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Exhibit 10.5(a)
LOAN AND SECURITY AGREEMENT
ALLIANCE MEDICAL CORPORATION
AND
PARAGON HEALTH CARE CORPORATION
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TABLE OF CONTENTS
Page
1 ACCOUNTING AND OTHER TERMS.................................................. 1
2 LOAN AND TERMS OF PAYMENT................................................... 1
2.1 Promise to Pay........................................................ 1
2.1.1 Revolving Advances.............................................. 1
2.1.2 Letters of Credit Sublimit...................................... 1
2.1.3 Acquisition Term Loan........................................... 2
2.1.4 Equipment Term Loan............................................. 2
2.2 Overadvances.......................................................... 2
2.3 Interest Rate, Payments............................................... 2
2.4 Fees.................................................................. 3
3 CONDITIONS OF LOANS......................................................... 3
3.1 Conditions Precedent to Initial Credit Extension...................... 3
3.2 Conditions Precedent to all Credit Extensions......................... 3
4 GRANT OF SECURITY INTEREST.................................................. 4
5 REPRESENTATIONS AND WARRANTIES.............................................. 4
5.1 Due Organization and Authorization.................................... 4
5.2 Collateral............................................................ 4
5.3 Litigation............................................................ 5
5.4 No Material Adverse Change in Financial Statements.................... 5
5.5 Solvency.............................................................. 5
5.6 Regulatory Compliance................................................. 5
5.7 Subsidiaries.......................................................... 5
5.8 Full Disclosure....................................................... 6
6 AFFIRMATIVE COVENANTS....................................................... 6
6.1 Government Compliance................................................. 6
6.2 Financial Statements, Reports, Certificates........................... 6
6.3 Inventory; Returns.................................................... 7
6.4 Taxes................................................................. 7
6.5 Insurance............................................................. 7
6.6 Primary Accounts...................................................... 7
6.7 Financial Covenants................................................... 8
6.8 Registration of Intellectual Property Rights.......................... 8
6.9 Further Assurances.................................................... 8
7 NEGATIVE COVENANTS.......................................................... 8
7.1 Dispositions.......................................................... 8
7.2 Changes in Business, Ownership, Management or Business Locations...... 9
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7.3 Mergers or Acquisitions............................................... 9
7.4 Indebtedness.......................................................... 9
7.5 Encumbrance........................................................... 9
7.6 Distributions; Investments............................................ 9
7.7 Transactions with Affiliates.......................................... 9
7.8 Subordinated Debt..................................................... 10
7.9 Compliance............................................................ 10
8 EVENTS OF DEFAULT........................................................... 10
8.1 Payment Default....................................................... 10
8.2 Covenant Default...................................................... 10
8.3 Material Adverse Change............................................... 10
8.4 Attachment............................................................ 11
8.5 Insolvency............................................................ 11
8.6 Other Agreements...................................................... 11
8.7 Judgments............................................................. 11
8.8 Misrepresentations.................................................... 11
8.9 Litigation............................................................ 11
9 BANK'S RIGHTS AND REMEDIES.................................................. 12
9.1 Rights and Remedies................................................... 12
9.2 Power of Attorney..................................................... 12
9.3 Accounts Collection................................................... 13
9.4 Bank Expenses......................................................... 13
9.5 Bank's Liability for Collateral....................................... 13
9.6 Remedies Cumulative................................................... 13
9.7 Demand Waiver......................................................... 13
10 NOTICES..................................................................... 14
11 CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER.................................. 14
12 GENERAL PROVISIONS.......................................................... 14
12.1 Successors and Assigns................................................ 14
12.2 Indemnification....................................................... 14
12.3 Time of Essence....................................................... 14
12.4 Severability of Provision............................................. 15
12.5 Amendments in Writing, Integration.................................... 15
12.6 Counterparts.......................................................... 15
12.7 Survival.............................................................. 15
12.8 Confidentiality....................................................... 15
12.9 Attorneys' Fees, Costs and Expenses................................... 15
13 DEFINITIONS................................................................. 16
13.1 Definitions........................................................... 16
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THIS LOAN AND SECURITY AGREEMENT dated June 11, 2001, between SILICON
VALLEY BANK, whose address is 0000 Xxxxxx Xxxxx, Xxxxx Xxxxx, Xxxxxxxxxx 00000
("Bank") and ALLIANCE MEDICAL CORPORATION, whose address is 00000 Xxxxx 00xx
Xxxxxx, Xxxxxxx, Xxxxxxx 00000 ("Alliance") and PARAGON HEALTH CARE CORPORATION,
whose address is 00000 Xxxxxxxxx Xxxxxx Xxxxx, Xxxxx 000, Xxxxxx Xxxx, Xxxxxxxx
00000 ("Paragon") (Alliance and Paragon are sometimes collectively, jointly and
severally referred to herein as "Borrower"), provides the terms on which Bank
will lend to Borrower and Borrower will repay Bank. The parties agree as
follows:
1 ACCOUNTING AND OTHER TERMS
Accounting terms not defined in this Agreement will be construed following
GAAP. Calculations and determinations must be made following GAAP. The term
"financial statements" includes the notes and schedules. The terms "including"
and "includes" always mean "including (or includes) without limitation," in this
or any Loan Document.
2 LOAN AND TERMS OF PAYMENT
2.1 PROMISE TO PAY.
Borrower promises to pay Bank the unpaid principal amount of all Credit
Extensions and interest on the unpaid principal amount of the Credit Extensions.
2.1.1 REVOLVING ADVANCES.
(a) Bank will make Advances not exceeding (i) the lesser of (A) the
Committed Revolving Line or (B) the Borrowing Base, minus (ii) the amount of all
outstanding Letters of Credit (including drawn but unreimbursed Letters of
Credit). Amounts borrowed under this Section may be repaid and reborrowed during
the term of this Agreement.
(b) To obtain an Advance, Borrower must notify Bank by facsimile or
telephone by 12:00 p.m. Pacific time on the Business Day the Advance is to be
made. Borrower must promptly confirm the notification by delivering to Bank the
Payment/Advance Form attached as Exhibit B. Bank will credit Advances to
Borrower's deposit account. Bank may make Advances under this Agreement based on
instructions from a Responsible Officer or his or her designee or without
instructions if the Advances are necessary to meet Obligations which have become
due. Bank may rely on any telephone notice given by a person whom Bank believes
is a Responsible Officer or designee. Borrower will indemnify Bank for any loss
Bank suffers due to such reliance.
(c) The Committed Revolving Line terminates on the Revolving Maturity
Date, when all Advances are immediately payable.
2.1.2 LETTERS OF CREDIT SUBLIMIT.
Bank will issue or have issued Letters of Credit for Borrower's account
not exceeding (i) the lesser of the Committed Revolving Line or the Borrowing
Base minus (ii) the outstanding
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principal balance of the Advances; however, the face amount of outstanding
Letters of Credit (including drawn but unreimbursed Letters of Credit) may not
exceed $500,000. Each Letter of Credit will have an expiry date of no later than
180 days after the Revolving Maturity Date, but Borrower's reimbursement
obligation will be secured by cash on terms acceptable to Bank at any time after
the Revolving Maturity Date if the term of this Agreement is not extended by
Bank. Borrower agrees to execute any further documentation in connection with
the Letters of Credit as Bank may reasonably request.
2.1.3 ACQUISITION TERM LOAN.
(a) Bank will make the Acquisition Term Loan to Borrower in a single
advance on the earlier of (i) Borrower's completion of its filing with the U.S.
Securities and Exchange Commission on Form S-1 or (ii) July 31, 2001.
(b) Borrower will pay equal monthly installments of principal plus
interest (the "Acquisition Term Loan Payment"). Each Acquisition Term Loan
Payment is payable on the 11th of each month during the term of the Acquisition
Term Loan. Borrower's final Acquisition Term Loan Payment, due on April 30,
2004, includes all outstanding Acquisition Term Loan principal and accrued
interest.
2.1.4 EQUIPMENT TERM LOAN.
(a) Bank will make an Equipment Term Loan available to Borrower. On the
Closing Date, Bank will make a single advance to Borrower in an amount not to
exceed 75% of the eligible Equipment previously financed under Borrower's
existing Equipment facility. Up to 15% of eligible Equipment may include
software and other soft costs, including sales tax, freight and installation
expenses. Borrower will deliver to Bank with the request for the Equipment Term
Loan an invoice for the Equipment to be refinanced.
(b) Borrower will pay 36 equal installments of principal plus interest
(the "Equipment Term Loan Payment"). Each Equipment Term Loan Payment is payable
on the 11th of each month during the term of the Equipment Term Loan.
(c) Borrower's final Equipment Term Loan Payment, due on April 30, 2004,
includes (i) all outstanding Equipment Term Loan principal and accrued interest,
plus (ii) an additional payment equal to 5% of the total amount advanced under
the Equipment Term Loan.
2.2 OVERADVANCES.
If Borrower's Obligations under Section 2.1.1 and 2.1.2 exceed the lesser
of either (i) the Committed Revolving Line or (ii) the Borrowing Base, Borrower
must immediately pay Bank the excess.
2.3 INTEREST RATE, PAYMENTS.
(a) Interest Rate. (i) Advances accrue interest on the outstanding principal
balance at a per annum rate of 1 percentage points above the Prime Rate; (ii)
the Equipment Term Loan accrues interest at a per annum rate of 1.5 percentage
points above the Prime Rate; and (iii) the
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Acquisition Term Loan accrues interest at a per annum rate of 2 percentage
points above the Prime Rate. After an Event of Default, Obligations accrue
interest at 5 percent above the rate effective immediately before the Event of
Default. The interest rate increases or decreases when the Prime Rate changes.
Interest is computed on a 360 day year for the actual number of days elapsed.
(b) Payments. Interest due on the Committed Revolving Line is payable on
the 11th of each month. Bank may debit any of Borrower's deposit accounts
including Account Number 3300234870 for principal and interest payments owing or
any amounts Borrower owes Bank. Bank will promptly notify Borrower when it
debits Borrower's accounts. These debits are not a set-off. Payments received
after 12:00 noon Pacific time are considered received at the opening of business
on the next Business Day. When a payment is due on a day that is not a Business
Day, the payment is due the next Business Day and additional fees or interest
accrue.
2.4 FEES.
Borrower will pay:
(a) Commitment Fees. The following fully earned, non-refundable commitment
fees are due on the Closing Date: (i) 0.50% of the Committed Revolving Line
($12,500) and (ii) 1% of the Acquisition Term Loan ($10,000).
(b) Bank Expenses. All Bank Expenses (including reasonable attorneys' fees
and reasonable expenses) incurred through and after the date of this Agreement,
are payable when due.
3 CONDITIONS OF LOANS
3.1 CONDITIONS PRECEDENT TO INITIAL CREDIT EXTENSION.
Bank's obligation to make the initial Credit Extension is subject to the
following conditions precedent:
(a) Bank must receive the agreements, documents and fees it requires,
except that Borrower may deliver to Bank those documents titled "Consent to
Removal of Personal Property" set forth as Exhibits E, F and G no later than
thirty (30) days after the Closing Date; and
(b) the satisfactory completion of a field examination, the results of
which must be acceptable to Bank in its sole and absolute discretion or any
issues arising therefrom must be resolved to Bank's complete satisfaction.
3.2 CONDITIONS PRECEDENT TO ALL CREDIT EXTENSIONS.
Bank's obligations to make each Credit Extension, including the initial
Credit Extension, is subject to the following:
(a) timely receipt of any Payment/Advance Form; and
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(b) the representations and warranties in Section 5 must be materially
true on the date of the Payment/Advance Form and on the effective date of each
Credit Extension and no Event of Default (or any event that with the giving of
notice or the lapse of time or both would become an Event of Default) may have
occurred and be continuing, or result from the Credit Extension. Each Credit
Extension is Borrower's representation and warranty on that date that the
representations and warranties of Section 5 remain true.
4 GRANT OF SECURITY INTEREST
Borrower grants Bank a continuing security interest in all presently
existing and later acquired Collateral to secure all Obligations and performance
of each of Borrower's duties under the Loan Documents. Except for Permitted
Liens, any security interest will be a first priority security interest in the
Collateral. If this Agreement is terminated, Bank's lien and security interest
in the Collateral will continue until Borrower fully satisfies its Obligations.
5 REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 DUE ORGANIZATION AND AUTHORIZATION.
Borrower and each Subsidiary is duly existing and in good standing in its
state of formation and qualified and licensed to do business in, and in good
standing in, any state in which the conduct of its business or its ownership of
property requires that it be qualified, except where the failure to do so could
not reasonably be expected to cause a Material Adverse Change.
The execution, delivery and performance of the Loan Documents have been
duly authorized, and do not conflict with Borrower's formation documents, nor
constitute an event of default under any material agreement by which Borrower is
bound. Borrower is not in default under any agreement to which or by which it is
bound in which the default could reasonably be expected to cause a Material
Adverse Change.
5.2 COLLATERAL.
Borrower has good title to the Collateral, free of Liens except Permitted
Liens. The Accounts are bona fide, existing obligations, and the service or
property has been performed or delivered to the account debtor or its agent for
immediate shipment to and unconditional acceptance by the account debtor.
Borrower has no notice of any actual or imminent Insolvency Proceeding of any
account debtor whose accounts are an Eligible Account in any Borrowing Base
Certificate. All Inventory is in all material respects of good and marketable
quality, free from material defects. Borrower is the sole owner of the
Intellectual Property, except for non-exclusive licenses granted to its
customers in the ordinary course of business. Each Patent is valid and
enforceable and no part of the Intellectual Property has been judged invalid or
unenforceable, in whole or in part, and no claim has been made that any part of
the Intellectual Property violates the rights of any third party, except to the
extent such claim could not reasonably be expected to cause a Material Adverse
Change.
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5.3 LITIGATION.
Except as shown in the Schedule, there are no actions or proceedings
pending or, to the knowledge of Borrower's Responsible Officers, threatened by
or against Borrower or any Subsidiary in which a likely adverse decision could
reasonably be expected to cause a Material Adverse Change.
5.4 NO MATERIAL ADVERSE CHANGE IN FINANCIAL STATEMENTS.
All consolidated financial statements for Borrower, and any Subsidiary,
delivered to Bank fairly present in all material respects Borrower's
consolidated financial condition and Borrower's consolidated results of
operations. There has not been any material deterioration in Borrower's
consolidated financial condition since the date of the most recent financial
statements submitted to Bank.
5.5 SOLVENCY.
The fair salable value of Borrower's assets (including goodwill minus
disposition costs) exceeds the fair value of its liabilities; the Borrower is
not left with unreasonably small capital after the transactions in this
Agreement; and Borrower is able to pay its debts (including trade debts) as they
mature.
5.6 REGULATORY COMPLIANCE.
Borrower is not an "investment company" or a company "controlled" by an
"investment company" under the Investment Company Act. Borrower is not engaged
as one of its important activities in extending credit for margin stock (under
Regulations T and U of the Federal Reserve Board of Governors). Borrower has
complied in all material respects with the Federal Fair Labor Standards Act.
Borrower has not violated any laws, ordinances or rules, the violation of which
could reasonably be expected to cause a Material Adverse Change. None of
Borrower's or any Subsidiary's properties or assets has been used by Borrower or
any Subsidiary or, to the best of Borrower's knowledge, by previous Persons, in
disposing, producing, storing, treating, or transporting any hazardous substance
other than legally. Borrower and each Subsidiary has timely filed all required
tax returns and paid, or made adequate provision to pay, all material taxes,
except those being contested in good faith with adequate reserves under GAAP.
Borrower and each Subsidiary has obtained all consents, approvals and
authorizations of, made all declarations or filings with, and given all notices
to, all government authorities that are necessary to continue its business as
currently conducted, except where the failure to do so could not reasonably be
expected to cause a Material Adverse Change.
5.7 SUBSIDIARIES.
Borrower does not own any stock, partnership interest or other equity
securities except for Permitted Investments. No Subsidiary except Paragon
currently owns any tangible assets and at no time were any tangible assets
transferred from a Subsidiary to Borrower.
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5.8 FULL DISCLOSURE.
No written representation, warranty or other statement of Borrower in any
certificate or written statement given to Bank (taken together with all such
written certificates and written statements to Bank) contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements contained in the certificates or statements not misleading. It
being recognized by Bank that the projections and forecasts provided by Borrower
in good faith and based upon reasonable assumptions are not viewed as facts and
that actual results during the period or periods covered by such projections and
forecasts may differ from the projected and forecasted results.
6 AFFIRMATIVE COVENANTS
Borrower will do all of the following for so long as Bank has an
obligation to lend, or there are outstanding Obligations:
6.1 GOVERNMENT COMPLIANCE.
Borrower will maintain its and all Subsidiaries' legal existence and good
standing in its jurisdiction of formation and maintain qualification in each
jurisdiction in which the failure to so qualify would reasonably be expected to
cause a material adverse effect on Borrower's business or operations. Borrower
will comply, and have each Subsidiary comply, with all laws, ordinances and
regulations to which it is subject, noncompliance with which could have a
material adverse effect on Borrower's business or operations or would reasonably
be expected to cause a Material Adverse Change.
6.2 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES.
(a) Borrower will deliver to Bank: (i) as soon as available, but no later
than 30 days after the last day of each month, a company prepared consolidated
balance sheet and income statement covering Borrower's consolidated operations
during the period certified by a Responsible Officer and in a form acceptable to
Bank; (ii) as soon as available, but no later than 90 days after the last day of
Borrower's fiscal year, audited consolidated financial statements prepared under
GAAP, consistently applied, together with an unqualified opinion on the
financial statements from an independent certified public accounting firm
reasonably acceptable to Bank; (iii) a prompt report of any legal actions
pending or threatened against Borrower or any Subsidiary that could result in
damages or costs to Borrower or any Subsidiary of $100,000 or more; (iv)
budgets, sales projections, operating plans or other financial information Bank
reasonably requests; and (v) prompt notice of any material change in the
composition of the Intellectual Property, including any subsequent ownership
right of Borrower in or to any Copyright, Patent or Trademark not shown in any
intellectual property security agreement between Borrower and Bank or knowledge
of an event that materially adversely affects the value of the Intellectual
Property.
(b) Within 45 days after the last day of each quarter, Borrower will
deliver to Bank a company prepared consolidated financial projection for
Alliance and its Subsidiaries, on a rolling 4-quarter basis ("Rolling Revenue
Projection").
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(c) Within 20 days after the last day of each month, Borrower will deliver
to Bank a Borrowing Base Certificate signed by a Responsible Officer in the form
of Exhibit C, with aged listings of accounts receivable and accounts payable.
(d) Within 30 days after the last day of each month, Borrower will deliver
to Bank with the monthly financial statements a Compliance Certificate signed by
a Responsible Officer in the form of Exhibit D.
(e) Allow Bank to audit Borrower's Collateral at Borrower's expense, such
amount not to exceed $5,000 annually. Such audits will be conducted no more
often than every 6 months unless an Event of Default has occurred and is
continuing.
6.3 INVENTORY; RETURNS.
Borrower will keep all Inventory in good and marketable condition, free
from material defects. Returns and allowances between Borrower and its account
debtors will follow Borrower's customary practices as they exist at execution of
this Agreement. Borrower must promptly notify Bank of all returns, recoveries,
disputes and claims that involve more than $50,000.
6.4 TAXES.
Borrower will make, and cause each Subsidiary to make, timely payment of
all material federal, state, and local taxes or assessments (other than taxes
and assessments which Borrower is contesting in good faith, with adequate
reserves maintained in accordance with GAAP) and will deliver to Bank, on
demand, appropriate certificates attesting to the payment.
6.5 INSURANCE.
Borrower will keep its business and the Collateral insured for risks and
in amounts standard for Borrower's industry, and as Bank may reasonably request.
Insurance policies will be in a form, with companies, and in amounts that are
satisfactory to Bank in Bank's reasonable discretion. All property policies will
have a lender's loss payable endorsement showing Bank as an additional loss
payee, proof of which Borrower will provide to Bank, and all liability policies
will show the Bank as an additional insured and provide that the insurer must
give Bank at least 20 days notice before canceling its policy. At Bank's
request, Borrower will deliver certified copies of policies and evidence of all
premium payments. Proceeds payable under any policy will, at Bank's option, be
payable to Bank on account of the Obligations. Borrow will deliver to Bank proof
of general business insurance and casualty insurance.
6.6 PRIMARY ACCOUNTS.
No later than thirty (30) days after the Closing Date, Borrower will
maintain all its deposits and investments, except for payroll and xxxxx cash,
with Bank.
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6.7 FINANCIAL COVENANTS.
(a) Borrower will maintain:
(i) TANGIBLE NET WORTH. As of the last day of each month, a
Tangible Net Worth of at least the sum of (A) $4,750,000 and (B) the following,
calculated quarterly on a cumulative basis from the Closing Date: (I) 100% of
any additional equity raised by Borrower (net of expenses and costs of
issuance), plus (II) 100% of Borrower's net income, calculated in accordance
with GAAP, without offset for net losses.
(ii) LIQUIDITY COVERAGE. As of the last day of each month, a ratio
at all times of unrestricted cash (and equivalents) on deposit or invested with
Bank divided by the aggregate of outstanding balances of the Acquisition Term
Loan and the Equipment Term Loan of not less than 1.25 to 1.00.
(b) REVENUE VARIANCE. For each quarter, Borrower shall not permit a
deviation of greater than 15% from Borrower's most recent business plan
presented to and accepted by Bank prior to the execution of this Agreement.
6.8 REGISTRATION OF INTELLECTUAL PROPERTY RIGHTS.
Borrower will register with the United States Patent and Trademark Office
or the United States Copyright Office its Intellectual Property and additional
Intellectual Property rights developed or acquired including revisions or
additions with any product before the sale or licensing of the product to any
third party.
Borrower will (i) protect, defend and maintain the validity and
enforceability of the Intellectual Property and promptly advise Bank in writing
of material infringements and (ii) not allow any Intellectual Property material
to Borrower's business to be abandoned, forfeited or dedicated to the public
without Bank's written consent.
6.9 FURTHER ASSURANCES.
Borrower will execute any further instruments and take further action as
Bank reasonably requests to perfect or continue Bank's security interest in the
Collateral or to effect the purposes of this Agreement.
7 NEGATIVE COVENANTS
Borrower will not do any of the following without Bank's prior written
consent, which will not be unreasonably withheld, for so long as Bank has an
obligation to lend or there are any outstanding Obligations:
7.1 DISPOSITIONS.
Convey, sell, lease, transfer or otherwise dispose of (collectively
"Transfer"), or permit any of its Subsidiaries to Transfer, all or any part of
its business or property, except for Transfers of (i) Inventory in the ordinary
course of business; (ii) non-exclusive licenses and similar
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arrangements for the use of the property of Borrower or its Subsidiaries in the
ordinary course of business; or (iii) worn-out or obsolete Equipment.
7.2 CHANGES IN BUSINESS, OWNERSHIP, MANAGEMENT OR BUSINESS LOCATIONS.
Engage in or permit any of its Subsidiaries to engage in any business
other than the businesses currently engaged in by Borrower or reasonably related
thereto or have a material change in its ownership or management of greater than
25% (other than by the sale of Borrower's equity securities in a public offering
or to venture capital investors so long as Borrower identifies the venture
capital investors prior to the closing of the investment). Borrower will not,
without at least 30 days prior written notice, relocate its chief executive
office or add any new offices or business locations in which Borrower maintains
or stores over $5,000 in Borrower's assets or property.
7.3 MERGERS OR ACQUISITIONS.
Merge or consolidate, or permit any of its Subsidiaries to merge or
consolidate, with any other Person, or acquire, or permit any of its
Subsidiaries to acquire, all or substantially all of the capital stock or
property of another Person, except where (i) no Event of Default has occurred
and is continuing or would result from such action during the term of this
Agreement and (ii) such transaction would not result in a decrease of more than
25% of Tangible Net Worth. A Subsidiary may merge or consolidate into another
Subsidiary or into Borrower.
7.4 INDEBTEDNESS.
Create, incur, assume, or be liable for any Indebtedness, or permit any
Subsidiary to do so, other than Permitted Indebtedness.
7.5 ENCUMBRANCE.
Create, incur, or allow any Lien on any of its property, or assign or
convey any right to receive income, including the sale of any Accounts, or
permit any of its Subsidiaries to do so, except for Permitted Liens, or permit
any Collateral not to be subject to the first priority security interest granted
here, subject to Permitted Liens.
7.6 DISTRIBUTIONS; INVESTMENTS.
Directly or indirectly acquire or own any Person, or make any Investment
in any Person, other than Permitted Investments, or permit any of its
Subsidiaries to do so. Pay any dividends or make any distribution or payment or
redeem, retire or purchase any capital stock.
7.7 TRANSACTIONS WITH AFFILIATES.
Directly or indirectly enter into or permit to exist any material
transaction with any Affiliate of Borrower except for transactions that are in
the ordinary course of Borrower's business, upon fair and reasonable terms that
are no less favorable to Borrower than would be obtained in an arm's length
transaction with a nonaffiliated Person.
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7.8 SUBORDINATED DEBT.
Make or permit any payment on any Subordinated Debt, except under the
terms of the Subordinated Debt, or amend any provision in any document relating
to the Subordinated Debt without Bank's prior written consent.
7.9 COMPLIANCE.
Become an "investment company" or a company controlled by an "investment
company," under the Investment Company Act of 1940 or undertake as one of its
important activities extending credit to purchase or carry margin stock, or use
the proceeds of any Credit Extension for that purpose; fail to meet the minimum
funding requirements of ERISA, permit a Reportable Event or Prohibited
Transaction, as defined in ERISA, to occur; fail to comply with the Federal Fair
Labor Standards Act or violate any other law or regulation, if the violation
could reasonably be expected to have a material adverse effect on Borrower's
business or operations or would reasonably be expected to cause a Material
Adverse Change, or permit any of its Subsidiaries to do so.
8 EVENTS OF DEFAULT
Any one of the following is an Event of Default:
8.1 PAYMENT DEFAULT.
If Borrower fails to pay any of the Obligations within 5 days after their
due date. During the additional period the failure to cure the default is not an
Event of Default (but no Credit Extension will be made during the cure period);
8.2 COVENANT DEFAULT.
If Borrower does not perform any obligation in Section 6 or violates any
covenant in Section 7, or if Borrower does not perform or observe any other
material term, condition or covenant in this Agreement, any Loan Documents, or
in any agreement between Borrower and Bank and as to any default under a term,
condition or covenant that can be cured, has not cured the default within 15
days after it occurs, or if the default cannot be cured within 15 days or cannot
be cured after Borrower's attempts within 15 day period, and the default may be
cured within a reasonable time, then Borrower has an additional period (of not
more than 30 days) to attempt to cure the default. During the additional time,
the failure to cure the default is not an Event of Default (but no Credit
Extensions will be made during the cure period);
8.3 MATERIAL ADVERSE CHANGE.
If there (i) occurs a material adverse change in the business, operations,
or condition (financial or otherwise) of the Borrower, or (ii) is a material
impairment of the prospect of repayment of any portion of the Obligations or
(iii) is a material impairment of the value or priority of Bank's security
interests in the Collateral;
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8.4 ATTACHMENT.
If any material portion of Borrower's assets is attached, seized, levied
on, or comes into possession of a trustee or receiver and the attachment,
seizure or levy is not removed in 10 days, or if Borrower is enjoined,
restrained, or prevented by court order from conducting a material part of its
business or if a judgment or other claim becomes a Lien on a material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed against
any of Borrower's assets by any government agency and not paid within 10 days
after Borrower receives notice. These are not Events of Default if stayed or if
a bond is posted pending contest by Borrower (but no Credit Extensions will be
made during the cure period);
8.5 INSOLVENCY.
If Borrower becomes insolvent or if Borrower begins an Insolvency
Proceeding or an Insolvency Proceeding is begun against Borrower and not
dismissed or stayed within 30 days (but no Credit Extensions will be made before
any Insolvency Proceeding is dismissed);
8.6 OTHER AGREEMENTS.
If there is a default in any agreement between Borrower and a third party
that gives the third party the right to accelerate any Indebtedness exceeding
$100,000 or that could cause a Material Adverse Change;
8.7 JUDGMENTS.
If a money judgment(s) in the aggregate of at least $50,000 is rendered
against Borrower and is unsatisfied and unstayed for 10 days (but no Credit
Extensions will be made before the judgment is stayed or satisfied);
8.8 MISREPRESENTATIONS.
If Borrower or any Person acting for Borrower makes any material
misrepresentation or material misstatement now or later in any warranty or
representation in this Agreement or in any writing delivered to Bank or to
induce Bank to enter this Agreement or any Loan Document; or
8.9 LITIGATION.
If Borrower receives an adverse ruling on any dispositive or partially
dispositive motion or application in the case of Vanguard Medical Concepts, Inc.
vs. Xxxxx X. Xxxxx and Alliance Medical Corporation, case number C10 01-565,
pending in the Circuit Court of the 9th Judicial Circuit in and for Orange
County, Florida, which causes a Material Adverse Change in the business,
operations, or condition (financial or otherwise) of the Borrower, or if the
Vanguard case is set for trial.
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9 BANK'S RIGHTS AND REMEDIES
9.1 RIGHTS AND REMEDIES.
When an Event of Default occurs and continues, Bank may, without notice or
demand, do any or all of the following:
(a) Declare all Obligations immediately due and payable (but if an Event
of Default described in Section 8.5 occurs, all Obligations are immediately due
and payable without any action by Bank); (
b) Stop advancing money or extending credit for Borrower's benefit under
this Agreement or under any other agreement between Borrower and Bank;
(c) Settle or adjust disputes and claims directly with account debtors for
amounts, on terms and in any order that Bank considers advisable;
(d) Make any payments and do any acts it considers necessary or reasonable
to protect its security interest in the Collateral. Borrower will assemble the
Collateral if Bank requires and make it available as Bank designates. Bank may
enter premises where the Collateral is located, take and maintain possession of
any part of the Collateral, and pay, purchase, contest, or compromise any Lien
which appears to be prior or superior to its security interest and pay all
expenses incurred. Borrower grants Bank a license to enter and occupy any of its
premises, without charge, to exercise any of Bank's rights or remedies;
(e) Apply to the Obligations any (i) balances and deposits of Borrower it
holds, or (ii) any amount held by Bank owing to or for the credit or the account
of Borrower;
(f) Ship, reclaim, recover, store, finish, maintain, repair, prepare for
sale, advertise for sale, and sell the Collateral. Bank is granted a
non-exclusive, royalty-free license or other right to use, without charge,
Borrower's labels, Patents, Copyrights, Mask Works, rights of use of any name,
trade secrets, trade names, Trademarks, servicemarks, and advertising matter, or
any similar property as it pertains to the Collateral, in completing production
of, advertising for sale, and selling any Collateral and, in connection with
Bank's exercise of its rights under this Section, Borrower's rights under all
licenses and all franchise agreements inure to Bank's benefit; and
(g) Dispose of the Collateral according to the Code.
9.2 POWER OF ATTORNEY.
Effective only when an Event of Default occurs and continues, Borrower
irrevocably appoints Bank as its lawful attorney to: (i) endorse Borrower's name
on any checks or other forms of payment or security; (ii) sign Borrower's name
on any invoice or xxxx of lading for any Account or drafts against account
debtors; (iii) make, settle, and adjust all claims under Borrower's insurance
policies; (iv) settle and adjust disputes and claims about the Accounts directly
with account debtors, for amounts and on terms Bank determines reasonable; and
(v) transfer the Collateral into the name of Bank or a third party as the Code
permits. Bank may
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exercise the power of attorney to sign Borrower's name on any documents
necessary to perfect or continue the perfection of any security interest
regardless of whether an Event of Default has occurred. Bank's appointment as
Borrower's attorney in fact, and all of Bank's rights and powers, coupled with
an interest, are irrevocable until all Obligations have been fully repaid and
performed and Bank's obligation to provide Credit Extensions terminates.
9.3 ACCOUNTS COLLECTION.
When an Event of Default occurs and continues, Bank may notify any Person
owing Borrower money of Bank's security interest in the funds and verify the
amount of the Account. Borrower must collect all payments in trust for Bank and,
if requested by Bank, immediately deliver the payments to Bank in the form
received from the account debtor, with proper endorsements for deposit.
9.4 BANK EXPENSES.
If Borrower fails to pay any amount or furnish any required proof of
payment to third persons, Bank may make all or part of the payment or obtain
insurance policies required in Section 6.5, and take any action under the
policies Bank deems prudent. Any amounts paid by Bank are Bank Expenses and
immediately due and payable, bearing interest at the then applicable rate and
secured by the Collateral. No payments by Bank are deemed an agreement to make
similar payments in the future or Bank's waiver of any Event of Default.
9.5 BANK'S LIABILITY FOR COLLATERAL.
If Bank complies with reasonable banking practices and the Code, it is
not liable for: (a) the safekeeping of the Collateral; (b) any loss or damage
to the Collateral; (c) any diminution in the value of the Collateral; or (d)
any act or default of any carrier, warehouseman, bailee, or other person.
Borrower bears all risk of loss, damage or destruction of the Collateral.
9.6 REMEDIES CUMULATIVE.
Bank's rights and remedies under this Agreement, the Loan Documents, and
all other agreements are cumulative. Bank has all rights and remedies provided
under the Code, by law, or in equity. Bank's exercise of one right or remedy is
not an election, and Bank's waiver of any Event of Default is not a continuing
waiver. Bank's delay is not a waiver, election, or acquiescence. No waiver is
effective unless signed by Bank and then is only effective for the specific
instance and purpose for which it was given.
9.7 DEMAND WAIVER.
Borrower waives demand, notice of default or dishonor, notice of payment
and nonpayment, notice of any default, nonpayment at maturity, release,
compromise, settlement, extension, or renewal of accounts, documents,
instruments, chattel paper, and guarantees held by Bank on which Borrower is
liable.
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10 NOTICES
All notices or demands by any party about this Agreement or any other
related agreement must be in writing and be personally delivered or sent by an
overnight delivery service, by certified mail, postage prepaid, return receipt
requested, or by telefacsimile to the addresses set forth at the beginning of
this Agreement. A party may change its notice address by giving the other party
written notice.
11 CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER
Arizona law governs the Loan Documents without regard to principles of
conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction of
the State and Federal courts in Maricopa County, Arizona.
BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY CONTEMPLATED
TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS
WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT.
EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
12 GENERAL PROVISIONS
12.1 SUCCESSORS AND ASSIGNS.
This Agreement binds and is for the benefit of the successors and
permitted assigns of each party. Borrower may not assign this Agreement or any
rights under it without Bank's prior written consent which may be granted or
withheld in Bank's discretion. Bank has the right, without the consent of or
notice to Borrower, to sell, transfer, negotiate, or grant participation in all
or any part of, or any interest in, Bank's obligations, rights and benefits
under this Agreement.
12.2 INDEMNIFICATION.
Borrower will indemnify, defend and hold harmless Bank and its officers,
employees, and agents against: (a) all obligations, demands, claims, and
liabilities asserted by any other party in connection with the transactions
contemplated by the Loan Documents; and (b) all losses or Bank Expenses
incurred, or paid by Bank from, following, or consequential to transactions
between Bank and Borrower (including reasonable attorneys' fees and expenses),
except for losses caused by Bank's gross negligence or willful misconduct.
12.3 TIME OF ESSENCE.
Time is of the essence for the performance of all obligations in this
Agreement.
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12.4 SEVERABILITY OF PROVISION.
Each provision of this Agreement is severable from every other
provision in determining the enforceability of any provision.
12.5 AMENDMENTS IN WRITING, INTEGRATION.
All amendments to this Agreement must be in writing and signed by Borrower
and Bank. This Agreement represents the entire agreement about this subject
matter, and supersedes prior negotiations or agreements. All prior agreements,
understandings, representations, warranties, and negotiations between the
parties about the subject matter of this Agreement merge into this Agreement and
the Loan Documents.
12.6 COUNTERPARTS.
This Agreement may be executed in any number of counterparts and by
different parties on separate counterparts, each of which, when executed and
delivered, are an original, and all taken together, constitute one Agreement.
12.7 SURVIVAL.
All covenants, representations and warranties made in this Agreement
continue in full force while any Obligations remain outstanding. The obligations
of Borrower in Section 12.2 to indemnify Bank will survive until all statutes of
limitations for actions that may be brought against Bank have run.
12.8 CONFIDENTIALITY.
In handling any confidential information, Bank will exercise the same
degree of care that it exercises for its own proprietary information, but
disclosure of information may be made (i) to Bank's Subsidiaries or Affiliates
in connection with their business with Borrower, (ii) to prospective transferees
or purchasers of any interest in the loans (provided, however, Bank shall use
commercially reasonable efforts in obtaining the agreement of such prospective
transferee or purchaser to the terms of this provision), (iii) as required by
law, regulation, subpoena, or other order, (iv) as required in connection with
Bank's examination or audit and (v) as Bank considers appropriate exercising
remedies under this Agreement. Confidential information does not include
information that either: (a) is in the public domain or in Bank's possession
when disclosed to Bank, or becomes part of the public domain after disclosure to
Bank; or (b) is disclosed to Bank by a third party, if Bank does not know that
the third party is prohibited from disclosing the information.
12.9 ATTORNEYS' FEES, COSTS AND EXPENSES.
In any action or proceeding between Borrower and Bank arising out of the
Loan Documents, the prevailing party will be entitled to recover its reasonable
attorneys' fees and other reasonable costs and expenses incurred, in addition to
any other relief to which it may be entitled.
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13 DEFINITIONS
13.1 DEFINITIONS.
In this Agreement:
"ACCOUNTS" are all existing and later arising accounts, contract rights,
and other obligations owed Borrower in connection with its sale or lease of
goods (including licensing software and other technology) or provision of
services, all credit insurance, guaranties, other security and all merchandise
returned or reclaimed by Borrower and Borrower's Books relating to any of the
foregoing.
"ACQUISITION TERM LOAN" is a loan of $1,000,000.
"ACQUISITION TERM LOAN MATURITY DATE" is April 30, 2004.
"ADVANCE" or "ADVANCES" is a loan advance (or advances) under the
Committed Revolving Line.
"AFFILIATE" of a Person is a Person that owns or controls directly or
indirectly the Person, any Person that controls or is controlled by or is under
common control with the Person, and each of that Person's senior executive
officers, directors, partners and, for any Person that is a limited liability
company, that Person's managers and members.
"BANK EXPENSES" are all audit fees and expenses and reasonable costs and
expenses (including reasonable attorneys' fees and expenses, field examination
fees, and filing fees) for preparing, negotiating, administering, defending and
enforcing the Loan Documents (including appeals or Insolvency Proceedings).
"BOOKS" are all Borrower's books and records including ledgers, records
regarding Borrower's assets or liabilities, the Collateral, business operations
or financial condition and all computer programs or discs or any equipment
containing the information.
"BORROWING BASE" is 80% of Eligible Accounts as determined by Bank from
Borrower's most recent Borrowing Base Certificate; provided, however, that Bank
may lower the percentage of the Borrowing Base after performing an audit of
Borrower's Collateral.
"BUSINESS DAY" is any day that is not a Saturday, Sunday or a day on which
the Bank is closed.
"CLOSING DATE" is the date of this Agreement.
"CODE" is the Uniform Commercial Code, as applicable.
"COLLATERAL" is the property described on Exhibit A.
"COMMITTED REVOLVING LINE" is an Advance of up to $2,500,000.
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"CONTINGENT OBLIGATION" is, for any Person, any direct or indirect
liability, contingent or not, of that Person for (i) any indebtedness, lease,
dividend, letter of credit or other obligation of another such as an obligation
directly or indirectly guaranteed, endorsed, co-made, discounted or sold with
recourse by that Person, or for which that Person is directly or indirectly
liable; (ii) any obligations for undrawn letters of credit for the account of
that Person; and (iii) all obligations from any interest rate, currency or
commodity swap agreement, interest rate cap or collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; but "Contingent
Obligation" does not include endorsements in the ordinary course of business.
The amount of a Contingent Obligation is the stated or determined amount of the
primary obligation for which the Contingent Obligation is made or, if not
determinable, the maximum reasonably anticipated liability for it determined by
the Person in good faith; but the amount may not exceed the maximum of the
obligations under the guarantee or other support arrangement.
"COPYRIGHTS" are all copyright rights, applications or registrations and
like protections in each work or authorship or derivative work, whether
published or not (whether or not it is a trade secret) now or later existing,
created, acquired or held.
"CREDIT EXTENSION" is each Advance, Letter of Credit, Acquisition Term
Loan, Equipment Term Loan, or any other extension of credit by Bank for
Borrower's benefit.
"ELIGIBLE ACCOUNTS" are Accounts in the ordinary course of Borrower's
business that meet all Borrower's representations and warranties in Section 5;
but Bank may change eligibility standards by giving Borrower notice. Unless Bank
agrees otherwise in writing, Eligible Accounts will not include:
(a) Accounts that the account debtor has not paid within 90 days of
invoice date;
(b) Accounts for an account debtor, 50% or more of whose Accounts have not
been paid within 90 days of invoice date;
(c) Credit balances over 90 days from invoice date;
(d) Accounts for an account debtor, including Affiliates, whose total
obligations to Borrower exceed 25% of all Accounts, for the amounts that exceed
that percentage, unless the Bank approves in writing;
(e) Accounts for which the account debtor does not have its principal
place of business in the United States;
(f) Accounts for which the account debtor is a federal, state or local
government entity or any department, agency, or instrumentality;
(g) Accounts for which Borrower owes the account debtor, but only up to
the amount owed (sometimes called "contra" accounts, accounts payable, customer
deposits or credit accounts);
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(h) Accounts for demonstration or promotional equipment, or in which goods
are consigned, sales guaranteed, sale or return, sale on approval, xxxx and
hold, or other terms if account debtor's payment may be conditional;
(i) Accounts for which the account debtor is Borrower's Affiliate,
officer, employee, or agent;
(j) Accounts in which the account debtor disputes liability or makes any
claim and Bank believes there may be a basis for dispute (but only up to the
disputed or claimed amount), or if the account debtor is subject to an
Insolvency Proceeding, becomes insolvent, or goes out of business;
(k) Accounts for which Bank reasonably determines collection to be
doubtful.
"EQUIPMENT" is all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which Borrower has any interest.
"EQUIPMENT TERM LOAN" is a loan of up to $500,000.
"EQUIPMENT TERM LOAN MATURITY DATE" is April 30, 2004.
"ERISA" is the Employment Retirement Income Security Act of 1974, and its
regulations.
"GAAP" is generally accepted accounting principles.
"INDEBTEDNESS" is (a) indebtedness for borrowed money or the deferred
price of property or services, such as reimbursement and other obligations for
surety bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations and (d)
Contingent Obligations.
"INSOLVENCY PROCEEDING" are proceedings by or against any Person under the
United States Bankruptcy Code, or any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.
"INTELLECTUAL PROPERTY" is:
(a) Copyrights, Trademarks, Patents, and Mask Works including
amendments, renewals, extensions, and all licenses or other rights to use and
all license fees and royalties from the use;
(b) Any trade secrets and any intellectual property rights in computer
software and computer software products now or later existing, created, acquired
or held;
(c) All design rights which may be available to Borrower now or later
created, acquired or held;
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(d) Any claims for damages (past, present or future) for infringement of
any of the rights above, with the right, but not the obligation, to xxx and
collect damages for use or infringement of the intellectual property rights
above;
All proceeds and products of the foregoing, including all insurance,
indemnity or warranty payments.
"INVENTORY" is present and future inventory in which Borrower has any
interest, including merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products intended for sale or
lease or to be furnished under a contract of service, of every kind and
description now or later owned by or in the custody or possession, actual or
constructive, of Borrower, including inventory temporarily out of its custody or
possession or in transit and including returns on any accounts or other proceeds
(including insurance proceeds) from the sale or disposition of any of the
foregoing and any documents of title.
"INVESTMENT" is any beneficial ownership of (including stock, partnership
interest or other securities) any Person, or any loan, advance or capital
contribution to any Person.
"LETTER OF CREDIT" is defined in Section 2.1.2.
"LIEN" is a mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.
"LOAN DOCUMENTS" are, collectively, this Agreement, any note, or notes or
guaranties executed by Borrower, and any other present or future agreement
between Borrower and/or for the benefit of Bank in connection with this
Agreement, all as amended, extended or restated.
"MASK WORKS" are all mask works or similar rights available for the
protection of semiconductor chips, now owned or later acquired.
"MATERIAL ADVERSE CHANGE" is described in Section 8.3.
"OBLIGATIONS" are debts, principal, interest, Bank Expenses and other
amounts Borrower owes Bank now or later, including letters of credit, interest
accruing after Insolvency Proceedings begin and debts, liabilities, or
obligations of Borrower assigned to Bank.
"PATENTS" are patents, patent applications and like protections, including
improvements, divisions, continuations, renewals, reissues, extensions and
continuations-in-part of the same.
"PERMITTED INDEBTEDNESS" is:
(a) Borrower's indebtedness to Bank under this Agreement or any other Loan
Document;
(b) Indebtedness existing on the Closing Date and shown on the
Schedule;
(c) Subordinated Debt;
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(d) Indebtedness to trade creditors incurred in the ordinary course
of business; and
(e) Indebtedness secured by Permitted Liens.
"PERMITTED INVESTMENTS" are:
(a) Investments shown on the Schedule and existing on the Closing
Date; and
(b) (i) marketable direct obligations issued or unconditionally
guaranteed by the United States or its agency or any State maturing within 1
year from its acquisition, (ii) commercial paper maturing no more than 1 year
after its creation and having the highest rating from either Standard & Poor's
Corporation or Xxxxx'x Investors Service, Inc., and (iii) Bank's certificates of
deposit issued maturing no more than 1 year after issue.
"PERMITTED LIENS" are:
(a) Liens existing on the Closing Date and shown on the Schedule or
arising under this Agreement or other Loan Documents;
(b) Liens for taxes, fees, assessments or other government charges or
levies, either not delinquent or being contested in good faith and for which
Borrower maintains adequate reserves on its Books, if they have no priority over
any of Bank's security interests;
(c) Purchase money Liens (i) on Equipment acquired or held by Borrower
or its Subsidiaries incurred for financing the acquisition of the Equipment, or
(ii) existing on equipment when acquired, if the Lien is confined to the
property and improvements and the proceeds of the equipment;
(d) Licenses or sublicenses granted in the ordinary course of Borrower's
business and any interest or title of a licensor or under any license or
sublicense, if the licenses and sublicenses permit granting Bank a security
interest;
(e) Leases or subleases granted in the ordinary course of Borrower's
business, including in connection with Borrower's leased premises or leased
property;
(f) Liens incurred in the extension, renewal or refinancing of the
indebtedness secured by Liens described in (a) through (c), but any extension,
renewal or replacement Lien must be limited to the property encumbered by the
existing Lien and the principal amount of the indebtedness may not increase.
"PERSON" is any individual, sole proprietorship, partnership, limited
liability company, joint venture, company association, trust, unincorporated
organization, association, corporation, institution, public benefit corporation,
firm, joint stock company, estate, entity or government agency.
"PRIME RATE" is Bank's most recently announced "prime rate," even if it is
not Bank's lowest rate.
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"RESPONSIBLE OFFICER" is each of the Chief Executive Officer and the Chief
Financial Officer of Borrower.
"REVOLVING MATURITY DATE" is April 30, 2002.
"ROLLING REVENUE PROJECTION" is defined in Section 6.2(b).
"SCHEDULE" is any attached schedule of exceptions.
"SUBORDINATED DEBT" is debt incurred by Borrower subordinated to
Borrower's indebtedness owed to Bank and which is reflected in a written
agreement in a manner and form acceptable to Bank and approved by Bank in
writing.
"SUBSIDIARY" is for any Person, or any other business entity of which more
than 50% of the voting stock or other equity interests is owned or controlled,
directly or indirectly, by the Person or one or more Affiliates of the Person.
"TANGIBLE NET WORTH" is, on any date, the consolidated total assets of
Alliance and its Subsidiaries minus, (i) any amounts attributable to (a)
goodwill, (b) intangible items such as unamortized debt discount and expense,
Patents, trade and servicemarks and names, Copyrights and research and
development expenses except prepaid expenses, and (c) reserves not already
deducted from assets, and (ii) Total Liabilities.
"TOTAL LIABILITIES" is on any day, obligations that should, under GAAP, be
classified as liabilities on Borrower's consolidated balance sheet, including
all Indebtedness, and current portion Subordinated Debt allowed to be paid, but
excluding all other Subordinated Debt.
"TRADEMARKS" are trademark and servicemark rights, registered or not,
applications to register, and registrations and like protections, and the entire
goodwill of the business of Borrower connected with the trademarks.
[Signatures on following page]
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BORROWER:
ALLIANCE MEDICAL CORPORATION
By:
-----------------------------------
Title:
--------------------------------
BORROWER:
PARAGON HEALTH CARE CORPORATION
By:
-----------------------------------
Title:
--------------------------------
BANK:
SILICON VALLEY BANK
By:
-----------------------------------
Title:
--------------------------------
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EXHIBIT A
Subject to the penultimate paragraph hereof, the Collateral consists of
all of Borrower's right, title and interest in and to the following:
All goods and equipment now owned or hereafter acquired, including,
without limitation, all machinery, fixtures, vehicles (including motor vehicles
and trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located;
All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above;
All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, servicemarks,
trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, income tax
refunds, payments of insurance and rights to payment of any kind;
All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Borrower, whether or not earned by performance, and any
and all credit insurance, guaranties, and other security therefor, as well as
all merchandise returned to or reclaimed by Borrower;
All documents, cash, deposit accounts, securities, securities
entitlements, securities accounts, investment property, financial assets,
letters of credit, certificates of deposit, instruments and chattel paper now
owned or hereafter acquired and Borrower's Books relating to the foregoing;
All copyright rights, copyright applications, copyright registrations and
like protections in each work of authorship and derivative work thereof, whether
published or unpublished, now owned or hereafter acquired; all trade secret
rights, including all rights to unpatented inventions, know-how, operating
manuals, license rights and agreements and confidential information, now owned
or hereafter acquired; all mask work or similar rights available for the
protection of semiconductor chips, now owned or hereafter acquired; all claims
for damages by way of any past, present and future infringement of any of the
foregoing; and
All Borrower's Books relating to the foregoing and any and all claims,
rights and interests in any of the above and all substitutions for, additions
and accessions to and proceeds thereof.
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The foregoing notwithstanding, and, in anticipation of the application of
the Revised Article 9 of the Uniform Commercial Code in the form or
substantially in the form approved by the American Law Institute and National
Conference Commissioners on Uniform State Law and contained in the 1999 Official
Text of the Uniform Commercial Code ("Revised Article 9"), it is agreed that
applying the law of any jurisdiction in which Revised Article 9 is in effect,
the Collateral is all assets of the Borrower, whether or not within the scope of
Revised Article 9, and the Collateral shall include, without limitation, the
following categories of assets as defined in the Code: goods (including
inventory, equipment and any accessions thereto), instruments (including
promissory notes), documents, accounts (including health-care-insurance
receivables, and license fees), chattel paper (whether tangible or electronic),
deposit accounts, letter-of-credit rights (whether or not the letter of credit
is evidenced by a writing), commercial tort claims, securities and all other
investment property, general intangibles (including payment intangibles and
software), supporting obligations and any and all proceeds of any thereof,
wherever located, whether now owned or hereafter acquired.
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EXHIBIT B
LOAN PAYMENT/ADVANCE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 12:00 P.M., P.S.T.
FAX TO: DATE: ____________________
--------------------------------------------------------------------------------
[ ] Loan Payment:
Alliance Medical Corporation (Borrower) and
Paragon Health Care Corporation (Borrower)
From Account # ________________________ To Account # ___________________
(Deposit Account #) (Loan Account #)
Principal $ __________________ and/or Interest $ ____________________________
All Borrower's representation and warranties in the Loan and Security Agreement
are true, correct and complete in all material respects to on the date of the
telephone transfer request for and advance, but those representations and
warranties expressly referring to another date shall be true, correct and
complete in all material respects as of the date:
AUTHORIZED SIGNATURE: __________________________ Phone Number: ___________
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[ ] LOAN ADVANCE:
COMPLETE OUTGOING WIRE REQUEST SECTION BELOW IF ALL OR A PORTION OF THE FUNDS
FROM THIS LOAN ADVANCE ARE FOR AN OUTGOING WIRE.
From Account # __________________________ To Account # _____________________
(Loan Account #) (Deposit Account #)
Amount of Advance $______________________
All Borrower's representation and warranties in the Loan and Security Agreement
are true, correct and complete in all material respects to on the date of the
telephone transfer request for and advance, but those representations and
warranties expressly referring to another date shall be true, correct and
complete in all material respects as of the date:
AUTHORIZED SIGNATURE: _____________________ Phone Number: __________________
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--------------------------------------------------------------------------------
OUTGOING WIRE REQUEST
COMPLETE ONLY IF ALL OR A PORTION OF FUNDS FROM THE LOAN ADVANCE ABOVE ARE TO
BE WIRED.
Deadline for same day processing is 12:00 p.m., P.S.T.
Beneficiary Name: ________________________ Amount of Wire: $ ____________
Beneficiary Bank: ________________________ Account Number:_______________
City and Sate: ___________________________
Beneficiary Bank Transit (ABA) #: __ __ __ __ __ __ __ __
Beneficiary Bank Code (Swift, Sort, Chip, etc.): _______________
(FOR INTERNATIONAL WIRE ONLY)
Intermediary Bank: ___________________ Transit (ABA) #: ___________________
For Further Credit to: _______________________________________________________
Special Instruction: _________________________________________________________
By signing below, I (we) acknowledge and agree that my (our) funds transfer
request shall be processed in accordance with and subject to the terms and
conditions set forth in the agreements(s) covering funds transfer service(s),
which agreements(s) were previously received and executed by me (us).
Authorized Signature: ________________ 2nd Signature (If Required): ________
Print Name/Title: ____________________ Print Name/Title: ___________________
Telephone # __________________________ Telephone # _________________________
--------------------------------------------------------------------------------
29
EXHIBIT C-1
BORROWING BASE CERTIFICATE
Borrower: Alliance Medical Corporation Bank: Silicon Valley
00000 Xxxxx 00xx Xxxxxx Xxxx
Xxxxxxx, XX 00000 0000 Xxxxxx Xxxxx
Xxxxx Xxxxx, XX 00000
Commitment Amount: $2,500,000
ACCOUNTS RECEIVABLE
(1) Accounts Receivable Book Value as of $
(2) Additions (please explain on reverse) $
(3) TOTAL ACCOUNTS RECEIVABLE $
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
(4) Amounts over 90 days due $
(5) Balance of 50% over 90 day accounts $
(6) Credit balances over 90 days $
(7) Concentration Limits $
(8) Foreign Accounts $
(9) Governmental Accounts $
(10) Contra Accounts $
(11) Promotion or Demo Accounts $
(12) Intercompany/Employee Accounts $
(13) Other (please explain on reverse) $
(14) TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $
(15) Eligible Accounts (#3 minus #14) $
(16) LOAN VALUE OF ACCOUNTS (80% of #15) $
BALANCES
(17) Maximum Loan Amount $
(18) Total Funds Available [Lesser of #17 or #16] $
(19) Present balance owing on Line of Credit $
(20) Outstanding under Sublimits (LC) $
(21) RESERVE POSITION (#18 minus #19 and #20) $
The undersigned represents and warrants that this is true, complete and correct,
and that the information in this Borrowing Base Certificate complies with the
representations and warranties in the Loan and Security Agreement between the
undersigned and Silicon Valley Bank.
COMMENTS: BANK USE ONLY
Rec'd By: ___________
Auth. Signer
Alliance Medical Corporation Date:________________
By:___________________________ Verified: ___________
Authorized Signer Auth. Signer
Date: _______________
_____________________
30
EXHIBIT C-2
BORROWING BASE CERTIFICATE
Borrower: Paragon Health Care Corporation Bank: Silicon Valley Bank
00000 Xxxxxxxxx Xxxxxx Xxxxx, Xxxxx 000 0000 Xxxxxx Xxxxx
Xxxxxx Xxxx, XX 00000 Xxxxx Xxxxx, XX 00000
Commitment Amount: $2,500,000
ACCOUNTS RECEIVABLE
(22) Accounts Receivable Book Value as of $
(23) Additions (please explain on reverse) $
(24) TOTAL ACCOUNTS RECEIVABLE $
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
(25) Amounts over 90 days due $
(26) Balance of 50% over 90 day accounts $
(27) Credit balances over 90 days $
(28) Concentration Limits $
(29) Foreign Accounts $
(30) Governmental Accounts $
(31) Contra Accounts $
(32) Promotion or Demo Accounts $
(33) Intercompany/Employee Accounts $
(34) Other (please explain on reverse) $
(35) TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $
(36) Eligible Accounts (#3 minus #14) $
(37) LOAN VALUE OF ACCOUNTS (80% of #15) $
BALANCES
(38) Maximum Loan Amount $
(39) Total Funds Available [Lesser of #17 or #16] $
(40) Present balance owing on Line of Credit $
(41) Outstanding under Sublimits (LC) $
(42) RESERVE POSITION (#18 minus #19 and #20) $
The undersigned represents and warrants that this is true, complete and correct,
and that the information in this Borrowing Base Certificate complies with the
representations and warranties in the Loan and Security Agreement between the
undersigned and Silicon Valley Bank.
COMMENTS:
Paragon Health Care Corporation BANK USE ONLY
By: ________________________________ Rec'd By: ___________
Authorized Signer Auth. Signer
Date:________________
Verified: ___________
Auth. Signer
Date: _______________
_____________________
31
EXHIBIT D-1
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
0000 Xxxxxx Xxxxx
Xxxxx Xxxxx, XX 00000
FROM: ALLIANCE MEDICAL CORPORATION
The undersigned authorized officer ("Officer") of Alliance Medical
Corporation ("Borrower") certifies that under the terms and conditions of the
Loan and Security Agreement between Borrower and Bank (the "Agreement"), (i)
Borrower is in complete compliance for the period ending _______________ with
all required covenants except as noted below and (ii) all representations and
warranties in the Agreement are true and correct in all material respects on
this date. Attached are the required documents supporting the certification. The
Officer certifies that these are prepared in accordance with Generally Accepted
Accounting Principles (GAAP) consistently applied from one period to the next
except as explained in an accompanying letter or footnotes. The Officer
acknowledges that no borrowings may be requested at any time or date of
determination that Borrower is not in compliance with any of the terms of the
Agreement, and that compliance is determined not just at the date this
certificate is delivered.
PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES"
COLUMN.
REPORTING COVENANT REQUIRED COMPLIES
------------------ -------- --------
Monthly financial statements + CC Monthly within 30 days Yes No
Annual (Audited) + XX XXX within 90 days Yes No
A/R & A/P Agings (by invoice date) Monthly within 20 days Yes No
Projections (rolling 4-quarter basis) Quarterly within 45 days Yes No
Borrowing Base Certificate Monthly within 30 days Yes No
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
------------------ -------- ------ --------
Maintain on a Monthly Basis:
Minimum Tangible Net Worth $4,750,000 Yes No
Plus Equity Raised Since 4/2001 $________
Plus Net Income Since 4/2001 $________
Total $________ $______ Yes No
Minimum Liquidity Coverage 1.25:1.00 _____:1.00 Yes No
Revenue Variance:
Maximum Quarterly Variance
From Plan 15% _____ % Yes No
Have there been updates to Borrower's
intellectual property, if applicable? Yes No
32
COMMENTS REGARDING EXCEPTIONS: BANK USE ONLY
See attached.
Received by: _________________________
Sincerely, AUTHORIZED SIGNER
Date: ________________________________
ALLIANCE MEDICAL CORPORATION
Verified: ____________________________
_________________________________ AUTHORIZED SIGNER
SIGNATURE
Date: ________________________________
_________________________________
TITLE Compliance Status: Yes No
_________________________________
DATE
2
33
EXHIBIT D-2
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
0000 Xxxxxx Xxxxx
Xxxxx Xxxxx, XX 00000
FROM: PARAGON HEALTH CARE CORPORATION
The undersigned authorized officer ("Officer") of Paragon Health Care
Corporation ("Borrower") certifies that under the terms and conditions of the
Loan and Security Agreement between Borrower and Bank (the "Agreement"), (i)
Borrower is in complete compliance for the period ending _______________ with
all required covenants except as noted below and (ii) all representations and
warranties in the Agreement are true and correct in all material respects on
this date. Attached are the required documents supporting the certification. The
Officer certifies that these are prepared in accordance with Generally Accepted
Accounting Principles (GAAP) consistently applied from one period to the next
except as explained in an accompanying letter or footnotes. The Officer
acknowledges that no borrowings may be requested at any time or date of
determination that Borrower is not in compliance with any of the terms of the
Agreement, and that compliance is determined not just at the date this
certificate is delivered.
PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES"
COLUMN.
REPORTING COVENANT REQUIRED COMPLIES
------------------ -------- --------
Monthly financial statements + CC Monthly within 30 days Yes No
Annual (Audited) + XX XXX within 90 days Yes No
A/R & A/P Agings (by invoice date) Monthly within 20 days Yes No
Projections (rolling 4-quarter basis) Quarterly within 45 days Yes No
Borrowing Base Certificate Monthly within 30 days Yes No
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
------------------ -------- ------ --------
Maintain on a Monthly Basis:
Minimum Tangible Net Worth $4,750,000 Yes No
Plus Equity Raised Since 4/2001 $________
Plus Net Income Since 4/2001 $________
Total $________ $______ Yes No
Minimum Liquidity Coverage 1.25:1.00 _____:1.00 Yes No
Revenue Variance:
Maximum Quarterly Variance
From Plan 15% _____ % Yes No
Have there been updates to Borrower's
intellectual property, if applicable? Yes No
34
COMMENTS REGARDING EXCEPTIONS: BANK USE ONLY
See attached.
Received by: _________________________
Sincerely, AUTHORIZED SIGNER
Date: ________________________________
PARAGON HEALTH CARE CORPORATION
Verified: ____________________________
_________________________________ AUTHORIZED SIGNER
SIGNATURE
Date: ________________________________
_________________________________
TITLE Compliance Status: Yes No
_________________________________
DATE
2
35
EXHIBIT E
RECORDING REQUESTED BY
AND WHEN RECORDED RETURN TO:
SILICON VALLEY BANK
0000 Xxxxxx Xxxxx
Xxxxx Xxxxx, XX 00000
Attn: Loan Services
CONSENT TO REMOVAL OF PERSONAL PROPERTY
KNOW ALL PERSONS BY THESE PRESENTS:
(a) The undersigned has an interest as owner and landlord in the following
described real property (the "Real Property"): SEE ATTACHMENT 1 ATTACHED HERETO
FOR FULL LEGAL DESCRIPTION, commonly known as 00000 XXXXX 00XX XXXXXX, XXXXXXX,
XXXXXXX 00000.
(b) ALLIANCE MEDICAL CORPORATION, whose address is 00000 Xxxxx 00xx Xxxxxx,
Xxxxxxx, Xxxxxxx 00000 ("Borrower"), has entered into or will enter into a Loan
and Security Agreement with Silicon Valley Bank ("Bank") dated June 11, 2001 (as
amended and supplemented from time to time, the "Loan Agreement"). As a
condition to entering into the Loan Agreement, Bank requires that the
undersigned consent to the removal by Bank of the equipment and other assets
covered by the Loan Agreement (hereinafter called "Equipment") from the Real
Property.
NOW, THEREFORE, the undersigned consents to the placing of the Equipment
on the Real Property, and agrees with Bank as follows:
1. So long as Bank or its assignees or their assignees has any rights
thereto, the undersigned waives and releases each and every right which
undersigned now has, under applicable law or by virtue of the lease for the Real
Property now in effect, to levy or distrain upon for rent, in arrears, in
advance or both, or to claim or assert title to the Equipment that is already on
said Real Property, or may hereafter be delivered or installed thereon.
2. The Equipment shall be considered to be personal property and shall
not be considered part of the Real Property regardless of whether or by what
means it is or may become attached or affixed to the Real Property.
3. The undersigned will permit Bank, or its agent or representative, to
enter upon the Real Property for the purpose of exercising any right it may have
under the terms of the Loan Agreement or otherwise including, without
limitation, the right to remove the Equipment; provided, however, that if Bank,
in removing the Equipment damages any improvements of the undersigned on the
Real Property, Bank will, at its expense, cause same to be repaired.
4. This agreement shall be binding upon the heirs, successors and
assigns of the undersigned and shall inure to the benefit of each of Bank and
its respective successors and assigns.
36
IN WITNESS WHEREOF, the undersigned has executed this instrument
at _______________, this __________________ day of ________________ , 2001.
BEDFORD PROPERTY INVESTORS, INC.,
A MARYLAND CORPORATION
By:______________________________
Title: __________________________
2
37
ATTACHMENT 1
LEGAL DESCRIPTION OF COMPLEX
LOT 18, XXXX/XXXXXX TRACT A, A SUBDIVISION RECORDED IN BOOK 247, PAGE 4,
M.C.R., LYING IN THE EAST HALF OF THE SOUTHWEST QUARTER OF SECTION 8, TOWNSHIP 1
SOUTH, RANGE 4 EAST OF THE GILA & SALT RIVER BASE & MERIDIAN, MARICOPA COUNTY,
ARIZONA
38
EXHIBIT F
RECORDING REQUESTED BY
AND WHEN RECORDED RETURN TO:
SILICON VALLEY BANK
0000 Xxxxxx Xxxxx
Xxxxx Xxxxx, XX 00000
Attn: Loan Services
CONSENT TO REMOVAL OF PERSONAL PROPERTY
KNOW ALL PERSONS BY THESE PRESENTS:
(a) The undersigned has an interest as owner and landlord in the
following described real property (the "Real Property"): SEE ATTACHMENT 1
ATTACHED HERETO FOR FULL LEGAL DESCRIPTION, commonly known as 000 X. XXXXX XXXX,
XXXXXX, XXXXXXX 00000.
(b) ALLIANCE MEDICAL CORPORATION, whose address is 00000 Xxxxx 00xx Xxxxxx,
Xxxxxxx, Xxxxxxx 00000 ("Borrower"), has entered into or will enter into a Loan
and Security Agreement with Silicon Valley Bank ("Bank") dated June 11, 2001 (as
amended and supplemented from time to time, the "Loan Agreement"). As a
condition to entering into the Loan Agreement, Bank requires that the
undersigned consent to the removal by Bank of the equipment and other assets
covered by the Loan Agreement (hereinafter called "Equipment") from the Real
Property.
NOW, THEREFORE, the undersigned consents to the placing of the Equipment
on the Real Property, and agrees with Bank as follows:
1. So long as Bank or its assignees or their assignees has any rights
thereto, the undersigned waives and releases each and every right which
undersigned now has, under applicable law or by virtue of the lease for the Real
Property now in effect, to levy or distrain upon for rent, in arrears, in
advance or both, or to claim or assert title to the Equipment that is already on
said Real Property, or may hereafter be delivered or installed thereon.
2. The Equipment shall be considered to be personal property and shall
not be considered part of the Real Property regardless of whether or by what
means it is or may become attached or affixed to the Real Property.
3. The undersigned will permit Bank, or its agent or representative, to
enter upon the Real Property for the purpose of exercising any right it may have
under the terms of the Loan Agreement or otherwise including, without
limitation, the right to remove the Equipment; provided, however, that if Bank,
in removing the Equipment damages any improvements of the undersigned on the
Real Property, Bank will, at its expense, cause same to be repaired.
39
4. This agreement shall be binding upon the heirs, successors and
assigns of the undersigned and shall inure to the benefit of each of Bank and
its respective successors and assigns.
IN WITNESS WHEREOF, the undersigned has executed this instrument
at ________________ , this ______________ day of _________________ , 2001.
BFI WASTE SYSTEMS OF NORTH AMERICA, INC.,
A DELAWARE CORPORATION
By: ____________________________
Title: _________________________
2
40
ATTACHMENT 1
41
EXHIBIT G
RECORDING REQUESTED BY
AND WHEN RECORDED RETURN TO:
SILICON VALLEY BANK
0000 Xxxxxx Xxxxx
Xxxxx Xxxxx, XX 00000
Attn: Loan Services
CONSENT TO REMOVAL OF PERSONAL PROPERTY
KNOW ALL PERSONS BY THESE PRESENTS:
(a) The undersigned has an interest as owner and landlord in the following
described real property (the "Real Property"): SEE ATTACHMENT 1 ATTACHED HERETO
FOR FULL LEGAL DESCRIPTION, commonly known as 00000 XXXXXXXXX XXXXXX XXXXX,
XXXXX 000, XXXXXX XXXX, XXXXXXXX 00000.
(b) PARAGON HEALTH CARE CORPORATION, whose address is 00000 Xxxxxxxxx Xxxxxx
Xxxxx, Xxxxx 000, Xxxxxx Xxxx, Xxxxxxxx 00000 ("Borrower"), has entered into or
will enter into a Loan and Security Agreement with Silicon Valley Bank ("Bank")
dated June 11, 2001 (as amended and supplemented from time to time, the "Loan
Agreement"). As a condition to entering into the Loan Agreement, Bank requires
that the undersigned consent to the removal by Bank of the equipment and other
assets covered by the Loan Agreement (hereinafter called "Equipment") from the
Real Property.
NOW, THEREFORE, the undersigned consents to the placing of the Equipment
on the Real Property, and agrees with Bank as follows:
1. So long as Bank or its assignees or their assignees has any rights
thereto, the undersigned waives and releases each and every right which
undersigned now has, under applicable law or by virtue of the lease for the Real
Property now in effect, to levy or distrain upon for rent, in arrears, in
advance or both, or to claim or assert title to the Equipment that is already on
said Real Property, or may hereafter be delivered or installed thereon.
2. The Equipment shall be considered to be personal property and shall
not be considered part of the Real Property regardless of whether or by what
means it is or may become attached or affixed to the Real Property.
3. The undersigned will permit Bank, or its agent or representative, to
enter upon the Real Property for the purpose of exercising any right it may have
under the terms of the Loan Agreement or otherwise including, without
limitation, the right to remove the Equipment; provided, however, that if Bank,
in removing the Equipment damages any improvements of the undersigned on the
Real Property, Bank will, at its expense, cause same to be repaired.
42
4. This agreement shall be binding upon the heirs, successors and
assigns of the undersigned and shall inure to the benefit of each of Bank and
its respective successors and assigns.
IN WITNESS WHEREOF, the undersigned has executed this instrument
at ________________ , this ______________ day of _________________ , 2001.
KOALA LITTLE ROCK REALTY HOLDING
CO., INC., A DELAWARE CORPORATION
By: ______________________________
Title: ___________________________
2
43
ATTACHMENT 1
44
SCHEDULE 1
PERMITTED INVESTMENT SCHEDULE
SUBSIDIARIES OF ALLIANCE MEDICAL CORPORATION
Subsidiary State of Incorporation Ownership Interest
---------- ---------------------- ------------------
Sterile Reprocessing Services, Inc. Texas 100% Alliance
Crystal Medical Technologies, Inc. Nevada 100% Alliance
(dba XXXXX, Inc.)
Applied Medical Recovery, Inc. Arizona 100% Alliance
Arizona Medical Recovery
& Reprocessing, L.L.C. Arizona 100% Applied
Medical Recovery, Inc.
Applied Medical Technologies, L.L.C. Arizona 72% Applied
Medical Recovery, Inc.
28% Xx. Xxxx Xxxx
Paragon Health Care Corporation South Carolina 100% Alliance
Paragon Reprocessing Services, Inc. Arkansas 100% Paragon Health
Care Corp.
45
SCHEDULE 2
LITIGATION SCHEDULE
On January 19, 2001, Vanguard Medical Concepts, Inc. filed a complaint
against Xxxxx X. Xxxxx, one of our employees, and our company in the Ninth
Judicial Circuit in Orange County, Florida. The complaint alleges causes of
action for breach of contract and misappropriation of trade secrets arising from
the breach of a confidentiality and non-compete agreement between Xx. Xxxxx and
Vanguard and unauthorized access to confidential portions of Vanguard's web
site. Vanguard is seeking damages from us, including attorneys' fees and costs,
in excess of $10 million plus punitive damages. We deny that any trade secrets
were misappropriated and will vigorously defend this lawsuit.
On March 15, 1999, Xx. Xxxx Xxxx filed a complaint against our company and
several of our subsidiaries in the Third Judicial District Court of Salt Lake
County, Utah. The complaint alleges conversion, fraud, breach of contract,
breach of fiduciary duty, unjust enrichment and conspiracy. The allegations
arise out of the March 1996 transaction in which Xx. Xxxx entered into a joint
venture with Xxxxxxx Xxxx and Xxxxxxx Xxxxxx. Xx. Xxxx alleges that Sill and
Xxxxxx misrepresented a business opportunity and defrauded him during the
formation of their joint venture, Applied Medical Technologies, L.L.C. Although
Sill and Xxxxxx appear to be the primary defendants, we were made a party to the
lawsuit when we acquired an indirect ownership interest in the joint venture.
Xx. Xxxx alleges that we furthered any fraud committed by Sill and Xxxxxx. Xx.
Xxxx seeks unspecified damages which could exceed $350,000. We deny ever having
committed any fraud and will vigorously defend this lawsuit.
