary action taken by
the duly authorized officers of Borrower and any guarantors and, if necessary,
by making appropriate filings with any governmental agency or unit and are the
legal, binding, valid and enforceable obligations of Borrower and any
guarantors; and do not (i) contravene, or constitute (with or without the giving
of notice or lapse of time or both) a violation of any provision of applicable
law, a violation of the organizational documents of Borrower or any guarantor,
or a default under any agreement, judgment, injunction, order, decree or other
instrument binding upon or affecting Borrower or any guarantor, (ii) result in
the creation or imposition of any lien (other than the lien(s) created by the
Loan Documents) on any of Borrower's or guarantor's assets, or (iii) give cause
for the acceleration of any obligations of Borrower or any guarantor to any
other creditor. ASSET OWNERSHIP. Borrower has good and marketable title to all
of the properties and assets reflected on the balance sheets and financial
statements supplied Bank by Borrower, and all such properties and assets are
free and clear of mortgages, security deeds, pledges, liens, charges, and all
other encumbrances, except as otherwise disclosed to Bank by Borrower in writing
("Permitted Liens"). To Borrower's knowledge, no default has occurred under any
Permitted Liens and no claims or interests adverse to Borrower's present rights
in its properties and assets have arisen. DISCHARGE OF LIENS AND TAXES. Borrower
has duly filed, paid and/or discharged all taxes or other claims which may
become a lien on any of its property or assets, except to the extent that such
items are
E-9
4
being appropriately contested in good faith and an adequate reserve for the
payment thereof is being maintained. SUFFICIENCY OF CAPITAL. Borrower is not,
and after consummation of this Agreement and after giving effect to all
indebtedness incurred and liens created by Borrower in connection with the Loan,
will not be, insolvent within the meaning of 11 U.S.C. Section 101(32).
COMPLIANCE WITH LAWS. Borrower is in compliance in all respects with all
federal, state and local laws, rules and regulations applicable to its
properties, operations, business, and finances, including, without limitation,
any federal or state laws relating to liquor (including 18 U.S.C. Section 3617,
et seq.) or narcotics (including 21 U.S.C.Section 801, et seq.) and/or any
commercial crimes; all applicable federal, state and local laws and regulations
intended to protect the environment; and the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), if applicable. ORGANIZATION AND AUTHORITY.
Each Borrower is duly created, validly existing and in good standing under the
laws of the state of its organization, and has all powers, governmental
licenses, authorizations, consents and approvals required to operate its
business as now conducted. Each Borrower is duly qualified, licensed and in good
standing in each jurisdiction where qualification or licensing is required by
the nature of its business or the character and location of its property,
business or customers, and in which the failure to so qualify or be licensed, as
the case may be, in the aggregate, could have a material adverse effect on the
business, financial position, results of operations, properties or prospects of
Borrower or any such guarantor. NO LITIGATION. There are no pending or
threatened suits, claims or demands against Borrower or any guarantor that have
not been disclosed to Bank by Borrower in writing. REGULATION U. None of the
proceeds of the Loan made pursuant to this Agreement shall be used directly or
indirectly for the purpose of purchasing or carrying any margin stock in
violation of any of the provisions of Regulation U of the Board of Governors of
the Federal Reserve System ("Regulation U"), or for the purpose of reducing or
retiring any indebtedness which was originally incurred to purchase or carry
margin stock or for any other purchase which might render the Loan a "Purpose
Credit" within the meaning of Regulation U. ERISA. Each employee pension benefit
plan, as defined in ERISA, maintained by Borrower meets, as of the date
E-10
5
hereof, the minimum funding standards of ERISA and all applicable regulations
thereto and requirements thereof, and of the Internal Revenue Code of 1954, as
amended. No "Prohibited Transaction" or "Reportable Event" (as both terms are
defined by ERISA) has occurred with respect to any such plan.
AFFIRMATIVE COVENANTS. Borrower agrees that from the date of this Agreement and
until final payment in full of the Obligations, unless Bank shall otherwise
consent in writing, Borrower will: BUSINESS CONTINUITY. Conduct its business in
substantially the same manner and locations as such business is now and has
previously been conducted. MAINTAIN PROPERTIES. Maintain, preserve and keep its
property in good repair, working order and condition, making all needed
replacements, additions and improvements thereto, to the extent allowed by this
Agreement. ACCESS TO BOOKS & RECORDS. Allow Bank, or its agents, during normal
business hours, access to the books, records and such other documents of
Borrower as Bank shall reasonably require, and allow Bank to make copies thereof
at Bank's expense. INSURANCE. Maintain adequate insurance coverage with respect
to its properties and business against loss or damage of the kinds and in the
amounts customarily insured against by companies of established reputation
engaged in the same or similar businesses including, without limitation,
commercial general liability insurance, workers compensation insurance, and
business interruption insurance; all acquired in such amounts and from such
companies as Bank may reasonably require. NOTICE OF DEFAULT AND OTHER NOTICES.
(a) Notice of Default. Furnish to Bank immediately upon becoming aware of the
existence of any condition or event which constitutes a Default (as defined in
the Loan Documents) or any event which, upon the giving of notice or lapse of
time or both, may become a Default, written notice specifying the nature and
period of existence thereof and the action which Borrower is taking or proposes
to take with respect thereto. (b) Other Notices. Promptly notify Bank in writing
of (i) any material adverse change in its financial condition or its business;
(ii) any default under any material agreement, contract or other instrument to
which it is a party or by which any of its properties are bound, or any
acceleration of the maturity of any indebtedness owing by
E-11
6
Borrower; (iii) any material adverse claim against or affecting Borrower or any
part of its properties; (iv) the commencement of, and any material determination
in, any litigation with any third party or any proceeding before any
governmental agency or unit affecting Borrower; and (v) at least 30 days prior
thereto, any change in Borrower's name or address as shown above, and/or any
change in Borrower's structure. COMPLIANCE WITH OTHER AGREEMENTS. Comply with
all terms and conditions contained in this Agreement, and any other Loan
Documents, and swap agreements, if applicable, as defined in the Note. PAYMENT
OF DEBTS. Pay and discharge when due, and before subject to penalty or further
charge, and otherwise satisfy before maturity or delinquency, all obligations,
debts, taxes, and liabilities of whatever nature or amount, except those which
Borrower in good faith disputes. REPORTS AND PROXIES. Deliver to Bank, promptly,
a copy of all financial statements, reports, notices, and proxy statements, sent
by Borrower to stockholders, and all regular or periodic reports required to be
filed by Borrower with any governmental agency or authority. OTHER FINANCIAL
INFORMATION. Deliver promptly such other information regarding the operation,
business affairs, and financial condition of Borrower which Bank may reasonably
request. NON-DEFAULT CERTIFICATE FROM BORROWER. Deliver to Bank, with the
Financial Statements required herein, a certificate signed by Borrower, if
Borrower is an individual, or by a principal financial officer of Borrower
warranting that no "Default" as specified in the Loan Documents nor any event
which, upon the giving of notice or lapse of time or both, would constitute such
a Default, has occurred. ESTOPPEL CERTIFICATE. Furnish, within 15 days after
request by Bank, a written statement duly acknowledged of the amount due under
the Loan and whether offsets or defenses exist against the Obligations.
NEGATIVE COVENANTS. Borrower agrees that from the date of this Agreement and
until final payment in full of the Obligations, unless Bank shall otherwise
consent in writing, Borrower will not: DEFAULT ON OTHER CONTRACTS OR
OBLIGATIONS. Default on any material contract with or obligation when due to a
third party or default in the performance of any obligation to a third party
incurred for money borrowed in an amount in excess of $25,000.00. JUDGMENT
ENTERED. Permit the entry of any monetary
E-12
7
judgment or the assessment against, the filing of any tax lien against, or the
issuance of any writ of garnishment or attachment against any property of or
debts due Borrower in an amount in excess of $25,000.00 and that is not
discharged or execution is not stayed within Thirty (30) days of entry.
GOVERNMENT INTERVENTION. Permit the assertion or making of any seizure, vesting
or intervention by or under authority of any government by which the management
of Borrower or any guarantor is displaced of its authority in the conduct of its
respective business or such business is curtailed or materially impaired.
PREPAYMENT OF OTHER DEBT. Retire any long-term debt entered into prior to the
date of this Agreement at a date in advance of its legal obligation to do so.
RETIRE OR REPURCHASE CAPITAL STOCK. Without prior written consent of the Bank,
expend more than $2,500,000 in the aggregate during the term of this Agreement
to retire or otherwise acquire any of its capital stock. CHANGE OF CONTROL.
Borrower shall not make a material change in executive management without prior
written consent of the Bank. CHANGE IN FISCAL YEAR. Borrower or guarantor shall
not change its fiscal year without prior written notice to Bank. GUARANTEES.
Guarantee or otherwise become responsible for obligations of any other person
other than the endorsement of checks and drafts for collection in the ordinary
course of business. ENCUMBRANCES. Create, assume, or permit to exist any
mortgage, security deed, deed of trust, pledge, lien, charge or other
encumbrance on any of its assets, whether now owned or hereafter acquired, other
than: (i) liens for taxes contested in good faith; (ii) liens accruing by law
for employee benefits; or (iii) Permitted Liens.
FINANCIAL COVENANTS. Borrower agrees to the following provisions, all of which
shall be on a consolidated basis, from the date hereof until final payment in
full of the Obligations, unless Bank shall otherwise consent in writing: FIXED
CHARGE COVERAGE RATIO. Borrower shall, at each fiscal year-end, maintain a Fixed
Charge Coverage Ratio of not less than 3.00 to 1.00. "Fixed Charge Coverage"
shall mean the sum of net profit plus taxes, depreciation, amortization, and
interest expense less capital expenditures divided by the sum of interest
expense and current maturities of long term debt and capital lease obligations
from the prior fiscal year. WORKING CAPITAL.
E-13
8
Borrower shall, at all times, maintain Working Capital of at least $11,000,000.
"Working Capital" shall mean cash, accounts receivable, and inventory minus
current liabilities including borrowings under this Agreement and the Note.
TANGIBLE NET WORTH. Borrower shall, at all times, maintain a Tangible Net Worth
of at least $20,000,000.00. Tangible Net Worth shall increase annually, as of
the last day of each fiscal year of the Borrower, by not less than fifty percent
(50%) of net income plus one hundred percent (100%) of additions to paid in
capital realized in such fiscal year. "Tangible Net Worth" shall mean the total
assets minus total liabilities. For purposes of this computation, the aggregate
amount of any intangible assets of Borrower including, without limitation,
goodwill, franchises, licenses, patents, trademarks, trade names, copyrights,
service marks, and brand names, shall be subtracted from total assets, and total
liabilities shall include fully subordinated debt. TOTAL LIABILITIES TO TANGIBLE
NET WORTH RATIO. Borrower shall, at all times, maintain a ratio of Total
Liabilities, including fully subordinated debt, divided by Tangible Net Worth of
not more than 1.00 to 1.00. For purposes of this computation, "Total
Liabilities" shall mean all liabilities of Borrower, including capitalized
leases and all reserves for deferred taxes and other deferred sums appearing on
the liabilities side of a balance sheet of Borrower, in accordance with
generally accepted accounting principles applied on a consistent basis. DEPOSIT
RELATIONSHIP. Borrower shall maintain its primary depository account and cash
management account with Bank. LIMITATION ON DEBT. Borrower shall not, directly
or indirectly, create, incur, assume or become liable for, any debt, contingent
or direct, if, giving effect to such additional debt on a pro forma basis,
causes the aggregate amount of Borrower's debt, including obligations to Bank,
to exceed $5,000,000.00.
ANNUAL FINANCIAL STATEMENTS. Borrower shall deliver to Bank, within 90 days
after the close of each fiscal year, audited financial statements reflecting its
operations during such fiscal year, including, without limitation, a balance
sheet, profit and loss statement and statement of cash flows, with supporting
schedules; all on a consolidated and consolidating basis and in reasonable
detail, prepared in conformity with generally accepted accounting principles,
applied on a basis
E-14
9
consistent with that of the preceding year. All such statements shall be
examined by an independent certified public accountant acceptable to Bank. The
opinion of such independent certified public accountant shall not be acceptable
to Bank if qualified due to any limitations in scope imposed by Borrower or its
Subsidiaries, if any. Any other qualification of the opinion by the accountant
shall render the acceptability of the financial statements subject to Bank's
approval.
PERIODIC FINANCIAL STATEMENTS. Borrower shall deliver to Bank unaudited
management-prepared quarterly financial statements, including, without
limitation, a balance sheet, profit and loss statement and statement of cash
flows, with supporting schedules, as soon as available and in any event within
45 days after the close of each such period; all in reasonable detail and
prepared in conformity with generally accepted accounting principles, applied on
a basis consistent with that of the preceding year. Such statements shall be
certified as to their correctness by a principal financial officer of Borrower.
FINANCIAL AND OTHER INFORMATION. Borrower shall deliver to Bank such information
as Bank may reasonably request from time to time, including without limitation,
financial statements and information pertaining to Borrower's financial
condition. Such information shall be true, complete, and accurate.
YEAR 2000 COMPATIBILITY. Borrower shall take all action necessary to assure that
Borrower's computer based systems are able to operate and effectively process
data including dates on and after January 1, 2000. At the request of Bank,
Borrower shall provide Bank assurance acceptable to Bank of Borrower's Year 2000
compatibility.
CONDITIONS PRECEDENT. The obligations of Bank to make the Loan and any advances
pursuant to this Agreement are subject to the following conditions precedent:
ADDITIONAL DOCUMENTS. Receipt by Bank of such additional supporting documents as
Bank or its counsel may reasonably request. PAYMENT OF COMMITMENT FEE. Borrower
shall have paid to the Bank the commitment fee of $10,000. AVAILABILITY FEE.
Borrower shall pay to Bank quarterly, on the 1st day of each October, January,
April and
E-15
10
July, an availability fee at a rate equal to 0.125% per annum on the average
daily unused available principal under the Note for the preceding calendar
quarter or portion thereof. OPINION OF COUNSEL. On or prior to the date of any
borrowing hereunder, Bank shall have received a written opinion of the counsel
of Borrower acceptable to Bank that includes confirmation of the following: (a)
The accuracy of the representations set forth in this Agreement in the
Representations Subparagraphs entitled "Authorization; Non-Contravention";
"Compliance with Laws", and "Organization and Authority". (b) This Agreement and
other Loan Documents have been duly executed and delivered by Borrower and
constitute the legal, valid and binding obligations of Borrower, enforceable in
accordance with their terms. (c) No registration with, consent of, approval of,
or other action by, any federal, state or other governmental authority or
regulatory body to the execution and delivery of this Agreement, the borrowing
under this Agreement or other Loan Documents, is required by law, or, if so
required, such registration has been made, and consent or approval given or such
other appropriate action taken. (d) The Loan is not usurious.
JOINT AND SEVERAL OBLIGATIONS. The obligations of the Borrower hereunder and
under the Note shall be joint and several.
IN WITNESS WHEREOF, Borrower and Bank, on the day and year first written above,
have caused this Agreement to be executed under seal.
NOVAMETRIX MEDICAL SYSTEMS INC.
By:_____________________________
name:
title:
NTC TECHNOLOGY, INC.
By:_____________________________
name:
title:
E-16
11
FIRST UNION NATIONAL BANK
By:_____________________________
name:
title:
E-17
