EXHIBIT 10.10
SIXTH AMENDMENT TO LOAN AGREEMENT
THIS SIXTH AMENDMENT ("Amendment") made this 18th day of June, 2002
between MEDICAL ACTION INDUSTRIES INC., a Delaware corporation, having its
principal place of business at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (the
"Borrower") and CITIBANK, N.A., having an office at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (the "Bank").
W I T N E S S E T H :
WHEREAS, the Borrower and the Bank entered into a Loan Agreement dated
as of the 18th day of March, 1999, which Loan Agreement has heretofore been
amended pursuant to that certain First Amendment dated as of September 1, 1999,
that certain Second Amendment dated as of June 28, 2000, that certain Third
Amendment dated as of October 10, 2000, that certain Fourth Amendment dated as
of November 10, 2000 and that certain Fifth Amendment dated as of November 28,
2001 (as so amended, the "Agreement"); and
WHEREAS, the Bank has made loans to the Borrower as evidenced by
certain notes of the Borrower and specifying interest to be paid thereon; and
WHEREAS, the Borrower has requested that the Bank:
(i) increase the Commitment for Revolving Credit Loans to Thirteen
Million ($13,000,000.00) Dollars;
(ii) amend the Borrowing Base; and
(iii) amend certain financial covenants contained in the
Agreement.
NOW, THEREFORE, in consideration of Ten ($10.00) Dollars and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Borrower, the Guarantors and the Bank do hereby agree as
follows:
1. Defined Terms. As used in this Amendment, capitalized terms, unless
otherwise defined, shall have the meanings set forth in the Agreement.
2. Representations and Warranties. As an inducement for the Bank to
enter into this Amendment, the Borrower and each Guarantor represents and
warrants as follows:
A. That with respect to the Agreement and the Loan Documents
executed in connection therewith and herewith:
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(i) There are no defenses or offsets to the Borrower's or any
Guarantor's obligations under the Agreement as amended hereby, the Note
or any of the Loan Documents or any other agreements in favor of the
Bank referred to in the Agreement, and if any such defenses or offsets
exist without the knowledge of the Borrower or any Guarantor, the same
are hereby waived.
(ii) All of the representations and warranties made by the
Borrower and any Guarantor in the Agreement as amended hereby are true
and correct in all material respects as if made on the date hereof,
except for those made with respect to a particular date, which such
representations and warranties are restated as of such date; and
provided further that the representations and warranties set forth in
Section 4.01(f) of the Agreement shall relate to the financial
statements of the Borrower for the fiscal year ended March 31, 2002.
4. New and Amended Definitions. (a) The following definition is hereby
added to the Agreement:
"AMENDED AND RESTATED REVOLVING CREDIT NOTE" means a promissory
note of the Borrower payable to the order of the Bank, in
substantially the form of Exhibit A annexed to the Sixth Amendment
to this Agreement, evidencing the aggregate indebtedness of the
Borrower to the Bank resulting from Revolving Credit Loans made by
the Bank to the Borrower pursuant to this Agreement.
(b) The following definitions contained in the Agreement are
hereby amended to read as follows:
"BORROWING BASE" means the sum of eighty (80%) of the Borrower's
Eligible Accounts Receivable, plus (ii) the lesser of (x) fifty
five (55%) percent of the Borrower's Eligible Inventory or (y)
$8,000,000.00.
"NOTE" OR "NOTES" means the Term Loan Note, the Amended and
Restated Revolving Credit Note, the Term Loan II Note or any or
all of the same as the context may require.
"REVOLVING CREDIT MATURITY DATE" means March 31, 2004.
5. Amendments. (a) Section 2.08 of the Agreement is hereby amended to
read as follows:
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"SECTION 2.08. THE REVOLVING CREDIT LOANS. The Bank agrees, on the
date of this Agreement, on the terms and conditions of this
Agreement and in reliance upon the representations and warranties
set forth in this Agreement, to lend to the Borrower prior to the
Revolving Credit Maturity Date such amounts as the Borrower may
request from time to time (individually, a "Revolving Credit Loan"
or collectively, the "Revolving Credit Loans"), which amounts may
be borrowed, repaid and reborrowed; provided, however, that the
aggregate amount of such Revolving Credit Loans plus L/C Exposure
plus B/A Exposure outstanding at any one time shall not exceed the
lesser of (i) Thirteen Million ($13,000,000.00) Dollars (the
"Commitment"), or (ii) the Adjusted Borrowing Base, or such lesser
amount of the Commitment as may be reduced pursuant to Section
2.14 hereof.
Each Revolving Credit Loan shall be a Prime Rate Loan or a
Eurodollar Loan (or a combination thereof) as the Borrower may
request subject to and in accordance with Section 2.09. The Bank
may at its option make any Eurodollar Loan by causing a foreign
branch or affiliate to make such Loan, provided that any exercise
of such option shall not affect the obligation of the Borrower to
repay such Loan in accordance with the terms of the Revolving
Credit Note. Subject to the other provisions of this Agreement,
Revolving Credit Loans of more than one type may be outstanding at
the same time."
(b) Section 2.10 of the Agreement is hereby amended to read as
follows:
"SECTION 2.10. AMENDED AND RESTATED REVOLVING CREDIT NOTE. Each
Revolving Credit Loan shall be (i) in the case of each Prime Rate
Loan, in the minimum principal amount of $100,000.00, and in
minimum increased multiples of $50,000.00, and (ii) in the case of
each Eurodollar Loan, in the minimum principal amount of
$1,000,000.00 and in minimum increased multiples of $100,000.00
(except that, if any such Prime Rate Loan so requested shall
exhaust the remaining available Commitment, such Prime Rate Loan
may be in an amount equal to the amount of the remaining available
Commitment). Each Revolving Credit Loan shall be evidenced by the
Amended and Restated Revolving Credit Note of the Borrower. The
Amended and Restated Revolving Credit Note shall be dated the date
of the Sixth Amendment to this Agreement and be in the principal
amount of Thirteen Million ($13,000,000.00) Dollars, and shall
mature on the Revolving Credit Maturity Date, at which time the
entire outstanding principal balance and all interest thereon
shall be due and payable. The Amended and Restated
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Revolving Credit Note shall be entitled to the benefits and
subject to the provisions of this Agreement.
At the time of the making of each Revolving Credit Loan and at the
time of each payment of principal thereon, the holder of the
Amended and Restated Revolving Credit Note is hereby authorized by
the Borrower to make a notation on the schedule annexed to the
Amended and Restated Revolving Credit Note of the date and amount,
and the type and Interest Period of the Revolving Credit Loan or
payment, as the case may be. Failure to make a notation with
respect to any Revolving Credit Loan shall not limit or otherwise
affect the obligation of the Borrower hereunder or under the
Amended and Restated Revolving Credit Note with respect to such
Revolving Credit Loan, and any payment of principal on the Amended
and Restated Revolving Credit Note by the Borrower shall not be
affected by the failure to make a notation thereof on said
schedule."
(c) Section 2.11 of the Agreement is hereby amended to read as
follows:
"SECTION 2.11. PAYMENT OF INTEREST ON THE AMENDED AND RESTATED
REVOLVING CREDIT NOTE. (a) In the case of a Prime Rate Loan,
interest shall be payable at a rate per annum equal to the Prime
Rate. Such interest shall be payable on each Interest Payment
Date, commencing with the first Interest Payment Date after the
date of such Prime Rate Loan and on the Revolving Credit Maturity
Date. Any change in the rate of interest on the Amended and
Restated Revolving Credit Note due to a change in the Prime Rate
shall take effect as of the date of such change in the Prime Rate.
(b) In the case of a Eurodollar Loan, interest shall be
payable at a rate per annum equal to the Reserve Adjusted LIBOR
Rate plus the LIBOR Applicable Margin. Such interest shall be
payable on each Interest Payment Date, commencing with the first
Interest Payment Date after the date of such Eurodollar Loan and
on the Revolving Credit Maturity Date. In the event Eurodollar
Loans are available, the Bank shall determine the rate of interest
applicable to each requested Eurodollar Loan for each Interest
Period at 11:00 a.m., New York City time, or as soon as
practicable thereafter, two (2) Business Days prior to the
commencement of such Interest Period and shall use its best
efforts to notify the Borrower of the rate of interest so
determined. Such determination shall be conclusive absent manifest
error."
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(d) The first sentence of Section 5.01 of the Agreement is hereby
amended to read as follows:
"SECTION 5.01. AFFIRMATIVE COVENANTS. So long as any amount shall
remain outstanding under the Term Loan II Note, the Revolving
Credit Note or the Amended and Restated Revolving Credit Note, or
so long as the Commitment shall remain in effect, the Borrower
will, unless the Bank shall otherwise consent in writing:"
(e) The first sentence of Section 5.02 of the Agreement is hereby
amended to read as follows:
"SECTION 5.02. NEGATIVE COVENANTS. So long as any amount shall
remain outstanding under the Term Loan II Note, the Revolving
Credit Note or the Amended and Restated Revolving Credit Note, or
so long as the Commitment shall remain in effect, the Borrower
will not, without the written consent of the Bank:"
(f) Section 5.02(d) of the Agreement is hereby amended to read as
follows:
"(d) Merger. Merge into, or consolidate with or into, or have
merged into it, any Person; and, for the purpose of this
subsection (d), the acquisition or sale by the Borrower by lease,
purchase or otherwise, of all, or substantially all, of the common
stock or the assets of any Person or of it shall be deemed a
merger of such Person with the Borrower other than in connection
with Permitted Acquisitions, provided that the total aggregate
consideration (whether cash, stock or assumed liabilities) for all
Permitted Acquisitions (not including the acquisition of the
medical products division of Acme United Corp., certain assets of
Medi-Flex Products, Inc. or the acquisition of MD Industries)
shall not exceed $2,000,000.00 in any fiscal year or $5,000,000.00
in the aggregate during the term of this Agreement."
(g) The first sentence of Section 5.03 of the Agreement is hereby
amended to read as follows:
"SECTION 5.03. FINANCIAL REQUIREMENTS. So long as any amount shall
remain outstanding under the Revolving Credit Note, the Amended
and Restated Revolving Credit Note or the Term Loan II Note or so
long as the Commitment shall remain in effect:"
(h) Section 5.03(a) of the Agreement is hereby amended to read as
follows:
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"(a) Minimum Capital Base. The Borrower will maintain at all
times, to be tested as of each fiscal quarter end, a minimum
Capital Base of not less than the following:
Period Minimum Capital Base
------ --------------------
3/31/01 to 3/30/03 $ 7,000,000.00
3/31/03 to 3/30/04 $12,000,000.00
3/31/04 and thereafter $17,000,000.00"
(i) Section 5.03(b) of the Agreement is hereby amended to read as
follows:
"(b) Maximum Cash Flow Leverage Ratio. The Borrower will maintain
at all times a maximum Cash Flow Leverage Ratio of not less than
the following, to be tested quarterly (i) on an annualized basis
during the period ending December 31, 2002, and (ii) on a rolling
four quarter basis for each fiscal year thereafter:
Maximum Cash Flow
Period Leverage Ratio
------ --------------
3/31/01 to 3/30/03 3.50 to 1.0
3/31/03 to 3/30/04 2.00 to 1.0
3/31/04 and thereafter 1.50 to 1.0"
(j) Section 6.01(a) of the Agreement is hereby amended to read as
follows:
"(a) The Borrower shall fail to pay any installment of principal
of, or interest on, the Term Loan Note, the Term Loan II Note, the
Revolving Credit Note or the Amended and Restated Revolving Credit
Note when due or any fees or other amounts owed in connection with
this Agreement; or"
(k) Section 6.01(d) of the Agreement is hereby amended to read as
follows:
"(d) The Borrower or any Subsidiary of the Borrower shall fail to
pay any Debt (excluding Debt evidenced by the Term Loan Note, the
Term Loan II Note, the Revolving Credit Note and the Amended and
Restated Revolving Credit Note) of the Borrower or any such
Subsidiary (as the case may be), or any interest or premium
thereon, when due (whether by scheduled maturity, required
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prepayment, acceleration, demand or otherwise) and such failure
shall continue after the applicable grace period, if any,
specified in the agreement or instrument relating to such Debt; or
any other default under any agreement or instrument relating to
any such Debt, or any other event shall occur and shall continue
after the applicable grace period, if any, specified in such
agreement or instrument, if the effect of such default or event is
to accelerate, or to permit the acceleration of, the maturity of
such Debt; or any such Debt shall be declared to be due and
payable, or required to be prepaid (other than by a regularly
scheduled required prepayment), prior to the stated maturity
thereof; or"
(l) Section 6.02 of the Agreement is hereby amended to read as
follows:
"SECTION 6.02. REMEDIES ON DEFAULT. Upon the occurrence and
continuance of an Event of Default the Bank may by notice to the
Borrower, (i) terminate the Commitment, (ii) declare the Term Loan
Note, the Term Loan II Note, the Revolving Credit Note, the
Amended and Restated Revolving Credit Note, all interest thereon
and all other amounts payable under this Agreement to be forthwith
due and payable, whereupon the Commitment shall be terminated, the
Term Loan Note, the Term Loan II Note, the Revolving Credit Note,
the Amended and Restated Revolving Credit Note, all such interest
and all such amounts shall become and be forthwith due and
payable, without presentment, demand, protest or further notice of
any kind, all of which are hereby expressly waived by the
Borrower, and (ii) proceed to enforce its rights whether by suit
in equity or by action at law, whether for specific performance of
any covenant or agreement contained in this Agreement or any Loan
Document, or in aid of the exercise of any power granted in either
this Agreement or any Loan Document or proceed to obtain judgment
or any other relief whatsoever appropriate to the enforcement of
its rights, or proceed to enforce any other legal or equitable
right which the Bank may have by reason of the occurrence of any
Event of Default hereunder or under any Loan Document, provided,
however, upon the occurrence of an Event of Default referred to in
Section 6.01(e), the Commitment shall be immediately terminated,
the Term Loan Note, the Term Loan II Note, the Revolving Credit
Note, the Amended and Restated Revolving Credit Note, all interest
thereon and all other amounts payable under this Agreement shall
be immediately due and payable without presentment, demand,
protest or further notice of any kind, all of which are hereby
expressly waived by the Borrower. Any amounts collected pursuant
to action taken under this Section 6.02 shall be applied to the
payment of, first, any costs incurred by
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the Bank in taking such action, including but without limitation
attorneys fees and expenses, second, to payment of the accrued
interest on the Term Loan Note, the Term Loan II Note, the
Revolving Credit Note and the Amended and Restated Revolving
Credit Note,, and third, to payment of the unpaid principal of the
Term Loan Note, the Term Loan II Note, the Revolving Credit Note
and the Amended and Restated Revolving Credit Note,."
(m) Section 7.04 of the Agreement is hereby amended to read as
follows:
"SECTION 7.04. COSTS, EXPENSES AND TAXES. The Borrower agrees to
pay on demand all costs and expenses of the Bank in connection
with the preparation, execution, delivery and administration of
this Agreement, the Term Loan II Note, the Revolving Credit Note,
the Amended and Restated Revolving Credit Note and any other Loan
Documents, including, without limitation, the fees and expenses of
counsel for the Bank with respect thereto and with respect to
advising the Bank as to its rights and responsibilities under this
Agreement, and all costs and expenses, if any (including counsel
fees and expenses), in connection with the enforcement of this
Agreement, the Term Loan II Note, the Revolving Credit Note, the
Amended and Restated Revolving Credit Note and any other Loan
Documents. The Borrower shall at all times protect, indemnify,
defend and save harmless the Bank from and against any and all
claims, actions, suits and other legal proceedings, and
liabilities, obligations, losses, damages, penalties, judgments,
costs, expenses or disbursements which the Bank may, at any time,
sustain or incur by reason of or in consequence of or arising out
of the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby. The Borrower
acknowledges that it is the intention of the parties hereto that
this Agreement shall be construed and applied to protect and
indemnify the Bank against any and all risks involved in the
execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby, all of which risks are
hereby assumed by the Borrower, including, without limitation, any
and all risks of the acts or omissions, whether rightful or
wrongful, of any present or future de jure or de facto government
or governmental authority, provided that the Borrower shall not be
liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from the Bank's gross negligence or
willful misconduct. The provisions of this Section 7.04 shall
survive the payment of the Notes and the termination of this
Agreement."
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(n) Section 7.05 of the Agreement is hereby amended to read as
follows:
"SECTION 7.05. RIGHT OF SET-OFF. Upon the occurrence and during
the continuance of any Event of Default, the Bank is hereby
authorized at any time and from time to time, to the fullest
extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any
time held and other indebtedness at any time owing by the Bank, or
any affiliate of the Bank, to or for the credit or the account of
the Borrower or any Guarantor against any and all of the
obligations of the Borrower or any Guarantor now or hereafter
existing under this Agreement, the Term Loan Note, the Term Loan
II Note, the Revolving Credit Note and the Amended and Restated
Revolving Credit Note, irrespective of whether or not the Bank
shall have made any demand under this Agreement, the Term Loan
Note, the Term Loan II Note, the Revolving Credit Note or the
Amended and Restated Revolving Credit Note and although such
obligations may be unmatured. The rights of the Bank under this
Section are in addition to all other rights and remedies
(including, without limitation, other rights of set-off) which the
Bank may have."
(o) Section 7.10 of the Agreement is hereby amended to read as
follows:
"SECTION 7.10. GOVERNING LAW. This Agreement, the Term Loan Note,
the Term Loan II Note, the Revolving Credit Note, the Amended and
Restated Revolving Credit Note and all other Loan Documents shall
be governed by, and construed in accordance with, the laws of the
State of New York."
7. Conditions Precedent to the Effectiveness of this Amendment. The
obligation of the Bank hereunder is subject to the condition precedent that the
Bank shall have received from the Borrower the following, in form and substance
satisfactory to the Bank and its counsel:
(a) The Amended and Restated Revolving Credit Note duly executed
and payable to the order of the Bank.
(b) Certified (as of the date of the Sixth Amendment to this
Agreement) copies of the resolutions of the Board of Directors of
the Borrower authorizing Amended and Restated Revolving Credit
Note and authorizing and approving the Sixth Amendment to this
Agreement and the other Loan Documents and the execution, delivery
and performance thereof and certified copies of all
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documents evidencing other necessary corporate action and
governmental approvals, if any, with respect to the Sixth
Amendment to this Agreement and the other Loan Documents.
(c) A certificate of the Secretary or an Assistant Secretary
(attested to by another officer) of the Borrower certifying: (i)
the names and true signatures of the officer or officers of the
Borrower authorized to sign the Sixth Amendment to this Agreement,
the Amended and Restated Revolving Credit Note and the other Loan
Documents to be delivered hereunder on behalf of the Borrower; and
(ii) a copy of the Borrower's by-laws as complete and correct on
the date of the Sixth Amendment to this Agreement.
(d) Copies of the certificate of incorporation and all amendments
thereto of the Borrower, certified by the Secretary of State (or
equivalent officer) of the state of incorporation of the Borrower
and a certificate of existence and good standing with respect to
the Borrower from the Secretary of State (or equivalent officer)
of the state of incorporation of the Borrower and from the
Secretary of State (or equivalent officer) of any state in which
the Borrower is authorized to do business.
(e) An opinion of ▇▇▇▇▇▇▇ ▇. Satin, Esq., counsel for the Borrower
as to certain matters referred to in Article IV of the Agreement
and as to such other matters as the Bank or its counsel may
reasonably request.
(f) A Commitment Fee equal to $9,500.00.
(g) All schedules, documents, certificates and other information
provided to the Bank pursuant to or in connection with the Sixth
Amendment to this Agreement shall be satisfactory to the Bank in
all respects.
(i) The following statements shall be true and the Bank shall have
received a certificate signed by the President or principal
accounting officer of the Borrower dated the date of the Sixth
Amendment to this Agreement, stating that:
(i) The representations and warranties contained in Article
IV of the Agreement and in the Loan Documents are true and correct
on and as of such date; and
(ii) No Default or Event of Default has occurred and is
continuing, or would result from the increase in the Commitment
contemplated hereby.
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(h) All legal matters incident to the Sixth Amendment to this
Agreement and the Loan transactions contemplated hereby shall be
satisfactory to Cullen and ▇▇▇▇▇▇, LLP, counsel to the Bank.
(i) The Bank shall have received evidence that the Borrower has
closed the acquisition of MD Industries, Inc.
(j) Receipt by the Bank of such other approvals, opinions or
documents as the Bank or its counsel may reasonably request.
(k) The Borrower shall have paid the reasonable fees and
disbursements of the Bank's counsel, Cullen and ▇▇▇▇▇▇, LLP in
connection with this Sixth Amendment to the Agreement."
8. Governing Law. This Amendment shall be governed by, and construed in
accordance with, the laws of the State of New York.
9. Counterparts. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
10. Ratification. Except as hereby amended, the Agreement and all other
Loan Documents executed in connection therewith shall remain in full force and
effect in accordance with their originally stated terms and conditions. The
Agreement and all other Loan Documents executed in connection therewith, as
amended hereby, are in all respects ratified and confirmed.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the year and date first above written.
MEDICAL ACTION INDUSTRIES INC. CITIBANK, N.A.
By:/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ By:/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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President Group Vice President
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