EXHIBIT XIII
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement (the "Agreement") is made as of this
10th day of October, 2002, by and among Advanced Tissue Sciences, Inc., ATS
Dermagraft, Inc., and ATS Orthopedics, Inc., as debtors and
debtors-in-possession (collectively, "ATS" or the "Borrowers"), and Xxxxx &
Nephew SNATS, Inc. ("S&N") (S&N being sometimes hereinafter referred to as the
"Lender").
RECITALS
A. WHEREAS, on October 10, 2002 (the "Petition Date"), each of the
Borrowers filed with the United States Bankruptcy Court for the Southern
District of California (the "Bankruptcy Court") a voluntary petition for relief
under Chapter 11 of the Bankruptcy Code;
B. WHEREAS, S&N, X.X. Xxxxx & Nephew Limited and the Borrowers are
entering into an Asset and Equity Purchase Agreement (the "Purchase Agreement")
pursuant to which S&N has agreed to acquire certain assets and Equity Interests
(as herein defined) of the Borrowers (collectively, the "Assets") that are
owned, held or used by the Borrowers in certain of their respective businesses,
and to assume certain liabilities related to such businesses, subject to
approval of the Purchase Agreement by the Bankruptcy Court pursuant to section
363 of the Bankruptcy Code (the "Asset Sale"); and pursuant thereto, ATS has
agreed to use its commercially reasonable efforts to obtain (i) an order of the
Bankruptcy Court approving the procedures which shall govern the notice, auction
and sale of the Assets (as more particularly described herein, the "Sale
Procedures Order") and (ii) an order of the Bankruptcy Court approving the sale
of the Assets to S&N on the terms and conditions set forth in the Purchase
Agreement (as more particularly described herein, the "Sale Order");
C. WHEREAS, Borrowers require additional funds to maintain their
operations until the Bankruptcy Court approves the Asset Sale and the Asset Sale
is consummated in accordance with the Purchase Agreement; and
D. WHEREAS, Lender is willing to make Loans to Borrowers to permit
Borrowers to use loaned funds for its business operations for a period of time
not to exceed the consummation of the Asset Sale.
NOW THEREFORE, in consideration of the terms and conditions
contained herein, and of all loans or extensions of credit made to or for the
benefit of Borrowers by the Lender hereunder, and for other valuable
consideration, the receipt and sufficiency of which is hereby acknowledged by
Borrowers and Lender, such parties hereby agree as follows:
Section 1. DEFINITIONS. When used herein, the following terms shall
have the following meanings:
"Agreement" shall have the meaning given to such term in the
Preamble of this Agreement.
"Asset Sale" shall have the meaning ascribed to such term in
Recital B.
"Assets" shall have the meaning ascribed to such term in Recital B.
"Bankruptcy Code" shall mean title 11 of the United States Code, 11
U.S.C.(S)(S)101 et seq., and each successor provision thereto.
"Bankruptcy Court" shall have the meaning ascribed to such term in
Recital A.
"Borrowers" shall have the meaning ascribed to such term in the
Preamble of this Agreement.
"Borrowing Limit" shall mean $5,000,000 less the amount of any
Milestone Payment(s).
"Budget" shall have the meaning given to such term in Section 2.9.
"Business" shall have the meaning given to such term in the
Purchase Agreement.
"Business Day" shall mean a day other than a Saturday, Sunday or
legal holiday under the laws of the State of Delaware.
"Case" shall mean the bankruptcy cases filed by the Borrowers in
the Bankruptcy Court, identified as case nos. 02- ________ through
02-___________.
"Collateral" shall have the meaning ascribed to such term in
Section 4.1.
"Default" shall mean any event or condition that with the passage
of time or the giving of notice or both would become an Event of
Default.
"DIP Orders" shall mean the Interim DIP Order and the Final DIP
Order.
"Dollars" and the symbol "$" shall each mean and refer to Dollars
of the United States of America.
"Equity Interests" shall have the meaning given to such term in the
Purchase Agreement.
"Event of Default" shall mean the occurrence or existence of any
one or more of the events described in Section 5.1.
"Final DIP Order" shall mean an order of the Bankruptcy Court (in
form and substance satisfactory to the Lender) approving the terms of
this Agreement on an final basis.
"Governmental Authority" shall mean any nation or government, any
state or other political subdivision thereof, any agency, authority,
instrumentality, division, regulatory body, department, court or other
entity exercising executive, legislative, judicial, taxing, regulatory
or administrative functions of or pertaining to government.
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"Initial Loan" shall mean the first loan made by the Lender to the
Borrowers under this Agreement.
"Interest Rate" shall mean a per annum rate equal to the lesser of
10% and the maximum rate permitted by law.
"Interim DIP Order" shall mean an order of the Bankruptcy Court,
[in the form of Exhibit A, with such modifications as may be approved
by the Lender in its sole discretion,] approving the terms of this
Agreement on an interim basis, pending a final hearing.
"Lender" shall have the meaning set forth in the Preamble, and
includes the successors and assigns of S&N.
"Liabilities" shall mean the unpaid principal of and interest on
the Loans and all other obligations (including but not limited to
interest, fees, reimbursement of costs and expenses, attorneys fees,
indemnities and other amounts) of the Borrowers to the Lender under
this Agreement and any other Postpetition Loan Documents, including,
without limitation, all of the Borrowers' payment and performance
obligations, liabilities and indebtedness to the Lender.
"Lien" shall mean any mortgage, pledge, hypothecation, deed of
trust, assignment, deposit arrangement, lien (statutory or other),
charge, option, right to purchase, right of first refusal, encumbrance
or security interest of any kind, the interest of a vendor or lessor
under any conditional sale agreement, capital lease or other title
retention agreement or any other preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
having substantially the same economic effect as any of the foregoing.
"Loan" shall have the meaning given such term in Section 2.1(a).
"Material Adverse Effect" shall have the meaning given to such term
in Section 3.2(d).
"Maturity Date" shall have the meaning given to such term in
Section 2.6.
"Milestone Payments" shall have the meaning given to such term in
the Purchase Agreement.
"Note" shall have the meaning given to such term in Section 2.5.
"Person" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization,
association, corporation, limited liability company, business trust,
joint stock company, institution, entity, party or Governmental
Authority (whether national, federal, state, provincial, county, city,
municipal or otherwise).
"Petition Date" shall have the meaning ascribed to such term in
Recital A.
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"Postpetition Loan Documents" shall mean this Agreement, the Note
and all guarantees, mortgages, deeds of trust, subordination
agreements, pledges, powers of attorney, consents, assignments,
certificates, acknowledgements, contracts, notices, financing
statements and other documents, now or hereafter executed by or on
behalf of the Borrowers and delivered to the Lender, in order to
evidence the Loans and to perfect, preserve or support in any way the
security interests provided for herein and in the DIP Orders or
otherwise relating to the transaction contemplated hereby.
"Purchase Agreement" shall have the meaning given to such term in
Recital B.
"Sale Order" shall mean a final, non-appealable order of the
Bankruptcy Court (in form and substance reasonably satisfactory to the
Lender) approving the Asset Sale to S&N in accordance with terms of the
Purchase Agreement.
"Sale Procedures Order" means a final, non-appealable order of the
Bankruptcy Court setting forth the procedures for the auction and sale
of the Assets and making provision for the payment of a termination fee
to S&N in the event the Asset Sale is not consummated with S&N, in
accordance with the Purchase Agreement.
ARTICLE II
LOANS AND INTEREST; BUDGETS
Section 2.1. Loans.
(a) Upon the terms and subject to the conditions set forth herein,
including but not limited to the conditions precedent set forth in Section 3.1,
the Lender shall make periodic advances to the Borrowers, each such advance in
the amount specified in the Budget for the applicable calendar two (2) week
period (collectively, the "Loans," and individually, a "Loan"). Subject to the
foregoing, (a) the Initial Loan shall be made on the first Business Day after
the first DIP Order is entered and (b) the subsequent Loans shall be made as
provided in Section 2.2; provided, that the aggregate principal amount of the
Loans made shall not exceed the Borrowing Limit.
(b) So long as any Liabilities remain outstanding and unpaid or any
other amount is owing to the Lender hereunder or the Lender has any obligation
to make any Loan hereunder (i) the Lender shall the have the right to audit the
Borrowers' books and records during normal business hours to ensure that the
Borrowers' expenditures are in accordance with the Budget, and the Borrowers
shall cooperate with and assist the Lender in performing such audit; and (ii) on
or prior to the last day of each two (2) week period described in Section 2.2,
the Borrowers shall provide to the Lender a two (2) week report, showing the
Borrowers' cash expenditures against the expenses set forth in the Budget during
the two (2) week period and the outstanding cash balances during the two (2)
week period.
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Section 2.2. Making the Loans. Each Loan made by the Lender
hereunder after the funding of the Initial Loan will be made on a bi-weekly
basis, and be funded on the same day of the week as the Initial Loan (or the
following Business Day if such date is a legal holiday). In the event that any
Milestone Payment becomes due and owing by the Lender, (i) the Lender shall be
entitled to set off the amount of any Milestone Payment in accordance with
Section 2.8, and (ii) if after setoff the remaining amount of a Milestone
Payment is paid to the Borrowers, the Lender shall have no obligation to make
any further Loans to Borrowers unless and until the Loans scheduled to be
advanced in accordance with the Budget exceed the amount of the Milestone
Payment received by the Borrowers. In no event is the Lender obligated to make
Loans in excess of the Borrowing Limit.
Section 2.3. Use of Proceeds. The proceeds of the Loans shall be
used solely to pay those expenses in the amounts set forth in the Budget, and
for the period of time covered by the Budget. The proceeds may also be used to
pay reasonable fees and expenses of professionals and trustees fees incurred in
connection with the Case. If the Borrowers wish to make an expenditure not
provided for in or otherwise in accordance with the Budget, the Borrowers must
notify the Lender (in accordance with Section 6.2) of its request to make such
expenditure and must receive approval from the Lender before making such
expenditure. The Lender may respond within three (3) Business Days of receiving
such notice from the Borrowers. If the Lender fails to respond within three (3)
Business Days, the Borrowers' request to make such expenditure shall be deemed
denied by the Lender.
Section 2.4. Interest and Fees.
(a) The Borrowers shall pay to the Lender interest at the Interest
Rate on (i) the outstanding principal balance of each Loan from the
date made until the date repaid, and (ii) to the extent permitted by
applicable law, all accrued and unpaid interest, fees and other amounts
payable to the Lender hereunder or under the other Postpetition Loan
Documents from the date payable until paid. Interest will be computed
on the basis of the actual number of days and a year of 365/366 days.
In no event shall the Interest Rate exceed the maximum rate of interest
permitted by law.
(b) Following the occurrence of an Event of Default (provided that
such Event of Default is not timely cured, to the extent curable
hereunder, or waived by the Lender), the Borrowers shall pay to the
Lender interest on the Liabilities at a per annum rate equal to the
Interest Rate plus three percent (3.0%) (in lieu of the interest
payment under subsection (a) above). In no event shall the Interest
Rate in the Event of Default exceed the maximum rate of interest
permitted by law.
Section 2.5. Promissory Note. The Loans shall be evidenced by a
promissory note (the "Note") duly executed by the Borrowers, dated the date of
the Initial Loan, in the form attached hereto as Exhibit B, payable to the order
of the Lender. The Lender shall endorse the date and amount of each Loan on the
schedule included in the Note, which endorsement shall constitute prima facie
evidence of the accuracy of the information so endorsed; provided, however, that
failure to make such endorsement shall not in any manner relieve the Borrowers
of their obligations to repay any Loans and to pay interest, fees or any other
Liabilities, as provided under this Agreement and the other Postpetition Loan
Documents.
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Section 2.6. Payment Dates and Maturity Date.
(a) The "Maturity Date" is the earlier of (i) seventy-five (75) days
from the Petition Date, or (ii) the date on which there is an Event of
Default under this Agreement; provided, however, that the Lender, in its
sole and absolute discretion, may elect to extend the Maturity Date at any
time.
(b) On the Maturity Date, the outstanding principal balance of each
Loan, and all interest on such principal balance accrued but unpaid
hereunder, and all other outstanding Liabilities, shall become due and
payable immediately (without demand by the Lender or setoff by the
Borrowers).
(c) If the Sale Order is entered by the Bankruptcy Court and the Asset
Sale is consummated on or prior to the Maturity Date, (i) the Liabilities
(excluding any interest) and any Milestone Payments received by the
Borrowers will be credited against and deducted from the purchase price
paid by S&N pursuant to the Purchase Agreement in accordance with Section
363(k) of the Bankruptcy Code and Sections 3.1(b) of the Purchase
Agreement, and (ii) all accrued but unpaid interest on the Loans shall be
forgiven by S&N.
Section 2.7. Application of Payments. Except as provided in Section
2.6(c), all payments of the Borrowers shall be made pursuant to the terms of
this Agreement and shall be applied to satisfy the Liabilities in the following
order: (unless the Lender, in its discretion elects otherwise) first, to pay
interest on the outstanding Loans; second, to pay principal on the outstanding
Loans; third, to pay any fees, costs or expense reimbursements due to the
Lender; and fourth, to pay any other Liabilities.
Section 2.8. Setoff By Lender. Notwithstanding anything to the
contrary contained herein, including, without limitation, the application of
payments set forth in Section 2.7, the Lender shall have the right to set off
the Borrowers' Liabilities against any Milestone Payment or other amounts due
and owing from the Lender to the Borrowers, whether due and owing prior to the
Petition Date, now or at any time in the future.
Section 2.9. Budget. Attached hereto as Exhibit C is the consolidated
budget of the Borrowers (the "Budget"), which has been approved by the Lender in
its sole discretion reflecting on a line-item basis anticipated bi-weekly cash
receipts and expenditures of the Borrowers for the 75-day period commencing on
the Petition Date.
Section 2.10. Mandatory Prepayments. If the Borrowers disposes of any
Collateral outside of the ordinary course of business without the prior express
written approval of the Lender (which may be withheld in the Lender's sole
discretion) and the Bankruptcy Court, all proceeds of such disposition shall
promptly be paid to the Lender upon receipt by the Borrowers and until so paid
shall be segregated and held in trust for the benefit of the Lender. The
provisions of this Section 2.10 are not a consent, express or implied, to the
disposition of any Collateral of the Borrowers in breach of the provisions of
Section 4.3 or any other provisions of this Agreement, the other Postpetition
Loan Documents, the Purchase Agreement or either
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DIP Order. The Borrowers may prepay the Liabilities, in whole or in part, at any
time or from time to time without premium or penalty.
ARTICLE III
CONDITIONS OF LENDING; REPRESENTATIONS AND WARRANTIES
Section 3.1. Conditions Precedent to the Loans. The making of any Loan
hereunder shall be subject to the following conditions precedent, to the extent
not waived in writing by the Lender:
(a) The Lender's receipt, on or before the date of the Initial Loan,
of all of the following, each fully executed and satisfactory in form and
substance to the Lender in it's sole discretion:
(i) this Agreement;
(ii) the Note; and
(iii) any other Postpetition Loan Documents, papers, instruments
and documents as the Lender may reasonably request (each in a form
reasonably satisfactory to Borrowers).
(b) Each of the documents listed in paragraph (a) above shall be in
full force and effect and the Borrowers shall have performed or observed
each of its covenants and agreements contained therein and no default shall
exist thereunder.
(c) At least one of the DIP Orders shall have been entered in the
Case, and neither of the DIP Orders, nor the Borrowers' Liabilities and the
Lender's rights and remedies thereunder, shall have been reversed, stayed,
vacated, amended, modified or otherwise impaired (except for the
replacement of the Interim DIP Order by the Final DIP Order).
(d) No Default or Event of Default shall have occurred and be
continuing or shall result from the making of the requested Loan.
(e) The absence of any event which would allow S&N to terminate this
Agreement or the Purchase Agreement, including any default (after any
applicable notice and cure periods) by the Borrowers under the Purchase
Agreement.
(f) Each of the representations and warranties made by the Borrowers
in this Agreement, the other Postpetition Loan Documents and the Purchase
Agreement shall be true and correct, in all materials respects, when made
and at the time of making the Loans.
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(g) Borrowers shall have performed or observed, in all material
respects, each of its covenants and agreements contained in this Agreement
and the Asset Purchase Agreement.
(h) The principal amount of the Loan to be made, together with the
original principal amount of all Loans that have previously been made,
shall not exceed the Borrowing Limit or the Budget.
(i) The Borrowers are continuing to operate their business and manage
their properties as a debtors-in-possession under Chapter 11 of the
Bankruptcy Code in the Case and in accordance with the Budget.
(j) The Maturity Date has not occurred.
(k) There does not exist any Material Adverse Effect.
The acceptance by the Borrowers of the proceeds of a Loan shall constitute a
representation and warranty by the Borrowers that each of the foregoing
conditions precedent has been satisfied with respect to such Loan.
Section 3.2. Representations and Warranties. To induce the Lender to
make the Loans as provided for herein, the Borrowers make the following
representations and warranties to the Lender, each and all of which shall
survive the execution and delivery of this Agreement, the other Postpetition
Loan Documents, the Purchase Agreement and the making of any Loan, and each and
all of which shall be true on the date hereof and on the date each Loan is made:
(a) Each Borrower is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of organization and
is duly qualified to transact business as a foreign corporation and is in
good standing in each of the jurisdictions in which the ownership or
leasing of its properties or the conduct of its business requires such
qualification, except where failure to so qualify or be in good standing
would not have a Material Adverse Effect. Each Borrower has full corporate
power and authority to enter into this Agreement and to own or lease and to
operate and use the Collateral owned, leased, operated or used by it;
(b) The execution, delivery and performance by the Borrowers of the
Postpetition Loan Documents and all instruments and documents to be
delivered by the Borrowers hereunder and thereunder and the creation of all
liens and security interests provided for herein and therein: (i) are
within the Borrowers' corporate power and authority and the Borrowers have
the legal right to execute, deliver and perform such agreements; (ii) have
been, or by the date of the Initial Loan will be, duly authorized by the
Court ; (iii) have been, or by the date of the Initial Loan will be, duly
authorized by all necessary or proper corporate action; (iv) are not in
contravention of any provision of the Borrowers' certificate of
incorporation or by-laws; (v) will not violate any law or regulation or any
order or decree of any court or other Governmental Authority; (vi) do not
require the consent or approval of or require any notice to or filing with
or other act by or in respect of any Person (except such consents or
approvals as have been obtained, or notices or filings or other actions
that have been made, in each case remaining in full force and
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effect); and (vii) will not violate or result in, require or permit the
imposition of any Lien under any agreement to which any Borrower is a party
or to which the Borrowers or any of their properties are subject;
(c) The Postpetition Loan Documents have been, or in the case of
Postpetition Loan Documents other than this Agreement and the Note, will
be, duly executed and delivered by the Borrowers, and upon execution and
delivery shall constitute legal, valid and binding obligations of the
Borrowers, enforceable against the Borrowers in accordance with their
respective terms;
(d) There is no fact, condition, change or event that could reasonably
be expected to, individually or in the aggregate, materially and adversely
affect the Equity Interests, the Assets or the operations, financial
condition or prospects of the Business, taken as a whole, except to the
extent that any such fact, condition, change or event results from or
arises out of (i) changes in general economic conditions, or (ii) changes
affecting the industry in which the Business operates generally ("Material
Adverse Effect");
(e) The security interest and liens granted to Lender pursuant to the
Interim DIP Order and Final DIP Order and the Postpetition Loan Documents
will be (and, except as set forth in Schedule 3.2 (e) identifying
encumbered Collateral) first-priority security interests and liens in and
to the Collateral;
(f) The Borrowers own all of the Collateral and have good and valid
leasehold interests in all real property subject to all of their leases,
and have good and marketable title to, or valid leasehold interests in or
licenses to use, all of their other properties and assets, and none of the
properties and assets of the Borrowers are subject to any Liens (except as
set forth in Schedule 3.2(e)); and the Borrowers have received all deeds,
assignments, waivers, consents, non-disturbance and recognition of similar
agreements, bills of sale and other documents, and duly effected all
recordings, filings, registrations and other actions, necessary to
establish, protect and perfect in all material respects the Borrowers'
right, title and interest in and to all such property;
(g) None of the Borrowers is an investment company or a company
controlled by an investment company, within the meaning of the Investment
Company Act of 1940, as amended;
(h) No person or entity other than the Borrowers, including, without
limitation, Segenix, Inc. or BioNuvia, Inc., shall use or be entitled to
use any proceeds of the Loans advanced under this Agreement; and
(i) Neither Segenix, Inc. or BioNuvia, Inc. own or hold any material
tangible assets or property.
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ARTICLE IV
COLLATERAL; COVENANTS
Section 4.1. Security Interest. To secure payment and performance of
the Liabilities, whether now existing or hereafter incurred, whether direct or
indirect, absolute or contingent, due or to become due, and based on the
authorization of the DIP Orders, the Borrowers hereby grant to the Lender,
pursuant to Section 364(c) of the Bankruptcy Code, a valid, perfected and
enforceable security interest in and lien upon all property of the Borrowers or
their bankruptcy estates of any kind or nature whatsoever, whether now existing
or hereafter acquired or arising, including, but not limited to, all accounts,
chattel paper, contracts, contract rights, general intangibles (including all
intellectual property and all rights, registrations and applications relating
thereto), goods, equipment, inventory, vehicles, instruments, documents,
investment property, deposit accounts, books and records (in whatever form
maintained), leasehold interest and tenancies (and all rights relating thereto)
relating to any real or personal property occupied or used by the Borrowers and
all collateral security, letters of credit and guarantees given by any Person
with respect to any of the foregoing, and all proceeds (whether cash or
non-cash), rents, lease or license payments, products or profits of the
foregoing (collectively, the "Collateral"). The liens and security interests
granted to the Lender in the Collateral shall be first-priority as to all
property of the Borrowers that is unencumbered and junior in priority as to all
property of the Borrowers that is subject to a lien. Additionally, the security
interest in the Collateral shall be subject to the "Carveout" as such term is
defined in the DIP Orders. The Carveout is not to exceed $300,000, exclusive of
any prepetition retainer provided by the Borrowers' to their bankruptcy counsel
or other professionals. The Lien and security interest granted herein, pursuant
to Sections 364(c)(1), (2), and (3) of the Bankruptcy Code and the DIP Orders,
shall at all times be a valid, xxxxxx, perfected and enforceable security
interest without any further action by the Borrowers or the Lender.
Section 4.2. Preservation of Collateral and Perfection of Security
Interests Therein; Further Assurances. The Borrowers agree to do such further
acts and things, and to execute and deliver such additional conveyances,
assignments, agreements, financing statements and other documents (at the sole
cost and expense of the Borrowers) as the Lender may at any time reasonably
request in connection with the creation, perfection, administration or
enforcement of this Agreement and the other Postpetition Loan Documents
(including, without limitation, to aid the Lender in the sale of all or any part
of the Collateral after an Event of Default) or related to the Collateral or any
part thereof, or to give any necessary or desirable notice of the Lien and
security interest in the Collateral granted by this Agreement or in order better
to assure and confirm to the Lender its rights, powers and remedies hereunder
and under the DIP Orders. Should the Borrowers fail to do any of the foregoing,
the Lender is authorized to sign any such financing statements and other
documents and to take any other appropriate actions as the agent and
attorney-in-fact of the Borrowers (which power is coupled with an interest and
shall be irrevocable), and any expenses incurred by the Lender in connection
therewith shall be reimbursed by the Borrowers. The Borrowers further agree (i)
to seek such orders from the Bankruptcy Court as the Lender may reasonably
request to accomplish the foregoing, and (ii) that, to the extent permitted by
law, a carbon, photographic, facsimile copy or
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other reproduction of this Agreement or of a financing statement shall be
sufficient and may be recorded as a financing statement.
Section 4.3. Disposition of Collateral. Notwithstanding any other
provision of this Agreement or any of the other Postpetition Loan Documents, the
Borrowers may not dispose of any right, title or interest of the Borrowers in
any of the Collateral without the prior express written consent of the Lender
(which consent may be withheld in the Lender's sole discretion) and the
Bankruptcy Court. This provision shall not limit the expenditure of funds
(including but not limited to cash proceeds of collection of accounts
receivable) by the Borrowers in accordance with the Budget.
Section 4.4. Other Covenants.
(a) Affirmative Covenants. So long as any Liabilities remain
outstanding and unpaid or any other amount is owing to the Lender hereunder
or the Lender has any obligation to make any Loan hereunder, each Borrower
shall:
(i) Preserve, renew and keep in full force and effect its
organizational existence and (ii) take all reasonable action to
maintain all rights, privileges and franchises necessary or desirable
in the normal conduct of its business.
(ii) Keep all property useful and necessary in its business in
good working order and condition, ordinary wear and tear excepted, and
maintain with financially sound and reputable insurance companies
insurance on all its property in at least such amounts and against at
least such risks as are usually insured against in the same general
area by companies engaged in the same or a similar business.
(iii) Keep proper books of records and account in which full,
true and correct entries in conformity with GAAP and all requirements
of law shall be made of all dealings and transactions in relation to
its business and activities and, as reasonably requested by the
Lender, permit representatives of the Lender to visit and inspect any
of its properties and examine and make abstracts from any of its books
and records at any reasonable time and as often as may reasonably be
desired and to discuss the business, operations, properties and
condition of the Borrowers with its officers and employees and with
its accountants.
(iv) Promptly give notice to the Lender, after becoming aware
of:
(A) the occurrence of any Default or Event of Default;
(B) any litigation or proceeding affecting the Borrowers (i)
in which the amount involved is $100,000 or more and not covered
by insurance, (ii) in which injunctive or similar relief is
sought or (iii) which relates to this Agreement, the other
Postpetition Loan Documents, either of the DIP Orders or any of
the transactions contemplated hereby or thereby; and
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(C) any development or event that has had or could
reasonably be expected to have a Material Adverse Effect.
Each notice pursuant to this paragraph (a)(iv) shall be
accompanied by a statement of a corporate officer of the
Borrowers setting forth details of the occurrence referred to
therein and stating what action the Borrowers propose to take
with respect thereto.
(v) The Borrowers will defend any Lien granted to the Lender
in the Collateral against claims and demands of all Persons
whomsoever.
(b) Negative Covenants. So long as any Liabilities remain outstanding
and unpaid or any other amount is owing to the Lender hereunder or the
Lender has any obligation to make any Loan hereunder, the Borrowers shall
not directly or indirectly:
(i) Enter into any merger, consolidation or amalgamation, or
liquidate, wind up or dissolve itself (or suffer any liquidation or
dissolution), or dispose of all or substantially all of its property
or business.
(ii) Make or commit to make any expenditures in excess of the
amounts or for purposes other than those shown on the Budget (whether
from funds from the Loans or other funds of the Borrowers).
Section 4.5. Automatic Stay Not Applicable. The exercise of any right
or remedy available to the Lender (whether under this Agreement, any other
Postpetition Loan Document, applicable law or otherwise), whether before or
after the occurrence of any Default or Event of Default, shall not be subject to
the "automatic stay" under Section 362 of the Bankruptcy Code.
ARTICLE V
DEFAULT; REMEDIES
Section 5.1. Events of Default. Any one of the following events shall
constitute an "Event of Default" under this Agreement:
(a) Failure by the Borrowers to pay in cash the principal amount of
any of the Loans or any Liabilities when due and payable.
(b) Failure by the Borrowers to pay in cash any interest, fee or
other sum due from Borrowers to the Lender hereunder, under any other
Postpetition Loan Document, under either of the DIP Orders or otherwise,
which failure remains uncured for two (2) Business Days after such amount
becomes due and payable.
(c) Any representation or warranty now or hereafter made by the
Borrowers herein or in connection with this Agreement, any of the other
Postpetition Loan
12
Documents, either of the DIP Orders or the Purchase Agreement shall prove
to have been incorrect in any material respect.
(d) Failure by the Borrowers to timely perform or observe any
covenant, condition or agreement contained in this Agreement, any of the
other Postpetition Loan Documents, either of the DIP Orders or the Purchase
Agreement, which failure remains uncured for five (5) calendar days after
the Lender provides notice of such failure.
(e) The filing of a motion by the Borrowers or the entry of an order
(upon motion of a party other than the Borrowers) for dismissal of the Case
or for conversion of the Case to a case under Chapter 7 of the Bankruptcy
Code (or a similar provision of otherwise applicable law).
(f) The filing of a motion by the Borrowers or the entry of an order
(upon a motion of a party other than the Borrowers) for the appointment of
or confirming the election of a trustee or of an examiner with powers
exceeding those set forth in Sections 1106(a)(3) and (4) of the Bankruptcy
Code.
(g) The Borrowers voluntarily or involuntarily dissolve or are
dissolved, terminate or are terminated.
(h) The Bankruptcy Court shall have declined to enter the Sale
Procedures Order or a similar order in a form and substance acceptable to
the Lenders.
(i) The Sale Procedures Order (or other similar order in a form and
substance acceptable to the Lender) shall not have been entered by the
Bankruptcy Court on or prior to thirty-five (35) days of the Petition Date.
(j) The Sale Order shall not have been entered by the Bankruptcy Court
on or prior to sixty (60) days from the Petition Date.
(k) The Bankruptcy Court shall schedule a hearing to approve the sale
of the Assets to S&N to occur on a date more than sixty (60) days from the
Petition Date.
(l) The entry of an order by the Bankruptcy Court approving the sale
of the Assets to any entity or person other than S&N or its affiliates or
subsidiaries.
(m) Any Postpetition Loan Document shall cease for any reason to be in
full force and effect (or the Borrowers shall so assert in writing) or the
reversal, stay vacation or modification, without the Lender's consent
(which the Lender may withhold in its sole discretion), of either of the
DIP Orders or any other impairment of either of the DIP Orders or of the
Borrowers' obligations or the Lender's rights and remedies thereunder or
under any of the other Postpetition Loan Documents or the Purchase
Agreement.
13
(n) After entry of either of the DIP Orders, any of the Postpetition
Loan Documents, or any Lien granted thereunder or under either of the DIP
Orders, shall terminate, cease to be effective or cease to be the legal,
valid, binding and enforceable obligation of the Borrowers thereunder or to
be of first priority (or junior priority with respect to encumbered
Collateral), as the case may be, (ii) the Borrowers shall, directly or
indirectly, contest in any manner such effectiveness, validity, binding
nature, enforceability or priority; or (iii) any lien or security interest
or priority claim securing any of the Liabilities shall, except as
otherwise provided in the DIP Orders, cease to be effective and to be of
first priority (or junior priority with respect to encumbered Collateral).
(o) (i) The entry of an order (a) under Section 105 of the Bankruptcy
Code, or otherwise, restraining the Lender from the enforcement of its
rights and remedies under the DIP Orders or the Postpetition Loan
Documents; (b) authorizing the grant of any administrative priority senior
to, or on a parity with, the priority accorded the Lender under the DIP
Orders, whether under Sections 364, 503 or 507 of the Bankruptcy Code or
otherwise, except as permitted in the DIP Orders; (c) granting another
party relief from the stay to enforce its liens or claims as to any of the
Collateral if such Collateral exceeds a value of $10,000 individually or
$50,000 in the aggregate; or (d) approving a charge against Lender or the
Collateral under Section 506(c) of the Bankruptcy Code; or (ii) the filing
of a motion or commencement of an action by the Borrowers seeking any form
of relief described in clauses (i)(a)-(d) of this paragraph.
(p) The filing by the Borrowers of, or the entry of an order
approving, any sale motion or plan of reorganization or liquidation in the
Case, providing for the sale of the Assets other than in accordance with
the terms of the Purchase Agreement.
(q) The Final DIP Order shall not have been entered within thirty (30)
days of date of the entry of the Interim DIP Order.
(r) The Borrowers shall perform or fail to perform any act that
results in a material violation of any provision of either of the DIP
Orders.
(s) Failure by the Borrowers to pay over proceeds of Collateral as
required by Section 2.10.
(t) Termination of the Purchase Agreement.
(u) The occurrence of any Material Adverse Effect at any time prior to
the Maturity Date, including, but not limited to, the loss of personnel or
the loss of federal or state regulatory approvals and/or licenses
materially affecting the value of the Collateral or the ability of the
Borrowers' to operate their respective businesses.
Section 5.2. Remedies. Upon the occurrence and during the continuance
of an Event of Default, the Lender may, by written notice to the Borrowers, (i)
declare the Loans, all interest thereon and all other Liabilities to be
forthwith due and payable, whereupon the Loans, all such interest and all such
other Liabilities shall become and be forthwith due and payable,
14
without presentment, demand, protest, or further notice of any kind, all of
which are hereby expressly waived by the Borrowers, and (ii) exercise all or any
of its rights under the Postpetition Loan Documents, the DIP Orders, or of a
secured party under the Uniform Commercial Code or under applicable law, all of
which rights and remedies shall be cumulative, and non-exclusive, to the extent
permitted by law. Notwithstanding anything in the foregoing to the contrary,
upon the occurrence of any Event of Default described in Sections 5.1(e), (f)
and (g), the Liabilities shall become automatically due and payable, without the
requirement of giving of any notice to the Borrowers.
Section 5.3. Sale or Other Disposition of Collateral by the Lender.
Upon the occurrence and during the continuance of an Event of Default, subject
to Part 5 of Article 9 of the Uniform Commercial Code, the Lender may (i) retain
the Collateral in satisfaction of the Liabilities hereunder or (ii) sell and
deliver any Collateral at public or private sale, for cash, upon credit or
otherwise, at such prices and upon such terms as the Lender deems advisable in
its reasonable discretion, and, if the Lender deems it reasonable, the Lender
may postpone or adjourn any sale of the Collateral by an announcement at the
time and place of such sale, or any adjourned or postponed sale, without giving
an additional notice of sale. Any notice required to be given by the Lender of a
sale or other disposition or other intended action by the Lender with respect to
any of the Collateral which is deposited in the United States mail, postage
prepaid and duly addressed to the Borrowers at the address specified in Section
6.2, at least five (5) Business Days prior to such proposed action, shall
constitute fair and reasonable notice to the Borrowers of any such action. The
net proceeds realized by the Lender upon any such sale or other disposition,
after deduction for the expense of retaking, holding, preparing for sale or
lease, selling or the like and the reasonable attorneys' fees and legal expenses
incurred by the Lender in connection therewith, shall be applied toward
satisfaction of the Liabilities in the order set forth in Section 2.7. The
Lender shall account to the Borrowers for any surplus realized upon such
retention, sale or other disposition, and the Borrowers shall remain liable for
any deficiency. The commencement of any action, legal or equitable, or the
rendering of any judgment or decree for any deficiency shall not affect the
Lender's security interest in the Collateral until the Liabilities are fully
paid.
Section 5.4. Waivers. The Borrowers waive any right to require the
Lender to (i) proceed against any other Person, (ii) proceed against or exhaust
any Collateral, (iii) pursue any other remedy in the Lender's power, or (iv)
make or give any presentments, demands for performance, notices of
nonperformance, protests, notices of protests or notices of dishonor in
connection with any obligations or evidence of indebtedness which constitute in
whole or in part the Liabilities (other than any notices expressly provided for
in this Agreement). The Borrowers further waive any right (v) to commence any
action under Section 105 of the Bankruptcy Code or otherwise, seeking to
restrain the Lender from the enforcement and exercise of its rights and remedies
under the Postpetition Loan Documents and/or either of the DIP Orders (provided,
however, that this clause (v) shall not limit the right of the Borrowers to
commence an action to determine whether the Lender has the right to enforce its
rights and remedies under the terms of the Postpetition Loan Documents and/or
either of the DIP Orders); (w) except as specifically permitted in this
Agreement, to sell, lease, sublease, license or sublicense any of the
Collateral; (x) to attempt to recover from the Lender under Section 506(c) of
the Bankruptcy Code; (y) to seek relief under Section 552(b) of the Bankruptcy
Code; (v) to seek authorization to grant any administrative priority senior to,
or on a parity with, the priority accorded the Lender under the
15
DIP Orders, whether under Sections 364, 503 or 507 of the Bankruptcy Code or
otherwise (with the exception of the "Carveout" as such term is defined in the
DIP Orders); or (z) through a plan of reorganization or otherwise, to seek
authorization to do anything other than pay all of the Liabilities on the
Maturity Date. In addition, the Borrowers waive any right to seek to modify,
vacate or amend either of the DIP Orders absent the prior written consent of the
Lender (which the Lender may withhold in its sole discretion).
Section 5.6. Limitations. The obligation of the Lender with respect to
the Collateral shall be strictly limited to the duty to exercise reasonable care
in the custody of Collateral in its possession. The Lender has no duty to the
Borrowers or any other Person (i) to take any steps necessary to preserve the
rights of the Borrowers against any Person or to initiate any action to protect
against the possibility of a decline in the market value of the Collateral, (ii)
to take any action with respect to the Collateral requested by the Borrowers, or
(iii) to take any other action to preserve, protect or defend any right, title
or interest of the Borrowers, the Lender or any other Person with respect
thereto or to preserve any value thereof.
ARTICLE VI
MISCELLANEOUS
Section 6.1. Amendments, etc. No amendment or waiver of any provision
of this Agreement, nor consent to any departure by the Borrowers therefrom,
shall be effective unless the same shall be in writing and signed by the Lender,
and then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given.
Section 6.2. Notices. All notices and other communications provided for
hereunder (unless otherwise specifically provided herein) shall be in writing
(including telecopy transmission) and mailed by registered mail, return receipt
requested, or telecopied, hand delivered, or sent via nationally-recognized
overnight courier service, if to the Borrowers, Advanced Tissue Services, Inc.,
00000 Xxxxx Xxxxxx Xxxxx Xxxx, Xx Xxxxx, Xxxxxxxxxx 00000, attn.: Xx. Xxxx
Xxxxxx, facsimile number (000) 000-0000, with a copy to Xxxxx X. Xxxxxx, Esq.,
Xxxxxx, Xxxx & Xxxxxxxx LLP, 0 Xxxx Xxxxx, Xxxxxx, Xxxxxxxxxx 00000-0000,
facsimile number (000) 000-0000, and if to Lender, Xxxxx & Nephew SNATS, Inc.,
c/o Smith & Nephew plc, 00 Xxxx Xxxxxx, Xxxxxx, Xxxxxxx XX0 X 0XX, Xxxxxx
Xxxxxxx, attn: Xx. Xxxxx Xxxxxxx, facsimile number 011 44 207 930 3426, with a
copy to Xxxxx X. Xxxxxxxxx, Esq., Sidley Xxxxxx Xxxxx & Xxxx, LLP, 000 X. Xxxxx
Xxxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000, facsimile number (000) 000-0000. All such
notices and communications shall be effective three (3) Business Days after
depositing such notice in the mails (if mailed), upon receipt of electronic
confirmation (if telecopied), upon receipt (if hand delivered), and one (1)
Business Day after delivery to the courier service (if sent via overnight
courier).
Section 6.3. No Waiver; Cumulative Remedies. No failure on the part of
the Lender to exercise, and no delay in exercising any right hereunder, or under
any of the other Postpetition Loan Documents shall operate as a waiver thereof;
nor shall any single or partial exercise of any right hereunder, under any other
Postpetition Loan Document, under either DIP
16
Order or under applicable law preclude any other or further exercise thereof or
the exercise of any other right. No waiver of any Default or Event of Default
shall be deemed a waiver of any other Default or Event of Default. The remedies
herein provided are cumulative and not exclusive of any remedies provided by
law.
Section 6.4. Costs, Expenses and Taxes. The Lender shall be reimbursed
by Borrowers, without further motion to or hearing by the Bankruptcy Court, for
all costs and expenses (including, without limitation, all filing and recording
fees and taxes, reasonable attorneys' and paralegals' fees and expenses, and
out-of-pocket audit expenses) incurred by the Lender in connection with: (i) the
negotiation, preparation, execution and delivery of the DIP Orders, the
Postpetition Loan Documents and the Motion (as such term is defined in the DIP
Orders) and related orders, instruments, documents, and agreements (including
without limitation, this Agreement and the other Postpetition Loan Documents),
and any amendment, supplement or modification of the terms thereof, or any
waiver or consent thereunder or in respect thereof, and the consummation of the
transactions contemplated hereby and thereby, provided that any such costs and
expenses incurred under this subsection (i) prior to the entry of the Interim
DIP Order shall not exceed $25,000; (ii) the monitoring, enforcement,
preservation and protection of the Lender's rights hereunder and under the other
Postpetition Loan Documents and the DIP Orders (including, without limitation,
the perfection of the Lender's security interest in the Collateral); (iii) the
collection of all Loans and other Liabilities by the Lender; (iv) the defense of
any claim or action asserted or brought against the Lender by any Person
(including the Borrowers) that arises from or relates to the Postpetition Loan
Documents, the DIP Orders, the Lender's claims against the Borrowers or any and
all matters in connection therewith; (v) the commencement or defense of, or
intervention in any court proceeding with respect to, matters referred to in the
DIP Orders; (vi) the filing of any petition, complaint, answer, motion, or other
pleading, or taking of any other similar action, with respect to the Collateral;
(vii) the protection, collection, lease, license, sale, taking possession of, or
liquidation or other disposition of any of the Collateral or the Lender's
interest therein; (viii) any attempt to enforce any Lien on or security interest
in any of the Collateral; or (ix) the receipt of any advice with respect to any
of the foregoing. In addition, the Borrowers agree to pay, indemnify and hold
the Lender harmless from and against any and all claims, demands, liabilities,
losses, damages, penalties, costs and expenses (including reasonable attorneys'
and paralegals' fees and expenses) relating to or in any way arising out of (w)
any and all recording and filing fees and any and all liabilities with respect
to stamp, excise and other taxes, if any, which may be payable or determined to
be payable by the Borrowers in connection with the execution and delivery of, or
any amendment, supplement or modification of, or any waiver or consent under or
in respect of, the DIP Orders, this Agreement, the other Postpetition Loan
Documents and any other similar orders, agreements, instruments and documents,
(x) the Lender's possession, use, operation or control of the Borrowers' assets
resulting from its enforcement of rights hereunder, under the other Postpetition
Loan Documents or under either of the DIP Orders or under applicable law, except
those resulting from the Lender's gross negligence or willful misconduct, (y)
the Borrowers' license fees, bonding premiums and related taxes and charges, and
(z) the Borrowers' real and personal property taxes, assessments and charges and
all of the Borrowers' franchise, income, unemployment, use, excise, old age
benefit, withholding, sales and other taxes and other governmental charges
assessed against the Borrowers, or payable by the Borrowers. All of the
foregoing costs, expenses, taxes, claims, demands, liabilities, losses, damages
and
17
penalties shall be added to and become part of the Liabilities hereunder, and
shall be payable in accordance with Section 2.6.
Section 6.5. Successors and Assigns; Binding Effect; Governing Law;
Severability. This Agreement shall be binding upon and inure to the benefit of
the Borrowers and the Lender and their respective successors and assigns, except
that the Borrowers shall not have the right to assign their rights hereunder and
under the other Postpetition Loan Documents or any interest herein or therein
without the prior written consent of the Lender. The Lender, at its sole option,
shall have the right to assign this Agreement, the Note and the other
Postpetition Loan Documents and any of its rights and interests hereunder and
thereunder. This Agreement and the Note shall be governed by, and construed in
accordance with, the laws (other than conflicts of law provisions) of the State
of Delaware. Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited or invalid under
applicable law, such provision shall be effective only to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement.
Section 6.6. Jurisdiction. THE BORROWERS AND THE LENDER CONSENT TO THE
JURISDICTION OF THE BANKRUPTCY COURT, AND THE BANKRUPTCY COURT SHALL RETAIN
EXCLUSIVE JURISDICTION TO ENFORCE, INTERPRET OR RESOLVE DISPUTES ARISING UNDER
THIS AGREEMENT.
Section 6.7. Counterparts. This Agreement may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute but one and the same agreement.
Section 6.8. Headings. Section and Article headings in the Postpetition
Loan Documents are for the convenience of reference only and shall not govern
the interpretation of any provision of the Postpetition Loan Documents.
Section 6.9. Time. Time is of the essence under this Agreement and the
other Postpetition Loan Documents and the DIP Orders.
Section 6.10. Merger. This Agreement, the other Postpetition Loan
Documents and the DIP Orders integrate all terms and conditions mentioned herein
or incidental hereto and supersede all oral negotiations and prior writings in
respect of the subject matter hereof. In the event of any conflict between the
terms, covenants, conditions and provisions of this Agreement and the other
Postpetition Loan Documents, the terms, covenants, conditions and provisions of
this Agreement shall prevail; provided, however, in the event the terms of this
Agreement or any of the other Postpetition Loan Documents conflict with terms of
either of the DIP Orders, the terms of the relevant DIP Order shall prevail.
Section 6.12. No Off-Set. The Borrowers shall not, under any
circumstances, fail or delay to perform (or resist the enforcement of) any of
their obligations to the Lender in connection with the Postpetition Loan
Documents or the DIP Orders because of any alleged
18
offsetting claim or cause of action against the Lender or any indebtedness or
obligation of the Lender. The Borrowers further waive any rights which they
might otherwise have (if any) to require a marshalling of any security by the
Lender or to direct the order in which the Lender pursues its remedies or rights
with respect to any of its security.
Section 6.13. Term; Effectiveness. This Agreement shall become
effective upon entry of (and in accordance with) the DIP Orders and shall
terminate upon the Maturity Date. Notwithstanding any such termination, until
all Liabilities have been paid and satisfied in full, the Lender shall retain
all rights and remedies hereunder, under the other Postpetition Loan Documents
and under the DIP Orders (including, without limitation, all rights to
Collateral granted hereunder and thereunder and all rights of indemnification
pursuant to Section 6.4.)
Section 6.14. Relationship. The relationship of the Borrowers and the
Lender under the Postpetition Loan Documents is, and shall at all times remain,
solely that of a borrower and debtor, on the one hand, and a lender and secured
party, on the other hand.
Section 6.15. Third Party Beneficiaries. In making decisions to advance
Loans to the Borrowers, in administering any such Loans, or in taking any other
actions reasonably related to the DIP Orders, this Agreement, or the other
Postpetition Loan Documents, the Lender shall have no liability to any third
party (including creditors of the Borrowers), and no such third parties are
intended to be or shall be deemed to be third party beneficiaries of the
provisions of the DIP Orders, this Agreement or the other Postpetition Loan
Documents.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
19
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
Advanced Tissue Sciences, Inc., Xxxxx & Nephew SNATS, Inc.,
ATS Dermagraft, Inc., and
ATS Orthopedics, Inc., collectively and
on behalf of each,
By: /s/ Xxxxxx Xxxxxxxxx By: /s/ Xxxxxx X. Xxxxx
------------------------ -----------------------
Name: Xxxxxx Xxxxxxxxx Name: Xxxxxx X. Xxxxx
Title: Title: Assistant Secretary
20
EXHIBIT A
to
LOAN AND SECURITY AGREEMENT
[INTENTIONALLY OMITTED]
21
EXHIBIT B
to
LOAN AND SECURITY AGREEMENT
FORM OF NOTE
Advanced Tissue Sciences, Inc., ATS Dermagraft, Inc., and ATS
Orthopedics, Inc. (collectively, "Borrowers") hereby promise, jointly and
severally, to pay to the order of Xxxxx & Nephew SNATS, Inc. ("S&N") the
following amounts of principal together with any interest accrued thereon at the
Interest Rate or any other applicable interest rate on the dates specified
below:
Principal Amount Advanced Date Advanced Endorsement
------------------------- ------------- -----------
This is the Note referred to in, governed by the terms of and secured as
provided in that certain Loan and Security Agreement dated as of October ___,
2002 (the "Loan and Security Agreement") executed by and between the Borrowers
and S&N, the terms and provisions of which are incorporated by reference as if
set forth in full herein. All capitalized terms not defined herein shall have
the meanings attributed to them in the Loan and Security Agreement. If anything
in this Note should conflict in any way with any of the terms, conditions or
provisions of the Loan and Security Agreement, the Loan and Security Agreement
shall in all respects control.
Advanced Tissue Sciences, Inc.
ATS Dermagraft, Inc.
ATS Orthopedics, Inc.
By:___________________________
Name:
Title:
22
EXHIBIT C
to
LOAN AND SECURITY AGREEMENT
BUDGET
[INTENTIONALLY OMITTED]
23
