Third Amended and Restated
Revolving Credit and
Security Agreement
THIS AGREEMENT (the
“Agreement”), dated as of March 7, 2006, between
HOME DIAGNOSTICS, INC., a Delaware corporation, whose address is
2400 NW 55
th
Court, Fort Lauderdale, Florida 33301 (the “Borrower”),
and WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking
association, whose address is 225 Water Street, Jacksonville,
Florida 32202 (“Bank”);
WHEREAS, Borrower and Bank entered
into that certain Revolving Credit and Security Agreement as of
October 31, 2003 (the “Original Agreement”);
and
WHEREAS, Borrower and Bank entered
into that certain Amended and Restated Revolving Credit and
Security Agreement as of September 17, 2004 (the
“Amended Agreement”), which Amended Agreement amended
and restated the Original Agreement in its entirety; and
WHEREAS, Borrower and Bank entered
into that certain Second Amended and Restated Revolving Credit and
Security Agreement as of November 14, 2005 (the “Second
Amended Agreement”), which Second Amended Agreement amended
and restated the Amended Agreement in its entirety; and
WHEREAS, the parties desire to
further amend and restate the Second Amended Agreement in its
entirety pursuant to the terms hereof.
NOW, THEREFORE, in consideration of
the premises and of the mutual covenants herein contained and to
induce Bank to extend credit to Borrower, the parties agree as
follows:
1. Definitions .
Capitalized terms that are not otherwise defined herein shall have
the meanings set forth in Exhibit 1 hereto.
2.1.(a)
$7,000,000.00 Revolving Loan . Bank agrees, on the terms and
conditions set forth in this Agreement, to make Advances and to
issue letters of credit and bankers acceptances on behalf of
Borrower from time to time during the Revolving Credit Period in
amounts such that the aggregate principal amount of Advances and
the face amount of any letters of credit and bankers acceptances at
any one time outstanding will not exceed the Maximum Loan Amount
(the “$7,000,000.00 Revolving Loan”). Within the
foregoing limit, Borrower may borrow, prepay and reborrow Advances
at any time during the Revolving Credit Period to support working
capital and for general corporate purposes, such as business
acquisition and capital expenditures to expand its product
lines.
2.1.(b)
$666,532.34 Term Loan . Bank agrees, on the terms and
conditions set forth in this Agreement, subject to the terms and
conditions set forth in the $666,532.34 Term Note (as defined
below), to modify the existing credit to Borrower in the original
principal amount of $666,532.34 (the “$666,532.34 Term
Loan”).
2.1.(c)
$2,638,888.87 Term Loan . Bank agrees, on the terms and
conditions set forth in this Agreement, subject to the terms and
conditions set forth in the $2,638,888.87 Term Note (as defined
below), to extend credit to Borrower in the original principal
amount of $2,638,888.87 (the “$2,638,888.87 Term
Loan”), the proceeds of which have been used to refinance an
existing loan with Albion Alliance Mezzanine Fund II, L.P., a
Delaware limited partnership.
2.2.
Notes . The Loan shall be evidenced by (i) a Third
Amended and Restated Revolving Promissory Note in the face amount
of the Maximum Loan Amount of even date herewith (the
“$7,000,000.00 Revolving Note”), (ii) a Third
Amended and Restated Promissory Note in the face amount of
$666,532.34 of even date herewith (the “$666,532.34 Term
Note”), and (iii) a Second Amended and Restated
Promissory Note in the face amount of $2,638,888.87 (the
“$2,638,888.87 Term Note”) and shall be payable in
accordance with the terms of each respective Note, as shall be
amended, modified, renewed or restated from time to time, and this
Agreement.
(a) Bank
shall require Borrower to establish a lockbox under the control of
Bank to which Account Debtors shall forward all payments on
Accounts and other Collateral. Borrower shall pay all of
Bank’s standard fees and charges in connection with such
lockbox arrangement as such fees and charges may change from time
to time. Borrower shall notify Account Debtors on the Accounts to
forward payments on the Accounts to the lockbox; provided, however,
that after an event or condition has occurred which but for notice
or the passage of time, or both, would constitute an Event of
Default, that Bank shall have the right to directly contact Account
Debtors at any time to ensure that payments on the Accounts are
directed to the lockbox. All payment items received by Borrower on
Accounts and sale of Inventory and other Collateral shall be held
by Borrower in trust for Bank and not commingled with
Borrower’s funds and shall be deposited promptly by Borrower
to the lockbox. All such items shall be the exclusive property of
Bank upon the earlier of the receipt thereof by Bank or by
Borrower. Borrower hereby grants to Bank a security interest in and
lien upon all items and balances held in the lockbox as collateral
for the Indebtedness.
(b) Borrower
hereby irrevocably appoints Bank (and any duly authorized Person
designated by Bank) as Borrower’s attorney-in-fact to endorse
Borrower’s name on any checks, drafts, money orders or other
media of payment which come into Bank’s possession or
control; this power being coupled with an interest is irrevocable
so long as any of the Indebtedness remain outstanding. Such
endorsement by Bank under power of attorney shall, for all
purposes, be deemed to have been made by Borrower (prior to any
subsequent endorsement by Bank) in negotiation of the item. Bank
will not exercise such power of attorney until after an event or
condition has occurred which but for notice or the passage of time,
or both, would constitute an Event of Default.
(c) For
the purpose of calculating interest due under this Agreement,
payment items received into the lockbox shall be deemed applied by
Bank on account of the Loan as collected and cleared by Bank,
subject to chargebacks for uncollected payment items. No payment
item received by Bank shall constitute payment to Bank until such
item is actually collected by Bank and credited to the lockbox;
provided, however, Bank shall have the right to charge back to the
lockbox any item which is returned for inability to collect, plus
accrued interest during the period of Bank’s provisional
credit for such item prior to receiving notice of
dishonor.
(a) Under
the $7,000,000.00 Revolving Loan, Bank, in its discretion, may
require from Borrower a signed written request for an Advance in
form satisfactory to Bank, which request shall be delivered to Bank
no later than 12:00 noon (local time in Fort Lauderdale, Florida)
on the date of the requested Advance, and shall specify the date
(which shall be a Business Day) and the amount of the proposed
Advance and provide such other information as Bank may reasonably
require. Bank’s acceptance of such a request shall be
indicated by its making the Advance requested. Such an Advance
shall be made available to Borrower in immediately available
funds.
(b) Notwithstanding
the foregoing, Bank may, in its sole and absolute discretion, make
or permit to remain outstanding Advances under the $7,000,000.00
Revolving Loan in excess of the original principal amount of the
$7,000,000.00 Revolving Note, and all such amounts shall
(i) be part of the Indebtedness evidenced by the $7,000,000.00
Revolving Note, (ii) bear interest as provided herein, and
(iii) be entitled to all rights and security as provided under
the Loan Documents.
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(a) Interest
on the $7,000,000.00 Revolving Loan shall accrue and be payable as
set forth in the $7,000,000.00 Revolving Note. The $7,000,000.00
Revolving Loan is a demand note, and the principal amount thereof
and all accrued and unpaid interest, fees, expenses and other
amounts payable under the Loan Documents shall be due and payable,
on the earlier of the Bank’s demand or the Termination
Date.
(b) Interest
on the $666,532.34 Term Loan shall accrue and be payable as set
forth in the $666,532.34 Term Note. The $666,532.34 Term Loan shall
mature, and the principal amount thereof and all accrued and unpaid
interest, fees, expenses and other amounts payable under the Loan
Documents shall be due and payable, as set forth in the $666,532.34
Note.
(c) Interest
on the $2,638,888.87 Term Loan shall accrue and be payable as set
forth in the $2,638,888.87 Term Note. The $2,638,888.87 Term Loan
shall mature, and the principal amount thereof and all accrued and
unpaid interest, fees, expenses and other amounts payable under the
Loan Documents shall be due and payable, as set forth in the
$2,638,888.87 Term Note.
(d) Upon
the occurrence of an event or condition, which but for notice or
the passage of time, or both, would constitute an Event of Default,
Bank may debit the lockbox and/or make Advances to Borrower
(whether or not in excess of the Maximum Loan Amount) and apply
such amounts to the payment of interest, fees, expenses and other
amounts to which Bank may be entitled from time to time and Bank is
hereby irrevocably authorized to do so without the consent of
Borrower.
(e) Subject
to the terms of any treasury services to which Borrower may
subscribe, Borrower shall make each payment of principal of and
interest on the Loan and fees hereunder not later than 12:00 noon
(local time Fort Lauderdale, Florida) on the date when due, without
set off, counterclaim or other deduction, in immediately available
funds to Bank at its address referred to in Section 10.4.
Whenever any payment of principal of, or interest on, the Loan or
of fees shall be due on a day which is not a Business Day, the date
for payment thereof shall be extended to the next succeeding
Business Day. If the date for any payment of principal is extended
by operation of law or otherwise, interest thereon shall be payable
for such extended time.
(f) Intentionally
deleted.
(g) Any
prepayment shall not affect Borrower’s obligation to continue
making payments under any swap agreement (as defined in 11 U.S.C.
§ 101), which shall remain in full force and effect
notwithstanding such prepayment, subject to the terms of such swap
agreement.
2.7.
Overdue Amounts . Any payments not made as and when due
shall bear interest in Bank’s discretion from the date due
until paid at the Default Rate.
2.8.
Calculation of Interest . All interest under the Notes or
hereunder shall be calculated on the basis of the Actual/360
Computation, as defined in the respective Notes.
2.9.
Sales Tax . Borrower shall notify Bank if any Account
includes any sales or other similar tax and Bank may, but shall not
be obligated to, remit any such taxes directly to the taxing
authority and make Advances therefore. In no event shall Bank be
liable for any such taxes.
2.10.
Letters of Credit .
(a) At
its discretion Bank may from time to time issue, extend or renew
letters of credit and banker’s acceptances for the account of
Borrower or its Subsidiaries. The availability of Advances under
the $7,000,000.00 Revolving Loan shall be reduced by outstanding
obligations of Bank under any letters of credit and bankers
acceptances. All payments made by Bank under any such letters of
credit or bankers acceptances (whether or not Borrower is the
account party or drawer) and all fees, commissions, discounts and
other amounts owed or to be owed to Bank in connection therewith,
shall be deemed to be Advances under the $7,000,000.00 Revolving
Note, shall be secured by the Collateral, and shall be repaid on
demand. Borrower shall complete and sign such applications and
supplemental agreements and provide
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such other documentation as Bank may reasonably require. The form
and substance of all letters of credit and acceptances, including
expiration dates, shall be subject to Bank’s approval. Bank
may charge a standard fee or commission for issuance, renewal or
extension of a letter of credit or acceptance. Borrower
unconditionally guarantees all obligations of any Subsidiary with
respect to letters of credit issued by Bank for the account of such
Subsidiary and all acceptances of any Subsidiary’s drafts.
Upon a Default, Borrower shall, on demand, deliver to Bank good
funds equal to 105% of Bank’s maximum liability under all
outstanding letters of credit and bankers acceptances, to be held
as cash Collateral for Borrower’s reimbursement obligations
and other Indebtedness.
(b) Any
letter of credit issued hereunder shall be governed, as applicable,
by the Uniform Customs and Practice for Documentary Credits,
International Chamber of Commerce (“ICC”) Publication
500 or any subsequent revision or restatement thereof adopted by
the ICC and in use by Bank or the International Standby Practices,
ICC Publication No. 590 or any subsequent revision or
restatement thereof adopted by the ICC and in use by Bank, except
to the extent that the terms of such publication would limit or
diminish rights granted to Bank hereunder or in any other Loan
Document.
(a) Borrower
shall pay to Bank a non-refundable facility fee for the
$7,000,000.00 Revolving Loan equal to $3,000.00 payable on the date
of this Agreement.
(b) Intentionally
deleted.
(c) Borrower
shall pay to Bank quarterly an unused fee equal to 0.25% per annum
on the average daily unused available principal under the
$7,000,000.00 Revolving Loan for the preceding calendar quarter or
portion thereof.
(d) Borrower
shall pay to Bank, at such times as Bank shall require,
Bank’s standard fees in connections with letters of credit,
as in effect from time to time, and with respect to standby letters
of credit, at the time of issuance of each standby letter of
credit, a fee equal to 1.00% per annum on the face amount of the
standby letter of credit for the period of time the standby letter
of credit will be outstanding.
2.12.
Statement of Account . If requested by Borrower and Bank
provides Borrower with a statement of account on a periodic basis,
such statement will be presumed complete and accurate and will be
definitive and binding on Borrower, unless objected to with
specificity by Borrower in writing within forty-five (45) days
after receipt.
3. Conditions Precedent
to Borrowing . Prior to any Advance, the following
conditions shall have been satisfied, in the sole opinion of Bank
and its counsel:
3.1.
Conditions Precedent to Initial Advance . In addition to any
other requirement set forth in this Agreement, Bank will not make
an Advance under the $7,000,000.00 Revolving Loan unless and until
the following conditions shall have been satisfied:
(a)
Loan Documents. Borrower and each other party to any Loan
Document, as applicable, shall have executed and delivered this
Agreement, the $7,000,000.00 Revolving Note, the $2,638,888.87 Term
Note, the $666,532.34 Term Note and other required Loan Documents,
all in form and substance satisfactory to Bank.
(b)
Supporting Documents. Borrower shall cause to be delivered
to Bank the following documents:
(i) A
copy of the governing instruments of Borrower and each Subsidiary,
and a good standing certificate of Borrower and each Subsidiary,
certified by the appropriate official of its state of incorporation
and the State of Florida, if different;
(ii) Incumbency
certificate and certified resolutions of the board of directors (or
other appropriate governing body) of Borrower and each other Person
executing any Loan
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Documents, signed by the Secretary or another authorized officer of
Borrower or such other Person, authorizing the execution, delivery
and performance of the Loan Documents;
(iii) The
legal opinion of Borrower’s legal counsel addressed to Bank
regarding such matters as Bank and its counsel may
request;
(iv) Intentionally
deleted;
(v) Satisfactory
evidence of payment of all fees due and reimbursement of all costs
incurred by Bank, and evidence of payment to other parties of all
fees or costs which Borrower is required under this Agreement to
pay by the date of the initial Advance;
(vi) UCC-11
searches and other Lien searches showing no existing security
interests in or Liens on the Collateral other than Permitted
Liens;
(vii) Any
lien waivers requested by Bank pursuant to section 5.13(c) hereof;
and
(viii) A
satisfactory Perfection Certificate duly completed by
Borrower.
(c)
Insurance . Borrower shall have delivered to Bank
satisfactory evidence of insurance meeting the requirements of
Section 5.3.
(d)
Perfection of Liens . UCC-1 financing statements and, if
applicable, certificates of title covering the Collateral executed
by Borrower shall duly have been recorded or filed in the manner
and places required by law to establish, preserve, protect and
perfect the interests and rights created or intended to be created
by the Security Agreement; and all taxes, fees and other charges in
connection with the execution, delivery and filing of the Security
Agreement and the financing statements shall duly have been
paid.
(e)
Subordinations . Bank shall have received subordinations
satisfactory to it from (i) all lessors that might have
landlord’s Liens on any Collateral, and (ii) all
Affiliates as required by Section 5.9.
(f)
Additional Documents . Borrower shall have delivered to Bank
all additional opinions, documents, certificates and other
assurances that Bank or its counsel may require.
(g)
Payment of Fees . Borrower shall have paid all fees, costs
and expenses as required by the Loan Documents in connection with
the Closing.
3.2.
Conditions Precedent to Each Advance . The following
conditions, in addition to any other requirements set forth in this
Agreement, shall have been met or performed by the Advance Date
with respect to any Advance Request and each Advance Request
(whether or not a written Advance Request is required) shall be
deemed to be a representation that all such conditions have been
satisfied:
(a)
Advance Request . Borrower shall have delivered to Bank an
Advance Request and other information, as required under
Section 2.5(a), unless the procedures described in
Section 2.4 are in effect.
(b)
No Default . No Default shall have occurred and be
continuing or would occur upon the making of the Advance in
question and, if Borrower is required to deliver a written Advance
Request, Borrower shall have delivered to Bank an officer’s
certificate to such effect, which may be incorporated in the
Advance Request.
(c)
Correctness of Representations . All representations and
warranties made by Borrower herein or otherwise in writing in
connection herewith shall be true and correct in all material
respects with the same effect as though the representations and
warranties had been made on and as of the proposed Advance Date,
and, if Borrower is required to deliver a written Advance Request,
Borrower
5
shall have delivered to Bank an officer’s certificate to such
effect, which may be incorporated in the Advance
Request.
(d)
No Adverse Change . There shall have been no change which
would have a Material Adverse Effect on Borrower, any Subsidiary
since the date of the most recent financial statements of such
Person delivered to Bank from time to time.
(e)
Limitations Not Exceeded . As to the $7,000,000.00 Revolving
Note, the proposed Advance shall not cause the outstanding
principal balance of the $7,000,000.00 Revolving Loan to exceed the
Maximum Loan Amount.
(f)
New Subsidiary Acquisition Funded by Advances. As to
Advances under the Loan for the purpose of financing the
acquisition of companies in a related industry, Borrower shall have
delivered: (i) a purchase contract or letter of intent for the
entity being acquired; (ii) two (2) most recent fiscal
year-end financial statements of the entity being acquired; and
(iii) such other documents and items that the Bank may request
in its reasonable discretion.
(g)
Further Assurances . Borrower shall have delivered such
further documentation or assurances as Bank may reasonably
require.
4. Representations and
Warranties . In order to induce Bank to enter into this
Agreement and to make the Loan provided for herein, Borrower makes
the following representations and warranties, all of which shall
survive the execution and delivery of the Loan Documents. Unless
otherwise specified, such representations and warranties shall be
deemed made as of the date hereof and as of the Advance Date of any
Advance by Bank to Borrower:
4.1.
Valid Existence and Power . Borrower is a corporation duly
organized, validly existing and in good standing under the laws of
the jurisdiction of its organization and is duly qualified or
licensed to transact business in all places where the failure to be
so qualified would have a Material Adverse Effect on it. Each of
Borrower and each other Person which is a party to any Loan
Document (other than Bank) has the power to make and perform the
Loan Documents executed by it and all such instruments will
constitute the legal, valid and binding obligations of such Person,
enforceable in accordance with their respective terms, subject only
to bankruptcy and similar laws affecting creditors’ rights
generally and to the effect of general principles of equity which
may limit the availability of equitable remedies (whether in a
proceeding at law or in equity). Borrower is organized under the
laws of Delaware and has not changed the jurisdiction of its
organization within the five years preceding the date hereof except
as previously reported to Bank.
4.2.
Authority . The execution, delivery and performance thereof
by Borrower and each other Person (other than Bank) executing any
Loan Document have been duly authorized by all necessary action of
such Person, and do not and will not violate any provision of law
or regulation, or any writ, order or decree of any court or
governmental or regulatory authority or agency or any provision of
the governing instruments of such Person, and do not and will not,
with the passage of time or the giving of notice, result in a
breach of, or constitute a default or require any consent under, or
result in the creation of any Lien (except liens in favor of Bank)
upon any property or assets of such Person pursuant to, any law,
regulation, instrument or agreement to which any such Person is a
party or by which any such Person or its respective properties may
be subject, bound or affected, which would have a Material Adverse
Effect on Borrower.
4.3.
Financial Condition . Other than as disclosed in financial
statements delivered on or prior to the date hereof to Bank,
Borrower does not have any direct or contingent obligations or
liabilities (including any guarantees or leases) or any material
unrealized or anticipated losses from any commitments of Borrower
except as described on Exhibit 4.3 (if any) which would have a
Material Adverse Effect on Borrower. All such financial statements
have been prepared in accordance with GAAP and fairly present the
financial condition of Borrower as of the date thereof. Borrower is
not aware of any material adverse fact (other than facts which are
generally available to the public and not particular to Borrower,
such as general economic or industry trends) concerning the
conditions or future prospects of Borrower which has not been fully
disclosed to Bank, including any material adverse change in the
operations or financial
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condition of Borrower since the date of the most recent financial
statements delivered to Bank. Borrower is Solvent, and after
consummation of the transactions set forth in this Agreement and
the other Loan documents, Borrower will be Solvent.
4.4.
Litigation . Except as disclosed on Exhibit 4.4 (if
any), there are no suits or proceedings pending, or to the
knowledge of Borrower threatened, before any court or by or before
any governmental or regulatory authority, commission, bureau or
agency or public regulatory body against or affecting Borrower or
its assets, which if adversely determined would have a Material
Adverse Effect on the financial condition or business of
Borrower.
4.5.
Agreements, Etc. Borrower is not a party to any agreement or
instrument or subject to any court order, governmental decree or
any charter or other corporate restriction, which would have a
Material Adverse Effect on its business, assets, operations or
condition (financial or otherwise), nor is Borrower in default in
the performance, observance or fulfillment of any of the material
obligations, covenants or conditions contained in any agreement or
instrument to which it is a party, or any law, regulation, decree,
order or the like which would have a Material Adverse Effect on
Borrower.
4.6.
Authorizations . All authorizations, consents, approvals and
licenses required under applicable law or regulation for the
ownership or operation of the property owned or operated by
Borrower or for the conduct of any business in which it is engaged
have been duly issued and are in full force and effect where the
failure to be in compliance would have a Material Adverse Effect on
Borrower, and it is not in default, nor has any event occurred
which with the passage of time or the giving of notice, or both,
would constitute a default, under any of the terms or provisions of
any part thereof, or under any order, decree, ruling, regulation,
closing agreement or other decision or instrument of any
governmental commission, bureau or other administrative agency or
public regulatory body having jurisdiction over Borrower, which
default would have a Material Adverse Effect on Borrower. Except as
noted herein, no material approval, consent or authorization of, or
filing or registration with, any governmental commission, bureau or
other regulatory authority or agency is required with respect to
the execution, delivery or performance of any Loan
Document.
4.7.
Title . Borrower has good title to all of the assets shown
in its financial statements free and clear of all Liens, except
Permitted Liens. Borrower alone has full ownership rights in all
Collateral except Permitted Liens.
4.8.
Collateral . The security interests granted to Bank herein
and pursuant to any other Security Agreement (a) constitute
and, as to subsequently acquired property included in the
Collateral covered by the Security Agreement, will constitute,
security interests under the Code entitled to all of the rights,
benefits and priorities provided by the Code and (b) are, and
as to such subsequently acquired Collateral will be, fully
perfected, superior and prior to the rights of all third persons,
now existing or hereafter arising, subject only to Permitted Liens.
All of the Collateral is intended for use solely in
Borrower’s business.
4.9
Jurisdiction of Organization; Location . The jurisdiction in
which Borrower is organized, existing and in good standing, the
chief executive office of Borrower where Borrower’s business
records are located, all of Borrower’s other places of
business and any other places where any Collateral is kept, are all
correctly and completely indicated on Exhibit 4.9. The
Collateral is located and shall at all times be kept and maintained
only at Borrower’s location or locations as described on
Exhibit 4.9 herein. No such Collateral is attached or affixed
to any real property so as to be classified as a fixture unless
Bank has otherwise agreed in writing. Borrower has not changed its
legal status or the jurisdiction in which it is organized or moved
its chief executive office within the five (5) years preceding
the date hereof.
4.10.
Taxes . Borrower has filed all federal and state income and
other tax returns which are required to be filed, and have paid all
taxes as shown on said returns and all taxes, including
withholding, FICA and ad valorem taxes, shown on all
assessments received by it to the extent that such taxes have
become due except only for items being actively contested in
accordance with law. Borrower is not subject to any federal, state
or local tax Liens nor has such Person received any notice of
deficiency or
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other official notice to pay any taxes. Borrower has paid all sales
and excise taxes payable by it except only for items being actively
contested in accordance with law.
4.11.
Labor Law Matters . No goods or services have been or will
be produced by Borrower in violation of any applicable labor laws
or regulations or any collective bargaining agreement or other
labor agreements or in violation of any minimum wage, wage-and-hour
or other similar laws or regulations.
4.12.
Accounts . Except as set forth on Exhibit 4.12, each
Account, Instrument, Chattel Paper and other writing constituting
any portion of the Collateral (a) is genuine and enforceable
in accordance with its terms except for such limits thereon arising
from bankruptcy and similar laws relating to creditors’
rights and to the effect of general principles of equity which may
limit the availability of equitable remedies (whether in a
proceeding at law or in equity); (b) is not subject to any
deduction or discount (other than as stated in the invoice and
disclosed to Bank), defense, set off, claim or counterclaim of a
material nature against Borrower except as to which Borrower has
notified Bank in writing; (c) is not subject to any other
circumstances that would impair the validity, enforceability or
amount of such Collateral except as to which Borrower has notified
Bank in writing; (d) arises from a bona fide
sale of goods or delivery of services in the ordinary course and in
accordance with the terms and conditions of any applicable purchase
order, contract or agreement; (e) is free of all Liens other
than Permitted Liens; and (f) is for a liquidated amount
maturing as stated in the invoice therefor.
4.13.
Judgment Liens . Neither Borrower, nor any of its assets,
are subject to any unpaid judgments (whether or not stayed) or any
judgment liens in any jurisdiction.
4.14.
Subsidiaries . If Borrower has any Subsidiaries, they are
listed on Exhibit 4.14.
4.15.
Environmental . Except as disclosed on Exhibit 4.15,
and except for ordinary and customary amounts of solvents, cleaners
and similar materials used in the ordinary course of
Borrower’s business and in strict compliance with all
Environmental Laws, neither Borrower, nor to Borrower’s best
knowledge any other previous owner or operator of any real property
currently owned or operated by Borrower, has generated, stored or
disposed of any Regulated Material on any portion of such property,
or transferred any Regulated Material from such property to any
other location in violation of any applicable Environmental Laws.
Except as disclosed on Exhibit 4.15, no Regulated Material has
been generated, stored or disposed of on any portion of the real
property currently owned or operated by Borrower by any other
Person, or is now located on such property. Except as disclosed on
Exhibit 4.15, Borrower is in full compliance with all
applicable Environmental Laws and Borrower has not been notified of
any action, suit, proceeding or investigation which calls into
question compliance by Borrower with any Environmental Laws or
which seeks to suspend, revoke or terminate any license, permit or
approval necessary for the generation, handling, storage, treatment
or disposal of any Regulated Material.
4.16.
ERISA . Except as disclosed on Exhibit 4.16, Borrower
does not have any pension, profit-sharing or other benefit plan
subject to the Employee Retirement Income Security Act of 1974, as
amended (“ERISA”). Borrower has furnished to Bank true
and complete copies of the latest annual report required to be
filed pursuant to Section 104 of the Employee Retirement
Income Security Act of 1974, as amended (“ERISA”), with
respect to each employee benefit plan or other plan maintained for
employees of Borrower and covered by Title IV of ERISA (a “
Plan ”), and no Termination Event (as hereinafter
defined) with respect to any Plan has occurred and is continuing.
For the purposes of this Agreement, a “ Termination
Event ” shall mean a “reportable event” as
defined in Section 4043(b) of ERISA, or the filing of a notice of
intent to terminate under Section 4041 of ERISA. Borrower does
not have any unfunded liability with respect to any such
Plan.
4.17.
Investment Company Act . Borrower is not an
“investment company” as defined in the Investment
Company Act of 1940, as amended.
4.18.
Names . Except as disclosed on Exhibit 4.18, Borrower
currently conducts all business only under its legal name as set
forth above in the introductory section of this Agreement. Except
as disclosed on Exhibit 4.18, during the preceding five
(5) years Borrower has not (i) been known as
or
8
used any other corporate, fictitious or trade name, (ii) been
the surviving entity of a merger or consolidation or
(iii) acquired all or substantially all of the assets of any
Person.
4.19.
Insider . Borrower is not, and no Person having
“control” (as that term is defined in 12 U.S.C. Sec.
375(b)(5) or in regulations promulgated pursuant thereto) of
Borrower is, an “executive officer,”
“director,” or “principal shareholder” (as
those terms are defined in 12 U.S.C. Sec. 375(b) or in regulations
promulgated pursuant thereto) of Bank, of a bank holding company of
which Bank is a subsidiary, or of any subsidiary of a bank holding
company of which Bank is a subsidiary.
4.20.
Compliance with Covenants; No Default . Borrower is, and
upon funding of the Loan will be, in compliance with all of the
covenants hereof. No Default has occurred, and the execution,
delivery and performance of the Loan Documents and the funding of
the Loan will not cause a Default.
4.21.
Full Disclosure . There is no material fact which is known
by Borrower that Borrower has not disclosed to Bank which would
have a Material Adverse Effect. No Loan Document, nor any
agreement, document, certificate or statement delivered by Borrower
to Bank, contains any untrue statement of a material fact or omits
to state any material fact which is known by Borrower necessary to
keep the other statements from being materially
misleading.
4.22.
Additional Representations . Any additional representations
or warranties set forth on Exhibit 4.22 (if any) hereto are
true and correct in all material respects.
4.23
Perfection Certificate . All representations, warranties and
statements made by Borrower in the Perfection Certificate executed
and delivered by Borrower to Bank in connection with the Loan are
true and correct as of the date hereof.
5 . Affirmative
Covenants of Borrower . Borrower covenants and agrees that
from the date hereof and until payment in full of the Indebtedness
and the formal termination of this Agreement, Borrower:
5.1.
Use of Loan Proceeds . Shall use the proceeds of the Loan
only to support working capital to be used in the operation of
Borrower’s business, and for general corporate purposes, and
Borrower shall furnish Bank all evidence that it may reasonably
require with respect to such uses.
5.2.
Maintenance of Business and Properties . Shall at all times
maintain, preserve and protect all Collateral and all the remainder
of its material property used or useful in the conduct of its
business, and keep the same in good repair, working order and
condition, normal wear and tear excepted, and from time to time
make, or cause to be made, all material needful and proper repairs,
renewals, replacements, betterments and improvements thereto so
that the business carried on in connection therewith may be
conducted properly and in accordance with standards generally
accepted in businesses of a similar type and size at all times, and
maintain and keep in full force and effect all material licenses
and permits necessary to the proper conduct of its business, of
which the failure to keep is likely to have a Material Adverse
Effect.
5.3.
Insurance . Shall maintain such liability insurance,
workers’ compensation insurance, business interruption
insurance and casualty insurance as may be required by law,
customary and usual for prudent businesses in its industry or as
may be reasonably required by Bank and shall insure and keep
insured all Collateral and other properties in good and responsible
insurance companies satisfactory to Bank. All hazard insurance
covering Collateral shall be in amounts and shall contain
co-insurance and deductible provisions approved by Bank, shall name
and directly insure Bank as secured party and loss payee under a
long-form loss payee clause acceptable to Bank, or its equivalent,
and shall not be terminable except upon 30 days’ written
notice to Bank. Borrower shall furnish to Bank copies of all such
policies.
5.4.
Notice of Default . Shall provide to Bank immediate notice
of (a) the occurrence of a Default and what action (if any)
Borrower is taking to correct the same, (b) any material
litigation or material changes in existing litigation or any
judgment against it or its assets in excess of $100,000.00 in the
aggregate, (c) any material damage or loss to property in
excess of $100,000.00 in the aggregate, (d)
9
any notice from taxing authorities as to claimed deficiencies
having a Material Adverse Effect, or any tax lien, or any notice
relating to alleged ERISA violations having a Material Adverse
Effect, (e) any Reportable Event, as defined in ERISA,
(f) any rejection, return, offset, dispute, loss or other
circumstance having a Material Adverse Effect on any Collateral,
(g) the cancellation or termination of, or any default under,
any material agreement to which Borrower is a party or by which any
of its properties are bound, or any acceleration of the maturity of
any Debt of Borrower; and (h) any loss or threatened loss of
material licenses or permits, which loss or threatened loss is
likely to have a Material Adverse Effect.
5.5.
Inspections . From time to time during normal business hours
and upon reasonable notice to Borrower, shall permit annual
inspections of the Collateral and the records of such Person
pertaining thereto and verification of the Accounts, at such times
and in such manner as may be reasonably required by Bank and shall
further permit such inspections, reviews and field examinations of
its other records and its properties (with such reasonable
frequency and at such reasonable times as Bank may desire) by Bank
as Bank may deem necessary or desirable. The cost of such field
examinations, reviews, verifications and inspections shall be borne
by Borrower.
5.6.
Financial Information . Shall maintain books and records in
accordance with GAAP and shall furnish to Bank the following
periodic financial information:
(a)
Intentionally Deleted.
(b)
Interim Statements . Within twenty (20) days after the
end of each calendar quarter, a consolidated unaudited
management-prepared financial statement of Borrower, including,
without limitation, a balance sheet of Borrower and its
Subsidiaries at the end of that period and a consolidated profit
and loss statement and statement of cash flows for that period (and
for the portion of the fiscal year ending with, such period),
together with all supporting schedules, setting forth in
comparative form the figures for the same period of the preceding
fiscal year, and certified by the chief financial officer of
Borrower as true and correct and fairly representing the financial
condition of Borrower and its Subsidiaries and that such statements
are prepared in accordance with GAAP, except without footnotes and
subject to normal year-end audit adjustments;
(c)
Annual Statements . Within one hundred twenty
(120) days after the end of each fiscal year, consolidated
audited financial statements reflecting Borrower’s operations
during such fiscal year, including, without limitation, a balance
sheet, profit and loss statement and statement of cash flow, with
supporting schedules; all in reasonable detail, prepared in
conformity with generally accepted accounting principles, applied
on a basis consistent with that of the preceding year. All such
statements shall be examined by an independent certified public
accountant acceptable to Bank. The opinion of such independent
certified public accountant shall not be acceptable to Bank if
qualified due to any limitations in scope imposed by Borrower. Any
other qualification of the opinion by the accountant shall render
the acceptability of the financial statements subject to
Bank’s approval;
(d)
No Default Certificates . Together with each report required
by Subsections (b) and (c), a compliance certificate and a
certificate of its president or chief financial officer in form
attached hereto as Exhibit 5.6 that no Default then exists or
if a Default exists, the nature and duration thereof and
Borrower’s intention with respect thereto, and in addition,
shall cause Borrower’s independent auditors (if applicable)
to submit to Bank, together with its audit report, a statement
that, in the course of such audit, it discovered no circumstances
which it believes would result in a Default or if it discovered any
such circumstances, the nature and duration thereof;
(e)
Intentionally Deleted .
(f)
Intentionally Deleted .
(g)
Intentionally Deleted .
(h)
Tax Returns . Within thirty (30) days of filing, a
complete copy of federal and state tax returns, as applicable,
together with all schedules thereto, including, without limitation,
K-1 statements
10
for all Partnerships and Sub Chapter S corporations, each of
which shall be signed and certified by Borrower to be true, correct
and a complete copy of such returns. In the event an extension is
filed, Borrower shall also deliver a copy of such extension within
thirty (30) days of filing; and
(i)
Other Information . Such other information reasonably
requested by Bank from time to time concerning the business,
properties or financial condition of Borrower and their respective
Subsidiaries.
5.7.
Maintenance of Existence and Rights . Shall preserve and
maintain its corporate existence, authorities to transact business,
rights and franchises, trade names, patents, trademarks and permits
necessary to the conduct of its business, the failure of which is
likely to cause a Material Adverse Effect.
5.8.
Payment of Taxes, Etc . Shall pay before delinquent all of
its debts and taxes, except that Bank shall not unreasonably
withhold its consent to nonpayment of taxes being actively
contested in accordance with law (provided that Bank may require
reasonable bonding or other assurances, such as
reserving).
5.9.
Subordination . Shall cause all debt and other obligations
now or hereafter owed to any Affiliate to be subordinated in right
of payment and security to the Indebtedness in accordance with
subordination agreements satisfactory to Bank.
5.10.
Compliance; Hazardous Materials . Shall strictly comply with
all laws, regulations, ordinances and other legal requirements,
specifically including, without limitation, ERISA, all securities
laws and all laws relating to hazardous materials and the
environment, the failure of which is likely to cause a Material
Adverse Effect. Unless approved in writing by Bank, Borrower shall
not engage in the storage, manufacture, disposition, processing,
handling, use or transportation of any hazardous or toxic
materials, whether or not in compliance with applicable laws and
regulations.
5.11.
Compliance with Assignment Laws . Shall if required by Bank
comply with the Federal Assignment of Claims Act and any other
applicable law relating to assignment of government
contracts.
5.12.
Further Assurances . Shall take such further action and
provide to Bank such further assurances as may be reasonably
requested to ensure compliance with the intent of this Agreement
and the other Loan Documents.
5.13.
Covenants Regarding Collateral . Borrower makes the
following covenants with Bank regarding the Collateral.
Borrower:
(a) will
use the Collateral only in the ordinary course of its business and
will not permit the Collateral to be used in violation of any
applicable law or policy of insurance;
(b) as
agent for Bank, will defend the Collateral against all claims and
demands of all Persons, except for Permitted Liens;
(c) will,
at Bank’s request, obtain and deliver to Bank such waivers as
Bank may require waiving the landlord’s, mortgagee’s or
other lienholder’s enforcement rights against the Collateral
and assuring Bank’s access to the Collateral in exercise of
its rights hereunder;
(d) will
promptly deliver to Bank all promissory notes, drafts, trade
acceptances chattel paper, Instruments or documents of title which
are Collateral in tangible form, appropriately endorsed to
Bank’s order, and Borrower will not create any Electronic
Chattel Paper without taking all steps deemed necessary by Bank to
confer control of the Electronic Chattel Paper upon Bank in
accordance with the Code;
11
(e) Except
for sales of Inventory in the ordinary course of business, will not
sell, assign, lease, transfer, pledge, hypothecate or otherwise
dispose of or encumber any Collateral or any interest therein;
and
(f) shall
promptly notify Bank of any future patents, trademarks or
copyrights owned by Borrower and any license agreements entered
into by Borrower authorizing said person to use any patents,
trademarks or copyrights owned by third parties.
(g) shall
give Bank at least thirty (30) days prior written notice of
any new trade or fictitious name. Borrower’s use of any trade
or fictitious name shall be in compliance with all laws regarding
the use of such names.
6. Negative Covenants of
Borrower . Borrower covenants and agrees that from the date
hereof and until payment in full of the Indebtedness and the formal
termination of this Agreement, Borrower:
6.1.
Debt . Shall not create or permit to exist any Debt,
including any guaranties or other contingent obligations, except
Permitted Debt.
6.2.
Liens . Shall not create or permit any Liens on any of its
property except Permitted Liens.
6.3.
Dividends . Shall not pay or declare any dividends (other
than stock dividends) or other distribution or purchase, redeem or
otherwise acquire any stock or other equity interests or pay or
acquire any debt subordinate to the Indebtedness unless, after
giving effect thereto, there shall be no Default hereunder and such
payment or acquisition is specifically permitted by
Exhibit 6.3 hereto (if any); provided, however, Applied
Sciences Corporation, a Taiwanese corporation (“ASC”),
a wholly-owned Subsidiary of Borrower, and DiagnoSys Medical
Limited, an England & Wales corporation, a wholly-owned
Subsidiary of Borrower, may pay dividends to Borrower or another
Subsidiary wholly-owned by Borrower.
6.4.
Loans and Other Investments . Shall not make or permit to
exist, without the express written consent of Bank, any advances or
loans to, or guarantee or become contingently liable, directly or
indirectly, in connection with the obligations, leases, stock or
dividends of, or own, purchase or make any commitment to purchase
any stock, bonds, notes, debentures or other securities of, or any
interest in, or make any capital contributions to (all of which are
sometimes collectively referred to herein as
“Investments”) any Person except for (a) purchases
of direct obligations of the federal government, (b) deposits
in commercial banks, (c) commercial paper of any U.S.
corporation having the highest ratings then given by the
Moody’s Investors Services, Inc. or Standard &
Poor’s Corporation, (d) existing investments in
Subsidiaries, (e) endorsement of negotiable instruments for
collection in the ordinary course of business, and
(f) advances to employees for business travel and other
expenses incurred in the ordinary course of business which do not
at any time exceed $100,000.00 in the aggregate.
6.5.
Change in Business . Shall not enter into any business which
is substantially different from the business in which it is
presently engaged.
6.6.
Intentionally Deleted.
6.7.
Transactions with Affiliates . Except as set forth on
Exhibit 6.7, shall not directly or indirectly purchase,
acquire or lease any property from, or sell, transfer or lease any
property to, pay any management fees to or otherwise deal with, in
the ordinary course of business or otherwise, any
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