EXHIBIT 10.1
SECOND AMENDMENT TO FORBEARANCE AGREEMENT
THIS SECOND AMENDMENT TO FORBEARANCE AGREEMENT (the "Amendment") made
and entered into as of the 15th day of October, 2001 (the "Effective Date"), by
and among HORIZON MEDICAL PRODUCTS, INC., a Georgia corporation (the
"Borrower"), HORIZON ACQUISITION CORP., STRATO/INFUSAID, INC. and XXXXXX
CORPORATION (collectively "Guarantors") the Lender signatory to the Credit
Agreement referred to below (the "Lender"), and BANK OF AMERICA, N.A., successor
to BANC OF AMERICA COMMERCIAL FINANCE CORPORATION, formerly known as
NationsCredit Commercial Corporation, as Agent for the Lender (the "Agent")
(Lender and Agent are at times hereinafter collectively referred to as
"Lender").
Statement of Facts
A. Borrower, Guarantors and Lenders are parties to the
Forbearance Agreement dated March 30, 2001, as amended by that certain First
Amendment to Forbearance Agreement dated March 31, 2001 (the "Agreement";
capitalized terms used in this Amendment and not otherwise defined herein have
the meanings given in the Agreement, as amended hereby).
B. The Borrower has requested that Lender agree to modify certain
terms of the Agreement and the Lender is willing to agree to such modifications
subject to the terms and conditions of this Amendment.
C. Except as modified and amended hereby, the Agreement and Loan
Documents shall be and remain in full force and effect and unchanged. This
Amendment is not intended to be nor shall it constitute a novation of the
Agreement or the Loan Documents or the indebtedness evidenced thereby. Borrower
hereby ratifies, confirms and approves the Agreement and Loan Documents as
modified herein, and agrees that the same constitutes the valid and binding
obligation of Borrower, enforceable by Lender in accordance with its terms. Any
references to the Agreement in any other document evidencing, securing or
otherwise relating to the indebtedness evidenced by the Agreement shall mean and
refer to the Agreement as modified and amended hereby.
D. By execution hereof, Borrower and Guarantors hereby reaffirm
as of the Effective Date all representations and warranties contained in the
Agreement, as amended.
Statement of Terms
NOW THEREFORE, in consideration of the premises and mutual covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Amendment to Agreement. Subject to the terms and conditions of
this Amendment, the Agreement is hereby amended as follows:
(a) Paragraph 3 of the Agreement is hereby amended by deleting the
words and figures "March 31, 2002" in line 7 and
simultaneously substituting in lieu thereof "January 15,
2002", it being the intent of the parties to shorten the
outside date of the Forbearance Period.
(b) Paragraph 4 of the Agreement is hereby amended by inserting
the following words and figures as subparagraph (d): "(d)
Borrower shall maintain a general operating account with
Lender in Borrower's name (the "Operating Account") from which
all loan proceeds will be deposited and all expenses (except
payroll expenses) of Borrower shall be paid. Absent the prior
written consent of Lender, the use of any funds in the
Operating Account in any calendar month shall be restricted to
payments only in amounts equal to or less than the monthly
budget attached hereto as Exhibit "A" (the "Monthly Budget"),
and no other amount shall be spent during any calendar month
for any such budgeted item in excess of the amount set out to
the right of that line item during any calendar month.
Borrower shall establish a separate payroll account with
Lender in Borrower's name (the "Payroll Account"). Upon a
Termination Event, in the sole discretion of Lender, any funds
in the Operating Account will be paid to Lender and may be
offset by Lender."
(c) Paragraph 4 of the Agreement is hereby amended by inserting
the following words and figures as subparagraph (e): "Borrower
shall furnish to Lender (1) on or before the close of business
(5:00 p.m.) on Tuesday, October 23, 2001, and on each Tuesday
thereafter during the Forbearance Period, current information
relating to its Borrowing Base in a form consistent with its
prior practice under the Credit Agreement; (2) by the third
and eighteenth day of each month (or the next business day if
on a holiday or weekend) a status report of all collections on
outstanding accounts, by name and address of account debtor,
accounts receivable, cash on hand and all expenditures for the
prior period and all invoices for that period, (3) monthly a
complete listing of inventory and equipment specifying the
locations of said inventory and equipment, a breakdown of said
inventory and equipment at each such location and the dollar
value of inventory and equipment at each such location; (4) by
the third and eighteenth day of each month (or the next
business day if on a holiday or weekend) weekly and monthly
income and expense statements broken down in the same
categories as Exhibit "A" comparing actual income and expenses
incurred to budgeted income and expenses; (5) by the twentieth
day of each month, on a monthly basis, the monthly financial
statements required under the Credit Agreement including
income and expense statements and balance sheets, and (6) by
the twentieth day of each month, on a monthly basis, a
complete list of all accounts receivable and the aging of each
account receivable and an aged trial balance."
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(d) The text of Paragraph 4(b) of the Agreement is hereby deleted
in its entirety and the following is substituted in lieu
thereof: "Note Modifications. Borrower agrees to pay any
accrued and unpaid interest on the Note on the first day of
each month commencing on November 1, 2001 and continuing on
the same day of each successive month thereafter during the
Forbearance Period. Interest will continue to accrue and shall
be computed on the outstanding principal balance of the Note
from time to time during the Forbearance Period at the Bank of
America Prime Rate plus two and one half percent (2.5%) per
annum effective upon the Effective Date. Upon a Termination
Event (hereinafter defined), interest will accrue at the
interest rate then in effect plus six percent (6%). Except as
modified above, all other terms and conditions of the Note,
Credit Agreement and Loan Documents shall remain unchanged."
(e) Paragraph 5 of the Agreement is hereby amended to delete the
financial covenants set forth in Paragraph 5(e)(1), 5(e)(3),
5(e)(4), 5(e)(5) and 5(e)(6) and to insert in lieu thereof
"Intentionally Omitted."
(f) The text of Paragraph 5(f) of the Agreement is hereby deleted
in its entirety and the following text is hereby inserted in
lieu thereof: "Borrower and the Guarantors fail to execute and
deliver or fail to cause Xxxxxxxx Xxxx and Xxxx L.L.L.P. to
execute and deliver to Lender, within ten (10) days from the
date hereof, (x) a non-recourse guaranty of the Note from
Xxxxxxxx Xxxx secured by a pledge of all stock of Borrower
owned by Xxxxxxxx Xxxx, and (y) documentation in form and
content satisfactory to the Lender and to Lender's counsel so
as to amend that certain Pledge Agreement, dated June 6, 2000,
between Xxxx, as pledgor, and Horizon Medical Products, Inc.,
as pledgee, covering 1,889,733 shares of Horizon Medical
Products, Inc. common stock and that certain Pledge Agreement,
dated June 6, 2000, between Xxxx L.L.L.P., as pledgor, and
Horizon Medical Products, Inc. as pledgee, covering 924,210
shares of Horizon Medical Products, Inc. common stock so that
said agreement secure the Note, which documents shall be held
in escrow by Lender and shall be released only in the event
that Xxxxxxxx Xxxx interferes with the daily operations of the
Borrower determinable in Lender's reasonable discretion at any
point prior to January 1, 2005."
(g) The text of Paragraph 5(j) of the Agreement is hereby deleted
in its entirety and the following text is hereby inserted in
lieu thereof: "Borrower fails to engage and hire within five
(5) days from the date hereof competent crisis and turn around
management and a new Chief Executive Officer experienced in
the same upon terms and conditions reasonably acceptable to
Lender and Borrower, who shall report to the independent
members of the Company's Board of Directors and such Chief
Executive Officer is unable to assume and continue management
of the daily operations of the Borrower."
(h) The text of Paragraph 5(m) of the Agreement is hereby deleted
in its entirety and the following text is hereby inserted in
lieu thereof: "Borrower fails to provide to
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Lender within five (5) days of the date hereof a copy of
organizational resolutions and minutes of Borrower confirming
that Xxxxxxxx Xxxx has resigned as an officer and director of
Borrower and that no further salary or bonuses shall be paid
to Xxxxxxxx Xxxx."
(i) The following is hereby inserted as Paragraph 5(n) of the
Agreement: "(n) Any party interferes with the daily operations
of the Borrower or with the operation of the board of
directors of the Borrower or the exercise of their fiduciary
obligations to all parties in interest."
(j) The following is hereby inserted as Paragraph 5(o) of the
Agreement: "(o) Borrower fails to undertake good faith effects
or refinance the Note and Borrower fails to provide weekly
written status reports describing such efforts to Lender
beginning on October 22, 2001. Any proposal by Borrower
requesting that Lender accept a discounted payoff of the Note
shall be subject to Lender's sole and absolute discretion."
(k) The following is hereby inserted as Paragraph 5(p) of the
Agreement: "(p) On or before December 15, 2001, Borrower fails
to provide to Lender evidence that Borrower has engaged an
investment banking firm upon terms and conditions reasonably
acceptable to Lender to begin marketing the sale of the assets
of Borrower in the event that the Note is not paid off by the
Termination Date. The foregoing sentence is not nor shall it
be deemed to be a waiver or an agreement of Lender not to
fully execute its remedies in the event of a Termination
Event. On or after the Termination Date, upon the request of
Lender, Borrower agrees to provide Lender with unimpeded
access to the collateral of Lender. The foregoing sentence is
not nor shall it be deemed an election of remedies by Lender."
(l) The following is hereby inserted as Paragraph 5(q) of the
Agreement: "(q) The actual expenses of Borrower paid in a
given calendar month exceed by more than ten (10%) percent the
budgeted expenses as set forth in the Monthly Budget."
(m) The following is hereby inserted as Paragraph 5(r) of the
Agreement: "(r) The actual income of Borrower in a given
calendar month is more than ten (10%) percent below the
budgeted income as set forth in the Monthly Budget."
(n) The following is hereby inserted as Paragraph 5(t) of the
Agreement: "The Borrower's Borrowing Base declines more than
ten (10%) percent below the Borrower's base reflected in its
report as of October 23, 2001;
(o) The following is hereby inserted as Paragraph 5(u) of the
Agreement: "Borrower fails to execute and deliver to Lender
within twenty-four (24) hours of Lender's request a consent
order in form and substance reasonably acceptable to Lender
and Lender's counsel consenting to the appointment of a
Receiver in the event of a Termination Event."
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(p) The text of Paragraph 6 of the Agreement is hereby deleted in
its entirety and the following is substituted in lieu thereof:
Amendments to Credit Agreement
(a) Section 1.01 of the Credit Agreement is hereby
amended such that the definition of the "Working Capital Sublimit" is
hereby amended to read as follows: "WORKING CAPITAL SUBLIMIT" means
$5,000,000.
(b) Section 2.01(b) of the Credit Agreement is hereby
amended to read as follows:
(i) Working Capital Loans shall be available for
the working capital needs of the Company and its Subsidiaries. The sum of
Working Capital Loans and Working Capital Letter of Credit Liabilities shall not
at any time exceed in aggregate principal amount outstanding the least of (said
amount, the "Working Capital Availability"):
(A) the Working Capital Sublimit of
Five Million Dollars ($5,000,000)
less any Letter of Credit
Liabilities, or
(B) an amount equal to the Borrowing
Base.
(ii) Each Working Capital Loan shall be in an
aggregate amount of $100,000 or an integral multiple of $10,000 in excess
thereof. No more than one Working Capital Loan shall be made within any week.
2. Conditions to Effectiveness. This Amendment shall become
effective upon the date hereof, subject to the satisfaction of the following
conditions:
(a) the receipt by the Lender of this Amendment, duly
executed, completed and delivered on or before
October 15, 2001; and
(b) the receipt by the Lender of $35,855.99 for Lender's
unreimbursed attorney's fees and expenses due from
the Borrower; and
(c) the receipt by the Lender of $1,375.00 for Lender's
title insurance related fees to Xxxxxxxx Title and
Escrow, LLC; and
(d) the receipt by the Lender of $296,573.08 for accrued
interest on the Note through October 1, 2001.
3. No Waiver. The execution, delivery and performance of the
Agreement, as amended by this Amendment by Lender and the acceptance by Lender
of performance of Borrower and Guarantors hereunder (a) shall not constitute a
waiver or release by Lender of any default that may now or hereafter exist under
the Loan Documents, (b) shall not constitute a novation of the Loan Documents as
it is the intent of the parties to modify the Loan Documents
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as expressly set out herein and (c) except as expressly provided in this
Amendment, shall be without prejudice to, and is not a waiver or release of,
Lender's rights at any time in the future to exercise any and all rights
conferred upon Lender by the Loan Documents or otherwise at law or in equity,
including but not limited to the right to institute collection or arbitration
proceedings against Borrower and/or Guarantors and/or to exercise any right
against any other person or entity not a party to the Agreement, as amended by
this Amendment.
4. Waiver of Claims and Release. Borrower and Guarantors warrant
and represent to Lender that the Note and the Bridge Note are not subject to any
credits, charges, claims, or rights of offset or deduction of any kind or
character whatsoever, and Borrower and Guarantors hereby ratify and reaffirm
their obligations under the Loan Documents; and Borrower and Guarantors hereby
release and discharge Lender and its predecessors, successors, assigns,
officers, managers, directors, shareholders, employees, agents, attorneys,
representatives, parent corporations, subsidiaries, and affiliates (collectively
referred to as "Affiliates"), jointly and severally from any and all claims and
causes of action, whether known or unknown and whether now existing or hereafter
arising, including without limitation, any usury claims, that have at any time
been owned, or that are hereafter owned, in tort or in contract by Borrower or
any Guarantors or subsidiaries and that arise out of any one or more
circumstances or events that occurred prior to the date of this Amendment which
they had, may have or claim to have against Lender or Affiliates. Moreover,
Borrower and Guarantors and subsidiaries, jointly and severally, waive any and
all claims now or hereafter arising from or related to any delay by Lender or
Affiliates in exercising any rights or remedies under the Loan Documents,
including, without limitation, any delay in foreclosing any collateral securing
the Note or the Bridge Note.
5. Bankruptcy.
(a) In entering into the Agreement, as amended by this
Amendment, Borrower, Guarantors and Lender hereby stipulate,
acknowledge and agree that Lender gave up valuable rights and agreed to
forbear from exercising legal remedies available to it in exchange for
the promises, representations, acknowledgements and warranties of
Borrower and Guarantors as contained herein and that Lender would not
have entered into the Agreement, as amended by this Amendment but for
such promises, representations, acknowledgements, agreements, and
warranties, all of which have been accepted by Lender in good faith,
the breach of which by Borrower or Guarantors in any way, at any time,
now or in the future, would admittedly and confessedly constitute cause
for dismissal of any such bankruptcy petition pursuant to 11 U.S.C.
ss. 1112(b).
(b) As additional consideration for Lender agreeing to
forbear from immediately enforcing its rights and remedies under the
Agreement, the Note and the Loan Documents, including but not limited
to the institution of foreclosure proceedings, Borrower and Guarantors
agree that in the event a bankruptcy petition under any Chapter of the
Bankruptcy Code (11 U.S.C. ss. 101, et seq.) is filed by or against
Borrower or Guarantors at any time after the execution of this
Amendment, Lender shall be entitled to the immediate entry of an order
from the appropriate bankruptcy court granting Lender complete relief
from the automatic stay imposed by ss. 362 of the Bankruptcy Code (11
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U.S.C. ss. 362) to exercise its foreclosure and other rights, including
but not limited to obtaining a foreclosure judgment and foreclosure
sale, upon the filing with the appropriate court of a motion for relief
from the automatic stay with a copy of the Agreement attached thereto.
Borrower and Guarantors specifically agree (i) that upon filing a
motion for relief from the automatic stay, Lender shall be entitled to
relief from the stay without the necessity of an evidentiary hearing
and without the necessity or requirement of the Lender to establish or
prove the value of the Collateral, the lack of adequate protection of
its interest in the Collateral, or the lack of equity in the
Collateral; (ii) that the lifting of the automatic stay hereunder by
the appropriate bankruptcy court shall be deemed to be "for cause"
pursuant to ss. 362(d)(1) of the Bankruptcy Code (11 U.S.C. ss.
362(d)(1)); and (iii) that Borrower and Guarantors will not directly or
indirectly oppose or otherwise defend against Lender's efforts to gain
relief from the automatic stay. This provision is not intended to
preclude Borrower or Guarantors from filing for protection under any
Chapter of the Bankruptcy Code. The remedies prescribed in this
paragraph are not exclusive and shall not limit Lender's rights under
the Loan Documents, the Agreement or under any law.
(c) Moreover, as additional consideration for Lender
agreeing to forbear from immediately enforcing its rights and remedies
under the Agreement, the Note and in the Loan Documents, including but
not limited to the institution of foreclosure proceedings, Borrower and
Guarantors agree that in the event a bankruptcy petition under Chapter
of the Bankruptcy Code (11 U.S.C. ss. 101, et seq.) is filed by or
against Borrower or Guarantors at any time after the execution of this
Amendment, Borrower and Guarantors hereby and in the future irrevocably
agree to waive the exclusive period provided for under ss. 1121 of the
Bankruptcy Code (11 U.S.C. ss. 1121).
(d) All of the above terms and conditions have been
freely bargained for and are all supported by reasonable and adequate
consideration and the provisions herein are material inducements for
Lender entering into this Amendment.
6. Counterparts. This Amendment may be executed in any number of
counterparts, all of which shall be deemed to constitute but one original and
shall be binding upon all parties, their successors and permitted assigns and
facsimile signatures shall be deemed binding and of the same force and effect as
originals.
7. Entire Agreement. The Agreement as amended by this Amendment
embodies the entire agreement between the parties hereto relating to the subject
matter hereof and supersedes all prior agreements, representations and
understandings, if any, relating to the subject matter hereof.
8. Notice and Cure. Borrower and Guarantors shall have no right
to notice or to cure any act or omission which constitutes a Termination Event.
EXECUTED under seal as of the Effective Date.
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BORROWER:
Signed, sealed and delivered in the HORIZON MEDICAL PRODUCTS, INC.
presence of:
------------------------------
Unofficial Witness By:
-----------------------------------
Name:
---------------------------------
------------------------------ Title:
Notary Public --------------------------------
My commission expires: (CORPORATE SEAL)
[NOTARIAL SEAL]
GUARANTORS:
Signed, sealed and delivered in the
presence of: HORIZON ACQUISITION CORP.
------------------------------
Unofficial Witness By:
-----------------------------------
Name:
---------------------------------
------------------------------ Title:
Notary Public --------------------------------
My commission expires: (CORPORATE SEAL)
[NOTARIAL SEAL]
Signed, sealed and delivered in the
presence of: STRATO/INFUSAID, INC.
------------------------------
Unofficial Witness By:
-----------------------------------
Name:
---------------------------------
------------------------------ Title:
Notary Public --------------------------------
My commission expires: (CORPORATE SEAL)
[NOTARIAL SEAL]
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Signed, sealed and delivered in the
presence of: XXXXXX CORPORATION
------------------------------
Unofficial Witness By:
-----------------------------------
Name:
---------------------------------
------------------------------ Title:
Notary Public --------------------------------
My commission expires: (CORPORATE SEAL)
[NOTARIAL SEAL]
LENDER AND AGENT:
----------------
Signed, sealed and delivered in the BANK OF AMERICA, N.A., successor to
presence of: BANC OF AMERICA COMMERCIAL
FINANCE CORPORATION
------------------------------
Unofficial Witness By:
-----------------------------------
Name:
---------------------------------
------------------------------ Title:
Notary Public --------------------------------
My commission expires: (BANK SEAL)
[NOTARIAL SEAL]
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