EXHIBIT 10.3
AMENDED AND RESTATED CREDIT AGREEMENT
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Agreement made as of this 14th day of June, 1999, by and among PRIMESOURCE
SURGICAL, INC., formerly known as Tucson Medical Corporation, a Delaware
corporation (the "Borrower"), as a borrower, BIMECO, INC., a Florida corporation
("Bimeco"), MEDICAL COMPANIES ALLIANCE, INC., a Utah corporation ("MCA"), and
XXXXXXXX MEDICAL, INC., a Florida corporation ("Xxxxxxxx"), as guarantors
(Bimeco, MCA and Xxxxxxxx each a "Guarantor" and collectively the "Guarantors")
and STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust company
(hereinafter referred to as the "Bank").
WHEREAS, the Borrower wishes to amend credit facilities with the Bank so
that the Borrower may borrow funds from the Bank (i) to finance the acquisitions
of stock of FOUR wholly-owned subsidiaries of HTD Corporation, a Delaware
corporation ("HTD") which are Futuretech of Maryland, Inc., formerly known as
Megatech Medical, Inc., a Maryland corporation ("Futuretech Maryland"),
Futuretech of Washington, Inc., formerly known as Omni Medical, Inc., a
Washington corporation ("Futuretech Washington"), Healthcare Technology
Delivery, Inc., a Delaware corporation ("Healthcare"), and Bimeco (each, a "HTD
Subsidiary" and collectively, the "HTD Subsidiaries"), (ii) for general working
capital purposes, (iii) certain future acquisitions of the Borrower approved by
the Bank, (iv) to repay existing credit facilities; and to fund permitted stock
repurchases. The HTD Subsidiaries and their subsidiaries, Futuretech, Inc.
("Futuretech"), an Alabama corporation that is a subsidiary of Healthcare, MCA
that is a subsidiary of Healthcare, and Xxxxxxxx that is a subsidiary of Bimeco,
are hereafter collectively referred to as the "Acute Care Subsidiaries" and,
individually, as an "Acute Care Subsidiary."
WHEREAS, the Bank has agreed to amend its existing credit facilities with
the Borrower under the terms and conditions hereinafter set forth;
NOW, THEREFORE, the parties hereby agree as follows:
ARTICLE I. DEFINITIONS
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Section 1.01. Definitions.
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As used herein and in the other Credit Documents, the following terms shall
have the following meanings;
"Applicable LIBOR Rate" shall mean the LIBOR Rate plus 3.75% per annum
unless adjusted pursuant to Section 2.06.
"Applicable Prime Rate" shall mean the Prime Rate plus .75% per annum
unless adjusted pursuant to Section 2.06.
"Acquisitions" shall mean the (i) the acquisition of HTD by MEDIQ/PRN Life
Support Services ("MEDIQ") and (ii) acquisition of all of the outstanding stock
of the Acute Care Subsidiaries by the Borrower pursuant to the Acquisitions
Agreements.
"Acquisitions Agreements" shall mean the (i) Agreement and Plan of Merger
by and among HTD, HTD Management, Inc., MEDIQ, MEDIQ Incorporated and HTD
Acquisition Corporation dated June 14, 1999 (the "MEDIQ Merger Agreement") and
(ii) Stock Purchase Agreement among the Borrower, HTD, HTD Management, Inc., and
MEDIQ, dated June 14, 1999 (the "HTD Merger Agreement").
"Acquisitions Documents" shall mean all documents and instruments executed
in connection with the Acquisitions, including the MEDIQ Merger Agreement and
the HTD Merger Agreement, including the Escrow Agreement by and among the
Borrower, Xxxxxx Private Equity and Mezzanine Fund, L.P., EQUUS, II Incorporated
and Xxxxx Xxxxxxx, in their capacities as Stockholders' Agents, and The Chase
Manhattan Trust Company, National Association, as Escrow Agent dated June 14th,
1999.
"Banking Day" shall mean any day which the Bank is open to conduct
commercial banking business in Boston, Massachusetts.
"Credit Documents" shall mean this Agreement, the Notes, the Security
Agreement, the Guarantor Security Agreements, the Unlimited Guaranty Agreements,
the Pledge Agreements, the Subordination Side Letters, the Landlord's Consent
and Estoppel Certificates, the Collateral Assignment of Acquisitions Documents,
Intellectual Property Security Agreement, the Warrant Agreement, the Warrant,
and all other documents, instruments and agreements now or hereafter executed in
connection with any of them.
"Equity Documents" shall mean the Convertible Preferred Stock Purchase
Agreement (the "Purchase Agreement"), the Stockholders' Agreement (as defined in
the Purchase Agreement) the Certificate of Designations, Preferences and
Relative participating Optional and Other Special, Rights of Series C
Convertible Preferred Stock of Prime Source Surgical, Inc. all dated as of June
14, 1999 and all instruments and documents related thereto.
"Interest Rate Determination Date" shall mean each date for calculating the
LIBOR Rate for purposes of determining the interest rate in respect of an
Interest Period. The Interest Rate Determination Date shall be the second
Business Day prior to the first day of the related Interest Period for a LIBOR
Rate Loan.
"Leverage Ratio" shall mean the ratio at any time of total Indebtedness
divided by the Borrower's trailing twelve month EBITDA.
"LIBOR Rate" shall mean, for any given dare, the London Interbank Offered
Rate for the applicable Interest Period selected by the Borrower in accordance
with Sections 2.05(b) hereof as quoted by Barclays Bank PLC, London, England or
by Lloyds Bank, London, England (and if such rate shall differ, the Lender shall
have the option of which rate applies for purposes of this Agreement) at 11:00
a.m., London time as adjusted by dividing (i) the LIBOR Rate for that Interest
Period by (ii) a percentage equal to 100% minus the stated maximum percentage
rate of all reserves (including, without limitation, any basic, supplemental,
emergency or marginal reserve requirement) required to be maintained against
"Eurocurrency liabilities" as specified in Regulation D (or against any other
category of liabilities that includes deposits by reference to which the
interest rate on LIBOR Rate Loans is determined or any category of extensions of
credit or other assets that includes loans by a non-U.S. office of a Lender to
U.S. residents).
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"LIBOR Rate Loans" shall mean all or a portion of the outstanding Term
Credit which accrue and bear daily interest during the Interest Period so
selected at a per annum rate equal to the Applicable LIBOR Rate for such
Interest Period pursuant to Section 2.05 hereof.
"Notes" shall mean collectively, the Term Note and the Revolving Credit
Note, all substitutions and replacements of either of the foregoing, and any
other notes issued by the Borrower to the Bank pursuant to this Agreement.
"Permitted Acquisitions" shall mean acquisition of stock or assets of an
entity by the Borrower approved in writing by the Bank.
"Permitted Stock Payments" shall mean on terms satisfactory to the Bank
payments (i) not to exceed $87,500 to fund the repurchase of stock from Xxxxxxx
Xxxxx pursuant to the Stock Redemption Agreement between the Borrower and
Xxxxxxx Xxxxx dated March 31, 1999; and (ii) not to exceed $1,600,000 to fund
the repurchase of stock from Xxxxx Xxxxx at up to $.875 per share pursuant to a
certain settlement agreement between Borrower and Xxxxx Xxxxx acceptable to the
Bank and to fund the repurchase of stock of Xxxxxxx Xxxxx and Xxxxxxx Xxxxx (the
"Wynnes") at up to $.875 per share pursuant to a stock repurchase agreement to
be entered into between the Borrower and the Wynnes which is acceptable to the
Bank.
"Prime Rate" shall mean the annual rate of interest announced by the Bank
from time to time, at the principal office of the Bank, 000 Xxxxxxxx Xxxxxx,
Xxxxxx, Xxxxxxxxxxxxx 00000, as its prime rate.
"Regulation D" shall mean Regulation D of the Board of Governors of the
Federal Reserve System from time to time in effect, and shall include any
successor or other regulation or official interpretation of said Board of
Governors relating to reserve requirements applicable to member banks of the
Federal Reserve System.
"Subsidiary" shall mean any corporation, business trust or other business
entity in which the Borrower or a Subsidiary owns or has options to acquire 50%
or more of the voting control.
"Unlimited Guaranty Agreements" shall mean the unlimited guaranties of
Bimeco, MCA and Xxxxxxxx of the obligations of the Borrower under the Credit
Documents.
"Unutilized Revolving Commitment" shall mean the excess of (i) the Maximum
Revolving Credit over (ii) the aggregate outstanding principal amount of
Revolving Credit Advances made by the Bank hereunder.
The following terms are defined or described in the following sections:
Affiliate Section 5.15
Bank Preamble
Base Financial Statements Section 3.04
Borrower Preamble
Borrowing Base Section 2.03
Borrowing Base Certificate Section 5.06
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Capital Expenditures Section 5.26
Closing Section 7.06
Code Section 3.10
Collateral Assignment of Acquisitions Documents Section 4.01(g)
Compliance Certificate Section 5.06(c)
CPA Section 5.06(a)
Credit Section 2.01
Current Assets Section 5.27
Current Liabilities Section 5.27
EBITDA Section 5.25
Eligible Accounts Receivable Section 2.03(c)
ERISA Section 3.10
Event(s) of Default Article VI
Facility Fee Section 2.12
Guarantors Preamble
Guarantor Security Agreements Section 4.01(e)
Indebtedness Section 5.10
Intellectual Property Section 3.18
Intellectual Property Security Agreement Section 4.01(s)
Key Licenses Section 5.08
Key-Man Life Insurance Policy Section 4.01(j)
Landlord's Consent and Estoppel Certificates Section 4.01(g)
Maturity Date Section 2.02(b)
Maximum Revolving Credit Section 2.03(a)
Net Worth Section 5.24
Rate Change Certificate Section 2.06
Rate Change Financial Statement(s) Section 2.06
Restricted Payment(s) Section 5.18
Revolving Credit Section 2.01
Revolving Credit Advance(s) Section 2.03(a)
Revolving Credit Note Section 2.03(b)
Security Agreement Section 4.01(c)
Special Counsel Section 4.01(a)
Stock Section 5.18
Subordination Side Letter(s) Section 4.01(n)
Term Credit Section 2.01
Term Note Section 2.02(a)
Total Liabilities Section 5.24
Warrants Section 4.01(t)
Warrant Agreement Section 4.01(t)
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Section 1.02. Accounting Terms.
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Unless otherwise specified herein, all accounting terms used herein shall
be construed in accordance with generally accepted accounting principles
consistently applied.
ARTICLE II. AMOUNT AND TERMS OF THE CREDIT.
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Section 2.01. The Credit.
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Subject to the terms and conditions hereof, and in reliance on the
representations and warranties contained herein, the Bank hereby establishes a
credit facility in favor of the Borrower in the aggregate principal amount of
$17,000,000 as set forth below (the "Credit"). The Credit shall consist of (i) a
secured term loan in the principal amount of $5,000,000 (the "Term Credit"), and
(ii) a secured revolving line of credit in the maximum principal amount of
$12,000000 (the "Revolving Credit").
Section 2.02. The Term Credit.
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(a) GENERAL TERMS; THE TERM NOTE. Subject to the terms and conditions
herein, on the date of the Closing the Bank shall loan the Borrower the Term
Credit. All amounts owed by the Borrower with respect to the Term Credit shall
be evidenced by an amended and restated promissory note of the Borrower in the
principal amount of the Term Credit, dated the date of the Closing, in the form
attached hereto as EXHIBIT 2.02(a) (the "Term Note"). The Term Credit may be
prepaid in whole or in part without penalty in a minimum amount of $50,000 and
an integral multiple of $50,000, or such lesser amount as is then outstanding
provided however that such payments shall be applied to the remaining payments
under the Term Note in inverse order of maturity or during the occurrence and
continuance of or Event of Default at the Bank's discretion.
(b) PAYMENTS OF PRINCIPAL. Unless accelerated pursuant to Article VI
hereof, the principal amount of the Term Credit shall be repaid (i) in
forty-eight (48) monthly installments payable on the first day of each calendar
month in the amount of (a) $75,000 from July 1, 1999 through June 1, 2000; (b)
$95,834 from July 1, 2000 through June 1, 2001; (c) $112,500 from July 1, 2001
through June 1, 2002; (d) $133,334 from July 1, 2002 through June 1, 2003; and
(e) a final installment in the amount of the entire unpaid balance of the Term
Credit (including principal, all accrued but unpaid interest costs and fees and
any other amounts then due), due and payable on June 1, 2003 (the "Maturity
Date").
(c) INTEREST. The Term Credit shall bear interest as provided in
Section 2.04.
Section 2.03. The Revolving Credit.
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(a) GENERAL TERMS. Subject to the terms and conditions hereof and
provided that no default, or Event of Default, has occurred or is continuing,
the Borrower may, from time to time from the date hereof up to the Maturity Date
borrow and reborrow from the Bank, and the Bank shall advance funds to the
Borrower as requested pursuant to Section 2.03(f) (each a "Revolving Credit
Advance" and collectively, the "Revolving Credit Advances"); PROVIDED, HOWEVER,
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that the aggregate of all Revolving Credit Advances outstanding at any time
shall not exceed an amount equal to the lesser of (i) $12,000,000 (the "Maximum
Revolving Credit"), or (ii) the Borrowing Base. The Revolving Credit may be
prepaid in whole or in part without penalty.
(b) THE REVOLVING CREDIT NOTE. All amounts owed by the Borrower with
respect to Revolving Credit Advances shall be evidenced by an amended and
restated revolving credit note in the principal amount of the Maximum Revolving
Credit, dated the date hereof in the form attached hereto as Exhibit 2.03(b)
(the "Revolving Credit Note").
(c) BORROWING BASE. Subject to the limitations set forth below, the
"Borrowing Base" shall consist of the 80% of Eligible Accounts Receivable and
45% of Eligible Inventory.
"ELIGIBLE ACCOUNTS RECEIVABLE" shall mean an account receivable which
meets all of the following requirements:
(i) such account receivable is subject to a perfected
security interest in favor of the Bank and is subject to no other lien
whatsoever other than a lien permitted under Section 5.12 hereof;
(ii) such account receivable is owned by the Borrower and
represents a complete bona fide transaction which requires no further
act under any circumstances on the part of the Borrower to make such
account receivable payable by the account debtor;
(iii) such account receivable is no more than 90 days past
due from invoice date;
(iv) the amount owing on the invoice evidencing such account
receivable is a valid, legally enforceable obligation of the account
debtor with respect thereto and is not subject to any material present
or contingent offset, deduction or counterclaim, dispute or other
defense on the part of such account debtor, and no facts exist which
are the basis for any future such action or claim;
(v) such account receivable is not evidenced by chattel
paper or an instrument of any kind unless such chattel paper or
instrument has been delivered to the Bank;
(vi) the goods giving rise to such account receivable were
not, at the time of the sale thereof, subject to any lien, other than
a lien permitted under Section 5.12 hereof;
(vii) the account debtor with respect to such account
receivable is not insolvent or the subject of any bankruptcy or
insolvency proceedings of any kind or of any other proceeding or
action, pending, or to the knowledge of the Borrower, threatened,
which might have a materially adverse effect on such account debtor;
(viii) the account debtor with respect thereto is not an
Affiliate or employee of the Borrower or any Subsidiary;
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(ix) if the account debtor with respect thereto is located
outside of the United States of America, the goods which gave rise to
such account receivable were shipped after receipt by the Borrower
from the account debtor of an irrevocable letter of credit issued or
confirmed by a financial institution reasonably acceptable to the Bank
and in form and substance reasonably acceptable to the Bank, payable
in the amount of the face value of the Account in dollars at a place
of payment located within the United States;
(x) the account debtor with respect thereto is not a
governmental agency (except where the Borrower and account debtor have
complied with the Federal Assignment of Claims Act to the Bank's
satisfaction); and
(xi) such account receivable is not determined by the Bank
to be ineligible for any other reason based upon such credit and
collateral considerations as the Bank may reasonably deem appropriate.
"ELIGIBLE INVENTORY" shall mean inventory which meets all of the
following requirements"
(i) such Inventory is owned by the Borrower, is subject to a
perfected security interest in favor of the Bank and is subject to no
other lien whatsoever other than a lien permitted under Section 5.12
hereof;
(ii) if such Inventory is located within a premises leased
by the Borrower, the landlord has executed a Landlord Consent and
Estoppel Certificate for such premises;
(iii) such Inventory is located within the United States at
one of the Borrower's locations or (subject to (i) above) in the
possession of the Borrower's sales representatives; and
(iv) such Inventory is not determined by the Bank to be
ineligible for any other reason as the Bank may reasonably deem
appropriate.
Notwithstanding the foregoing, no advances under the Revolving Credit shall be
made with respect to any inventory of the Borrower held by sales representatives
who have not executed in form and substance satisfactory to the Bank a "Memo on
Stock" or similar instrument. Inventory immediately loses the status of Eligible
Inventory if and when the Borrower sells it, otherwise passes title thereto or
consumes it or the Bank releases its security interest therein. After December
31, 1999, the Borrowing Base shall not include any account receivable or
inventory of the Borrower's Subsidiaries.
(d) REVOLVING CREDIT PAYMENT. If at any time the aggregate outstanding
Revolving Credit Advances exceed the lesser of (i) the Maximum Revolving Credit
or (ii) the Borrowing Base, then the Borrower shall immediately pay such excess
to the Bank, and the Bank may, without prior notice to the Borrower, charge any
of Borrower's accounts with the Bank in order to effect such payment, and
following such charge, send notice thereof to the Borrower.
(e) INTEREST. The Revolving Credit shall bear interest as provided in
Section 2.04.
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(f) REQUESTS FOR ADVANCES. Each Revolving Credit Advance shall be made
on the day on which the Bank receives notice from the Borrower or, if such day
is not a Banking Day, on the next succeeding Banking Day, provided the Bank
receives notice from the Borrower prior to 12:00 noon Boston time on such
Banking Day. Each request for a Revolving Credit Advance shall be made to the
Bank in writing (including by telecopy) or by telephone by a duly authorized
representative of the Borrower (promptly followed by a request in writing), and
the Bank may rely upon any telephone request which it reasonably believes is
made by such a representative. The Borrower agrees to indemnify and hold the
Bank harmless for any action, including the making of Revolving Credit Advances
hereunder, or loss or expense, taken or incurred by the Bank in good faith
reliance upon such telephone request. At he time of the initial request for a
Revolving Credit Advance made under this Section 2.03(f), the Borrower shall
have provided the Bank with a Compliance Certificate in the form required by
Section 5.06(c) hereof. The Borrower hereby agrees (i) that the Bank shall be
entitled to rely upon the most recent Compliance Certificate in its possession
until it is superseded by another Compliance Certificate and (ii) that each
request for a Revolving Credit Advance, whether by telephone or in writing or
otherwise, shall constitute a confirmation of the representations and warranties
contained in the most recent Compliance Certificate then in the Bank's
possession.
(g) PAYMENT UPON MATURITY DATE. The Revolving Credit shall expire on
the Maturity Date and all Revolving Credit Advances then outstanding shall be
due and payable on such date together with all accrued and unpaid interest
thereon costs and fees and any other amounts then due.
Section 2.04. Interest on the Credit.
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Subject to the terms of Section 2.05 relating to LIBOR Pricing Options, the
Term Credit and the Revolving Credit Advances shall bear interest prior to the
occurrence of an Event of Default or maturity (computed on the basis of the
actual days elapsed over a 360-day year) at a fluctuating rate per annum equal
to the Applicable Prime Rate or with respect to Term Loans the Applicable LIBOR
Rate, if such an election is made. From and after the occurrence of an Event of
Default or maturity (whether by demand, acceleration or otherwise) the unpaid
principal balance of the Term Credit and the Revolving Credit shall bear
interest at a fluctuating rate per annum equal to five percent (5%) above the
rate of interest then payable with respect thereto. Interest on the Term Credit
and the Revolving Credit shall be payable monthly in arrears on the first day of
each month commencing July 1, 1999. The effective rate of interest shall change
on each date on which the Prime Rate shall change.
Section 2.05. Special Provisions Governing LIBOR Rate Loans.
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Notwithstanding any other provisions of this Agreement to the contrary, the
following provisions shall govern with respect to LIBOR Rate Loans as to the
matters covered:
(a) LIBOR RATE LOAN INTEREST PERIODS. In connection with each LIBOR
Rate Loan, the Borrower shall elect an interest period (the "Interest Period")
to be applicable to such LIBOR Rate Loan, which Interest Period shall be, at the
option of the Borrower, a thirty (30), sixty (60), ninety (90), one hundred
twenty (120), and if available, one hundred eighty (180), or three hundred and
sixty-five (365) day period; PROVIDED THAT:
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(i) the Interest Period for any LIBOR Rate Loan shall
commence on the date of such LIBOR Rate Loan;
(ii) if an Interest Period would otherwise expire on a day
that is not a Business Day, such Interest Period shall expire on the
next succeeding Business Day; provided, further that if any Interest
Period in respect of a LIBOR Rate Loan would otherwise expire on a day
that is not a Business Day but is a day of the month after which no
further Business Day occurs in such month, such Interest Period shall
expire on the next preceding Business Day:
(iii) any Interest Period in respect of a LIBOR Rate Loan
that begins on the last Business Day of a calendar month (or on a day
for which there is not numerically corresponding day in the calendar
month at the end of such Interest Period) shall, subject to clause
(iv) below, end on the last Business Day of a calendar month;
(iv) no Interest Period with respect to any LIBOR Rate Loan
shall extend beyond the Maturity Date; and
(v) no Interest Period shall be selected if at the time
thereof an Event of Default is in existence.
(b) Subject to the provisions hereof (including, without limitation
Section 2.05(a)) and as long as there exists no Default, the Borrower shall
have, the option (A) to elect to convert integral multiples of One Million
Dollars ($1,000,000) of its outstanding Prime Rate Loans which are Term Credits
to LIBOR Rate Loans and (B) effective on and as of the expiration date of the
Interest Period of a LIBOR Rate Loan, to continue such LIBOR Rate Loan;
PROVIDED, HOWEVER, that (i) no more than three (3) LIBOR Rate Loans may be
outstanding at any one time; and (ii) a LIBOR Rate Loan may only be continued
pursuant to clause (B) above if the outstanding principal amount of such LIBOR
Rate Loan equals or exceeds One Million Dollars ($1,000,000). Interest on each
LIBOR Rate Loan shall be payable monthly in arrears on the first day of each
month commencing July 1, 1999. The Borrower shall deliver a notice (the "Notice
of Conversion/Continuation") to the Lender no later than 1:00 P.M. (Boston time)
at least three (3) Business Days in advance of the proposed
conversion/continuation date. A Notice of Conversion/Continuation shall, in the
case of a conversion to, or continuation of, a LIBOR Rate Loan, be irrevocable
and shall be given by the Borrower in the form of EXHIBIT 2.05(b), appropriately
completed to specify (i) the proposed conversion/continuation date (which shall
be a Business Day), (ii) the amount of the Term Credit to be
converted/continued, (iii) whether the Term Credit to be converted/continued is
a Prime Rate Loan or a LIBOR Rate Loan, and (iv) the requested Interest Period.
In lieu of delivering the above-described Notice of Conversion/Continuation, the
Borrower may give the Lender telephonic notice by the required time of any
proposed conversion/continuation under this Section 2.05; PROVIDED, that such
notice shall be promptly confirmed in writing by delivery of a Notice of
Conversion/Continuation to the Lender on or before the proposed
conversion/continuation date. If the Borrower has failed to timely deliver
Notice of Conversion/Continuation or to give such a telephonic notice with
respect to a LIBOR Rate Loan, the Borrower shall be deemed to have delivered to
the Lender a Notice of Conversion/Continuation electing to convert such LIBOR
Rate Loan into a Prime Rate Loan. Any notice pursuant to this Section 2.05
(including any telephonic notice) shall be irrevocable on and after the date of
delivery thereof to the Lender, and the Borrower shall be bound to convert or
continue in accordance therewith.
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(c) DETERMINATION OF INTEREST RATE. As soon as practicable after 10:00
A.M. Boston time) on an Interest Rate Determination Date, the Lender shall
determine (which determination shall, absent manifest error, be final,
conclusive and binding) the Applicable LIBOR Rate, which rate shall apply to the
LIBOR Rate Loans for which an interest rate is then being determined for the
applicable Interest Period, and the Lender shall promptly give notice thereof to
the Borrower.
(d) SUBSTITUTED RATE OF BORROWING. In the event that on any Interest
Rate Determination Date the Lender shall have reasonably determined (which
determination shall, absent manifest error, be final, conclusive and binding)
that:
(i) by reason of any changes affecting the LIBOR market, or
affecting the position of the Lender in such market, adequate and fair
means do not exist for ascertaining the applicable interest rate by
reference to the LIBOR Rate with respect to the LIBOR Rate Loans as to
which an interest rate determination is then being made; or
(ii) by reason of (A) any change in any applicable law or
governmental rule, regulation or order (or any interpretation thereof
and including the introduction of any new law or governmental rule,
regulation or order) or (B) other circumstances affecting the Lender,
the LIBOR market or the position of the Lender in such market (such
as, for example, but not limited to, official reserve requirements
required by Regulation D to the extent not given effect in the LIBOR
Rate), the LIBOR Rate shall not represent the effective pricing to the
Lender for dollar deposits of comparable amounts for the relevant
period;
then, and in any such event, the Lender shall promptly (and in any event as soon
as possible after being notified of a borrowing, conversion or continuation)
give notice to the Borrower of such determination. Thereafter, the Borrower
shall pay to the Lender with respect to the LIBOR Rate Loans of the Borrower,
upon written demand therefor, such additional amounts (in the form of an
increased rate of, or a different method of calculating, interest or otherwise
as the Lender in its sole discretion shall reasonably determine) as shall be
required to cause the Lender to receive interest with respect to such LIBOR Rate
Loans for the Interest Period following the Interest Rate Determination Date
(the "Affected Interest Period") at a rate equal to 2.0% per annum in excess of
the effective pricing to the Lender for dollar deposits to make or maintain such
LIBOR Rate Loans. A certificate as to additional amounts owed the Lender,
showing in reasonable detail the basis for the calculation thereof, submitted in
good faith to the Borrower by the Lender, shall, absent manifest error, be
final, conclusive and binding.
(e) REQUIRED TERMINATION AND PREPAYMENT. In the event that on any date
the Lender shall have reasonably determined (which determination shall, absent
manifest error, be final, conclusive and binding) that the making or
continuation of LIBOR Rate Loans has become unlawful by compliance by the Lender
in good faith with any law, governmental rule, regulation or order (whether or
not having the force of law and whether or not failure to comply therewith would
be unlawful), then, and in any such event, the Lender shall promptly give notice
to the Borrower of that determination. The obligation of the Lender to make or
maintain such LIBOR Rate Loans during any such period shall be determined at the
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earlier of the termination of the Interest Period then in effect or when
required by law, and the Borrower shall, no later than the termination of the
Interest Period in effect at the time any such determination pursuant to this
Section 2.05(e) is made, or earlier when required by law, repay such LIBOR Rare
Loans, together with all interest accrued thereon or automatically convert the
LIBOR Rate Loans to a Prime Rate Loan.
(f) COMPENSATION. The Borrower shall compensate the Lender, upon
written request from the Lender (which request shall set forth in reasonable
detail the basis for requesting such amounts), for all losses, expenses and
liabilities (including, without limitation, any interest paid by the Lender to
lenders of funds borrowed by Lender to make or carry the LIBOR Rate Loans and
any loss sustained by the Lender in connection with the reemployment of such
funds) that the Lender may sustain with respect to the Borrower's LIBOR Rate
Loans: (i) if for any reason (other than a default or manifest error by the
Lender) a borrowing of any LIBOR Rate Loan does not occur on a date specified
therefor in a notice of borrowing or a telephonic request for borrowing or
conversion/continuation, or a successive Interest Period does not commence after
notice thereof is given; (ii) if, for any reason, any prepayment of any LIBOR
Rate Loan occurs on a date that is not the last day of the Interest Period
applicable to such LIBOR Rate Loan; (iii) if, for any reason, any prepayment of
the LIBOR Rate Loans is not made on the date specified in a notice of prepayment
given by the Borrower with respect to such LIBOR Rate Loan; or (iv) as a
consequence of any other default by the Borrower to repay such LIBOR Rate Loans
when, and on the terms, required by the terms of this Agreement.
(g) QUOTATION OF LIBOR RATE. Notwithstanding anything contained herein
to the contrary, if on any Interest Rate Determination Date the LIBOR Rate is
unavailable by reason of the failure of the referenced lenders to provide
offered quotations to the Lender in accordance with the definition of "LIBOR
Rate", the Lender shall give the Borrower prompt notice within three days
thereof and any LIBOR Rate Loans requested shall be made as Prime Rate Loans;
provided, however, that failure to give such notice within three days shall not
entitle the Borrower to obtain nor require the Lender to provide LIBOR Rate
Loans if the LIBOR Rate is otherwise unavailable as provided for herein.
(h) LIBOR RATE TAXES. The Borrower agrees that:
(i) Promptly upon notice from the Lender to the Borrower,
the Borrower will pay, prior to the date on which penalties attach
thereto, all present and future income, stamp and other taxes, levies,
or costs and charges whatsoever imposed, assessed, levied or collected
on or in respect of the Term Loan solely as a result of the interest
rate being determined by reference to the LIBOR Rate and/or the
provisions of this Agreement relating to the LIBOR Rate and/or the
recording, registration, notarization or other formalization of any
thereof and/or any payments of principal, interest or other amounts
made on or in respect of a Term Loan when the interest rate is
determined by reference to the LIBOR Rate (all such taxes, levies,
cost and charges being herein collectively called "LIBOR Rate Taxes");
PROVIDED that LIBOR Rate Taxes shall not include taxes imposed on or
measured by the net income of the Lender by the country under the laws
of which the Lender is organized or any political subdivision or
taxing authority thereof or therein, or taxes imposed on or measured
11
by the net income of any branch or subsidiary of the Lender (whether
gross or net income) by any jurisdiction or subdivision thereof in
which that branch or subsidiary is doing business. The Borrower shall
also pay such additional amounts equal to increases in taxes payable
by the Lender, which increases are attributable to payments made by
the Borrower described in the immediately preceding sentence or this
sentence. Notwithstanding anything contained in this Section 2.05(h)
to the contrary, in the event that the Lender shall recover any
amounts in respect of LIBOR Rate Taxes as to which the Borrower has
previously rendered payment to Lender, then Lender shall reimburse the
Borrower in full for such amounts. Promptly after the date on which
payment of any such LIBOR Rate Tax is due pursuant to applicable law,
the Borrower will at the request of the Lender, furnish to Lender
evidence, in form and substance satisfactory to Lender, that the
Borrower has met its obligation under this Section 2.05(h); and
(ii) The Borrower will indemnify the Lender against, and
reimburse the Lender on demand for, any LIBOR Rate Taxes as determined
by the Lender in its good faith discretion. The Lender shall provide
the Borrower with appropriate receipts for any payments or
reimbursements made by the Borrower pursuant to this clause (ii).
(i) BOOKING OF LIBOR RATE LOANS. The Lender may make, carry or
transfer LIBOR Rate Loans at, to, or for the account of, any of its branch
offices or the office of an affiliate of the Lender.
(j) INCREASED COSTS. If, by reason of (i) the introduction of or any
change in (including, without limitation, any change by way of imposition or
increase of reserve requirements) or in the interpretation of any law or
regulation or (ii) the compliance with any guideline or request from any central
bank or other governmental authority or quasi-governmental authority exercising
control over banks or financial institutions generally (whether or not having
the force of law), any reserve (including, without limitation, any imposed by
the Federal Reserve Board), special deposit or similar requirement against
assets of, deposits with or for the account of, or credit extended by, the
Lender or its applicable Lending office shall be imposed or deemed applicable or
other condition affecting any of its LIBOR Rate Loans or its obligation to make
such LIBOR Rate Loans shall be imposed on the Lender or its applicable lending
office or the London interbank market, and as a result thereof there shall be
any increase in the cost to the Lender of agreeing to make or making, funding or
maintaining such LIBOR Rate Loans, or there shall be a reduction in the amount
received or receivable by the Lender or time, upon written notice from and
demand by the Lender, pay to the Lender for the account of the Lender, within
five Business Days after the date specified in such notice and demand,
additional amounts sufficient to indemnify the Lender against such increased
cost. A certificate in reasonable detail as to the amount of such increased
cost, submitted to the Borrower by the Lender, shall, except for manifest error,
be final, conclusive and binding for all purposes.
(k) ASSUMPTIONS CONCERNING FUNDINGS OF LIBOR RATE LOANS. The
calculation of all amounts payable to the Lender under this Section 2.05 shall
be made as though the Lender had actually funded the LIBOR Rate Loans through
the purchase of a LIBOR deposit bearing interest at the LIBOR Rate applicable to
such LIBOR Rate Loan, in the case of a LIBOR Rate Loan, through the transfer of
such LIBOR deposit from an offshore office of the Lender to a domestic office of
such Lender in the United States of America; it being understood that the Lender
12
may fund LIBOR Rate Loans in any manner it sees fir and the foregoing assumption
shall be utilized only for the calculation of amounts payable under this
subsection.
(l) LIBOR RATE LOANS AFTER DEFAULT. After the occurrence of and during
the continuance of a Default, the Borrower may not elect to have a Term Credit
be made as a LIBOR Rate Loan or continued as, or converted to, a LIBOR Rate Loan
after the expiration of any Interest Period then in effect.
Section 2.06. Adjustments to Interest on the Credit.
------------- --------------------------------------
The Borrower may twice annually request that the Bank adjust the Applicable
Prime Rate and the Applicable LIBOR Rate to Level II or Level III set forth
below by delivering to the Bank a rate change certificate (the "Rate Change
Certificate") in the form attached hereto as Exhibit 2.06 certifying that either
(i) the unaudited consolidated financial statements of the Borrower and its
Subsidiaries for the twelve-month period ending June 30, or (ii) the unaudited
consolidated financial statements of the Borrower and its Subsidiaries for the
twelve-month period ending December 31 (each a "Rate Change Financial Statement"
and collectively, the "Rate Change Financial Statements") attached thereto
indicate Leverage Ratio of the Borrower for the trailing twelve-month period
that corresponds with the ratios opposite such levels set forth below.
Applicable
Level Leverage Ratio Applicable Prime Rate LIBOR Rate
----- -------------- --------------------- ----------
Level 1 Greater than 2.5:1 Prime Rate plus .75% LIBOR Rate plus 3.75%
Level II Greater than 1.5:1 and less than or Prime Rate plus .25% per LIBOR Rate plus 3.25% per
equal to 2.5:1 annum annum
Level III Less than or equal to 1.5:1 Prime Rate LIBOR Rate plus 3.00 per
annum
In the event that the Bank adjusts the Applicable Prime Rate and the
Applicable LIBOR Rate to Level II or Level III, the Borrower shall not be
entitled to a refund on account of interest accrued prior to and including the
date of the delivery of the Rare Change Financial Statement. The Borrower shall
deliver to the Bank the Rate Change Financial Statements
In the event that the Borrower fails to timely deliver the Rate Change
Financial Statements within forty-five (45) days after the end of each six (6)
month period ending June 30 and December 31, the Applicable Prime Rate and the
Applicable LIBOR Rate shall be automatically and immediately adjusted to the
Level I until such time as the Rate Change Financial Statement is delivered. In
the event that upon the delivery of the Rate Change Financial Statement, the
Bank re-adjusts the Applicable Prime Rate and the Applicable LIBOR Rate to Level
II or Level III, the Borrower shall not be entitled to a refund on account of
interest accrued prior to and including the date of the delivery of the Rate
Change Financial Statement. In the event that upon delivery of audited financial
statements pursuant to Section 5.06(a) hereof (the "Audited Statements"), the
13
Level corresponding to the Leverage Ratio is different than the Level previously
indicated by the Rate Change Financial Statement delivered pursuant to the first
sentence of this paragraph and the difference indicates a higher interest rare,
the Applicable Prime Rate and the Applicable LIBOR Rate shall immediately adjust
to the Level indicated by the Audited Statements. In such event, the Borrower
shall immediately repay to the Bank retroactively for the period covered by the
Audited Statements as if such Level had been in effect for the entire period.
The Borrower may request from the Bank written permission to include the
twelve month trailing EBITDA of a Permitted Acquisition in calculating the
Leverage Ratio which the Bank may grant in its reasonable discretion.
Notwithstanding the foregoing, the Bank agrees to allow the Borrower to include
the twelve month trailing EBITDA of the Acute Care Subsidiaries in calculating
the Leverage Ratio.
In addition to the foregoing, upon the occurrence of an Event of Default,
the Applicable Prime Rate and the Applicable LIBOR Rate shall be automatically
and immediately adjusted to a Default Rate of Interest as provided in Section
2.04.
Section 2.07. Method of Payment.
------------- ------------------
All payments and prepayments of principal and interest due under the Notes
and of fees their hereunder shall be made by the Borrower to the Bank in
immediately available funds. Payments received by the Bank after 12:00 noon
Boston time shall be deemed received on the next succeeding Banking Day. All
payments of principal, interest or fees to be made to the Bank may be effected
by the Bank debiting accounts of the Borrower with the Bank and sending notice
thereof to the Borrower.
Section 2.08. Payment and Interest Cutoff.
------------- ----------------------------
Notice of each prepayment pursuant to Section 2.03(a) shall be given to the
Bank not Later than 12:00 noon (Boston time) on the date of payment, and shall
specify the total principal, interest and penalty, if any, of the Term Credit
and/or the Revolving Credit to be paid on such date. Notice of prepayment having
been given in compliance with this Section 2.08, the amount specified to be
prepaid shall become due and payable on the date specified for prepayment and
from and after said date (unless the Borrower shall default in the payment
thereof) interest thereon shall cease to accrue. Unpaid interest on the
principal amount of the Revolving Credit or Term Credit so prepaid accrued to
the date of prepayment shall be due on the date of prepayment.
Section 2.09. Closing Fee.
------------- ------------
The Borrower shall pay the Bank $140,000 at Closing.
Section 2.10. Expenses.
------------- ---------
The Borrower Shall pay the Bank on demand all reasonable out-of-pocket fees
and expenses up to a maximum amount of $7,500 per year incurred by the Bank in
connection with examinations of the books and records of the Borrower,
appraisals of the assets of the Borrower and visits to the Borrower by officers,
employees and agents of the Bank. The Borrower shall cooperate with the Bank's
officers, employees and agents in connection with each audit or appraisal
performed and comply with all reasonable requests in connection therewith.
14
Section 2.11. Cash Management Service.
------------- ------------------------
At the Bank's request, the Borrower shall at all times use the LMCS Cash
Management Service provided by the Bank with respect to the Credit and shall at
all times maintain substantially all of its principal operating and disbursement
accounts with the Bank or alternatively a cash management system satisfactory to
the Bank; provided, however, that the Borrower may maintain the Acute Care
Subsidiaries' current operating and disbursement accounts for a period not to
exceed one hundred and twenty (120) days after the Closing; provided further,
however, that the aggregate amount of funds in the Acute Care Subsidiaries
operating and disbursement accounts during the one hundred and twenty (120) day
period shall not exceed $1,500,000 at any time.
Section 2.12. Facility Fee.
------------- -------------
The Borrower shall pay the Bank a revolving credit facility fee (the
"Facility Fee") from and including the Closing to the date upon which the Bank's
commitment to make Revolving Credit Advances has terminated, computed at a rate
of 3/8 of 1% per annum on the daily average Unutilized Revolving Commitment.
Such Facility Fee shall be due and payable in arrears on the first day of each
month, commencing July 1, 1999.
Section 2.13. Use of Credit Proceeds.
------------- -----------------------
The proceeds of the Term Credit shall be used by the Borrower to finance
the Acquisitions. The proceeds of the Revolving Credit shall be used by the
Borrower to: (a) finance the Acquisitions, (b) refinance existing indebtedness
to the Bank, (c) pay costs and expenses incurred in connection with the
Acquisitions and the establishment of the Credit and (d) the balance, if any,
solely for general working capital purposes, Permitted Acquisitions, repayment
of indebtedness of entities acquired in Permitted Acquisitions, and Permitted
Stock Payments.
ARTICLE III. REPRESENTATIONS AND WARRANTIES.
------------ -------------------------------
Borrower hereby represents and warrants that:
Section 3.01. Corporate Existence and Power; Organizational Structure.
------------- --------------------------------------------------------
The Borrower is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware, and has full corporate
and other power and authority to conduct its business and own its assets as now
conducted and owned and as proposed to be conducted and owned. The Borrower and
each of its Subsidiaries are licensed or qualified as a foreign corporation in
each jurisdiction where the conduct of its business or the ownership of its
assets require such licensing or qualification, except where the failure to be
so licensed or qualified would not have a material adverse effect upon the
business, assets, operations, or financial condition or prospects of the
Borrower and its Subsidiaries, taken as a whole.
There are presently issued by the Borrower and its Subsidiaries the shares
of capital stock indicated on SCHEDULE 3.01, which shares are owned beneficially
and of record as set forth on such SCHEDULE 3.01. The Borrower and its
Subsidiaries have received the consideration for which such stock was authorized
15
to be issued and have otherwise complied with all legal requirements relating to
the authorization and issuance of shares of stock and all such shares are
validly issued, fully paid and non-assessable. The Borrower and its Subsidiaries
have no other capital stock of any class outstanding. Except as disclosed on
Schedule 3.01, there are no (i) outstanding options, warrants or rights to
acquire any shares of the capital stock or other securities of the Borrower,
(ii) outstanding securities or obligations which are convertible into or
exchangeable for any shares of the capital stock or other securities of the
Borrower, or (iii) preemptive or subscription rights, contracts or arrangements
under which the Borrower is or may become bound to sell or otherwise issue any
shares of capital stock or other securities, other than as granted by law.
Section 3.02. Subsidiaries.
------------- -------------
Except as set forth in Schedule 3.02, the Borrower currently has no
Subsidiaries or any equity investments in any other entity. The Borrower shall
not organize or permit to exist any new Subsidiaries, or make any new equity
investments in any other entity without the prior written consent of the Bank
(except for Permitted Acquisitions).
Section 3.03. Power and Authority Relative to Borrowing; Legal and Binding
------------- ------------------------------------------------------------
Nature; Compliance with Other Instruments.
------------------------------------------
Except as set forth in SCHEDULE 3.03, the Borrower has full power and
authority and has taken all required corporate and other action necessary to
permit it to execute and deliver and perform all of its obligations contained in
the Credit Documents to which it is a party, and to borrow hereunder, and none
of such actions will violate any provision of law applicable to it, or of its
charter or by-laws or result in the breach of or constitute a default under any
material agreement or instrument to which it is a party or by which it is bound.
Each of the Credit Documents to which the Borrower is a party has been (or will
upon execution be) duly authorized and validly executed and is (or will upon
execution be) the valid and binding obligations of the Borrower enforceable in
accordance with its respective terms. Neither the execution or delivery by the
Borrower of any of the Credit Documents to which it is a party or the
performance of its obligations thereunder, require the consent, approval or
authorization of any person or governmental authority.
The provisions of the Credit Documents executed and delivered by the
Borrower in accordance with Sections 4.01(c) through (g) hereof have created in
favor of the Bank legal, valid and enforceable security interests in the
collateral described therein, and all financing statements and other filings
have been (or will promptly after the Closing be) filed or made as required by
applicable law so as to cause such security interests to constitute fully
perfected first priority liens on all right, title and interest of the Borrower
in such collateral.
Neither the Borrower nor any of its Subsidiaries is in violation of any
term of its charter or by-laws, and none of the Borrower or its Subsidiaries is
in violation of any material agreement, instrument, mortgage, indenture,
contract or any judgment, decree, order, statute, rule or governmental
regulation applicable to it. The execution, delivery and performance of the
Credit Documents will not result in the creation of any security interest, lien,
charge or encumbrance upon any of the properties or assets of the Borrower or
its Subsidiaries except in favor of the Bank.
16
Section 3.04. Financial Condition.
------------- -------------------
The following financial statements have been delivered to the Bank: (i) the
audited consolidated financial statements of the Borrower and its Subsidiaries
dated as of June 30, 1998 and the unaudited consolidated financial statements of
the Borrower and its Subsidiaries dated as of March 31, 1999 (the "Base
Financial Statements"); (ii) the unaudited consolidated financial statements of
each of the Acute Care Subsidiaries dated December 31, 1998 (the "Subsidiary
Financial Statements") The Base Financial Statements are complete and correct
and present fairly and accurately the financial position of the Borrower and its
Subsidiaries, on a consolidated basis, as of the date of each of the Base
Financial Statements and the results of operations of the Borrower and its
Subsidiaries on a consolidated basis in conformity with generally accepted
accounting principles consistently applied. Except as set forth on Schedule 3.04
hereof, to the best of the Borrower's knowledge, the Subsidiary Financial
Statements are complete and correct and present fairly and accurately the
financial position of the Acute Care Subsidiaries as of the date of the
Subsidiary Financial Statements in conformity with generally accepted accounting
principles consistently applied. The Borrower and the Acute Care Subsidiaries
have no material contingent liabilities or material liabilities for taxes, or
any unusual or burdensome agreement or commitment which would have a materially
adverse effect on their business assets, operations or financial condition,
except as disclosed in the Base Financial Statements, the Subsidiary Financial
Statements and in this Agreement.
Section 3.05. No Material Adverse Change.
------------- ---------------------------
Except as set forth in SCHEDULE 3.05 hereto, since the date of the Base
Financial Statements there has been no material adverse change in the business,
assets, operation or condition (financial or otherwise) of the Borrower, and the
Borrower, has not paid any dividends or made any distributions on or purchased
or otherwise acquired any shares of its capital stock. To the best of the
Borrower's knowledge, except as set forth in Schedule 3.05, there has been no
material adverse change in the business, assets, operation or condition
(financial or otherwise) of the Acute Care Subsidiaries and none of the Acute
Care Subsidiaries has paid any dividends or made any distributions on or
purchased or otherwise acquired any shares of its capital stock.
Section 3.06. Litigation.
------------- -----------
Except as set forth in SCHEDULE 3.06 hereto, there are no suits or
proceedings pending or, to the best knowledge of the Borrower, threatened
against or affecting the Borrower or any of its respective Subsidiaries which
would have a material adverse effect on the business, assets, financial
condition or prospects of the Borrower or any Subsidiary or the transactions
contemplated by the Credit Documents.
Section 3.07. Title.
------------- ------
Except as set forth in SCHEDULE 3.07, the Borrower has good and marketable
title to, or valid leasehold interests in, all of the properties and assets and
leasehold interests reflected in the Base Financial Statements, or acquired
since such date (except for materials used, inventory sold, accounts receivable
collected and other items disposed of, all in the ordinary course of business
since the date of the Base Financial Statements), free and clear of all liens
18
and encumbrances except liens permitted by Section 5.12, and easements,
restrictions and minor defects in title which do not, either individually or in
the aggregate materially detract from the value or materially limit the use of
any real property.
Section 3.08. Tax Returns and Payments.
------------- -------------------------
Except as set forth in Schedule 3.08 hereto, all of the tax returns and tax
reports of the Borrower and its Subsidiaries required by law to be filed have
been duly filed, or extensions of the time for filing have been duly obtained,
and the Borrower and its Subsidiaries have paid all taxes shown due thereon. The
federal income tax returns of the Borrower and its Subsidiaries have never been
audited by the Internal Revenue Service. There are in effect no waivers of the
applicable statutes of limitations for federal taxes for any period. No
deficiency assessment or proposed adjustment of the federal income taxes of the
Borrower or any of its Subsidiaries is pending and to the best of Borrower's
knowledge there is no proposed liability of a substantial nature for any tax to
be imposed upon any of its assets for which there is not an adequate reserve
reflected in the Base Financial Statements. To the best of the Borrower's
knowledge, no deficiency assessment or proposed adjustment of the federal income
taxes of Acute Care Subsidiaries is pending and to the best of Borrower's
knowledge there is no proposed liability of a substantial nature for any tax to
be imposed upon any of its assets for which there is not an adequate reserve
reflected in the Subsidiary Financial Statements.
Section 3.09. Compliance with Law, etc.
------------- -------------------------
The Borrower and its Subsidiaries have all necessary franchises, permits,
licenses and other rights to allow them to conduct their business as presently
conducted and as proposed to be conducted, and neither the Borrower nor any
Subsidiaries are in default with respect to any order or decree of any court, or
under any law, order or regulation of any governmental authority, or under the
provisions of any contract or agreement to which any of them is a party or by
which they may be bound, which default would have a material adverse effect on
the business, assets, operations, financial condition or prospects of any of
them.
Section 3.10. Pension Matters.
------------- ----------------
Neither the Borrower nor any of its Subsidiaries has incurred (a) any
material accumulated funding deficiency within the meaning of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or (b) any
material liability to the Pension Benefit Guaranty Corporation established under
ERISA (or any successor thereto under ERISA) in connection with any employee
benefit plan established or maintained by it; nor has Borrower had any tax
assessed against it by the Internal Revenue Service for any alleged violation
under Section 4975 of the Internal Revenue Code of 1986, as amended (the
"Code"). Neither the Borrower nor any of its Subsidiaries has any material
unfunded liability under a pension plan or a contingent liability for withdrawal
from a multi-employer pension plan except as disclosed in the financial
statements referred to in the Base Financial Statements. To the best of the
Borrower's knowledge, none of the Acute Care Subsidiaries have any material
unfunded liability under a pension plan or a contingent liability for withdrawal
from a multi-employer pension plan except as disclosed in the Subsidiary
Financial Statements.
18
Section 3.11. Compliance with Regulation U.
------------- -----------------------------
None of the proceeds of the Credit will be used to purchase, carry or
refinance any borrowing the proceeds of which were used to purchase or carry any
"margin securities" within the meaning of Regulation U of the Board of Governors
of the Federal Reserve System.
Section 3.12. Credit Agreements.
------------- ------------------
Set forth on Schedule 3.12 is a complete and correct list of all existing
loan agreements, indentures, note purchase agreements, guarantees or other
instruments relating to extensions of credit or money borrowed for an amount in
excess of $50,000 under which the Borrower or any Subsidiary is or may become
directly or indirectly obligated.
Section 3.13. Leases and Options to Purchase.
------------- -------------------------------
Set forth on Schedule 3.13 is a complete and correct list of all existing
leases with respect to, or options to purchase any, real estate or any equipment
involving a commitment, potential commitment, or series of commitments in any
twelve month period, in excess of $50,000 under which the Borrower is or may
become directly or indirectly obligated as lessee or purchaser.
Section 3.14. Insolvency.
------------- -----------
Neither the Borrower nor any of its Subsidiaries has (a) made a general
assignment for the benefit of creditors, (b) filed any voluntary petition in
bankruptcy or suffered the filing of an involuntary petition by its creditors,
(c) suffered the appointment of a receiver to take possession of all or
substantially all of its assets, (c) suffered the attachment or other judicial
seizure of all, or substantially all of its assets, (d) admitted in writing its
inability to pay its debts as they come due, or (e) made an offer of settlement,
extension or composition to its creditors generally. After giving effect to the
financing provided for in this Agreement, the Borrower will not: (a) have
liabilities (contingent or otherwise) which exceed the fair and salable value of
its assets; (b) be left with unreasonably small capital with which to engage in
its business; (c) have incurred, or anticipate or reasonably should anticipate
incurring, debts beyond its ability to pay such debts as they mature.
Section 3.15. Real Estate Owned.
------------- ------------------
Neither the Borrower nor any of its Subsidiaries owns any real
property.
Section 3.16. Hazardous Waste.
------------- ----------------
Except as set forth in SCHEDULE 3.16, neither of the Borrower nor any of
its Subsidiaries has generated, stored or disposed of any oil, hazardous
substance or hazardous material as amended in the Comprehensive Environmental
Response Compensation and Liability Act, as amended, 42 U.S.C. ss.9601, et seq.,
applicable state or federal laws, or regulations adopted pursuant thereto, in
violation of applicable law; and, except as set forth on Schedule 3.16, to the
best of the Borrower's knowledge there has been no generation, storage, or
disposal of any such materials by anyone else on the property owned or leased by
the Borrower or the subsidiaries, nor have any such materials been present on
such property.
19
Section 3.17. Permits.
------------- --------
All necessary licenses and permits for the use and occupancy of the real
property owned or leased by the Borrower have been issued and are in full force
and effect except as set forth on Schedule 3.17 hereto and except for any such
licenses or permits the absence of which would not have a material adverse
effect upon the business, assets, operations, or financial condition or
prospects of the Borrower and its Subsidiaries, taken as a whole.
Section 3.18. Patents; Trademarks, Etc.
------------- -------------------------
Set forth on SCHEDULE 3.18 hereto are all patents, parent rights, patent
applications, trademarks, trademark applications, trade names, brand names,
service marks, and service applications and all applications for such that are
in the process of being prepared, owned by or registered in the name of
Borrower, or of which Borrower is a licensor or licensee or in which Borrower
has any right (collectively with the trade secrets and copyrights owned or
licensed by the Borrower, the "Intellectual Property"). All such Intellectual
Property is valid and in full force and effect, and there is no claim by or
demand of any person pertaining hereto, and there are no suits or proceedings
pending or, to the knowledge of Borrower threatened, against Borrower which
would have a material adverse effect upon any rights of Borrower in respect of
any such Intellectual Property; nor to the knowledge of the Borrower is there a
basis for any such claim, suit, proceeding or investigation.
Except as set forth in SCHEDULE 3.18. hereto, the Borrower owns or
possesses adequate licenses or other rights to use all intellectual Property
which is necessary for its business or operations as now conducted and where the
failure to so have such rights would have a material adverse effect on the
business, properties, assets, prospects, operations or conditions, financial or
otherwise, of Borrower. Furthermore, except as set forth in Schedule 3.18
hereto, the Borrower represents and warrants that it has good right to assign or
transfer its interest in the Intellectual Property and the assignment or
transfer will not cause default or permit termination of the transferee's rights
or interest in the Intellectual Property. Except as set forth in Schedule 3.18
hereto, the Borrower has not granted or assigned to any other person or entity
any right to manufacture, have manufactured, assemble or sell the products or
proposed products, or to provide the services or proposed services of Borrower,
in connection with the Intellectual Property.
Section 3.19. No Omissions.
------------- -------------
None of the representations or warranties in this Agreement nor any
document, agreement, statement, certificate, exhibit, schedule or other
information furnished or to be furnished by or on behalf of the Borrower to the
Bank pursuant to this Agreement contains any untrue statement of a material fact
or omits to state a material fact necessary to make the statements of facts
contained therein not misleading.
ARTICLE IV. CONDITIONS.
----------- -----------
Section 4.01. Conditions to the Term Credit and the First Advances.
------------- -----------------------------------------------------
The obligation of the Bank to extend the Term Credit and make the initial
advances under the Revolving Credit is subject to the fulfillment of the
following conditions:
20
(a) LEGAL OPINIONS FROM COUNSEL FOR THE BORROWER AND GUARANTORS. The
Bank shall have received the written opinion of (a) Nossaman, Guthner, Xxxx &
Xxxxxxx, LLP, (b) Xxxxxxxxxxx & Xxxxxxxx LLP (Massachusetts counsel) and (c)
Xxxxxxxxxxx and Xxxxxxxx LLP (Florida counsel), counsel to the Borrower, in form
satisfactory to Messrs. Xxxxxxx, Procter & Xxxx LLP, special counsel to the Bank
(said special counsel and any successor counsel shall be hereinafter referred to
as "Special Counsel") covering such matters as the Bank or its Special Counsel
may request.
(b) THE NOTES. The Borrower shall have executed and delivered to the
Bank the Term Note and the Revolving Credit Note.
(c) THE SECURITY AGREEMENT. The Bank shall have received an amended
and restated security agreement executed by the Borrower in form satisfactory to
the Bank and its Special Counsel (the "Security Agreement"), granting to the
Bank a first priority security interest in and assignment of substantially all
of the assets of the Borrower. All Uniform Commercial Code Financing Statements
and other filings (including without limitation, filings with the United States
Patent and Trademark Office) required in order to perfect the liens granted
under the Security Agreement shall have been executed by the Borrower and shall
have been duly filed or recorded.
(d) ACQUISITIONS CONSUMMATION. Other than as consented to by the Bank
in writing:
(i) The provisions of the Acquisitions Agreements shall not
have been amended, modified, waived or terminated;
(ii) All of the representations and warranties of the
Sellers set forth in Acquisitions Agreements shall be complete and
correct in all material respects on and as of Closing with the same
force and effect as though made on and as of such date;
(iii) All of the other conditions to the obligations of the
Borrower and Subsidiaries set forth in the Acquisitions Agreements
shall have been satisfied;
(iv) Any material consent, authorization, order or approval
of any Person required in connection with the transactions
contemplated by the Acquisitions Agreements shall have been obtained
and shall be in full force and effect;
(v) All of the items required to be delivered under the
Acquisitions Agreements shall have been so delivered;
(vi) The merger of Futuretech, Futuretech Maryland,
Futuretech Washington, and Healthcare into the Borrower shall have
been consummated in accordance with the Acquisitions Agreements and
Delaware corporate law and the corporate laws of the respective states
in which Futuretech, Futuretech Maryland, Futuretech Washington, and
Healthcare are organized, as applicable;
(vii) Contemporaneously with the making by the Bank of the
first extension of credit hereunder, the Borrower shall have furnished
to the Bank a certificate, signed by a Financial Officer, to the
21
effect that the closing has occurred under the Acquisitions Agreements
and to the effect that each of the conditions set forth in this
Section 4.01(d) has been satisfied; and
(viii) Contemporaneously with the making by the Bank of the
first extension of credit hereunder, the Borrower shall have furnished
to the Bank evidence, satisfactory to the Bank, of the termination of
existing indebtedness of the Acute Care Subsidiaries pursuant to the
Acquisitions Agreements, including payoff letters, UCC-3's and any
other documentation that the Bank may request.
(e) GUARANTOR SECURITY AGREEMENTS. The Bank shall have received
security agreement executed by each of the Guarantors in form satisfactory to
the Bank and its Special Counsel (the "Guarantor Security Agreements"), granting
to the Bank a first priority security interest substantially all of the assets
of the Borrower. All Uniform Commercial Code Financing Statements and other
filings (including without limitation, filings with the United Stares Patent and
Trademark Office) required in order to perfect the liens granted under the
Security Agreement shall have been executed by the Borrower and shall have been
duly filed or recorded.
(f) LANDLORD'S CONSENTS AND ESTOPPEL CERTIFICATES. The Bank shall have
received with respect to each parcel of real property leased by the Borrower (or
leased by a sales representative that has in its possession any Collateral (as
defined in the Security Agreement)) a duly executed Landlord's Consent and
Estoppel Certificate in form satisfactory to the Bank and its Special Counsel
(the "Landlord's Consent and Estoppel Certificates").
(g) COLLATERAL ASSIGNMENT OF ACQUISITIONS DOCUMENTS. The Bank shall
have received a Collateral Assignment of Acquisitions Documents executed by the
Borrower in form satisfactory to the Bank and its Special Counsel (the
"Collateral Assignment of Acquisitions Documents").
(h) PLEDGE AGREEMENTS. Each of the Borrower and Bimeco shall have
executed and delivered to the Bank a Pledge Agreement on terms and conditions
satisfactory to the Bank (the "Pledge Agreements").
(i) GUARANTY AGREEMENTS. Each Guarantor shall have executed and
delivered to the Bank the Unlimited Guaranty Agreements on terms and conditions
satisfactory to the Bank.
(j) KEY-MAN LIFE INSURANCE POLICY. The Borrower shall have obtained a
life insurance policies in the minimum amount of $1,000,000 each with respect to
Xxxx Xxxxxx and Xxxxxxx Xxxxxx.
(k) INSURANCE. The Borrower shall have delivered to the Bank a list in
the form of Exhibit 4.01(k) hereto, certified by the president or chief
financial officer of the Borrower, of all insurance required by Section 5.05
showing the insurer, the face amount and the nature of the coverage and the Bank
as an additional insured and loss payee (or beneficiary, as the case may be)
under each policy then in force.
(l) OFFICER'S CERTIFICATE RE: AUTHORIZATION, REPRESENTATIONS AND
WARRANTIES; ABSENCE OF DEFAULTS: TRADENAMES, PLACES OF BUSINESS AND LOCATIONS OF
COLLATERAL. The Borrower shall have delivered to the Bank a certificate in
22
substantially the form of EXHIBIT 4.01(L) hereto and dated the date of the
Closing.
(m) NO DEFAULT. No Event of Default specified in Article VI and no
event which, under Article VI with the giving of notice or the lapse of time, or
both, would constitute an Event of Default, shall have occurred and be
continuing.
(n) SUBORDINATION SIDE LETTERS. Each of GE Capital Equity Investments,
Inc., Xxxxxxx Xxxxxxx Xxxxxxx Booth IV L.P., Xxxx X. Xxxxxx, BAM Enterprises,
LLC, Xxxxxxx X. Xxxxxx, Xxxxxxx X. Xxxxxxx, Webbmont Holdings, L.P., Investors
Equity, Inc. and the Borrower have duly executed and delivered to the Bank a
Subordination Side Letter on terms and conditions satisfactory to the Bank (each
a "Subordination Side Letter" and collectively, the Subordination Side
Letters").
(o) PAYOFF LETTER AND TERMINATION STATEMENTS. The Bank shall have
received a payoff letter and UCC-3 Termination Statements and/or any other
instrument necessary to terminate the security interests granted to all third
parties and provide evidence of satisfaction all obligations of the Borrower to
such third parties.
(p) MATERIAL ADVERSE CHANGE. There shall not have occurred any
material adverse change in the condition (financial or otherwise), operation,
properties, assets, liabilities, earnings or prospects of the Borrower since the
date of the Base Financial statements delivered to the Bank.
(q) CAPITALIZATION. The Borrower shall have at Closing available funds
in amount of at least $19,550,000, and delivered to the Bank evidence thereof,
derived from sources satisfactory to the Bank.
(r) EQUITY INVESTMENT. The Borrower shall have received, and delivered
to the Bank evidence of an equity investment of at least $11,100,000 on terms
and conditions satisfactory to the Bank.
(s) INTELLECTUAL PROPERTY SECURITY AGREEMENTS. The Bank shall have
received from the Borrower and its Subsidiaries an Intellectual Property
Security Agreement in a form satisfactory to the Bank and its Special Counsel
(the "Intellectual Property Security Agreement").
(t) WARRANT AND WARRANT AGREEMENT. The Borrower shall have executed
and delivered to the Bank a confirmation of (i) the warrant agreement (the
"Warrant Agreement"); and (ii) the warrant (the "Warrant") dated as of February
5, 1998 in form satisfactory to the Bank and its Special Counsel.
(u) MISCELLANEOUS REQUIREMENTS. The Borrower shall have delivered to
the Bank such other documents as the Bank or its Special Counsel shall
reasonably require.
Section 4.02. Conditions to Subsequent Advances.
------------- ----------------------------------
Each request for a subsequent Revolving Credit Advance shall be deemed to
be a representation by the Borrower to the Bank that all representations and
warranties contained in Article III hereof or in any Exhibit, Schedule or
23
Certificate attached hereto or delivered to the Bank in connection herewith were
true and correct when made and continue to be true and correct as of the date of
such advance, and that no Event of Default specified in Article VI hereof, and
no event which, under said Article VI with the giving of notice or the lapse of
time, or both, would constitute an Event of Default, has occurred and is then
continuing.
ARTICLE V. COVENANTS OF THE BORROWER.
---------- --------------------------
The Borrower hereby covenants as follows:
Section 5.01. Payment of Amounts Due, Etc.
------------- ----------------------------
The Borrower will make all payments of principal, interest and other
amounts in connection with the Notes and this Agreement in accordance with the
terms hereof and thereof, and will observe, perform and comply with each and
every one of the covenants, terms and conditions contained herein, in the Notes
or in any other Credit Document to be observed, performed or complied with by
it.
Section 5.02. Corporate Existence.
------------- --------------------
The Borrower and its Subsidiaries will maintain and preserve in full force
and effect its corporate existence and will maintain and preserve in full force
and effect all material rights, Licenses, patents, trademarks and franchises,
and comply with all applicable regulations in all jurisdictions necessary for
the conduct of their business.
Section 5.03. Maintenance of Properties.
------------- --------------------------
The Borrower and its Subsidiaries will maintain, preserve, protect and keep
all properties used or useful in the conduct of their respective businesses in
good repair, working order and condition, ordinary wear and tear excepted, and
from time to time shall make such repairs, renewals, replacements, betterments
and improvements thereto as in the judgment of the Borrower's management are
necessary to permit such business to be properly and advantageously conducted at
all dines.
Section 5.04. Payment of Taxes, Compliance with Laws, Etc.
------------- --------------------------------------------
The Borrower and its Subsidiaries will pay and discharge all taxes,
assessments and governmental charges or levies imposed upon them or upon their
income or profits, or upon any property belonging to them before the same shall
become in default, as well as all lawful claims for labor, materials and
supplies, which, if not paid when due, might become a lien or charge upon such
property or any part thereof; provided, however, that neither the Borrower nor
any of their respective Subsidiaries shall be required to pay and discharge any
such tax, assessment, charge, levy or claim so long as the validity thereof
shall be contested in good faith by appropriate proceedings, an adequate reserve
for the payment thereof is established on the books of the Borrower or
applicable Subsidiary in accordance with generally accepted accounting
principles, and the Borrower or applicable Subsidiary shall pay such tax,
assessment, charge, levy or claim before any taxing authority files any lien
with respect thereto.
24
The Borrower and its Subsidiaries will at all times and in all material
respects comply with all applicable provisions of laws, rules, regulations,
licenses, permits, approvals and orders and observe all requirements of federal,
state, local and other governmental authorities except to the extent that
noncompliance would have an adverse effect on the business, assets, operations,
financial condition or prospects of the Borrower.
The Borrower and its Subsidiaries will satisfy, or cause to be satisfied,
the minimum annual funding standard, within the meaning of ERISA, for any
employee benefit plan established or maintained by them which is subject to
ERISA and neither of the Borrower nor any of their respective Subsidiaries will
permit any tax or penalty to be incurred by it as a result of any failure to
satisfy any such minimum funding requirement or as a result of any violation of
the provisions of Section 4975 of the Code or any regulation issued thereunder.
Section 5.05. Insurance.
------------- ----------
The Borrower and its Subsidiaries will at all times maintain casualty and
liability insurance with financially sound and reputable insurers satisfactory
to the Bank in such amounts and to the extent customary for entities of like
size in similar businesses. All insurance policies will name the Bank as a loss
payee or insured mortgagee, as applicable. Each such insurance policy shall
contain a provision requiring at least thirty (30) days' written notice to the
Bank prior to the cancellation or modification of each such policy. Certificates
relating to such insurance shall be furnished by the Borrower to the Bank at the
Closing and hereafter upon demand by the Bank.
Section 5.06. Accounts and Reports.
------------- ---------------------
The Borrower and the Guarantors will furnish or cause to be furnished to
the Bank, the following reports:
(a) ANNUAL REPORTS. As soon as available and in any event within one
hundred and twenty (120) days after the end of each fiscal year, (i)
consolidated and consolidating audited financial statements of the Borrower and
its Subsidiaries, together with all notes thereto, prepared in reasonable detail
and in accordance with generally accepted accounting principles consistently
applied, such statements to be duly certified by a certified, independent public
accounting firm selected by the Borrower and acceptable to the Bank ("CPA"),
which statements shall be accompanied by an (A) unqualified opinion thereon by
the CPA, and (B) a statement executed by the Borrower's President or Chief
Financial Officer that to the best of his or her knowledge, following diligent
inquiry, he or she does not know of any condition or event which constitutes an
Event of Default under this Agreement or which, after notice, or lapse of time
or both, would constitute such an Event of Default, or a statement specifying
the nature and period of existence of any such condition or event.
(b) MONTHLY REPORTS. As soon as available, and in any event within
thirty (30) days after the end of each monthly accounting period in each fiscal
year during the term of his Agreement, consolidated unaudited financial
statements of the Borrower and its subsidiaries prepared in reasonable detail
and in accordance with generally accepted accounting principles consistently
25
applied, certified by the President or Chief Financial Officer of due Borrower,
which statements shall contain balance sheets as of the end of such accounting
period, statements of profit and loss and cash flow for the period from the
beginning of such fiscal year to the end of such accounting period.
(c) COMPLIANCE CERTIFICATES. With the annual financial statements
furnished pursuant to subsections (a) hereof and within thirty (30) days after
the end of each other fiscal quarter, an officer's certificate substantially in
the form of Exhibit 5.05(c) hereto certified by the President or Chief Financial
Officer of the Borrower (the "Compliance Certificate"), and such other reports
as the Bank may reasonably request.
(d) The Borrower shall furnish to the Bank not later than twenty (20)
days following the end of each monthly accounting period a "Borrowing Base
Certificate" in the form of EXHIBIT 5.06(d) attached hereto, completed and
signed by the Borrower's Chief financial Officer. The Borrowing Base shown on
such certificate shall be of the last day of said monthly accounting period. The
Bank shall be under no obligation to make any further Revolving Credit Advances
if a Borrowing Base Certificate is not delivered within the specified period.
(e) AUDITOR'S MANAGEMENT LETTER. Promptly after receipt by the
Borrower, copies of the management letter, if any, provided by its independent
certified public accountants who audit the annual financial statements.
(f) PUBLIC INFORMATION. Promptly, copies of all reports and financial
statements which the Borrower sends to its stockholders, in their capacity as
stockholders, as a class or which the Borrower files with the Securities and
Exchange Commission or any other public body.
(g) Accounting Principles. Reports furnished to the Bank under this
Agreement shall be prepared in accordance with generally accepted accounting
principles consistently applied except that unaudited statements need not
contain notes thereto and shall be subject to normal year end adjustments.
Compliance with the covenants set forth in this Agreement will be determined in
accordance with generally accepted accounting principles consistently applied.
Section 5.07. Information and Inspection.
------------- ---------------------------
The Borrower will furnish to the Bank from time to time promptly upon the
Bank's request, full information pertinent to any covenant, provision or
condition hereof or to any matter in connection with its business and, at all
reasonable times during normal business hours and as often as the Bank shall
reasonably request, permit any authorized representative designated by the Bank
to visit and inspect any of their properties, including their books and records
(and to make extracts therefrom), and to discuss their affairs, finances and
accounts with its officers. The Borrower will, in addition, promptly furnish to
the Bank such financial information as the Bank shall reasonably request.
Without limiting the generality of the foregoing, the Bank shall be entitled to
conduct as many examinations of the books and records of the Borrower as the
Bank in its sole discretion deems reasonable and necessary and the Borrower
shall pay on demand the Bank's out-of-pocket expenses and field audits and
appraisal fees as and to the extent provided in Section 2.08.
26
Section 5.08. Additional Notice.
------------- ------------------
The Borrower will promptly advise the Bank of any change which constitutes
or, after notice or lapse of time or both, would constitute an Event of Default
as defined in Article VI of this Agreement, or a default in the performance by
the Borrower under any covenant or agreement contained in any other agreement
(in which the Borrower has obligations, present or future, in excess of $50,000)
to which it is a party or by which it is bound which has not been cured within
the applicable grace period, if any. The Borrower will also promptly give notice
in writing to the Bank of each waiver, consent or amendment granted or made with
respect to borrowed money in excess of $50,000, or any dispute or default under
or change in a material term of any license agreement (the "Key Licenses") set
forth in Schedule 5.08 during the prior fiscal year.
Section 5.09. Payment of Expenses.
------------- --------------------
The Borrower will bear all reasonable out-of-pocket fees and expenses of
the Bank in connection with the negotiation, preparation, execution, amendment,
administration or enforcement of this Agreement, the other Credit Documents and
the transactions contemplated hereby (whether or not the Credit hereunder is
consummated) and the making and collection of the Credit hereunder, including
without limitation, the fees and disbursements of Special Counsel for the Bank,
costs of appraisals, recording fees, taxes and filing fees.
Section 5.10. Limitation on Indebtedness.
------------- ---------------------------
Neither the Borrower nor any of its respective Subsidiaries will create,
incur, assume, or become, be or remain liable in any manner in respect of, or
allow to exist, any indebtedness ("Indebtedness") (which term shall include: all
indebtedness, obligations and liabilities which in accordance with generally
accepted accounting principles would be reflected on the balance sheet of the
Borrower as liability; all indebtedness, obligations and liabilities, whether or
not assumed by Borrower or any Subsidiary, secured by any mortgage, pledge or
lien existing on property owned by the Borrower or any Subsidiary; all
indebtedness in respect of operating leases; and all amounts representing rental
payments which, in accordance with generally accepted accounting principles,
would be classified as a liability on its balance sheet), except for:
(a) the Notes and any other obligations owed to the Bank under this
Agreement or otherwise;
(b) Indebtedness of the Borrower existing as of the date of this
Agreement which is specifically disclosed in SCHEDULE 5.10(b) attached hereto;
(c) Indebtedness representing trade debt, wages, employee benefits,
advance payments on sales contracts and other indebtedness incurred in the
ordinary course of business;
(d) Indebtedness existing as of the date of this Agreement secured by
liens permitted by subsections (a) and (e) of Section 5.12;
(e) Liabilities for taxes, assessments, governmental charges, liens or
claims described in Section 5.04 hereof to the extent that payment thereof is
not required by such Section 5.04;
27
(f) Indebtedness in respect of final judgments for the payment of
money not in excess of $50,000 in the aggregate at any time outstanding
(excluding sums covered by insurance) remaining unsatisfied and in effect for
any period of less than sixty (60) days or in respect of which a stay of
execution shall have been obtained pending an appeal or proceeding for review;
and
(g) Indebtedness of entities acquired in Permitted Acquisitions.
Section 5.11 . Limitation on Liability for Obligations of Others.
Neither the Borrower nor any of its Subsidiaries will assume,
guarantee, endorse or otherwise be or become liable, contingently or otherwise,
for the obligations of any other corporation, firm or entity or other person,
except for:
(a) the endorsement of negotiable instruments for deposit or
collection in the normal course of its business; and
(b) guarantees existing as of the date of this Agreement which are
specifically disclosed on Schedule 5.11(b) attached hereto.
Section 5.12. Limitation on Liens.
------------- --------------------
Neither the Borrower nor any of its Subsidiaries will (i) create, incur,
assume or allow to be created, incurred or assumed, or to exist, any pledge of,
or any lien, charge or encumbrance of any kind on, any of their property or
assets, (ii) subject any of such assets to prior payments of any other
indebtedness whether by subordination agreement, transfer of assets or
otherwise, or (iii) own or acquire or agree to acquire any property of any
character subject to or upon any mortgage, conditional sale agreement or other
title retention agreement, provided, however, that the foregoing restrictions
shall not prohibit the Borrower:
(a) from creating or allowing to exist any liens or encumbrances which
existed on the date hereof are set forth in SCHEDULE 5.12(a) hereto;
(b) from creating or allowing to exist any liens in favor of the Bank;
(c) from allowing to exist liens in respect of judgments or awards
which have been in force for less than the applicable appeal period or less than
sixty (60) days, whichever is sooner, so long as execution is not levied
thereunder, or in respect of which the Borrower at the time shall in good faith
be prosecuting an appeal, or proceedings for review are pending and in respect
of which a stay of execution shall have been obtained pending such appeal or
review;
(d) from creating or allowing to exist deposits or pledges made in
connection with, or to secure payment of, workmen's compensation, unemployment
insurance or similar programs; liens, charges or encumbrances imposed by law,
such as carriers', warehousemen's and mechanics' liens and other liens arising
in the ordinary course of business which do not, individually or in the
aggregate, materially detract from the value or limit the use of any property
subject thereto; and
28
(e) from creating or allowing to exist any liens securing indebtedness
solely for the purpose of acquiring personal property, other than inventory;
provided, however, that no such purchase money security interest shall extend to
any property other than the personal property so acquired and provided further
that the amount of any such purchase money indebtedness shall not exceed
$150,000, nor the fair market value of such property at the time of acquisition
without the Bank's consent.
Section 5.13. Sale of Assets.
------------- ---------------
Neither the Borrower nor any of its Subsidiaries will sell or transfer to
each other or to any third party any of their respective assets, including,
without limitation, accounts receivable whether with or without recourse, other
than as permitted by Section 5.16 hereof.
Section 5.14. Loans and Investments in Securities.
------------- ------------------------------------
Neither the Borrower nor any of its Subsidiaries will, without the prior
written consent of the Bank, purchase or otherwise acquire or retain any stock,
assets or obligations of, or make any loans or advances to, or investments in
any corporation, partnership or other entity or person, other than:
(a) obligations of the United States of America, or any agency
thereof, maturing not more than one (1) year from the date of issue thereof,
provided that the Bank shall acquire a perfected first security interest in any
such obligation simultaneously with its purchase or acquisition;
(b) certificates of deposit or other obligations maturing not more
than one (1) year from the date of issue thereof issued by the Bank, provided
that the Bank shall acquire a perfected first security interest in such
obligation simultaneously with its purchase or acquisition; and
(c) Permitted Acquisitions.
Section 5.15. Transactions With Affiliated Persons.
------------- -------------------------------------
Neither the Borrower nor any of its Subsidiaries will enter into any
transaction with an Affiliate, except (a) on terms no less favorable to Borrower
than would be available in a bona fide arm's length transaction with a
non-affiliated person or entity, and provided that Borrower shall have obtained
the Bank's prior written consent to any such transaction or series of related
transactions involving an amount of $50,000 or more; (b) employment agreements
entered into in the ordinary course of business; (c) in connection with stock
option plans acceptable to the Bank; (d) Permitted Stock Payments; (e) any
dividends, distributions or other Restricted Payments permitted under Section
5.18 hereof; (f) any Permitted Payments, and (g) those transactions set forth on
Schedule 5.15 hereto. "Affiliate" means: any officer, director or shareholder
who owns five percent (5%) or more of any class of securities of any Borrower or
any Subsidiary; any entity where the Borrower owns directly or indirectly five
percent (5%) or more of any class of securities or interest issued by such
entity; or any entity that controls, is controlled by or under common control
with, the Borrower.
29
Section 5.16. Consolidation, Merger or Disposition/Acquisition of Assets.
------------- -----------------------------------------------------------
Neither the Borrower nor any of its Subsidiaries will, without the prior
written consent of the Bank, consolidate with or merge into or with another
firm, person or corporation, directly or indirectly, issue, sell, assign, pledge
or otherwise encumber or dispose of any shares of the capital stock or sell,
lease or otherwise dispose of (other than in the ordinary course of its
business) all or any material portion of their properties or assets to any firm,
person or corporation, or acquire any material portion of the properties or
assets of any other firm, person or corporation, whether in one or a series of
related transactions, except that:
(a) any Subsidiary may merge into or consolidate with the Borrower
(provided that the Borrower shall be the surviving corporation);
(b) the Borrower or any of its Subsidiaries may sell or otherwise
dispose of any property which has become uneconomic, obsolete or worn out if
disposed of in the ordinary course of business; and
(c) the Borrower may enter into Permitted Acquisitions (including the
Acquisitions).
Section 5.17. Changes in Corporate Business.
------------- ------------------------------
The Borrower will not materially alter the nature of its business.
Section 5.18. Restricted Payments.
------------- --------------------
The Borrower shall not, directly or indirectly, declare, order, pay or make
Restricted payments other than, absent an Event of Default and provided that the
occurrence of which or payment thereof will not constitute an Event of Default,
(i) any payment to the extent specifically permitted hereunder; (ii) Permitted
Stock Payments; (iii) redemption of unvested options from employees whose
employment is terminated; and (iv) distributions payable solely in Stock
(including without limitation any distribution of shares of common stock made
upon conversion of the shares of Series C Convertible Preferred Stock into
Common stock). Notwithstanding any other provision of the Section 5.18, this
Section 5.18 shall not be construed to restrict or prohibit any Permitted
Payments.
"Restricted Payments" shall mean
(a) any payment or declaration of any dividend on any class of Stock
of the Borrower;
(b) any redemption, purchase or other acquisition by the Borrower,
directly or indirectly, of any shares of its Stock; and
(c) any payment or distribution in cash or other property or in any
other manner made by the Borrower on account of its obligations under the Equity
Documents (including any such payment or distribution by set-off, recoupment or
from or by way of collateral).
"Stock" shall mean capital stock and warrants or options to purchase stock.
30
"Permitted Payments" shall mean each of the following: (i) payments on
account of any indemnity claims or breach of contract claims under the Equity
Documents; (ii) payment of the fees and reimbursement of expenses of directors
required pursuant to the terms of the Equity Documents; and (iii) payment of
outside legal, accounting and due diligence fees and expenses required pursuant
to the terms of the Equity Documents.
Section 5.19. Restriction on Use of Proceeds.
------------- -------------------------------
None of the proceeds of the Credit shall be used by the Borrower to
purchase commodities except for use in the ordinary course of the Borrower's
business, or for the purpose of purchasing or carrying, or refinancing any
borrowing the proceeds of which were used to purchase or carry, any "margin
securities" within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System.
Section 5.20. Bank Accounts.
------------- --------------
Subject to Section 2.11 hereof, the Borrower shall maintain at all times
all of its primary operating and disbursement accounts with the Bank.
Section 5.21. Further Security.
------------- -----------------
The Borrower agrees to provide the Bank with such security interest or
liens as the Bank may hereafter reasonably request with respect to the assets of
the Borrower.
Section 5.22. Material Agreements.
------------- --------------------
The Borrower will observe and perform all of its obligations under each
material agreement to which it is a party, except where the failure so to
observe would not have a material adverse affect upon the business, assets,
operations, financial or other condition, or Prospects of the Borrower.
Section 5.23. Continuance of Key-Man Life Insurance.
------------- --------------------------------------
The Borrower will purchase and maintain in full force and effect two
key-man life insurance policies in the amount of $1,000,000 each on the lives of
Xxxx Xxxxxx and Xxxxxxx Xxxxxx and each such policy and the proceeds thereof
will be collaterally assigned to the Bank for the payment of the obligations of
the Borrower to the Bank. A certificate relating to such insurance will be
furnished by the Borrower to the Bank at Closing.
Section 5.24. Ratio Total Liabilities to Net Worth.
------------- -------------------------------------
The ratio of (a) the Borrower's Total Liabilities to (b) Net Worth shall
be, as of the last day of each fiscal quarter, equal to or less than the ratio
of 1.15 to 1.
"Total Liabilities" shall mean the sum of all liabilities of the Borrower
and its Subsidiaries, on a consolidated basis, determined in accordance with
generally accepted accounting principles.
"Net Worth" shall mean the consolidated assets of Borrower and its
Subsidiaries less the consolidated liabilities of the Borrower and its
Subsidiaries.
31
Section 5.25. Minimum EBITDA.
------------- ---------------
The EBITDA of the Borrower and its Subsidiaries on a consolidated basis
shall for the three month period ending on the last day of each quarter
indicated below, shall equal or exceed the amount set forth opposite such
period:
Three Month Period
------------------
Ending on the Following Quarter Ends Minimum EBITDA
------------------------------------ --------------
September 30, 1999 $750,000
December 31, 1999 $800,000
March 31, 2000 $800,000
June 30, 2000 $850,000
September 30, 2000 $900,000
Each Quarter End Thereafter $950,000
"EBITDA" shall mean for any period the total of (a) the consolidated net
income of the Borrower and its Subsidiaries, on a consolidated basis, plus (b)
amounts paid by the Borrower and its Subsidiaries in respect of taxes, plus (c)
to the extent deducted in calculating net income, the consolidated interest,
depreciation and amortization expense of the Borrower and its Subsidiaries.
Section 5.26. Maximum Capital Expenditures.
------------- -----------------------------
Capital Expenditures made or incurred by the Borrower and its Subsidiaries
on a consolidated basis, shall not exceed $500,000 without prior written consent
of the Bank from the Closing through the fiscal year of the Borrower ending June
30, 2000. Thereafter, Capital Expenditures shall not exceed $400,000 without
prior written consent of the Bank for any fiscal year of the Borrower beginning
with the fiscal year ending June 30, 2001.
"Capital Expenditures" shall mean expenditures which are properly
chargeable to capital account in accordance with generally accepted accounting
principles (including leases which are capitalized and research and development
expenses).
Section 5.27. Minimum Liquidity Ratio.
------------- ------------------------
The ratio of the Borrower's Current Assets to Current Liabilities shall at
all times during the periods indicated equal or exceed the indicated ratios:
Minimum Liquidity
Periods Ratio
------- -----
April 1, 1999 through 1.4 to 1
June 30, 1999
July 1, 1999 through 1.4 to 1
September 30, 1999
Thereafter 1.5 to 1
32
"Current Assets" shall mean all cash, accounts receivable, and inventory of
the Borrower and its Subsidiaries, on a consolidated basis.
"Current Liabilities" shall mean all accounts payable, all accruals and all
amounts outstanding under the Revolving Credit of the Borrower and its
Subsidiaries, on a consolidated basis.
Section 5.28. Minimum Fixed Charge Coverage.
------------- ------------------------------
The ratio of the (a) EBITDA of the Borrower and its Subsidiaries for the
immediately preceding three month period to (b) the sum of (i) fees and
principal amortization on the Credit, plus (ii) consolidated interest expense,
plus (iii) capital lease payments, plus (iv) Capital Expenditures, plus (v) cash
income taxes of the Borrower and its Subsidiaries for the immediately preceding
three month period, shall, as of the last day of each fiscal quarter equal or
exceed the ratio indicated:
Quarter Ended Ratio
------------- -----
September 30, 1999 1 to 1
Each quarter end thereafter 1.05 to 1
Section 5.29. Change of Control.
------------- ------------------
The shareholders of the Borrower at Closing will at all times continue to
hold not less than 70% of the Borrower's Stock on a fully diluted basis without
the prior written consent of the Bank.
Section 5.30. Sales Representations.
------------- ----------------------
The Borrower agrees that prior to allowing any of its sales representatives
from taking into his or her possession any of the Collateral (as defined in the
Security Agreement) the Borrower shall (i) have each such sales representative
execute a "Memo on Stock" and obtain a Landlord Consent and Estoppel
Certificate, if applicable, in form and substance satisfactory to the Bank and
deliver copies of the same to the Bank and (ii) execute all UCC-1 financing
statements and similar documents as the Bank may request to provide the Bank
with a first priority perfected security interest in such Collateral.
Section 5.31. Subsidiaries.
------------- -------------
The Borrower shall have no Subsidiaries other than Bimeco, MCA and
Xxxxxxxx.
33
Section 5.32. Utah Legal Opinion.
------------- -------------------
On or before June 28, 1999, the Borrower and MCA shall have delivered to
the Bank written opinion of Utah counsel (reasonably acceptable to the Bank) to
the Borrower and MCA, in form and substance satisfactory to the Bank.
Section 5.33. Landlord's Consent and Estoppel Certificate for Largo,
-------------- -----------------------------------------------------------
Florida. On or before June __, 1999, the Borrower shall (i) have ceased doing
--------
business at its office and warehouse facility located at 00000 00xx Xxxxx Xxxxx,
Xxxxx, Xxxxxxx (the "Florida Premises") and have removed all assets from such
location to locations disclosed is the Security Agreement or (ii) have delivered
to the Bank a new duly executed Landlord's Consent and Estoppel Certificate for
the Florida Premises in form and substance satisfactory to the Bank.
ARTICLE VI. EVENTS OF DEFAULT.
----------- ------------------
If, while any part of the principal of or interest on the Notes remains
unpaid or while any part of the Credit shall be in effect, any one of the
following "Events of Default" shall occur:
(a) the Borrower's (i) failure to pay when due any principal of the
Credit or (ii) failure to pay any interest, fees or other amounts due to the
Bank with respect to the Credit if such failure remains uncured for three (3)
Banking Days after the due dates;
(b) the Borrower or any of its Subsidiaries shall (i) apply for or
consent to the appointment of a receiver, trustee or liquidator of it or of all
or a substantial part of its assets; (ii) admit in writing of its inability to
pay its debts as they mature; (iii) make a general assignment for the benefit of
creditors; (iv) be adjudicated a bankrupt or insolvent; (v) file a voluntary
petition in bankruptcy or a petition or an answer seeking reorganization or an
arrangement with creditors to take advantage of any insolvency law; (vi) file
any answer admitting the material allegations of a petition filed against it in
any bankruptcy, reorganization or insolvency proceeding or fail to dismiss such
petition within thirty (30) days after the filing thereof; or (vii) take any
corporate action for the purpose of effecting any of the foregoing;
(c) an order, judgment or decree shall be entered, without the
application, approval or consent of the Borrower or any of its Subsidiaries by
any court of competent jurisdiction, approving a petition seeking reorganization
or liquidation of any of the Borrower, any of its Subsidiaries or appointing a
receiver, trustee or liquidator of the Borrower, or of all or a substantial part
of its assets;
(d) any representation or warranty made by the Borrower herein or
hereunder or in any other Credit Document or in any certificate, document or
instrument furnished pursuant hereto or thereto shall prove to have been false
or incorrect in any material respect when made;
(e) default by the Borrower in the performance of any covenant or
agreement contained herein, or in any other Credit Document, unless such default
34
is (i) a default of a covenant set forth in Sections 5.03, 5.04, 5.05, 5.07 and
5.09, and (ii) is cured within thirty (30) days;
(f) default by the Borrower in the performance of any covenant or
agreement contained in any other agreement to which it is a party or by which it
is bound involving a liability or obligation of the Borrower in excess of
$50,000 which shall not be remedied within the period of time (if any) within
which such other agreement permits such default to be remedied without the
consent or waiver of the other party thereto, unless such default is waived or
excused as a matter of law;
(g) any guarantor of the Borrower's obligations hereunder shall take
any action to terminate its guarantee (other than in accordance with the terms
thereof) or there shall exist any payment default thereunder;
(h) all or any substantial part of the assets of the Borrower shall be
condemned, seized or otherwise appropriated by any governmental authority or any
officer or instrumentally thereof;
(i) a judgment or judgments for the payment of money in excess of the
sum of $20,000 in the aggregate (not covered by insurance) shall be rendered
against the Borrower and such judgment or judgments shall remain unsatisfied and
in effect for any period of sixty (60) days without a stay of execution;
(j) there shall occur any material adverse change in the consolidated
financial condition of the Borrower;
(k) either Xxxx Xxxxxx or Xxxxxxx Xxxxxx shall own less than 80% of
the Borrower's Stock on a fully diluted basis that each owned at the Closing; or
(l) a Change of Control as defined in the Equity Documents;
then and in every such event, while such event shall be continuing, the Bank may
(i) terminate the Revolving Credit with respect to further advances, whereupon
no advances may be made hereunder, and/or (ii) declare the Notes to be forthwith
due and payable, whereupon the Notes shall forthwith become due and payable
without presentment, demand, protest or further notice of any kind, all of which
are expressly waived by the Borrower, and the right to borrow thereunder shall
terminate, and may exercise all rights and remedies under the Credit Documents
and applicable law. Notwithstanding the foregoing, the Notes shall be due and
payable without declaration or demand on the occurrence of an event under
paragraphs (b) and (c) of this Article VI.
ARTICLE VII. MISCELLANEOUS.
------------ --------------
Section 7.01. Term of Agreement.
------------- ------------------
This Agreement shall terminate on the date (the "Termination Date")
whenever the following conditions shall have been met: (i) all principal of and
interest on the Notes and all other amounts due and payable under this Agreement
have been paid and discharged in full, and (ii) the Borrower shall have no
further right to borrow under this Agreement.
Section 7.02. Notices.
------------- --------
Except as otherwise specifically provided in this Agreement, all notices
and other communications hereunder shall be in writing and shall be delivered in
person, mailed by United States registered or certified first class mail,
35
postage prepaid, sent by overnight courier, or telexed, telegraphed, telecopied
or telefaxed to the parties hereto addressed as follows:
To the Bank: State Street Bank and Trust Company
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxxxx, Vice President
Telefax Number: (000) 000-0000
With copies to: Xxxxxxx, Procter & Xxxx LLP
Exchange Place
Boston, Massachusetts 02109
Attention: Xxxxxx X. Xxxxx, P.C.
Telefax Number: (000) 000-0000
To the Borrower: PrimeSource Surgical, Inc.
0000 Xxxx 00xx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Telefax Number: (000) 000-0000
With copies to: Nossaman, Guthner, Xxxx & Xxxxxxx, LLP
00 Xxxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Telefax Number: (000) 000-0000
Any such notice or demand shall be deemed to have been duly given or made
and to have become effective (a) if delivered by hand or overnight courier, or
sent by telegraph, telecopy, facsimile or telex, at the time of the receipt
thereof or the sending of such telegraph, telecopy, facsimile or telex, if
during normal business hours on a Banking Day, and (b) if sent by registered or
certified first-class mail, postage prepaid, on the third Banking Day following
the mailing thereof.
Section 7.03. No Waiver.
------------- ----------
No failure to exercise, and no delay in exercising, on the part of the
Bank, any right, power or privilege hereunder shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, power or privilege
hereunder preclude any other or further exercise hereof or the exercise of any
other right, power or privilege. The rights and remedies herein provided are
cumulative and not exclusive of any rights or remedies provided by law.
Section 7.04. Choice of Law; Construction.
------------- ----------------------------
This Agreement and the Notes shall each be deemed to be a contract made
under the laws of the Commonwealth of Massachusetts, and shall be construed in
accordance with the laws of the Commonwealth of Massachusetts. The descriptive
headings of the several Sections hereof are for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
36
This Agreement, together with the Exhibits hereto and all documents, instruments
and agreements executed pursuant hereto, constitutes the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof, supersedes all prior agreements, understandings or representations
pertaining to the subject matter hereof, whether oral or written, and may not be
contradicted by evidence of any alleged oral agreement.
Section 7.05. Amendments, Waivers and Consents.
------------- ---------------------------------
Compliance by the Borrower with any term, covenant or condition of this
Agreement may be omitted or waived (either generally or in a particular instance
and either retroactively or prospectively) only by a consent or consents in
writing signed by the Bank.
Section 7.06. Closing.
------------- --------
The closing of the Credit ("Closing") shall take place at 9:00 a.m. on June
__, 1999, at the offices of Xxxxxxx, Procter & Xxxx LLP. Xxxxxxxx Xxxxx, Xxxxxx,
Xxxxxxxxxxxxx 00000, or such other time and place as the parties hereto may
agree.
Section 7.07. Assignment.
------------- -----------
The Bank may assign all or a portion of its interests, rights and
obligations under the Credit and the Notes held by it to Citizens Financial
Groups Inc., Citizens Bank or their affiliates or designee or upon the consent
of the Borrower (not to be unreasonably withheld) to any other person or entity,
provided however, that no such consent will be required upon the occurrence and
continuance of a default under the Credit Documents.
Section 7.08. Consent to Jurisdiction.
------------- ------------------------
The Borrower and any guarantor of the Borrower's obligations under this
Agreement irrevocably consents and submits to the non-exclusive jurisdiction of
the Superior Court in The Commonwealth of Massachusetts and the United States
District Court for the Eastern District of Massachusetts in connection with any
action, proceeding or claim arising out of or relating to this Agreement or
other document executed in connection with this Agreement. In any such
litigation, the Borrower and all guarantors waive personal service and agree
that service may be made by certified mail directed, in the case of the
Borrower, to the location specified for notices under this Agreement and, in the
case of guarantors, to their last known address.
Section 7.09. Waiver of Jury Trial.
------------- ---------------------
The Borrower and the Bank hereby waive their respective rights to a jury
trial of any claim or cause of action based upon or arising out of any of the
Credit Documents or any of the transactions contemplated therein, including
contract claims, tort claims, breach of duty claims and all other common law or
statutory claims.
Section 7.10. Indemnity.
------------- ----------
The Borrower hereby indemnifies and agrees to hold harmless the Bank
(exclusive of the Bank's cost of funds and allocation of overhead and salaries),
any other financing institutions that participate in the Credit, and each of
their directors, officers, agents, employees and counsel, from and against any
and all losses, claims, damages, liabilities or expenses imposed on or incurred
37
by any of them in connection with the lending relationship reflected in this
Agreement except as a result of any indemnified party's gross negligence or
willful misconduct. This indemnity shall survive termination of the Agreement.
Section 7.11. Setoff.
------------- -------
Any sums due from the Bank to the Borrower and any property of the Borrower
in the possession of the Bank may be held and treated as collateral security for
the payment of the obligations of the Borrower to the Bank and upon the
occurrence of any Event of Default and while such Event of Default is
continuing, may be applied to the payment of such obligations regardless of the
adequacy of other collateral. Any sums due from any financing institution that
may participate in the Credit or property of the Borrower in the possession of
such institution may be held as collateral security for the payment of the
obligations of the Borrower the Bank as if such institution had extended the
Credit directly to the Borrower and, upon the occurrence of an Event of Default
and while such Event of Default is continuing, may be applied to the payment of
such obligations regardless of the adequacy of other collateral.
[END OF TEXT]
IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated Credit Agreement under seal as of the date first above written.
PRIMESOURCE SURGICAL, INC.
By: /s/ Xxxx Xxxxxx
--------------------------------
Name: Xxxx Xxxxxx
Title: President
BIMECO, INC.
By: /s/ Xxxx Xxxxxx
--------------------------------
Name: Xxxx Xxxxxx
Title: President
MEDICAL COMPANIES ALLIANCE, INC.
By: /s/ Xxxx Xxxxxx
--------------------------------
Name: Xxxx Xxxxxx
Title: President
XXXXXXXX MEDICAL, INC.
By: /s/ Xxxx Xxxxxx
--------------------------------
Name: Xxxx Xxxxxx
Title: President
STATE STREET BANK AND TRUST COMPANY
By: /s/ Xxxxx X. Xxxxxxxxxx
--------------------------------
Name: Xxxxx X. Xxxxxxxxxx
Title: Vice President
