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EXHIBIT 10(iiii)
NINTH AMENDMENT TO FINANCING AND SECURITY AGREEMENT
THIS NINTH AMENDMENT TO FINANCING AND SECURITY AGREEMENT (this
"Agreement") is made the 16th day of November, 1995, by HANGER ORTHOPEDIC
GROUP, INC., a corporation organized and existing under the laws of the State
of Delaware (the "Borrower"), and NATIONSBANK, N.A., successor by merger to
Maryland National Bank, its successor and assigns (the "Lender").
RECITALS
A. The Borrower and the Lender entered into a Financing and Security
Agreement dated July 3, 1993, (the same, as amended, modified, substituted,
extended, and renewed from time to time, the "Financing Agreement"). The
Financing Agreement includes, without limitation, the following amendments:
Number of Amendment Date
------------------- ----
First November 17, 1993
Second December 22, 1993
Third April 15, 1994
Fourth May 3, 1994
Fifth August 12, 1994
Sixth September 13, 1994
Xxxxxxx Xxxxx 00, 0000
Xxxxxx October 2, 1995
B. Pursuant to the provisions of the Financing Agreement, the Lender
has from time to time made certain credit facilities available to the
Borrower, including the following: (i) a revolving credit facility in the
current maximum principal amount of $13,000,000 (the "Revolving Loan"); (ii)
one or more term loans in the aggregate principal amount of $2,375,000 (the
"Term Loans"); and (iii) an acquisition loan in the principal amount of
$3,000,000 (the "Acquisition Loan").
C. The Borrower has requested that the Lender agree to eliminate the
scheduled reductions of the Revolving Credit Committed Amount and to maintain
the Revolving Credit Committed Amount at $13,000,000. The Borrower has also
requested that the Lender extend the maturity date of the Revolving Loan,
increase the limit on the Borrower's capital expenditures and eliminate the
Revolving Line of Unused Line Fee and make certain other changes in the
Financing Agreement.
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D. The Lender is willing to agree to the Borrower's requests on the
condition, among others, that this Agreement be executed.
AGREEMENTS
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, receipt of which is hereby acknowledged, the Borrower
and the Lender agree as follows:
1. The Borrower and the Lender agree that the Recitals above are a part
of this Agreement. Unless otherwise expressly defined in this Agreement, terms
defined in the Financing Agreement shall have the same meaning under this
Agreement.
2. Amendments. The Financing Agreement is hereby amended as follows:
(a) Elimination of Certain Definitions. Effective as of the date
hereof, the following definitions shall henceforth be eliminated from Section
1.1 of the Financing Agreement:
"Revolving Credit Unused Line Fee"
"Revolving Loan Mandatory Prepayment" and "Revolving Loan
Mandatory Prepayments"
(b) Modification of Certain Definitions. Effective as of the date
hereof, the following definitions in Section 1.1 of the Financing Agreement
are amended and restated as follows:
"Eligible Inventory" means all of the Borrower's and each of its
Subsidiary's Inventory, valued at the lowest of (a) the Borrower's and
each of its Subsidiary's net purchase cost or net manufacturing cost, (b)
the lowest bulk market price, (c) the Borrower's and each of its
Subsidiary's lowest bulk selling price, minus estimated expenses for
completion and disposal, and minus an allowance for normal profit margin
for bulk sales, (d) any ceiling prices which may be established by any
Laws of any Governmental Authority or (e) prevailing market value,
excluding, however, any Inventory which consists of (i) any goods located
outside of the United States, (ii) any goods located outside of a State
in which the Lender has properly and unavoidably perfected its security
interests by filing, free and clear of all other Liens, (iii) any goods
not in the actual possession of, or in transit to, or from, the Borrower
or any Subsidiary, (iv) any goods in the possession of a bailee,
warehouseman, consignee or similar third party, (v) work-in-process, (vi)
any goods the sale or other disposition of which has given rise to a
Receivable, (vii) any goods as to
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which the Lender determines in the exercise of its sole and absolute
discretion at any time and in good faith are defective, unmerchantable,
slow moving or obsolete, and (viii) any goods which the Lender in the
good faith exercise of its sole and absolute discretion has deemed to be
ineligible because the Lender otherwise considers the collateral value
thereof to the Lender to be impaired or its ability to realize such value
to be insecure. In the event of any dispute, under the foregoing
criteria, as to whether goods are, or have ceased to be, Eligible
Inventory, the decision of the Lender in the good faith exercise of its
sole and absolute discretion shall control.
"Eligible Receivable" and "Eligible Receivables" mean, at any time
of determination thereof, each Account which conforms and continues to
conform to the following criteria to the satisfaction of the Lender: (a)
the account arose in the ordinary course of the Borrower's or any
Subsidiary's business from a bona fide outright sale or lease of goods by
the Borrower or a Subsidiary, or from services performed by the Borrower,
and (i) such goods have been delivered to the appropriate Account Debtors
or their respective designees, the Borrower or a Subsidiary has in its
possession shipping and delivery receipts evidencing such shipment and
delivery, no return, rejection or repossession has occurred, and such
goods have been finally accepted by the Account Debtor, or (ii) such
services have been satisfactorily completed and accepted by the
appropriate Account Debtor; (b) the Account is based upon an enforceable
order or contract, written or oral, for goods delivered or for services
performed, and the same were shipped, held, or performed in accordance
with such order or contract; (c) the title of the Borrower or its
Subsidiary to the Account and, except as to the Account Debtor and any
creditor which finances the Account Debtor's purchase of such goods, to
any goods is absolute and is not subject to any prior assignment, claim,
Lien, or security interest, except Permitted Liens and Liens created by
the Account Debtors in connection with their interests in the goods, and
the Borrower or its Subsidiary otherwise have the full and unqualified
right and power to assign and grant a security interest in it to the
Lender as security and collateral for the payment of the Obligations; (d)
the amount shown on the books of the Borrower or its Subsidiary and on
any invoice, certificate, schedule or statement delivered to the Lender
is owing to the Borrower or its Subsidiary and no partial payment has
been received unless reflected with that delivery; (e) the Account is not
subject to any claim of reduction, counterclaim, setoff, recoupment, or
other defense in law or equity, or any claim for credits, allowances, or
adjustments by the Account Debtor because of returned, inferior, or
damaged goods or unsatisfactory
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services, or for any other reason; (f) the Account Debtor has not
returned or refused to retain, or otherwise notified the Borrower or any
Subsidiary of any dispute concerning, or claimed nonconformity of, any of
the goods or services from the sale of which the Account arose; (g) the
Account is not outstanding more than one hundred twenty (120) days from
the date of the invoice therefor; (h) the account is not owing by any
Account Debtor for which the Lender has deemed fifty percent (50%) or
more of such Account Debtor's other accounts (or any portion thereof) due
to the Borrower to be non-Eligible Receivables; (i) the Account does not
arise out of a contract with, or order from, an Account Debtor that, by
its terms, forbids or makes void or unenforceable the assignment by the
Borrower to the Lender of the Account arising with respect thereto; (j)
the Account Debtor is not a Subsidiary or other Affiliate of the
Borrower; (k) the Account Debtor is not incorporated in or primarily
conducting business in any jurisdiction located outside of the United
States of America; (l) the Borrower or any Subsidiary is not indebted in
any manner to the Account Debtor, with the exception of customary
credits, adjustments and/or discounts given to an Account Debtor by the
Borrower or any Subsidiary in the ordinary course of their businesses,
(m) no part of the Account represents a progress billing or a retainage,
and (n) the Lender in the exercise of its sole and absolute discretion
has not deemed the Account ineligible because of uncertainty as to the
creditworthiness of the Account Debtor or because the Lender otherwise
considers the collateral value thereof to the Lender to be impaired or
its ability to realize such value to be insecure. In the event of any
dispute, under the foregoing criteria, as to whether an account is, or
has ceased to be, an Eligible Receivable, the decision of the Lender in
the exercise of its sole and absolute discretion shall control.
"Revolving Credit Expiration Date" means June 30, 1997.
(c) Addition of Certain Definitions. Effective as of the date
hereof, the following definitions shall be added to Section 1.1 of the
Financing Agreement:
"Borrowing Base" shall have the meaning given such term in
Section 2.1.10.
"Borrowing Base Deficiency" shall have the meaning given
such term in Section 2.1.10.
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"Borrowing Base Report" and "Borrowing Base Reports" shall
have the meaning given such terms in Section 2.1.10.
(d) Revolving Credit Facility Fee. Effective as of the date
hereof, Section 2.1.8 of the Financing Agreement is amended and restated in
its entirety as follows:
2.1.8 Revolving Credit Facility Fee. The Borrower shall
pay to the Lender a revolving credit commitment fee, (a "Revolving
Credit Facility Fee") on June 30, 1996 in an amount equal to Twenty
Five Thousand Dollars ($25,000).
(e) Elimination of Mandatory Reduction. Effective as of the date
hereof, Section 2.1.9 of the Financing Agreement is deleted in its entirety.
(f) Elimination of Revolving Credit Unused Line Fee. Effective as
of the date hereof, existing Section 2.1.10 of the Financing Agreement is
deleted in its entirety.
(g) Borrowing Base. Paragraph 3 of the Fifth Amendment to
Financing and Security Agreement dated August 12, 1994 is hereby deleted and
is replaced by replacement Section 2.1.10:
2.1.10 Borrowing Base for Revolving Loan. (a) From and
after April 1, 1996, the Revolving Credit Committed Amount shall
equal the lesser of (i) $13,000,000, or (ii) the most current
Borrowing Base (as hereinafter defined). As used herein, the term
"Borrowing Base" means at any time an amount equal to the aggregate
of (i) eighty percent (80%) of the amount of Eligible Receivables,
plus (ii) fifty percent (50%) of the amount of Eligible Inventory
but not to exceed $7,000,000.
(b) If at any time during the period referenced in
sub-part (a) of this Section the outstanding principal amount
outstanding under the Revolving Loan exceeds the Borrowing Base, a
borrowing base deficiency ("Borrowing Base Deficiency") shall exist.
Each time a Borrowing Base Deficiency exists, the Borrower shall pay
to the Lender the Borrowing Base Deficiency on demand from time to
time. Without implying any limitation on the Lender's discretion
with respect to determining the Borrowing Base, the criteria for
Eligible Receivables and for Eligible Inventory contained in the
respective definitions of Eligible Receivables and of Eligible
Inventory are in part based
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upon the business operations of the Borrower and the Subsidiaries
existing on or about the date of this Agreement and upon information or
records furnished to the Lender by the Borrower and its Subsidiaries. If
at any time or from time to time hereafter, the business operations of
the Borrower or any of its Subsidiaries change so as to impair the
financial condition of the Borrower or any of its Subsidiaries or impair
the value of Collateral or such information or records furnished to the
Lender are materially incorrect or materially misleading, the Lender in
its discretion, may at any time and from time to time during the duration
of the Financing Agreement upon prior written notice to the Borrower
change such Borrowing Base criteria and add new Borrowing Base criteria.
(c) The Borrower will furnish to the Lender no less
frequently than the fifteenth day of each month and at such other
times as may be requested by the Lender a report of the Borrowing
Base (each a "Borrowing Base Report"; collectively, the "Borrowing
Base Reports") in the form required from time to time by the Lender,
appropriately completed and duly signed. The Borrowing Base Report
shall contain the amount and payments on the Receivables, the value
of the Inventory and the calculations of the Borrowing Base as of
the end of the preceding month, all in such detail, and accompanied
by such supporting and other information, as the Lender may from
time to time request. Upon the Lender's request and upon the
creation of any Receivables, or at such intervals as the Lender may
require, the Borrower shall provide the Lender with: (a)
confirmatory assignment schedules; (b) copies of Account Debtor
invoices; (c) evidence of shipment or delivery; (d) such further
schedules, documents and/or information regarding Receivables and
the Inventory as the Lender may reasonably require. The items to be
provided under this subsection shall be in form satisfactory to the
Lender and certified as true and correct by a Responsible Officer,
and delivered to the Lender from time to time solely for the
Lender's convenience in maintaining records of the Collateral. The
Borrower's failure to deliver any of such items the Lender shall not
affect, terminate, modify or otherwise limit the Lender's security
interest in the Collateral.
(h) Capital Expenditures. Effective as of the date hereof, Section
6.4.5 of the Financing Agreement is amended and restated in its entirety as
follows:
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6.4.5 Capital Expenditures. Without the prior written
consent of the Lender, the Borrower will not, or will not permit any
Subsidiary to, directly or indirectly (by way of the acquisition of
the securities of a Person or otherwise other than the Acquisitions
permitted by this Agreement), make any expenditure in respect of the
purchase or other acquisition (including by way of incurring Lease
Obligations which should be, in accordance with GAAP, capitalized)
of Fixed or Capital Assets (excluding normal replacements and
maintenance which are properly charged to current operations in the
ordinary course of business) in the aggregate for the Borrower and
their Subsidiaries (taken as a whole) in any Fiscal Year exceeding
One Million Two Hundred Thousand Dollars ($1,200,000).
3. Conditions Precedent. This Agreement shall become effective on the
date the Lender receives the following documents, each of which shall be
satisfactory in form and substance to the Lender:
(a) this Agreement executed and delivered by the Borrower and the
Guarantors;
(b) a certificate of an officer of the Borrower to the effect that
there has been no change to the Articles of Incorporation or Bylaws of the
Borrower as delivered to the Lender in connection with the Loans made under
the Financing Agreement, all evidence of all actions taken by the Borrower
approving each Financing Document to which it is a party and as to the
incumbency and the specimen signature of each officer of the Borrower
executing this Agreement, and other documents executed in connection herewith
and a certification by the President or Vice President of the Borrower as to
the incumbency and signature of the Secretary of the Borrower and any other
documents as the Lender may reasonably require the Borrower to execute in form
and substance acceptable to the Lender; and
(c) proof that the Borrower has paid all costs and expenses of the
Lender in connection with the Loans and with this Agreement, including but not
limited to all Lender's attorneys' fees.
4. Representations; No Novation. The Borrower hereby issues, ratifies
and confirms the representations, warranties and covenants contained in the
Financing Agreement, as amended hereby. The Borrower represents and warrants
that there exists no Event of Default or event which with the giving of notice
or passage of time would constitute an Event of Default under the Financing
Documents. The Borrower agrees that this Agreement is not intended to and
shall not cause a novation with respect to any or all of the Obligations.
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5. Lender Release. The Borrower acknowledges and warrants that the
Lender has acted in good faith and has conducted in a commercially reasonable
manner its relationships with the Borrower in connection with this Agreement
and generally in connection with the Financing Agreement and the Obligations,
the Borrower hereby waiving and releasing any claims to the contrary.
6. Expenses. The Borrower shall pay at the time this Agreement is
executed and delivered all fees, commissions, costs, charges, taxes and other
expenses incurred by the Lender and its counsel in connection with this
Agreement, including, but not limited to, reasonable fees and expenses of the
Lender's counsel and all recording fees, taxes and charges.
7. Counterparts. This Agreement may be executed in any number of
duplicate originals or counterparts, each of such duplicate originals or
counterparts shall be deemed to be an original and all taken together shall
constitute but one and the same instrument. The Borrower agrees that the
Lender may rely on a telecopy of any signature of any Borrower. The Lender
agrees that the Borrower may rely on a telecopy of this Agreement executed by
the Lender.
8. Entire Agreement. This Agreement contains the entire understanding
between the Lender and the Borrower with respect to the subject matter hereof
and supersedes any prior understandings and agreements between them respecting
the subject matter hereof.
9. Governing Law. This Agreement is one of the Financing Documents in
the Financing Agreement and shall be governed by and construed in accordance
with the laws of the State of Maryland and shall be deemed an instrument under
seal pursuant to said law.
10. Headings. The headings and captions used in this Agreement are for
the convenience of the parties only and are not a part of this Agreement.
IN WITNESS WHEREOF, the Borrower and the Lender have executed this
Agreement under seal as of the date and year first written above.
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ATTEST: HANGER ORTHOPEDIC GROUP, INC.
By: (SEAL)
------------------------- ----------------------
, Secretary Xxxxxxx X. Xxxxx
-------------- Vice President
WITNESS: NATIONSBANK, N.A., as successor by merger to
Maryland National Bank
By: (SEAL)
------------------------- ----------------------
Xxxxxx X. Xxxxxxx
Vice President
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AGREEMENT OF GUARANTORS
The undersigned are the "Guarantors" under various Guaranty of Payment
Agreements, dated July 2, 1993 and a Confirmation of Guaranty and Security
Agreement dated September 13, 1994 (collectively, as amended, modified,
substituted, extended and renewed from time to time, the "Guaranty"), in favor
of the foregoing Lender. In order to induce the Lender to enter into the
foregoing Agreement, the undersigned (a) consent to the transactions
contemplated by, and agreements made by the Borrower under, the foregoing
Agreement, and (b) ratify, confirm and reissue the terms, conditions,
promises, covenants, grants, assignments, security agreements, agreements,
representations, warranties and provisions contained in the Guaranty. Without
limiting the foregoing, the undersigned acknowledge and agree that the
Obligations (defined in the Financing Agreement) are covered by the Guaranty.
WITNESS signatures and seals of the undersigned as of the date of the
Agreement.
GUARANTORS:
ATTEST: ALBUQUERQUE PROSTHETIC CENTER, INC.
By: (SEAL)
------------------------- --------------------------
Name:
Title:
ATTEST: CAPITAL ORTHOPEDICS, INC.
By: (SEAL)
------------------------- --------------------------
Name:
Title:
ATTEST: COLUMBIA BRACE ACQUISITION CORP.
By: (SEAL)
------------------------- --------------------------
Name:
Title:
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ATTEST: XXXXXX PROSTHETICS & ORTHOTICS,
INC.
By: (SEAL)
------------------------- --------------------------
Name:
Title:
ATTEST: DOBI-SYMPLEX, INC.
By: (SEAL)
------------------------- --------------------------
Name:
Title:
ATTEST: XXXXXXX AND XXXX ORTHOPEDICS, INC.
By: (SEAL)
------------------------- --------------------------
Name:
Title:
ATTEST: X.X. XXXXXX, INC.
By: (SEAL)
------------------------- --------------------------
Name:
Title:
ATTEST: X.X. XXXXXX OF CALIFORNIA, INC.
By: (SEAL)
------------------------- --------------------------
Name:
Title:
ATTEST: MEMPHIS ORTHOPEDIC, INC.
By: (SEAL)
------------------------- --------------------------
Name:
Title:
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ATTEST: XXXXX XXXXXX, INC.
By: (SEAL)
------------------------- --------------------------
Name:
Title:
ATTEST: XXXXX ORTHOPEDICS, INC.
By: (SEAL)
------------------------- --------------------------
Name:
Title:
ATTEST: XXXXX ORTHOPEDICS OF NORTHERN
COLORADO, INC.
By: (SEAL)
------------------------- --------------------------
Name:
Title:
ATTEST: YORK PROSTHETICS, INC.
By: (SEAL)
------------------------- --------------------------
Name:
Title:
ATTEST: XXXXXX ORTHOTICS & PROSTHETICS,
INC.
By: (SEAL)
------------------------- --------------------------
Name:
Title:
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