Exhibit 10.12
CITIZENS BANK NEW HAMPSHIRE
AMERICAN ELECTROMEDICS CORP.
FORBEARANCE AND WORKOUT AGREEMENT
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This Agreement made this 28th of October, 1997 by and
between American Electromedics Corp., a Delaware corporation with
a principal place of business at 00 Xxxxxxxx Xxxxx, Xxxxxxx, Xxx
Xxxxxxxxx 00000 (referred to herein as the "Borrower"), and
Citizens Bank New Hampshire, successor in interest to First NH
Bank, with an address of 000 Xxx Xxxxxx, Xxxxxxxxxx, Xxx
Xxxxxxxxx 00000 ("Lender").
1. RECITALS.
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1.01. Borrower and Lender are the parties directly
interested in certain loan documents and other instruments
evidencing a certain loan, financial accommodations and
agreements including, but not limited to, the following
(sometimes collectively referred to as the "Loan Documents"):
(A) Promissory Note dated December 22, 1995, executed
and delivered by Borrower to First NH Bank ("Bank") in the
original principal amount of $200,000.00 (the "Note I");
(B) Revolving Line of Credit Promissory Note dated
October 4, 1996, executed and delivered by Borrower to the Lender
in the original principal amount of $400,000.00 (the "Note II");
(C) Term Promissory Note dated October 4, 1996,
executed and delivered by Borrower to the Lender in the original
principal amount of $500,000.00 (the "Note III");
(D) Loan Agreement dated October 4, 1996, executed and
delivered by Borrower to the Lender (the "Loan Agreement");
(E) Security Agreement dated October 4, 1996, executed
and delivered by Borrower to the Lender (the "Security
Agreement") secured by certain UCC-1 Financing Statements
recorded at the New Hampshire Secretary of State and the Town of
Amherst (the "Financing Statements");
(F) Collateral Assignment of Leasehold Rights dated
October 4, 1996, executed and delivered by Borrower to the Lender
("Collateral Assignment") along with Landlord's Estoppel
Certificate and Consent to Collateral Assignment dated October 3,
1996 by Mareld Co., Inc. ("Consent").
1.02. Borrower is in default of certain financial
covenants under and in breach of the Loan Agreement, and the
outstanding balances due under the Notes are now due and payable
to Lender in full.
1.03. Lender is considering to enforce its rights to
payment, possession, attachment and collection under the Notes
and Loan Documents in full as available under the Notes and Loan
Documents, including without limitation, applicable New Hampshire
law.
1.04. Borrower has requested that Lender forbear with
respect to enforcing its rights to collecting full payment now
due under the Notes and in exercising its rights under the Loan
Documents and applicable state law.
1.05. In consideration of the foregoing and the
warranties, representations, covenants, agreements, and promises
contained herein, Borrower and Lender hereby covenant and agree
upon the express terms and conditions set forth herein.
2. LOAN DEFAULT.
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The Borrower hereby acknowledges that the Loan Agreement and
the Notes are in default by its failure to meet certain
non-payment covenants and that even though the Lender has not
made formal demand, the Notes are now due and payable in full and
further acknowledges, confirms, and agrees that the Notes are now
and continue to be due and payable in full, for the outstanding
principal amount, together with interest, and late charges
accrued and accruing thereon and costs incurred and to be
incurred, including attorneys' fees to the Lender, all in the
amounts as set forth in Section 4 below as of the date stated
therein, which amounts do not include interest accruing and costs
incurred thereafter, all without further notice or demand by the
Lender to the Borrower. The Borrower waives and releases any and
all claims arising out of or relating to any requirement of or
for notice of default, acceleration and demand under the Notes,
the other Loan Documents, or otherwise under applicable law and
hereby acknowledge, confirm and agree that the amounts claimed as
due by the Lender are now and continue to be due to the Lender as
claimed without deduction, defense, set-off or counterclaim.
3. RELEASE; WAIVER OF CLAIMS AND
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DEFENSES/INDEMNITY.
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3.01. WAIVER AND RELEASE. Subject to the terms and
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conditions of this Agreement, the Borrower, for itself, its
officers, directors, heirs, legal representatives, employees and
agents, as appropriate, and its respective successors and
assigns, hereby expressly waives and releases and discharges
Lender, its officers, directors, employees, agents, attorneys and
participants and its successors and assigns, of and from any and
all manner of action, cause or cause of action, suit, demand,
obligation, judgment, claim, right of offset, reduction and/or
defense of any and all types whatsoever, whether in law or
equity, whether known or unknown, contingent or otherwise, which
Borrower ever had, now has, or which hereafter can, shall or may
have against Lender for, upon, or by reason of, any matter, cause
or thing whatsoever, which would arise from any actions or
inactions taken to date by the Lender, its officers, directors,
employees, attorneys, participants and agents, all from the
beginning of time to the date first above written, including, but
not limited to, any and all lender liability claims arising out
of, relating to or concerning, whether directly or indirectly,
proximately or remotely, the subject loan, the Loan Documents,
the Notes, this Agreement, the documents executed in connection
with this Agreement and the subject workout, and any discussions,
negotiations or oral representations or agreements among any of
the parties. This Release is accepted by Lender pursuant to the
terms of this Agreement and shall not be construed as an
admission of liability on the part of the Lender or any other
released party.
3.02. REAFFIRMATION. The terms of the Loan Documents,
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including without limitation, any provisions creating a security
interest in favor of Lender in property of Borrower are expressly
acknowledged, agreed, reaffirmed and consented to. Borrower
hereby acknowledges and confirms the Notes and related Loan
Documents, as they may apply to each party, and whether or not
listed in this Agreement, and each hereby expressly waives
presentment, demand of payment, protest, and notice of nonpayment
and any and all other notices and demands whatsoever.
3.03. INDEMNIFICATION. The Borrower agrees to indemnify
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and hold harmless the Lender, its officers, directors, employees,
attorneys and agents, from and against any and all claims,
actions, and suits, whether groundless or otherwise, and from and
against any and all liabilities, losses, damages and expenses of
every nature and character arising out of this Agreement, the
documents executed in connection therewith, the Notes, the other
Loan Documents, or the transactions contemplated hereby and
thereby, in each case including, without limitation, the
reasonable fees and disbursements of counsel and allocated costs
of internal counsel incurred in connection with any such
investigation, litigation or other proceeding connected
therewith. If and to the extent that the obligations of the
Borrower under this indemnity are unlawful due to the amount
involved or for any other reason, the Borrower hereby agrees to
make the maximum contribution to the payment in satisfaction of
such obligations that is permissible under applicable law.
Notwithstanding the foregoing, this section shall impose no
liability upon the Borrower for any claims, actions, suits of
shareholders of the Lender or any affiliate, or claims, actions,
suits of any governmental agency charged with regulation of the
Lender. In the event this provision expands the obligation of one
or more of the Borrowers beyond his, her or its or their
liability, it is hereby expressly recognized and stated that the
foregoing undertaking of the Borrower is in consideration of the
accommodations and undertakings of the Lender set forth herein
which are granted at the request of the Borrower for the purposes
of assisting them in otherwise satisfying their contractual
obligations to Lender under the Loan Documents.
4. AMOUNT OF OBLIGATION.
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The Borrower and Lender hereby acknowledge, confirm and
agree that the amount due and owing under the Notes and related
Loan Documents as of October 21, 1997, is as follows:
Original Current
Principal Principal Accrued
Note Balance Balance Interest
---- ----------- ----------- ---------
I $200,000.00 $ 83,332.24 $ 604.16
II $400,000.00 $300,000.00 $2,175.00
III $500,000.00 $422,770.67 $2,219.55
Approximate Total Outstanding Indebtedness (as of October 21,
1997): $811,102.62. Interest and costs continue to accrue on the
Total Outstanding Indebtedness in accordance with the terms of
the Notes.
5. WORKOUT PROVISIONS.
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5.01. NOTE II PAYMENT. Immediately, upon execution
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hereof, the Borrower will pay to the Lender all of Borrower's
available cash, in the approximate amount of $250,000.00 as of
October 21, 1997, to be applied to the principal balance of Note
II.
5.02. ADDITIONAL EQUITY CAPITAL. Borrower agrees that on
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or before thirty (30) days from the date of this Agreement, it
will raise or obtain additional equity capital of $250,000.00
(the "Additional Capital").
5.03. PAYMENT TO LENDER. On or before thirty (30) days
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from the date of this Agreement, the Borrower agrees to pay
$150,000.00 to the Lender from the Additional Capital. Said funds
shall be applied, first, to payoff in full Note I, and, second,
to paydown the principal balance of Note III.
5.04. CONSULTANT. The Borrower agrees that, at the
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convenience and discretion of the Lender, the Lender may hire a
consultant to review the Borrower's business operations. The
Borrower agrees to cooperate fully with the Lender in conducting
the review and the Borrower shall bear the reasonable expense of
the Lender's review of the Borrower's business operations. The
Borrower shall be provided with copies of any and all written
reports prepared by the consultants retained from time to time by
the Lender.
5.05. LOCKBOX AGREEMENT. The Borrower shall execute a
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Lockbox Agreement in form and substance satisfactory to the
Lender whereby all payments made to the Borrower by its customers
and clients shall be paid into a lock box controlled by the
Lender. The Borrower further agrees that all proceeds received
into the Lockbox will be applied to the outstanding principal
balance owing under Note II.
5.06. FINANCIAL REPORTING. The Borrower shall provide
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to the Lender daily reporting of advances, cash receipts and
sales. In addition, the Borrower will provide the Lender with
financial statements, including, but not limited to profit, loss
and income statements, on or before the 15th day of each month
covering the period of the Borrower's previous monthly business
operations. Further, the Borrower will provide to the Lender, on
or before the 15th day of each month, cash flow projections for
the Borrower's business.
5.07. LINE OF CREDIT REDUCTION. The Borrower's ability
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to borrow or draw funds under Note II is hereby permanently
reduced and limited to $300,000.00.
5.08. CONDITIONS PRECEDENT TO CLOSING. The Lender's
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agreement hereunder is expressly conditioned upon the Borrower's
provision of the following on or before the closing of the
transactions contemplated hereunder (the "Closing"):
(A) All FDA approvals necessary for the Borrower's
business; and
(B) ISO 9000 Certification.
5.09. AMENDMENT TO LOAN AGREEMENT. Schedule A of the
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Loan Agreement is amended to reflect the following:
(A) Applicable Percentage of Eligible Accounts
Receivable: 75%.
(B) Applicable Percentage of Finished Goods Inventory:
50%.
The second full paragraph of Schedule A shall be amended and
restated in its entirety as follows:
"Definition of "Finished Goods Inventory": The
term "Finished Goods Inventory" shall mean Inventory of
the Borrower which is completed and salable. Inventory
shall be valued at the lower of costs on a "first
in/first out" basis or fair market value and shall be
inventory which is owned for sale in the ordinary
course of the Borrower's business as presently
conducted by it and held by the Borrower at its
principal place of business in Amherst, New Hampshire,
and, in all cases, which is subject to a valid and
prior, fully perfected security interest of the Lender,
free of all security interests or liens of any other
person."
The balance of the second full paragraph of Schedule A shall
remain unchanged.
The remaining portions of Schedule A shall remain unchanged.
5.10. ASSIGNMENT OF STOCK IN XXXXXX GMBH MEDIZINTECH.
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Xxxxxx GMBH Medizintech is a business entity with its principal
place of business in Berlin, Germany and organized under the laws
of Germany ("Xxxxxx"). As security for the repayment of the Total
Outstanding Indebtedness, the Borrower shall assign and pledge
its fifty percent (50%) ownership in the stock of Xxxxxx to the
Lender. The Borrower shall provide the original stock certificate
evidencing its ownership of the Xxxxxx stock to the Lender at
Closing, and/or execute such documents as are required under
German law to create and perfect a security interest in said
ownership interest in favor of the Lender. Additionally, the
Borrower agrees to execute all documents necessary and take all
steps required by applicable law to accomplish the assignment of
the Borrower's Xxxxxx stock to the Lender within ninety (90) days
of the date of the Closing.
5.11. XXXXXX SECURITY INTEREST. The Borrower
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acknowledges that Xxxxxx owes the Borrower $443,000.00 (as
reflected in the Borrower's accounts receivables) (the "Xxxxxx
Account Receivable") and $250,000.00 (evidenced as a note
receivable in favor of the Borrower) (the "Xxxxxx Note
Receivable"). In addition to the security interest of the Lender
in accounts and contract rights, the Borrower shall assign the
Xxxxxx Account Receivable and the Xxxxxx Note Receivable to the
Lender (collectively, the "Xxxxxx Receivables") within thirty
(30) days of Closing. Consistent therewith, the Borrower will
direct Xxxxxx to make any and all payments submitted under the
Xxxxxx Receivables directly to the Lender. Any payments made to
the Lender on the Xxxxxx Receivables shall be applied by the
Lender to the Total Outstanding Indebtedness as the Lender may
decide, in its sole discretion; provided, however, that assuming
no event of default has occurred, the Lender will consider any
reasonable request of the Borrower to retain some of the funds
repaid to it by Xxxxxx, it being expressly acknowledged that any
response shall be made by the Lender in its sole and absolute
discretion. The Borrower shall cause Xxxxxx to execute any and
all documents necessary to accomplish the assignment of the
Xxxxxx Receivables to the Lender in accordance with this
Paragraph 5.10 under all applicable laws, including, but not
limited to, the laws of Germany.
5.12. SECURITY INTEREST IN ASSETS OF XXXXXX. The amount
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owing to the Lender pursuant to the assignment of the Xxxxxx
Receivables shall be secured by a security interest in all of the
assets of Xxxxxx. The Borrower shall obtain a security interest
in all of the assets of Xxxxxx and assign said security interest
in favor of the Lender. The Borrower shall cause Xxxxxx to
execute all documents necessary, and take all steps necessary to
accomplish the grant of a fully perfected security interest in
the assets of Xxxxxx under all applicable laws including, but not
limited to the laws of Germany within ninety (90) days of the
date of the Closing.
5.13. BANKRUPTCY. In the event that Borrower files for
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bankruptcy protection under Title 11 of the United States Code,
Borrower agrees to continue making payments under the Notes. In
addition, and if requested by the Lender, Borrower will consent
to relief from the automatic stay pursuant to Section 362 of
Title 11 of the United States Code so that Lender can foreclose
upon its collateral.
5.14. REVIVAL. If the Borrower fails to fulfill any of
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the terms and conditions herein, Lender shall have the right to
take such other action permitted thereby and all costs of the
Lender incurred in connection with this Agreement and any other
costs of enforcement of the rights and remedies of the Lender
shall be deemed a part of the obligations and payable upon demand
by Borrower.
5.15. WAIVER OF FINANCIAL COVENANT DEFAULTS. The Lender
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shall waive all financial covenant defaults existing under the
Loan Documents as of July 31, 1997 as part of this Agreement.
5.16. XXXXXX FINANCIAL INFORMATION. Upon request, the
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Borrower will obtain and provide all financial information on
Xxxxxx to the Lender.
5.17. ADVANCES TO XXXXXX. Advances by the Borrower to
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Xxxxxx shall be limited to $10,000.00 per calendar quarter.
5.18. AMENDMENT TO SCHEDULE B OF THE LOAN AGREEMENT.
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The parties hereto agree that Section IV, Paragraph A of Schedule
B to the Loan Agreement dated October 4, 1996, be and hereby is
amended to read as follows:
"The BORROWER shall have a Tangible Capital Base
(as hereinafter defined) (i) as of July 31, 1998,qual
to at least Nine Hundred Thirty-Four Thousand Dollars
($934,000.00); and (ii) as of July 31, 1999 and as at
each July 31st thereafter, the foregoing Tangible
Capital Base of the BORROWER shall be increased by an
additional Two Hundred Thousand Dollars ($200,000.00),
(i.e., $1,134,000.00 as of July 31, 1999, $1,334,000.00
as of July 31, 2000, etc.). "Tangible Capital Base"
means total shareholders' equity less intangible assets
----
less investment of the BORROWER in Xxxxxx GMBH Medizintech,
----
all as determined in accordance with generally accepted
accounting principles from the BORROWER's financial
statements delivered to the BANK in accordance with the
covenants of the BORROWER hereinabove (the "Financial
Statements").
6. MISCELLANEOUS
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6.01. BREACH. A breach of this Agreement shall
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constitute a breach of each Loan Document, whether or not
referenced herein, without further notice, and shall entitle the
Lender to the remedies provided to the Lender in such Loan
Documents, and under applicable state law, including, but not
limited to, possession of the property securing the Loan
Documents.
6.02. NO WAIVER. Except as otherwise specifically
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provided in this Agreement, Borrower waives demand, notice of any
action taken in reliance on this Agreement and all other demands
and notices of any description. No delay or omission on the part
of the Lender in exercising any right or remedy or any subsequent
or continuing event of default under this Agreement or the Notes
or Loan Documents shall constitute a waiver of any other right or
remedy under this Agreement or under the Notes or Loan Documents.
A waiver on any one occasion shall not be construed as a bar to
or waiver of any such right and/or remedy on any future occasion.
No single or partial exercise of any power hereunder shall
preclude other or future exercises hereof or the exercises of any
other right. THE BORROWER FURTHER ACKNOWLEDGES THAT, WHILE THE
LENDER HAS AGREED NOT TO ACCELERATE OR DEMAND REPAYMENT OF THE
TOTAL INDEBTEDNESS BASED UPON THE BORROWER'S PRIOR DEFAULTS,
NOTHING CONTAINED HEREIN IS INTENDED TO MODIFY OR LIMIT THE
LENDER'S ABILITY TO DO SO IN THE FUTURE BASED UPON A FUTURE EVENT
OF DEFAULT ARISING PURSUANT TO THE TERMS SET FORTH IN THE LOAN
DOCUMENTS.
6.03. INFORMATION. All information furnished to the
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Lender pursuant to this Agreement or the negotiation thereof is
true, accurate and complete.
6.04. COSTS AND FEES. The Borrower will pay all costs
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associated with the negotiation and preparation of this
Agreement, including, but not limited to, appraisal fees, legal
fees, consultant fees and environmental reports.
6.05. BINDING AGREEMENT. This Agreement shall inure to
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the benefit of and shall be binding upon the parties hereto and
their respective heirs, legal representatives, successors and
assigns.
6.06. GOOD FAITH. This Agreement and all information
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furnished to the Lender is made and furnished in good faith, for
value and valuable consideration, and has not been made under or
induced by any fraud, duress or undue influence exercised by the
Lender or any other person.
6.07. MISREPRESENTATION. Borrower, jointly and
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severally, shall indemnify and hold the Lender harmless from and
against any losses, damages, costs or expenses (including
attorneys' fees) incurred by the Lender as a direct or indirect
result of: (a) breach of any representation or warranty of
Borrower contained in this Agreement; or (b) any breach or
default by Borrower under any of the covenants or agreements
contained in this Agreement to be performed by Borrower, all of
which shall survive the closing hereof
6.08. SURVIVAL. All representations, warranties,
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covenants and agreements of the parties made in this Agreement
shall survive the execution and delivery hereof and the closing
hereunder, until such time as all of the obligations of the
signatories hereto shall have lapsed in accordance with their
respective terms or shall have been discharged in full.
6.09. MERGER CLAUSE; AMENDMENT. The parties hereto
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agree that this Agreement represents their entire understanding
and undertakings as of the date first above written, and that all
prior discussions and negotiations have been incorporated herein.
Accordingly, to the extent that any term, condition or covenant
previously discussed does not appear herein, the parties hereto
agree that the same has been rendered null and void or otherwise
is covered by this Agreement. The parties hereto further agree
that this Agreement will not be extended, modified or amended,
and that no oral modification shall be binding or otherwise
admissible in any dispute.
6.10. GOVERNING LAW. The parties hereto agree that this
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Agreement and all of the other agreements attached hereto or
referred to herein shall be governed and construed exclusively in
accordance with the internal substantive laws of the State of New
Hampshire. The parties further agree that the Hillsborough County
Superior Court, Northern District, shall have sole and exclusive
jurisdiction over any dispute arising hereunder and the parties
expressly consent to the jurisdiction and venue of said Court.
6.11. COUNTERPARTS. This Agreement may be executed in
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one or more counterparts, each of which shall together or singly
be and be deemed to constitute an original.
6.12. NOTICES. All notices, demands and requests given
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are required to be given by any party to this Agreement are to be
in writing and will be sent by U.S. Certified Mail, return
receipt requested, or if hand-delivered, to the addresses set
forth below:
If To Borrower: American Electromedics Corp.
00 Xxxxxxxx Xxxxx
Xxxxxxx, Xxx Xxxxxxxxx 00000
If To Lender: Xxxx Xxxxxxxxx, Vice President
Citizens Bank New Hampshire
000 Xxx Xxxxxx
Xxxxxxxxxx, XX 00000
With A Copy To: Xxxxxx X. Xxxxx, Esq.
Peabody & Xxxxx
000 Xxx Xxxxxx
Xxxxxxxxxx, XX 00000
6.13. INTERPRETATION. The parties hereto agree that
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this Agreement has been carefully and diligently negotiated by
the parties, each of whom or which have been represented by
counsel, or have had the opportunity to be represented by
counsel, and consequently the parties agree that this Agreement
shall not be interpreted adversely against one party or the other
by reason of its having been drafted by that party.
The parties have executed and delivered this Agreement all
as of the day and date first above written.
LENDER:
CITIZENS BANK NEW
HAMPSHIRE
By: /s/ Xxxx Xxxxxxxxx
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Xxxx Xxxxxxxxx, Its Duly
Authorized Vice President
BORROWER:
AMERICAN ELECTROMEDICS
CORP.
By: /s/ Xxxxxxx X. Xxxxxxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
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Its: President
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STATE OF NEW HAMPSHIRE
COUNTY OF Hillsborough
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The foregoing instrument was acknowledged before me this
28th day of October, 1997, by Xxxx Xxxxxxxxx, duly authorized
President of Citizens Bank New Hampshire, on behalf of the Bank.
/s/ Xxxx X. Xxxxx
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Notary Public
My Commission Expires June 19, 2001
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STATE OF NEW HAMPSHIRE
COUNTY OF Hillsborough
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The foregoing instrument was acknowledged before me this
28th day of October, 1997 by by Xxxxxxx X. Xxxxxxxxx, duly
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authorized President of American Electromedics Corp., on behalf
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of the corporation.
/s/ Xxxx X. Xxxxx
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Notary Public
My Commission Expires June 19, 2001
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