AMENDMENT NUMBER ONE TO LOAN AND SECURITY AGREEMENT
This Amendment Number One to Loan and Security Agreement ("Amendment")
is entered into as of March 3, 1998, by and among FOOTHILL CAPITAL CORPORATION
("Foothill"), ALLIED HEALTHCARE PRODUCTS, INC., B&F MEDICAL PRODUCTS, INC.,
HOSPITAL SYSTEMS, INC., and LIFE SUPPORT SYSTEMS, INC. (jointly "Borrowers"), in
light of the following:
FACT ONE: Borrowers and Foothill have previously entered into that
certain Loan and Security Agreement, dated as of August 7, 1997 (the
"Agreement").
FACT TWO: Bear Medical Systems, Inc. and Bicore Monitoring Systems,
Inc. were previously borrowers under the Agreement; the assets of such
corporations were sold as of October 31, 1997 and Foothill concurrently released
such corporations as borrowers and released its security interests in the assets
of such corporations.
FACT THREE: Borrowers and Foothill desire to amend the Agreement as
provided for and on the conditions herein.
NOW, THEREFORE, Borrowers and Foothill hereby amend and supplement the
Agreement as follows:
1. DEFINITIONS. All initially capitalized terms used in this
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Amendment shall have the meanings given to them in the Agreement unless
specifically defined herein.
2. AMENDMENTS.
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(a) Section 1.1 of the Agreement is hereby amended by
revising the definitions of "Average Unused Portion of Maximum Revolving
Amount," "Borrower," "Inventory Reserve," and "Term Loans" to read as follows:
"Average Unused Portion of Maximum Revolving Amount means,
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as of any date of determination, (a) $15,000,000 less (b) the sum of (i) the
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average Daily Balance of Advances that were outstanding during the immediately
preceding month, plus (ii) the average Daily Balance of the undrawn Letters of
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Credit that were outstanding during the immediately preceding month."
"Borrower means anyone of Parent, B&F, Hospital Systems or
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Life Support."
"'Inventory Reserve' means $2,000,000; provided, however,
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that on the date that the outstanding principal balance of Term Loan A is
reduced to $7,000,000 or less, the Inventory Reserve will be reduced to $0.
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"Term Loans means Term Loan A."
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The following definitions and all references to such
definitions in the Agreement are hereby deleted: Bear, Bicore, Term Loan B and
Term Loan C.
(b) Section 2.3 of the Agreement is hereby amended in its
entirety to read as follows:
"2.3 TERM LOANS. Effective as of November 1, 1997,
Foothill agrees to provide Borrowers with a term loan in the amount of
$7,000,000 ("Term Loan A"). Principal payments on Term Loan A shall be made on
November 1, 1997, and shall continue on the first day of each subsequent month
until paid in full. For Term Loan A, during the first 12 months, each principal
payment shall be in the amount of $150,000; and commencing November 1, 1998,
each principal payment shall be in the amount of $200,000.
Payments of accrued interest under Term Loan A shall be
made on the first day of each month commencing on November 1, 1997. The
outstanding principal balance and all accrued and unpaid interest under Term
Loan A shall be due and payable on the earliest to occur of:
(a) The acceleration of the Obligations by Foothill
following an Event of Default; and
(b) The Maturity Date.
Upon the completion of a Financing or Sale Event, the
proceeds shall be used to prepay Term Loan A. Borrower shall have the right to
prepay Term Loan A, in whole or in part, from the proceeds of asset sales,
without penalty or premium. All such prepaid amounts to be applied to the
installments due on Term Loan A in the inverse order of their maturity. The
amounts outstanding under the Term Loans shall constitute Obligations."
(c) Section 2.11 of (f) of the Agreement is hereby amended to
read as follows:
"(f) Servicing Fee. On the first day of each month during
the term of this Agreement and thereafter so long as any obligations are
outstanding, a servicing fee in an amount equal to $3,000."
(d) Section 6.2 of the Agreement is hereby amended to read as
follows:
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"6.2 COLLATERAL REPORTING. Provide Foothill with the
following documents at the fol-lowing times in form satisfactory to Foothill:
(a) on a weekly basis, the summary page of such Borrower's Accounts aging
report, (b) on a monthly basis, a sales journal, collection journal, and credit
register since the last such schedule and a calculation of the Borrowing Base as
of such date using the amount of ineligible Accounts as determined based upon
the prior month's aging of Accounts, (c) on a monthly basis and, in any event,
by no later than the 10th day of each month during the term of this Agreement,
(i) a detailed calculation of the Borrowing Base, and (ii) a detailed aging, by
total, of such Borrower's Accounts, together with a reconciliation to the
detailed calculation of the Borrowing Base previously provided to Foothill, (d)
on a monthly basis and, in any event, by no later than the 10th day of each
month during the term of this Agreement, a summary aging, by vendor, of such
Borrower's accounts payable and any book overdraft, (e) on a monthly basis,
Inventory reports specifying such Borrower's cost, (f) upon Foothill's request,
notice of all returns, disputes, or claims, (g) upon Foothill's request, copies
of invoices in connection with its Accounts, customer statements, credit memos,
remittance advices and reports, deposit slips, shipping and delivery documents
in connection with its Accounts and for Inventory and Equipment acquired by such
Borrower, purchase orders and invoices, (h) on a quarterly basis, a detailed
list of such Borrower's customers, (i) on a monthly basis, a calculation of the
Dilution for the prior month; and (j) such other reports as to the Collateral or
the financial condition of such Borrower as Foothill may reasonably request from
time to time. Original sales invoices evidencing daily sales shall be mailed by
such Borrower to each Account Debtor and, at Foothill's direction, the invoices
shall indicate on their face that such Borrower's Account has been assigned to
Foothill and that all payments are to be made directly to Foothill. In the
event that, at any time, Borrowers' excess borrowing availability under Section
2.1 shall be less than $3,000,000, then Borrower agrees that Foothill may, in
the exercise of its reasonable credit judgment, require changes in the frequency
and type of reports required under this Section 6.2."
(e) Paragraphs (a), (b), and (c) of Section 7.20 are hereby
deleted and replaced by the following:
"(a) Minimum Tangible Net Worth. Minimum Tangible Net Worth
of Parent, at all times, of not less than $21,000,000."
3. REPRESENTATIONS AND WARRANTIES. Borrowers hereby affirm to
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Foothill that (a) all of Borrowers' representations and warranties set forth in
the Agreement are true, complete and accurate in all respects as of the date
hereof; and (b) each of the Junior Notes has been repaid in full.
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4. NO DEFAULTS. Borrowers hereby affirm to Foothill that no Event
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of Default has occurred and is continuing as of the date hereof.
5. CONDITION PRECEDENT. The effectiveness of this Amendment is
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expressly conditioned upon the following:
(a) Receipt by Foothill of an executed copy of this Amendment
and the attached acknowledgment.
6. COSTS AND EXPENSES. Borrowers shall pay to Foothill all of
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Foothill's out-of-pocket costs and expenses (including, without limitation, the
fees and expenses of its counsel, which counsel may include any local counsel
deemed necessary, search fees, filing and recording fees, documentation fees,
appraisal fees, travel expenses, and other fees) arising in connection with the
preparation, execution, and delivery of this Amendment and all related
documents.
7. LIMITED EFFECT. In the event of a conflict between the terms
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and provisions of this Amendment and the terms and provisions of the Agreement,
the terms and provisions of this Amendment shall govern. In all other respects,
the Agreement, as amended and supplemented hereby, shall remain in full force
and effect.
8. COUNTERPARTS; EFFECTIVENESS. This Amendment may be executed in
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any number of counterparts and by different parties on separate counterparts,
each of which when so executed and delivered shall be deemed to be an original.
All such counterparts, taken together, shall constitute but one and the same
Amendment. This Amendment shall become effective upon the execution of a
counterpart of this Amendment by each of the parties hereto.
[SPACE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first set forth above.
FOOTHILL CAPITAL CORPORATION,
a California corporation
By:
Title:
ALLIED HEALTHCARE PRODUCTS, INC.,
a Delaware corporation
By:
Title:
B&F MEDICAL PRODUCTS, INC.,
a Delaware corporation
By:
Title:
HOSPITAL SYSTEMS, INC.,
a California corporation
By:
Title:
LIFE SUPPORT PRODUCTS, INC.,
a California corporation
By:
Title:
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