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EXHIBIT 10.3
TBCC
LOAN AND SECURITY AGREEMENT
BORROWER: ENDOCARE, INC.,
A DELAWARE CORPORATION
ADDRESS: 7 STUDEBAKER
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
DATE: JULY 29, 1999
THIS LOAN AND SECURITY AGREEMENT is entered into as of the above date, between
the above borrower(s) (jointly and severally, the "Borrower"), having its chief
executive office and principal place of business at the address shown above, and
TRANSAMERICA BUSINESS CREDIT CORPORATION, a Delaware corporation, ("TBCC")
having its principal office at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and having an office at ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇. The Schedule to this Agreement (the "Schedule") being signed
concurrently is an integral part of this Agreement. (Definitions of certain
terms used in this Agreement are set forth in Section 9 below.) The parties
agree as follows:
1. Loans.
1.1. Loans. TBCC, subject to the terms and conditions of this Agreement,
agrees to make loans (the "Loans") to Borrower, from time to time during the
period from the date of this Agreement to the Maturity Date set forth in the
Schedule, at Borrower's request, in an aggregate principal amount at any one
time outstanding not to exceed the Credit Limit shown on the Schedule (the
"Credit Limit"). If at any time the total outstanding Loans and other monetary
Obligations exceed the Credit Limit, Borrower shall repay the excess immediately
without demand*. Borrower shall use the proceeds of all Loans solely for lawful
general business purposes.
* , PROVIDED, HOWEVER, THAT IF THE TOTAL OUTSTANDING LOANS AND OTHER MONETARY
OBLIGATIONS EXCEED THE CREDIT LIMIT BECAUSE OF A CHANGE IN THE MANNER IN WHICH
ELIGIBLE RECEIVABLES IS COMPUTED, THEN BORROWER SHALL HAVE TWO (2) BUSINESS DAYS
TO REPAY SUCH EXCESS.
1.2. Due Date. The Loans, all accrued interest and all other monetary
Obligations shall be payable in full on the Maturity Date. Borrower may borrow,
repay and reborrow Loans (other than any Term Loans), in whole or in part, in
accordance with the terms of this Agreement.
1.3. Loan Account. TBCC shall maintain an account on its books in the name of
Borrower (the "Loan Account"). All Loans and advances made by TBCC to Borrower
or for Borrower's account and all other monetary Obligations will be charged to
the Loan Account. All amounts received by TBCC from Borrower or for Borrower's
account will be credited to the Loan Account. TBCC will send Borrower a monthly
statement reflecting the activity in the Loan Account, and each such monthly
statement shall be an account stated between Borrower and TBCC and shall be
final, conclusive and binding absent manifest error.
1.4. Collection of Receivables. Borrower shall remit to TBCC all Collections
including all checks, drafts and other documents and instruments evidencing
remittances in payment (collectively referred to as "Items of Payment") within
one Business Day after receipt, in the same form as received, with any necessary
indorsements. For purposes of calculating interest due to TBCC, credit will be
given for Collections and all other proceeds of Collateral and other payments to
TBCC three Business Days after receipt of cleared funds. For all purposes of
this Agreement any cleared funds received by TBCC later than 10:00 a.m.
(California time) on any Business Day shall be deemed to have been received on
the following Business Day and any applicable interest or fee shall continue to
accrue. Borrower's Loan Account will be credited only with the net amounts
actually received in payment of Receivables, and such payments shall be credited
to the Obligations in such order as TBCC shall determine in its discretion.
Pending delivery to TBCC, Borrower will not commingle any Items of Payment with
any of its other funds or property, but will segregate them from the other
assets of Borrower and will hold them in trust and for the account and as the
property of TBCC. Borrower hereby agrees to endorse any Items of Payment upon
the request of TBCC.
1.5. Reserves. TBCC may, from time to time, in its Good Faith business
judgment: (i) establish and modify reserves against Eligible Receivables,
(ii) modify advance rates with respect to Eligible Receivables and Eligible
Inventory, (iii) modify the standards of eligibility set forth in the
definitions of Eligible Receivables and Eligible Inventory, and (iv) establish
reserves against available Loans.
1.6. Term.
(a) The term of this Agreement shall be from the date of this Agreement to
the Maturity Date set forth in the Schedule, unless sooner terminated in
accordance with the
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terms of this Agreement, provided that the Maturity Date shall automatically be
extended, and this Agreement shall automatically and continuously renew, for
successive additional terms of one year each, unless one party gives written
notice to the other, not less than sixty days prior to the next Maturity Date,
that such party elects to terminate this Agreement effective on the next
Maturity Date. On the Maturity Date or on any earlier termination of this
Agreement Borrower shall pay in full all Obligations, and notwithstanding any
termination of this Agreement all of TBCC's security interests and all of TBCC's
other rights and remedies shall continue in full force and effect until payment
and performance in full of all Obligations.
(b) This Agreement may be terminated prior to the Maturity Date as follows:
(i) by Borrower, effective three Business Days after written notice of
termination is given to TBCC; or (ii) by TBCC at any time after the occurrence
of an Event of Default, *, effective immediately. If this Agreement is
terminated by Borrower or by TBCC under this Section 1.6(b), Borrower shall pay
to TBCC a termination fee (the "Termination Fee") in the amount shown on the
Schedule. The Termination Fee shall be due and payable on the effective date of
termination. Notwithstanding the foregoing, Borrower shall have no right to
terminate this Agreement at any time that any principal of, or interest on any
of the Loans or any other monetary Obligations are outstanding, except upon
prepayment of all Obligations and the satisfaction of all other conditions set
forth in the Loan Documents.
*UPON NOTICE TO BORROWER
1.7. Payment Procedures. Borrower hereby authorizes TBCC to charge the Loan
Account with the amount of all interest, fees, expenses and other payments to be
made hereunder and under the other Loan Documents. TBCC may, but shall not be
obligated to, discharge Borrower's payment obligations hereunder by so charging
the Loan Account. Whenever any payment to be made hereunder is due on a day that
is not a Business Day, the payment may be made on the next succeeding Business
Day and such extension of time shall be included in the computation of the
amount of interest due.
1.8. Conditions to Initial Loan. The obligation of TBCC to make the initial
Loan is subject to the satisfaction of the following conditions prior to or
concurrent with such initial Loan, and Borrower shall cause all such conditions
to be satisfied by the Closing Deadline set forth in the Schedule:
(a) Except for the filing of termination statements under the Code by the
existing lender to Borrower whose loans are being repaid with the Loan proceeds,
no consent or authorization of, filing with or other act by or in respect of any
Governmental Authority or any other Person is required in connection, with the
execution, delivery, performance, validity or enforceability of this Agreement,
or the other Loan Documents or the consummation of the transactions contemplated
hereby or thereby or the continuing operations of the Borrower following the
consummation of such transactions.
(b) TBCC and its counsel shall have performed (i) a review satisfactory to
TBCC of all of the Material Contracts and other assets of the Borrower, the
financial condition of the Borrower, including all of its tax, litigation,
environmental and other potential contingent liabilities, and the corporate and
capital structure of the Borrower and (ii) a pre-closing audit and collateral
review, in each case with results satisfactory to TBCC.
(c) TBCC shall have received the following, each dated the date of the
initial Loan or as of an earlier date acceptable to TBCC, in form and substance
satisfactory to TBCC and its counsel: (i) a Depository Account Agreement (as
TBCC shall designate), duly executed by the Borrower and its bank on TBCC's
standard form; (ii) acknowledgment copies of Uniform Commercial Code financing
statements (naming TBCC as secured party and the Borrower as debtor), duly filed
in all jurisdictions that TBCC deems necessary or desirable to perfect and
protect the Liens created hereunder, and evidence that all other filings,
registrations and recordings have been made in the appropriate governmental
offices, and all other action has been taken, which shall be necessary to
create, in favor of TBCC, a perfected first priority Lien on the Collateral;
(iii) the opinion of counsel for the Borrower covering such matters incident to
the transactions contemplated by this Agreement as TBCC may specify in its
discretion; (iv) certified copies of all policies of insurance required by this
Agreement and the other Loan Documents, together with loss payee endorsements
for all such policies naming TBCC as lender loss payee and an additional
insured; (v) copies of the Borrower's articles or certificate of incorporation,
certified as true, correct and complete by the secretary of state of Borrower's
state of incorporation within 45 days of the date hereof; (vi) copies of the
bylaws of the Borrower and a copy of the resolutions of the Board of Directors
of the Borrower authorizing the execution, delivery and performance of this
Agreement, the other Loan Documents, and the transactions contemplated hereby
and thereby, attached to which is a certificate of the Secretary or an Assistant
Secretary of the Borrower certifying (A) that such copies of the bylaws and
resolutions are true, complete and accurate copies thereof, have not been
amended or modified since the date of such certificate and are in full force and
effect and (B) the incumbency, names and true signatures of the officers of the
Borrower; (vii) a good standing certificate from the Secretary of State of
Borrower's state of incorporation and each state in which the Borrower is
qualified as a foreign corporation, each dated within ten days of the date
hereof; (viii) the additional documents and agreements, if any, listed in the
Schedule; and (ix) such other agreements and instruments as TBCC deems necessary
in its sole and absolute discretion in connection with the transactions
contemplated hereby.
1.9. Conditions to Lending. The obligation of TBCC to make any Loan is subject
to the satisfaction of the following conditions precedent:
(a) There shall be no pending or, to the knowledge of Borrower after due
inquiry, threatened litigation, proceeding, inquiry or other action relating to
this Agreement, or any other Loan Document, or which could be expected to have a
Material Adverse Effect in the judgment of TBCC;
(b) Borrower shall be in compliance with all Requirements of Law and Material
Contracts, other than such noncompliance that could not have a Material Adverse
Effect;
(c) The Liens in favor of TBCC shall have been duly perfected and shall
constitute first priority Liens, except for Permitted Liens;
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TBCC LOAN AND SECURITY AGREEMENT
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(d) All representations and warranties contained in this Agreement and the
other Loan Documents shall be true and correct * on and as of the date of such
Loan as if then made, other than representations and warranties that expressly
relate solely to an earlier date, in which case they shall have been true and
correct * as of such earlier date;
(e) No Default or Event of Default shall have occurred and be continuing or
would result from the making of the requested Loan as of the date of such
request; and
(f) No Material Adverse Effect shall have occurred.
* IN ALL MATERIAL RESPECTS
2. INTEREST AND FEES.
2.1. Interest. Borrower shall pay TBCC interest on all outstanding Loans and
other monetary Obligations, at the interest rate set forth in the Schedule.
Interest shall be payable monthly in arrears on the first Business Day of each
month, and on the Maturity Date. Following the occurrence and during the
continuance of any Event of Default, the interest rate applicable to all
Obligations shall be increased by two percent per annum.
2.2. Fees. Borrower shall pay TBCC the fees set forth in the Schedule.
2.3. Calculations. All interest and fees under this Agreement shall be
calculated on the basis of a year of 360 days for the actual number of days
elapsed in the period for which such interest or fees are payable.
2.4. Taxes. Any and all payments by Borrower under this Agreement or any other
Loan Document shall be made free and clear of and without deduction for any and
all present or future taxes, levies, imposts, deductions, charges or
withholdings and penalties, interest and all other liabilities with respect
thereto, excluding in the case of TBCC, taxes imposed on its net income and
franchise taxes imposed on it by the jurisdiction under the laws of which TBCC
is organized or any political subdivision thereof.
3. SECURITY.
3.1. Grant of Security Interest. To secure the payment and performance when
due of all of the Obligations, Borrower hereby grants to TBCC a security
interest in all of its present and future Receivables, Investment Property,
Inventory, Equipment, Other Property, and other Collateral, wherever located*.
* , PROVIDED THAT THE SECURITY INTEREST GRANTED TO TBCC SHALL NOT EXTEND TO
ANY OF BORROWER'S PRESENT OR FUTURE "INTELLECTUAL PROPERTY" (AS DEFINED IN
SECTION 9(A) OF THE SCHEDULE), BUT THE SECURITY INTEREST OF TBCC SHALL EXTEND TO
ANY AND ALL PRESENT AND FUTURE PAYMENTS IN RESPECT TO, AND PROCEEDS OF,
INTELLECTUAL PROPERTY, OF EVERY KIND (INCLUDING WITHOUT LIMITATION ALL ROYALTIES
AND LICENSE FEES)
3.2. Other Liens; Location of Collateral. Borrower represents, warrants and
covenants that all of the Collateral is, and will at all times continue to be,
free and clear of all Liens, other than Permitted Liens and Liens in favor of
TBCC. All Collateral is and will continue to be maintained at the locations
shown on the Schedule.
3.3. Receivables.
(a) Schedules and Other Actions. As often as requested by TBCC, Borrower
shall execute and deliver to TBCC written schedules of Receivables and Eligible
Receivables (but the failure to execute or deliver any schedule shall not affect
or limit TBCC's security interest in all Receivables). On TBCC's request,
Borrower shall also furnish to TBCC copies of invoices to customers and shipping
and delivery receipts. Borrower shall deliver to TBCC the originals of all
letters of credit, notes, and instruments in its favor and such endorsements or
assignments as TBCC may reasonably request and, upon the request of TBCC,
Borrower shall deliver to TBCC all certificated securities with respect to any
Investment Property, with all necessary indorsements, and obtain such account
control agreements with securities intermediaries and take such other action
with respect to any Investment Property, as TBCC shall request, in form and
substance satisfactory to TBCC. Upon request of TBCC Borrower additionally shall
obtain consents from any letter of credit issuers with respect to the assignment
to TBCC of any letter of credit proceeds.
(b) Records, Collections. Borrower shall report all customer credits to TBCC,
on the regular reports to TBCC in the form from time to time specified by TBCC.
Borrower shall notify TBCC of all returns and recoveries of merchandise and of
all claims asserted with respect to merchandise, on its regular reports to TBCC.
Borrower shall not settle or adjust any dispute or claim, or grant any discount,
credit or allowance or accept any return of merchandise, except in the ordinary
course of its business, without TBCC's prior written consent.
(c) Representations. Borrower represents and warrants to TBCC that each
Receivable with respect to which Loans are requested by Borrower shall, on the
date each Loan is requested and made, represent an undisputed, bona fide,
existing, unconditional obligation of the account debtor created by the sale,
delivery, and acceptance of goods, the licensing of software or the rendition of
services, in the ordinary course of Borrower's business, and meet the Minimum
Eligibility Requirements set forth in Section 9.1(n) below.
3.4. Inventory. Borrower shall maintain full, accurate and complete records
respecting the Inventory describing the kind, type and quantity of the Inventory
and Borrower's cost therefor, withdrawals therefrom and additions thereto,
including a perpetual inventory for work in process and finished goods.
3.5. Equipment. Borrower shall at all times keep correct and accurate records
itemizing and describing the location, kind, type, age and condition of the
Equipment, Borrower's cost therefor and accumulated depreciation thereof and
retirements, sales, or other dispositions thereof. Borrower shall keep all of
its Equipment in a satisfactory state of repair and satisfactory operating
condition in accordance with industry standards, ordinary wear and tear
excepted. No Equipment shall be annexed or affixed to or become part of any
realty, unless the owner of the realty has executed and delivered a Landlord
Waiver in such form as TBCC shall specify. Where Borrower is permitted to
dispose of any Equipment under this Agreement or by any consent thereto
hereafter given by TBCC, Borrower shall do so at arm's length, in good faith and
by obtaining the maximum amount of recovery practicable therefor and without
impairing the operating integrity or value of the remaining Equipment.
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3.6. Investment Property. Borrower shall have the right to retain all
Investment Property payments and distributions, unless and until a Default or an
Event of Default has occurred. If a Default or an Event of Default exists,
Borrower shall hold all payments on, and proceeds of, and distributions with
respect to, Investment Property in trust for TBCC, and Borrower shall deliver
all such payments, proceeds and distributions to TBCC, immediately upon receipt,
in their original form, duly endorsed, to be applied to the Obligations in such
order as TBCC shall determine. Upon the request of TBCC, any such distributions
and payments with respect to any Investment Property held in any securities
account shall be held and retained in such securities account as part of the
Collateral.
3.7 Further Assurances. Borrower will perform any and all steps that TBCC may
reasonably request to perfect TBCC's security interests in the Collateral,
including, without limitation, executing and filing financing and continuation
statements in form and substance satisfactory to TBCC. TBCC is hereby authorized
by Borrower to sign Borrower's name or file any financing statements or similar
documents or instruments covering the Collateral whether or not Borrower's
signature appears thereon. Borrower agrees, from time to time, at TBCC's
request, to file notices of Liens, financing statements, similar documents or
instruments, and amendments, renewals and continuations thereof, and cooperate
with TBCC, in connection with the continued perfection and protection of the
Collateral. If any Collateral is in the possession or control of any Person
other than a public warehouseman where the warehouse receipt is in the name of
or held by TBCC, Borrower shall notify such Person of TBCC's security interest
therein and, upon request, instruct such Person or Persons to hold all such
Collateral for the account of TBCC and subject to TBCC's instructions. If so
requested by TBCC, Borrower will deliver to TBCC warehouse receipts covering any
Collateral located in warehouses showing TBCC as the beneficiary thereof and
will also cause the warehouseman to execute and deliver such agreements as TBCC
may request relating to waivers of liens by such warehouseman and the release of
the Inventory to TBCC on its demand. Borrower shall defend the Collateral
against all claims and demands of all Persons.
3.8. Power of Attorney. Borrower hereby appoints and constitutes TBCC as
Borrower's attorney-in-fact (i) to request at any time from account debtors
verification of information concerning Receivables and the amount owing thereon,
(ii) upon the occurrence and during the continuance of an Event of Default, to
convey any item of Collateral to any purchaser thereof, (iii) to give or sign
Borrower's name to any notices or statements necessary or desirable to create or
continue the Lien on any Collateral granted hereunder, (iv) to execute and
deliver to any securities intermediary or other Person any entitlement order,
account control agreement or other notice, document or instrument with respect
to any Investment Property, and (v) to make any payment or take any act
necessary or desirable to protect or preserve any Collateral. TBCC's authority
hereunder shall include, without limitation, the authority to execute and give
receipt for any certificate of ownership or any document, transfer title to any
item of Collateral and take any other actions arising from or incident to the
powers granted to TBCC under this Agreement. This power of attorney is coupled
with an interest and is irrevocable.
4. Representations and Warranties of Borrower. Borrower represents and warrants
as follows:
4.1. Organization, Good Standing and Qualification. Borrower (i) is a
corporation duly organized, validly existing and in good standing under the laws
of the State set forth above, (ii) has the corporate power and authority to own
its properties and assets and to transact the businesses in which it is engaged
and (iii) is duly qualified, authorized to do business and in good standing in
each jurisdiction where it is engaged in business, except to the extent that the
failure to so qualify or be in good standing would not have a Material Adverse
Effect.
4.2. Locations of Offices, Records and Collateral. The address of the
principal place of business and chief executive office of Borrower is, and the
books and records of Borrower and all of its chattel paper and records relating
to Collateral are maintained exclusively in the possession of Borrower at, the
address of Borrower specified in the heading of this Agreement. Borrower has
places of business, and Collateral is located, only at such address and at the
addresses set forth in the Schedule and at any additional locations reported to
TBCC as provided in Section 5.8(c) as to which TBCC has taken all necessary
action to perfect and protect its security interests in the Collateral at any
such locations.
4.3. Authority. Borrower has the requisite corporate power and authority to
execute, deliver and perform its obligations under each of the Loan Documents.
All corporate action necessary for the execution, delivery and performance by
Borrower of the Loan Documents has been taken.
4.4. Enforceability. This Agreement is, and, when executed and delivered, each
other Loan Document will be, the legal, valid and binding obligation of Borrower
enforceable in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency or similar laws affecting creditors' rights
generally and general principles of equity.
4.5. No Conflict. The execution, delivery and performance of each Loan
Document by Borrower does not and will not contravene (i) any of the Governing
Documents, (ii) any Requirement of Law or (iii) any Material Contract and will
not result in the imposition of any Liens other than in favor of TBCC.
4.6. Consents and Filings. No consent, authorization or approval of, or filing
with or other act by, any shareholders of Borrower or any Governmental Authority
or other Person is required in connection with the execution, delivery,
performance, validity or enforceability of this Agreement or any other Loan
Document, the consummation of the transactions contemplated hereby or thereby or
the continuing operations of Borrower following such consummation, except (i)
those that have been obtained or made, (ii) the filing of financing statements
under the Uniform Commercial Code and (iii) any necessary filings with the U.S.
Copyright Office and the U.S. Patent and Trademark Office.
4.7. Solvency. Borrower is Solvent and will be Solvent upon the completion of
all transactions contemplated to occur on or before the date of this Agreement
(including, without limitation, the Loans to be made on the date of this
Agreement).
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4.8. Financial Data. Borrower has provided to TBCC complete and accurate
Financial Statements, which have been prepared in accordance with GAAP
consistently applied throughout the periods involved and fairly present the
financial position and results of operations of Borrower for each of the periods
covered, subject, in the case of any quarterly financial statements, to normal
year-end adjustments and the absence of notes. Borrower has no Contingent
Obligation or liability for taxes, unrealized losses, unusual forward or
long-term commitments or long-term leases, which is not reflected in such
Financial Statements or the footnotes thereto. Since the last date covered by
such Financial Statements, there has been no sale, transfer or other disposition
by Borrower of any material part of its business or property and no purchase or
other acquisition of any business or property (including any capital stock of
any other Person) material in relation to the financial condition of Borrower at
said date. Since said date, (i) there has been no change, occurrence,
development or event which has had or could reasonably be expected to have a
Material Adverse Effect and (ii) none of the capital stock of Borrower has been
redeemed, retired, purchased or otherwise acquired for value by Borrower. *
* THE FINANCIAL STATEMENTS DO NOT REFLECT THE SALE ON JUNE 7, 1999 OF
$5,000,000 AGGREGATE PRINCIPAL AMOUNT OF BORROWER'S 7% CONVERTIBLE DEBENTURES
DUE JUNE 7, 2002 (THE "DEBENTURES"). THE TERMS OF THE DEBENTURES (INCLUDING THE
ABILITY OF THE PURCHASERS OF THE DEBENTURES TO PURCHASE AN ADDITIONAL $5,000,000
IN AGGREGATE PRINCIPAL AMOUNT) ARE SUMMARIZED IN, AND THE DOCUMENTS EVIDENCING
THE DEBENTURES ARE FILED WITH, THE BORROWER'S CURRENT REPORT ON FORM 8-K FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 14, 1999. THE FINANCIAL
STATEMENTS ALSO DO NOT REFLECT THE ACQUISITION OF AMP, DESCRIBED BELOW IN
SECTION 4.10 (THE "AMP ACQUISITION").
4.9. Accuracy and Completeness of Information. All data, reports and
information previously, now or hereafter furnished by or on behalf of Borrower
to TBCC or the Auditors are or will be true and accurate in all material
respects on the date as of which such data, reports and information are dated or
certified, and not incomplete by omitting to state any material fact necessary
to make such data, reports and information not materially misleading at such
time. There are no facts now known to Borrower which individually or in the
aggregate would reasonably be expected to have a Material Adverse Effect and
which have not been disclosed in writing to TBCC.
4.10. No Joint Ventures, Partnerships or Subsidiaries. Borrower is not engaged
in any joint venture or partnership with any other Person. Borrower has no
Subsidiaries*.
* OTHER THAN ADVANCED MEDICAL PROCEDURES, INC., A DELAWARE CORPORATION
("AMP"), ALL OF WHOSE ASSETS ARE LOCATED IN THE STATE OF FLORIDA
4.11. Corporate and Trade Name. During the past five years, Borrower has not
been known by or used any other corporate, trade or fictitious name except for
its name as set forth on the signature page of this Agreement and the other
names specified in the Schedule.
4.12. No Actual or Pending Material Modification of Business. There exists no
actual or, to the best of Borrower's knowledge after due inquiry, threatened
termination, cancellation or limitation of, or any modification or change in the
business relationship of Borrower with any customer or group of customers whose
purchases individually or in the aggregate are material to the operation of
Borrower's business or with any material supplier.
4.13. No Broker's or Finder's Fees. No broker or finder brought about this
Agreement or the Loans. No broker's or finder's fees or commissions will be
payable by Borrower to any Person in connection with the transactions
contemplated by this Agreement.
4.14. Taxes and Tax Returns. Borrower has properly completed and timely filed
all income tax returns it is required to file. The information filed is complete
and accurate in all material respects. All deductions taken in such income tax
returns are appropriate and in accordance with applicable laws and regulations,
except deductions that may have been disallowed but are being challenged in good
faith and for which adequate reserves have been made in accordance with GAAP.
All taxes, assessments, fees and other governmental charges for periods
beginning prior to the date of this Agreement have been timely paid (or, if not
yet due, adequate reserves therefor have been established in accordance with
GAAP) and Borrower has no liability for taxes in excess of the amounts so paid
or reserves so established. No deficiencies for taxes have been claimed,
proposed or assessed by any taxing or other Governmental Authority against
Borrower and no notice of any tax Lien has been filed. There are no pending or
threatened audits, investigations or claims for or relating to any liability for
taxes and there are no matters under discussion with any Governmental Authority
which could result in an additional liability for taxes*. No extension of a
statute of limitations relating to taxes, assessments, fees or other
governmental charges is in effect with respect to Borrower. Borrower is not a
party to and does not have any obligations under any written tax sharing
agreement or agreement regarding payments in lieu of taxes.
* , BUT THERE IS A PENDING ORDINARY COURSE SALES AND USE TAX AUDIT BEING
CONDUCTED
4.15. No Judgments or Litigation. Except as set forth in the Schedule, no
judgments, orders, writs or decrees are outstanding against Borrower, nor is
there now pending or, to the knowledge of Borrower after due inquiry, threatened
litigation, contested claim, investigation, arbitration, or governmental
proceeding by or against Borrower that (i) could individually or in the
aggregate be likely in the reasonable business judgment of TBCC to have a
Material Adverse Effect or (ii) purports to affect the legality, validity or
enforceability of this Agreement, any other Loan Document or the consummation of
the transactions contemplated hereby or thereby.
4.16. Investments; Contracts. Borrower (i) has not committed to make any
Investment*; (ii) is not a party to any indenture, agreement, contract,
instrument or lease or subject to any charter, by-law or other corporate
restriction or any injunction, order, restriction or decree, which would
materially and adversely affect its business, operations, assets or financial
condition; (iii) is not a party to any take or pay contract as to which it is
the purchaser; or (iv) has no material contingent or long-term liability,
including management contracts (excluding employment contracts of full-time
individual officers or employees), which could have a Material Adverse Effect.
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* OTHER THAN THE SANARUS TRANSACTION (DEFINED BELOW)
4.17. No Defaults; Legal Compliance. Borrower is not in default under any term
of any Material Contract or in violation of any Requirement of Law, nor is
Borrower subject to any investigation with respect to a claimed violation of any
Requirement of Law.
4.18. Rights in Collateral; Priority of Liens. All Collateral is owned or
leased by Borrower, free and clear of any and all Liens in favor of third
parties, other than Permitted Liens. The Liens granted to TBCC pursuant to the
Loan Documents constitute valid, enforceable and perfected first-priority Liens
on the Collateral, except for Permitted Liens.
4.19. Intellectual Property. Set forth in the written Representations and
Warranties of Borrower previously delivered to TBCC is a complete and accurate
list of all patents, trademarks, trade names, service marks and copyrights
(registered and unregistered), and all applications therefor and licenses
thereof, of Borrower. Borrower owns or licenses all material patents,
trademarks, service-marks, logos, tradenames, trade secrets, know-how,
copyrights, or licenses and other rights with respect to any of the foregoing,
which are necessary or advisable for the operation of its business as presently
conducted or proposed to be conducted. To the best of its knowledge after due
inquiry, Borrower has not infringed any patent, trademark, service-▇▇▇▇,
tradename, copyright, license or other right owned by any other Person by the
sale or use of any product, process, method, substance, part or other material
presently contemplated to be sold or used, where such sale or use would
reasonably be expected to have a Material Adverse Effect and no claim or
litigation is pending, or to the best of Borrower's knowledge, threatened
against or affecting Borrower that contests its right to sell or use any such
product, process, method, substance, part or other material.
4.20. Labor Matters. There are no existing or threatened strikes, lockouts or
other disputes relating to any collective bargaining or similar agreement to
which Borrower is a party which would, individually or in the aggregate, be
reasonably likely to have a Material Adverse Effect.
4.21. Licenses and Permits. Borrower has obtained and holds in full force and
effect, all franchises, licenses, leases, permits, certificates, authorizations,
qualifications, easements, rights of way and other rights and approvals which
are necessary or advisable for the operation of its business as presently
conducted and as proposed to be conducted, except where the failure to possess
any of the foregoing (individually or in the aggregate) would not have a
Material Adverse Effect.
4.22. Government Regulation. Borrower is not subject to regulation under the
Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act, the Investment Company Act of 1940, or any other
Requirement of Law that limits its ability to incur indebtedness or its ability
to consummate the transactions contemplated by this Agreement and the other Loan
Documents.
4.23. Business and Properties. The business of Borrower is not affected by any
fire, explosion, accident, strike, lockout or other labor dispute, drought,
storm, hail, earthquake, embargo, act of God or of the public enemy or other
casualty (whether or not covered by insurance) that could reasonably be expected
to have a Material Adverse Effect.
4.24. Affiliate Transactions. Borrower is not a party to or bound by any
agreement or arrangement (whether oral or written) to which any Affiliate of
Borrower is a party except * (i) in the ordinary course of and pursuant to the
reasonable requirements of the business of Borrower and (ii) upon fair and
reasonable terms no less favorable to Borrower than it could obtain in a
comparable arm's-length transaction with an unaffiliated Person.
* FOR THE AGREEMENT AND PLAN OF MERGER DATED JUNE 30, 1999, FOR THE AMP
ACQUISITION, TO WHICH ▇▇▇▇▇▇ ▇▇▇▇▇ IS A PARTY, AS DISCLOSED IN BORROWER'S PROXY
STATEMENT FOR ITS 1999 ANNUAL MEETING OF SHAREHOLDERS FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION OR AS ENTERED INTO
4.25. Survival of Representations. All representations made by Borrower in
this Agreement and in any other Loan Document executed and delivered by it in
connection herewith shall survive the execution and delivery hereof and thereof
and the closing of the transactions contemplated hereby and thereby.
5. AFFIRMATIVE COVENANTS OF THE BORROWER. Until termination of this Agreement
and payment and satisfaction of all Obligations:
5.1. Corporate Existence. Borrower shall (i) maintain its corporate existence,
(ii) maintain in full force and effect all material licenses, bonds, franchises,
leases, trademarks, qualifications and authorizations to do business, and all
material patents, contracts and other rights necessary or advisable to the
profitable conduct of its business, and (iii) continue in, and limit its
operations to, the same lines of business as presently conducted by it.
5.2. Maintenance of Property. Borrower shall keep all property useful and
necessary to its business in good working order and condition (ordinary wear and
tear excepted) in accordance with its past operating practices.
5.3. Affiliate Transactions. Borrower shall conduct transactions with any of
its Affiliates on an arm's-length basis or other basis no less favorable to
Borrower and which are approved by the board of directors of Borrower.
5.4. Taxes. Borrower shall pay when due (i) all tax assessments, and other
governmental charges and levies imposed against it or any of its property and
(ii) all lawful claims that, if unpaid, might by law become a Lien upon its
property; provided, however, that, unless such tax assessment, charge, levy or
claim has become a Lien on any of the property of Borrower, it need not be paid
if it is being contested in good faith, by appropriate proceedings diligently
conducted and an adequate reserve or other appropriate provision shall have been
made therefor as required in accordance with GAAP.
5.5. Requirements of Law. Borrower shall comply with all Requirements of Law
applicable to it, including, without limitation, all applicable Federal, State,
local or foreign laws and regulations, including, without limitation, those
relating to environmental matters, employee matters, the Employee Retirement
Income Security Act of 1974, and the collection, payment and deposit of
employees' income, unemployment and social security taxes, provided that
Borrower shall not be deemed in violation hereof if
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Borrower's failure to comply with any of the foregoing would not require more
than * $50,000 to cure the same.
*$100,000
5.6. Insurance. Borrower shall maintain public liability insurance, business
interruption insurance, third party property damage insurance and replacement
value insurance on its assets (including the Collateral) under such policies of
insurance, with such insurance companies, in such amounts and covering such
risks as are at all times satisfactory to TBCC in its commercially reasonable
judgment, all of which policies covering the Collateral shall name TBCC as an
additional insured and lender loss payee in case of loss, and contain other
provisions as TBCC may reasonably require to protect fully TBCC's interest in
the Collateral and any payments to be made under such policies.
5.7. Books and Records; Inspections. Borrower shall (i) maintain books and
records (including computer records) pertaining to the Collateral in such
detail, form and scope as is consistent with good business practice and (ii)
provide TBCC and its agents access to the premises of Borrower at any time and
from time to time, during normal business hours and upon reasonable notice under
the circumstances, and at any time on and after the occurrence of a Default or
Event of Default, for the purposes of (A) inspecting and verifying the
Collateral, (B) inspecting and copying (at Borrower's expense) any and all
records pertaining thereto, and (C) discussing the affairs, finances and
business of Borrower with any officer, employee or director of Borrower or with
the Auditors. Borrower shall reimburse TBCC for the reasonable travel and
related expenses of TBCC's employees or, at TBCC's option, of such outside
accountants or examiners as may be retained by TBCC to verify or inspect
Collateral, records or documents of Borrower on a regular basis or for a special
inspection if TBCC deems the same appropriate. If TBCC's own employees are used,
Borrower shall also pay therefor $600 per person per day (or such other amount
as shall represent TBCC's then current standard charge for the same), or, if
outside examiners or accountants are used, Borrower shall also pay TBCC such sum
as TBCC may be obligated to pay as fees therefor.
5.8. Notification Requirements. Borrower shall give TBCC the following notices
and other documents:
(a) Notice of Defaults. Borrower shall give TBCC written notice of any
Default or Event of Default within two Business Days after becoming aware of the
same.
(b) Proceedings or Adverse Changes. Borrower shall give TBCC written notice
of any of the following, promptly, and in any event within five Business Days
after Borrower becomes aware of any of the following: (i) any proceeding being
instituted or threatened by or against it in any federal, state, local or
foreign court or before any commission or other regulatory body involving a sum,
together with the sum involved in all other similar proceedings, in excess of *
in the aggregate, (ii) any order, judgment or decree being entered against
Borrower or any of its properties or assets involving a sum, together with the
sum of all other orders, judgments or decrees, in excess of * in the aggregate,
and (iii) any actual or prospective change, development or event which has had
or could reasonably be expected to have a Material Adverse Effect.
*$100,000
(c) Change of Name or Chief Executive Office; Opening Additional Places of
Business. Borrower shall give TBCC at least 30 days prior written notice of any
change of Borrower's corporate name or its chief executive office or of the
opening of any additional place of business.
(d) Casualty Loss. Borrower shall (i) provide written notice to TBCC, within
ten Business Days, of any material damage to, the destruction of or any other
material loss to any asset or property owned or used by Borrower other than any
such asset or property with a net book value (individually or in the aggregate)
less than * or any condemnation, confiscation or other taking, in whole or in
part, or any event that otherwise diminishes so as to render impracticable or
unreasonable the use of such asset or property owned or used by Borrower
together with the amount of the damage, destruction, loss or diminution in value
and (ii) diligently file and prosecute its claim or claims for any award or
payment in connection with any of the foregoing.
*$50,000
(e) Intellectual Property. Borrower shall promptly give TBCC written notice
of any copyright registration made by it, any rights Borrower may obtain to any
copyrightable works, new trademarks or any new patentable inventions, and of any
renewal or extension of any trademark registration, or if it shall otherwise
become entitled to the benefit of any patent or patent application or trademark
or trademark application.
(f) Deposit Accounts and Security Accounts. Borrower shall promptly give TBCC
written notice of the opening of any new bank account or other deposit account,
and any new securities account.
5.9. Qualify to Transact Business. Borrower shall qualify to transact business
as a foreign corporation in each jurisdiction where the nature or extent of its
business or the ownership of its property requires it to be so qualified or
authorized and where failure to qualify or be authorized would have a Material
Adverse Effect.
5.10. Financial Reporting. Borrower shall timely deliver to TBCC the following
financial information: the information set forth in the Schedule, and, when
requested by TBCC in its good-faith judgment, any further information respecting
Borrower or any Collateral. Borrower authorizes TBCC to communicate directly
with its officers, employees and Auditors and to examine and make abstracts from
its books and records. Borrower authorizes its Auditors to disclose to TBCC any
and all financial statements, work papers and other information of any kind that
they may have with respect to Borrower and its business and financial and other
affairs. Borrower shall deliver a letter addressed to the Auditors requesting
them to comply with the provisions of this paragraph when requested by TBCC.
5.11. Payment of Liabilities. Borrower shall pay and discharge, in the
ordinary course of business, all Indebtedness, except where the same may be
contested in good faith by appropriate proceedings and adequate reserves with
respect thereto have been provided on the books and records of Borrower in
accordance with GAAP.
5.12. Patents, Trademarks, Etc. Borrower shall do and cause to be done all
things necessary to preserve, maintain and keep in full force and effect all of
its registrations of trademarks, service marks and other marks, trade names
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and other trade rights, patents, copyrights and other intellectual property in
accordance with prudent business practices.
5.13. Proceeds of Collateral. Without limiting any of the other terms of this
Agreement, and without implying any consent to any sale or other transfer of
Collateral in violation of any provision of this Agreement, Borrower shall
deliver to TBCC all proceeds of any sale or other transfer or disposition of any
Collateral, immediately upon receipt of the same and in the same form as
received, with any necessary endorsements, and Borrower will not commingle any
such proceeds with any of its other funds or property, but will segregate them
from the other assets of Borrower and will hold them in trust and for the
account and as the property of TBCC.
5.14. Solvency. Borrower shall be Solvent at all times.
6. Negative Covenants. Until termination of this Agreement and payment and
satisfaction of all Obligations:
6.1. Contingent Obligations. Borrower will not, directly or indirectly, incur,
assume, or suffer to exist any Contingent Obligation, excluding indemnities
given in connection with this Agreement or the other Loan Documents in favor of
TBCC or in connection with the sale of Inventory or other asset dispositions
permitted hereunder.
6.2. Corporate Changes. Borrower will not, directly or indirectly, merge or
consolidate with any Person, or liquidate or dissolve (or suffer any liquidation
or dissolution)*.
* EXCEPT THAT (I) BORROWER MAY MERGE AMP INTO BORROWER, AND (II) CERTAIN
PROPOSED GENERALLY ACCEPTED ACCOUNTING PROCEDURES MAY REQUIRE THAT SANARUS BE
CONSOLIDATED WITH BORROWER FOR FINANCIAL ACCOUNTING PURPOSES
6.3. Change in Nature of Business. Borrower will not at any time make any
material change in the lines of its business as carried on at the date of this
Agreement or enter into any new line of business.
6.4. Sales of Assets. Borrower will not, directly or indirectly, in any fiscal
year, sell, transfer or otherwise dispose of any assets, or grant any option or
other right to purchase or otherwise acquire any assets other than (i) Equipment
with an aggregate value of less than * the proceeds of which shall be paid to
TBCC and applied to the Obligations, (ii) sales of Inventory in the ordinary
course of business and (iii) licenses or sublicenses on a non-exclusive basis of
intellectual property in the ordinary course of Borrower's business**.
*$50,000
**AND EXCLUSIVE DISTRIBUTION LICENSES AND MANUFACTURING LICENSES IN ARMS
LENGTH TRANSACTIONS
6.5. Cancellation of Debt. Borrower will not cancel any claim or debt owed to
it, except in the ordinary course of business.
6.6. Loans to Other Persons. Borrower will not at any time make loans or
advance any credit (except to trade debtors in the ordinary course of business)
to any Person in excess of * in the aggregate at any time for all such loans. **
*$150,000
** THE FOREGOING NEGATIVE COVENANT SHALL NOT BE CONSTRUED TO PROHIBIT ISSUANCE
OF BORROWER'S CAPITAL STOCK TO ITS EMPLOYEES, CONSULTANTS OR DIRECTORS IN
EXCHANGE FOR PROMISSORY NOTES, I.E., IN A COMPLETELY CASHLESS TRANSACTION.
NOTWITHSTANDING THE PROVISIONS OF THIS SECTION 6.6, BORROWER MAY MAKE LOANS TO
AMP, PROVIDED THAT THE OUTSTANDING BALANCE OF ALL AMOUNTS OWING FROM AMP TO
BORROWER, INCLUDING BUT NOT LIMITED TO PRINCIPAL AND INTEREST, SHALL NOT EXCEED
(I) $685,000 AT ANY TIME FROM THE DATE OF THIS AGREEMENT THROUGH JUNE 30, 2000,
AND (II) $1,185,000 AT ANY TIME AFTER JUNE 30, 2000.
6.7. Liens. Borrower will not, directly or indirectly, at any time create,
incur, assume or suffer to exist any Lien on or with respect to any of the
Collateral, other than: Liens created hereunder and by any other Loan Document;
and Permitted Liens.
6.8. Dividends, Stock Redemptions. Borrower will not, directly or indirectly,
pay any dividends or distributions on, purchase, redeem or retire any shares of
any class of its capital stock or any warrants, options or rights to purchase
any such capital stock, whether now or hereafter outstanding (Stock), or make
any payment on account of or set apart assets for a sinking or other analogous
fund for, the purchase, redemption, defeasance, retirement or other acquisition
of its Stock, or make any other distribution in respect thereof, either directly
or indirectly, whether in cash or property or in obligations of Borrower, except
for dividends paid solely in stock of the Borrower *.
* , PROVIDED HOWEVER, THAT BORROWER MAY REPURCHASE STOCK, PROVIDED THAT NO
DEFAULT OR EVENT OF DEFAULT SHALL EXIST EITHER IMMEDIATELY PRIOR TO OR AFTER
GIVING EFFECT TO ANY SUCH REPURCHASE, AND PROVIDED THAT THE AGGREGATE AMOUNTS SO
PAID FOR SUCH REPURCHASE(S) OF STOCK DURING THE TERM OF THIS AGREEMENT AND ANY
RENEWAL TERMS SHALL NOT EXCEED $250,000 CUMULATIVELY
6.9. Investments in Other Persons. Borrower will not, directly or indirectly,
at any time make or hold any Investment in any Person (whether in cash,
securities or other property of any kind) other than Investments in Cash
Equivalents*.
* AND IN CONNECTION WITH THE SANARUS TRANSACTION (DEFINED BELOW)
6.10. Partnerships; Subsidiaries; Joint Ventures; Management Contracts.
Borrower will not at any time create any direct or indirect Subsidiary, enter
into any joint venture or similar arrangement or become a partner in any general
or limited partnership or enter into any management contract (other than an
employment contract for the employment of an officer or employee entered into in
the regular course of Borrower's business) permitting third party management
rights with respect to Borrower's business*.
* , EXCEPT FOR THE SANARUS TRANSACTION (DEFINED BELOW)
6.11. Fiscal Year. Borrower will not change its fiscal year.
6.12. Accounting Changes. Borrower will not at any time make or permit any
change in accounting policies or reporting practices, except as required by
GAAP.
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6.13. Broker's or Finder's Fees. Borrower will not pay or incur any broker's
or finder's fees in connection with this Agreement or the transactions
contemplated hereby.
6.14. Unusual Terms of Sale. Borrower will not sell goods or products on
extended terms, consignment terms, on a progress billing or ▇▇▇▇ and hold basis,
or on any other unusual terms*.
* , EXCEPT THAT BORROWER MAY FROM TIME TO TIME (I) LOAN A CRYOCARE SYSTEM TO A
USER, AND (II) TRANSFER A CRYOCARE SYSTEM TO A USER WHO HAS PURCHASED A
SUFFICIENT NUMBER OF DISPOSABLE UNITES WHICH ARE USED IN CONNECTION WITH SUCH
CRYOCARE SYSTEM
6.15. Amendments of Material Contracts. Borrower will not amend, modify,
cancel or terminate, or permit the amendment, modification, cancellation or
termination of, any Material Contract, if such amendment, modification,
cancellation or termination could * have a Material Adverse Effect.
*REASONABLY BE EXPECTED TO
6.16. Sale and Leaseback Obligations. Borrower will not at any time create,
incur or assume any obligations as lessee for the rental of real or personal
property in connection with any sale and leaseback transaction.
6.17. Acquisition of Stock or Assets. Borrower will not acquire or commit or
agree to acquire all or any stock, securities or assets of any other Person
other than Inventory and Equipment acquired in the ordinary course of business*.
* , EXCEPT THAT BORROWER MAY ACQUIRE, AND TBCC CONSENTS TO THE ACQUISITION OF
THE FOLLOWING: (I) SERIES A PREFERRED STOCK OF SANARUS MEDICAL INCORPORATED
("SANARUS") REPRESENTING APPROXIMATELY SIX PERCENT (6%) OF THE CURRENT
OUTSTANDING CAPITAL STOCK OF SANARUS (THE "SANARUS STOCK"), FOR A PURCHASE PRICE
OF APPROXIMATELY $500,000; AND (II) A WARRANT TO PURCHASE AN ADDITIONAL
EIGHTY-TWO PERCENT (82%) OF THE CURRENT OUTSTANDING CAPITAL STOCK OF SANARUS
(THE "SANARUS WARRANT"), FOR A PURCHASE PRICE OF APPROXIMATELY $100,000 (THE
PURCHASE BY BORROWER OF THE SANARUS STOCK AND THE SANARUS WARRANT MAY BE
COLLECTIVELY REFERRED TO HEREIN AS THE "SANARUS TRANSACTION"), PROVIDED THAT,
BORROWER EXECUTES SUCH DOCUMENTS, INSTRUMENTS, AND AGREEMENTS, INCLUDING BUT NOT
LIMITED TO PLEDGE AGREEMENTS WITH RESPECT TO THE SANARUS STOCK AND THE SANARUS
WARRANT, AND TAKES SUCH OTHER ACTION WITH RESPECT THERETO, INCLUDING BUT NOT
LIMITED TO DELIVERING POSSESSION OF THE SANARUS STOCK AND THE SANARUS WARRANT TO
TBCC, AS TBCC MAY SPECIFY
7. EVENTS OF DEFAULT.
7.1. Events of Default. The occurrence of any of the following events shall
constitute an Event of Default:
(a) Borrower shall fail to pay any principal, interest, fees, expenses or
other Obligations when payable, whether at stated maturity, by acceleration, or
otherwise; or
(b) Borrower shall default in the performance or observance of any agreement,
covenant, condition, provision or term contained in Section 1.1, 1.2, 1.4, 3.3,
5.7, 5.13, 6 (and its Sections and subsections), or 8.1 of this Agreement, or
Borrower shall fail to perform any non-monetary Obligation which by its nature
cannot be cured; or
(c) Borrower shall default in the performance or observance of any other
agreement, covenant, condition, provision or term of this Agreement (other than
those referred to in Section 7.1(a) above or Section 7.1(b) above) or any other
Loan Document, and such failure continues uncured for a period of * Business
Days after the date it occurs; or
*TEN
(d) Borrower or any Guarantor shall dissolve, wind up or otherwise cease to
conduct its business; or
(e) Borrower or any Guarantor shall become the subject of (i) an Insolvency
Event except as set forth in clause (e) of the definition of Insolvency Event or
(ii) an Insolvency Event as set forth in clause (e) of the definition of
Insolvency Event that is not dismissed within sixty days; or
(f) any representation or warranty made by or on behalf of Borrower or any
Guarantor to TBCC, under this Agreement or otherwise, shall be incorrect or
misleading in any material respect when made or deemed made; or
(g) A change in the ownership or control of more than * of the voting stock
of the Borrower compared to such ownership on the date of this Agreement; or
*30%
(h) any judgment or order for the payment of money shall be rendered against
Borrower and shall not be stayed, vacated, bonded or discharged within thirty
days; or
(i) any defined "Event of Default" shall occur under any other Loan Document;
or Borrower or any Guarantor shall deny or disaffirm its obligations under any
of the Loan Documents or any Liens granted in connection therewith or shall
otherwise challenge any of its obligations under any of the Loan Documents; or
any Liens granted in any of the Collateral shall be determined to be void,
voidable or invalid, are subordinated or are not given the priority contemplated
by this Agreement; or
(j) any Loan Document shall for any reason cease to create a valid and
perfected Lien on the Collateral purported to be covered thereby, of first
priority (except for Permitted Liens)*; or
*AND, IF THE FOREGOING IS THROUGH NO FAULT OF THE BORROWER, THE SAME SHALL
NOT BE CURED WITHIN FIVE (FIVE) DAYS
(k) the Auditors for Borrower shall deliver a Qualified opinion on any
Financial Statement; or
(l) Borrower or any Guarantor (i) shall fail to pay any Indebtedness owing to
TBCC under any other agreement with TBCC or note or instrument in favor of TBCC,
when due (whether at scheduled maturity or by required prepayment, acceleration,
demand or otherwise), or (ii) shall otherwise be in breach of or default in any
of its obligations under any such agreement, note or instrument with respect to
any such Indebtedness*; or
*WHICH WOULD PERMIT ACCELERATION OF SUCH INDEBTEDNESS
(m) Borrower or any Guarantor (i) shall fail to pay any Indebtedness in excess
of * owing to any Person other than TBCC or any interest or premium thereon,
when due (whether at scheduled maturity or by required
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prepayment, acceleration, demand or otherwise), ** or (ii) shall otherwise be in
breach or default in any of its obligations under any agreement with respect to
any such Indebtedness, if the effect of such breach, default or failure to pay
is to cause such Indebtedness to become due or redeemed or permit the holder or
holders of such Indebtedness (or a trustee or agent on behalf of such holder or
holders) to declare such Indebtedness due or require such Indebtedness to be
redeemed prior to its stated maturity***; or
*$100,000
** PROVIDED THAT, THIS PROVISION SHALL NOT APPLY WITH RESPECT TO ANY CLAIM BY
CIRCLE SEAL FOR UP TO $250,000 PURPORTEDLY DUE FROM BORROWER IN CONNECTION WITH
SALES OF VALVES BY CIRCLE SEAL TO BORROWER WHICH WERE SHIPPED TO, AND REJECTED
BY, BORROWER BETWEEN APRIL AND SEPTEMBER OF 1997,
*** AND THE HOLDER OR HOLDERS OF SUCH INDEBTEDNESS (OR A TRUSTEE OR AGENT ON
BEHALF OF SUCH HOLDER OR HOLDERS) DO DECLARE SUCH INDEBTEDNESS DUE OR REQUIRE
SUCH INDEBTEDNESS TO BE REDEEMED PRIOR TO ITS STATED MATURITY
(n) the occurrence of any event or condition that, in TBCC's * judgment,
could reasonably be expected to have a Material Adverse Effect.
* REASONABLE GOOD FAITH
TBCC may cease making any Loans hereunder during any of the above cure periods,
and thereafter if any Event of Default has occurred and is continuing.
7.2. Remedies. Upon the occurrence and during the continuance of an Event of
Default, TBCC shall have all rights and remedies under applicable law and the
Loan Documents, and TBCC may do any or all of the following:
(a) Declare all Obligations to be immediately due and payable (except with
respect to any Event of Default with respect to Borrower set forth in Section
7.1(e), in which case all Obligations shall automatically become immediately due
and payable) without presentment, demand, protest or any other action or
obligation of TBCC;
(b) Cease making any Loans or other extensions of credit to Borrower of any
kind;
(c) Take possession of all documents, instruments, files and records
(including the copying of any computer records) relating to the Receivables or
other Collateral and use (at the expense of Borrower) such supplies or space of
Borrower at Borrower's places of business necessary to administer and collect
the Receivables and other Collateral;
(d) Accelerate or extend the time of payment, compromise, issue credits, or
bring suit on the Receivables and other Collateral (in the name of Borrower or
TBCC) and otherwise administer and collect the Receivables and other Collateral;
(e) Collect, receive, dispose of and realize upon any Investment Property,
including withdrawal of any and all funds from any securities accounts;
(f) Sell, assign and deliver the Receivables and other Collateral, with or
without advertisement, at public or private sale, for cash, on credit or
otherwise, subject to applicable law;
(g) Foreclose on the security interests created pursuant to the Loan
Documents by any available procedure, take possession of any or all of the
Collateral, with or without judicial process and enter any premises where any
Collateral may be located for the purpose of taking possession of or removing
the same; and
(h) Bid or become a purchaser at any sale, free from any right of redemption,
which right is expressly waived by Borrower, if permitted under applicable law.
If notice of intended disposition of any Collateral is required by law, it is
agreed that ten days' notice shall constitute reasonable notification. Borrower
will assemble the Collateral and make it available at such locations as TBCC may
specify, whether at the premises of Borrower or elsewhere, and will make
available to TBCC the premises and facilities of Borrower for the purpose of
TBCC's taking possession of or removing the Collateral or putting the Collateral
in salable form.
(i) Borrower recognizes that TBCC may be unable to make a public sale of any
or all of the Investment Property, by reasons of prohibitions contained in
applicable securities laws or otherwise, and expressly agrees that a private
sale to a restricted group of purchasers for investment and not with a view to
any distribution thereof shall be considered a commercially reasonable sale.
7.3. Receivables. Upon the occurrence and during the continuance of an Event
of Default, or at any time that TBCC believes in good faith that fraud has
occurred or that Borrower has failed to deliver the proceeds of Receivables or
other Collateral to TBCC as required by this Agreement or any other Loan
Document, TBCC may (i) settle or adjust disputes or claims directly with account
debtors for amounts and upon terms which it considers advisable, and (ii) notify
account debtors on the Receivables and other Collateral that the Receivables and
Collateral have been assigned to TBCC, and that payments in respect thereof
shall be made directly to TBCC. If an Event of Default has occurred and is
continuing or TBCC reasonably believes in good faith that fraud has occurred, or
that Borrower has failed to deliver the proceeds of Receivables or other
Collateral to TBCC as required by this Agreement or any other Loan Document,
Borrower hereby irrevocably authorizes and appoints TBCC, or any Person TBCC may
designate, as its attorney-in-fact, at Borrower's sole cost and expense, to
exercise, all of the following powers, which are coupled with an interest and
are irrevocable, until all of the Obligations have been indefeasibly paid and
satisfied in full in cash: (A) to receive, take, endorse, sign, assign and
deliver, all in the name of TBCC or Borrower, any and all checks, notes, drafts,
and other documents or instruments relating to the Collateral; (B) to receive,
open and dispose of all mail addressed to Borrower and to notify postal
authorities to change the address for delivery thereof to such address as TBCC
may designate; and (C) to take or bring, in the name of TBCC or Borrower, all
steps, actions, suits or proceedings deemed by TBCC necessary or desirable to
enforce or effect collection of Receivables and other Collateral or file and
sign Borrower's name on a proof of claim in bankruptcy or similar document
against any obligor of Borrower.
7.4. Right of Setoff. In addition to all rights of offset that TBCC may have
under applicable law, upon the occurrence and during the continuance of any
Event of Default, and whether or not TBCC has made any demand or the Obligations
of Borrower have matured, TBCC shall have
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the right to appropriate and apply to the payment of the Obligations of Borrower
all deposits and other obligations then or thereafter owing by TBCC to or for
the credit or the account of Borrower. In the event that TBCC exercises any of
its rights under this Section, TBCC shall provide notice to Borrower of such
exercise, provided that the failure to give such notice shall not affect the
validity of the exercise of such rights.
7.5. License for Use of Software and Other Intellectual Property. After the
occurrence and during the continuance of an Event of Default, unless expressly
prohibited by any licensor thereof, TBCC is hereby granted a license to use all
computer software programs, data bases, processes, trademarks, tradenames and
materials used by Borrower in connection with its businesses or in connection
with the Collateral.
7.6. No Marshalling; Deficiencies; Remedies Cumulative. The net cash proceeds
resulting from TBCC's exercise of any of its rights with respect to Collateral,
including any and all Collections (after deducting all of TBCC's reasonable
expenses related thereto), shall be applied by TBCC to such of the Obligations
in such order as TBCC shall elect in its sole and absolute discretion, whether
due or to become due. Borrower shall remain liable to TBCC for any deficiencies
and TBCC shall remit to Borrower or its successor or assign, any surplus
resulting therefrom. The remedies specified in this Agreement are cumulative,
may be exercised in such order and with respect to such Collateral as TBCC may
deem desirable and are not intended to be exclusive, and the full or partial
exercise of any of them shall not preclude the full or partial exercise of any
other available remedy under this Agreement, under any other Loan Document, at
equity or at law.
7.7. Waivers. Borrower hereby waives any bonds, security or sureties required
by any statute, rule or any other law as an incident to any taking of possession
by TBCC of any Collateral. Borrower also waives any damages (direct,
consequential or otherwise) occasioned by the enforcement of TBCC's rights under
this Agreement or any other Loan Document including the taking of possession of
any Collateral or the giving of notice to any account debtor or the collection
of any Receivable or other Collateral (other than damages that are the result of
acts or omissions constituting gross negligence or willful misconduct of TBCC).
These waivers and all other waivers provided for in this Agreement and the other
Loan Documents have been negotiated by the parties and Borrower acknowledges
that it has been represented by counsel of its own choice and has consulted such
counsel with respect to its rights hereunder.
7.8. Right to Make Payments. In the event that Borrower shall fail to purchase
or maintain insurance required hereunder, or to pay any tax, assessment,
government charge or levy, except as the same may be otherwise permitted
hereunder, or in the event that any Lien prohibited hereby shall not be paid in
full or discharged, or in the event that Borrower shall fail to perform or
comply with any other covenant, promise or obligation to TBCC hereunder or under
any other Loan Document, TBCC may (but shall not be required to) perform, pay,
satisfy, discharge or bond the same for the account of Borrower, and all amounts
so paid by TBCC shall be treated as a Loan hereunder to Borrower and shall
constitute part of the Obligations.
8. Assignments and Participations.
8.1. Assignments. Borrower shall not assign this Agreement or any right or
obligation hereunder without the prior written consent of TBCC. TBCC may assign
(without the consent of Borrower) to one or more Persons all or a portion of its
rights and obligations under this Agreement and the other Loan Documents.
8.2. Participations. TBCC may sell participations in or to all or a portion of
its rights and obligations under this Agreement (including, without limitation,
all or a portion of the Loans); provided, however, that TBCC's obligations under
this Agreement shall remain unchanged.
8.3. Disclosure. TBCC may, in connection with any permitted assignment or
participation or proposed assignment or participation pursuant to this
Agreement, disclose to the assignee or participant or proposed assignee or
participant any information relating to Borrower furnished to TBCC by or on
behalf of Borrower.
9. DEFINITIONS.
9.1. General Definitions. As used herein, the following terms shall have the
meanings herein specified (to be equally applicable to both the singular and
plural forms of the terms defined):
(a) Affiliate means as to any Person, any other Person who directly or
indirectly controls, is under common control with, is controlled by or is a
director or officer of such Person. As used in this definition, "control"
(including its correlative meanings, "controlled by" and "under common control
with") means possession, directly or indirectly, of the power to direct or cause
the direction of management or policies (whether through ownership of voting
securities or partnership or other ownership interests, by contract or
otherwise), provided that, in any event, any Person who owns directly or
indirectly twenty percent (20%) or more of the securities having ordinary voting
power for the election of the members of the board of directors or other
governing body of a corporation or twenty percent (20%) or more of the
partnership or other ownership interests of any other Person (other than as a
limited partner of such other Person) will be deemed to control such
corporation, partnership or other Person.
(b) Agreement means this Loan and Security Agreement, as amended,
supplemented or otherwise modified from time to time.
(c) Auditors means a nationally recognized firm of independent public
accountants selected by Borrower and reasonably satisfactory to TBCC.
(d) Bankruptcy Code means Title 11 of the United States Code entitled
"Bankruptcy," as that title may be amended from time to time, or any successor
statute.
(e) Borrowing means a borrowing of Loans.
(f) Business Day means any day other than a Saturday, Sunday or any other day
on which commercial banks in Chicago, Illinois are required or permitted by law
to close.
(g) Cash Equivalents means (i) securities issued, guaranteed or insured by the
United States or any of its agencies with maturities of not more than one year
from the date acquired; (ii) certificates of deposit with maturities of not more
than one year from the date acquired, issued by any U.S. federal or state
chartered commercial bank of
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recognized standing which has capital and unimpaired surplus in excess of
$100,000,000; (iii) investments in money market funds registered under the
Investment Company Act of 1940; and (iv) other instruments, commercial paper or
investments acceptable to TBCC in its sole discretion.
(h) Collateral means Receivables, Investment Property, Inventory, Equipment,
and Other Property, and all additions and accessions thereto and substitutions
and replacements therefor and improvements thereon, and all proceeds (whether
cash or other property) and products thereof, including, without limitation, all
proceeds of insurance covering the same and all tort claims in connection
therewith, and all records, files, computer programs and files, data and
writings relating to the foregoing, and all equipment containing the foregoing.
(i) Collections means all cash, funds, checks, notes, instruments, any other
form of remittance tendered by account debtors in respect of payment of
Receivables and any other payments received by Borrower with respect to any
other Collateral.
(j) Compliance Certificate means a certificate as to compliance with the
Obligations, on TBCC's standard form (in effect from time to time).
(k) Contingent Obligation means any direct, indirect, contingent or
non-contingent guaranty or obligation for the Indebtedness of another Person,
except endorsements in the ordinary course of business.
(l) Default means any of the events specified in Section 7.1, whether or not
any of the requirements for the giving of notice, the lapse of time, or both, or
any other condition, has been satisfied.
(m) [Omitted]
(n) Eligible Receivables means and includes only those Receivables which TBCC
in its * deems eligible for borrowing, based on such considerations as TBCC in
its sole discretion may deem appropriate from time to time and less any such
reserves as TBCC, in its sole discretion, may require. Without limiting the fact
that the determination of which Receivables are eligible for borrowing is a
matter of TBCC's sole discretion, the following (the "Minimum Eligibility
Requirements") are the minimum requirements for a Receivable to be an Eligible
Receivable: (i) the Receivable must not be outstanding for more than 90 days
from its invoice date, (ii) the Receivable must not represent progress ▇▇▇▇▇▇▇▇,
or be due under a fulfillment or requirements contract with the account debtor,
(iii) the Receivable must not be subject to any contingencies (including
Receivables arising from sales on consignment, guaranteed sale or other terms
pursuant to which payment by the account debtor may be conditional), (iv) the
Receivable must not be owing from an account debtor with whom the Borrower has
any dispute (whether or not relating to the particular Receivable), (v) the
Receivable must not be owing from an Affiliate of Borrower, (vi) the Receivable
must not be owing from an account debtor which is subject to any insolvency or
bankruptcy proceeding, or whose financial condition is not acceptable to TBCC,
or which, fails or goes out of a material portion of its business, (vii) the
Receivable must not be owing from the United States or any department, agency or
instrumentality thereof (unless there has been compliance, to TBCC's
satisfaction, with the United States Assignment of Claims Act), (viii) the
Receivable must not be owing from an account debtor located outside the United
States or Canada (unless pre-approved by TBCC in its discretion in writing, or
backed by a letter of credit satisfactory to TBCC, or FCIA insured satisfactory
to TBCC), (ix) the Receivable must not be owing from an account debtor to whom
Borrower is or may be liable for goods purchased from such account debtor or
otherwise, (x) the Receivable must not violate any representation or warranty
set forth in this Agreement, and (xi) the Receivable must not be one in which
TBCC does not have a first-priority, valid, perfected Lien. Without limiting the
generality of the foregoing, Borrower must be in compliance with all
requirements of the Loan Documents regarding registration with the U.S.
Copyright Office of any copyrightable software in order for any Receivable
arising from any licensing of such software to constitute an Eligible Receivable
hereunder. Receivables owing from one account debtor will not be deemed Eligible
Receivables to the extent they exceed 35% of the total eligible Receivables
outstanding. In addition, if more than 50% of the Receivables owing from an
account debtor are outstanding more than 90 days from their invoice date
(without regard to unapplied credits) or are otherwise not eligible Receivables,
then all Receivables owing from that account debtor will be deemed ineligible
for borrowing. TBCC may, from time to time, in its sole discretion, revise the
Minimum Eligibility Requirements, upon written notice to the Borrower.
*GOOD FAITH BUSINESS JUDGMENT
(o) Equipment means all machinery, equipment, furniture, fixtures, conveyors,
tools, materials, storage and handling equipment, hydraulic presses, cutting
equipment, computer equipment and hardware, including central processing units,
terminals, drives, memory units, printers, keyboards, screens, peripherals and
input or output devices, molds, dies, stamps, vehicles, and other equipment of
every kind and nature and wherever situated now or hereafter owned by Borrower
or in which Borrower may have any interest as lessee or otherwise (to the extent
of such interest), together with all additions and accessions thereto, all
replacements and all accessories and parts therefor, all manuals, blueprints,
know-how, warranties and records in connection therewith, all rights against
suppliers, warrantors, manufacturers, sellers or others in connection therewith,
and together with all substitutes for any of the foregoing.
(p) Event of Default means the occurrence of any of the events specified in
Section 7.1.
(q) Financial Statements means the balance sheets, profit and loss
statements, statements of cash flow, and statements of changes in intercompany
accounts, if any, for the period specified, prepared in accordance with GAAP and
consistent with prior practices.
(r) GAAP means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board that are applicable to the
circumstances as of the date of determination. Whenever any accounting term is
used herein which is not otherwise defined, it shall be interpreted in
accordance with GAAP.
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TBCC LOAN AND SECURITY AGREEMENT
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(s) Good Faith means "good faith" as defined in the Uniform Commercial Code,
from time to time in effect in the State of Illinois.
(t) Governing Documents means the articles or certificate of incorporation
and by-laws of Borrower.
(u) Governmental Authority means any nation or government, any state or other
political subdivision thereof or any entity exercising executive, legislative,
judicial, regulatory or administrative functions thereof or pertaining thereto.
(v) Guarantor means any present or future guarantor of any or all of the
Obligations.
(w) Indebtedness means, with respect to any Person, as of the date of
determination any indebtedness, liability or obligation of such Person
(including without limitation obligations under capital leases and Contingent
Obligations).
(x) Insolvency Event means, with respect to any Person, the occurrence of any
of the following: (a) such Person shall be adjudicated insolvent or bankrupt, or
shall generally fail to pay or admit in writing its inability to pay its debts
as they become due, (b) such Person shall seek dissolution or reorganization or
the appointment of a receiver, trustee, custodian or liquidator for it or a
substantial portion of its property, assets or business or to effect a plan or
other arrangement with its creditors, (c) such Person shall make a general
assignment for the benefit of its creditors, or consent to or acquiesce in the
appointment of a receiver, trustee, custodian or liquidator for a substantial
portion of its property, assets or business, (d) such Person shall file a
voluntary petition under any bankruptcy, insolvency or similar law or take any
corporate or similar act in furtherance thereof, or (e) such Person, or a
substantial portion of its property, assets or business shall become the subject
of an involuntary proceeding or petition for its dissolution, reorganization,
and such proceeding is not dismissed or stayed within sixty days, or the
appointment of a receiver, trustee, custodian or liquidator, and such receiver
is not dismissed within sixty days.
(y) Inventory means all present and future goods intended for sale, lease or
other disposition by Borrower including, without limitation, all raw materials,
work in process, finished goods and other retail inventory, goods in the
possession of outside processors or other third parties, goods consigned to
Borrower to the extent of its interest therein as consignee, materials and
supplies of any kind, nature or description which are or might be used in
connection with the manufacture, packing, shipping, advertising, selling or
finishing of any such goods, and all documents of title or documents
representing the same.
(z) Investment in any Person means, as of the date of determination thereof,
any payment or contribution, or commitment to make a payment or contribution, by
any Person including, without limitation, property contributed or committed to
be contributed by any Person, on its account for or in connection with its
acquisition of any stock, bonds, notes, debentures, partnership or other
ownership interest or any other security of the Person in whom such Investment
is made or any evidence of indebtedness by reason of a loan, advance, extension
of credit, guaranty or other similar obligation for any debt, liability or
indebtedness of such Person in whom the Investment is made.
(aa) Investment Property means any and all investment property of Borrower,
including all securities, whether certificated or uncertificated, security
entitlements, securities accounts, commodity contracts and commodity accounts,
and all financial assets held in any securities account or otherwise, wherever
located, and whether now existing or hereafter acquired or arising.
(bb) Lien means any lien, claim, charge, pledge, security interest,
assignment, hypothecation, deed of trust, mortgage, lease, conditional sale,
retention of title or other preferential arrangement having substantially the
same economic effect as any of the foregoing, whether voluntary or imposed by
law.
(cc) Loan Account has the meaning specified in Section 1.3.
(dd) Loan Documents means this Agreement and all present and future documents
and instruments delivered or to be delivered by Borrower or any of its
Affiliates or any Guarantor under, in connection with or relating to this
Agreement, or any other present or future instrument or agreement between TBCC
and Borrower, as each of the same may be amended, supplemented or otherwise
modified from time to time.
(ee) Loans means the loans and financial accommodations made by TBCC
hereunder.
(ff) Material Adverse Effect means (i) a material adverse effect on the
business, prospects, operations, results of operations, assets, liabilities or
condition (financial or otherwise) of Borrower, (ii) the impairment of
Borrower's ability to perform its obligations under the Loan Documents to which
it is a party or of TBCC to enforce the Obligations or realize upon the
Collateral or (iii) a material adverse effect on the value of the Collateral or
the amount which TBCC would be likely to receive (after giving consideration to
delays in payment and costs of enforcement) in the liquidation of the
Collateral.
(gg) Material Contract means any contract or other arrangement to which
Borrower is a party (other than the Loan Documents) for which breach,
nonperformance, cancellation or failure to renew could have a Material Adverse
Effect.
(hh) Obligations means and includes all loans (including the Loans), advances,
debts, liabilities, obligations, covenants and duties owing by Borrower to TBCC
of any kind or nature, present or future, whether or not evidenced by any note,
guaranty or other instrument, whether or not arising under or in connection
with, this Agreement, any other Loan Document or any other present or future
instrument or agreement, whether or not for the payment of money, whether
arising by reason of an extension of credit, opening, guaranteeing or confirming
of a letter of credit, loan, guaranty, indemnification or in any other manner,
whether direct or indirect (including those acquired by assignment, purchase,
discount or otherwise), whether absolute or contingent, due or to become due,
now due or hereafter arising and however acquired (including without limitation
all loans previously made by TBCC to Borrower). The term includes, without
limitation, all interest (including interest accruing on or after an Insolvency
Event, whether or not an allowed claim), charges, expenses, commitment,
facility, closing and collateral management fees, letter of credit fees,
reasonable attorneys' fees, and any other sum properly chargeable to
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TBCC LOAN AND SECURITY AGREEMENT
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Borrower under this Agreement, the other Loan Documents or any other present or
future agreement between TBCC and Borrower.
(ii) Other Property means all present and future: instruments, documents,
documents of title, securities, bonds, notes, promissory notes, drafts,
acceptances, letters of credit and rights to receive proceeds of letters of
credit, deposit accounts, chattel paper, certificates, insurance policies,
insurance proceeds, leases, computer tapes, causes of action, judgments, claims
against third parties, leasehold rights in any personal property, books,
ledgers, files and records, general intangibles (including without limitation,
all contract rights, tax refunds, rights to receive tax refunds, royalties,
licenses, permits, franchise rights, authorizations, customer lists, rights of
indemnification, contribution and subrogation, computer programs, discs and
software, computer service contracts, trademarks, trade names, service marks and
names, logos, goodwill, deposits, choses in action, telephone numbers and rights
thereto, credits, reserves, and all forms of obligations whatsoever now or
hereafter owing to Borrower), all property at any time in the possession or
under the control of TBCC, and all security given by Borrower to TBCC pursuant
to any other Loan Document or agreement.
(jj) Permitted Liens means such of the following as to which no enforcement,
collection, execution, levy or foreclosure proceeding shall have been commenced
and be continuing: (i) Liens for taxes, assessments and other governmental
charges or levies or the claims or demands of landlords, carriers, warehousemen,
mechanics, laborers, materialmen and other like Persons arising by operation of
law in the ordinary course of business for sums which are not yet due and
payable, (ii) deposits or pledges to secure the payment of workmen's
compensation, unemployment insurance or other social security benefits or
obligations, public or statutory obligations, surety or appeal bonds, bid or
performance bonds, or other obligations of a like nature incurred in the
ordinary course of business (but nothing in this clause (ii) shall permit the
creation of Liens on Receivables, Investment Property, Inventory or Other
Property), (iii) zoning restrictions, easements, encroachments, licenses,
restrictions or covenants on the use of property which do not materially impair
either the use of the property in the operation of the business of Borrower or
the value of the property, (iv) rights of general application reserved to or
vested in any municipality or other governmental, statutory or public authority
to control or regulate property, or to use property in a manner which does not
materially impair the use of the property for the purposes for which it is held
by Borrower, (v) state and municipal Liens for personal property taxes which are
not yet due and payable, and (vi) Purchase Money Liens.
(kk) Person means any individual, sole proprietorship, partnership, joint
venture, limited liability company, trust, unincorporated organization, joint
stock company, association, corporation, institution, entity, party or
government (including any division, agency or department thereof) or any other
legal entity, whether acting in an individual, fiduciary or other capacity, and,
as applicable, the successors, heirs and assigns of each.
(ll) Plan means any employee benefit plan, program or arrangement maintained
or contributed to by Borrower or with respect to which it may incur liability.
(mm) Purchase Money Lien means a Lien on any item of Equipment created
substantially simultaneously with the acquisition of such Equipment for the
purpose of financing such acquisition, provided that such Lien shall attach only
to the Equipment acquired.
(nn) Qualification or Qualified means, with respect to any report of Auditors
covering Financial Statements, a material qualification to such report (i)
resulting from a limitation on the scope of examination of such Financial
Statements or the underlying data, (ii) as to the capability of Borrower to
continue operations as a going concern or (iii) which could be eliminated by
changes in Financial Statements or notes thereto covered by such report (such as
by the creation of or increase in a reserve or a decrease in the carrying value
of assets) and which if so eliminated by the making of any such change and after
giving effect thereto would result in a Default or an Event of Default.
(oo) Receivables means all present and future accounts and accounts
receivable, together with all security therefor and guaranties thereof and all
rights and remedies relating thereto, including any right of stoppage in
transit.
(pp) Requirement of Law means (a) the Governing Documents, (b) any law,
treaty, rule, regulation, order or determination of an arbitrator, court or
other Governmental Authority or (c) any franchise, license, lease, permit,
certificate, authorization, qualification, easement, right of way, right or
approval binding on Borrower or any of its property.
(qq) Schedule means the Schedule to this Agreement being signed concurrently
by Borrower and TBCC, as amended from time to time.
(rr) Solvent means when used with respect to any Person that as of the date
as to which such Person's solvency is to be measured: (a) the fair salable value
of its assets is in excess of the total amount of its liabilities (including
contingent liabilities as valued in accordance with applicable law) as they
become absolute and matured; (b) it has sufficient capital to conduct its
business; and (c) it is able to meet its debts as they mature.
(ss) Subsidiary means, as to any Person, a corporation or other entity in
which that Person directly or indirectly owns or controls shares of stock or
other ownership interests having ordinary voting power to elect a majority of
the board of directors or appoint other managers of such corporation or other
entity.
9.2. Accounting Terms and Determinations. Unless otherwise defined or
specified herein, all accounting terms used in this Agreement shall be construed
in accordance with GAAP, applied on a basis consistent in all material respects
with the Financial Statements delivered to TBCC on or before the date of this
Agreement. All accounting determinations for purposes of determining compliance
with this Agreement shall be made in accordance with GAAP as in effect on the
date of this Agreement and applied on a basis consistent in all material
respects with the audited Financial Statements delivered to TBCC on or before
the date of this Agreement. The Financial Statements required to be delivered
hereunder, and all financial records, shall be maintained in accordance with
GAAP. If GAAP shall change from the basis used in preparing the audited
Financial Statements delivered to TBCC on or before the date of this Agreement,
the Compliance Certificates required to be delivered pursuant
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to this Agreement shall include calculations setting forth the adjustments
necessary to demonstrate how Borrower is in compliance with the Financial
Covenants (if any) based upon GAAP as in effect on the date of this Agreement.
9.3. Other Terms; Headings; Construction. Unless otherwise defined herein,
terms used herein that are defined in the Uniform Commercial Code, from time to
time in effect in the State of Illinois, shall have the meanings set forth
therein. Each of the words "hereof," "herein," and "hereunder" refer to this
Agreement as a whole. The term "including", whenever used in this Agreement,
shall mean "including (but not limited to)". An Event of Default shall
"continue" or be "continuing" unless and until such Event of Default has been
waived or cured within the grace period specified therefor under Section 7.1.
References to Articles, Sections, Annexes, Schedules, and Exhibits are internal
references to this Agreement, and to its attachments, unless otherwise
specified. The headings and any Table of Contents are for convenience only and
shall not affect the meaning or construction of any provision of this Agreement.
This Agreement has been fully reviewed and negotiated between the parties and no
uncertainty or ambiguity in any term or provision of this Agreement shall be
construed strictly against TBCC or Borrower under any rule of construction or
otherwise.
10. GENERAL PROVISIONS.
10.1. GOVERNING LAW. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS AND ANY DISPUTE ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, WHETHER
SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE GOVERNED BY THE
INTERNAL LAWS AND DECISIONS OF THE STATE OF ILLINOIS.
10.2. SUBMISSION TO JURISDICTION. ALL DISPUTES BETWEEN THE BORROWER AND TBCC,
WHETHER SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE RESOLVED ONLY
BY STATE AND FEDERAL COURTS LOCATED IN CHICAGO, ILLINOIS, AND THE COURTS TO
WHICH AN APPEAL THEREFROM MAY BE TAKEN; PROVIDED, HOWEVER, THAT TBCC SHALL HAVE
THE RIGHT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TO PROCEED AGAINST THE
BORROWER OR ITS PROPERTY IN ANY LOCATION REASONABLY SELECTED BY TBCC IN GOOD
FAITH TO ENABLE TBCC TO REALIZE ON SUCH PROPERTY, OR TO ENFORCE A JUDGMENT OR
OTHER COURT ORDER IN FAVOR OF TBCC. THE BORROWER AGREES THAT IT WILL NOT ASSERT
ANY PERMISSIVE COUNTERCLAIMS, SETOFFS OR CROSS-CLAIMS IN ANY PROCEEDING BROUGHT
BY TBCC. THE BORROWER WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF
THE COURT IN WHICH TBCC HAS COMMENCED A PROCEEDING, INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON FORUM NON
CONVENIENS.
10.3. SERVICE OF PROCESS. THE BORROWER HEREBY IRREVOCABLY DESIGNATES * AS THE
DESIGNEE AND AGENT OF THE BORROWER TO RECEIVE, FOR AND ON BEHALF OF THE
BORROWER, SERVICE OF PROCESS IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT. IT IS UNDERSTOOD THAT A COPY OF SUCH
PROCESS SERVED ON SUCH AGENT AT ITS ADDRESS WILL BE PROMPTLY FORWARDED BY MAIL
TO THE BORROWER, BUT THE FAILURE OF THE BORROWER TO RECEIVE SUCH COPY SHALL NOT
AFFECT IN ANY WAY THE SERVICE OF SUCH PROCESS. NOTHING HEREIN SHALL AFFECT THE
RIGHT OF THE LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
*▇▇▇▇▇▇▇▇-▇▇▇▇ CORPORATION SYSTEM, INC., ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
10.4. LIMITATION OF LIABILITY. TBCC SHALL HAVE NO LIABILITY TO THE BORROWER
(WHETHER SOUNDING IN TORT, CONTRACT, OR OTHERWISE) FOR LOSSES SUFFERED BY THE
BORROWER IN CONNECTION WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO THE
TRANSACTIONS OR RELATIONSHIPS CONTEMPLATED BY THIS AGREEMENT, OR ANY ACT,
OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH, UNLESS IT IS DETERMINED BY
A FINAL AND NONAPPEALABLE JUDGMENT OR COURT ORDER BINDING ON TBCC THAT THE
LOSSES WERE THE RESULT OF ACTS OR OMISSIONS CONSTITUTING GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF TBCC. THE BORROWER HEREBY WAIVES ALL FUTURE CLAIMS AGAINST
TBCC FOR SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES.
10.5. Delays; Partial Exercise of Remedies. No delay or omission of TBCC to
exercise any right or remedy hereunder shall impair any such right or operate as
a waiver thereof. No single or partial exercise by TBCC of any right or remedy
shall preclude any other or further exercise thereof, or preclude any other
right or remedy.
10.6. Notices. Except as otherwise provided herein, all notices and
correspondence hereunder shall be in writing and sent by certified or registered
mail, return receipt requested, by overnight delivery service, with all charges
prepaid, or by telecopier followed by a hard copy sent by regular mail, to the
parties at their addresses set forth in the heading to this Agreement. All such
notices and correspondence shall be deemed given (i) if sent by certified or
registered mail, three Business Days after being postmarked, (ii) if sent by
overnight delivery service, when received at the above stated addresses or when
delivery is refused and (iii) if sent by telecopier transmission, when receipt
of such transmission is acknowledged. Borrower's and TBCC's telecopier numbers
for purpose of notice hereunder are set forth in the Schedule; each party's
number may be changed by written notice to the other party.
10.7. Indemnification; Reimbursement of Expenses of Collection. Borrower
hereby indemnifies and agrees, whether or not any of the transactions
contemplated by this Agreement or the other Loan Documents are consummated, to
defend and hold harmless (on an after-tax basis) TBCC, its successors and
assigns and their respective directors,
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TBCC LOAN AND SECURITY AGREEMENT
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officers, agents, employees, advisors, shareholders, attorneys and Affiliates
(each, an "Indemnified Party") from and against any and all losses, claims,
damages, liabilities, deficiencies, obligations, fines, penalties, actions
(whether threatened or existing), judgments, suits (whether threatened or
existing) or expenses (including, without limitation, reasonable fees and
disbursements of counsel, experts, consultants and other professionals) incurred
by any of them (collectively, "Claims") (except, in the case of each Indemnified
Party, to the extent that any Claim is determined in a final and non-appealable
judgment by a court of competent jurisdiction to have directly resulted from
such Indemnified Party's gross negligence or willful misconduct) arising out of
or by reason of (i) any litigation, investigation, claim or proceeding which
arises out of or is related to (A) Borrower, or this Agreement, any other Loan
Document or the transactions contemplated hereby or thereby, (B) any actual or
proposed use by Borrower of the proceeds of the Loans, or (C) TBCC's entering
into this Agreement or any other Loan Document or any other agreements and
documents relating hereto, including, without limitation, amounts paid in
settlement, court costs and the reasonable fees and disbursements of counsel
incurred in connection with any such litigation, investigation, claim or
proceeding, (ii) any remedial or other action taken by Borrower in connection
with compliance by Borrower, or any of its properties, with any federal, state
or local environmental laws, rules or regulations, and (iii) any pending,
threatened or actual action, claim, proceeding or suit by any shareholder or
director of Borrower or any actual or purported violation of Borrower's charter,
by-laws or any other agreement or instrument to which Borrower is a party or by
which any of its properties is bound. In addition and without limiting the
generality of the foregoing, Borrower shall, upon demand, pay to TBCC all
reasonable costs and expenses incurred by TBCC (including the reasonable fees
and disbursements of counsel and other professionals) in connection with the
preparation, execution, delivery, administration, modification and amendment of
the Loan Documents, and pay to TBCC all reasonable costs and expenses (including
the reasonable fees and disbursements of counsel and other professionals) paid
or incurred by TBCC in order to enforce or defend any of its rights under or in
respect of this Agreement, any other Loan Document or any other document or
instrument now or hereafter executed and delivered in connection herewith,
collect the Obligations or otherwise administer this Agreement, foreclose or
otherwise realize upon the Collateral or any part thereof, prosecute actions
against, or defend actions by, account debtors; commence, intervene in, or
defend any action or proceeding; initiate any complaint to be relieved of the
automatic stay in bankruptcy; file or prosecute any probate claim, bankruptcy
claim, third-party claim, or other claim; examine, audit, copy, and inspect any
of the Collateral or any of Borrower's books and records; protect, obtain
possession of, lease, dispose of, or otherwise enforce TBCC's security interest
in, the Collateral; and otherwise represent TBCC in any litigation relating to
Borrower. Without limiting the generality of the foregoing, Borrower shall pay
TBCC a fee with respect to each wire transfer in the amount of $15 plus all bank
charges and a fee of $15 for all returned checks plus all bank charges. If
either TBCC or Borrower files any lawsuit against the other predicated on a
breach of this Agreement, the prevailing party in such action shall be entitled
to recover its reasonable costs and attorneys' fees, including (but not limited
to) reasonable attorneys' fees and costs incurred in the enforcement of,
execution upon or defense of any order, decree, award or judgment. If and to the
extent that the Obligations of Borrower hereunder are unenforceable for any
reason, Borrower hereby agrees to make the maximum contribution to the payment
and satisfaction of the Obligations which is permissible under applicable law.
Borrower's obligations under Section 2.4 and this Section shall survive any
termination of this Agreement and the other Loan Documents and the payment in
full of the Obligations, and are in addition to, and not in substitution of, any
of the other Obligations.
10.8. Amendments and Waivers. Any provision of this Agreement or any other
Loan Document may be amended or waived if, but only if, such amendment or waiver
is in writing and signed by Borrower and TBCC and then any such amendment or
waiver shall be effective only to the extent set forth therein. The failure of
TBCC at any time or times to require Borrower to strictly comply with any of the
provisions of this Agreement or any other present or future agreement between
Borrower and TBCC shall not waive or diminish any right of TBCC later to demand
and receive strict compliance therewith. Any waiver of any default shall not
waive or affect any other default, whether prior or subsequent, and whether or
not similar. None of the provisions of this Agreement or any other agreement now
or in the future executed by Borrower and delivered to TBCC shall be deemed to
have been waived by any act or knowledge of TBCC or its agents or employees, but
only by a specific written waiver signed by an authorized officer of TBCC and
delivered to Borrower.
10.9. Counterparts; Telecopied Signatures. This Agreement and any waiver or
amendment hereto may be executed in counterparts and by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but both of which shall together constitute one and the same
instrument. This Agreement and each of the other Loan Documents and any notices
given in connection herewith or therewith may be executed and delivered by
telecopier or other facsimile transmission all with the same force and effect as
if the same was a fully executed and delivered original manual counterpart.
10.10. Severability. In case any provision in or obligation under this
Agreement or any other Loan Document shall be invalid, illegal or unenforceable
in any jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
10.11. Joint and Several Liability. If Borrower consists of more than one
Person, their liability shall be joint and several, and the compromise of any
claim with, or the release of, any Borrower shall not constitute a compromise
with, or a release of, any other Borrower.
10.12. Maximum Rate. Notwithstanding anything to the contrary contained
elsewhere in this Agreement or in any other Loan Document, the parties hereto
hereby agree that all agreements between them under this Agreement and the other
Loan Documents, whether now existing or hereafter arising and whether written or
oral, are expressly limited so that in no contingency or event whatsoever shall
the amount paid, or agreed to be paid, to TBCC for the use, forbearance, or
detention of the money loaned to Borrower and evidenced hereby or thereby or for
the performance or
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payment of any covenant or obligation contained herein or therein, exceed the
maximum non-usurious interest rate, if any, that at any time or from time to
time may be contracted for, taken, reserved, charged or received on the
Obligations, under the laws of the State of Illinois (or the laws of any other
jurisdiction whose laws may be mandatorily applicable notwithstanding other
provisions of this Agreement and the other Loan Documents), or under applicable
federal laws which may presently or hereafter be in effect and which allow a
higher maximum non-usurious interest rate than under the laws of the State of
Illinois (or such other jurisdiction), in any case after taking into account, to
the extent permitted by applicable law, any and all relevant payments or charges
under this Agreement and the other Loan Documents executed in connection
herewith, and any available exemptions, exceptions and exclusions (the "Highest
Lawful Rate"). If due to any circumstance whatsoever, fulfillment of any
provisions of this Agreement or any of the other Loan Documents at the time
performance of such provision shall be due shall exceed the Highest Lawful Rate,
then, automatically, the obligation to be fulfilled shall be modified or reduced
to the extent necessary to limit such interest to the Highest Lawful Rate, and
if from any such circumstance TBCC should ever receive anything of value deemed
interest by applicable law which would exceed the Highest Lawful Rate, such
excessive interest shall be applied to the reduction of the principal amount
then outstanding hereunder or on account of any other then outstanding
Obligations and not to the payment of interest, or if such excessive interest
exceeds the principal unpaid balance then outstanding hereunder and such other
then outstanding Obligations, such excess shall be refunded to Borrower. All
sums paid or agreed to be paid to TBCC for the use, forbearance, or detention of
the Obligations and other indebtedness of Borrower to TBCC shall, to the extent
permitted by applicable law, be amortized, prorated, allocated and spread
throughout the full term of such indebtedness, until payment in full thereof, so
that the actual rate of interest on account of all such indebtedness does not
exceed the Highest Lawful Rate throughout the entire term of such indebtedness.
The terms and provisions of this Section shall control every other provision of
this Agreement, the other Loan Documents and all other agreements between the
parties hereto.
10.13. Entire Agreement; Successors and Assigns. This Agreement and the other
Loan Documents constitute the entire agreement between the parties, supersede
any prior written and verbal agreements between them, and shall bind and benefit
the parties and their respective successors and permitted assigns. There are no
oral understandings, oral representations or oral agreements between the parties
which are not set forth in this Agreement or in other written agreements signed
by the parties in connection herewith.
10.14. MUTUAL WAIVER OF JURY TRIAL. TBCC AND BORROWER EACH HEREBY WAIVE THE
RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF,
OR IN ANY WAY RELATING TO: (I) THIS AGREEMENT; OR (II) ANY OTHER PRESENT OR
FUTURE INSTRUMENT OR AGREEMENT BETWEEN TBCC AND BORROWER; OR (III) ANY CONDUCT,
ACTS OR OMISSIONS OF TBCC OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH TBCC OR
BORROWER; IN EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT
OR OTHERWISE.
BORROWER:
ENDOCARE, INC.
By /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------
Title Senior Vice President and
Chief Financial Officer
---------------------------------
TBCC:
TRANSAMERICA BUSINESS CREDIT
CORPORATION
By /s/ ▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------------
Title
---------------------------------
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18
TBCC
SCHEDULE TO
LOAN AND SECURITY AGREEMENT
BORROWER: ENDOCARE, INC.
ADDRESS: 7 STUDEBAKER
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
DATE: JULY 29, 1999
This Schedule is an integral part of the Loan and Security Agreement between
TRANSAMERICA BUSINESS CREDIT CORPORATION (TBCC) and the above borrower
(Borrower) of even date.
1. CREDIT LIMIT (Section 1.1):
An amount (the "Credit Limit") not to exceed the lesser of: $3,000,000 at
any one time outstanding; or the sum of (a) and (b) below:
(a) Loans (the "Formula Loans") in an amount equal to 80% of the amount
of Borrower's Eligible Receivables (as defined in Section 9.1(n)
above); plus
(b) Loans (the "Non-Formula Loans") in an amount equal to $2,000,000.
Loans made to the Borrower will first be Formula Loans to the extent
Formula Loans are available to Borrower (based on the most recent
Borrowing Base Certificate provided by Borrower to TBCC under the
Streamlined Facility Agreement of even date), and next Non-Formula Loans
to the extent available to Borrower.
2. INTEREST.
(Section 2.1): The interest rate in effect throughout each calendar month
during the term of this Agreement shall be the highest "Base Rate" in
effect during such month, plus
(a) In the case of Formula Loans, 2% per annum, and
(b) In the case of Non-Formula Loans, 3.5% per annum;
provided that the interest charged for each month shall be a minimum of
$5,000, regardless of the amount of the Obligations outstanding. Interest
shall be calculated on the basis of a 360-day year for the actual number
of days elapsed. "Base Rate" shall mean the highest prime, base or
equivalent rate of interest announced from time to time by Citibank, N.A.,
First National Bank of Chicago and Bank of America National Trust and
Savings
19
TBCC SCHEDULE TO LOAN AND SECURITY AGREEMENT
--------------------------------------------------------------------------------
Association (which may not be the lowest rate of interest charged by such
bank).
3. FEES:
Loan Fee (Section 2.2): $30,000, payable concurrently herewith, plus
$30,000 payable on the earlier of (i) the first anniversary of the date
hereof, or (ii) termination of this Agreement. Both such Loan Fees are
fully earned on the date hereof and are non-refundable.
Termination Fee (Section 1.6(b)): An amount equal to $5,000 multiplied by
each month (or portion thereof) from the effective date of termination to
the Maturity Date, provided that the Termination Fee shall not exceed
$45,000. The Termination Fee shall be payable on the date of termination.
4. MATURITY DATE
(Section 1.6):
JULY 31, 2001 (the "Maturity Date"), subject to automatic renewal and
early termination as provided in Section 1.6 above.
5. REPORTING (Section 5.10): Borrower shall provide TBCC with the following
reports:
(a). Monthly Financial Statements. Monthly unaudited financial
statements, as soon as available, and in any event within 30 days
after the end of each month.
(b). Monthly Receivable Agings. Monthly Receivable agings, aged by
invoice date, within 10 days after the end of each month.
(c). Monthly Payable Agings. Monthly accounts payable agings, aged by
invoice date, and outstanding or held check registers within 10 days
after the end of each month.
(d). Monthly Compliance Certificates. As soon as available, but not later
than thirty days after the end of each month, a Compliance
Certificate, with an attached schedule of calculations demonstrating
compliance or indicating non-compliance with any Financial
Covenants.
(e). Quarterly Financial Statements. Quarterly unaudited financial
statements, as soon as available, and in any event within * 30 days
after the end of each fiscal quarter of Borrower.
* 45
(f). Annual Financial Statements. As soon as available, but not later
than 90 days after the end of the Borrower's fiscal year, (A)
Borrower's annual audited Financial Statements; (B) a comparison in
reasonable detail to the prior year's audited Financial Statements;
(C) the Auditors' opinion without Qualification, *
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(D) a narrative discussion of Borrower's financial condition and
results of operations and the liquidity and capital resources for
such fiscal year.
* AND ANY RELATED MANAGEMENT LETTER FROM THE AUDITORS TO BORROWER
6. BORROWER INFORMATION:
(a) Prior Names of Borrower (Section 4.11): None
(b) Prior Trade Names of Borrower (Section 4.11): None
(c) Existing Trade Names of Borrower (Section 4.11): None
(d) Other Places of Business and Locations of Collateral (Section 4.2):
None
7. FACSIMILE NUMBERS:
Borrower: (▇▇▇) ▇▇▇-▇▇▇▇
TBCC: (▇▇▇) ▇▇▇-▇▇▇▇
8. CLOSING DEADLINE (Section 1.8): JULY 31, 1999
9. ADDITIONAL PROVISIONS:
(a) NEGATIVE PLEDGE-INTELLECTUAL PROPERTY. Borrower agrees, throughout
the term of this Agreement and until all Obligations have been paid
and performed in full, not to permit any of Borrower's present or
future Intellectual Property to be subject to any voluntary or
involuntary security interest, pledge, lien or encumbrance, of any
kind or nature whatsoever, which secures any indebtedness, liability
or obligation, except for indebtedness which is subordinated to the
Obligations pursuant to a written subordination agreement between
TBCC and the subordinating creditor on TBCC's standard form. As used
herein "Intellectual Property" shall mean all of Borrower's present
and future software, copyrights, copyright applications, patents,
patent applications, trade secrets, designs, blueprints, plans, know
how, and licenses of any of the foregoing.
(b) LIMITATION ON INDEBTEDNESS. Borrower shall not, throughout the term
of this Agreement and until all Obligations have been paid and
performed in full, incur any Indebtedness, except for (i)
Indebtedness to TBCC, (ii) trade payables incurred in the ordinary
course of business, (iii) indebtedness which is subordinated to the
Obligations pursuant to a written subordination agreement between
TBCC and the subordinating creditor acceptable to TBCC, * (iv)
Indebtedness which is outstanding on the date hereof, ** and (v)
Indebtedness secured by Permitted Liens.
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TBCC SECURITY AGREEMENT
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* OR PURSUANT TO THE TERMS OF AN AGREEMENT BETWEEN SUCH
SUBORDINATING CREDITOR AND BORROWER WHICH PROVIDE THAT SUCH
INDEBTEDNESS IS SUBORDINATED TO THE OBLIGATIONS UPON TERMS
ACCEPTABLE TO TBCC, INCLUDING UP TO $11,000,000 IN INDEBTEDNESS
WHICH MAY BE INCURRED PURSUANT TO THE TERMS OF THE DEBENTURES OR
ADDITIONAL DEBENTURES SUBSTANTIALLY SIMILAR TO THE DEBENTURES, AS
DETERMINED BY TBCC IN ITS SOLE DISCRETION (IN ADDITION TO THE
$5,000,000 IN OUTSTANDING INDEBTEDNESS OWING AS OF THE DATE OF THIS
AGREEMENT), PROVIDED THAT SUCH ADDITIONAL $11,000,000 IN
INDEBTEDNESS IS SUBJECT TO (I) THE SAME SUBORDINATION PROVISIONS AS
SET FORTH IN THE DEBENTURES, OR (II) SUBORDINATION PROVISIONS MORE
FAVORABLE TO TBCC, AS DETERMINED BY TBCC IN ITS SOLE DISCRETION,
** INCLUDING THE $5,000,000 IN INDEBTEDNESS EVIDENCED BY, AND
SUBJECT TO THE SUBORDINATION PROVISIONS OF, THE DEBENTURES,
(c) ADVANCED MEDICAL PROCEDURES. Concurrently herewith, Borrower shall
cause AMP to execute and deliver to TBCC a Continuing Guaranty (the
"AMP Guaranty"), and Certified Resolution in connection therewith,
with respect to all of the Obligations, together with a Security
Agreement (the "AMP Security Agreement"), and UCC-1 Financing
Statements, in order to secure the AMP Guaranty, all such
documentation in form reasonably satisfactory to Borrower and TBCC
and consistent with this Agreement.
(d) AMP INDEBTEDNESS TO ONIK AND NARAYAN. Within 30 days of the date
hereof, Borrower shall cause ▇▇▇▇ ▇▇▇▇ ("▇▇▇▇") and ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ("Narayan") to either: (i) terminate any security
interest(s) they may have in any assets of AMP, and in connection
therewith execute any and all documentation required by TBCC,
including but not limited to terminations of any UCC Financing
Statements filed in connection with such security interest(s); or
(ii) subordinate their security interest(s) to the security interest
of TBCC in the assets of AMP, as evidenced by the AMP Security
Agreement, and subordinate all indebtedness of AMP to Onik and/or
Narayan to the obligations of AMP to TBCC under the AMP Guaranty.
Borrower: TBCC:
ENDOCARE, INC. TRANSAMERICA BUSINESS CREDIT CORPORATION
By /s/ ▇▇▇ ▇▇▇▇▇▇▇▇
----------------------------------
By /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Title
------------------------------ ----------------------------------
President or Vice President
Version: -6
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