EXHIBIT 10.1
CITIZENS BANK OF MASSACHUSETTS
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
December 11, 2001
Xx. Xxxxxxxx Xxxxxx
PrimeSource Surgical, Inc.
Bimeco, Inc.
Ruby Merger Sub, Inc.
0000 X. Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Xx. Xxxxxxxx Xxxxxx
PrimeSource Healthcare, Inc.
f/k/a Luxtec Corporation
00 Xxxxxxxx Xxxxxx
Xxxx Xxxxxxxx, XX 00000
Re: Outstanding Obligations to Citizens Bank of Massachusetts
Dear Xx. Xxxxxx:
Reference is made to (i) an Amended and Restated Credit Agreement dated as
of June 14, 1999, as amended by that certain First Amendment to Amended and
Restated Credit Agreement dated as of August 22, 2000, as further amended by
that certain Second Amendment to Amended and Restated Credit Agreement dated as
of December 28, 2000 and as further amended by that certain Third Amendment to
Amended and Restated Credit Agreement dated as of March 2, 2001 (the "Credit
Agreement"), by and among Citizens Bank of Massachusetts (the "Bank"), as
lender, PrimeSource Surgical, Inc., a Delaware corporation (the "Borrower"), as
borrower, and Bimeco, Inc., a Florida corporation ("Bimeco"), Ruby Merger Sub,
Inc., a Delaware corporation ("Ruby") and Luxtec Corporation, a Delaware
corporation ("Luxtec" and together with the Borrower, Bimeco and Ruby, the
"Obligors"), as guarantors; (ii) $5,000,000 Second Amended and Restated Term
Note dated December 28, 2000 issued by the Borrower to the Bank (the "Term
Note"); (iii) $12,000,000 Second Amended and Restated Revolving Credit Note
dated December 28, 2000 issued by the Borrower to the Bank (the "Revolving
Credit Note" and together with the Term Note, the "Notes"); (iv) the Guaranty
Agreement dated as of June 14, 1999 made by Bimeco in favor of the Bank; (v) the
Guaranty Agreement dated as of December 28, 2000 made by Ruby in favor of the
Bank; (vi) the Limited Guaranty dated as of March 2, 2001 made by Luxtec in
favor of the Bank; (vii) the Parent Pledge Agreement dated as of March 2, 2001
made by Luxtec in favor of the Bank and (viii) all other documents and
instruments related to the foregoing, including, without limitation, the "Credit
Documents." The above documents together with all related documents are
collectively referred to as the "Loan Documents". Capitalized terms used herein
and not otherwise defined shall have the meanings ascribed to them in the Credit
Agreement.
December 10, 2001
Page 2
The Obligors have informed the Bank that Events of Defaults have occurred
under the Loan Documents as a result of the failure of the Borrower to observe
the covenants listed on the attached Schedule A [Company to prepare] as of
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November , 2001 (the "Designated Events of Defaults"). The Obligors
--
acknowledge the materiality of these Designated Events of Defaults, and
acknowledge receipt of any notice of such Designated Events of Defaults required
by the Loan Documents. Furthermore, the Obligors acknowledge that, subject only
to the temporary effect of the forbearance described herein, there are no
defenses to the Bank's right to exercise immediately, or at any time hereafter,
any and all rights and remedies granted to the Bank by the Loan Documents or by
operation of law, as a result of the occurrence of such Designated Event of
Defaults.
Based on the foregoing and various negotiations between the Obligors and
the Bank, and for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Obligors, jointly and severally, have
agreed to the terms set forth below.
A. Acknowledgment of Debt. Due to the occurrence of the aforementioned
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Designated Events of Defaults, each Obligor acknowledges and agrees that the
Bank has no obligation to make further loans to the Borrower, provided the Bank
agrees to provide funding subject to the terms and conditions set forth herein.
The unpaid principal balance of the Notes is as follows (not including interest,
costs and expenses):
Revolving Loan Principal (as of December 11, 2001) $6,908,463.38
Term Loan Principal (as of December 11, 2001) $2,499,992.00
TOTAL $9,408,455.38
(The above figures do not include amounts (or other costs and expenses)
that have accrued from the date indicated above.)
B. Validity of Documents. The Obligors acknowledge and agree that:
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(a) the liabilities and obligations arising out of the Loan Documents are
valid obligations of the parties thereto;
(b) the liabilities and obligations arising out of the Loan Documents (to
the extent set forth therein) are joint and several obligations of
each Obligor;
(c) the liens and security interests granted to the Bank pursuant to the
Loan Documents remain valid, perfected and enforceable; and
(d) except to the extent that the Bank has expressly agreed to limit its
rights under this Letter Agreement, the Bank may enforce the payment
December 10, 2001
Page 3
of the liabilities and the performance of the obligations of the
Obligors as set forth in the Loan Documents and as provided by
applicable law. All rights and remedies available to the Bank either
under the Loan Documents, at law or in equity, are preserved except as
expressly waived herein.
C. Advances during Forbearance Period. Notwithstanding any contrary
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provision herein or in the Loan Documents, (i) the amounts drawn under the Notes
shall be at the reasonable discretion of the Bank and (ii) the Maximum Revolving
Credit shall be deemed permanently reduced to $9,500,000.
D. LIBOR Rate Loans. The Borrower shall not be entitled to LIBOR Rate
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Loans for any advances under the Loan Documents.
E. Financial Advisor. The Bank shall have the right to engage a financial
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consultant, at the Obligors' expense, to review and monitor the financial
condition of the Obligors. The scope of the consultant's work shall be at the
Bank's discretion. Each Obligor agrees to cooperate fully with the consultant in
providing information and access to personnel.
F. Weekly Borrowing Base Certificate. Until all of the obligations of the
---------------------------------
Borrower to the Bank have been paid in full in cash (whether before or after the
Deferral Period (as defined below), the Borrower shall furnish to the Bank not
later than two (2) business days following the end of each weekly accounting
period a Borrowing Base Certificate completed and signed by the Borrower's Chief
Financial Officer or Chief Restructuring Officer.
G. Suspension of Principal Payments. The Bank hereby agrees to defer the
--------------------------------
obligation of any Obligors, as applicable to make principal payments under the
Term Note from the date hereof until January 18, 2002 (the "Deferral Period").
The aforementioned deferral of principal payments due under the Term Note is
expressly limited to the Deferral Period and is not intended to be a waiver of
any such principal payments. In addition, the forgoing in no way relieves or
limits such Obligors' obligation to pay to the Bank accrued and unpaid interest
outstanding now or during the term hereof, related costs and expenses or other
obligations (other than principal described above) due under the Loan Documents.
H. Events of Default: The following occurrences or any one or more of the
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following events shall constitute a default ("Event of Default") hereunder:
(a) default in the payments due under the Loan Documents (as modified
by this Letter Agreement) as and when due; and
(b) default (after the date hereof) in the observance or the
performance of any covenant or agreement herein set forth or in
any Loan Document or other agreement, note, or instrument,
December 10, 2001
Page 4
heretofore, now, or hereafter executed by the Borrower in favor
of the Bank, other than the Designated Events of Default
I. Cross-Defaults: An Event of Default of any obligation in this Letter
--------------
Agreement will be deemed an Event of Default of each Loan Document.
J. Forbearance. Notwithstanding the existence of the Designated Events of
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Defaults in the Loan Documents, the Bank shall forbear from exercising its
rights and remedies under the Loan Documents until the earlier of (a) January
18, 2002; or (b) the occurrence of an Event of Default hereunder.
K. Rights and Remedies. After the expiration of the forbearance period as
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set forth in Sections G and J, the Bank shall have the right to exercise
immediately all rights and remedies pursuant to the Loan Documents and
applicable law, together with the following rights and remedies:
(a) the right to demand and receive immediately, without prior
notice to any Obligor, full payment of all obligations of
the Obligors to the Bank;
(b) the right to appoint receivers; and
(c) the right to immediate possession of any property or any
other collateral securing the obligations of the Obligors to
the Bank.
L. Survival of Representations and Warranties. All representations and
-------------------------------------------
warranties contained in this Letter Agreement are material and have been relied
upon by the Bank and have induced the Bank to enter into this Letter Agreement,
and each such representation and warranty shall survive the delivery of this
Letter Agreement and the performance of all obligations hereunder. The Obligors
hereby agree to hold the Bank harmless from and indemnify the Bank against any
and all losses that the Bank may incur including, but not limited to, reasonable
attorneys' fees, as a result of any inaccuracy in any representation or warranty
contained herein.
M. Fees and Expenses. Each Obligor, jointly and severally, agrees that it
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is obligated to pay the Bank a forbearance fee in the amount of $16,875.00 and
all reasonable out-of-pocket expenses of the Bank in connection with the
preparation, execution and delivery of this Letter Agreement and all
documentation related thereto, including reasonable fees and disbursements of
counsel to the Bank, all costs of collection (including reasonable counsel fees
and fees of other professionals) in case default is made under this Letter
Agreement or any Loan Documents.
N. General Release. To the extent not otherwise set forth herein, the
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Obligors hereby remise, release, acquit, satisfy and forever discharge the Bank,
its agents, employees, officers, directors, predecessors, attorneys and all
others acting on behalf of or at the direction of the Bank, of and from any and
all manner of actions, causes of action, suit, debts, accounts, covenants,
December 10, 2001
Page 5
contracts, controversies, agreements, variances, damages, judgments, claims and
demands whatsoever, in law or in equity, which any of such parties ever had, now
have or can, shall or may at any time have against the Bank, its agents,
employees, officers, directors, attorneys and all persons acting or purporting
to act on behalf of or at the direction of the Bank ("Releasees"), for, upon or
by reason of any matter, cause or thing whatsoever through the date hereof.
Without limiting the generality of the foregoing, the Obligors waive and
affirmatively agree not to allege or otherwise pursue any defenses, affirmative
defenses, counterclaims, claims, causes of action, setoffs or other rights they
do, shall or may have as of the date hereof, including, but not limited to, the
rights to contest: (a) the right of the Bank, upon the expiration or termination
of the forbearance, to exercise the rights and remedies described in Paragraph K
above and other rights and remedies described in this Letter Agreement; (b) any
provision of this Letter Agreement or the Loan Documents; (c) the liens,
pledges, assignments, security interests and other collateral or security
granted by the Loan Documents or in this Letter Agreement; or (d) any conduct of
the Bank or Releasees.
O. Negotiations. Each Obligor stipulates and agrees that each of the Loan
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Documents and this Letter Agreement are products of and result from arms length
negotiations between the parties and that neither the Bank nor any other party
has exerted or attempted to exert improper or unlawful pressure in connection
with the execution or delivery of this Letter Agreement, or any of the Loan
Documents. Without in any way limiting the foregoing, each of the parties hereto
stipulate and agree that at all times during the course of the negotiations
surrounding the execution and delivery of the Loan Documents and this Letter
Agreement, they have, to the extent deemed necessary or advisable in their sole
discretion, been advised and assisted by competent counsel of their own
choosing, that counsel has been present and actively participated in the
negotiations surrounding the Loan Documents and this Letter Agreement.
P. Miscellaneous. This Letter Agreement represents the entire agreement
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between the parties and supersedes all negotiations and understandings between
the parties through the effective date hereof. This agreement may be amended
only by an instrument signed by all parties. This agreement is intended to be
binding upon the Bank, the Borrower and each of the other Obligors and their
successors, assigns, heirs, legal representatives, and executors. This agreement
shall be governed by the laws of The Commonwealth of Massachusetts.
All other terms and conditions of the Loan Documents shall remain in full
force and effect except as modified by this Letter Agreement.
Upon any Event of Default hereunder, the Bank will be under no obligation
to continue to forbear in taking any action permitted under this Letter
Agreement, the Loan Documents or applicable law.
If the foregoing terms are satisfactory to you, would you kindly so
indicate by signing and returning the enclosed counterpart hereof.
December 10, 2001
Page 6
Very truly yours,
CITIZENS BANK OF MASSACHUSETTS
/s/ Xxxxxxxxxxx X. Xxxxxx
--------------------------------
Xxxxxxxxxxx X. Xxxxxx
Vice President
December 10, 2001
Page 7
AGREED AND ACCEPTED:
BORROWER:
PRIMESOURCE SURGICAL, INC.
By: /s/ Xxxxxxxx X. Xxxxxx
--------------------------------------
Name: Xxxxxxxx X. Xxxxxx
Title: Chief Restructuring Officer
GUARANTORS:
BIMECO, INC.
By: /s/ Xxxxxxxx X. Xxxxxx
--------------------------------------
Name: Xxxxxxxx X. Xxxxxx
Title: Chief Restructuring Officer
RUBY MERGER SUB, INC.
By: /s/ Xxxxxxxx X. Xxxxxx
--------------------------------------
Name: Xxxxxxxx X. Xxxxxx
Title: Chief Restructuring Officer
PRIMESOURCE HEALTHCARE, INC. f/k/a LUXTEC CORPORATION
By:/s/ Xxxxxxxx X. Xxxxxx
--------------------------------------
Name: Xxxxxxxx X. Xxxxxx
Title: Chief Restructuring Officer
