EXHIBIT 10.13
LOAN AGREEMENT
THIS LOAN AGREEMENT is made as of March 31, 2000, by and among
INFUSYSTEM, INC., a California corporation, having an address at ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("BORROWER"), I-FLOW
CORPORATION, a California corporation, of ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("GUARANTOR"), and OLD KENT BANK, a Michigan banking
corporation, of Southfield, Michigan ("BANK").
R E C I T A L S:
A. Borrower has requested Bank to extend to it:
(i) a Revolving Line of Credit of up to Two Million Five
Hundred Thousand Dollars ($2,500,000.00); and
(ii) an Equipment Line of Credit of One Million Five
Hundred Thousand Dollars ($1,500,000.00); and
B. Bank is willing to extend the loans on the terms and subject
to the conditions set forth in this Agreement.
Accordingly, the parties agree as follows:
SECTION 1. DEFINITIONS.
In this Agreement:
"ADVANCE FORMULA" has the meaning specified in SCHEDULE 3.1 attached to
this Agreement.
"AFFILIATE" means any person, firm, or corporation that now or in the
future controls, is controlled by, or is under common control with Borrower. The
term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of Borrower or any
such other person, firm, or corporation.
"AGREEMENT" means this Loan Agreement, as amended, including the
schedules attached to this Loan Agreement.
"BANK INDEBTEDNESS" means any indebtedness, obligation or liability of
whatever type or nature, now or in the future owing to Bank by Borrower.
"BUSINESS DAY" means any day on which Bank is open to the public in the
State of Michigan for carrying on substantially all of its banking functions,
other than a Saturday or Sunday.
"CAPITALIZED EXPENDITURES" means all expenditures that, in accordance
with GAAP, are required to be classified as Capital Expenditures on a balance
sheet of Borrower.
"CAPITALIZED LEASE OBLIGATION" means any obligation of Borrower to pay
future rentals under a lease that, in accordance with GAAP, is required to be
shown as a liability on the balance sheet of Borrower.
"CHAMPUS" means the Civilian Health and Medical Program of the
Uniformed Service, a program of medical benefits covering former and active
members of the uniformed services and certain of their dependents, financed and
administered by the United States Departments of Defense, Health and Human
Services and Transportation and established pursuant to 10 USC Secs. 1071-1106,
and all regulations promulgated thereunder including without limitation (a) all
federal statutes (whether set forth in 10 USC Secs. 1071-1106 or elsewhere)
affecting CHAMPUS; and (b) all rules, regulations (including 32 CFR 199),
manuals, orders and administrative, reimbursement and other guidelines of all
Governmental Entities (including, without limitation, the Department of Health
and Human Services, the Department of Defense, the Department of Transportation,
the Assistant Secretary of Defense (Health Affairs), and the Office of CHAMPUS,
or any Person or entity succeeding to the functions of any of the foregoing)
promulgated pursuant to or in connection with any of the foregoing) promulgated
pursuant to or in connection with any of the foregoing (whether or not having
the force of law) in each case as may be amended, supplemented or otherwise
modified from time to time.
"CHAMPVA" means the Civilian Health and Medical Program of Veterans
Affairs.
"COLLATERAL" means any properties or assets of Borrower in or upon
which Bank shall at any time hold a security interest, mortgage or other lien to
secure any Bank Indebtedness.
"COLLATERAL DOCUMENT" means each security agreement, mortgage, pledge
agreement, assignment, guaranty agreement and any other agreement or document
that has been or in the future is, or is required to be, given by Borrower or
any third party to Bank to secure any Bank Indebtedness.
"CONTAMINATION" or "CONTAMINATED" means, when used with reference to
any real or personal property, the presence of a Hazardous Substance in or on,
or the release, discharge or emission of a Hazardous Substance from, the
property in excess of any limit or criterion established or issued under any
Environmental Law.
"CONTRACT PHYSICIAN" means an independent contractor physician who has
entered into a written agreement with Borrower pursuant to which, inter alia,
Borrower has agreed to pay such physician compensation to ▇▇▇▇ Obligors for such
physician's services, and the physician has agreed that all rights to payment
for his or her services shall belong to Borrower.
"DEBT SERVICE" means, for any period, scheduled repayments of principal
required to be made on any Indebtedness plus total interest expense for such
period (including, without limitation, imputed interest on Capital Lease
Obligations).
"DEBT SERVICE RATIO" means EBIDA divided by Debt Service.
"EBIDA" means, for any period, net income, plus to the extent deducted
in determining net income, interest expense, including but not limited to
imputed interest on capitalized leases, depreciation and amortization.
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"ELIGIBLE ACCOUNT" has the meaning specified in Schedule 3.1 attached
to this Agreement.
"ENVIRONMENTAL LAW" means at any time any applicable federal, state,
local or foreign law (including common law), ordinance, rule, regulation,
permit, order or other legally binding requirement that then (i) regulates the
quality of air, water, soil or other environmental media, (ii) regulates the
generation, management, transportation, treatment, storage, recycling or
disposal of any waste, (iii) protects public health, occupational safety and
health, natural resources or the environment, or (iv) establishes liability for
the investigation, removal, or remediation of, or harm caused by, Contamination.
"EQUIPMENT" means the net book value of Borrower's equipment, wherever
located and whether now owned or acquired in the future, computed in accordance
with GAAP.
"EQUIPMENT LOAN COMMITMENT" means at any given time an amount equal to
the lesser of One Million Five Hundred Thousand Dollars ($1,500,000.00) or the
outstanding Equipment Loan Notes plus 80% of any equipment being financed under
the Equipment Line of Credit whether by means of Bank Indebtedness or a leasing
arrangement with Bank or an Affiliate of Bank.
"EQUIPMENT LOAN NOTES" has the meaning specified in Section 3.2 of this
Agreement.
"EQUIPMENT LOANS" has the meaning specified in Section 3.2 of this
Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
now and in the future amended, together with all regulations issued under it.
"GAAP" means generally accepted accounting principles, consistently
applied.
"GOVERNMENTAL ENTITY" means the United States of America, any state,
any political subdivision of a state and any agency or instrumentality of the
United States of America or any state or political subdivision thereof and any
entity exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government. Payments from Governmental Entities
shall be deemed to include payments governed under the Social Security Act (42
U.S.C. Secs. 1395 et seq.), including payments under Medicare, Medicaid and
CHAMPUS, and payments administered or regulated by HCFA.
"GUARANTY" means the guaranty of I-Flow Corporation.
"HAZARDOUS SUBSTANCE" means at any time any substance or waste that is
then regulated by or subject to any Environmental Law.
"HCFA" means' the Health Care Financing Administration of the United
States Department of Health and Human Services.
"HEALTHCARE SERVICES" means, collectively, (i) health and medical,
preventative, diagnostic and treatment services, (ii) speech therapy and
physical rehabilitation services, and (iii) ambulance or other patient transport
services.
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"INDEBTEDNESS" means indebtedness for borrowed money, indebtedness
representing the deferred purchase price of property (excluding indebtedness
under normal trade credit for property purchased in the normal course of
operations), any obligation under a note payable or draft accepted representing
an extension of credit, indebtedness (whether or not assumed) secured by a
mortgage, security interest or other lien on property, and any Capitalized Lease
Obligation.
"INSURER" means any Person which in the ordinary course of its business
or activities agrees to pay for healthcare goods and services received by
individual, including commercial insurance companies, nonprofit insurance
companies (such as Blue Cross, Blue Shield entities), employers or unions which
self-insure for employee or member health insurance, prepaid healthcare
organizations, preferred provider organizations and health maintenance
organizations. "Insurer" includes insurance companies issuing health or other
types of insurance but does not include any individual guarantors.
"LIABILITIES" means all liabilities that, in accordance with GAAP, are
required to be classified as liabilities on a balance sheet of Borrower other
than intercompany Indebtedness owing to Guarantor., but including intercompany
Indebtedness from Guarantor to Borrower.
"LOAN" means any loan that Bank makes to Borrower under this Agreement.
"LOAN DOCUMENT" means this Agreement, each Note and other promissory
note that has been or in the future is given to Bank by Borrower, each
Collateral Document, the Guaranty and every other agreement, instrument or
document that has been or in the future is signed or delivered in connection
with this Agreement or in connection with any Bank Indebtedness.
"MATERIAL ADVERSE EFFECT" means any material adverse effect upon (i)
the validity, performance or enforceability of any Loan Document, (ii) the
properties, contracts, business operations, prospects, profits or condition
(financial or otherwise) of Borrower, (iii) the ability of Borrower or any
Guarantor to fulfill any obligation under any Loan Document or (iv) the ability
of Bank to take possession of, collect or otherwise realize upon any Collateral
or other security for the Bank Indebtedness.
"MATURITY" of an indebtedness or obligation means the time when that
indebtedness or obligation has become due and payable, for whatever reason.
"MEDICAID" means the medical assistance program established by Title
XIX of the Social Security Act (42 U.S.C. Secs. 1396 et seq.) and any statutes
succeeding thereto.
"MEDICARE" means the health insurance program for the aged and disabled
established by Title XVIII of the Social Security Act (42 U.S.C. Secs. 1395 et
seq.) and any statutes succeeding thereto.
"NOTE" means any Revolving Credit Note, Equipment Line of Credit Note
and any other promissory note signed and delivered by Borrower to evidence any
Bank Indebtedness, including any renewal, extension or modification of the note.
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"PERMITTED LIEN" means (i) a security interest, mortgage or other lien
in favor of Bank; (ii) an existing security interest or lien described on
SCHEDULE 2.1.7 attached to this Agreement; (iii) purchase money security
interests not in excess of One Hundred Thousand Dollars ($100,000.00) in the
aggregate in any fiscal year of the Borrower; (iv) a lien for taxes not
delinquent or, in a jurisdiction where payment of taxes is abated during the
period of any contest, being contested in good faith by appropriate proceedings,
if adequate reserves for it have been set aside on its books; and (v) an
inchoate materialmen's, mechanics', workmen's, repairmen s or other like lien
arising in the ordinary course of business, if the obligation secured is not
delinquent.
"PERSON" means an individual, partnership, corporation (including a
business trust), limited liability company, joint stock company, trust,
unincorporated association, joint venture or other entity, or a government or
any political subdivision instrumentality or agency thereof.
"PLAN" means an employee pension benefit plan or other plan with
respect to which Borrower or any Affiliate is an "employer" or "party in
interest," as those terms are defined in ERISA.
"PRIME RATE" means at any time the rate of interest then in effect as
Bank's announced "prime rate," which is not necessarily the lowest rate of
interest charged by Bank to its customers, which Prime Rate shall change
simultaneously with any change in Bank's announced "prime rate."
"REVOLVING CREDIT COMMITMENT" means at any given time an amount equal
to the lesser of (i) Two Million Five Hundred Thousand Dollars ($2,500,000.00)
or (ii) 80% of the lesser of Borrower's Eligible Accounts (x) less than 120 days
old as reflected on Borrower's most recent Month-End Accounts Receivable
Summary, or (y) the net book value of Borrower's Accounts Receivable (less any
reserves for bad debts) as reflected in Borrower's financial records computed in
accordance with GAAP.
"REVOLVING CREDIT LOANS" has the meaning specified in Section 3.1 of
this Agreement.
"REVOLVING CREDIT NOTE" has the meaning specified in Section 3.1.3 of
this Agreement.
"SCHEDULE" means a schedule attached to this Agreement.
"STOCKHOLDERS' EQUITY" means, at any time, the sum of the following
accounts set forth in a balance sheet of Borrower, prepared in accordance with
GAAP: (i) the par or stated value of all outstanding capital stock; (ii) capital
surplus; and (iii) retained earnings.
"SUBORDINATED INDEBTEDNESS" means, at any time, all Indebtedness owing
by Borrower the repayment of which is subordinated to payment of the Bank
Indebtedness in form and manner satisfactory to Bank.
"TANGIBLE NET WORTH" means, at any time, Stockholders' Equity plus
intercompany Indebtedness and payables to Guarantor, less the sum of (i)
goodwill, including any amounts, however designated on a balance sheet of
Borrower, representing the excess of the purchase price paid for assets or stock
acquired over the value assigned to the assets or stock on the books
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of Borrower; (ii) patents, trademarks, trade names and copyrights; (iii)
treasury stock; (iv) loans and advances to Affiliates, stockholders, directors,
officers or employees; (v) prepaid expenses; and (vi) other intangible assets.
SECTION 2. WARRANTIES AND REPRESENTATIONS.
2.1 Borrower represents and warrants to Bank as follows:
2.1.1 Borrower is a corporation duly organized, validly existing,
and in good standing under the laws of the State of California. Borrower is duly
qualified and authorized to do business, and is in good standing as a foreign
corporation in the State of Michigan and in each other jurisdiction in which the
failure to be so qualified or authorized to do business could have a Material
Adverse Effect.
2.1.2 Borrower has all requisite corporate power and authority and
all necessary licenses and permits to own and operate its properties and to
carry on its business as now conducted and as it contemplates that business to
be conducted in the future. Borrower is in compliance with all laws, rules and
regulations that are applicable to Borrower, its operations, or its properties.
2.1.3 The interim balance sheet of Borrower as of October 31, 1999,
and the balance sheet for the year ended December 31, 1998, together with the
related statements of income, of retained earnings and of changes in financial
position for the periods then ended, copies of all of which have been delivered
to Bank, have been prepared in accordance with GAAP and present fairly the
financial position of Borrower as of those dates and the results of its
operations for those periods. Since the date of the most recent of those
financial statements, no change has occurred in Borrower's financial condition
or operations that could have a Material Adverse Effect.
2.1.4 Neither this Agreement nor any financial statement referred to
in Section 2.13 above nor any other written statement furnished by Borrower to
Bank in connection with the negotiation of the loans provided for in this
Agreement, contains any untrue statement of a material fact or omits a material
fact necessary to make the statements contained in this Agreement, the financial
statement or other statement not misleading. There is no fact that Borrower has
not disclosed to Bank in writing that has, or, to the best of the knowledge of
the officers and directors of Borrower, in the future could have, a Material
Adverse Effect.
2.1.5 Except as identified on SCHEDULE 2.1.5 attached to this
Agreement, there is no proceeding pending, or to the knowledge of the officers
of Borrower threatened, before any court, governmental authority or arbitration
board or tribunal, against or affecting Borrower, that, if determined adversely
to Borrower, could reasonably be expected to have a Material Adverse Effect.
Borrower is not in default with respect to any order, judgment, or decree of any
court, governmental authority or arbitration board or tribunal.
2.1.6 The issued and outstanding capital stock of Borrower and the
ownership of it are described on SCHEDULE 2.1.6 attached to this Agreement.
There are no outstanding options, warrants or rights to purchase, nor any
agreement for the subscription, purchase or acquisition of, any shares of the
capital stock of Borrower, except as described on SCHEDULE 2.1.6.
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2.1.7 Borrower has good and marketable title to all of the assets
that it purports to own, including the assets described in the financial
statements referred to in Section 2.1.3 of this Agreement, free and clear from
all liens, encumbrances, security interests, claims, charges and restrictions
whatever, except Permitted Liens.
2.1.8 Borrower owns and controls all of the patents, trademarks,
service marks, trade names, copyrights, licenses and rights necessary for the
present and planned future conduct of its business, without any conflict with
the right of any other person, firm, or corporation.
2.1.9 Borrower has full corporate power and authority to sign,
deliver and perform the Loan Documents to which it is a signatory; the signing,
delivery, and performance of such Loan Documents by Borrower have been duly
authorized by appropriate corporate action of Borrower and will not violate the
provisions of the articles of incorporation or bylaws of Borrower or of any law,
rule, judgment, order, agreement or instrument to which Borrower is a party or
by which it is bound, nor do they require any approval or consent of any public
authority or other third party; and the Loan Documents have been duly signed and
delivered by, and are the valid and binding obligations of, the parties to them,
enforceable in accordance with their terms.
2.1.10 All tax returns required to be filed by Borrower in any
jurisdiction have been filed, and each tax, assessment, fee and other
governmental charge upon Borrower or upon its assets, income, or franchises has
been paid before the time when its nonpayment could give rise to a lien.
Borrower knows of no proposed additional tax assessment against it.
2.1.11 Except as identified on SCHEDULE 2.1.11 attached to this
Agreement, Borrower has no investments in the securities of any other
corporation or business entity. Borrower does not intend to carry or purchase
any "margin security" within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System, 12 C.F.R. Chapter II.
2.1.12 Attached to this Agreement as SCHEDULE 2.1.12 is a list of all
Plans. No Plan has been terminated since the effective date of ERISA. No Plan is
a "multi-employer plan" within the meaning of Section 3(37)(A) of ERISA. No
"accumulated deficiency" (within the meaning of Section 412 of ERISA) or
"reportable event" (as defined in Title IV of ERISA) has occurred with respect
to any Plan. Neither Borrower nor any Affiliate has incurred any material
liability to the Pension Benefit Guaranty Corporation ("PBGC") or otherwise
under ERISA. The PBGC has not started or threatened to start a proceeding
against Borrower or any Affiliate under ERISA.
2.1.13 Borrower is not, and no person, firm, or corporation having
"control" of Borrower is, an "executive officer," "director" or "person who
directly or indirectly, or in concert with one or more persons owns, controls,
or has the power to vote more than 10 percent of any class of voting securities"
(within the meaning of 12 U.S.C. Section 375(b) and regulations issued under
that section), of Bank, Old Kent Financial Corporation ("OKFC") or any
subsidiary of OKFC.
2.1.14 To the best of Borrower's knowledge, all of Borrower's real
and personal property and all operations and activities of Borrower, are in
compliance with all Environmental Laws; and none of Borrower's real or personal
property is (i) Contaminated or the site of the disposal or release of any
Hazardous Substance; (ii) the source of any Contamination of any adjacent
prop-
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erty or of any groundwater or surface water; or (iii) the source of any air
emissions in excess of any legal limit now or in the future in effect.
2.1.15 Borrower has all requisite power and authority and all
necessary licenses and permits (including, without limitation, facility
licenses), accreditations, certifications, authorization, approvals, consents
and agreements of all Insurers, Governmental Entities, accreditation agencies
and any other Person (including without limitation, accreditation by the
appropriate Governmental Entities and industry accreditation agencies and
accreditations and certifications as a provider of healthcare services eligible
to receive payment and compensation and to participate under Medicare, Medicaid,
CHAMPUS/CHAMPVA and other equivalent programs) necessary or required for it to
own and operate its properties and to carry on its business as now conducted and
as it contemplates that business to be conducted in the future, except where
failure to have such permits, licenses, agreements with third-party payors,
accreditation and certifications (including without limitation, accreditation by
the appropriate Governmental Entities and industry accreditation agencies and
accreditation and certifications as a provide of healthcare services eligible to
receive payment and compensation and to participate under Medicare, Medicaid,
CHAMPUS/CHAMPVA and other equivalent programs) would not have a Material Adverse
Effect. Borrower is in compliance in all material respects with all laws, rules
and regulations that are applicable to Borrower, its operations, or its
properties.
2.1.16 Neither Borrower nor any predecessor in interest of Borrower
has been notified by any Insurer, Governmental Entity or instrumentality,
accreditation agency or any other Person, during the immediately preceding 24
month period, that such party has rescinded or not renewed, or is reasonably
likely to rescind or not renew, any such permit, license, accreditation,
certification, authorization, approval, consent or agreement granted to it or to
which it is a party.
2.2 Guarantor represents and warrants to Bank as follows:
2.2.1 Guarantor is a corporation duly organized, validly existing,
and in good standing under the laws of the State of California. Guarantor is
duly qualified and authorized to do business, and is in good standing as a
foreign corporation, in each other jurisdiction in which the failure to be so
qualified or authorized to do business could have a Material Adverse Effect.
2.2.2 Guarantor has all requisite corporate power and authority and
a necessary licenses and permits to own and operate its properties and to carry
on its business as now conducted and as it contemplates that business to be
conducted in the future. Guarantor is in compliance with all laws, rules and
regulations that are applicable to Guarantor, its operations, or its properties.
2.2.3 The interim balance sheet of Guarantor as of September 30,
l999, and the balance sheet for the year ended December 31, 1998, together with
the related statements of income, of retained earnings and of changes in
financial position for the periods then ended, copies of all of which have been
delivered to Bank, have been prepared in accordance with GAAP and present fairly
the financial position of Guarantor as of those dates and the results of its
operations for those periods. Since the date of the most recent of those
financial statements, no change has occurred in Guarantor's financial condition
or operations that could have a Material Adverse Effect.
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2.2.4 Neither this Agreement nor any financial statement referred to
in Section 2.2.3 above nor any other written statement furnished by Guarantor to
Bank in connection with the negotiation of the loans provided for in this
Agreement, contains any untrue statement of a material fact or omits a material
fact necessary to make the statements contained in this Agreement, the financial
statement or other statement not misleading. There is no fact that Guarantor has
not disclosed to Bank in writing that has, or, to the best of the knowledge of
the officers and directors of Guarantor, in the future could have, a Material
Adverse Effect.
2.2.5 Guarantor has full corporate power and authority to sign,
deliver and perform the Loan Documents to which it is a signatory; the signing,
delivery, and performance of such Loan Documents by Guarantor have been duly
authorized by appropriate corporate action of Borrower and will not violate the
provisions of the certificate or articles of incorporation or bylaws of
Guarantor or of any law, rule, judgment, order, agreement or instrument to which
Guarantor is a party or by which it is bound, nor do they require any approval
or consent of any public authority or other third party; and the Loan Documents
have been duly signed and delivered by, and are the valid and binding
obligations of, the parties to them, enforceable in accordance with their terms.
2.2.6 Guarantor is not, and no person, firm, or corporation having
"control" of Guarantor is, an "executive officer," "director" or "person who
directly or indirectly, or in concert with one or more persons owns, controls,
or has the power to vote more than 10 percent of any class of voting securities"
(within the meaning of 12 U.S.C. Section 375(b) and regulations issued under
that section), of Bank, OKFC or any subsidiary of OKFC.
SECTION 3. LOANS.
3.1 REVOLVING LINE OF CREDIT LOAN.
3.1.1 Subject to satisfaction of the conditions precedent set forth
in Section 9 of this Agreement, and as long as there shall not have occurred any
event of default as defined in Section 8 of this Agreement, or any event that
with the giving of notice or lapse of time, or both, would be an event of
default, Bank shall extend to Borrower loans ("REVOLVING CREDIT LOANS") in
amounts that shall not at any time in the aggregate exceed the Revolving Credit
Commitment.
3.1.2 If the aggregate principal amount of the Revolving Credit
Loans outstanding should at any time exceed the Revolving Credit Commitment,
Borrower shall immediately repay a sufficient amount of the Loans as shall be
required to eliminate the excess.
3.1.3 All Revolving Credit Loans shall be evidenced by and payable
with interest in accordance with the terms of the promissory note in the form
attached to this Agreement as SCHEDULE 3.1.3 ("REVOLVING CREDIT NOTE"), which
Borrower shall sign and deliver to Bank.
3.1.4 Borrower shall have the right to prepay all Revolving Credit
Loans, in whole or in part, at any time without penalty. Amounts that are
prepaid may, subject to the other provisions of this Section 3.1, be reborrowed
by Borrower.
3.1.5 Unless sooner terminated under Section 8 of this Agreement or
extended by Bank in writing, the obligation of Bank to make or to renew
Revolving Credit Loans shall expire on
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March 31, 2002. If extended by Bank, Bank's obligation to make or to renew
Revolving Credit Loans shall expire on the date stated in the extension. If
Bank's obligation to make or to renew Revolving Credit Loans shall expire, the
aggregate unpaid principal balance of all outstanding Revolving Credit Loans,
together with all interest accrued on them, shall be payable in full on the
expiration date.
3.2 EQUIPMENT LINE OF CREDIT LOAN.
3.2.1 Subject to the satisfaction of the conditions precedent set
forth in Section 9 of this Agreement, and so long as there shall not have
occurred any event of default as defined in Section 8 of this Agreement, or any
event that with the giving of notice or lapse of time, or both, would be an
event of default, Bank shall extend to Borrower loans or provide lease financing
for the acquisition of new machinery and equipment (the "EQUIPMENT LOANS") in
aggregate amounts not to exceed $1,500,000 (the "EQUIPMENT LOAN COMMITMENT"). If
the aggregate principal amount of the Equipment Loans outstanding under the
Equipment Loan Notes should at any time exceed the Equipment Loan Commitment,
Borrower shall immediately repay a sufficient amount of the Equipment Loans as
shall be required to eliminate the excess.
3.2.2 Borrower shall apply the proceeds of Equipment Loans to
finance the acquisition of new machinery and equipment.
3.2.3 Each advance of the Equipment Loans shall be extended to
Borrower upon the request of Borrower and shall not exceed 80% of the invoiced
cost of the machinery and equipment purchased.
3.2.4 Each Equipment Loan shall be evidenced by and payable with
interest in accordance with the terms of a promissory note in the form attached
to this Agreement as SCHEDULE 3.2.4 (the "EQUIPMENT NOTE"), which Borrower shall
sign and deliver to Bank in connection with each advance, provided, however;
that each Equipment Loan in the form of lease financing shall be evidenced by
Bank's standard form of lease financing documents.
3.2.5 As Bank extends each advance of the Equipment Loans to
Borrower, the amount of the Equipment Loans available to be disbursed in the
future under the Equipment Loan Commitment shall be reduced by the amount of
each advance. The amount of the Equipment Loans available to be disbursed under
the Equipment Loan Commitment shall be increased by the amount of the principal
payments made on Equipment Loans.
3.2.6 Unless sooner terminated pursuant to Section 8 of this
Agreement, Bank's obligation to extend the Equipment Loans shall expire on March
31, 2002.
3.2.7 Borrower shall have the right to prepay the Equipment Loans at
any time without penalty.
SECTION 4. APPLICATION OF PROCEEDS.
4.1 The proceeds of the loans provided for in this Agreement shall
be used by Borrower to pay off existing indebtedness and provide working
capital.
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4.2 Simultaneously with the initial extension by Bank of any Loan
under this Agreement, Borrower shall borrow an amount under this Agreement that
shall be sufficient to pay all indebtedness owing by Borrower to Comerica Bank.
Bank may pay the proceeds of Loans under this Agreement directly to Comerica
Bank.
SECTION 5. SECURITY.
To secure payment of all obligations and indebtedness of Borrower to
Bank under this Agreement and all other Bank Indebtedness:
5.1 Borrower shall sign and deliver to Bank security agreements,
in form and substance satisfactory to Bank, granting to Bank a valid first
security interest in all machinery, equipment, fixtures, furniture, inventory,
accounts, chattel paper; instruments, documents, investment property and general
intangibles, wherever located, now owned and in the future acquired by Borrower,
and in all proceeds of those properties.
5.2 Guarantor shall guarantee all such indebtedness and
obligations, by signing and delivering to Bank written guaranty satisfactory to
Bank and shall maintain that guaranty in full force and effect. The liability of
Guarantor under the Guaranty shall be limited to One Million Five Hundred
Thousand Dollars ($1,500,000.00).
5.3 Borrower shall sign and deliver to Bank, and shall cause third
parties to sign and deliver, all financing statements, assignments, documents of
title and other documents, agreements and instruments, and shall take all
further actions, and shall cause third parties to take all further actions, that
Bank shall reasonably request in connection with the perfection or priority of
the security provided for above.
5.4 Upon request by Bank, Borrower shall establish a lock
box/sweep account arrangement, or appoint a third party intermediary, for the
purpose of providing Bank with access to Medicare and Medicaid receivables. If
Borrower declines to establish such an arrangement, Bank may, in its sole
discretion, cease to include Medicare and Medicaid receivables as Eligible
Accounts.
SECTION 6. AFFIRMATIVE COVENANTS.
6.1 BORROWER'S COVENANTS. From the date of this Agreement until
all Bank Indebtedness is fully paid and Bank has no further obligation to extend
loans or other credit facilities to Borrower:
6.1.1 Borrower shall furnish to Bank, within ninety (90) days after
the end of each of its fiscal years, beginning with its fiscal year ending
December 31, 1999, an audited financial report (on a consolidating basis)
prepared in accordance with GAAP by independent certified public accountants
satisfactory to Bank, containing Borrower's balance sheet as of the end of that
year, its related profit and loss and reconciliation of surplus statements for
that year, its statement of cash flows for that year, together with (i) any
management letter prepared by those certified public accountants, (ii) comments
and financial details that are customarily included in reports of that type and
(iii) the unqualified opinion of the certified public accountants as to the
fairness of the statements contained in the report. At the time when Borrower
engages the independent certified
11
public accountants ("CPAs") to prepare the report, Borrower shall inform the
CPAs in writing that a primary intent of such party is for the CPAs' services in
preparing the report to benefit and influence Bank. At the time that Borrower
furnishes the report to Bank, Borrower shall furnish to Bank a writing, in form
satisfactory to Bank and signed by the CPAs, stating that the CPAs intend to
have Bank rely on the CPA's services in preparing the report.
6.1.2 Borrower shall furnish to Bank within forty-five (45) days
after the end of each of the first three quarters of each of its fiscal years,
beginning with the first quarter of 2000, a financial report, the accuracy of
which is certified to by the President or the chief financial officer of the
furnishing party, prepared in accordance with GAAP, containing Borrower's
balance sheet as of the end of that quarter and Borrower' s income statement
showing the results of its operations for the portion of its fiscal year then
elapsed.
6.1.3 Borrower shall furnish to Bank, within ten (10) days after the
end of each month, beginning with the month of March, 2000, a fully completed
Month End Accounts Receivable Summary, together with complete accounts
receivable and accounts payable agings in forms satisfactory to Bank, and a
fully completed Month End Accounts Payable Summary, the accuracy of which shall
be certified by the President or chief financial officer of Borrower.
6.1.4 Borrower shall furnish to Bank, within ten (10) days after the
end of each month, beginning with the month of March, 2000, a fully completed
compliance report; substantially in the form attached to this Agreement as
SCHEDULE 6.1.4, detailing Borrower's compliance with the Advance Formula,
provided, however, that no such compliance report shall be required for any
month in which outstanding Revolving Loans are equal to or less than One Million
Dollars ($1,000,000.00) in aggregate principal amount.
6.1.5 Bank shall have the right at any time during Bank's or
Borrower's regular business hours to inspect, audit and make copies of and
extracts from any records, documents and papers (including computer records and
software) that relate in any way to any of the Collateral. Upon Bank's request
at any time and from time to time, Borrower shall promptly furnish to Bank
copies of any of those records, documents and papers (including computer records
and software) and/or shall deliver possession of them to Bank. Bank may at any
time and from time to time contact Borrower's account debtors for the purpose of
verifying the existence, amount and collectibility of, and other information
regarding, Borrower's accounts, chattel paper, investment property, instruments
and general intangibles. Borrower acknowledges that Bank may regularly (as
frequently as every 45 days) obtain tax lien searches with respect to Borrower.
6.1.6 Borrower shall (i) promptly inform Bank of any occurrence that
is an event of default as defined in Section 8 of this Agreement or that, with
the giving of notice or the lapse of time, or both, would be an event of default
and of any other occurrence that has, or could reasonably be expected to have, a
Material Adverse Effect; (ii) grant to Bank or its representatives the right to
examine its books and records at any reasonable time or times; (iii) maintain
complete and accurate books and records of its transactions in accordance with
good accounting practices; and (iv) furnish to Bank any information that it may
reasonably request concerning Borrower's financial affairs within 10 days after
Bank requests that information.
12
6.1.7 Borrower shall (i) maintain insurance, including, but not
limited to, fire and extended coverage insurance, workers' compensation
insurance and casualty and liability insurance with responsible insurance
companies on its properties and against such risks and in such amounts that is
customarily maintained by similar businesses; (ii) furnish to Bank upon its
request the details with respect to that insurance and satisfactory evidence of
that insurance coverage; and (iii) within 30 days after Bank requests, obtain
any additional insurance that Bank may reasonably request. Each insurance policy
required under this Section shall be so written or endorsed as to make losses;
if any, payable to Borrower and Bank as their respective interests may appear
and shall include, where appropriate, a mortgage clause or endorsement in favor
of Bank in form and substance satisfactory to Bank.
6.1.8 Borrower shall pay and discharge, as often as they may become
due and payable, all taxes and assessments of whatever nature that may be levied
or assessed against it or any of its properties prior to the time that any
penalty attaches, unless and to the extent only that (i) in a jurisdiction where
payment of taxes and assessments is abated during the period of any contest,
those taxes or assessments are being contested in good faith by appropriate
proceedings and (ii) Borrower shall have set aside or its books adequate
reserves with respect to those taxes and assessments.
6.1.9 Borrower shall (i) maintain its corporate existence in good
standing in the State of California and its qualification in good standing in
the State of Michigan and in every other jurisdiction in which the failure to be
so qualified or authorized to do business could have a Material Adverse Effect;
(ii) continue to conduct and operate its business substantially as presently
conducted and operated; and (iii) comply with all Environmental Laws and with
all other governmental laws, rules, regulations and orders applicable to it, the
failure to comply with which could have a Material Adverse Effect.
6.1.10 Borrower shall act prudently and in accordance with customary
industry standards in managing and operating its assets, properties, business
and investments and shall keep in good working order and condition, ordinary
wear and tear excepted, all of its assets and properties that are necessary to
the conduct of its business.
6.1.11 Borrower shall maintain a Debt Service Ratio of not less than
1.75 to 1.
6.1.12 Borrower shall maintain a ratio of total Liabilities to
Tangible Net Worth of not more than 3.0 to 1.
6.1.13 Borrower shall maintain its principal commercial deposit
accounts with Bank.
6.1.14 Borrower shall (i) comply in all material respects with the
requirements of ERISA, including, without limitation, all provisions regarding
minimum funding requirements and requirements as to plan termination insurance;
(ii) within 30 days after it is filed, furnish to Bank a copy of each annual
report and annual return, with all schedules and attachments, required to be
filed with the Department of Labor or the Internal Revenue Service pursuant to
ERISA in connection with each Plan for each Plan year; (iii) notify Bank
immediately of any fact or circumstance, including, but not limited to, any
"reportable event" (as defined in Title IV of ERISA), that might be grounds for
termination of a Plan by the Pension Benefit Guaranty
13
Corporation or for the appointment by a United States District Court of a
trustee to administer the Plan, together with a statement, if requested by Bank,
as to the reason the fact or circumstance has occurred and the action, if any,
that Borrower proposes to take to avoid termination of the Plan; and (iv)
furnish to Bank, upon its request, any additional information concerning any
Plan that Bank may reasonably request.
6.1.15 Borrower shall notify Bank in writing within 10 days after
Borrower receives any notice of the commencement of (i) any proceeding or
investigation by a federal or state environmental agency against Borrower
regarding Borrower's compliance with Environmental Laws, or (ii) any other
judicial or administrative proceeding or litigation by or against Borrower.
6.2 Guarantor's Covenants. From the date of this Agreement until
all the Bank indebtedness is fully paid and Bank has no further obligations to
extend loans or other credit facilities to Borrower:
6.2.1 Guarantor shall furnish to Bank, within 90 days after the end
of each of its fiscal years, beginning with its fiscal year ending December 31,
1999, an audited financial report (on a consolidating basis) prepared in
accordance with GAAP by independent certified public accountants satisfactory to
Bank, containing Guarantor's balance sheet as of the end of that year, its
related profit and loss and reconciliation of surplus statements for that year,
its statement of cash flows for that year, together with (i) any management
letter prepared by those certified public accountants, (ii) comments and
financial details that are customarily included in reports of that type and
(iii) the unqualified opinion of the certified public accountants as to the
fairness of the statements contained in the report. At the time when Guarantor
engages the CPAs to prepare the report, Guarantor shall inform the CPAs in
writing that a primary intent of such party is for the CPAs' services in
preparing the report to benefit and influence Bank. At the time that Guarantor
furnishes the report to Bank, Guarantor shall furnish to Bank a writing, in form
satisfactory to Bank and signed by the CPAs, stating that the CPAs intend to
have Bank rely on the CPA's services in preparing the report.
6.2.2 Guarantor shall furnish to Bank within 45 days after the end
of each of the first three quarters of each of its fiscal years, beginning with
the first quarter of 2000, a financial report, the accuracy of which is
certified to by the President or the chief financial officer of the furnishing
party, prepared in accordance with GAAP, containing Borrower's balance sheet as
of the end of that quarter and Guarantor's income statement showing the results
of its operations for the portion of its fiscal year then elapsed.
6.2.3 Guarantor shall (i) maintain its corporate existence in good
standing in the State of California and its qualification in good standing and
in every jurisdiction in which the failure to be so qualified or authorized to
do business could have a Material Adverse Effect; (ii) continue to conduct and
operate its business substantially as presently conducted and operated; and
(iii) comply with all Environmental Laws and with all other governmental laws,
rules, regulations and orders applicable to it, the failure to comply with which
could have a Material Adverse Effect.
14
SECTION 7. NEGATIVE COVENANTS.
From the date of this Agreement until all Bank Indebtedness is fully
paid and Bank has no further obligation to extend loans or other credit
facilities to Borrower, Borrower shall not, without the prior written consent of
Bank:
7.1 Create or permit to exist any lien, security interest,
mortgage, pledge, attachment, garnishment, execution or other legal process or
encumbrance, on any of its assets, except Permitted Liens.
7.2 Sell, lease or otherwise dispose of any of its assets except
for (i) the sale of inventory in the ordinary course of business (as Borrower's
business is conducted on the date of this Agreement); and (ii) the disposition,
in the ordinary course of business, of machinery and equipment that shall have
become obsolete, damaged, unsuitable or unnecessary for its business, if the net
proceeds of sale or disposition are promptly paid to Bank to the extent not
applied to acquire additional or substitute machinery and equipment.
7.3 Make loans or advances to any person, firm or corporation.
7.4 Guarantee, endorse, assume or otherwise incur or suffer to
exist any contingent liability in respect of, any obligation of any other
person, firm or corporation except by the endorsement of negotiable instruments
for deposit or collection in the ordinary course of business, and except for the
guaranty of indebtedness and obligations owing to Bank.
7.5 Enter into any merger, consolidation, reorganization or
recapitalization, or purchase or otherwise acquire all, or substantially all, of
the assets, obligations or capital stock of or any other interest in any other
person, firm or corporation.
7.6 Pay any dividends, other than dividends payable in the capital
stock of Borrower, on any shares of any class of its capital stock.
7.7 Purchase, redeem or otherwise acquire or make other
distribution of its assets, by reduction of capital or otherwise, with respect
to any shares of any class of its capital stock.
7.8 Expend, or obligate itself to expend, for the purchase of
fixed capital assets during any of its fiscal years an amount in excess of Two
Million Dollars ($2,000,000.00). The allowable expenditures for the purchase of
fixed capital assets shall be noncumulative, and any amounts not expended in any
fiscal year may not be carried over and expended in any later fiscal year. Each
purchase of a fixed capital asset shall be for cash in the full amount of the
purchase price.
7.9 Subordinate any indebtedness owing to Borrower by any person,
firm or corporation to indebtedness of that person, firm or corporation owing to
any other person, firm or corporation.
7.10 Engage in any transaction with any Affiliate on terms less
favorable to Borrower than would be obtainable at the time in a comparable
transaction of Borrower in an arm's-length dealing with a person other than an
Affiliate.
15
7.11 Engage, directly or indirectly, in any line of business other
than a line of business presently engaged in by Borrower or a line of business
related to it.
7.12 Issue, incur, assume or permit to remain outstanding any
Indebtedness, other than Bank Indebtedness and existing Indebtedness described
on SCHEDULE 2.1.7 attached to this Agreement.
7.13 Use or acquire the use or possession of any real or personal
property from any person under any lease or lease arrangement, except (i) leases
or lease arrangements in respect of personal property with Bank or an Affiliate
of Bank, (ii) leases or lease arrangements with parties other than Bank or an
Affiliate of Bank in respect of personal property under which the amount payable
by Borrower in any one calendar year does not exceed Two Hundred Fifty Thousand
Dollars ($250,000.00) in the aggregate, and (iii) Capitalized Lease Obligations.
7.14 Become a contributing employer with respect to a
multi-employer employee benefit plan within the meaning of Section 3(37)(A) of
ERISA (29 U.S.C. 1002), as amended by Section 302 of the Multi-Employer Pension
Plan Amendments Act of 1980 (other than the plans described on SCHEDULE 2.1.12
attached to this Agreement); or establish for any of its employees any employee
benefit plan that has, or may in the future incur, any unfunded past service
liability.
7.15 Change its name, fiscal year, or method of accounting, except
as required by GAAP, and except that Borrower may change its name if Borrower
has given Bank 60 days' prior written notice of the name change and taken any
action that Bank considers necessary to continue the perfection of the security
interests and liens granted to Bank under the Collateral Documents.
SECTION 8. EVENTS OF DEFAULT AND REMEDIES.
8.1 Each of the following shall be an Event of Default under this
Agreement:
A. If Borrower shall default in the payment of the
principal or interest of any Loan or if Borrower shall default in the
payment of principal or interest of any other Bank Indebtedness, when
and as it shall be due and payable, whether by acceleration or
otherwise, and Borrower has failed to cure such default within five (5)
business days.
B. If Borrower shall fail to perform any of its other
obligations under, or to comply with any of the terms, conditions and
covenants, contained in, this Agreement or any other Loan Document or
other agreement, document or instrument that has been or later is given
to Bank by Borrower or any third party to secure any Bank Indebtedness,
or if there shall occur any other event of default as defined in any
Loan Document or in any such other agreement, instrument or document,
and Borrower has failed to cure such default within ten (10) business
days.
C. If Borrower shall default in the payment of any
Indebtedness owing to any other firm, Indebtedness person or
corporation.
16
D. If any warranty or representation that is made in
this Agreement or any statement, warranty or representation that has
been or in the future is made in any other Loan Document certificate,
report or other document, instrument or agreement delivered under this
Agreement or in connection with any Bank Indebtedness, shall be false
or inaccurate in any material respect when made.
E. If any guaranty that now or in the future secures
payment of all or any part of the Bank Indebtedness shall be terminated
or limited for any reason without the written consent of Bank.
F. If Guarantor shall for any reason cease to own,
beneficially and of record, and control, a majority of the issued and
outstanding voting capital stock of Borrower and a majority of all of
the issued and outstanding capital stock of Borrower.
G. If Borrower or Guarantor shall (i) apply for or
consent to the appointment of, or the taking of possession by, a
receiver, custodian, trustee or liquidator of itself or of all or a
substantial part of its property; (ii) be generally unable to pay its
debts as they become due; (iii) make a general assignment for the
benefit of its creditors; (iv) start a voluntary case under the federal
Bankruptcy Code (as now or in the future in effect); (v) file a
petition seeking to take advantage of any other law providing for the
relief of debtors; (vi) fail to controvert in a timely or appropriate
manner, or acquiesce in writing to, any petition filed against Borrower
or Guarantor in any involuntary case under the Bankruptcy Code; or
(vii) take any action for the purpose of effecting any of the
foregoing.
H. If a proceeding or case shall be started in any court
of competent jurisdiction and is not dismissed within 60 days, seeking
(i) the liquidation, reorganization, dissolution, winding up or
composition or readjustment of Borrower or Guarantor or their
respective assets or the appointment of a trustee, receiver, custodian,
liquidator or the like of Borrower or Guarantor or of all or any
substantial part of the assets of Borrower or Guarantor; or (ii)
similar relief in respect of Borrower or Guarantor under any law
providing for the relief of debtors; or if an order for relief against
Borrower or Guarantor shall be entered in an involuntary case under the
Bankruptcy Code.
8.2 Upon the occurrence of any event of default described in
Subsections A through F above, at the option of Bank, Bank's obligation to make
or renew Loans shall terminate, and all or any part of the unpaid principal
balance of and accrued interest on all Bank Indebtedness shall become
immediately due and payable, without presentment, demand or notice of any kind,
all of which are waived by Borrower.
8.3 Upon the occurrence of any event of default described in
Subsections G or H above, Bank's obligation to make or renew Loans shall
immediately terminate, and the entire unpaid principal balance of and accrued
interest on all outstanding Bank indebtedness, shall automatically become due
and payable without presentment, demand or notice of any kind, all of which are
waived by Borrower.
17
SECTION 9. CONDITIONS PRECEDENT.
The obligation of Bank to make the initial Loans under this Agreement
shall be subject to satisfaction of all of the following conditions precedent:
9.1 Bank shall have received copies of resolutions of the boards
of directors of Borrower and Guarantor respectively, certified by the secretary
of such party as being in full force and effect on the date of making the Loan,
authorizing the signing, delivery and performance by such party of this
Agreement and all other Loan Documents to which it is a party.
9.2 Bank shall have received all reports, certificates and
opinions of attorneys and accountants that Bank shall have requested in
connection with the Loan Documents, and all legal matters incident to them shall
be satisfactory to Bank's attorneys.
9.3 Bank shall have received copies of the bylaws of Borrower and
Guarantor respectively, including all amendments to them, certified by the
secretary of such party, as being in full force and effect on the date of making
the Loans.
9.4 Bank shall have received copies of the Articles or Certificate
of Incorporation of each of Borrower and Guarantor, including all amendments to
them, certified by the appropriate department of such party's state of
incorporation as of a date not more than 30 days before the initial extension of
a Loan.
9.5 Bank shall have received good standing certificates with
respect to Borrower from the Michigan Department of Consumer and Industry
Services and the appropriate department of the State of California and a good
standing certificate with respect to Guarantor from the appropriate department
of the State of California, each dated not more than 30 days before the initial
extension of a Loan.
9.6 Borrower and Guarantor shall each have signed and delivered to
Bank all Loan Documents to which they are parties.
9.7 Borrower shall have delivered to Bank evidence satisfactory to
Bank that Borrower has obtained the insurance policies required by this
Agreement and any Collateral Documents.
9.8 There shall not have occurred any event of default as defined
in Section 8 of this Agreement or any event or circumstance that, with the
giving of notice or passage of time, or both, would be such an event of default.
SECTION 10. OTHER PROVISIONS.
10.1 Borrower represents and warrants to Bank, and agrees, that
each computer software program and each computer hardware component that now or
in the future is used in Borrower's business or financial operations, whether
the program or hardware is owned by or leased or licensed to Borrower, now is
and at all times in the future shall be Year 2000 Compliant. Computer software
or hardware is "YEAR 2000 COMPLIANT" if it:
18
1. handles date information before, during and after
January 1, 2000, including but not limited to accepting date input,
providing date output and performing calculations on dates or portions
of dates;
2. functions accurately and without interruption before,
during and after January 1, 2000, without any change in operations or
loss of functionality associated with the advent of the new century;
3. responds to two-digit, year-date input in a way that
correctly resolves the ambiguity as to century in a disclosed, defined
and predetermined manner; and
4. stores, processes and provides output of date
information in ways that are unambiguous as to century.
10.2 Borrower shall pay, or reimburse Bank for, all out-of-pocket
expenses incurred by Bank (including, but not limited to, recording and filing
fees, search fees, title insurance premiums and fees and expenses of legal
counsel, other professional advisers, consultants and experts) in connection
with (i) the negotiation, preparation and signing of the Loan Documents, any
amendments to, or waivers of any provisions of, the Loan Documents and any
refinancing or restructuring of any Bank Indebtedness; (ii) the administration
of this Agreement and the other Loan Documents, including, without limitation,
making filings and recordings in public offices to perfect or give notice of
liens in favor of Bank, obtaining policies of title insurance, title searches,
financing statement searches, tax lien searches, appraisals and environmental
inspections, audits and assessments (iii) obtaining advice of counsel or other
professional advisers, consultants and experts regarding any aspect of the Loan
Documents or any Bank Indebtedness; (iv) the enforcement of any of the
provisions of the Loan Documents; (v) the collection of any Bank Indebtedness;
and (vi) the foreclosure of any security interests, mortgages or other liens
that at any time secure any Bank Indebtedness. Without limiting the generality
of the foregoing, Borrower shall pay Bank's standard fees for audits,
inspections and other activities that Bank conducts pursuant to Section 6.1.5 of
this Agreement. Bank's current audit fee is $500 per auditor per day. Bank may
at any time in its sole discretion, upon 30 days' notice to Borrower, change its
audit fee. Each fee and expense reimbursement that Borrower is obligated to pay
to Bank under this Section shall be due and payable within ten days after Bank
sends Borrower an invoice for it. Without limiting the generality of any other
Sections of this Agreement, if Borrower does not pay the invoice when due, then
Bank may, on the next Interest Payment Date, debit the Interest Payment Account
for the amount of the fee or expense reimbursement. "INTEREST PAYMENT ACCOUNT"
means the deposit account of Borrower that Bank debits for interest payments on
the Loans, and "INTEREST PAYMENT DATE" means each date on which interest on the
Loans is due and payable.
10.3 Borrower acknowledges that Bank has and shall have the right
to set off any indebtedness from time to time owing to Borrower by Bank,
including, without limitation, any indebtedness represented by any deposit
accounts maintained with Bank by Borrower, against any indebtedness that shall
at any time be due and payable by Borrower to Bank.
19
10.4 Upon signing this Agreement, Borrower shall pay to Bank a
nonrefundable commitment fee in the amount of Five Thousand Dollars ($5,000.00),
receipt of which is hereby acknowledged.
10.5 Each right and remedy granted to Bank in this Agreement or in
any other Loan Document or allowed to Bank by law shall be cumulative and may be
exercised from time to time. No failure on the part of Bank to exercise, and no
delay in exercising, any right or remedy shall be a waiver of it or of any other
right or remedy.
10.6 The relationship between Borrower and Bank under this
Agreement and the other Loan Documents is solely that of debtor and creditor.
Bank has no fiduciary responsibilities to Borrower. Bank does not and shall not
have any responsibility to review, or to inform Borrower of any matter in
connection with, any aspect of Borrower's business, operations or properties.
Borrower shall rely entirely upon its own judgment with respect to its business
and properties. Any review, appraisal, audit, inspection, survey, report or
other information obtained by Bank, whether or not paid for by Borrower or
furnished to it ("BANK INFORMATION"), is solely for the benefit of Bank. Neither
Borrower nor any third party is entitled to rely on any Bank Information. Bank
has no duty to Borrower with respect to any Bank Information, including, without
limitation, any duty to assure that any review, audit, survey, inspection or
appraisal is performed properly or any duty to disclose to Borrower any facts,
information, opinions, conclusions or statements contained in any review, audit,
inspection, survey, appraisal or other Bank Information.
10.7 Borrower shall indemnify Bank with respect to all losses,
damages, liabilities, and expenses (including attorneys' fees) incurred by Bank
by reason of any failure of Borrower or Guarantor to comply with any of its
obligations under this Agreement or any of the other Loan Documents or by reason
of any warranty or representation made by Borrower to Bank in any of the Loan
Documents being false in any material respect.
10.8 This Agreement and the other Loan Documents contain the entire
agreement of Borrower and Bank, and neither Borrower nor Bank has made any other
agreement, commitment, promise, warranty or representation to the other. No
provision of the Loan Documents may be modified, supplemented or waived except
by a writing signed by an authorized officer of Bank.
10.9 This Agreement and the rights and obligations of the parties
under it shall be governed by and interpreted in accordance with the laws of the
State of Michigan. Any action arising out of or related to this Agreement or any
other Loan Document may be brought in any state or federal court having
jurisdiction over Oakland County, Michigan, that has jurisdiction of the subject
matter, and Borrower irrevocably consents and submits to the personal
jurisdiction of that court.
10.10 Any notice or other communication required or permitted under
this Agreement shall be in writing, and shall be served either personally, by
telecopier or by certified United States mail with postage fully prepaid, or by
a nationally-recognized, overnight courier service, addressed to Borrower as:
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INFUSYSTEM, INC.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Phone: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇, President
and to Bank as:
OLD KENT BANK
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Phone: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
Attention: Corporate Banking Department
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Vice President
or to any other place that either party shall designate by written notice served
upon the other party.
10.11 Borrower authorizes Bank to debit account No. 7506510051,
which is maintained with Bank by Borrower for payments due to Bank under this
Agreement.
10.12 This Agreement shall be binding upon and shall inure to the
benefit of Borrower, Guarantor and Bank and their respective successors and
assigns.
The parties have signed this Agreement as of the date stated on the
first page of this Agreement.
INFUSYSTEM, INC.
By________________________________________________
▇▇▇▇▇ ▇▇▇▇▇▇▇
Its President
"BORROWER"
I-FLOW CORPORATION
By:_______________________________________________
Its:______________________________________________
"GUARANTOR"
21
OLD KENT BANK
By________________________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its Vice President
"BANK"
22
SCHEDULE 3.1
ADVANCE FORMULA
1. FORMULA. The Advance Formula at any given time shall be an
amount equal to eighty percent (80%) of Borrower's Eligible Accounts, as defined
in Paragraph 2 below.
2. Eligible Account. "Eligible Account" means an account
receivable of Borrower:
(a) that is not more than 120 days old from the earlier
of the original invoice date or the date of shipment of the goods or
performance of the services that gave rise to the account receivable
per the month-end accounts receivable summary for the month most
recently ended or that is calculated as the net book value (less any
reserves for bad debts) per Borrower's financial records.
(b) that arises from Borrower's sale and shipment of
goods or Borrower's performance of services, in the ordinary course of
Borrower's business;
(c) that is the valid, binding and enforceable obligation
of the account debtor and is not subject to any offset, counterclaim or
defense other than an account receivable from a Government Authority;
(d) that is evidenced by an invoice, dated not later than
the date of shipment of the goods or performance of the services and
payable in full no more than 120 days after the invoice date, and is
not evidenced by an instrument or chattel paper;
(e) that is owned by Borrower and is not subject to any
security interest, lien, encumbrance, assignment or trust, except in
favor of Bank;
(f) in which Bank holds a valid and perfected security
interest;
(g) that is payable in United States dollars and is owing
by an account debtor whose chief executive office and principal
business assets are located in the United States of America;
(h) that is not owing by an account debtor who is an
officer, director, shareholder, employee, subsidiary or Affiliate of
Borrower;
(i) that does not arise from a sale of goods on
consignment or on a sale-or-return basis;
(j) that is owing by an account debtor that is not
insolvent;
(k) that is owing by an account debtor to whom Borrower
does not have any maintenance obligation with respect to the goods or
services the sale of which gave rise to the account receivable; and
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(l) as to which Bank has not notified Borrower is, in
Bank's good faith judgment, uncollectible, in whole or in part, within
thirty (30) days.
3. PART OF LOAN AGREEMENT. This SCHEDULE 3.1 is part of the
attached Loan Agreement among Borrower, Guarantor and Bank.
INFUSYSTEM, INC.
By________________________________________________
▇▇▇▇▇ ▇▇▇▇▇▇▇
Its President
"BORROWER"
I-FLOW CORPORATION
By:_______________________________________________
Its:______________________________________________
"GUARANTOR"
OLD KENT BANK
By________________________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its Vice President
"BANK"
24
SCHEDULE 6.1.4
FORM OF MONTHLY COMPLIANCE REPORT
MONTHLY COMPLIANCE REPORT
(Due on the 10th day of each month)
TO: ______________________________________________ ("BANK")
____________________________________________
____________________________________________
____________________________________________
_______________________________________________________________ ("BORROWER")
files this compliance report with Bank for the _______________ (insert month or
quarter, as applicable) ended ________________, _______ ("COMPLIANCE DATE"), and
Borrower certifies to Bank as follows:
1. No event has occurred and is continuing that is an event of
default under the Loan Agreement or that, with the giving of notice or lapse of
time, or both, would constitute an event of default.
2. As of the Compliance Date, the total of Borrower's accounts
receivable is $________________, and the total of Borrower's Eligible Accounts
Receivable (as defined in the Loan Agreement) is $_________________. The agings
of Borrower's accounts receivable and Eligible Accounts Receivable are as
follows:
All Accounts Eligible Accounts
Receivable Receivable
0-30 Days $ $
31-60 Days $ $
61-90 Days $ $
91-l20 Days $ $
Over l20 Days $ $ 0
__________ _________
Total $ $
3. As of the Compliance Date, the aggregate principal balance of
all outstanding Revolving Credit Loans under the Loan Agreement is $___________
("LOANS OUTSTANDING").
4. As of the Compliance Date, the Revolving Credit Commitment
under the Loan Agreement is:
The lesser of:
(a) Borrower's Eligible
Accounts Receivable $_________________
25
or
(b) Net Book Value of
Borrower's Accounts
Receivable (less reserves
for bad debts) as reflected in
Borrower's financial records
computed in accordance with GAAP $_________________________
80%
$_________________________
(c) Revolving Credit Commitment $===================
5. Excess of Loans Outstanding (Paragraph 3) over Revolving
Credit Commitment (Paragraph 4):
$________________
If the amount of Loans Outstanding exceeds the Revolving Credit
Commitment, enclosed is a check in the amount of the excess.
The officer of Borrower signing below certifies to Bank that the
officer is familiar with the provisions of the Loan Agreement and that the
statements contained in this Request and Report are true and correct to the best
of the officer's knowledge.
Dated:____________, ______ _________________________________________
By_______________________________________
Its___________________________________
26