GEORGIA 5047 58-1882343
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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ONE HORIZON WAY
P.O. DRAWER 627
MANCHESTER, GEORGIA 31816
(706) 846-3126
(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)
COPIES TO:
JEFFREY M. STEIN LEONARD A. SILVERSTEIN
KING & SPALDING LONG ALDRIDGE & NORMAN LLP
191 PEACHTREE STREET 303 PEACHTREE STREET, SUITE 5300
ATLANTA, GEORGIA 30303-1763 ATLANTA, GEORGIA 30308
PHONE: (404) 572-4600 PHONE: (404)527-4000
FASCIMILE: (404) 572-5100 FACSIMILE: (404) 527-4198
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CALCULATION OF REGISTRATION FEE
=====================================================================================================================
TITLE OF EACH CLASS OF AMOUNT TO BE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1)(2)(3) REGISTRATION FEE
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Common Stock, par value $.001 per share.................. $55,000,000 $16,225
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED FEBRUARY 13, 1998
Shares
[LOGO] HORIZON MEDICAL PRODUCTS, INC.
HMP Common Stock
($.001 par value)
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Of the shares of Common Stock ("Common Stock") offered hereby (the "Offering"), shares are being sold by Horizon Medical Products, Inc. ("HMP") and shares are being sold by the Selling Shareholders named herein under "Principal and Selling Shareholders" (the "Selling Shareholders"). The Company will not receive any of the proceeds of shares sold by the Selling Shareholders. Prior to the Offering, there has been no public market for the Common Stock. It is anticipated that the initial public offering price will be between $ and $ per share. For information relating to the factors to be considered in determining the initial offering price to the public, see "Underwriting."
Application has been made to list the Common Stock on The Nasdaq Stock Market's National Market under the symbol "HMPS."
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK, SEE "RISK FACTORS" ON PAGE 7 HEREIN. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
UNDERWRITING PROCEEDS TO
PRICE DISCOUNTS AND PROCEEDS TO SELLING
TO PUBLIC COMMISSIONS COMPANY(1) SHAREHOLDERS
------------------- ------------------- ------------------- -------------------
Per Share............................ $ $ $ $
Total(2)............................. $ $ $ $
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(1) Before deduction of expenses payable by the Company, estimated at
$1,000,000.
(2) The Company has granted the Underwriters an option, exercisable for 30 days
from the date of this Prospectus, to purchase a maximum of
additional shares of Common Stock to cover over-allotments of shares. If the
option is exercised in full, the total Price to Public will be $ ,
Underwriting Discounts and Commissions will be $ , and Proceeds to
Company will be $ .
The shares of Common Stock are offered by the several Underwriters when, as and if delivered to and accepted by the Underwriters and subject to their right to reject orders in whole or in part. It is expected that the shares of Common Stock will be ready for delivery on or about , 1998, against payment in immediately available funds.
CREDIT SUISSE FIRST BOSTON
BANCAMERICA ROBERTSON STEPHENS
NATIONSBANC MONTGOMERY SECURITIES LLC
Prospectus dated , 1998.
[PHOTOGRAPHS OF PRODUCTS INDICATING BENEFITS AND USES]
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK OFFERED HEREBY, INCLUDING OVER-ALLOTMENT, STABILIZING TRANSACTIONS, SYNDICATE SHORT COVERING TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
CIRCLE C(R), HMP (AND DESIGN), INFUSE-A-PORT(R), LIFEPORT (STYLIZED), NEOSTAR MEDICAL(R) AND TRIUMPH-1(R) ARE REGISTERED TRADEMARKS OF THE COMPANY. BAYONET(TM), HMP(TM), HORIZON(TM), HORIZON MEDICAL PRODUCTS(TM), INFUSE-A-CATH(TM), LIFEPORT(TM) AND PHERES-FLOW(TM) ARE TRADEMARKS OF THE COMPANY. ALL OTHER TRADE NAMES, TRADEMARKS AND SERVICE MARKS REFERRED TO IN THIS PROSPECTUS ARE THE PROPERTY OF THEIR RESPECTIVE OWNERS.
PROSPECTUS SUMMARY
The following information is qualified in its entirety by, and should be read in conjunction with, the more detailed information, including "Risk Factors" and the Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Prospectus. Unless otherwise indicated, all information in this Prospectus (i) assumes no exercise of the Underwriters' over-allotment option and (ii) reflects the conversion of all shares of the Company's Class B Common Stock, $.001 par value per share, and Class A Common Stock, $.001 par value per share, into shares of Common Stock, $.001 par value per share, concurrently with a -for- stock split upon consummation of the Offering. See "Underwriting" and "Description of Capital Stock."
THE COMPANY
HMP(TM) is a leading specialty medical device company focused on manufacturing and marketing vascular access products. Vascular access products comprised an estimated $1.8 billion worldwide market in 1997 and industry sources estimate that worldwide sales of vascular access products will grow at a rate of approximately 10.5% per annum over the next three years to $2.4 billion in sales by the year 2000. The Company's vascular access product lines include implantable ports, which are used primarily in cancer treatment protocols, and specialty catheters, which are used in hemodialysis and stem cell apheresis procedures. The Company believes it offers the broadest available product lines in each of these product categories and that it has the largest sales force focused exclusively on vascular access products.
The Company's vascular access ports are used primarily in systemic or regional short- and long-term cancer treatment protocols that require frequent infusions of highly concentrated or toxic medications (such as chemotherapy agents, antibiotics or analgesics) and frequent blood samplings. The Company believes that the worldwide market for vascular access ports will continue to grow primarily due to the increased utilization of chemotherapy protocols, driven by (i) aging population demographics and the higher incidence of cancer among persons 60 years of age and older relative to other age groups and (ii) the increasing patient population for whom chemotherapy has become an appropriate treatment protocol due to earlier detection and intervention and the increased efficacy of chemotherapy treatments.
The Company expects that its specialty hemodialysis and apheresis families of catheters will continue to benefit from the unique Circle C(R) and Pheres-Flow(TM)designs and the growth of underlying markets. Growth in the number of hemodialysis patients is expected to result primarily from (i) the aging of the general population, (ii) the increased effectiveness of treatments for and higher survival rates of patients suffering from hypertension, diabetes and other illnesses which lead to renal failure and (iii) increasingly efficient hemodialysis procedures which have enabled older patients and others that previously could not tolerate hemodialysis to benefit from this treatment. The Company believes that stem cell apheresis procedures will continue to experience significant growth primarily from increasing awareness and acceptance of apheresis as part of the treatment protocol for various cancers and improvements in apheresis procedures.
The Company believes that the strength of its marketing, manufacturing, and management infrastructure, together with the experience of its management team in developing strategic partnerships and acquiring and integrating product lines, positions it to become a leading supplier in the vascular access product market. The Company will seek to achieve this objective and capitalize on favorable industry dynamics by pursuing the following strategies.
- Focus on the Vascular Access Market. The Company has developed a highly-specialized sales force that focuses exclusively on vascular access products and believes it offers its customers the broadest available lines in each of the Company's three major categories of products. By offering broad product lines, including proprietary products, the Company is able to take advantage of cross-selling opportunities within its targeted customer base. The Company believes that its customers benefit from its broad knowledge of vascular access products and procedures, comprehensive customer support and responsiveness to their changing needs.
- Exploit Unique Products. The Company manufactures and markets certain lines of products that utilize unique technologies which offer superior performance compared with competing products. Such products include the Circle C(R) dual lumen hemodialysis catheters and the Pheres-Flow(TM)stem cell apheresis catheter. The Company will seek to increase its sales of these unique products and utilize cross-selling to increase sales of its other product lines.
- Pursue Strategic Acquisitions/Partnerships. The Company has enhanced its product lines through completion of the acquisition (the "NeoStar Medical(R) Acquisition") of NeoStar Medical(R) Technologies, Inc. ("NeoStar Medical(R)") in October 1995, which gave the Company its first line of catheters, and the acquisition (the "Strato(R)/Infusaid(TM) Acquisition") of Strato(R)/Infusaid(TM) Inc. ("Strato(R)/Infusaid(TM)") in July 1997, which significantly expanded the Company's line of vascular access ports. The Company believes that the vascular access products industry remains highly fragmented, and that there will continue to be attractive strategic partnering and acquisition opportunities in the industry. The Company will seek to acquire products that: (i) will broaden its lines of vascular access products or increase its penetration of existing markets, (ii) can be effectively marketed by its sales organization and (iii) can be manufactured at the Company's recently opened manufacturing facility.
- Increase Efficiency of Manufacturing Operations. The Company believes that it can achieve significant cost efficiencies through transitioning the manufacturing of all its product lines to its recently expanded Manchester, Georgia manufacturing facility. The Company will also seek to leverage its manufacturing infrastructure by adding newly acquired or developed vascular access products to its product lines.
HMP(TM) was incorporated in Georgia in 1990. The Company's principal executive offices are located at One Horizon Way, P.O. Drawer 627, Manchester, Georgia 31816. The Company's telephone and facsimile numbers are (706) 846-3126 and (706) 846-3146, respectively.
THE OFFERING
Common Stock offered by:
The Company.......................... shares
The Selling Shareholders............. shares
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Total...................... shares
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Common Stock to be outstanding after
the Offering(1).................... shares
Use of Proceeds...................... Repayment of outstanding indebtedness and for working
capital and general corporate purposes, including the
acquisition of complementary businesses, products or
technologies and certain additional office space in
Atlanta, Georgia. The Company will not receive any
proceeds from the sale of Common Stock by the Selling
Shareholders. See "Use of Proceeds."
Proposed Nasdaq National Market
Symbol............................. HMPS
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(1) Does not include (i) shares of Common Stock reserved for issuance upon the exercise of outstanding stock options issued under the Company's 1998 Stock Incentive Plan (the "Stock Incentive Plan"), (ii) shares of Common Stock reserved for issuance upon the exercise of stock options which may be granted under the Stock Incentive Plan, (iii) shares of Common Stock reserved for issuance upon the exercise of a warrant to purchase Common Stock granted by the Company to Premier in connection with the Premier Purchasing Agreement and (iv) certain shares of Common Stock which may become issuable to two affiliates of the Company as consulting fees. See "Management -- Stock Incentive Plan", "Description of Capital Stock -- Premier Warrants", "Certain Transactions -- Consulting Agreements with Directors" and "-- Consulting Agreement with HealthCare Alliance."
SUMMARY CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
YEARS ENDED DECEMBER 31,
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1995 1996 1997
------ ------ ----------------------------
PRO FORMA
ACTUAL AS ADJUSTED(1)(2)
-------- -----------------
(UNAUDITED)
STATEMENT OF OPERATIONS DATA:
Net sales............................................. $5,003 $7,052 $ 15,798 $22,818
Cost of goods sold.................................... 2,227 2,997 6,273 8,660
------ ------ -------- -------
Gross profit.......................................... 2,776 4,055 9,525 14,158
Selling, general and administrative expenses.......... 2,706 4,240 6,111 8,111
------ ------ -------- -------
Income (loss) from operations......................... 70 (185) 3,414 6,047
Interest (expense) income............................. (242) (733) (3,971) 55
Accretion of value of put warrant repurchase
obligation(3)....................................... -- -- (8,000) --
Other income.......................................... -- 54 70 70
------ ------ -------- -------
Income (loss) before income taxes and extraordinary
item................................................ (172) (864) (8,487) 6,172
Income tax benefit (expense).......................... 7 -- (320) (2,379)
Effect of conversion to C Corporation status.......... (7) -- -- --
Extraordinary loss on early extinguishment of debt.... (70) -- -- --
------ ------ -------- -------
Net income (loss)..................................... $ (242) $ (864) $ (8,807) $ 3,793
====== ====== ======== =======
Loss per share before extraordinary item -- basic and
diluted............................................. $(1.61) -- --
Net loss per share -- basic and diluted............... $(2.26) $(7.83) $ (79.80)
Weighted average common shares outstanding............ 107,069 110,360 110,365
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DECEMBER 31, 1997
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ACTUAL AS ADJUSTED(2)
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BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 2,894 $ 5,318
Working capital............................................. 6,842 11,363
Total assets................................................ 31,577 34,211
Long-term debt, net of current maturities................... 23,972 43
Total shareholders' equity (deficit)........................ (11,150) 29,972
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The unaudited pro forma as adjusted consolidated financial information presented does not purport to represent what the consolidated results of operations or financial condition of the Company would have been if the transactions reflected therein had occurred on the assumed dates or to project the future consolidated results of operations or financial condition of the Company.
(1) Gives effect to the Strato(R)/Infusaid(TM) Acquisition as if it had been
completed on January 1, 1997. The pro forma adjustments include (i) a
reduction of cost of goods sold for eliminated overhead allocation, (ii)
adjustment of selling, general and administrative expenses to increase for
amortization of intangible assets and to decrease for elimination of
salaries, (iii) an increase in interest expense due to financial costs of
the acquisition, (iv) removal of accretion of value of the put warrant
repurchase obligation and (v) related tax effects.
(2) Adjusted to reflect net proceeds of $31,600 from the sale of shares of
Common Stock offered by the Company hereby (after deducting underwriting
discounts and commissions and estimated Offering expenses payable by the
Company) and the application thereof as set forth herein. See "Use of
Proceeds." The adjustments include a reduction of interest expense, an
increase in compensation costs following the Offering and related tax
effects.
(3) See Notes 6 and 8 of Consolidated Financial Statements of the Company for a discussion of this non-recurring item.
RISK FACTORS
An investment in the Common Stock involves a high degree of risk. In addition to the other information in this Prospectus, the following risk factors should be considered carefully in evaluating the Company and its business before purchasing shares of the Common Stock offered hereby.
HISTORY OF LOSSES
Since its inception in 1990, the Company has incurred substantial costs to develop, acquire and enhance its product lines, establish marketing and distribution relationships, recruit and train its sales force, establish its manufacturing capabilities and build a management infrastructure. As a result, from its inception through December 31, 1997, the Company sustained cumulative net losses of $14.4 million, which includes $13.5 million in interest expense incurred in 1997 in connection with the warrant issued to NationsCredit Commercial Corporation ("NationsCredit") in July 1997 (the "NationsCredit Warrant"). The Company incurred net losses of $242,113, $864,211 and $8.8 million during fiscal 1995, 1996 and 1997, respectively ($3.8 million income on a pro forma as adjusted basis giving effect to the Strato(R)/Infusaid(TM)Acquisition as if it had been completed in January 1, 1997 and as adjusted to reflect the sale of shares of Common Stock offered hereby and the application of the net proceeds therefrom as set forth herein). No assurance can be given that the Company will not continue to incur losses in future periods. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources."
LIMITED MANUFACTURING EXPERIENCE
The Company's success will depend in part on its ability to manufacture its products in compliance with international and domestic standards such as ISO 9001, the United States Food and Drug Administration's (the "FDA") Good Manufacturing Practices ("GMP") regulations and other applicable licensing and regulatory requirements in sufficient quantities and on a timely basis, while maintaining product quality and acceptable manufacturing costs. The Company has historically outsourced the manufacturing of most of its product lines to third parties while remaining responsible for that work. In the fourth quarter of 1996, the Company transitioned the manufacturing of its Circle C(R) and Pheres-Flow(TM) specialty catheter product lines into its manufacturing facility in Manchester, Georgia. The Company is currently transitioning the manufacturing of its LifePort(TM), Infuse-A-Port(R) and Infuse-A-Cath(TM) product lines to the Manchester facility from a facility in Norwood, Massachusetts. The Company has the right to use the Norwood facility until April 1998, and there is currently no assurance that the Company will be able to continue using this facility after April 1998, even if the Company has not completed its transition to the Manchester facility. If such an event were to occur, the Company could be unable to meet its customers' product needs, resulting in lost business. Before the Company's right to use the Norwood facility expires, the Company expects to move its inventory and remaining manufacturing equipment to the Manchester facility. The Company is currently building inventory in anticipation of this transition, however, there can be no assurance that the inventory level built up by the Company will be sufficient to meet customer demands during this period. The Norwood facility is certified under ISO 9001 and has received the Community European Mark (the "CE Mark"), thus allowing the products produced at this facility to be sold in the European Community. The Company is seeking certification as an ISO 9001 medical device manufacturing facility for the Manchester facility and a CE Mark for the products currently manufactured at the Manchester facility and the products in the LifePort(TM), Infuse-A-Port(R) and Infuse-A-Cath(TM) product lines. Although the Company expects to receive ISO 9001 certification and the CE Mark by June 1998, there can be no assurance that such certification and the CE Mark will be received by such time, if at all. If the Company does not receive these certifications for its Manchester facility, it will ultimately be unable to sell its products in Europe. See "Business -- Backlog." The Company has undergone and expects to continue to undergo regular GMP inspections in connection with the manufacture of its products at the Company's facilities. The Company's success will depend, among other things, on its ability to efficiently manufacture different products and to integrate newly acquired products with existing products. There can be no assurance that the Company will not encounter difficulties in transitioning the manufacturing of the LifePort(TM), Infuse-A-Port(R) and Infuse-A-Cath(TM) product lines to the Manchester facility and in increasing production of new products, including problems involving production yields, quality control and
assurance and component supply. The Company's failure to successfully commence the manufacturing of new products, to maintain or increase production volumes of new or existing products in a timely or cost-effective manner or to achieve or maintain compliance with ISO 9001, the CE Mark, GMP regulations or other applicable licensing or regulatory requirements could have a material adverse effect on the Company's business, results of operations and financial condition. See "Business -- Manufacturing."
MANAGEMENT OF GROWTH; RISKS ASSOCIATED WITH ACQUISITIONS
The rapid growth experienced by the Company to date has placed, and could continue to place, significant demands on the Company's management, operational and financial resources. In October 1995 and July 1997, respectively, the Company completed the NeoStar Medical(R) and Strato(R)/Infusaid(TM) Acquisitions. Although the Company has no present commitments or agreements with respect to any additional material acquisitions, the Company expects to pursue additional strategic acquisitions of complementary businesses, products or technologies as a means of expanding its existing product lines and distribution channels. As the medical devices industry continues to consolidate, the Company expects to face increasing competition from other companies for available acquisition opportunities. There can be no assurance that suitable acquisition candidates will be available, that financing for such acquisitions will be obtainable on terms acceptable to the Company or that such acquisitions will be successfully completed. Acquisitions entail numerous risks, including (i) the potential inability to successfully integrate acquired operations and products or to realize anticipated synergies, economies of scale or other value, (ii) diversion of management's attention, (iii) responsibility for undiscovered or contingent liabilities and (iv) loss of key employees of acquired operations. The relocation of manufacturing operations for acquired product lines to the Company's manufacturing facility in Manchester, Georgia may also result in interruptions in production and back orders. See "Business -- Backlog." No assurance can be given that the Company will not incur problems in integrating any future acquisition and there can be no assurance that the Strato(R)/Infusaid(TM) Acquisition or any future acquisition will increase the Company's profitability. Further, the Company's results of operations in fiscal quarters immediately following a material acquisition may be materially adversely affected while the Company integrates the acquired business into its existing operations. Any such problems could have a material adverse effect on the Company's business, results of operations and financial condition. In addition, future acquisitions by the Company may result in dilutive issuances of equity securities, the incurrence of additional debt, large one-time charges and the creation of goodwill or other intangible assets that could result in significant amortization expense.
DEPENDENCE ON PATENTS, TRADEMARKS, LICENSES AND PROPRIETARY RIGHTS
The Company believes that its competitive position and success has
depended, in part, on and will continue to depend on the ability of the Company
and its licensors to obtain patent protection for its products, to defend
patents once obtained, to preserve its trade secrets and to operate without
infringing upon patents and proprietary rights held by third parties, both in
the United States and in foreign countries. The Company's policy is to protect
its proprietary position by, among other methods, filing United States and
foreign patent applications relating to technology, inventions and improvements
that are important to the development of its business. The Company owns numerous
United States and foreign patents and United States and foreign patent
applications. The Company also is a party to several license agreements with
third parties pursuant to which it has obtained, for varying terms, the right to
make, use and/or sell products that are covered under such license agreement in
consideration for royalty payments. Many of the Company's major products,
including its Circle C(R) acute and chronic catheters and its Infuse-A-Cath(TM)
catheters are subject to such license agreements. There can be no assurance that
the Company or its licensors have or will develop or obtain additional rights to
products or processes that are patentable, that patents will issue from any of
the pending patent applications filed by the Company or that claims allowed will
be sufficient to protect any technology that is licensed to the Company. In
addition, no assurances can be given that any patents issued or licensed to the
Company or other licensing arrangements will not be challenged, invalidated,
infringed or circumvented or that the rights granted thereunder will provide
competitive advantages for the Company's business or products. In such event the
business, results of operations and financial condition of the Company could be
materially adversely affected.
A number of medical devices companies, physicians and others have filed patent applications or received patents to technologies that are similar to technologies owned or licensed by the Company. There can be no assurance that the Company is aware of all patents or patent applications that may materially affect the Company's ability to make, use or sell any products. United States patent applications are confidential while pending in the United States Patent and Trademark Office ("PTO"), and patent applications filed in foreign countries are often first published six or more months after filing. Any conflicts resulting from third-party patent applications and patents could significantly reduce the coverage of the patents owned or licensed by the Company and limit the ability of the Company or its licensors to obtain meaningful patent protection. If patents are issued to other companies that contain competitive or conflicting claims, the Company may be required to obtain licenses to those patents or to develop or obtain alternative technology. There can be no assurance that the Company would not be delayed or would be prevented from pursuing the development or commercialization of its products, which could have a material adverse effect on the Company.
There has been substantial litigation regarding patent and other intellectual property rights in the medical devices industry. Although the Company has not been a party to any material litigation to enforce any intellectual property rights held by the Company, or a party to any material litigation seeking to enforce any rights alleged to be held by others, future litigation may be necessary to protect patents, trade secrets, copyrights or "know-how" owned by the Company or to defend the Company against claimed infringement of the rights of others and to determine the scope and validity of the proprietary rights of the Company and others. The validity and breadth of claims covered in medical technology patents involve complex legal and factual questions for which important legal principles are unresolved. Any such litigation could result in substantial cost to and diversion of effort by the Company. Adverse determinations in any such litigation could subject the Company to significant liabilities to third parties, could require the Company to seek licenses from third parties and could prevent the Company from manufacturing, selling or using certain of its products, any of which could have a material adverse effect on the Company's business, results of operations and financial condition.
The Company also relies on trade secrets and proprietary technology that it seeks to protect, in part, through confidentiality agreements with employees, consultants and other parties. There can be no assurance that these agreements will not be breached, that the Company will have adequate remedies for any breach, that others will not independently develop substantially equivalent proprietary information or that third parties will not otherwise gain access to the Company's trade secrets.
The Company also relies upon trademarks and trade names for the development and protection of brand loyalty and associated goodwill in connection with its products. The Company's policy is to protect its trademarks, trade names and associated goodwill by, among other methods, filing United States and foreign trademark applications relating to its products and business. The Company owns numerous United States and foreign trademark registrations and applications. The Company also relies upon trademarks and trade names for which it does not have pending trademark applications or existing registrations, but in which the Company has substantial trademark rights. The Company's registered and unregistered trademark rights relate to the majority of the Company's products, including products comprising the Circle C(R), Infuse-A-Port(R), Triumph-1(R), Infuse-A-Cath(TM), LifePort(TM) and Pheres-Flow(TM) product lines. There can be no assurance that any registered or unregistered trademarks or trade names of the Company will not be challenged, canceled, infringed, circumvented, or be declared generic or infringing of other third-party marks or provide any competitive advantage to the Company. See "Business -- Trademarks, Patents, Proprietary Rights and Licenses."
POTENTIAL PRODUCT LIABILITY
Because its products are intended to be used in healthcare settings on
patients who are physiologically unstable and may be seriously or critically
ill, the Company's business exposes it to potential product liability risks
which are inherent in the medical devices industry. In addition, many of the
medical devices manufactured and sold by the Company are designed to be
implanted in the human body for extended periods of time. Component failures,
manufacturing flaws, design defects or inadequate disclosure of product-related
risks with respect to these or other products manufactured or sold by the
Company could result in injury to, or
death of, a patient. The occurrence of such a problem could result in product liability claims and/or a recall of, safety alert relating to, or other FDA or private civil action against one or more of the Company's products or responsible officials. The Company maintains product liability coverage in amounts that it deems sufficient for its business. There can be no assurance, however, that such coverage will be available with respect to or sufficient to satisfy all claims made against the Company or that the Company will be able to obtain insurance in the future at satisfactory rates or in adequate amounts. Product liability claims or product recalls in the future, regardless of their ultimate outcome, could result in costly litigation and could have a material adverse effect on the Company's business, results of operations and financial condition. See "Business -- Product Liability Claims and Insurance."
FUTURE CAPITAL REQUIREMENTS
During 1997 and in prior years, the Company's cash flow from operations was insufficient to cover its operating expenses, and the Company relied on external financing to meet its operating cash flow needs. The Company expects that its current cash and cash equivalents, together with additional cash from operations and the proceeds of the Offering, will be sufficient to meet its current operating cash requirements at least through December 31, 1998. However, depending upon the Company's acquisition activity and results of operations, there can be no assurance that such resources will be sufficient, in which case the Company would need to obtain additional financing. Adequate additional funds, whether from the financial markets or from other sources, may not be available on a timely basis, on terms acceptable to the Company or at all. Insufficient funds may cause the Company to delay or abandon some or all of its product acquisition, licensing, marketing or research and development programs or opportunities. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources."
NEW PRODUCT INTRODUCTIONS
Although the vascular access product industry has not experienced rapid technological change historically, as the Company's existing products become more mature, the importance of developing or acquiring, manufacturing and introducing new products that address the needs of its customers will increase. The development or acquisition of any such products will entail considerable time and expense, including acquisition costs, research and development costs, and the time and expense required to obtain necessary regulatory approvals, which approvals are not assured, and any of which could adversely affect the business, results of operations or financial condition of the Company. There can be no assurance that such development activities will yield products that can be commercialized profitably or that any product acquisition can be consummated on commercially reasonable terms or at all. To date, substantially all of the Company's products have been developed in conjunction with third parties or acquired as a result of acquisitions consummated by the Company. The inability of the Company to develop or acquire new products to supplement the Company's existing product lines could have an adverse impact on the Company's ability to fully implement its business strategy and further develop its operation.
CUSTOMER CONCENTRATION
The Company's net sales to its five largest customers accounted for 9.5%, 10.7% and 18.3% of net sales during 1995, 1996 and 1997, respectively. The loss of, or significant curtailments of purchases by, any of the Company's significant customers could have a material adverse effect on the Company's business, results of operations and financial condition.
DEPENDENCE ON KEY SUPPLIERS
The Company purchases raw materials and components for use in manufacturing
its products from approximately 80 suppliers. In fiscal 1997, products purchased
from its three largest suppliers accounted for 40%, 15% and 8%, respectively, of
the Company's total raw material and component purchases. There can be no
assurance that the Company will be able to maintain its existing supplier
relationships or secure additional suppliers as needed. The loss of a major
supplier, the deterioration of the Company's relationship with a major supplier,
changes by a major supplier in the specifications of the components used in the
Company's products,
or the failure of the Company to establish good relationships with major new suppliers could have a material adverse effect on the Company's business, results of operations and financial condition. See "Business -- Manufacturing."
DEPENDENCE ON KEY PERSONNEL
The Company's success is substantially dependent on the performance, contributions and expertise of its executive officers and key employees. The Company's success to date has been significantly dependent on the contributions of Marshall B. Hunt, its Chairman and Chief Executive Officer, and William E. Peterson, Jr., its President, each of whom will enter into an employment agreement with the Company at the time of the Offering and on each of whom the Company maintains key man life insurance in the amount of $1 million. The Company is also dependent on its ability to attract, retain and motivate additional personnel. The loss of the services of any of its executive officers or other key employees or the Company's inability to attract, retain or motivate the necessary personnel could have a material adverse effect on the Company's business, results of operations and financial condition. See "Management."
CONTROL BY CERTAIN SHAREHOLDERS
After the Offering, Marshall B. Hunt, William E. Peterson, Jr., and Roy C. Mallady, Jr. will own approximately %, % and % of the outstanding Common Stock (approximately %, % and % if the Underwriters' over-allotment option is exercised in full). These shareholders, if they were to act together, would have the power to elect all of the members of the Company's Board of Directors, amend the Amended and Restated Articles of Incorporation of the Company (the "Articles") and the Amended and Restated Bylaws of the Company (the "Bylaws") and effect or preclude fundamental corporate transactions involving the Company, including the acceptance or rejection of proposals relating to a merger of the Company or the acquisition of the Company by another entity. Accordingly, these shareholders are able to exert significant influence over the Company, including the ability to control decisions on matters on which shareholders are entitled to vote. See "Certain Transactions," "Principal and Selling Shareholders" and "Description of Capital Stock."
YEAR 2000 ISSUES
The approaching year 2000 could result in challenges related to the Company's computer software, accounting records and relationships with suppliers and customers. Management of the Company is studying year 2000 issues and is seeking to avoid such problems, but there can be no assurance that such problems will not be encountered or that the costs incurred to resolve such problems will not be material.
HEALTHCARE REFORM/PRICING PRESSURE
The healthcare industry in the United States continues to experience
change. In recent years, several healthcare reform proposals have been
formulated by members of Congress. In addition, state legislatures periodically
consider healthcare reform proposals. Federal, state and local government
representatives will, in all likelihood, continue to review and assess
alternative healthcare delivery systems and payment methodologies, and ongoing
public debate of these issues can be expected. Cost containment initiatives,
market pressures and proposed changes in applicable laws and regulations may
have a dramatic effect on pricing or potential demand for medical devices, the
relative costs associated with doing business and the amount of reimbursement by
both government and third-party payors to persons providing medical services. In
particular, the healthcare industry is experiencing market-driven reforms from
forces within the industry that are exerting pressure on healthcare companies to
reduce healthcare costs. Managed care and other healthcare provider
organizations have grown substantially in terms of the percentage of the
population in the United States that receives medical benefits through such
organizations and in terms of the influence and control that they are able to
exert over an increasingly large portion of the healthcare industry. Managed
care organizations are continuing to consolidate and grow, increasing the
ability of these organizations to influence the practices and pricing involved
in the purchase of medical devices, including certain of the products sold by
the Company, which is expected to exert downward pressure on product margins.
Both short- and long-term cost
containment pressures, as well as the possibility of continued regulatory reform, may have an adverse impact on the Company's business, results of operations and financial condition. See "Business -- Healthcare Reform; Third-Party Reimbursement."
GOVERNMENT REGULATION
The Company's products and operations are subject to extensive regulation
by numerous governmental authorities, including, but not limited to, the FDA
and, in some jurisdictions, by state and foreign governmental authorities. In
particular, the Company must obtain specific clearance or approval from the FDA
before it can market new products or certain modified products in the United
States. The FDA administers the Federal Food, Drug and Cosmetics Act (the "FDC
Act"). Under the FDC Act, medical devices must receive FDA clearance through the
Section 510(k) notification process ("510(k)") or the more lengthy premarket
approval ("PMA") process before they can be sold in the United States. To obtain
510(k) marketing clearance, a company must show that a new product is
"substantially equivalent" to a product already legally marketed and which does
not require PMA approval. Therefore, it is not always necessary to prove the
safety and effectiveness of the new product in order to obtain 510(k) clearance
for such product. To obtain PMA approval, a company must submit extensive data,
including clinical trial data, to prove the safety, effectiveness and clinical
utility of its products. FDA regulations also require companies to adhere to
certain GMP's, which include testing, quality control, storage, and
documentation procedures. Compliance with applicable regulatory requirements is
monitored through periodic site inspections by the FDA. The process of obtaining
such clearances or approvals can be time-consuming and expensive, and there can
be no assurance that all clearances or approvals sought by the Company will be
granted or that FDA review will not involve delays adversely affecting the
marketing and sale of the Company's products. In addition, the Company is
required to comply with FDA requirements for labeling and promotion of its
products. The Federal Trade Commission also regulates most device advertising.
In addition, international regulatory bodies often establish varying regulations governing product testing and licensing standards, manufacturing compliance (e.g., compliance with ISO 9001 standards), packaging requirements, labeling requirements, import restrictions, tariff regulations, duties and tax requirements and pricing and reimbursement levels. The inability or failure of the Company to comply with the varying regulations or the imposition of new regulations could restrict the Company's ability to sell its products internationally and thereby adversely affect the Company's business, results of operations and financial condition.
Subsequent to an FDA inspection in 1996, the Company received a warning letter alleging particular deficiencies in its compliance with the FDA's medical device reporting requirements. Under these requirements, the Company must report certain malfunctions and adverse events that may be associated with its devices. In response to this warning letter, the Company has implemented specific corrective actions which were proposed to and reviewed by the FDA without objection. The Company believes that it has substantially addressed the concerns delineated in the warning letter. At the conclusion of a follow-up inspection in 1997, the Company was advised of various inspectional observations. These inspectional observations allege various objectionable conditions that may or may not result in the issuance of a warning letter or other enforcement action. The Company has responded to these observations and, in each case, either believes that it is acting in substantial compliance with applicable laws and regulations or it has implemented corrective actions that achieve substantial compliance. While the FDA has taken no enforcement action with respect to these observations, there can be no assurance that such action will not ensue at a future time or will not adversely impact the Company's business. Failure to comply with applicable federal, state or foreign laws or regulations could subject the Company to enforcement actions, including, but not limited to, product seizures, recalls, withdrawal of clearances or approvals, and civil and criminal penalties against the Company or its responsible officials, any one or more of which could have a material adverse effect on the Company's business, results of operations and financial condition. Federal, state and foreign laws and regulations regarding the manufacture and sale of medical devices are subject to future changes, as are administrative interpretations of regulatory agencies. No assurance can be given that such changes will not have a material adverse effect on the Company's business, results of operation and financial condition. See "Business -- Government Regulation."
LIMITATIONS ON THIRD-PARTY REIMBURSEMENT
In the United States, the Company's products are purchased primarily by hospitals and medical clinics, which then bill various third-party payors, such as Medicare, Medicaid and other government programs and private insurance plans, for the healthcare services provided to patients. Government agencies, private insurers and other payors determine whether to provide coverage for a particular procedure and reimburse hospitals for medical treatment at a fixed rate based on the diagnosis-related group ("DRG") established by the United States Health Care Financing Administration ("HCFA"). The fixed rate of reimbursement is based on the procedure performed and is unrelated to the specific devices used in that procedure. If a procedure is not covered by a DRG, payors may deny reimbursement. In addition, third-party payors may deny reimbursement if they determine that the device used in a treatment was unnecessary, inappropriate or not cost-effective, experimental or used for a non-approved indication. Reimbursement of procedures implanting the Company's vascular access ports and catheter products is currently covered under a DRG. There can be no assurance that reimbursement for such implantation will continue to be available, or that future reimbursement policies of third-party payors will not adversely affect the Company's ability to sell its products on a profitable basis. Failure by hospitals and other users of the Company's products to obtain reimbursement from third-party payors, or changes in government and private third-party payors' policies toward reimbursement for procedures employing the Company's products, would have a material adverse effect on the Company's business, results of operations and financial condition. See "Business -- Healthcare Reform; Third-Party Reimbursement."
COMPETITION
The medical devices industry is highly competitive and fragmented. The Company currently competes with many companies in the development, manufacturing and marketing of vascular access ports, dialysis and apheresis catheters and related ancillary products. Some of these competitors have substantially greater capital resources, management resources, research and development staffs, sales and marketing organizations and experience in the medical devices industry than the Company. These competitors may succeed in marketing their products more effectively, pricing their products more competitively, developing technologies and products that are more effective than those sold or produced by the Company currently or in the future or that would render some products offered by the Company noncompetitive. See "Business -- Competition."
NO PRIOR PUBLIC MARKET; DETERMINATION OF INITIAL PUBLIC OFFERING PRICE; VOLATILITY OF COMMON STOCK PRICE
Prior to the Offering, there has been no public market for the Common Stock, and there can be no assurance that an active trading market will develop or be sustained. The initial public offering price will be determined by negotiations between the Company and Credit Suisse First Boston Corporation ("CSFBC"), BancAmerica Robertson Stephens and NationsBanc Montgomery Securities LLC based on several factors and may not be indicative of the market price of the Common Stock after the Offering. The market price of the Common Stock is likely to be highly volatile and may be significantly affected by factors such as actual or anticipated fluctuations in the Company's results of operations and other factors. In addition, the stock market has from time to time experienced significant price and volume fluctuations which could affect the market price of the Common Stock offered hereby. These broad market fluctuations may adversely affect the market price of the Common Stock. The market prices of the common stock of many publicly-held medical devices companies have been in the past, and are expected to continue to be, volatile. Announcements of technological or medical innovations or new commercial products by the Company or its competitors, developments or disputes concerning patents or proprietary rights, changes in regulatory or medical reimbursement policies, and economic and other external factors may have a significant impact on the market price and marketability of the Common Stock. See "Underwriting."
FACTORS INHIBITING TAKEOVER
Certain provisions of the Articles and Bylaws may delay or prevent a
takeover attempt that a shareholder might consider in its best interest. Among
other things, these provisions establish certain advance notice procedures for
shareholder proposals to be considered at shareholders' meetings, provide for
the classification
of the Board of Directors, provide that only the Board of Directors or shareholders owning 75% or more of the outstanding Common Stock may call special meetings of the shareholders and establish supermajority voting requirements with respect to the amendment of certain provisions of the Articles and Bylaws. In addition, the Board of Directors can authorize and issue shares of Preferred Stock, no par value (the "Preferred Stock"), issuable in one or more series, with voting or conversion rights that could adversely affect the voting or other rights of holders of the Common Stock. The terms of the Preferred Stock that might be issued could potentially prohibit the Company's consummation of any merger, reorganization, sale of all or substantially all of its assets, liquidation or other extraordinary corporate transaction without the approval of the holders of the outstanding shares of such stock. Furthermore, certain provisions of the Georgia Business Corporation Code (the "Georgia Code") may have the effect of delaying or preventing a change in control of the Company. See "Description of Capital Stock."
DILUTION
The initial public offering price of the Common Stock offered hereby is substantially higher than the net tangible book value per share of the Common Stock. Therefore, purchasers of Common Stock offered hereby will incur immediate and substantial dilution, and may incur additional dilution upon the future exercise of stock options. See "Dilution."
SHARES ELIGIBLE FOR FUTURE SALE
Sales of a substantial number of shares of Common Stock in the public market following the Offering could adversely affect the market price for the Common Stock. The Company, its directors and officers and certain of its shareholders have agreed with the Underwriters not to sell or otherwise dispose of any shares of Common Stock for a period of 180 days after the date of this Prospectus without the prior written consent of CSFBC (the "Lock-Up"), except issuances by the Company to optionees pursuant to the exercise of stock options granted under the Stock Incentive Plan. Notwithstanding the foregoing, the officers and directors of the Company and certain of its shareholders will be permitted to transfer shares of Common Stock or other securities convertible into or exchangeable or exercisable for any shares of Common Stock of which such persons are the beneficial owner to (i) the Company, (ii) shareholders of the Company who are bound by the terms of a similar Lock-Up, and (iii) any donees of such persons who receive such securities of the Company as a bona fide gift or any affiliate of such persons provided that such donees or affiliates agree in writing to be bound by the terms of a similar Lock-Up (each a "Permitted Transfer"). Beginning 180 days after the date of this Prospectus, assuming that CSFBC does not consent to any sales prior to such time or a Permitted Transfer does not occur, all shares of Common Stock outstanding on the date of this Prospectus and not otherwise offered and sold in this Offering will become eligible for sale in the public market, subject to compliance with the provisions of Rule 144 ("Rule 144") under the Securities Act of 1933, as amended (the "Securities Act"). Of such shares, shares are held by Mr. Hunt, the Chairman of the Board and Chief Executive Officer of the Company, shares are held by Mr. Mallady, the Vice Chairman of the Board, and shares are held by Mr. Peterson, the President and a director of the Company, each of whom is an affiliate of the Company within the meaning of Rule 144, and may, therefore, only be sold in the public market in compliance with the volume limitations and other requirements of Rule 144. See "Shares Eligible for Future Sale" and "Underwriting."
USE OF PROCEEDS
The net proceeds to the Company from the Offering are estimated to be approximately $31.6 million (approximately $ million if the Underwriters' over-allotment option is exercised in full). The Company intends to use the net proceeds of the Offering as follows: (i) an aggregate of $23.5 million to repay indebtedness of the Company expected to be outstanding under a $26.5 million credit facility with NationsCredit (the "Credit Facility") and a $1.5 million acquisition note originally issued to Sirrom Capital Corporation ("Sirrom") in connection with the NeoStar Medical(R)Acquisition (the "Acquisition Note") and presently owned by NationsCredit; (ii) an aggregate of $3.3 million to repay indebtedness incurred in connection with the NeoStar Medical(R) Acquisition; and (iii) the balance of approximately $ million for working capital and general corporate purposes including, among other things, the funding of acquisitions of complementary businesses, products or technologies, although the Company has no present commitments or agreements with respect to any additional material acquisitions, as well as the acquisition of certain additional office space in Atlanta, Georgia from an affiliated party. See "Certain Transactions."
Borrowings under the Credit Facility were used to finance the Strato(R)/Infusaid(TM) Acquisition and to redeem warrants to purchase Common Stock issued to a former lender. Outstanding indebtedness under the Credit Facility bears interest at floating rates based on NationsCredit's Commercial Paper Rate plus 4.25% to 5.25% (9.836% to 10.836% at December 31, 1997) and matures upon the earlier of the receipt by the Company of the proceeds from the Offering or July 1, 2004. The Acquisition Note bears interest at a rate of 13.75% per annum. Pending use of the net proceeds as described above, the Company will invest the net proceeds in investment grade, interest-bearing securities. The Company will not receive any proceeds from the sale of Common Stock by the Selling Shareholders.
DIVIDEND POLICY
The Company anticipates that following the completion of the Offering earnings will be retained for use in developing and growing its business and, therefore, does not anticipate paying any cash dividends in the foreseeable future. Any future determination to pay cash dividends will be at the discretion of the Board of Directors and will be dependent upon the Company's financial condition, results of operations, capital requirements, restrictions in financing arrangements and such other factors as the Board of Directors deems relevant.
CAPITALIZATION
The following table sets forth the capitalization of HMP(TM) as of December 31, 1997 (i) on an actual basis and (ii) as adjusted to give effect to the sale of shares of Common Stock offered by the Company hereby (after deducting underwriting discounts and commissions and estimated Offering expenses payable by the Company) and the application of the net proceeds to the Company from the Offering as set forth herein. See "Use of Proceeds." This table should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements and Notes thereto included in this Prospectus.
AT DECEMBER 31, 1997
----------------------
AS
ACTUAL ADJUSTED(2)
-------- -----------
(DOLLARS IN THOUSANDS)
Short-term debt, including current portion of long-term
debt...................................................... $ 1,959 $ 199
======== ========
Long-term debt.............................................. $ 23,971 $ 43
Shareholders' equity(1):
Preferred Stock, par value $.001 per share; (1,000,000)
shares authorized; no shares issued and outstanding
(actual); and no shares issued and outstanding (as
adjusted).............................................. -- --
Common Stock, par value $.001 per share; 5,000,000 shares
authorized; 101,919 shares outstanding (actual); and
[ ] shares outstanding (as adjusted)............. -- --
Additional paid-in capital................................ 51,200
Shareholders' notes receivable............................ (398) (398)
Accumulated deficit....................................... (10,752) (15,328)
-------- --------
Total shareholders' equity (deficit).............. (11,150) 35,474
-------- --------
Total capitalization.............................. $ 12,821 $ 35,517
======== ========
|
(1) Does not include (i) up to shares of Common Stock reserved for
issuance upon the exercise of outstanding stock options issued under the
Stock Incentive Plan, (ii) shares of Common Stock reserved for
issuance upon the exercise of stock options which may be granted under the
Stock Incentive Plan, (iii) shares of Common Stock reserved for
issuance upon the exercise of the NationsCredit Warrant, (iv) shares of
Common Stock reserved for issuance upon the exercise of a warrant to
purchase Common Stock granted by the Company to Premier in connection with
the Premier Purchasing Agreement and (v) certain shares of Common Stock
which are issuable to two affiliates of the Company as consulting fees. See
"Management -- Stock Incentive Plan", "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Liquidity and Capital
Resources", "Description of Capital Stock -- Premier Warrants", "Certain
Transactions -- Consulting Agreement with Directors" and "-- Consulting
Agreement with HealthCare Alliance."
(2) Gives effect to (i) the Strato(R)/Infusaid(TM) Acquisition as if it had been
completed on January 1, 1997 and (ii) the sale of shares of Common
Stock offered hereby at the initial public offering price of $ per
share and the application of the net proceeds to the Company from the
Offering as set forth herein. See "Use of Proceeds."
DILUTION
Net tangible book value per share is equal to the Company's tangible assets less total liabilities, divided by the total number of shares of Common Stock outstanding. The net tangible book value of the Company as of December 31, 1997 was approximately $ million, or $ per share. After giving effect to the sale of shares of Common Stock offered by the Company hereby (after deducting underwriting discounts and commissions and estimated Offering expenses payable by the Company resulting in estimated net proceeds of $ million), the net tangible book value of the Company as of December 31, 1997 would have been approximately $ million, or $ per share. This represents an immediate increase of $ per share to existing shareholders and an immediate dilution of $ per share to purchasers of shares of Common Stock in the Offering. The following table illustrates this per share dilution:
Initial public offering price per share..................... $
Net tangible book value per share at December 31, 1997.... $
Increase attributable to the Offering.....................
--------
Net tangible book value per share after the Offering........
Dilution per share to purchasers in the Offering (1)........ $
========
|
The following table summarizes, on a pro forma basis as of December 31, 1997, the number of shares of Common Stock acquired from the Company, the aggregate cash consideration paid and the average price per share paid by the existing shareholders and to be paid by investors purchasing shares of Common Stock from the Company in the Offering (before deducting underwriting discounts and commissions and estimated offering expenses):
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
----------------- -------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
------- ------- --------- -------- ---------
Existing Shareholders(1)(2)............... % $ % $
New Investors(2)..........................
------- --- -------- ---
Total........................... 100% $ 100%
======= === ======== ===
|
(1) Does not include (i) shares of Common Stock reserved for issuance upon
the exercise of outstanding stock options issued under the Stock Incentive
Plan, (ii) shares of Common Stock reserved for issuance upon the
exercise of stock options which may be granted under the Stock Incentive
Plan, (iii) shares of Common Stock reserved for issuance upon the
exercise of the NationsCredit Warrant, (iv) shares of Common Stock reserved
for issuance upon the exercise of a warrant to purchase Common Stock granted
by the Company to Premier in connection with the Premier Purchasing
Agreement and (v) certain shares of Common Stock which are issuable to two
affiliates of the Company as consulting fees. See "Management -- Stock
Incentive Plan", "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources",
"Description of Capital Stock -- Premier Warrants", "Certain
Transactions -- Consulting Agreement with Directors" and "-- Consulting
Agreement with HealthCare Alliance."
(2) Sales by the Selling Shareholders in the Offering will reduce the number of
shares held by existing shareholders to shares, or approximately
% of the total shares of Common Stock outstanding, and will
increase the number of shares held by new investors to shares, or
approximately % of the total shares of Common Stock outstanding
after the Offering. See "Principal and Selling Shareholders."
SELECTED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The following selected financial data for the years ended December 31, 1993, 1994, 1995, 1996 and 1997 and as of December 31, 1993, 1994, 1995, 1996 and 1997 are derived from, and are qualified by reference to, the Consolidated Financial Statements of the Company, which have been audited by Coopers & Lybrand L.L.P., independent certified public accountants, and which are included elsewhere in this Prospectus. The unaudited pro forma as adjusted information presented below has been prepared based upon the audited financial statements of the Company and unaudited financial data for Strato(R)/Infusaid(TM) for the period ended July 15, 1997. The selected financial data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements of the Company and notes thereto included in this Prospectus.
YEARS ENDED DECEMBER 31,
--------------------------------------------------------------------
1993 1994 1995 1996 1997
------ ------ -------- -------- ----------------------------
PRO FORMA
ACTUAL AS ADJUSTED(1)(2)
-------- -----------------
(UNAUDITED)
STATEMENT OF OPERATIONS DATA:
Net sales............................................ $3,629 $4,147 $ 5,003 $ 7,052 $ 15,798 $22,818
Cost of goods sold................................... 1,786 1,997 2,227 2,997 6,273 8,660
------ ------ -------- -------- -------- -------
Gross profit......................................... 1,843 2,150 2,776 4,055 9,525 14,158
Selling, general and administrative expenses......... 2,176 2,226 2,706 4,240 6,111 8,111
------ ------ -------- -------- -------- -------
Income (loss) from operations........................ (333) (76) 70 (185) 3,414 6,047
Interest (expense) income............................ (55) (160) (242) (733) (3,971) 55
Accretion of value of put warrant repurchase
obligation(3)...................................... -- -- -- -- (8,000) --
Other income......................................... 5 101 -- 54 70 70
------ ------ -------- -------- -------- -------
Income (loss) before income taxes and extraordinary
item............................................... (383) (135) (172) (864) (8,487) 6,172
Income tax benefit (expense)......................... -- -- 7 -- (320) (2,379)
Effect of conversion to C Corporation status......... -- -- (7) -- -- --
Extraordinary loss on early extinguishment of debt... -- -- (70) -- -- --
------ ------ -------- -------- -------- -------
Net income (loss).................................... $ (383) $ (135) $ (242) $ (864) $ (8,807) $ 3,793
====== ====== ======== ======== ======== =======
Loss per share before extraordinary item -- basic and
diluted............................................ $ (1.61) $ --
Net loss per share -- basic and diluted.............. $(3.94) $(1.38) $ (2.26) $ (7.83) $ (79.80)
Weighted average common shares outstanding........... 97,297 97,474 107,069 110,360 110,365
|
DECEMBER 31,
--------------------------------------------------------------------
1993 1994 1995 1996 1997
------ ------ -------- -------- ----------------------------
ACTUAL AS ADJUSTED(2)
-------- -------
BALANCE SHEET DATA:
Cash and cash equivalents............................ $ 62 $ 600 $ 394 $ 218 $ 2,894 $ 5,318
Working capital...................................... (415) 238 1,500 1,018 6,842 11,363
Total assets......................................... 1,449 2,222 6,894 6,176 31,577 34,211
Long-term debt, net of current maturities............ 379 1,227 4,907 5,053 23,972 43
Total shareholders' equity (deficit)................. (303) (438) (680) (1,916) (11,150) 29,972
|
The unaudited pro forma as adjusted consolidated financial information presented does not purport to represent what the consolidated results of operations or financial condition of the Company would have been if the transactions reflected therein had occurred on the assumed dates or to project the future consolidated results of operations or financial condition of the Company.
(1) Gives effect to the Strato(R)/Infusaid(TM) Acquisition as if it had been
completed on January 1, 1997. The pro forma adjustments include (i) a
reduction of cost of goods sold for eliminated overhead allocation, (ii)
adjustment of selling, general and administrative expenses to increase for
amortization of intangible assets and to decrease for elimination of
salaries, (iii) an increase in interest expense due to financial costs of
the acquisition, (iv) removal of accretion value of the put warrant
repurchase obligation, and (v) related tax effects.
(2) Adjusted to reflect net proceeds of $31,600 from the sale of shares of
Common Stock offered by the Company hereby (after deducting underwriting
discounts and commissions and estimated Offering expenses payable by the
Company) and the application thereof as set forth herein. See "Use of
Proceeds." The adjustments include a reduction of interest expense, an
increase in compensation costs following the Offering and related tax
effects.
(3) See Notes 6 and 8 of Consolidated Financial Statements of the Company for information on this non-recurring charge.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following should be read in conjunction with the Consolidated Financial Statements of the Company and the Notes thereto, and other financial information included elsewhere in this Prospectus.
BACKGROUND
The Company began its operations in February 1990 as a distributor of medical devices and began to distribute vascular access devices in the first quarter 1990. In November 1992, the Company entered into a collaborative effort with a leading heart valve manufacturer to design and develop a new line of vascular access ports. This new line of ports, the Triumph-1(R) line, was introduced in September 1994. The Company continues to market the Triumph-1(R) line of vascular access ports, with this product line having cumulative sales of over 30,000 units to date. In May 1995, the Company began to distribute the NeoStar Medical(R) line of hemodialysis catheters, and in October 1995 the Company exercised its option to acquire NeoStar Medical(R) for an aggregate purchase price of $4.0 million payable in a combination of cash and promissory notes. In March 1996, the Company began the construction of a 20,000 square foot manufacturing, distribution and administrative facility in Manchester, Georgia. The Company began manufacturing the NeoStar Medical(R) product line at this facility in October 1996 and recently expanded this facility to 45,000 square feet. In July 1997, the Company acquired the port business of Strato(R)/Infusaid(TM) for $19.5 million in cash. The primary product lines obtained in the Strato(R)/Infusaid(TM) Acquisition included the LifePort(TM) and Infuse-A-Port(R) vascular access ports, and the Infuse-A-Cath(TM) line of catheters. The Company had revenues of $7.1 million from these products from the date of acquisition through December 31, 1997.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated certain items contained in the Company's statements of operations expressed as a percentage of net sales:
YEARS ENDED DECEMBER 31,
--------------------------
1995 1996 1997
------ ------ ------
Net sales................................................... 100.0% 100.0% 100.0%
Cost of goods sold.......................................... 44.5 42.5 39.7
----- ----- -----
Gross profit................................................ 55.5 57.5 60.3
Selling, general and administrative expenses................ 54.1 60.1 38.7
----- ----- -----
Operating income (loss)................................... 1.4 (2.6) 21.6
----- ----- -----
Other income (expense):
Interest expense.......................................... (4.8) (10.4) (25.1)
Accretion value of put warrant repurchase obligation...... -- -- (50.6)
Other income.............................................. -- 0.7 0.4
----- ----- -----
Loss before income taxes and extraordinary item............. (3.4) (12.3) (53.7)
Income tax benefit (expense)................................ 0.1 -- (2.0)
Effect of conversion to C Corporation status................ (0.1) -- --
Extraordinary loss on early extinguishment of debt.......... (1.4) -- --
----- ----- -----
Net income (loss)........................................... (4.8)% (12.3)% (55.7)%
===== ===== =====
|
Year Ended December 31, 1997 compared to Year Ended December 31, 1996
Net Sales. Net sales increased 124.0% to $15.8 million in 1997, from $7.1
million in 1996. This increase is primarily attributable to (i) an overall
increase in sales of ports of $7.3 million, with $7.0 million of this increase
from sales of the port product lines acquired in the Strato(R)/Infusaid(TM)
Acquisition, and (ii) an overall
increase in sales of catheters of $1.3 million, with triple lumen catheter sales increasing $900,000 primarily due to the expansion of this product to the Company's full sales force in 1996.
Gross Profit. Gross profit increased 134.9% to $9.5 million in 1997, from $4.1 million in 1996. Gross margin increased to 60.3% in 1997, from 57.5% in 1996. The margin increase is attributable to the port product line acquired in the Strato(R)/Infusaid(TM) Acquisition having a higher margin than the Company's existing port product line and an increase in sales of triple lumen catheters which have a higher margin than the Company's other catheters. This margin increase was offset somewhat by increased overall international sales, which have lower profit margins than domestic sales generally.
Selling, General and Administrative Expenses. Selling, general and administrative expenses increased 44.1% to $6.1 million in 1997, from $4.2 million in 1996. This increase is primarily attributable to increased compensation expenses associated with the development of the Company's sales force. Selling, general and administrative expenses declined as a percentage of net sales to 38.7% in 1997 from 60.1% in 1996 due to substantial revenue growth in 1997.
Interest Expense. Net interest expense increased to $4.0 million in 1997 from $700,000 in 1996. Such expense increased as a percentage of net sales to 25.1% in 1997 from 10.4% in 1996. The increase is primarily a result of the amortization of deferred loan costs and interest expense in connection with the Credit Facility.
Accretion of Value of Put Warrant Repurchase Obligation. In connection with the Credit Facility, the Company issued warrants that contain a put feature. The Company recorded a charge of $8.0 million equalling the estimated increase in the value of these put warrants. See Notes 6 and 8 of Notes to Consolidated Financial Statements of the Company.
Taxes. Income taxes increased to $300,000 in 1997 from $0 in 1996. This was due to the Company generating taxable income in 1997. Prior to 1997, the Company recorded a full valuation allowance against its net deferred tax assets which were primarily attributable to its net operating loss carryforwards. During 1997, the Company generated taxable income sufficient to fully utilize the net operating loss carryforwards. The provision for income taxes in 1997 differs from the amount which would have been calculated by applying the federal statutory rate of 34% due primarily to non-deductible interest and accretion of the put warrant repurchase obligation of approximately $9.8 million.
Year Ended December 31, 1996 compared to Year Ended December 31, 1995
Net Sales. Net sales increased 40.9% to $7.1 million in 1996, from $5.0 million in 1995. This increase was attributable primarily to a $2.3 million increase in catheter sales resulting from sales of proprietary products acquired in the NeoStar Medical(R) Acquisition and includes $300,000 in sales resulting from the introduction of triple lumen catheters. The increase in catheter sales is partially offset by a $300,000 decline in port sales which resulted primarily from the Company's shifting resources to establish the catheter line of business and commence manufacturing this product line at its newly opened facility in Manchester, Georgia and a decline in sales to a significant customer.
Gross Profit. Gross profit increased 46.1% to $4.1 million in 1996, from $2.8 million in 1995. Gross margin increased to 57.5% in 1996 from 55.5% in 1995, primarily as a result of (i) a shift in the focus of the Company's operations from distribution to manufacturing achieved through consummation of the NeoStar Medical(R) Acquisition, (ii) increased sales of higher margin catheter products as part of the overall mix of sales and (iii) increased sales of higher margin port products resulting in improved margins in the port product line.
Selling, General and Administrative Expenses. Selling, general and administrative expenses increased 56.7% to $4.2 million in 1996, from $2.7 million in 1995, and such expenses increased as a percentage of net sales to 60.1% in 1996 from 54.1% in 1995. These increases resulted primarily from the full year effect during 1996 of the NeoStar Medical(R) Acquisition, including the cost of moving the NeoStar Medical(R) business to Manchester, Georgia and the amortization of the goodwill arising from this transaction.
Interest Expense. Net interest expense was $700,000 in 1996 compared to $200,000 in 1995, due to borrowings under promissory notes issued to Sirrom and Columbus Bank and Trust Company ("CB&T") and the former shareholders of NeoStar Medical(R).
Taxes. Effective January 1, 1995, the shareholders of the Company elected to be taxed as a C Corporation and, accordingly, revoked its S Corporation status. As a result, the Company recorded a deferred tax liability and recognized income tax expense at the effective date of the change.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company's primary sources of liquidity have been from financing activities. Net cash provided by (used in) financing activities, derived primarily from bank lines of credit was $1.8 million, $(200,000) and $20.4 million during 1995, 1996 and 1997, respectively.
On July 15, 1997, the Company entered into a $26.5 million Credit Facility with NationsCredit. The Credit Facility provides the Company with a term loan in the amount of $21.5 million repayable in 24 quarterly installments ranging from $537,500 to $1.075 million (the "Tranche A Loan"), a term loan in the amount of $2.0 million repayable in four quarterly installments of $500,000 each (the "Tranche B Loan") a revolving line of credit (the "Working Capital Line") of up to $3.0 million repayable on the earlier of July 1, 2004 or the date on which all amounts outstanding under the Tranche A Loan and the Tranche B Loan have been repaid in full. Additionally, NationsCredit effectively purchased the Acquisition Note. Borrowings under the Working Capital Line and Tranche A Loan bear interest at NationsCredit's Commercial Paper Rate plus 4.25% (9.836% at December 31, 1997). Borrowings under the Tranche B Loan bear interest at NationsCredit's Commercial Paper Rate plus 5.25% (10.836% at December 31, 1997). The Acquisition Note bears an interest rate of 13.75% per annum. Subject to certain limitations, amounts outstanding under each of the Tranche A Loan, the Tranche B Loan and the Working Capital Line may be prepaid at the Company's option subject, in certain cases, to the payment of a prepayment premium of 3.00%. Amounts outstanding under the Tranche A Loan and the Tranche B Loan are mandatorily prepayable, without penalty, in increments upon the occurrence of certain events, including, without limitation, issuances by the Company of Common Stock and other equity securities the proceeds of which exceed $250,000 and consummation by the Company of certain asset sales. The Credit Facility prohibits or restricts the Company from many actions, including paying dividends and incurring or assuming other indebtedness or liens.
The Company's obligations under the Credit Facility are secured by liens on substantially all of the Company's assets, including inventory, accounts receivable and general intangibles and a pledge of the stock of the Company's subsidiaries. The Company's obligations under the Credit Facility are also guaranteed by each of the Company's subsidiaries (the "Guarantees"). The obligations of such subsidiaries under the Guarantees are secured by liens on substantially all of their respective assets, including inventory, accounts receivable and general intangibles. As additional security, each of Marshall B. Hunt, William E. Peterson, Jr. and Roy C. Mallady, Jr. has pledged all shares of Common Stock of the Company owned by him.
As of January 31, 1998, there was $21.5 million outstanding under the Tranche A Loan, $2.0 million outstanding under the Tranche B Loan and zero outstanding under the Working Capital Line.
As additional consideration for the Credit Facility, the Company granted to NationsCredit the NationsCredit Warrant, expiring in 2007, to purchase up to, assuming the consummation by the Company of the Offering, shares of Common Stock at an exercise price of $.01 per share representing approximately 7.5% of the outstanding Common Stock on a fully-diluted basis. NationsCredit has indicated to the Company that it intends to exercise the NationsCredit Warrant and sell the shares of Common Stock issuable thereunder in the Offering.
All amounts outstanding under the Credit Facility will become immediately due and payable upon consummation of the Offering and the Credit Facility will terminate. The Company intends to enter into a new credit facility after the Offering.
In connection with the closing of the Credit Facility, on July 15, 1997 NationsCredit purchased the $1.5 million Acquisition Note from Sirrom. The Acquisition Note bears interest at the rate of 13.75% per annum,
matures September 25, 2000 and repayment thereof is guaranteed by Horizon Acquisition Corp, one of the Company's wholly-owned subsidiary. As additional security, Horizon Acquisition Corp. originally granted to Sirrom a security interest, which was transferred to NationsCredit, in its accounts receivable and inventory. At January 31, 1998, there was $1.5 million outstanding under the Acquisition Note. All amounts outstanding under the Acquisition Note will be repaid upon consummation of the Offering and the Acquisition Note will be extinguished.
The Company has established a capital expenditure budget of approximately $1,000,000 during 1998, including approximately $100,000 for computer hardware and software, approximately $50,000 for warehouse improvements, approximately $50,000 for additional leasehold improvements related to planned increases in personnel, approximately $300,000 for additional equipment, $25,000 for additional office furniture and equipment and approximately $475,000 for additional office space.
The Company's principal working capital requirements relate to the acquisition of inventory and carrying of receivables. The Company believes that the current level of working capital and the proceeds to the Company of the Offering will enable it to meet its liquidity requirements through December 31, 1998.
Recently Issued Accounting Standards -- In June 1997, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 130, Reporting Comprehensive Income, which requires the reporting and display of comprehensive income and its components in an entity's financial statements, and SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, which specifies revised guidelines for determining an entity's operating segments and the type and level of financial information to be required. The Company is required to adopt these standards in 1998. The Company does not expect the impact of these pronouncements to be material.
QUARTERLY RESULTS
The following table sets forth quarterly statement of operations data for 1996 and 1997. This quarterly information is unaudited but has been prepared on a basis consistent with the Company's audited financial statements presented elsewhere herein and, in the Company's opinion, includes all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the information for the quarters presented. The operating results for any quarter are not necessarily indicative of results for any future period.
THREE MONTHS ENDED,
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MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1996 1996 1996 1996
--------- -------- ------------- ------------
(IN THOUSANDS EXCEPT PER SHARE DATA)
Net sales........................................... $1,696 $1,765 $ 1,848 $ 1,743
Cost of goods sold.................................. 722 736 791 748
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Gross profit........................................ 974 1,029 1,057 995
Selling, general and administrative expenses........ 1,005 1,071 1,043 1,121
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Operating income (loss)............................. (31) (42) 14 (126)
Interest expense.................................... (166) (169) (195) (204)
Other income (expense).............................. 13 56 -- (14)
------ ------ ------- -------
Loss before income taxes............................ (184) (155) (181) (344)
Income tax benefit (expense)........................ -- -- -- --
------ ------ ------- -------
Net loss............................................ $ (184) $ (155) $ (181) $ (344)
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Net loss per share -- basic and diluted............. $(1.67) $(1.40) $ (1.64) $ (3.11)
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THREE MONTHS ENDED
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MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1997 1997 1997 1997
--------- -------- ------------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net sales........................................... $1,941 $2,216 $ 5,161 $ 6,480
Cost of goods sold.................................. 814 990 2,005 2,465
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Gross profit........................................ 1,127 1,226 3,156 4,015
Selling, general and administrative expenses........ 1,025 1,103 1,867 2,115
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Operating income (loss)............................. 102 123 1,289 1,900
Interest expense.................................... (175) (172) (1,668) (1,955)
Accretion of value of put warrant repurchase
obligation........................................ -- -- (3,636) (4,364)
Other income (expense).............................. 11 11 36 11
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Loss before income taxes............................ (62) (38) (3,979) (4,408)
Income tax benefit (expense)........................ -- -- -- (320)
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Net loss............................................ $ (62) $ (38) $(3,979) $(4,728)
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Net loss per share -- basic and diluted............. $(0.56) $(0.34) $(36.05) $(42.84)
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BUSINESS
GENERAL
HMP(TM) is a leading specialty medical device company focused on manufacturing and marketing vascular access products. Vascular access products comprised an estimated $1.8 billion worldwide market in 1997 and industry sources estimate that worldwide sales of vascular access products will grow at a rate of approximately 10.5% per annum over the next three years to $2.4 billion in sales by the year 2000. The Company's vascular access product lines include implantable ports, which are used primarily in cancer treatment protocols, and specialty catheters, which are used in hemodialysis and stem cell apheresis procedures. The Company believes it offers the broadest available product lines in each of these product categories and that it has the largest sales force focused exclusively on vascular access products.
The Company believes that it derives significant competitive advantage from its sales and marketing organization of over 50 full-time sales representatives and six distributors employing approximately 70 sales representatives and that this organization will enable the Company to effectively market a broader line of vascular access products and achieve greater penetration in its existing product markets. The Company's direct sales force focuses primarily on vascular surgeons who implant vascular access devices and other physicians and clinicians who utilize vascular access devices in the delivery of treatments. The Company's marketing strategy emphasizes the importance of building relationships with these medical professionals in order to provide such professionals with the benefits of the Company's broad knowledge of vascular access products and procedures and focused clinical support. These relationships also facilitate the Company's ability to modify its product lines in response to new clinical protocols and to meet its customers' changing needs. The Company also has a network of distributors which enhances its domestic marketing efforts and markets the Company's products in 53 countries outside the United States.
The vascular access product industry is highly fragmented and is comprised of several larger medical supply companies with diversified product lines and a number of smaller niche manufacturers with limited vascular access product lines. The Company believes there will be significant acquisition opportunities in the vascular access product industry in the future as larger companies seek to divest non-core business segments and certain smaller niche manufacturers seek to combine with larger vascular access product companies. The Company has grown significantly through the completion of two strategic acquisitions and intends to continue to pursue strategic opportunities to acquire new and complementary products and technologies. In October 1995, the Company entered the market for hemodialysis catheters by acquiring NeoStar Medical(R), the maker of the Circle C(R) line of catheters, and in July 1997 the Company significantly expanded its line of vascular access ports by acquiring Strato(R)/Infusaid(TM), a subsidiary of Pfizer, Inc., the maker of the LifePort(TM), Infuse-A-Port(R) and Infuse-A-Cath(TM) lines of vascular access products. As a result of the successful integration of the acquired product lines from these acquisitions and the growth of its own product lines, the Company's net sales have increased from $3.6 million in 1993 to $15.8 million in 1997 ($22.8 million in 1997 on a pro forma basis).
The Company's vascular access ports are used primarily in systemic or regional short- and long-term cancer treatment protocols that require frequent infusions of highly concentrated or toxic medications (such as chemotherapy agents, antibiotics or analgesics) and frequent blood samplings. The Company's lines of vascular access ports, which it believes are the most comprehensive in the industry, consist of the following families of products: (i) Triumph-1(R), which the Company believes contains one of the highest strength silicone catheter systems available in the market; (ii) LifePort(TM), certain models of which include the patented Bayonet(TM) locking system to ensure the integrity of the port/catheter connection; and (iii) Infuse-A-Port(R), which was one of the first implantable ports introduced to the market and continues to enjoy significant brand loyalty among physicians.
The Company's catheters are used primarily in hemodialysis and apheresis procedures and include the following families of products: (i) dual lumen hemodialysis catheters, which utilize the Company's unique Circle C(R) technology to obtain the highest flow rates of comparably sized catheters; (ii) Pheres-Flow(TM) triple lumen catheters, which are the only triple lumen catheters designed exclusively for the stem cell apheresis
protocol and have streamlined the surgical procedures required to complete such protocols; and (iii) Infuse-A-Cath(TM) catheters, which include the Company's patented Bayonet(TM) locking system on certain models.
BACKGROUND
The vascular access product market is comprised of six major categories of vascular access products: vascular access ports, dialysis catheters, central venous catheters, critical care catheters, intravenous grafts and peripheral inserted catheters. The Company believes that there is presently no medical supply company offering vascular access products from each of these six product categories. The vascular access product industry is highly fragmented and is comprised of several larger medical supply companies with diversified product lines which include certain vascular access products and a number of smaller niche manufacturers offering a single or limited number of vascular access products. In recent years, as medical supply companies have continued to evaluate their ability to operate their vascular access product divisions efficiently and focus on their core businesses, there have been divestitures by such companies of their vascular access product divisions. In addition, certain small manufacturers of specialty medical devices have encountered difficulty in developing sufficient distribution or marketing channels for their products because of their size and limited product line and have sought to combine with larger vascular access product companies.
The Company currently manufactures and markets products in three vascular access product categories: vascular access ports, dialysis catheters and central venous catheters.
THE MARKET FOR VASCULAR ACCESS PORTS. Vascular access ports are implantable devices utilized for the central venous administration of a variety of medical therapies, including chemotherapy, infusion of fluids and nutrients and administration of drugs and blood products. Vascular access ports are also used for blood sampling for diagnostic purposes. Access to the central vascular system has become an essential element in the treatment of many critically ill patients, particularly those with various forms of cancer. Central venous access facilitates a more systemic delivery of treatment agents, while mitigating certain of the harsh side effects of chemotherapy protocols and eliminating the need for repeated access to peripheral veins. A central venous catheter can be accessed either through a port that is implanted in a patient's subcutaneous tissue beneath the clavicle, or through an external catheter which extends several inches outside the patient's body. Once implanted in a patient's body, a port can be utilized for up to approximately 2,000 accesses. Ports have become the preferred method of central vascular access for both physicians and patients because the use of ports generally results in (i) lower infection rates, (ii) less interference with patients' day-to-day activities, since ports do not extend outside the body, are visually undetectable, can remain in place for extended periods and do not require the frequent extension line flushing and dressing changes required for external catheters and (iii) lower overall cost. For these reasons, domestic sales of vascular access ports have increased significantly in recent years, from approximately $52 million in 1991 to an estimated $92 million in 1997.
The Company believes that the worldwide market for vascular access ports
will continue to grow significantly primarily due to the increased utilization
of chemotherapy protocols. The utilization of these protocols is being driven
primarily by (i) aging population demographics and the higher incidence of
cancer among persons 60 years of age and older relative to other age groups and
(ii) the increasing patient population for whom chemotherapy has become an
appropriate treatment protocol due to earlier detection and intervention and the
increased efficacy of chemotherapy treatments.
THE MARKET FOR HEMODIALYSIS CATHETERS. Hemodialysis catheters are used in
the treatment of patients suffering from renal failure who are required to
undergo short-term (acute) or long-term (chronic) hemodialysis, a process
involving the removal of waste products from the blood by passing a patient's
blood through a dialysis machine. Both short-term and long-term hemodialysis
treatments require vascular access. Patients requiring short-term hemodialysis
may receive an acute catheter placed in a central vein. When hemodialysis
procedures are required on a long-term basis, synthetic grafts are often
surgically implanted into the patient's arm to provide a more permanent access
point. Such graft procedures generally require four to ten weeks to heal, during
which time the hemodialysis patient continues to require the use of a catheter
for treatment. In addition, certain patients are unable to tolerate the surgery
required to implant the graft or have
had repeated graft procedures and no longer are suitable graft candidates and, therefore, must utilize hemodialysis catheters for their treatment.
A typical hemodialysis treatment lasts three to four hours and is administered three times per week. The efficiency of a dialysis procedure is measured by the amount of urea which is removed from the patient's blood stream during the treatment. Because hemodialysis treatment is burdensome to the patient and often covered by third-party payors on a fixed-fee basis, the ability to complete a hemodialysis procedure quickly and efficiently is important to both patients and clinicians. The time required to complete a treatment and the efficiency of such treatment is affected by the rate at which blood may be continuously withdrawn from the patient, circulated through a hemodialysis filter and reintroduced into the patient, with these processes affected by the flow rate of the patient's catheter.
According to United States government sources, the number of patients requiring chronic hemodialysis services in the United States increased from 171,000 patients in 1993 to over 200,000 patients in 1995. Industry sources project that the worldwide market for hemodialysis catheters will grow at an annual rate of approximately 8.5% to over $135 million in sales in 2000. Growth in the number of hemodialysis patients is expected to result primarily from (i) the aging of the general population, (ii) the increased effectiveness of treatments for and higher survival rates of patients suffering from hypertension, diabetes and other illnesses which lead to renal failure and (iii) increasingly efficient hemodialysis procedures which have enabled older patients and others that previously could not tolerate hemodialysis to benefit from this treatment.
THE MARKET FOR APHERESIS CATHETERS. Stem cell apheresis is a newly-developed protocol for treating certain forms of mid- and late-stage cancers, particularly breast cancer. The typical apheresis procedure involves the insertion of multiple catheters into the patient through which (i) blood is withdrawn from the patient, cycled through an apheresis machine in which stem cells (cells which perform a key role in the body's immune system) are removed from the blood and the blood is then reinfused into the patient, (ii) chemotherapy agents, as well as antibiotics and blood products, are administered to the patient over extended periods of time and (iii) the previously removed stem cells are subsequently reintroduced into the patient. Such procedures historically have required the use of multiple catheters, multiple surgical procedures and extensive treatment duration.
In 1990, approximately 6,000 stem cell apheresis procedures were performed worldwide, with this protocol generally being considered an experimental procedure (and therefore not covered by most health insurers). Management estimates that by 1995 stem cell apheresis grew to approximately 18,000 procedures. The Company believes that such procedures will continue to experience significant growth primarily from increasing awareness and acceptance of apheresis as part of the treatment protocol for various cancers and improvements in apheresis procedures and as apheresis procedures increasingly become reimbursable by third-party payors as a treatment for many cancers.
BUSINESS STRATEGY
The Company believes that the strength of its marketing, manufacturing, and management infrastructure, together with the experience of its management team in developing strategic partnerships and acquiring and integrating product lines, positions it to become a leading supplier in the vascular access product market. The Company will seek to achieve this objective and capitalize on favorable industry dynamics by pursuing the following strategies.
- Focus on the Vascular Access Market. The Company has developed a highly-specialized sales force that focuses on addressing the needs of vascular surgeons and other physicians and clinicians who utilize vascular access products in providing medical treatments. Management believes its sales force is the largest sales force focused exclusively on vascular access products and that it offers the Company's customers the broadest available lines in each of the Company's three major categories of products -- vascular access ports, hemodialysis catheters and stem cell apheresis catheters. By offering broad product lines, including proprietary products, the Company is able to take advantage of cross-selling opportunities. The Company believes that its customers benefit from its broad knowledge of vascular
access products and procedures, comprehensive customer support and responsiveness to their changing needs.
- Exploit Unique Products. The Company manufactures and markets certain lines of products that utilize unique technologies which offer superior performance compared with competing products. With a unique Circle C(R) design, the Company's dual lumen hemodialysis catheters provide the highest flow rates available in the market for comparably sized catheters, yielding significant benefits for patients and practitioners. In addition, the Company believes its proprietary Pheres-Flow(TM) catheter is the only triple lumen catheter designed solely for the purpose of stem cell apheresis procedures and has significantly improved this newly-emerging protocol. The Company will seek to increase its sales of these unique products and utilize cross-selling to increase sales of its other product lines.
- Pursue Strategic Acquisitions/Partnerships. The Company has enhanced its product lines through completion of the NeoStar Medical(R) Acquisition, in October 1995, which gave the Company its first line of catheters, and the Strato(R)/Infusaid(TM) Acquisition, in July 1997, which significantly expanded the Company's line of vascular access ports. The Company believes that the vascular access products industry remains highly fragmented. Accordingly, the Company believes that there will be attractive strategic partnering and acquisition opportunities. The Company will seek to acquire products that: (i) will broaden its lines of vascular access products or increase its penetration of existing markets; (ii) can be effectively marketed by its sales organization; and (iii) can be manufactured at the Company's recently opened manufacturing facility.
- Increase Efficiency of Manufacturing Operations. In 1996, the Company opened a 20,000 square foot manufacturing facility in Manchester, Georgia. The Company recently increased the size of the facility to 45,000 square feet, and is currently manufacturing its Circle C(TM) and Pheres-Flow(TM) lines of catheters at this facility. In early 1998, the Company began transitioning the manufacturing of all of its LifePort()(TM), Infuse-A-Port(R) and Infuse-A-Cath(TM) product lines to this facility and expects to complete this transition during the second quarter of 1998. The Company expects to be able to manufacture all of its product lines at the Manchester facility without incurring significant future personnel or capital expenditures and believes that its manufacturing capacity and space will be able to support substantial future growth. The Company believes that it can achieve significant cost efficiencies through transitioning the manufacturing of all its product lines to this facility and that it will be able to leverage its manufacturing infrastructure by adding newly acquired or developed vascular access products to its product lines.
- Develop and Expand Distribution Capabilities. The Company plans to continue to build upon the success of its sales organization by expanding its marketing efforts internationally, by entering into group purchasing contracts and by enhancing its direct sales force. In particular, the Company plans to expand its relationships with international distributors, a process which will be coordinated by the Company's newly hired director of international sales. In 1997, approximately 17% of the Company's revenues were generated from sales to end-users outside the United States, despite the fact that approximately 50% of the vascular access device market is outside the United States. The Company will also seek to enter into additional group purchasing contracts with national purchasing groups, which are playing an increasingly significant role in the decisions of hospitals and other health care organizations to purchase certain medical devices. In connection with such efforts, the Company recently agreed to enter into the Premier Purchasing Agreement with Premier, a purchasing group comprising over 1,800 owned, leased, managed and affiliated hospitals pursuant to which the Company will be an approved vendor for such hospitals.
PRODUCTS
VASCULAR ACCESS PORTS
The Company manufactures and markets high quality, technologically
advanced, implantable vascular access ports and attached or attachable catheter
products intended to afford safe and simple vascular access and catheter
placement and greater patient convenience. The Company seeks to introduce new
products and
to extend the applications of its existing products through innovations in safety, effectiveness, ease of use and reliability in response to the specific, unmet needs of vascular surgeons and other physicians and clinicians.
The Company's lines of vascular access ports, which it believes are the most comprehensive in the industry, consist of three distinct families: (i) Triumph-1(R); (ii) LifePort(TM); and (iii) Infuse-A-Port(R). Through the sale and distribution of these three product lines, the Company has become one of the largest suppliers of vascular access ports in the United States, having an estimated 20% of the domestic market for such products by the end of 1997.
TRIUMPH-1(R). The Triumph-1(R) family of vascular access ports was developed and engineered by the Company in collaboration with CarboMedics, Inc. and first marketed by the Company in September 1994. All Triumph-1(R) ports are constructed from titanium or polysulfone with a factory-attached or attachable silicone catheter system designed to ensure a safe transition into the vascular system, while lowering the risk of a ruptured catheter. The Company tests each Triumph-1(R) port and catheter system in its product line to a rigorous 100 psi standard and the Company believes that Triumph-1(R) provides the highest strength silicone catheter system in the market.
LIFEPORT(TM). LifePort(TM), is a family of titanium and plastic ports acquired by the Company in the Strato(R)/ Infusaid(TM) Acquisition. The product line is marketed with either a factory-attached or attachable catheter system, with certain models utilizing the Company's patented Bayonet(TM) locking system. The catheter of certain LifePort(TM) products is secured to the port upon insertion into the patient by twisting the locking system into place and the locking mechanism and port are then sutured into place. This Bayonet(TM) locking system enhances the integrity of the port/catheter connection, substantially eliminating the medical risks of possible disconnection.
INFUSE-A-PORT(R). The Infuse-A-Port(R) line is a family of ports constructed with a polysulfone port body for durability and a self-sealing silicone septum. Introduced into the market in the early 1980s, Infuse-A-Port(R) products were the first implantable ports to enter the vascular access device market and, due to their proven reliability, continue to enjoy significant physician loyalty.
Each of the Triumph-1(R), LifePort(TM) and Infuse-A-Port(R) families of vascular access ports is marketed with a diverse array of product selections to accommodate the requirements and preferences of the surgeon inserting the port, the physician treating the patient and the clinicians administering drugs and monitoring the patient's condition, and to suit the patient's specific anatomy. Dual port systems have two separate reservoirs connected to a dual lumen catheter which allow the clinician to deliver non-compatible drugs simultaneously or, in chemotherapy treatments, allow the clinician to deliver two complementary drugs that cannot be mixed in an oxygenated environment. A single chamber port accommodates patients without these specific needs. Petite ports are designed to provide full-size performance in a small port for pediatric or petite patients with very little subcutaneous tissue. The choice of port materials can be dependent on the needs or anatomy of the patient or the preference of the physician. Because of its diversity and durability, the titanium port is currently the most commonly used of all ports available on the market. However, ports made of polysulfone plastic have been experiencing increased acceptance as a result of their lower per unit pricing.
SPECIALTY CATHETER PRODUCTS
CIRCLE C(R) HEMODIALYSIS CATHETERS. The Company's hemodialysis catheter
product lines consist of Circle C(R) acute and chronic catheters. The Company's
Circle C(R) design utilizes differentiated lumen sizes and a unique dividing
wall to support the catheter's chambers, which improves the resistance of the
catheter's chambers to negative pressure and collapse. Because of their Circle
C(R) design, these catheters provide the highest flow rates of comparably sized
catheters, thus providing patients the most thorough filtration treatment
obtainable and clinicians administering dialysis treatments increased
productivity. The Company's Circle C(R) catheters are used for both acute and
chronic hemodialysis. The Company's Circle C(R) acute catheters are made of
polyurethane (a rigid material which is temperature sensitive and softens once
inserted in the patient's body) and can remain implanted in a patient for up to
21 days. The Company's Circle C(R) chronic catheters are made of silicone and
can remain in a patient's body for as long as 18 months. The Company
manufactures its Circle C(R) acute and chronic catheters using an injection
molding process which provides a
continuous, one-piece design that helps to eliminate turbulence in blood flow, thereby providing additional gains in flow rates.
PHERES-FLOW(TM) APHERESIS CATHETERS. The Company's proprietary Pheres-Flow(TM) catheter is a central venous triple lumen silicone catheter that was designed and developed by NeoStar Medical(R) and introduced by the Company in 1996. The Pheres-Flow(TM) catheter is the only triple lumen catheter designed exclusively for the purpose of apheresis/bone marrow transplant procedures. The Pheres-Flow(TM) catheter has significantly improved the process utilized by clinicians in performing stem cell apheresis procedures and has streamlined the surgical procedure required to complete such protocols. The Pheres-Flow(TM) catheter can be inserted in the apheresis/stem cell transplant patient and utilized for the entire duration of the apheresis/stem cell protocol, including blood removal/reinfusion, chemotherapy, nutritional therapy, antibiotics, medications, and cell re-implantation. As a result, no further surgical procedures are required after the initial placement of the catheter. This reduction in the required surgical procedures greatly reduces the risk of infection for the apheresis patient, which is crucial since the patient's ability to fight infection is reduced through the removal of stem cells in the blood stream. The triple lumen design also allows for multi-line simultaneous administration of medications and the flexibility to use a single catheter, rather than multiple catheters, thus, also providing less chance of infection during critical patient treatment time. These factors also reduce the total costs of an apheresis procedure.
INFUSE-A-CATH(TM) CATHETERS. Infuse-A-Cath(TM) catheters are a family of external central venous catheters that are differentiated by their use of the Bayonet(TM) locking system patented by the Company. The Bayonet(TM) locking system is secured by a simple twist of the lock once the catheter is placed onto its connection plug. The Bayonet(TM) locking system ensures the integrity of the extension legs on the catheter and allows glue free repair, an easier repair method than those applicable to competing products. These products are also differentiated by being available in either silicone, which is widely used, or polyurethane, which the Company believes is preferred by many physicians because of its ease of insertion and durability.
OTHER CATHETERS. In addition, the Company markets and sells peritoneal, continuous arterial venous hemophiltration, shunts and single lumen catheters, all of which are used in connection with alternative methods in treating renal failure patients.
SALES AND MARKETING
The Company utilizes a highly-specialized direct sales force which focuses exclusively on vascular surgeons and other physicians and clinicians. This direct sales force has been developed by the Company since its formation in 1990, is trained extensively regarding vascular access products and the procedures and treatments in which they are utilized, and emphasizes a "relationship first" approach in the marketing of the Company's products. The Company markets and sells its product lines domestically through approximately 50 full-time direct sales and marketing employees and six distributors employing approximately 70 sales representatives. The Company distributes its products internationally exclusively through independent distributors, whose distribution efforts will be coordinated and overseen, commencing April 1, 1998, by the Company's recently-hired international sales manager based in Brussels, Belgium. In 1997, the Company marketed and sold its product lines in 53 countries outside the United States through approximately 50 distributors. The Company believes that it derives significant competitive advantages from its sales and marketing organization and that this organization will allow the Company to effectively market a broader line of vascular access products and achieve greater penetration in its existing product markets.
Within each hospital or other healthcare organization, the Company's marketing efforts are directed to those physicians responsible for implanting and utilizing ports and catheters, particularly vascular surgeons, general surgeons, oncologists, nephrologists, interventional radiologists, nurses, clinicians and other healthcare professionals. The Company believes that the input of all of these healthcare professionals is critical to the decision of a hospital or a healthcare organization to purchase a particular brand of vascular access product. The Company's sales personnel develop ongoing relationships by communicating regularly with vascular surgeons, and other physicians and clinicians in the hospitals where the Company's products are sold, devoting approximately 40% to 50% of their sales time to visiting hospital operating rooms and dialysis wards. The
Company also participates in trade shows, advertises in trade journals, funds clinical studies of vascular access products, administers continuing education programs and consults with clinical advisory committees of physicians and nurses. The Company believes that its "relationship first" approach provides significant benefits to its customers and promotes customer loyalty.
Hospital chains and large buying groups have played, and are expected to continue to play, an increasingly significant role in the purchase of medical devices. In recent years, these groups have sought to narrow their list of suppliers. As a result, the Company has increased its focus on marketing its products to these buying groups, while the Company's direct sales force continues to call on physicians associated with these buying groups in order to improve compliance with these group purchasing agreements and improve market share, generally.
As a result of such efforts, the Company recently agreed to enter into the Premier Purchasing Agreement with Premier, a national purchasing group comprising over 1,800 owned, leased, managed and affiliated hospitals. Pursuant to the Purchasing Agreement, the Company will be an approved vendor for the hospitals participating in Premier's purchasing program (the "Premier Hospitals") and will pay to Premier an administrative fee equal to a specified percentage of the aggregate amount of sales of the Company's products to Premier Hospitals. In connection with the Purchasing Agreement, the Company and Premier will also enter into a Warrant Agreement pursuant to which the Company will grant to Premier a warrant to acquire, subject to certain conditions, up to 500,000 shares of Common Stock. See "Description of Capital Stock -- Premier Warrant."
In 1997, 83.0% of the Company's net sales were derived from sales in the United States. In the international market, sales have increased from $200,000, or 4.2% of net sales, in 1995, to $2.7 million, or 17.0% of net sales, in 1997. A significant portion of the Company's 1997 international sales were derived from sales of the products acquired in the Strato(R)/Infusaid(TM) Acquisition, and this acquisition significantly increased the size of the Company's network of international distributors.
RESEARCH AND PRODUCT DEVELOPMENT
The Company is engaged in limited ongoing research and development activities. The principal focus of the Company's research and development effort is to identify and analyze the needs of vascular surgeons, physicians and clinicians, and to develop products that address these needs. The Company views proposals from physicians and other healthcare professionals as an important source of potential research and development projects. The Company believes that those end-users are often in the best position to conceive of new products and to recommend ways to improve the performance of existing products. Many of the Company's product improvements have resulted from collaborative efforts with physicians and other healthcare professionals or other medical device manufacturers.
In 1995, 1996 and 1997, research and development expenses accounted for $65,800 (1.3% of net sales), $58,700 (0.8% of net sales), and $7,000 (.04% of net sales), respectively. Such amounts were used primarily to improve existing products and implement new technology to produce these products.
MANUFACTURING
The Company manufactures and packages substantially all of its specialty catheter products at its 45,000 square foot manufacturing facility in Manchester, Georgia, which it opened in August 1996. The Company currently manufactures its LifePort(TM) and Infuse-A-Port(R) vascular access port product lines and its Infuse-A-Cath(TM) specialty catheter product line in 20,000 square feet of manufacturing space at a 55,000 square foot ISO 9001 production facility located in Norwood, Massachusetts. The Company has the right to use the Norwood space until April 15, 1998. The Company is presently transitioning its Norwood operations to the Manchester facility and expects to complete this transition during the second quarter of 1998. The Company is currently building inventory in anticipation of this transition. In addition, the Company contracts with a third party for the manufacture of certain portions of its Triumph-1(R) vascular access port product line and plans to continue to do so for the foreseeable future.
The Company believes that its manufacturing capacity at the Manchester facility will be sufficient to support significant future production and growth. The Company has applied for certification as an ISO 9001 medical device manufacturer for the Manchester, Georgia facility and a CE Mark for its product lines and expects to receive such certification and CE Mark by June 1998. See "Business -- Government Regulation."
The Company's manufacturing processes consist primarily of the assembly of standard and custom component parts, the injection molding of polyurethane or silicone used in its Circle C(R) and Pheres-Flow(TM) lines of catheters and the testing of completed products. The Company has arrangements with various suppliers to provide it with the quantity of component parts necessary to assemble its products. Almost all of the components and materials used in its injection molding process are available from a number of different suppliers, although certain components are purchased from a limited number of sources. The Company believes that there are alternative and satisfactory sources for limited-sourced components, although a sudden disruption in supply from one of these suppliers could adversely affect the Company's ability to deliver its product in a timely manner.
The Company devotes significant attention to quality control. Its quality control measures begin at the manufacturing level where components are molded and assembled in an "environmentally controlled area" designed and maintained to reduce product exposure to particulate matter. Products are tested throughout the manufacturing process for adherence to specifications.
Skills of assembly workers required for the manufacture of medical products are similar to those required in typical assembly operations. The Company believes that workers with these skills are readily available in the Manchester and Norwood areas. See "Risk Factors -- Limited Manufacturing Experience."
PATENTS, TRADEMARKS, LICENSES AND PROPRIETARY RIGHTS
The Company believes that patents and other proprietary rights are important to its business. The Company also relies upon trade secrets, "know-how," continuing technological innovations and licensing opportunities to develop and maintain its competitive position.
The Company currently owns numerous United States patents and patent applications, as well as numerous foreign patents and patent applications, which relate to aspects of the technology used in certain of the Company's products, including the LifePort(TM) family of vascular access ports, the Infuse-A-Cath(TM) family of hemodialysis catheters and the Bayonet(TM) locking system used in the LifePort(TM) family of products and in the Infuse-A-Cath(TM) family of products. The Company also is a party to several license agreements with third parties pursuant to which it has obtained, for varying terms, the right to make, use and/or sell products that are covered under such license agreements in consideration for royalty payments. Many of the Company's major products, including its Circle C(R) acute and chronic catheters and its Infuse-A-Cath(TM) catheters are subject to such license agreements. There can be no assurance that the Company or its licensors have or will develop or obtain additional rights to products or processes that are patentable, that patents will issue from any of the pending patent applications filed by the Company or that claims allowed will be sufficient to protect any technology that is licensed to the Company. In addition, no assurances can be given that any patents issued or licensed to the Company or other licensing arrangements will not be challenged, invalidated, infringed or circumvented or that the rights granted thereunder will provide competitive advantages for the Company's business or products. In such event the business, results of operations and financial condition of the Company could be materially adversely effected.
There has been substantial litigation regarding patent and other intellectual property rights in the medical devices industry. Although the Company has not been a party to any material litigation to enforce intellectual property rights held by the Company, or a party to any material litigation seeking to enforce rights alleged to be held by others, future litigation may be necessary to protect patents, trade secrets or "know-how" owned by the Company or to defend the Company against claimed infringement of the rights of others and to determine the scope and validity of the proprietary rights of the Company and others. The validity and breadth of claims covered in medical technology patents involve complex legal and factual questions. Any such litigation could result in substantial cost to and diversion of effort by the Company. Adverse determinations in any such litigation could subject the Company to significant liabilities to third parties, could require the Company to
seek licenses from third parties and could prevent the Company from manufacturing, selling or using certain of its products, any of which could have a material adverse effect on the business, results of operation and financial condition of the Company. Accordingly, the Company may, in the future, be subject to legal actions involving patent and other intellectual property claims.
The Company also relies upon trade secrets and proprietary technology for protection of its confidential and proprietary information. There can be no assurance that others will not independently develop substantially equivalent proprietary information or techniques or that third parties will not otherwise gain access to the Company's trade secrets or disclose such technology.
The Company also relies upon trademarks and trade names for the development and protection of brand loyalty and associated goodwill in connection with its products. The Company's policy is to protect its trademarks, trade names and associated goodwill by, among other methods, filing United States and foreign trademark applications relating to its products and business. The Company owns numerous United States and foreign trademark registrations and applications. The Company also relies upon trademarks and trade names for which it does not have pending trademark applications or existing registrations, but in which the Company has substantial trademark rights. The Company's registered and unregistered trademark rights relate to the majority of the Company's products, including the Circle C(R), Infuse-A-Port(R), Triumph-1(R), Infuse-A-Cath(TM), LifePort(TM) and Pheres-Flow(TM)product lines. There can be no assurance that any registered or unregistered trademarks or trade names of the Company will not be challenged, canceled, infringed or circumvented, or be declared generic, or be declared infringing on other third-party marks, or provide any competitive advantage of the Company.
GOVERNMENT REGULATION
As a manufacturer of medical devices, the Company is subject to regulation by, among other governmental entities, the FDA and the corresponding agencies of the states and foreign countries in which the Company sells its products. These regulations govern the introduction of new medical devices, the observance of certain standards with respect to the manufacture, testing and labeling of such devices, the maintenance of certain records, the tracking of devices, and other matters. These regulations may have a material impact on the Company. Recently, the FDA has pursued a more rigorous enforcement program to ensure that regulated businesses, like the Company's, comply with applicable laws and regulations. The Company believes that it is in substantial compliance with such governmental regulations.
All medical devices introduced to the United States market since 1976, which includes all of the Company's products, are required to be covered by a premarket notification clearance pursuant to Section 510(k) of the FDC Act or an approved PMA. Obtaining approval of a PMA can take up to several years or more and involve preclinical studies and clinical testing. In contrast, the process of obtaining a 510(k) clearance typically requires the submission of substantially less data and generally involves a shorter review period, although obtaining a 510(k) clearance may involve the submission of a substantial volume of data, including clinical data, and may require a substantial review period. A 510(k) premarket notification clearance indicates that the FDA agrees with an applicant's determination that the product for which clearance has been sought is substantially equivalent to another medical device that has been previously marketed but does not indicate that the product is safe and effective and does not require a PMA. An approved PMA indicates that the FDA has approved as safe and effective a product to be marketed for the uses described in the approved labeling.
In addition to requiring clearance or approval for new products, the FDA
may require clearance or approval prior to marketing products that are
modifications of existing products. The FDC Act provides that new 510(k)
clearances are required when, among other things, there is a major change or
modification in the intended use of the device or a change or modification to a
legally marketed device that could significantly affect its safety or
effectiveness. A manufacturer is expected to make the initial determination as
to whether a proposed change to a cleared device or to its intended use is of a
kind that would necessitate the filing of a new 510(k) notification. The Company
has made certain modifications to its cleared devices for which it has
determined that new 510(k) clearances are not required. There can be no
assurance, however, that the FDA
would concur with the Company's conclusion that a particular change does not necessitate a new 510(k) application. If the FDA were to investigate and disagree with the Company's determinations and conclude that one or more implemented changes requires a new 510(k), the FDA could take regulatory actions such as issuance of a warning letter or requiring that the Company cease marketing affected devices until new 510(k) notifications are cleared.
In order to conduct clinical trials of an uncleared or unapproved device, companies generally are required to comply with IDE regulations. The IDE regulations generally require FDA approval before clinical study may begin. Devices subject to the IDE regulations are subject to various restrictions imposed by the FDA. The number of patients that may be treated with the device is limited, as is the number of institutions at which the device may be used. Patients must give informed consent to be treated with an investigational device. The institutional review board of each institution where a study is being conducted must also approve the clinical study. The device may not be advertised or otherwise promoted. Unexpected adverse experiences must be reported to the FDA. The company sponsoring the investigation must ensure that the investigation is being conducted in accordance with the IDE regulations.
To date, the Company's products have received FDA marketing clearances only through the 510(k) process. Certain future product applications, however, could require approval through the PMA process. In addition, future products may require approval of an IDE. There can be no assurance that all necessary 510(k) clearances or PMA or IDE approvals will be granted on a timely basis or at all. The FDA review process may delay the Company's product introductions in the future. It is possible that delays in receipt of or failure to receive any necessary clearance or approval could have a material adverse effect on the Company.
The Company is also required to register with the FDA as a device manufacturer and to comply with the FDA's GMP regulations. These regulations require that the Company manufacture its products and maintain its records in a prescribed manner with respect to manufacturing, testing and control activities. Further, the Company is required to comply with FDA requirements for labeling and promotion of its products. For example, the FDA prohibits cleared or approved devices from being marketed for uncleared or unapproved uses. The medical device reporting regulation requires that the Company provide information to the FDA whenever there is evidence to reasonably suggest that one of its devices may have caused or contributed to a death or serious injury, or that there has occurred a malfunction that would be likely to cause or contribute to a death or serious injury if the malfunction were to recur. The Company intends to transfer completely its manufacturing from Norwood, Massachusetts to Manchester, Georgia in the second quarter of 1998. As a result of this transfer, the Manchester facility will be subject to a GMP inspection by the FDA. The Company cannot predict at this time what impact, if any, this inspection will have on its business.
Medical device manufacturers are generally subject to periodic inspections by the FDA. If the FDA believes that a company is not in compliance with applicable laws and regulations, it can, among other things, institute proceedings to issue a warning letter apprising of violative conduct, detain or seize products, issue a recall, enjoin future violations and assess civil and criminal penalties against the company, its officers or its employees. In addition, clearances or approvals could be withdrawn in appropriate circumstances. Failure to comply with regulatory requirements or any adverse regulatory action could have a material adverse effect on the Company.
Subsequent to an FDA inspection in 1996, the Company received a warning letter alleging particular deficiencies in its compliance with the FDA's medical device reporting requirements. Under these requirements, the Company must report certain malfunctions and adverse events that may be associated with its devices. In response to this warning letter, the Company has implemented specific corrective actions which were proposed to and reviewed by FDA without objection. The Company believes that it has substantially addressed the concerns delineated in the warning letter. At the conclusion of a follow-up inspection in 1997, the Company was advised of various inspectional observations. These inspectional observations allege various objectionable conditions that may or may not result in the issuance of a warning letter or other enforcement action. The Company has responded to these observations and, in each case, either believes that it is acting in substantial compliance with applicable laws and regulations or it has implemented corrective actions that achieve substantial compliance. While the FDA has taken no enforcement action with respect to these
observations, there can be no assurance that such action will not ensue at a future time or will not adversely impact the Company's business.
Medical device laws and regulations are also in effect in many of the countries in which the Company does business outside the United States. These range from comprehensive device approval requirements for some or all of the Company's medical device products to simple requests for product data or certifications. The number and scope of these requirements are increasing. Medical device laws and regulations are also in effect in many of the states in which the Company does business. State and foreign medical device laws and regulations may have a material impact on the Company. In addition, international sales of certain medical devices manufactured in the United States but not approved by the FDA for distribution in the United States are subject to FDA export requirements, which require the Company to obtain documentation from the medical device regulatory authority of such country stating that the sale of the device is not in violation of that country's medical device laws. This documentation is then submitted to the FDA with a request for a permit for export to that country.
Federal, state and foreign laws and regulations regarding the manufacture and sale of medical devices are subject to future changes. For example, Congress recently enacted the Food and Drug Administration Modernization Act of 1997, which included several significant amendments to the prior law governing medical devices. Additionally, the FDA has recently made significant changes to its GMP regulations and may make changes to other regulations as well. The Company cannot predict what impact, if any, such changes might have on its business; however, such changes could have a material impact on the Company. See "Risk Factors -- Government Regulation."
HEALTHCARE REFORM; THIRD-PARTY REIMBURSEMENT
In recent years, several comprehensive healthcare reform proposals were introduced in the United States Congress. The intent of the proposals was, generally, to expand healthcare coverage for the uninsured and reduce the growth of total healthcare expenditures. While none of the proposals were adopted, healthcare reform may again be addressed by the current United States Congress. Certain states have made significant changes to their Medicaid programs and have adopted various measures to expand coverage and limit costs. Implementation of government healthcare reform and other efforts to control costs may limit the price of, or the level at which reimbursement is provided for, the Company's products. In addition, healthcare reform may accelerate the growing trend toward involvement by hospital administrators, purchasing managers and buying groups in purchasing decisions. This trend would likely include increased emphasis on the cost-effectiveness of any treatment regimen. These changes may also cause the marketplace in general to place increased emphasis on the utilization of minimally invasive surgical procedures and the delivery of more cost-effective medical therapies. Regardless of which additional reform proposals, if any, are ultimately adopted, the trend toward cost controls and the requirements of more efficient utilization of medical therapies and procedures will continue and accelerate. The Company is unable at this time to predict whether any such additional healthcare initiatives will be enacted, the final form such reforms will take or when such reforms would be implemented. See "Risk Factors -- Healthcare Reform/Pricing Pressure."
The Company's products are purchased principally by hospitals, hospital networks and hospital buying groups. During the past several years, the major third-party payors of hospital services (Medicare, Medicaid, private healthcare indemnity insurance and managed care plans) have substantially revised their payment methodologies to contain healthcare costs. These cost pressures are leading to increased emphasis on the price and cost-effectiveness of any treatment regimen and medical device. In addition, third party payors, such as governmental programs, private indemnity insurance and managed care plans which are billed by hospitals for such healthcare services, are increasingly negotiating the prices charged for medical products and services and may deny reimbursement if they determine that a device was not used in accordance with cost-effective treatment methods as determined by the payor, was experimental or was used for an unapproved indication. There can be no assurance that in the future, hospital purchasing decisions or third party reimbursement levels will not adversely affect the profitability of the Company's products.
COMPETITION
The markets for the Company's product lines are highly competitive. The Company faces substantial competition from a number of other manufacturers and suppliers of vascular access ports, dialysis and apheresis catheters and related ancillary products, including companies with more extensive research and manufacturing capabilities and greater technical, financial and other resources. In response to increased concerns about the rising costs of healthcare, United States hospitals and physicians are placing increasing emphasis on cost-effectiveness in the selection of products to perform medical procedures. The Company believes that its products compete primarily on the basis of: (i) product design, development and improvement; (ii) customer support; (iii) brand loyalty; and (iv) price. The Company believes that Bard Access Systems, a division of C.R. Bard, Inc., is the only company which competes with the Company in each of the Company's product categories. See "Risk Factors -- Competition."
PRODUCT LIABILITY CLAIMS AND INSURANCE
The design, manufacture and marketing of medical devices of the types produced by the Company entail an inherent risk of product liability. The Company's products are often used in intensive care settings with seriously ill patients. While the Company believes that it maintains an adequate amount of product liability insurance, there can be no assurance that the amount of such insurance will be sufficient to satisfy claims made against the Company in the future or that the Company will be able to obtain insurance in the future at satisfactory rates or in adequate amounts. Product liability claims or product recalls could result in costly litigation and could have a material adverse effect on the business, results of operation and financial condition of the Company. In addition, the Company is required under certain of its licensing agreements to indemnify its licensors against certain product liability claims by third parties. See "Risk Factors -- Potential Product Liability."
ENVIRONMENTAL COMPLIANCE
The Company is subject to various federal, state and local laws and regulations relating to the protection of the environment. In the course of its business, the Company is involved in the handling, storing and disposal of materials which are classified as hazardous. The Company believes that its operations comply in all material respects with applicable environmental laws and regulations. While the Company continues to make capital and operational expenditures for protection of the environment, it does not anticipate that those expenditures will have a material adverse effect on its business, financial condition or results of operations.
BACKLOG
Delivery lead times for the Company's products are very short at times and, consequently, the Company routinely maintains a backlog of orders which are generally filled within 60 days of the order date. As of December 31, 1997 the Company had $198,000 of backlog for product orders, as compared with $96,300 for the previous year. Management currently believes that its backlog is not a reliable indicator of future financial or operating performance. If, however, the Company does not receive ISO 9001 certification and a CE Mark for products manufactured at the Manchester facility by June 1998, then the Company may not be able to fill European orders and could experience substantial backlog, which could have a material adverse effect on the Company.
PROPERTIES
The Company's principal executive and administrative offices and research
and manufacturing center is located in Manchester, Georgia in a 45,000 square
foot facility. The Company leases the Manchester facility and the 10.5 acre lot
on which it is located from The Development Authority of the City of Manchester
(the "Manchester Development Authority") pursuant to operating leases which
expire in 2009 and 2010 (collectively, the "Manchester Leases") and under which
the Company pays monthly lease payments of approximately $9,500 in the
aggregate. The Company has an option to extend each of the Manchester Leases for
an additional five-year term and to purchase the facility and/or the adjacent
lot containing approximately 9
acres. The Company considers the Manchester facility to be in good condition and adequate to meet the present and reasonably foreseeable needs of the Company.
The Company manufactures a portion of the acquired Strato(R)/Infusaid(TM) product line (LifePort(TM), Infuse-A-Port(R) and Infuse-A-Cath(TM)) in approximately 20,000 square feet of space at a 55,000 square foot production facility in Norwood, Massachusetts. The Company currently occupies the Norwood facility under an agreement which gives the Company the right to use such space until April 15, 1998. Management plans to transition all of the manufacturing of the acquired Strato(R)/Infusaid(TM) product line to the Manchester, Georgia facility in the second quarter of 1998.
The Company also maintains certain administrative offices in a 3,300 square foot floor of an office condominium located in Atlanta, Georgia (the "Atlanta Office"). See "Certain Transactions -- Agreements with CMI."
EMPLOYEES
At January 31, 1998, the Company had approximately 100 full-time employees, none of which are represented by a union. The Company maintains compensation, benefit, equity participation and work environment policies intended to assist in attracting and retaining qualified personnel. The Company believes that the success of its business will depend, in significant part, on its ability to attract and retain such personnel. The Company has never experienced an organized work stoppage or strike and considers its relations with its employees to be good.
LEGAL PROCEEDINGS AND INSURANCE
The Company is from time to time a party to litigation arising in the ordinary course of its business. Based upon information presently available to the Company, the Company believes that it is not currently involved in any litigation that will have a material adverse effect on its financial condition or results of operation.
The Company maintains insurance in such amounts and against such risks as it deems prudent, although no assurance can be given that such insurance will be sufficient under all circumstances to protect the Company against significant claims for damages. The occurrence of a significant event not fully insured against could materially and adversely affect the Company's financial condition and results of operations. Moreover, no assurance can be given that the Company will be able to maintain adequate insurance in the future at commercially reasonable rates or on acceptable terms.
MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
The following table sets forth certain information concerning each of the executive officers, directors and key employees of the Company as of February 10, 1998.
EXECUTIVE OFFICERS AND DIRECTORS: AGE POSITION
--------------------------------- --- --------
Marshall B. Hunt.......................... 41 Director, Chairman of the Board and Chief
Executive Officer
Roy C. Mallady, Jr........................ 53 Director and Vice Chairman
William E. Peterson, Jr................... 41 Director and President
J. Ronald Hager........................... 54 Vice President of Operations
Mark A. Jewett............................ 32 Vice President of Finance
L. Bruce Maloy............................ 34 Vice President of Administration
Charles E. Adair.......................... 50 Director
Robert Cohen.............................. 40 Director
Robert J. Simmons......................... 55 Director
Gordon Tunstall........................... 54 Director
KEY EMPLOYEES:
Michael A. Crouch......................... 35 National Accounts Manager
Frank D. DeBartola........................ 34 Director of Marketing
Robert R. Singer.......................... 32 National Sales Manager
|
Marshall B. Hunt is a co-founder of the Company and has served as a
director and Chief Executive Officer of the Company since its inception in 1990.
Mr. Hunt has served as the Chairman of the Board of the Company since 1997.
Prior to co-founding the Company, Mr. Hunt co-founded Cardiac Medical, Inc.
("CMI"), a distributor of cardiac pacemakers, in 1987, and served as its Chief
Executive Officer until October 1997. Mr. Hunt currently serves as Secretary of
CMI. In 1981, Mr. Hunt founded Hunt Medical Systems, Inc., a distributor of
pacemaker products, and served as its President from 1981 to 1987. From 1979
through 1981, Mr. Hunt held various sales and management positions with American
Hospital Supply Corporation.
Roy C. Mallady, Jr. is a co-founder of the Company and has served as a director and Vice Chairman since 1997. Mr. Mallady served as Chairman of the Company and a director of the Company from its inception to 1997. Prior to co-founding the Company, Mr. Mallady co-founded CMI in 1987 and served as its President until October 1997. He currently serves as CMI's President and Chief Executive Officer. Mr. Mallady has served as a consultant to Sulzer Intermedics, a medical technology company, since October 1997.
William E. Peterson, Jr. is a co-founder of the Company and has served as President of the Company since its inception in 1990. Mr. Peterson joined the Company's Board of Directors in January 1998. Mr. Peterson served as Vice President of Finance of CMI from 1987 to 1997. From 1981 through 1987 he served as a financial officer of Copolymer Rubber & Chemical Corporation, a manufacturer of synthetic rubber. From 1978 to 1981, Mr. Peterson held various positions with the public accounting firm of Coopers & Lybrand L.L.P., rising to the position of Audit Senior. Mr. Peterson is a Certified Public Accountant.
J. Ronald Hager joined the Company as Vice President of Operations in July 1997 in connection with the Strato(R)/Infusaid(TM) Acquisition. From 1992 to 1997, Mr. Hager held various management positions with Strato(R)/Infusaid(TM), including Vice President of Quality and Regulatory Affairs in 1992, Executive Vice President -- Operations in 1993 and General Manager from 1993 to 1997. Prior to joining Strato(R)/Infusaid(TM),
Mr. Hager was employed for 17 years with Abbott Laboratories in various management positions, including Group V.P., Group Director and Regulatory Director.
Mark A. Jewett joined the Company as Vice President of Finance in December 1997. Prior to joining the Company, Mr. Jewett served as Director of Finance for ProMedCo Management Company, a physician management company, from 1996 to 1997. From 1995 to 1996, he served as the Controller for Alliance Medical Practices, a physician management company. From 1992 to 1995, Mr. Jewett held various accounting management positions with HealthInfusion, Inc., an alternate site healthcare company, and Coram Healthcare, Inc., an alternate site healthcare company that was formed by the merger of HealthInfusion and three other publicly-owned companies. From 1989 to 1992, he held various positions, most recently as a senior accountant, for the public accounting firm of Arthur Andersen L.L.P. Mr. Jewett is a Certified Public Accountant and a Certified Internal Auditor.
L. Bruce Maloy joined the Company in 1990 in its sales and marketing department and has served as the Vice President of Administration of the Company since 1996. Prior to joining the Company, Mr. Maloy served as a Sales Manager of Ryder, Inc., a transportation company, from 1989 to 1990 and a Key Account Manager of Noxell Corporation, a subsidiary of The Proctor & Gamble Company, from 1987 to 1989.
Charles E. Adair joined the Company's Board of Directors in January 1998. From 1993 until present, Mr. Adair has been a principal of Cordova Capital, a venture capital and fund management company, where he serves as manager of venture capital funds. Mr. Adair was associated with Durr-Fillauer Medical, Inc., a pharmaceutical and medical products distribution company, where he served in various capacities, including President and Chief Operating Officer from 1981 to 1992. Mr. Adair currently serves on the Board of Directors of Performance Food Group Company, a food distributor, and Tech Data Corporation, a personal computer products distributor. Mr. Adair also serves on the Boards of Directors of numerous privately-held companies associated with Cordova Capital's venture capital fund investments. Mr. Adair is a Certified Public Accountant.
Robert Cohen joined the Company's Board of Directors in January 1998. Since 1992, Mr. Cohen has served as Group Vice President of Sulzer Medica Ltd., a medical technology company serving the orthopedic and cardiovascular markets. Mr. Cohen is engaged in the areas of mergers and acquisitions, corporate accounts, business development, corporate marketing and strategic planning. Prior to joining Sulzer Medica, Mr. Cohen served as President and Chief Executive Officer of GCI Medical, a medical device venture capital and management organization during 1992, and held a variety of positions at Pfizer Inc. and the Pfizer Hospital Products Group from 1981 to 1991.
Robert J. Simmons joined the Company's Board of Directors in January 1998. Since 1995, Mr. Simmons has served as a director and Chairman and Chief Executive Officer of Healthcare Alliance, Inc., a consortium of healthcare manufacturers, and since 1990 he has been a director and President of RJS Healthcare, Inc., a healthcare consulting company. Mr. Simmons is also a director and Chairman of Healthcare Logistics, a company focused on supply chain initiatives, founded in 1996. From 1985 to 1990, Mr. Simmons served as a director and Executive Vice President of Baxter International, Inc. Before joining Baxter International, Mr. Simmons held various positions at American Hospital Supply Corporation. Mr. Simmons presently serves as a director of American Health Products and serves on Lake Forest Hospital's Board of Directors. Mr. Simmons has served on the hospital Boards of Directors of Ancilla Systems, Inc., the Evanston Hospital Corporation and Wheaton Franciscan Services, Inc.
Gordon Tunstall joined the Company's Board of Directors in January 1998. Mr. Tunstall is the founder of and has served, since 1970, as President of Tunstall Consulting, Inc., a provider of strategic consulting and financial planning services. Mr. Tunstall is also currently a director of Romac International, Inc., a professional and technical placement firm; Orthodontic Centers of America, Inc., a manager of orthodontic practices; Discount Auto Parts, Inc., a retail chain of automotive aftermarket parts stores; and Advanced Lighting Technologies, a specialty lighting manufacturer.
Michael A. Crouch joined the Company in 1992 as a sales representative in Dallas, Texas. Mr. Crouch has served as National Accounts Manager of the Company since 1997. From 1995 to 1996, Mr. Crouch served
as a Sales Representative for renal dialysis equipment and supplies for Cobe Renal Care, a renal device company.
Frank D. DeBartola has served as Director of Marketing of the Company since 1996. Mr. DeBartola joined the Company in 1991 as a sales representative and thereafter held various management positions with the Company, including Sales Manager and Product Manager for the Circle C(R) and Pheres-Flow(TM) lines of catheters.
Robert R. Singer joined the Company in 1990. Prior to assuming his current position as National Sales Manager in 1996, Mr. Singer served in the Company's sales and marketing department, holding the position of Sales Representative from 1990 to 1993 and Regional Sales Manager from 1993 to 1996.
Pursuant to the Company's Articles and Bylaws, the Board of Directors of the Company is divided into three classes, with each director serving a three-year term (after the initial term). The directors of Class I, Messrs. Mallady and Adair, hold office until the first scheduled annual meeting of shareholders following the Offering, the directors of Class II, Messrs. Simmons and Cohen, hold office until the second scheduled annual meeting of shareholders following the Offering and the directors of Class III, Messrs. Hunt, Peterson and Tunstall, hold office until the third scheduled annual meeting of shareholders following the Offering. Shareholders will elect the directors of each Class for three-year terms at the appropriate succeeding annual meetings of shareholders. Executive officers are elected by and serve at the discretion of the Board of Directors.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company's Board of Directors has established an Executive Committee,
Audit Committee and Compensation Committee. The Executive Committee is
authorized to exercise the power and authority of the Board of Directors in the
management of the business and affairs of the Company subject to certain
limitations, including statutory restraints under Georgia Law, as well as the
lack of Board authority to approve (i) acquisitions or other business
combinations, (ii) material changes in the strategic plan of the Company and
(iii) Company borrowings in excess of $7.0 million. The members of the Executive
Committee are Messrs. Hunt, Peterson, Tunstall and Adair. The Audit Committee is
responsible for nominating the Company's independent auditors for approval by
the Board of Directors, reviewing the scope, results and costs of the audit with
the Company's independent auditors, and reviewing the financial statements and
accounting practices of the Company. The members of the Audit Committee are
Messrs. Adair and Simmons. The Compensation Committee is responsible for
recommending compensation decisions for the Company's executive officers to the
Board of Directors and for administering the Stock Incentive Plan. The Members
of the Compensation Committee are Messrs. Tunstall and Cohen.
COMPENSATION OF DIRECTORS
Directors of the Company who are not officers or employees of the Company ("Outside Directors") receive a fee of $1,000 for each meeting of the Board of Directors attended and each meeting of a committee of the Board of Directors attended (except for committee meetings held on the same days as Board meetings). Directors are reimbursed for travel and other expenses incurred in connection with attendance at meetings of the Board of Directors or committees thereof. Each Outside Director will automatically be granted, under the Stock Incentive Plan, options to acquire up to 10,000 shares of Common Stock at the initial offering price concurrently with the consummation of the Offering. See "Stock Incentive Plan."
EXECUTIVE COMPENSATION
No executive officer of the Company earned in excess of $100,000 for services rendered to the Company during 1997. In 1997, each of Messrs. Hunt and Peterson received compensation from the Company for services rendered in the amount of $3,000 in the form of an automobile allowance. After the completion of the Offering Messrs. Hunt and Peterson will be compensated in accordance with the terms of their Employment Agreements (as defined below). See "-- Employment Agreements."
EMPLOYMENT AGREEMENTS
The Company intends to enter into employment agreements with each of Marshall B. Hunt and William E. Peterson, Jr. (collectively, the "Employment Agreements") in connection with the Offering which will provide for Mr. Hunt's employment as Chairman of the Board of Directors and Chief Executive Officer and Mr. Peterson's employment as President. The Employment Agreements each will have a five-year term (subject to the right of either the Company or Messrs. Hunt and Peterson to terminate the Employment Agreement upon 90 days notice) and provide for initial annual base salaries for Messrs. Hunt and Peterson of $220,000 and $190,000, respectively, with the opportunity to earn an annual bonus of 100% of base salary if the annual increase in the Company's earnings per share is 35% or more and up to 50% of base salary if the annual increase in earnings per share is 25% or more. The Employment Agreements will provide that Messrs. Hunt and Peterson are entitled to participate in all compensation, benefit and insurance programs maintained by the Company in which executive officers are eligible to participate and for certain other benefits, including reimbursement for family medical and dental expenses which are not covered by insurance, automobile leases and certain reimbursements for country club dues. In the event Mr. Hunt or Mr. Peterson's employment is terminated without cause (as defined), he would be entitled to receive his base salary and benefits for the remaining term of the Employment Agreement, but in any event for no less than three years following the date of termination, as well as bonus compensation payable with respect to the calender year in which he is terminated on a prorated basis. In the event of a change in control (as defined) of the Company, Messrs. Hunt and Peterson would be entitled to receive, in lieu of salary and benefits, a lump-sum payment equal to the base salary for the remaining term of employment under the Employment Agreements, but in no event for a period less than three years.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1997, the Company did not have a Compensation Committee of the Board of Directors. In January 1998, the Company designated a Compensation Committee whose function is to recommend to the Board of Directors compensation decisions for the Company's executive officers and to administer the Company's Stock Incentive Plan. In 1997, executive officer compensation decisions were made by Messrs. Hunt and Peterson. See " -- Committees of the Board of Directors."
STOCK INCENTIVE PLAN
The Company has adopted the Stock Incentive Plan and has reserved 500,000 shares of Common Stock for issuance thereunder to key employees and Outside Directors. The Stock Incentive Plan aims to (i) attract and retain the services of key employees and Outside Directors, (ii) provide an additional incentive to each key employee or Outside Director to work to increase the value of the Company's Common Stock and (iii) provide each key employee or outside director with a stake in the future of the Company which corresponds to the stake of each of the Company's shareholders.
The Stock Incentive Plan is administered by the Compensation Committee of the Board of Directors. Under the Stock Incentive Plan, either incentive stock options ("ISOs"), which are intended to qualify under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or non-incentive stock options ("Non-ISOs") may be granted to key employees. Only Non-ISOs may be granted to Outside Directors under the Stock Incentive Plan, and each person who is an Outside Director upon consummation of this Offering will automatically be granted a Non-ISO to purchase 10,000 shares of Common Stock at an option price equal to the initial public offering price per share.
Each option granted under the Stock Incentive Plan is exercisable in whole or in part from time to time as set forth in the related option certificate, but no option may be exercised: (i) before the end of the six-month period which starts on the date such option is granted or (ii) on or after the earliest of (A) the date which is the fifth anniversary of the date the option is granted, if the option is an ISO and the key employee is a ten-percent shareholder of the Company on the date the option is granted or (B) the date which is the tenth anniversary of the date such option is granted, if such option is granted to a key employee who is not a ten-percent shareholder of the Company on the date the option is granted or if the option is a Non-ISO.
The Compensation Committee may grant SARs to key employees (but not Outside Directors) in tandem with an option or as an independent grant. The Compensation Committee may also grant restricted stock to key employees. No option, SAR or restricted stock granted under the Stock Incentive Plan is transferable by a key employee or outside director other than by will or by the laws of descent and distribution, and any option or SAR is only exercisable during a key employee's or Outside Director's lifetime only by the key employee or Outside Director.
The Stock Incentive Plan provides for adjustment of the number of shares of Common Stock available for the grant of options or SARs, the option price of such options and the SAR value of such SARs and the number, kind or class of shares of restricted stock granted by the Compensation Committee in an equitable manner to reflect any change in the capitalization of the Company.
If the Compensation Committee determines that there has been a "Change of Control" of the Company (as defined) or a bona fide tender or exchange offer for shares of Common Stock (other than a tender offer by the Company or an employee benefit plan established and maintained by the Company), the Compensation Committee has the right to take such action, if any, with respect to any or all then outstanding options, SARs and restricted stock grants under the Stock Incentive Plan as it deems appropriate under the circumstances to protect the interests of the Company in maintaining the integrity of such grants under the Stock Incentive Plan.
1995 STOCK APPRECIATION RIGHTS PLAN
Pursuant to the Company's 1995 Stock Appreciation Rights Plan (the "SAR Plan"), from June 1995 to date the Company has granted an aggregate 124,200 SARs to eligible employees and eligible sales representatives based on their achievement of certain performance targets. At January 31, 1997, 99,600 SARs were outstanding. The Compensation Committee has approved, effective the day immediately prior to consummation of the Offering, (i) the cancellation of all outstanding SARs, (ii) the grant of an aggregate 99,600 options (the "SAR Conversion Options") to purchase Common Stock under the Stock Incentive Plan to holders of SARs who are then employed by the Company and (iii) the payment of cash compensation equal to one dollar for each SAR held by holders of SARs who are not employed by the Company upon consummation of the Offering. The SAR Conversion Options will be exercisable, in increments of 25% per year over four years, commencing on the first anniversary of the date of grant, at an exercise price per share equal to the initial pubic offering price.
CERTAIN TRANSACTIONS
LOANS TO FOUNDERS
In connection with the purchase by Messrs. Hunt, Mallady and Peterson, the Chairman and Chief Executive Officer, Vice Chairman and President of the Company, respectively, of an aggregate of 8,091 shares of Common Stock from Cordova, a former lender to the Company, on September 28, 1995, the Company loaned each of Messrs. Hunt, Mallady and Peterson $77,612.43 (the "September Loans"). The September Loans to Messrs. Hunt, Mallady and Peterson mature on September 20, 2000 and bear interest at a rate of 8% per annum, payable annually. In addition, on October 12, 1995, the Company loaned each of Messrs. Hunt, Mallady and Peterson $35,000 (the "October Loans"). The October Loans to Messrs. Hunt, Mallady and Peterson mature on October 12, 2000 and bear interest at a rate of 8% per annum, payable annually.
GUARANTEE OF OBLIGATIONS UNDER LOAN AGREEMENTS BY FOUNDERS
Pursuant to Guaranty Agreements dated April 26, 1994 in favor of Cordova, each of Messrs. Hunt, Mallady and Peterson guaranteed all amounts payable by the Company to Cordova under the terms of a Loan Agreement dated April 26, 1994 between Cordova and the Company (the "Cordova Loan"). The Cordova Loan was in the aggregate principal amount of $1 million and bore interest at 10% per annum. The Cordova Loan was repaid in full by the Company in September 1995 and the guarantees of Messrs. Hunt, Mallady and Peterson with respect thereto were terminated.
Pursuant to Guaranty Agreements dated October 24, 1995 in favor of CB&T, each of Messrs. Hunt, Mallady and Peterson guaranteed all amounts payable by the Company to CB&T under a $1.7 million promissory note bearing interest at CB&T's prime rate of interest plus 1% per annum issued by the Company to CB&T (the "CB&T Note") in connection with the NeoStar Medical(R) Acquisition. The CB&T Note was repaid in full by the Company in July 1997 and the guarantees of Messrs. Hunt, Mallady and Peterson with respect thereto were terminated.
GUARANTEE OF OBLIGATIONS UNDER LOAN AGREEMENTS BY CMI
Pursuant to a Guaranty Agreement dated September 25, 1995 in favor of Sirrom, CMI, a corporation co-founded by and of which Messrs. Hunt and Mallady are the principal executive officers and shareholders and of which Mr. Peterson is a ten-percent shareholder, guaranteed all amounts payable by the Company to Sirrom under a 13.75% Secured Promissory Note due September 25, 2000 in the original principal amount of $1.5 million (the "Sirrom Note"). On July 15, 1997, NationsCredit purchased the Sirrom Note in connection with the Credit Facility and CMI's guarantee with respect thereto was terminated.
In connection with the NeoStar Medical(R) Acquisition, pursuant to a Guaranty Agreement dated October 24, 1995 in favor of CB&T, CMI guaranteed all amounts payable by the Company to CB&T under the CB&T Note. The CB&T Note was repaid in full in July 1997 and CMI's guarantee with respect thereto was terminated.
GUARANTEE OF REPAYMENT OF REVENUE BOND FINANCING BY CMI AND FOUNDERS
The development of the Manchester facility was financed with approximately $705,000 in proceeds of an industrial development revenue bond issuance in July 1996 by the Manchester Development Authority for the benefit of the Company. In connection with and as a condition to such bond financing, the Company entered into a lease with the Manchester Development Authority. All payments due on the bonds have been guaranteed, jointly and severally, by CMI and Messrs. Hunt, Peterson and Mallady.
PLEDGE OF COMMON STOCK BY FOUNDERS
Pursuant to Pledge Agreements dated July 15, 1997 each of Messrs. Hunt, Mallady and Peterson have pledged all shares of capital stock of the Company currently owned, or acquired by them in the future, to
secure the obligations of the Company under the Credit Facility. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources."
CONSULTING AGREEMENT WITH HEALTHCARE ALLIANCE, INC.
On February 1, 1996, the Company entered into a Consulting and Services
Agreement with HealthCare Alliance, an affiliate of Robert J. Simmons, a
director of the Company. The agreement provides for an initial three-year term
(which is automatically renewable for a successive three-year term unless the
Company notifies HealthCare Alliance of its intention not to renew the agreement
30 days prior to the beginning of the third year of the original term) during
which HealthCare Alliance will assist the Company in marketing its products
through the negotiation of purchasing agreements with hospital purchasing
groups, physicians' organizations and other medical service and healthcare
providers. The agreement provides for (i) the payment to HealthCare Alliance of
an annual consulting fee of $36,000, (ii) the payment to HealthCare Alliance of
an annual performance incentive fee equal to 5% of any annual sales increase
achieved by the Company that results from HealthCare Alliance's efforts and
(iii) the grant of an option to HealthCare Alliance to acquire from the Company
at a nominal price up to the number of shares equal to 1.5% of the outstanding
shares of Common Stock owned by Messrs. Hunt, Mallady and Peterson at the time
such payment becomes due, subject to the execution and delivery of certain
targeted group purchasing agreements, including the Premier Agreement.
CONSULTING AGREEMENTS WITH DIRECTORS
On May 8, 1997, the Company entered into a letter agreement with Robert Cohen, a director of the Company, pursuant to which Mr. Cohen has agreed to provide acquisition consulting and related services to the Company. In the event such services result in an acquisition or merger of the Company and a third party, Mr. Cohen will be entitled to receive a fee (a "General Consulting Fee") equal to 2.5% of the acquisition purchase price (x) payable by the Company with respect to a company acquired by the Company or (y) payable to the Company or its shareholders in the event the Company or any of the Company's assets are acquired. Such General Consulting Fee is conditioned upon, and is not payable until, there has occurred an initial public offering of the Company's capital stock or substantially all of the Company's business or outstanding shares of capital stock are acquired. Such General Consulting Fee is payable, at Mr. Cohen's option, (i) in shares of Common Stock, (ii) by the Company's issuance to Mr. Cohen of warrants or options to purchase, at a nominal exercise price, that number of shares of Common Stock (valued at the initial public offering price) which equals the General Consulting Fee, (iii) in shares of the company which acquires the Company, in the event the Company is acquired or (iv) in cash. The letter agreement also provides for payments to Mr. Cohen for his consulting services in connection with the Strato(R)/Infusaid(TM) Acquisition and a second strategic venture of $375,000 and $250,000, respectively (the "Specific Consulting Fees"). The Specific Consulting Fee relating to the Strato(R)/Infusaid(TM) Acquisition is payable upon consummation of the Offering in shares of the Common Stock or warrants or options to purchase, at a nominal exercise price, that number of shares of the Common Stock (valued at the initial public offering price) which equals $375,000, at Mr. Cohen's option. The Specific Consulting Fee for the second strategic venture is payable only if such venture is completed and is payable in warrants or options to purchase, at a nominal exercise price, that number of shares of Common Stock (valued at the initial public offering price) which equals $250,000. Such Specific Consulting Fees are to be paid in lieu of and not in addition to the General Consulting Fees described above with respect to the strategic ventures.
During 1997, Tunstall Consulting, Inc., an affiliate of Gordon Tunstall, a director of the Company, provided consulting services to the Company with respect to the Offering and certain related matters. In consideration for such services, the Company paid to Tunstall Consulting a fee of $235,699.
AGREEMENTS WITH CMI
The Company and CMI jointly own and occupy office space in the Atlanta Office and also share certain administrative employees. Pursuant to an agreement between CMI and the Company dated January 1, 1995, CMI agreed to provide, until December 31, 1997, certain management, administrative and secretarial services
to the Company from time to time when requested by the Company. In January 1995, the Company paid CMI $150,000 for all services to be rendered by CMI to the Company during the term of the agreement.
Following the Offering, the Company does not intend to enter into any material transactions with officers or directors, their family members or affiliates of such officers or directors without the approval of a majority of the directors who do not have an interest in any such transactions.
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth certain information concerning the beneficial ownership of the Company's capital stock prior to the Offering, and as adjusted to give effect to the sale of shares of Common Stock in the Offering, by (i) each person known by the Company to own beneficially more than 5% of the outstanding shares of Common Stock, (ii) the Named Executive Officer of the Company, (iii) each director of the Company, (iv) all executive officers and directors of the Company as a group and (v) each Selling Shareholder. Unless otherwise specified, the named beneficial owner claims sole investment and voting power as to the shares indicated. The table assumes (i) the persons it lists will not acquire shares directly from the Underwriters in connection with the Offering, and (ii) no other person will acquire beneficial ownership of more than 5% of the outstanding Common Stock as a result of the Offering. See "Description of Capital Stock."
SHARES BENEFICIALLY OWNED
-------------------------------------------------------------------------
NUMBER OF % OF CLASS NUMBER OF NUMBER OF % OF CLASS
SHARES PRIOR TO PRIOR TO SHARES OFFERED SHARES AFTER AFTER
OFFERING(1) OFFERING HEREBY OFFERING OFFERING
--------------- ---------- -------------- ------------ ----------
NAME(2)
----------
Marshall B. Hunt....................... --
Roy C. Mallady, Jr..................... --
William E. Peterson, Jr................ --
Charles E. Adair....................... --
Robert Cohen........................... --
Robert J. Simmons...................... --
Gordon Tunstall........................ --
All executive officers and directors as
a group (13 persons)................. --
SELLING SHAREHOLDERS
----------------------
NationsCredit Commercial
Corporation(3).......................
201 Broad Street
One Canterbury Green
Stanford, Connecticut 06901
Roy C. Mallady, Jr.....................
Seven North Parkway Square
4200 Northside Parkway, N.W.
Atlanta, Georgia 30327
Cordova Capital Partners,
L.P. -- Enhanced Appreciation........
c/o 3350 Cumberland Circle, Suite 970
Atlanta, Georgia 30339
|
(1) Includes shares of Common Stock that may be acquired upon the exercise of
stock options or warrants exercisable within 60 days.
(2) Except as otherwise indicated, the address of each of the executive officers
and directors is the address of the Company, which is One Horizon Way, P.O.
Drawer 627, Manchester, Georgia 31816.
(3) NationsCredit is an indirect subsidiary of NationsBank Corporation.
NationsBank Corporation is the parent corporation of NationsBanc Montgomery
Securities LLC.
DESCRIPTION OF CAPITAL STOCK
Upon completion of the Offering, the authorized capital stock of the Company will consist of 55,000,000 shares of capital stock, comprised of (i) 5,000,000 shares of Preferred Stock, no par value, issuable in one or more series, and (ii) 50,000,000 shares of Common Stock, $.001 par value, of which shares of Common Stock will be issued and outstanding and no shares of Preferred Stock will be issued and outstanding. As of the date of the Offering, an aggregate of shares of Common Stock were issued and outstanding and no shares of Preferred Stock were issued and outstanding.
The following summary of certain provisions of the Common Stock and Preferred Stock contained in the Articles and Bylaws is qualified in its entirety by reference to the Articles and Bylaws which are exhibits to the Registration Statement of which this Prospectus is a part.
COMMON STOCK
The Common Stock has no preemptive rights and no redemption, sinking fund or conversion provisions. All shares of Common Stock have one vote on any matter submitted to the vote of shareholders. The Common Stock does not have cumulative voting rights. Upon any liquidation of the Company, the holders of Common Stock are entitled to receive, share for share on a pro rata basis, all assets then legally available for distribution after payment of debts and liabilities and preferences on Preferred Stock, if any. Holders of Common Stock are entitled to receive dividends share for share on a pro rata basis when, as and if declared by the Board of Directors out of funds legally available therefor (subject to the prior rights of Preferred Stock, if any).
PREFERRED STOCK
The Board of Directors has the authority to issue up to 5,000,000 shares of Preferred Stock in one or more series and to fix the number of shares constituting any such series, the voting powers, designation, preferences and relative participation, optional or other special rights and qualifications, limitations or restrictions thereof, including the dividend rights and dividend rate, terms of redemption (including sinking fund provisions), redemption price or prices, conversion rights and liquidation preferences of the shares constituting any series, without any further vote or action by the shareholders. The issuance of Preferred Stock by the Board of Directors could affect the rights of the holders of Common Stock. For example, such issuance could result in a class of securities outstanding that would have preferences with respect to voting rights and dividends, and in liquidation, over the Common Stock, and could (upon conversion or otherwise) enjoy all of the rights appurtenant to Common Stock.
The authority possessed by the Board of Directors to issue Preferred Stock could potentially be used to discourage attempts by others to obtain control of the Company through a merger, tender offer, proxy contest or otherwise by making such attempts more difficult to achieve or more costly. The Board of Directors may issue the Preferred Stock with voting and conversion rights that could adversely affect the voting power of the holders of Common Stock. There are no agreements or understandings for the issuance of Preferred Stock and the Board of Directors has no present intention to issue Preferred Stock.
PREMIER WARRANTS
In connection with the Premier Purchasing Agreement, the Company has agreed to enter into a Warrant Agreement with Premier pursuant to which the Company will grant Premier warrants to acquire up to 500,000 shares of Common Stock at the initial public offering price. Such warrants will vest annually in increments of 100,000 based upon the achievement of certain specified minimum annual sales (the "Minimum Annual Sales Targets") and/or minimum cumulative sales (the "Cumulative Sales Targets") of the Company's products to Premier Hospitals. The vesting of the warrants will be subject to acceleration in any given year in the event that both the Minimum Annual Sales Targets and Cumulative Sales Targets with respect to such year are achieved. Warrants vesting on the first anniversary of the Purchasing Agreement will become exercisable on the third anniversary of the Purchasing Agreement. Warrants vesting in subsequent years will become
exercisable one year after their respective vesting dates. All unexercised warrants will expire on the fifth anniversary of their respective vesting dates.
ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF GEORGIA LAW
The Georgia Code restricts certain business combinations with "interested shareholders" (as defined below) (the "Business Combination Statute") and contains fair price requirements applicable to certain mergers with certain interested shareholders (the "Fair Price Statute"). In accordance with the provisions of these statutes, the Company must elect in its Articles or Bylaws to be covered by the restrictions imposed by these statutes. The Company has elected to be covered by such restrictions.
The Business Combination Statute regulates business combinations such as mergers, consolidations, share exchanges and asset purchases where the acquired business has at least 100 shareholders residing in Georgia and has its principal office in Georgia, as the Company does, and where the acquiror became an interested shareholder of the corporation, unless either (i) the transaction resulting in such acquiror becoming an interested shareholder or the business combination received the approval of the corporation's board of directors prior to the date on which the acquiror became an interested shareholder, or (ii) the acquiror became the owner of at least 90% of the outstanding voting shares of the corporation (excluding shares held by directors, officers and affiliates of the corporation and shares held by certain other persons) in the same transaction in which the acquiror became an interested shareholder. For purposes of the Business Combination Statute and the Fair Price Statute, an "interested shareholder" generally is any person who directly or indirectly, alone or in concert with others, beneficially owns or controls 10% or more of the voting power of the outstanding voting shares of the corporation. The Business Combination Statute prohibits business combinations with an unapproved interested shareholder for a period of five years after the date on which such person became an interested shareholder. The Business Combination Statute is broad in its scope and is designed to inhibit unfriendly acquisitions.
The Fair Price Statute prohibits certain business combinations between a
Georgia business corporation and an interested shareholder. The Fair Price
Statute would permit the business combination to be effected if (i) certain
"fair price" criteria are satisfied, (ii) the business combination is
unanimously approved by the continuing directors, (iii) the business combination
is recommended by at least two-thirds of the continuing directors and approved
by a majority of the votes entitled to be cast by holders of voting shares,
other than voting shares beneficially owned by the interested shareholder, or
(iv) the interested shareholder has been such for at least three years and has
not increased his ownership position in such three-year period by more than 1%
in any 12-month period. The Fair Price Statute is designed to inhibit unfriendly
acquisitions that do not satisfy the specified "fair price" requirements.
CERTAIN NOTICE AND VOTING PROVISIONS CONTAINED IN THE COMPANY'S ARTICLES OF INCORPORATION AND BYLAWS
Certain provisions of the Articles and Bylaws summarized in the following paragraphs may be deemed to have an anti-takeover effect and may delay, defer or prevent a tender offer or takeover attempt that a shareholder might consider in its best interest, including those attempts that might result in a premium over the market price for the shares held by shareholders.
Special Meeting of Shareholders. The Articles provide that special meetings of shareholders of the Company may be called only by the Board of Directors or upon the written demand of the holders of not less than 75% of all votes entitled to be cast on any issue proposed to be considered at a special meeting. This provision will make it more difficult for shareholders to take actions opposed by the Board of Directors and can only be amended with the approval of 75% of the outstanding shares entitled to be cast on the issue.
Advance Notice Requirements for Shareholder Proposals and Director
Nominations. The Bylaws provide that shareholders seeking to bring business
before an annual meeting of shareholders, or to nominate candidates for election
as directors at an annual meeting of shareholders, must provide timely notice
thereof in writing. To be timely, a shareholder's notice must be delivered to or
mailed and received at the executive offices of the Company not less than 120
days nor more than 180 days prior to the first anniversary of the date of the
Company's notice of annual meeting provided with respect to the prior year's
annual meeting. The
Bylaws also specify certain requirements for a shareholder's notice to be in proper written form. These provisions may preclude some shareholders from bringing matters before the shareholders at an annual meeting or from making nominations for directors at an annual meeting.
Staggered Board. The Company's Articles and Bylaws provide for an eight member Board of Directors to be elected, initially, to staggered one, two and three-year terms and, thereafter for successive three-year terms. In addition, directors may only be removed from office for cause upon a vote of 70% of the Common Stock outstanding.
Amendments of Articles and Bylaws. The Company's Articles and Bylaws provide that they may not be amended in certain respects except pursuant to the vote of 70% of the Common Stock represented at a shareholders' meeting. These provisions of the Articles and Bylaws could discourage potential acquisition proposals and could delay or prevent a change in control of the Company.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is SunTrust Bank, Atlanta.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the Offering, there has not been any public market for securities of the Company. No prediction can be made as to the effect, if any, that market sales of shares or the availability of shares for sale will have on the market price prevailing from time to time. Nevertheless, sales of substantial amounts of Common Stock in the public market could adversely affect the prevailing market price.
Upon completion of the Offering, the Company will have outstanding shares of Common Stock. All shares of Common Stock ( shares if the Underwriters' over-allotment option is exercised in full) sold in the Offering will be freely tradable without restriction or further registration under the Securities Act, except that shares owned by affiliates may generally only be sold in compliance with applicable provisions of Rule 144. The remaining shares of Common Stock (the "Restricted Shares") held by existing shareholders upon completion of the Offering will be "restricted" securities within the meaning of Rule 144 and may not be sold except in compliance with the registration requirements of the Securities Act or an applicable exemption under the Securities Act, including sales pursuant to Rule 144.
The Company, its directors and officers and certain of its shareholders
have agreed with the Underwriters not to sell or otherwise dispose of any shares
of Common Stock during the Lock-Up, except for a Permitted Transfer, issuances
by the Company pursuant to the exercise of employee stock options granted under
the Stock Incentive Plan and issuances in connection with acquisitions where the
person receiving the Common Stock agrees not to sell or otherwise dispose of
such shares until 180 days after the date of this Prospectus. See
"Underwriting." Beginning 180 days after the date of this Prospectus, assuming
that CSFBC does not consent to any sales prior to such time or a Permitted
Transfer does not occur, an additional shares will become eligible for
sale in the public market, subject to compliance with the provisions of Rule
144. Of such shares, shares are held by Mr. Hunt, the Chairman of
the Board and Chief Executive Officer of the Company, shares are held by
Mr. Mallady, the Vice Chairman of the Board of the Company, and shares
are held by Mr. Peterson, the President and a director of the Company, each of
whom are "affiliates" of the Company within the meaning of Rule 144, and may,
therefore, only be sold in the public market in compliance with the volume
limitations and other requirements of Rule 144. CSFBC may, in its sole
discretion and at any time without notice, waive the provisions of the lock-up
agreements.
In general, under Rule 144, a person (or persons whose shares are
aggregated), including an affiliate, who has beneficially owned Restricted
Shares for at least one year (including the holding period of certain prior
owners), will be entitled to sell in "restricted brokers' transactions" or to
market makers, within any three-month period commencing 90 days after the
Company becomes subject to the reporting requirements of Section 13 of the
Exchange Act, a number of Restricted Shares that does not exceed the greater of
(i) 1% of the then outstanding shares of Common Stock (approximately
shares immediately after the Offering) or (ii) the average weekly trading volume
in the Common Stock during the four calendar weeks immediately preceding such
sale, subject, generally, to the filing of a Form 144 with respect to such sales
and certain other limitations and restrictions. In addition, a person (or
persons whose shares are aggregated), who is not deemed to have been an
affiliate at any time during the 90 days immediately preceding the sale and who
has beneficially owned the Restricted Shares proposed to be sold for at least
two years, is entitled to sell such shares under Rule 144(k) without regard to
the limitations described above.
The Company intends to file one or more registration statements on Form S-8 under the Securities Act to register all shares of Common Stock subject to outstanding options and future grants under the Stock Incentive Plan. As of the date hereof, options have been granted at the initial public offering price of the Common Stock offered hereby, and options to purchase an additional shares of Common Stock remain available for issuance pursuant to the Stock Incentive Plan. See "Management -- Stock Incentive Plan." In addition, pursuant to the Warrant Agreement entered into by the Company with Premier, the Company has granted to Premier warrants to purchase, subject to the satisfaction of certain conditions, up to 500,000 shares of Common Stock at the initial public offering price of the Common Stock offered hereby. Sales of shares of Common Stock issuable upon exercise of stock options under the Stock Incentive Plan and warrants issued to Premier generally are subject to the limitations and restrictions under Rule 144.
UNDERWRITING
Under the terms and subject to the conditions contained in an Underwriting Agreement dated ________ (the "Underwriting Agreement") among the Company, the Selling Shareholders and the underwriters named below (the "Underwriters"), for whom CSFBC, BancAmerica Robertson Stephens and NationsBanc Montgomery Securities LLC are acting as the representatives (the "Representatives"), the Underwriters have severally but not jointly agreed to purchase from the Company and the Selling Shareholders the following respective numbers of shares of Common Stock:
NUMBER OF
UNDERWRITER SHARES
----------- -----------
Credit Suisse First Boston Corporation......................
BancAmerica Robertson Stephens..............................
NationsBanc Montgomery Securities LLC.......................
-----------
Total.....................................................
===========
|
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will be obligated to purchase all of the shares of Common Stock
(other than those shares covered by the over-allotment option described below)
if any are purchased. The Underwriting Agreement provides that, in the event of
a default by an Underwriter, in certain circumstances the purchase commitments
of non-defaulting Underwriters may be increased or the Underwriting Agreement
may be terminated.
The Company has granted to the Underwriters an option exercisable by CSFBC, expiring at the close of business on the 30th day after the date of this Prospectus, to purchase up to additional shares of Common Stock at the initial public offering price less underwriting discounts and commissions, all as set forth on the cover page of this Prospectus. Such option may be exercised only to cover over-allotments, if any, in the sale of the shares of Common Stock. To the extent such option is exercised, each Underwriter will become obligated, subject to certain conditions, to purchase approximately the same percentage of such additional shares of Common Stock as it was obligated to purchase pursuant to the Underwriting Agreement.
The Company and the Selling Shareholders have been advised by the Representatives that the Underwriters propose to offer the shares of Common Stock to the public initially at the public offering price set forth on the cover page of this Prospectus and, through the Underwriters, to certain dealers at such price less a concession of $ per share, and the Underwriters and such dealers may allow a discount of $ per share on sales to certain other dealers. After the Offering, the public offering price and concession and discount to dealers may be changed by the Representatives.
The Representatives have informed the Company and the Selling Shareholders that they do not expect discretionary sales by the Underwriters to exceed 5% of the shares being offered hereby.
The Company, its officers and directors and certain of its shareholders have agreed that they will not offer, sell, contract to sell, announce their intention to sell, pledge or otherwise dispose of, directly or indirectly, or, in the case of the Company, file with the Securities and Exchange Commission (the "Commission") a registration statement under the Securities Act relating to any additional shares of the Common Stock or securities convertible into or exchangeable or exercisable for any shares of the Common Stock, without the prior written consent of CSFBC during the Lock-Up, except for a Permitted Transfer, issuances by the Company pursuant to the exercise of stock options granted under the Stock Incentive Plan and issuances in connection with acquisitions where the person receiving the Common Stock agrees not to sell or otherwise dispose of such shares until 180 days after the date of this Prospectus.
The Company and the Selling Shareholders have agreed to indemnify the Underwriters against certain liabilities, including civil liabilities under the Securities Act, or to contribute to payments which the Underwriters may be required to make in respect thereof.
Prior to the Offering, there has been no public market for the Common Stock. The initial public offering price for the shares of Common Stock will be negotiated between the Company and the Representatives. Among the factors to be considered in determining the initial public offering price of the Common Stock will be the Company's historic performance, estimates of the business potential and earnings prospects of the Company and its industry in general, an assessment of the Company's management, the market valuation of companies in related businesses, the general condition of the equity securities market and other relevant factors. There can be no assurance that the initial public offering price of the Common Stock will correspond to the price at which the Common Stock will trade in the public market subsequent to the Offering or that an active public market for the Common Stock will develop and continue after the Offering.
The Representatives, on behalf of the Underwriters, may engage in over-allotment, stabilizing transactions, syndicate covering transactions and penalty bids in accordance with Regulation M under the Exchange Act. Over-allotment involves syndicate sales in excess of the offering size, which creates a syndicate short position. Stabilizing transactions permit bids to purchase in the underlying security so long as the stabilizing bids do not exceed a specified maximum. Syndicate covering transactions involve purchases of the Common Stock in the open market after the distribution has been completed in order to cover syndicate short positions. Penalty bids permit the Representatives to reclaim a selling concession from a syndicate member when the shares of Common Stock originally sold by such syndicate member are purchased in a syndicate covering transaction to cover syndicate short positions. Such stabilizing transactions, syndicate covering transactions and penalty bids may cause the price of the Common Stock to be higher than it would otherwise be in the absence of such transactions. These transactions may be effected on the Nasdaq National Market or otherwise and, if commenced, may be discontinued at any time.
NationsCredit, the beneficial owner of approximately 7.5% of the outstanding Common Stock of the Company on a fully-diluted basis, is an indirect subsidiary of NationsBank Corporation. NationsBank Corporation is the parent corporation of NationsBanc Montgomery Securities LLC.
CERTAIN U.S. FEDERAL TAX CONSIDERATIONS
FOR NON-U.S. HOLDERS OF COMMON STOCK
The following is a general discussion of certain U.S. federal income and estate tax consequences of the ownership and disposition of Common Stock applicable to a beneficial owner thereof that is a "Non-U.S. Holder." A "Non-U.S. Holder" is a person or entity other than (i) a citizen or resident of the United States, (ii) a corporation or partnership created or organized in or under the laws of the United States or of any state, (iii) an estate the income of which is subject to U.S. federal income tax, regardless of its source or (iv) a trust if (a) a court within the United States is able to exercise primary supervision over the administration of the trust and (b) one or more United States persons have the authority to control all substantial decisions of the trust.
An individual may, subject to certain exceptions, be deemed to be a resident alien (as opposed to a non-resident alien) by virtue of being present in the United States at least 31 days in the calendar year and for an aggregate of at least 183 days during a three-year period that includes the current calendar year (counting for such purposes all of the days present in the current year, one-third of the days present in the immediately preceding year, and one-sixth of the days present in the second preceding year). Resident aliens are subject to U.S. federal tax as if they were U.S. citizens and, thus, are not Non-U.S. Holders for purposes of this discussion.
This discussion is based on the Code existing and proposed regulations promulgated thereunder and administrative and judicial interpretations thereof as of the date hereof, all of which are subject to change, including changes with retroactive effect. This discussion does not address all aspects of U.S. federal income and estate taxation that may be important to Non-U.S. Holders in light of their particular circumstances (including tax consequences applicable to Non-U.S. Holders that are, or hold interests in Common Stock through, partnerships or other fiscally transparent entities) and does not address United States state and local or non-United States tax consequences. Prospective Non-U.S. Holders should consult their own tax advisors with respect to the particular U.S. federal income and estate tax consequences to them of owning and
disposing of Common Stock, as well as the tax consequences arising under the laws of any other taxing jurisdiction.
DIVIDENDS
Subject to the discussion below, dividends, if any, paid to a Non-U.S. Holder of Common Stock generally will be subject to United States withholding tax at a rate of 30% of the gross amount of the dividend or such lower rate as may be specified by an applicable income tax treaty. Non-U.S. Holders (and in the case of Non-U.S. Holders that are treated as partnerships or other fiscally transparent entities, partners, shareholders or other beneficiaries of such Non-U.S. Holders) may be required to satisfy certain certification requirements and provide certain information in order to claim treaty benefits. Special rules regarding the availability of treaty benefits apply with respect to entities that are treated as partnerships or other fiscally transparent entities for U.S. federal income tax purposes but treated as corporations for purposes of the tax laws of an applicable treaty country (or, conversely, treated as corporations for U.S. federal income tax purposes but treated as partnerships or other fiscally transparent entities for purposes of the tax laws of an applicable treaty country). Any such entities that hold Common Stock, and partners, beneficiaries and shareholders of such entities, should consult their tax advisors as to the applicability of such rules to their particular circumstances.
Dividends paid to a Non-U.S. Holder that are either (i) effectively connected with the Non-U.S. Holder's conduct of a trade or business within the United States or (ii) if a tax treaty applies, attributable to a permanent establishment maintained by the Non-U.S. Holder, will not be subject to the withholding tax (provided in either case the Non-U.S. Holder files the appropriate documentation with the Company or its Paying Agent), but, instead, will be subject to regular U.S. federal income tax at the graduated rates in the same manner as if the Non-U.S. Holder were a U.S. resident. In addition to such graduated tax in the case of a Non-U.S. Holder that is a corporation, effectively connected dividends or, if a tax treaty applies, dividends attributable to a U.S. permanent establishment of the corporate Non-U.S. Holder, may be subject to a "branch profits tax" which is imposed, under certain circumstances, at a rate of 30% (or such lower rate as may be specified by an applicable tax treaty) of the non-U.S. corporation's effectively connected earnings and profits, subject to certain adjustments.
GAIN ON DISPOSITION OF COMMON STOCK
A Non-U.S. Holder generally will not be subject to U.S. federal income tax (and no tax will generally be withheld) with respect to gain realized on a sale or other disposition of Common Stock unless (i) the gain is effectively connected with a trade or business of such Non-U.S. Holder in the United States or, if a tax treaty applies, attributable to a United States permanent establishment of the Non-U.S. Holder, (ii) in the case of certain Non-U.S. Holders who are nonresident alien individuals and hold the Common Stock as a capital asset, such individuals are present in the United States for 183 or more days in the taxable year of the sale or other disposition and certain other conditions are met, (iii) the Non-U.S. Holder is subject to tax pursuant to the provisions of the Code regarding the taxation of U.S. expatriates, or (iv) the Company is or has been a "U.S. real property holding corporation" within the meaning of the Code and the Non-U.S. Holder owned directly or pursuant to certain attribution rules more than 5% of the Company's Common Stock (assuming the Common Stock is regularly traded on an established securities market within the meaning of the Code) at any time within the shorter of the five-year period preceding such disposition or such Non-U.S. Holder's holding period. The Company is not, and does not anticipate becoming, a U.S. real property holding corporation.
If a Non-U.S. Holder who is an individual falls under clause (i) of the preceding paragraph, he or she will, unless an applicable treaty provides otherwise, be taxed on the net gain derived from the sale at regular graduated U.S. federal income tax rates. If an individual Non-U.S. Holder falls under clause (ii) of the preceding paragraph, he or she will be subject to a flat 30% tax on the gain derived from the sale, which may be offset by certain United States-source capital losses. If a Non-U.S. Holder that is a corporation falls under clause (i) in the preceding paragraph, it will be taxed on the net gain from the sale at regular graduated U.S. federal income tax rates and may be subject to an additional branch profits tax at a rate of 30% (or such lower rate as may be specified by an applicable tax treaty) on the non-U.S. corporation's effectively connected earnings and profits, subject to certain adjustments.
INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING
Generally, the Company must report annually to the Internal Revenue Service the amount of dividends paid to a Non-U.S. Holder and the amount, if any, of tax withheld with respect to, such Non-U.S. Holder. A similar report is sent to the Non-U.S. Holder. Pursuant to tax treaties or certain other agreements, the Internal Revenue Service may make its reports available to tax authorities in the recipient's country of residence.
Currently, United States backup withholding tax (which generally is a withholding tax imposed at a rate of 31% on certain payments to persons that fail to furnish the information required under the United States information reporting requirements) will generally not apply to dividends paid on Common Stock to a Non-U.S. Holder at an address outside the United States, unless the payor has actual knowledge that the payee is a U.S. Holder. Backup withholding tax generally will apply to dividends paid on Common Stock at addresses inside the United States to Non-U.S. Holders who fail to provide certain identifying information in the manner required.
In addition, information reporting and backup withholding imposed at a rate
of 31% will apply to the proceeds of a disposition of Common Stock paid to or
through a U.S. office of a broker unless the disposing holder, under penalties
of perjury, certifies as to its non-U.S. status or otherwise establishes an
exemption. Generally, U.S. information reporting and backup withholding will not
apply to a payment of disposition proceeds if the payment is made outside the
United States through a non-U.S. office of a non-U.S. broker. However, U.S.
information reporting requirements (but not backup withholding) will apply to a
payment of disposition proceeds outside the United States if the payment is made
through an office outside the United States of a broker that is (i) a U.S.
person, (ii) a foreign person which derives 50% or more of its gross income for
certain periods from the conduct of a trade or business in the United States or
(iii) a "controlled foreign corporation" for U.S. federal income tax purposes,
unless the broker maintains documentary evidence that the holder is a Non-U.S.
Holder and certain other conditions are met, or the holder otherwise establishes
an exemption.
Recently adopted United States Treasury regulations, which generally are effective for payments made after December 31, 1998, subject to certain transition rules, alter the foregoing rules in certain respects. Among other things, such regulations provide certain presumptions under which a Non-U.S. Holder is subject to backup withholding at the rate of 31% and information reporting unless the Company receives certification from the holder of non-U.S. status. Depending on the circumstances, this certification will need to be provided (i) directly by the Non-U.S. Holder, (ii) in the case of a Non-U.S. Holder that is treated as a partnership or other fiscally transparent entity, by the partners, shareholders or other beneficiaries of such entity, or (iii) by certain qualified financial institutions or other qualified entities on behalf of the Non-U.S. Holder.
Backup withholding is not an additional tax. Rather, the tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained, provided that the required information is furnished to the Internal Revenue Service.
FEDERAL ESTATE TAX
An individual holder who is not a citizen or resident (as defined for U.S. federal estate tax purposes) of the United States and at the time of death is treated as the owner of, or has made certain lifetime transfers of, an interest in the Common Stock will be required to include the value thereof in his gross estate for U.S. federal estate tax purposes, and may be subject to U.S. federal estate tax unless an applicable estate tax treaty provides otherwise.
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the Common Stock in Canada is being made only on a
private placement basis exempt from the requirement that the Company and the
Selling Shareholders prepare and file a prospectus with the securities
regulatory authorities in each province where trades of the Common Stock are
effected.
Accordingly, any resale of the Common Stock in Canada must be made in accordance with applicable securities laws which will vary depending on the relevant jurisdiction, and which may require resales to be made in accordance with available statutory exemptions or pursuant to a discretionary exemption granted by the applicable Canadian securities regulatory authority. Purchasers are advised to seek legal advice prior to any resale of the Common Stock.
REPRESENTATIONS OF PURCHASERS
Each purchaser of the Common Stock in Canada who receives a purchase confirmation will be deemed to represent to the Company, the Selling Shareholders and the dealer from whom such purchase confirmation is received that (i) such purchaser is entitled under applicable provincial securities laws to purchase such Common Stock without the benefit of a prospectus qualified under such securities laws, (ii) where required by law, that such purchaser is purchasing as principal and not as agent, and (iii) such purchaser has reviewed the text above under "-- Resale Restrictions."
RIGHTS OF ACTION (ONTARIO PURCHASERS)
The securities being offered are those of a foreign issuer and Ontario purchasers will not receive the contractual right of action prescribed by section 32 of the Regulation under the Securities Act (Ontario). As a result, Ontario purchasers must rely on other remedies that may be available, including common law rights of action for damages or rescission or rights of action under the civil liability provisions of the U.S. federal securities laws.
ENFORCEMENT OF LEGAL RIGHTS
All of the issuer's directors and officers as well as the experts named herein and the Selling Shareholders may be located outside of Canada and, as a result, it may not be possible for Canadian purchasers to effect service of process within Canada upon the issuer or such persons. All or a substantial portion of the assets of the issuer and such persons may be located outside of Canada and, as a result, it may not be possible to satisfy a judgment against the issuer or such persons in Canada or to enforce a judgment obtained in Canadian courts against the issuer or such persons outside of Canada.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of Common Stock to whom the Securities Act (British Columbia) applies is advised that such purchaser is required to file with the British Columbia Securities Commission a report within ten days of the sale of any Common Stock acquired by such purchaser pursuant to the Offering. Such report must be in the form attached to British Columbia Securities Commission Blanket Order BOR #95/17, a copy of which may be obtained from the Company. Only one such report must be filed in respect of Common Stock acquired on the same date and under the same prospectus exemption.
TAXATION AND ELIGIBILITY FOR INVESTMENT
Canadian purchasers of Common Stock should consult their own legal and tax advisors with respect to the tax consequences of an investment in the Common Stock in their particular circumstances and with respect to the eligibility of the Common Stock for investment by the purchaser under relevant Canadian legislation.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the Company by King & Spalding, Atlanta, Georgia. Certain legal matters in connection with the Offering will be passed upon for the Underwriters by Long Aldridge & Norman LLP, Atlanta, Georgia.
EXPERTS
The consolidated financial statements and financial statement schedule of the Company at December 31, 1996 and 1997, and for each of the three years in the period ended December 31, 1997, and the financial statements of Strato(R)/Infusaid(TM) at December 31, 1995 and 1996, and for each of the two years in the period
ended December 31, 1996, appearing in this Prospectus and Registration Statement, have been audited by Coopers & Lybrand, L.L.P., independent certified public accountants, as set forth in their report thereon appearing elsewhere herein and in the Registration Statement of which this Prospectus forms a part, and are included in reliance upon such report given upon the authority of such firm as experts in accounting and auditing.
INDEX TO FINANCIAL STATEMENTS
PAGE
----
HORIZON MEDICAL PRODUCTS, INC.
Report of Independent Accountants for the Years Ended
December 31, 1995, 1996 and 1997....................... F-2
Consolidated Balance Sheets at December 31, 1996 and
1997................................................... F-3
Consolidated Statements of Operations for Each of the
Three Years in the Period Ended December 31, 1997...... F-4
Consolidated Statements of Shareholders' Deficit for Each
of the Three Years in the Period Ended December 31,
1997................................................... F-5
Consolidated Statements of Cash Flows for Each of the
Three Years in the Period Ended December 31, 1997...... F-6
Notes to Consolidated Financial Statements................ F-7
STRATO/INFUSAID INC.
Report of Independent Accountants for the Years Ended
December 31, 1995 and 1996............................. F-19
Balance Sheets............................................ F-20
Statements of Operations for Each of the Years Ended
December 31, 1995 and 1996............................. F-21
Statements of Shareholder's Equity for Each of the Years
Ended December 31, 1995 and 1996....................... F-22
Statements of Cash Flows for Each of the Years Ended
December 31, 1995 and 1996............................. F-23
Notes to Financial Statements............................. F-24
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
Introduction to Unaudited Pro Forma Condensed Consolidated
Financial Statements................................... F-29
Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the Year Ended December 31, 1997........ F-30
Unaudited Pro Forma Condensed Consolidated Balance Sheet
at December 31, 1997................................... F-31
Notes to the Unaudited Pro Forma Condensed Consolidated
Financial Statements................................... F-32
|
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Horizon Medical Products, Inc.
We have audited the accompanying consolidated balance sheets of Horizon Medical Products, Inc. (the "Company") as of December 31, 1996 and 1997, and the related consolidated statements of operations, shareholders' deficit, and cash flows for each of the three years in the period ended December 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Horizon Medical Products, Inc. as of December 31, 1996 and 1997, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles.
Birmingham, Alabama
January 29, 1998
HORIZON MEDICAL PRODUCTS, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
--------------------------
1996 1997
----------- ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 217,753 $ 2,893,924
Accounts receivable -- trade (net of allowance for
doubtful accounts of $6,997 and $308,239 in 1996 and
1997, respectively).................................... 959,093 3,720,031
Inventories............................................... 1,155,214 5,405,861
Prepaid expenses and other current assets................. 167,648 366,942
Deferred taxes............................................ 569,393
----------- ------------
Total current assets.............................. 2,499,708 12,956,151
Property and equipment, net................................. 769,938 2,341,508
Intangible assets, net...................................... 2,877,803 15,726,406
Deferred taxes.............................................. 254,988
Other assets................................................ 28,068 297,852
----------- ------------
Total assets...................................... $ 6,175,517 $ 31,576,905
=========== ============
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
Cash overdraft............................................ $ 31,637 $ --
Accounts payable -- trade................................. 680,604 1,722,183
Accounts payable -- affiliate............................. 5,191 4,212
Accrued salaries and commissions.......................... 140,758 240,682
Accrued royalties......................................... 59,622 109,304
Accrued interest.......................................... 80,812 218,525
Accrued acquisition liabilities........................... -- 762,859
Other accrued expenses.................................... 23,023 350,344
Income taxes payable...................................... -- 409,726
Current portion of long-term debt......................... 219,413 1,959,482
Current portion of payable under non-compete and
consulting agreements.................................. 240,839 336,268
----------- ------------
Total current liabilities......................... 1,481,899 6,113,585
Long-term debt, net of current portion...................... 5,052,822 23,970,805
Payable under non-compete and consulting agreements, net of
current portion........................................... 1,366,815 1,463,319
Put warrant repurchase obligation (Note 8).................. -- 11,000,000
Other liabilities........................................... 189,748 178,951
----------- ------------
Total liabilities................................. 8,091,284 42,726,660
----------- ------------
Commitments and contingent liabilities (Notes 8, 10 and 11)
SHAREHOLDERS' DEFICIT:
Preferred stock, $.001 par value per share; 1,000,000
shares authorized, none issued and outstanding (Note
8)..................................................... -- --
Common stock:
Class A, $.001 par value per share; 4,500,000 authorized,
101,919 shares issued and outstanding in 1996 and 1997
(Note 8)............................................... 102 102
Class B, $.001 par value per share; 500,000 authorized,
none issued and outstanding (Note 8)................... -- --
Additional paid-in capital................................ 88 88
Shareholders' notes receivable............................ (371,497) (398,525)
Accumulated deficit....................................... (1,544,460) (10,751,420)
----------- ------------
Total shareholders' deficit....................... (1,915,767) (11,149,755)
----------- ------------
Total liabilities and shareholders' deficit....... $ 6,175,517 $ 31,576,905
=========== ============
|
The accompanying notes are an integral part of these consolidated financial statements.
HORIZON MEDICAL PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
DECEMBER 31,
--------------------------------------
1995 1996 1997
---------- ---------- ------------
Net sales................................................ $5,003,633 $7,051,858 $ 15,798,123
Cost of goods sold....................................... 2,227,165 2,996,741 6,273,418
---------- ---------- ------------
Gross profit............................................. 2,776,468 4,055,117 9,524,705
Selling, general and administrative expenses............. 2,706,383 4,239,700 6,110,827
---------- ---------- ------------
Operating income (loss)................................ 70,085 (184,583) 3,413,878
---------- ---------- ------------
Other income (expense):
Interest expense (Notes 6 and 8)....................... (242,153) (733,961) (3,970,734)
Accretion of value of put warrant repurchase obligation
(Note 8)............................................ -- -- (8,000,000)
Other income........................................... -- 54,333 69,727
---------- ---------- ------------
(242,153) (679,628) (11,901,007)
---------- ---------- ------------
Loss before income taxes and extraordinary item........ (172,068) (864,211) (8,487,129)
Income tax benefit (expense)............................. 7,305 -- (319,831)
Effect of conversion to C Corporation status............. (7,305) -- --
---------- ---------- ------------
Loss before extraordinary item........................... (172,068) (864,211) (8,806,960)
Extraordinary loss on early extinguishment of debt, net
of income tax effect of $0............................. (70,045) -- --
---------- ---------- ------------
Net loss............................................... $ (242,113) $ (864,211) $ (8,806,960)
========== ========== ============
Loss per share before extraordinary loss -- basic and
diluted................................................ $ (1.61) -- --
==========
Net loss per share -- basic and diluted.................. $ (2.26) $ (7.83) $ (79.80)
========== ========== ============
Weighted average common shares outstanding............... 107,069 110,360 110,365
========== ========== ============
|
The accompanying notes are an integral part of these consolidated financial statements.
HORIZON MEDICAL PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
CLASS A
COMMON STOCK
----------------- ADDITIONAL SHAREHOLDERS'
NUMBER OF PAR PAID-IN NOTES ACCUMULATED
SHARES VALUE CAPITAL RECEIVABLE DEFICIT TOTAL
--------- ----- ---------- ------------- ------------ ------------
Balance, December 31, 1994... 90,900 $ 91 $ 74 -- $ (438,136) $ (437,971)
Issuance of common stock..... 11,000 11 14 -- -- 25
Issuance of shareholders'
notes receivable........... -- -- -- $(337,837) -- (337,837)
Net increase in shareholders'
notes receivable........... -- -- -- (6,559) -- (6,559)
Net loss..................... -- -- -- -- (242,113) (242,113)
------- ---- ---- --------- ------------ ------------
Balance, December 31, 1995... 101,900 102 88 (344,396) (680,249) (1,024,455)
Issuance of common stock..... 19 -- -- -- -- --
Net increase in shareholders'
notes receivable........... -- -- -- (27,101) -- (27,101)
Net loss..................... -- -- -- -- (864,211) (864,211)
------- ---- ---- --------- ------------ ------------
Balance, December 31, 1996... 101,919 102 88 (371,497) (1,544,460) (1,915,767)
Net increase in shareholders'
notes receivable........... -- -- -- (27,028) -- (27,028)
Repurchase of stock warrants
(Note 6)................... -- -- -- -- (400,000) (400,000)
Net loss..................... -- -- -- -- (8,806,960) (8,806,960)
------- ---- ---- --------- ------------ ------------
Balance, December 31, 1997... 101,919 $102 $ 88 $(398,525) $(10,751,420) $(11,149,755)
======= ==== ==== ========= ============ ============
|
The accompanying notes are an integral part of these consolidated financial statements.
HORIZON MEDICAL PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
DECEMBER 31,
--------------------------------------
1995 1996 1997
----------- --------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................................ $ (242,113) $(864,211) $ (8,806,960)
----------- --------- ------------
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Extraordinary loss on early extinguishment of debt.... 70,045 -- --
Depreciation.......................................... 38,295 128,500 199,450
Amortization.......................................... 71,335 337,136 1,009,180
Amortization of discount.............................. 46,758 254,490 2,160,153
Accretion of value of put warrant repurchase
obligation......................................... -- -- 8,000,000
Gain on sale of property and equipment................ -- (5,829) --
Deferred income taxes, net change..................... -- -- (90,299)
(Increase) decrease in operating assets:
Accounts receivable................................ 45,667 (186,593) (947,075)
Inventories........................................ (52,446) 85,668 183,557
Prepaid expenses and other assets.................. (23,929) 173,574 (205,585)
Increase (decrease) in operating liabilities:
Accounts payable -- trade.......................... (371,039) (197,745) 859,713
Accounts payable -- affiliate...................... 21,159 1,417 (979)
Income taxes payable............................... -- -- 409,726
Accrued expenses and other liabilities............. (66,966) 385,050 (49,569)
----------- --------- ------------
Total adjustments................................ (221,121) 975,668 11,528,272
----------- --------- ------------
Net cash provided by (used in) operating
activities.................................... (463,234) 111,457 2,721,312
----------- --------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.................................... (20,062) (91,846) (899,563)
Proceeds from sale of property and equipment............ -- 7,800 --
Payment for acquisition, net of cash acquired........... (1,531,987) -- (19,500,000)
----------- --------- ------------
Net cash used in investing activities.............. (1,552,049) (84,046) (20,399,563)
----------- --------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Notes receivable -- shareholders........................ (344,396) (27,101) (27,028)
Cash overdraft.......................................... 76,148 (44,511) (31,637)
Proceeds from issuance of long-term debt................ 3,209,186 -- 23,500,000
Principal payments on long-term debt.................... (1,071,552) (132,282) (2,012,163)
Debt issue costs........................................ (59,944) -- (674,750)
Proceeds from issuance of common stock.................. 25 -- --
Payment for warrants.................................... -- -- (400,000)
----------- --------- ------------
Net cash provided by (used in) financing
activities....................................... 1,809,467 (203,894) 20,354,422
----------- --------- ------------
Net increase (decrease) in cash and cash
equivalents...................................... (205,816) (176,483) 2,676,171
Cash and cash equivalents, beginning of year............ 600,052 394,236 217,753
----------- --------- ------------
Cash and cash equivalents, end of year.................. $ 394,236 $ 217,753 $ 2,893,924
=========== ========= ============
Supplemental disclosure of cash flow information:
Cash paid during the year for interest............. $ 219,514 $ 423,766 $ 1,173,992
=========== ========= ============
|
See Notes 12 and 13 for additional supplemental disclosures of cash flow information.
The accompanying notes are an integral part of these consolidated financial statements.
HORIZON MEDICAL PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS
Horizon Medical Products, Inc. (the "Company") is a specialty medical device company focused on manufacturing and marketing vascular access products. The Company manufactures and markets products in three vascular access product categories: (i) implantable vascular access ports, which are used primarily in cancer treatment protocols for the infusion of highly concentrated toxic medications (such as chemotherapy agents, antibiotics or analgesics) and blood samplings; (ii) hemodialysis catheters, which are used primarily in treatments of patients suffering from renal failure who require short-term or long-term hemodialysis treatments; and (iii) central venous catheters, which are used primarily in stem cell apheresis procedures for treating certain forms of mid- and late-stage cancers. The Company was incorporated in Georgia in 1990.
2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of accounting policies utilized in the consolidated financial statements which were prepared in accordance with generally accepted accounting principles.
Principles of Consolidation -- The consolidated financial statements and notes to consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated.
Revenue Recognition -- The Company records sales upon shipment of the related product, net of any discounts.
Cash And Cash Equivalents -- The Company considers all highly liquid investments with an original maturity of three months or less at the time of purchase to be cash equivalents.
Inventories -- Purchased finished goods inventory are valued at the lower of cost or market using the specific identification method for determining cost. Raw materials, work in process, and manufactured ports and catheters are valued at the lower of average cost or market.
Property And Equipment -- Property and equipment are carried at cost, less accumulated depreciation. Expenditures for repairs and maintenance are charged to expense as incurred; betterments that materially prolong the lives of the assets are capitalized. The costs of assets retired or otherwise disposed of and the related accumulated depreciation are removed from the accounts, and the related gain or loss on such dispositions is included in other income. Depreciation is calculated using the straight-line method or double declining balance method over the estimated useful lives of the property and equipment. The lives of the assets range from 5 to 7 years for equipment to approximately 31.5 years for buildings.
Property and equipment acquired under capital lease agreements are carried at cost less accumulated depreciation. These assets are depreciated in a manner consistent with the Company's depreciation policy for purchased assets.
Intangible Assets -- Goodwill, the excess of purchase price over the fair value of net assets acquired in purchase transactions, is being amortized on a straight-line basis over periods ranging from 15 to 30 years. The Company assesses the recoverability and the amortization period of the goodwill by determining whether the amount can be recovered through undiscounted cash flows of the businesses acquired over the remaining amortization period. Additionally, goodwill is evaluated for recoverability utilizing a fair value approach. Amounts paid or accrued for non-compete and consulting agreements are amortized using the straight-line method over the term of the agreements of approximately 7 years. Patents are being amortized on a straight-line basis over the remaining lives of the related patents which range from 6 to 15 years. Debt issuance costs are amortized using the straight-line method over the estimated term of the related debt issues.
Long-Lived Assets -- The Company recognizes impairment losses on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those
HORIZON MEDICAL PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
assets are less than the assets' carrying amount. There were no such losses recognized during the years ended December 31, 1995, 1996 and 1997.
Research and Development -- Research and development costs are charged to expense as incurred and were approximately $66,000, $59,000 and $7,000 in 1995, 1996 and 1997, respectively.
Income Taxes -- Effective January 1, 1995, the shareholders of the Company elected to be taxed as a C Corporation and, accordingly, revoked its S Corporation status. As a result, the Company recorded a deferred tax liability and recognized income tax expense of $7,305 at the effective date of the change.
The Company accounts for income taxes under Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statement basis and the tax basis of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. The Company's deferred tax assets and liabilities relate primarily to the existence of net operating loss carryforwards and differences in the book and tax basis of property and equipment, intangible assets, and accrued liabilities.
Use of Estimates -- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Reclassifications -- Certain reclassifications have been made to the 1995 and 1996 financial statements to make them comparable to the 1997 presentation. These reclassifications had no impact on previously reported net loss.
Recently Issued Accounting Standards -- In June 1997, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 130, Reporting Comprehensive Income, which requires the reporting and display of comprehensive income and its components in an entity's financial statements, and SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, which specifies revised guidelines for determining an entity's operating segments and the type and level of financial information to be required. The Company is required to adopt these standards in 1998. The Company does not expect the impact of these pronouncements to be material.
3. INVENTORIES
A summary of inventories at December 31, is as follows:
1996 1997
---------- ----------
Raw materials............................................... $ 176,960 $2,300,745
Work in process............................................. 427,737 692,054
Finished goods.............................................. 573,056 2,662,995
---------- ----------
1,177,753 5,655,794
Less inventory reserves..................................... 22,539 249,933
---------- ----------
$1,155,214 $5,405,861
========== ==========
|
HORIZON MEDICAL PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. PROPERTY AND EQUIPMENT
A summary of property and equipment at December 31, is as follows:
1996 1997
---------- ----------
Building and improvements................................... $ 423,640 $1,271,309
Office equipment............................................ 223,224 669,316
Plant equipment............................................. 317,761 781,737
Transportation equipment.................................... 12,316 13,283
---------- ----------
976,941 2,735,645
Less accumulated depreciation............................... 207,003 394,137
---------- ----------
$ 769,938 $2,341,508
========== ==========
|
5. INTANGIBLE ASSETS
A summary of intangible assets at December 31, is as follows:
1996 1997
---------- -----------
Debt issuance costs......................................... $ 63,947 $ 738,697
Non-compete and consulting agreements....................... 1,473,091 1,473,091
Goodwill.................................................... 1,735,754 13,283,787
Patents..................................................... -- 1,635,000
---------- -----------
3,272,792 17,130,575
Less accumulated amortization............................... 394,989 1,404,169
---------- -----------
$2,877,803 $15,726,406
========== ===========
|
The expected amortization charges related to these intangibles are as follows:
1998........................................................ $ 1,111,717
1999........................................................ 832,204
2000........................................................ 832,204
2001........................................................ 832,204
2002........................................................ 797,131
Thereafter.................................................. 11,320,946
-----------
$15,726,406
===========
|
6. LONG-TERM DEBT
On September 25, 1995, the Company issued a $1,500,000 note (the "Acquisition Note") bearing interest at 13.75%. The proceeds of the note were used to repay debt, finance the acquisition of the net assets of Neostar Medical Technologies, Inc. ("Neostar") and provide additional working capital. As a result, the Company recorded an extraordinary loss on the early extinguishment of previously outstanding debt in the amount of $70,045. In conjunction with the financing, the Company issued warrants to its lender ("Sirrom") to acquire 8.25% of the shares of the Company's voting stock outstanding as of the date of the agreement.
In connection with the acquisition of Strato/Infusaid Inc. ("Strato") discussed in Note 13, the Company entered into a $26.5 million Credit Facility with NationsCredit on July 15, 1997. The Credit Facility provides the Company with a term loan in the amount of $21,500,000 (the "Tranche A Loan") repayable in quarterly installments ranging from $537,500 to $1,075,000 through 2004, a term loan in the amount of $2,000,000 (the "Tranche B Loan") repayable in four quarterly installments of $500,000 each occurring the earlier of the sixth
HORIZON MEDICAL PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
anniversary of the closing date or the date on which the Tranche A Loan has been repaid in its entirety, and a revolving line of credit of up to $3 million repayable on the earlier of July 1, 2004 or the date on which all amounts outstanding under the Tranche A Loan and the Tranche B Loan have been repaid in full. Borrowings under the revolving line of credit and Tranche A Loan bear interest at NationsCredit's Commercial Paper Rate plus 4.25% (9.836% at December 31, 1997). Borrowings under the Tranche B Loan bear interest at NationsCredit's Commercial Paper Rate plus 5.25% (10.836% at December 31, 1997). Subject to certain limitations, amounts outstanding under each of the Tranche A Loan, the Tranche B Loan and the revolving line of credit may be prepaid at the Company's option subject, in certain cases, to the payment of a prepayment premium of 3.00%. Amounts outstanding under the Tranche A Loan and the Tranche B Loan are mandatorily prepayable, without penalty, in increments upon the occurrence of certain events, including, without limitation, issuances by the Company of common stock and other equity securities the proceeds of which exceed $250,000, and consummation by the Company of certain asset sales. The Credit Facility prohibits or restricts the Company from many actions, including paying dividends and incurring or assuming other indebtedness or liens.
The Company's obligations under the Credit Facility are secured by liens on substantially all of the Company's assets, including inventory, accounts receivable and general intangibles and a pledge of the stock of the Company's subsidiaries. The Company's obligations under the Credit Facility are also guaranteed by each of the Company's subsidiaries (the "Guarantees"). The obligations of such subsidiaries under the Guarantees are secured by liens on substantially all of their respective assets, including inventory, accounts receivable and general intangibles. As additional security, the majority shareholders have pledged all shares of their common stock as collateral.
As of December 31, 1997, there was $21.5 million outstanding under the Tranche A Loan, $2.0 million outstanding under the Tranche B Loan and zero outstanding under the revolving line of credit.
In addition to the acquisition of Strato, the Company used proceeds from the Credit Facility to retire approximately $1,700,000 of the Company's existing debt. The Company also used proceeds of $400,000 to purchase the warrants issued in connection with the Acquisition Note from Sirrom thereby terminating all of Sirrom's rights under the warrants. This purchase resulted in a direct charge to the Company's accumulated deficit. NationsCredit also effectively purchased the $1,500,000 Acquisition Note from Sirrom.
In conjunction with the financing, the Company issued warrants to NationsCredit to acquire 15,276 shares of non-voting Class B Common Stock of the Company. The number of shares subject to such warrant will be reduced as follows: (1) to 7.5% of the outstanding common shares of the Company on a fully diluted basis in the event the Company completes an initial public offering for its shares prior to January 1, 1999 (where the net proceeds to the Company are in excess of $25 million) or achieves minimum earnings before interest, taxes, depreciation, and amortization (EBITDA) of not less than $10 million for its 1998 fiscal year or (2) to 10% of the outstanding common shares of the Company on a fully diluted basis in the event the Company completes an initial public offering of its shares during 1999 but prior to July 16, 1999 (where the net proceeds to the Company are in excess of $25 million) or achieves EBITDA of not less than $14 million for the twelve months ending June 30, 1999. The warrants are exercisable at $.01 per share pursuant to the warrant agreement and expire on July 15, 2007. NationsCredit can require the Company to repurchase all or a part of the common stock issued or issuable in connection with the warrants at the earliest repurchase date and at the redemption price as defined in the warrant agreement. As more fully described in Note 8, accounting for the amortization of the debt discount and debt issue costs results in an effective interest rate on the NationsCredit debt of approximately 31% for 1997 and a charge to earnings in 1997 of $8,000,000 related to the put feature.
HORIZON MEDICAL PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, long-term debt consists of the following:
1996 1997
---------- -----------
NationsCredit Credit Facility less unamortized discount of
$1,166,667 at December 31, 1997........................... $ -- $22,333,333
Note payable, bearing interest payable monthly at a fixed
rate of 13.75%, due September 25, 2000; collateralized by
inventory, accounts receivable, equipment, general
intangibles, trademarks and copyrights.................... 1,500,000 1,500,000
Note payable, bearing interest payable monthly at prime plus
1% (9.5% at December 31, 1996); retired July 15, 1997..... 1,676,389 --
Note payable (the Non-interest Bearing Note), non-interest
bearing (less unamortized discount of $937,790 and
$774,264 at December 31, 1996 and 1997, respectively,
based on an imputed interest rate of 10%), with payments
due monthly beginning January 31, 1997 (see below) and
continuing through June 30, 2000 and 5 payments on various
dates through October 31, 2003. The payments are
subordinated to the Acquisition Note. All scheduled
payments may be made as long as the Company is not in
default under the Acquisition Note........................ 1,523,227 1,511,749
Note payable, bearing interest at a variable rate (9.25% and
9.5% at December 31, 1996 and 1997, respectively); payable
in monthly payments of interest and principal through May
25, 2000; collateralized by the Company's building........ 353,455 342,588
Note payable, bearing interest at a fixed rate of 7.9%,
interest and principal payable monthly through May 11,
2000; collateralized by the Company's vehicle............. -- 9,286
Note payable, bearing interest at a fixed rate of 10%,
interest and principal payable monthly through March 10,
1997...................................................... 743 --
Note payable, bearing interest at a fixed rate of 7.84%,
interest and principal payable monthly through September
30, 1998.................................................. -- 161,719
Note payable, bearing interest at a fixed rate of 7.827%,
interest and principal payable monthly through September
30, 1997.................................................. 111,707 --
Miscellaneous capital lease obligations for office
equipment, requiring monthly payments ranging from $133 to
$2,729, including principal and interest at 9.25%, and
maturing at dates ranging from 1999 to 2001. These
obligations are collateralized by equipment with a net
book value of approximately $108,000 and $89,000 at
December 31, 1996 and 1997, respectively.................. 106,714 71,612
---------- -----------
5,272,235 25,930,287
Less: current portion....................................... 219,413 1,959,482
---------- -----------
Long-term debt, net of current portion...................... $5,052,822 $23,970,805
========== ===========
|
HORIZON MEDICAL PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Future maturities of long-term debt are as follows:
1998........................................................ $ 1,959,482
1999........................................................ 3,166,572
2000........................................................ 5,224,423
2001........................................................ 4,217,253
2002........................................................ 4,473,682
Thereafter.................................................. 8,829,806
-----------
27,871,218
Less unamortized discount on notes payable.................. (1,940,931)
-----------
Carrying amount of long-term debt........................... $25,930,287
===========
|
On July 31, 1997, the Company's Non-interest Bearing Note was amended to reduce total payments due in 1997 from $212,235 to $175,000. The payment of the remaining amount of $37,235 was deferred until the final payment date of this note of October 31, 2003. The amendment also requires quarterly payments of interest on the deferred amount at prime plus 1% (9.50% at December 31, 1997).
The Company's long-term debt agreements contain certain restrictive covenants which require the maintenance of minimum EBITDA, minimum tangible worth/deficit and a cash flow to debt service ratio as well as place limitations on dividends, advances, and other borrowings. The Company is in compliance with or has received appropriate waivers of these covenants.
7. INCOME TAXES
There was an income tax benefit in 1995 of $7,305 related to federal deferred income taxes. There was no provision or benefit for income taxes during 1996 due to the Company recording a full valuation allowance. The provision (benefit) for income taxes in 1997 is comprised of the following:
1997
--------
Current:
Federal................................................... $681,209
State..................................................... 102,237
--------
783,446
Deferred tax benefit...................................... (90,299)
--------
693,147
Change in valuation allowance............................... (373,316)
--------
Total provision for income taxes.................. $319,831
========
|
HORIZON MEDICAL PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Deferred tax assets and liabilities at December 31, 1996 and 1997 are composed of the following:
1996 1997
--------- ---------
Deferred tax assets:
Allowance for doubtful accounts and returns............... $ 2,659 $ 127,482
Inventory reserve......................................... -- 105,071
Intangible assets......................................... 49,758 413,874
Accrued liabilities....................................... -- 336,840
Net operating loss carryforwards.......................... 328,814 --
--------- ---------
Total gross deferred tax assets................... 381,231 983,267
--------- ---------
Deferred tax liabilities:
Property and equipment.................................... (7,915) (158,886)
--------- ---------
373,316 824,381
Less valuation allowance.................................... (373,316) --
--------- ---------
Net deferred tax asset...................................... $ 0 $ 824,381
========= =========
|
The Company recorded a full valuation allowance against its net deferred tax assets in 1995 and 1996. The Company's primary assets were its net operating loss carryforwards which management felt there was uncertainty whether they could be fully utilized. During 1997, the Company generated taxable income sufficient to fully utilize the net operating loss carryforwards. No valuation allowance was recorded against the deferred tax asset at December 31, 1997 as the Company believes that it is more likely than not that all of the net deferred tax asset will be realized through future taxable income.
The provision for income taxes differs from the amount which would be computed by applying the federal statutory rate of 34% to pre-tax earnings as indicated below:
1995 1996 1997
-------- --------- -----------
Income tax provision (benefit) at statutory federal
income tax rate................................... $(82,318) $(293,832) $(2,885,624)
Increase (decrease) resulting from:
Non-deductible meals and entertainment expense.... 18,294 21,849 28,698
State income taxes................................ -- -- 64,353
Non-deductible interest and accretion of put
warrant repurchase obligation.................. -- -- 3,343,333
Non-deductible amortization of goodwill........... -- -- 59,985
Change in valuation allowance..................... 56,719 271,983 (373,316)
Other, net........................................ -- -- 82,402
-------- --------- -----------
Total income tax provision (benefit)...... $ (7,305) $ 0 $ 319,831
======== ========= ===========
|
8. CAPITAL STOCK AND WARRANTS
The Company increased the total number of common shares authorized, effective July 9, 1997, to 5,000,000, consisting of 4,500,000 shares of Class A Common Stock at $.001 par value per common share and 500,000 shares of non-voting Class B Common Stock at $.001 par value per common share. At any time, each share of Class B Common Stock may, at the option of the holder thereof, be converted into one fully paid and non assessable share of Class A Common Stock.
HORIZON MEDICAL PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In addition, the Company authorized 1.0 million shares of preferred stock for issuance. The preferences, powers, and rights of the preferred stock are to be determined by the Company's board of directors. None of these shares are issued and outstanding.
All references to the number of common shares authorized have been adjusted to reflect this recapitalization on a retroactive basis.
The Company has a 1.99% owner which has anti-dilution rights. Additionally, warrants, representing 7.5% of outstanding shares for each period presented, outstanding under the Company's new credit facility, as discussed below and in Note 6, contain anti-dilution provisions. Shares issuable under these warrants are assumed outstanding for earnings per share computations in each period presented.
As discussed in Note 6, in connection with its new credit facility, the Company issued warrants to NationsCredit to acquire 15,276 shares of Class B non-voting common stock, representing 13% of fully diluted shares. This percentage reduces to 7.5% under certain conditions including completion of an initial public offering by the Company prior to January 1, 1999 where the net proceeds are in excess of $25 million. The warrants also contain a put feature which allows the holder to put the warrants to the Company for cash at an amount calculated as the greater of several financial tests and at dates which vary as to actions of the Company, one of which is repayment of associated debt.
The Company recorded the estimated value of the warrants with the put feature on July 15, 1997 of $3,000,000 as a discount to the related debt and as a put warrant repurchase obligation. Subsequent to issuance of the warrants, the Company's operations and other factors indicated that an initial public offering (IPO) of stock could be pursued, and management began intense efforts to accomplish such an offering. Management and its underwriting consultants anticipate a public offering in April 1998. A portion of the proceeds will be used to pay off the Company's credit facility as is required by the credit agreement upon successful completion of an initial public offering. Additionally, the integration of Strato, medical device market trends, and potential access to the public capital markets lead management to believe the estimated value of the put warrants has increased. Therefore, the value assigned to such put warrants is recorded herein at $11,000,000 at December 31, 1997. The change in value from date of issue of $8,000,000 has been recorded as a non-cash expense for the accretion of value of put warrant repurchase obligation in the accompanying Consolidated Statement of Operations for the year ended December 31, 1997. Additionally, due to the expected date of debt repayment of April 1998, the debt discount established at issue date and the associated debt issue costs are being amortized over a nine month period beginning July 15, 1997. This amortization resulted in a charge to interest expense of approximately $2,300,000 in 1997, resulting in an effective rate of interest on the underlying debt of approximately 31% (exclusive of the $8,000,000 put warrant charges).
Effective January 29, 1998, NationsCredit and the Company amended the warrant agreement such that NationsCredit's right to put the warrants to the Company for cash was rescinded. This constituted a forgiveness of the put obligation estimated at $1,100,000 to be recorded at the date of rescission and the net recorded value of the warrants was reclassed to additional paid-in capital in 1998.
9. STOCK APPRECIATION RIGHTS
In 1995, the Company approved a Stock Appreciation Rights Plan ("SAR Plan") which provides for the granting of stock appreciation rights to eligible employees and eligible sales representatives based on their performance as determined by the Board of Directors. Benefits under the SAR Plan are payable in cash. If there is a public offering of the Company's stock or an acquisition of the Company, at the discretion of the Board of Directors, the units may be canceled or modified and thereafter the vested benefits may be paid in cash, a number of shares of voting stock, or a number of options to purchase shares of voting stock. An eligible employee's or eligible sales representative's benefit attributable to each unit is equal to the excess of the accumulated deficit/retained earnings value as of the last day of the Company's fiscal year plus $1.00 over the
HORIZON MEDICAL PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
accumulated deficit/retained earnings value as of the date of the grant. The accumulated deficit/retained earnings value is calculated according to the following formula:
retained earnings/(accumulated deficit) X 5% total number of SAR units
The SAR Plan also provides that the value of each SAR unit shall never be less than $1.00.
The units become fully vested and are exercisable after four years of service from the date of the grant. The Company has not restricted the number of shares of voting stock subject to issuance under the SAR Plan. Further, the Company has not reserved any of the Company's voting stock for issuance under the SAR Plan.
Transactions under the SAR Plan are summarized as follows for the years ended December 31:
1995 1996 1997
------ -------- ------
Outstanding, beginning of year............................. -- 29,750 40,900
Granted (at $1.00 per unit)................................ 29,750 30,050 64,200
Canceled................................................... -- (18,900) (5,500)
------ -------- ------
Outstanding, end of year................................... 29,750 40,900 99,600
====== ======== ======
Exercisable, end of year................................... -- -- --
====== ======== ======
|
The cumulative expense recorded by the Company with respect to the plan through December 31, 1997 was approximately $35,000 and has been recorded in accrued liabilities.
10. RELATED-PARTY TRANSACTIONS
The Company and Cardiac Medical, Inc. ("CMI") are related parties due to common stock ownership by the Chairman and Chief Executive Officer ("CEO") and Vice-Chairman of the Company. The Company and CMI share office space and certain administrative employees. The Company paid CMI $150,000 in 1995 and expensed $50,000 during each of 1995, 1996 and 1997 related to these shared services. CMI previously guaranteed the Company's $1,500,000 note payable to Sirrom. On July 15, 1997, in connection with the new credit facility, NationsCredit effectively purchased the Sirrom note payable and CMI's guarantee with respect thereto was terminated.
At December 31, 1996 and 1997, the Company has unsecured loans to the majority shareholders in the form of notes receivable in the amount of $337,837. The notes require annual payments of interest at 8% beginning on September 28, 1997 and are due September 2000 through October 2000. In addition, the Company recognized interest income of $6,559, $27,101 and $27,028 during 1995, 1996 and 1997, respectively, related to the notes. The notes and related accrued interest are recorded as contra-equity in the Consolidated Balance Sheets.
The CEO and the President of the Company, who collectively hold 64% of the Company's stock, do not draw a salary or other form of compensation from the Company.
11. COMMITMENTS AND CONTINGENT LIABILITIES
Concurrent with the acquisition of Neostar, on October 24, 1995, the Company entered into non-compete and consulting agreements with four previous shareholders of Neostar (the previous shareholders). The agreements are non-interest bearing and have been recorded at their net present values based on an imputed interest rate of 10%.
HORIZON MEDICAL PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Payment requirements are as follows:
1998........................................................ $ 354,756
1999........................................................ 331,200
2000........................................................ 331,200
2001........................................................ 567,741
2002........................................................ 833,574
----------
Total payments.............................................. 2,418,471
Less amounts representing interest.......................... (618,884)
----------
Present value of payments under non-compete and consulting
agreements................................................ $1,799,587
==========
|
The Company leases its facility and certain equipment under operating lease agreements expiring in various years through 2009. Rent expense under various operating leases was approximately $25,000, $117,000 and $85,000 during December 31, 1995, 1996 and 1997, respectively. Minimum future rental payments under operating leases having remaining terms in excess of one year are as follows:
1998........................................................ $ 108,000
1999........................................................ 108,000
2000........................................................ 108,000
2001........................................................ 108,000
2002........................................................ 108,000
Thereafter.................................................. 704,666
----------
$1,244,666
==========
|
The Company is subject to numerous federal, state and local environmental laws and regulations. Management believes that the Company is in material compliance with such laws and regulations and that potential environmental liabilities, if any, are not material to the consolidated financial statements.
In connection with the 1995 acquisition of Neostar discussed in Note 13, the Company assumed a license agreement with an individual (the "Licensor") for the right to manufacture and sell dual lumen fistula needles, dual lumen over-the-needle catheters, and dual lumen chronic and acute catheters, covered by the Licensor's patents or derived from the Licensor's confidential information. Payments under the agreement vary, depending upon the purchaser, and range from 9% to 15% of Neostar's net sales of such licensed products. Such payments shall continue until the expiration date of each corresponding Licensed Patent Right covering each product under the agreement. Payments under this license agreement totaled approximately $51,000, $241,000 and $249,000 in 1995, 1996 and 1997, respectively.
On February 17, 1993, the Company entered into a supply agreement (the "Supply Agreement") with one of its vascular access port manufacturers (the "Manufacturer") for the development and supply of certain vascular access port products. On January 17, 1997, the Company entered into an agreement with the Manufacturer to amend the original Supply Agreement and to transfer the manufacture of the ports to the Company. The new agreement requires the Company to pay the Manufacturer $680,000 in connection with the transfer of the manufacturing process. This amount is to cover certain manufacturing equipment, documentation of the manufacturing process, and training of the Company's personnel by the Manufacturer. The amount is to be paid based upon ports produced by the Company over a period of time, with the total balance to be paid by September 30, 1998. The total amount can be reduced based on additional purchases of ports from the Manufacturer after September 30, 1997.
HORIZON MEDICAL PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
12. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
The following represent noncash investing and financing activities for the years ended December 31:
1995 1996 1997
------- -------- ----------
Capital lease obligations for property and equipment... $ -- $114,158 $ --
Short-term debt issued for certain insurance
coverage............................................. 95,512 111,707 161,719
Increase to goodwill................................... -- 52,169 --
Note issued for trade-in of auto....................... -- -- 11,641
Increase to property and equipment..................... -- -- 101,460
Discount recorded on credit facility................... -- -- 3,000,000
|
13. ACQUISITION
On October 24, 1995, Horizon Acquisition Corp. ("Horizon"), a wholly-owned subsidiary of the Company, acquired the net assets of Neostar for $1,559,672 in cash and a note of $1,356,148, net of a discount of $1,104,869, payable over a seven-year period. The acquisition has been accounted for under the purchase method of accounting and, accordingly, the purchase price has been allocated to the assets and liabilities of Neostar based on their estimated fair values at the date of acquisition. Operating results of Neostar since October 24, 1995 are included in the Company's consolidated financial statements.
On June 20, 1997, the Company, together with Arrow International, Inc. ("Arrow"), an unrelated entity, entered into a joint purchase agreement (the "Stock Purchase Agreement") to acquire all of the stock of Strato of Norwood, Massachusetts for a purchase price of $21,250,000 plus the assumption by the Company and Arrow of certain of Strato's trade debts and accrued expenses. Strato produces and distributes vascular access products (the "Port Business") and implantable infusion pump products (the "Pump Business"). Under the Stock Purchase Agreement, the Company acquired 275,294 shares of Strato's stock for $19,500,000, and Arrow acquired 24,706 shares of Strato's stock (the "Arrow Shares") for $1,750,000.
The transaction was completed on July 15, 1997. On that date, the Company and Arrow entered into an asset purchase and stock redemption agreement (the "Agreement") wherein the Company, as beneficial owner of a majority of the stock of Strato, sold the Pump Business and its related assets to Arrow in exchange for the Arrow Shares and Arrow's assumption of certain liabilities of Strato. The assets acquired and liabilities assumed under the Stock Purchase Agreement were divided between the Company and Arrow as outlined in the Agreement.
The Company has accounted for the acquisition under the purchase method of accounting.
The estimated fair value of assets acquired and liabilities assumed in each of the acquisitions is as follows:
NEOSTAR STRATO
---------- -----------
Cash........................................................ $ 27,685 $ --
Accounts receivable, net.................................... 295,707 1,813,863
Inventories................................................. 657,786 4,434,204
Other current assets........................................ 59,335 101,775
Property and equipment...................................... 323,413 758,356
Intangibles and other assets................................ 1,739,756 13,183,033
Deferred income tax asset................................... -- 734,082
Accounts payable and accrued expenses....................... (187,862) (1,525,313)
---------- -----------
Purchase price.................................... $2,915,820 $19,500,000
========== ===========
|
HORIZON MEDICAL PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following unaudited pro forma summary combines the results of operations of the Company with the acquisition of the port business of Strato as if the acquisition had occurred at the beginning of 1996. Certain adjustments, including interest expense on the acquisition debt, amortization of intangible assets, removal of the non-recurring accretion of value of put warrant repurchase obligation and income tax effects, have been made to reflect the impact of the purchase transactions. These pro forma results have been prepared for comparative purposes only and do not purport to be indicative of what would have occurred had the acquisition been made at the beginning of the respective fiscal years, or of results which may occur in the future.
1996 1997
------------ ------------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
Sales....................................................... $ 21,661 $ 22,818
Net loss.................................................... (308) (505)
Loss per share -- basic and diluted......................... (2.79) (4.58)
|
Pro forma earnings per share for the years ended December 31, 1996 and 1997 is calculated by dividing pro forma net income by the weighted average shares outstanding of 110,360 and 110,365, respectively.
14. LOSS PER SHARE
The Company adopted the provisions of Financial Accounting Standards Board Statement No. 128 "Earnings Per Share" ("FASB 128") in 1997. This Statement requires the presentation of earnings (loss) per share computed as "basic" and "diluted". There are no differences in the basic and diluted computations for the periods presented herein. A reconciliation of the denominator is as follows:
1995 1996 1997
-------- -------- --------
Weighted average shares outstanding.................... 98,936 101,914 101,919
Shares assumed issued under the NationsCredit warrant
(Note 8)............................................. 8,030 8,277 8,277
Antidilution features of certain shareholders (Note
8)................................................... 103 169 169
-------- -------- --------
Weighted average shares outstanding used to compute
loss per share....................................... 107,069 110,360 110,365
======== ======== ========
|
15. FINANCIAL INSTRUMENTS
Financial instruments consisted of the following:
DECEMBER 31, 1996 DECEMBER 31, 1997
----------------------- -------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
---------- ---------- ----------- -----------
Accounts receivable -- trade, net..... $ 959,093 $ 959,093 $ 3,720,031 $ 3,720,031
Accounts payable...................... 685,795 685,795 1,726,395 1,726,395
Long-term debt and non-compete
payable............................. 6,879,889 7,055,206 27,729,874 27,864,642
|
The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, accounts receivable, and accounts payable approximate fair value because of the immediate or short-term maturity of these financial instruments. The carrying amounts reported for the credit facility and a portion of the other long-term debt approximate fair value because the underlying instruments are at variable interest rates which reprice frequently. Fair value for the fixed rate long term debt was estimated using either quoted market prices for the same or similar issues or the current rates offered to the Company for debt with similar maturities. The non-interest bearing notes have been recorded at fair value using either the quoted market prices for the same or similar issues or the current rates offered to the Company for debt with similar maturities.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Strato/Infusaid Inc.
We have audited the accompanying balance sheets of Strato/Infusaid Inc. (the "Company") as of December 31, 1995 and 1996, and the related statements of operations, shareholder's equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Strato/Infusaid Inc. as of December 31, 1995 and 1996, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles.
Birmingham, Alabama
September 15, 1997
STRATO/INFUSAID INC.
BALANCE SHEETS
DECEMBER 31, 1995 AND 1996
1995 1996
----------- -----------
ASSETS
Accounts receivable -- trade, less allowance for doubtful
accounts of $150,388 and $102,442 in 1995 and 1996,
respectively.............................................. $ 3,203,878 $ 2,923,899
Inventories................................................. 9,125,346 9,979,985
Prepaid expenses and other assets........................... 179,295 244,580
Deferred taxes.............................................. 2,759,273 1,868,315
----------- -----------
Total current assets.............................. 15,267,792 15,016,779
Property and equipment, net................................. 3,360,215 2,772,079
Intangible assets, net...................................... 8,127,695 7,680,398
Deferred taxes.............................................. 429,572 195,830
----------- -----------
Total assets...................................... $27,185,274 $25,665,086
=========== ===========
LIABILITIES AND SHAREHOLDER'S EQUITY
Accounts payable............................................ $ 1,152,408 $ 997,147
Accrued sales returns and allowances........................ 404,202 404,202
Accrued wages and benefits.................................. 626,236 635,348
Accrued liabilities......................................... 166,775 188,700
----------- -----------
Total liabilities................................. 2,349,621 2,225,397
----------- -----------
Commitments and contingencies (Note 8)
Common stock, $.01 par value, 300,000 shares authorized,
issued, and outstanding in 1995 and 1996, respectively.... 3,000 3,000
Additional paid-in capital.................................. 64,610,571 64,610,571
Advances from parent (Note 10).............................. 41,550,605 45,112,878
Accumulated deficit......................................... (81,328,523) (86,286,760)
----------- -----------
Total shareholder's equity........................ 24,835,653 23,439,689
----------- -----------
Total liabilities and shareholder's equity........ $27,185,274 $25,665,086
=========== ===========
|
The accompanying notes are an integral part of these financial statements.
STRATO/INFUSAID INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996
1995 1996
----------- -----------
Sales....................................................... $21,225,142 $19,595,940
Cost of sales............................................... 8,840,877 9,257,372
----------- -----------
Gross profit...................................... 12,384,265 10,338,568
----------- -----------
Selling, general, and administrative expenses............... 10,433,801 9,758,359
Selling, general, and administrative expenses -- related
party..................................................... 2,662,000 2,825,000
Research and development expenses........................... 7,522,000 5,797,000
----------- -----------
Total operating expenses.......................... 20,617,801 18,380,359
----------- -----------
Operating loss.................................... (8,233,536) (8,041,791)
Other expenses, net......................................... (359,471) (40,813)
----------- -----------
Loss before income tax benefit.................... (8,593,007) (8,082,604)
Income tax benefit.......................................... 3,334,815 3,124,367
----------- -----------
Net loss.......................................... $(5,258,192) $(4,958,237)
=========== ===========
|
The accompanying notes are an integral part of these financial statements.
STRATO/INFUSAID INC.
STATEMENTS OF SHAREHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996
ADDITIONAL ADVANCES
NUMBER OF COMMON PAID-IN FROM ACCUMULATED
SHARES STOCK CAPITAL PARENT DEFICIT TOTAL
--------- ------ ----------- ----------- ------------ -----------
Balance, December 31, 1994........ 300,000 $3,000 $64,610,571 $37,545,040 $(76,070,331) $26,088,280
Net advances from parent.......... 4,005,565 4,005,565
Net loss.......................... (5,258,192) (5,258,192)
------- ------ ----------- ----------- ------------ -----------
Balance, December 31, 1995........ 300,000 3,000 64,610,571 41,550,605 (81,328,523) 24,835,653
Net advances from parent.......... 3,562,273 3,562,273
Net loss.......................... (4,958,237) (4,958,237)
------- ------ ----------- ----------- ------------ -----------
Balance, December 31, 1996........ 300,000 $3,000 $64,610,571 $45,112,878 $(86,286,760) $23,439,689
======= ====== =========== =========== ============ ===========
|
The accompanying notes are an integral part of these financial statements.
STRATO/INFUSAID INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996
1995 1996
----------- -----------
Cash flows from operating activities:
Net loss.................................................. $(5,258,192) $(4,958,237)
----------- -----------
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation........................................... 816,945 816,753
Amortization........................................... 447,297 447,297
Provision for doubtful accounts........................ 9,230 20,000
Deferred income taxes.................................. 965,555 1,124,700
Changes in operating assets and liabilities, net
Accounts receivable -- trade......................... 640,291 259,979
Inventories.......................................... (390,309) (854,639)
Prepaid expenses and other assets.................... 157,037 (65,285)
Accounts payable..................................... (58,217) (155,261)
Accrued expenses..................................... (61,747) 31,037
----------- -----------
Net cash used in operating activities............. (2,732,110) (3,333,656)
----------- -----------
Cash flows from investing activities:
Capital expenditures...................................... (1,273,455) (228,617)
----------- -----------
Net cash used in investing activities............. (1,273,455) (228,617)
----------- -----------
Cash flows from financing activities:
Net advances from parent.................................. 4,005,565 3,562,273
----------- -----------
Net cash provided by financing activities......... 4,005,565 3,562,273
----------- -----------
Net change in cash and cash equivalents........... -- --
Cash and cash equivalents, beginning of year................ -- --
----------- -----------
Cash and cash equivalents, end of year...................... $ -- $ --
=========== ===========
|
The accompanying notes are an integral part of these financial statements.
STRATO/INFUSAID INC.
NOTES TO FINANCIAL STATEMENTS
1. FORMATION AND PRESENTATION
Strato/Infusaid, Inc. (the "Company") produces implantable infusion pumps and vascular access products such as ports and catheters which are primarily used in chemotherapy and long-term pain management. The Company was formed from the merger of Strato Medical Products, Inc. ("Strato") and Infusaid, Inc. ("Infusaid") in January 1994 and is a wholly-owned subsidiary of Pfizer Inc. ("Pfizer"). As discussed in Note 10, the Company was sold in July 1997.
2. SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition -- The Company records sales upon shipment of the related product, net of any discounts.
Cash Management Program -- The Company participates in a consolidated cash management program with its parent. The program provides for the daily replenishment of major bank accounts for check clearing requirements. Accordingly, the Company maintains a cash balance of zero per books and outstanding checks that had not been paid by the banks are included in the intercompany account.
Inventories -- Implantable infusion pumps and vascular access products such as ports and catheters are valued at the lower of average cost or market.
Property and Equipment -- Property and equipment are carried at cost, less accumulated depreciation, and include expenditures that substantially increase the useful lives of existing assets. Maintenance, repairs, and minor renovations are charged to expense as incurred. Upon sale, retirement, or other disposition of these assets, the cost and related accumulated depreciation are removed from the respective accounts, and any gain or loss on the disposition is included in net loss.
The Company provides for depreciation of property and equipment using primarily the straight-line method designed to depreciate costs over estimated useful lives as shown below:
ESTIMATED
USEFUL LIFE
------------
Item:
Machinery and equipment................................... 8 - 12 years
Office equipment.......................................... 3 - 12 years
|
Intangible Assets -- Goodwill, the excess of the purchase price over the fair value of the net assets acquired in Pfizer's purchase of Strato, is being amortized on a straight-line basis over 40 years. Patents are being amortized on a straight-line basis over the lives of the related patents, which are primarily 13.5 years.
Long-Lived Assets -- The Company reviews long-lived assets for impairment whenever events or changes in business circumstances occur that indicate that the carrying amount of the assets may not be recoverable. The Company assesses the recoverability of long-lived assets held and to be used and measures the impairment, if any, based on a fair value approach. The Company had no such impairments for the years ended 1995 and 1996.
Research and Development -- Research and development costs are charged to expense as incurred and were $7,522,000 and $5,797,000 for 1995 and 1996, respectively.
Income Taxes -- The Company is included in the consolidated federal tax return of its parent, Pfizer. The consolidated income taxes are allocated to the Company under an agreement with its parent based on its contribution to the consolidated tax provision or benefit. Current federal tax provisions and benefits are settled through the intercompany account. The current federal tax benefits of $3,334,815 and $3,124,367 were used to reduce the advances from parent in 1995 and 1996, respectively.
STRATO/INFUSAID INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The Company accounts for income taxes under Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes, which requires recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the differences between the financial statement basis and the tax basis of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. Such temporary differences are principally related to using different methods of depreciating property and equipment and amortizing intangible assets for book and tax purposes.
Financial Instruments -- The carrying amounts reported in the balance sheets for cash and cash equivalents, accounts receivable, and accounts payable approximate fair value because of the immediate or short-term maturity of these financial instruments.
Use of Estimates -- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
3. INVENTORIES
A summary of inventories at December 31, is as follows:
1995 1996
----------- -----------
Raw materials............................................... $ 5,298,628 $ 5,391,001
Work in process............................................. 1,892,401 2,263,043
Finished goods.............................................. 4,674,427 5,276,378
----------- -----------
11,865,456 12,930,422
Less inventory reserves..................................... (2,740,110) (2,950,437)
----------- -----------
$ 9,125,346 $ 9,979,985
=========== ===========
|
4. PROPERTY AND EQUIPMENT
A summary of property and equipment at December 31, is as follows:
1995 1996
----------- -----------
Machinery and equipment..................................... $ 3,839,629 $ 3,981,367
Office equipment............................................ 5,129,274 5,216,153
----------- -----------
8,968,903 9,197,520
Less accumulated depreciation............................... (5,608,688) (6,425,441)
----------- -----------
$ 3,360,215 $ 2,772,079
=========== ===========
|
STRATO/INFUSAID INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. INTANGIBLE ASSETS
A summary of intangible assets at December 31, is as follows:
1995 1996
----------- -----------
Goodwill.................................................... $ 5,820,000 $ 5,820,000
Patents..................................................... 3,915,000 3,915,000
----------- -----------
9,735,000 9,735,000
Less accumulated amortization............................... (1,607,305) (2,054,602)
----------- -----------
$ 8,127,695 $ 7,680,398
=========== ===========
|
6. INCOME TAXES
The benefit (provision) for income taxes for the years ending December 31, 1995 and 1996 consists of the following:
1995 1996
----------- -----------
Current..................................................... $ 4,300,370 $ 4,249,067
Deferred.................................................... (965,555) (1,124,700)
----------- -----------
$ 3,334,815 $ 3,124,367
=========== ===========
|
Temporary differences which give rise to a significant portion of deferred tax assets and liabilities at December 31 are as follows:
1995 1996
---------- ----------
Allowance for doubtful accounts............................. $ 172,129 $ 151,972
Inventory reserves.......................................... 1,151,942 1,254,454
Intangible assets........................................... 429,572 195,830
Accrued liabilities and other............................... 1,435,202 461,889
---------- ----------
$3,188,845 $2,064,145
========== ==========
|
No valuation allowance was recorded by the Company against the net deferred tax asset at December 31, 1995 or 1996 as the Company is compensated for the use of its net operating losses by Pfizer with a direct reduction to the intercompany payable. Pfizer management feels that it is more likely than not that the net deferred tax assets will be realized through its future consolidated taxable income.
The benefit for income taxes differs from the amount that would be computed by applying the federal statutory rate of 34% to pre-tax earnings as indicated below:
Income tax benefit at the statutory federal income tax
rate...................................................... $2,921,622 $2,748,085
Increase (decrease) resulting from:
Non-deductible meals and entertainment expense............ (33,549) (38,893)
Non-deductible amortization of goodwill................... (53,481) (53,481)
State tax benefit......................................... 500,223 468,656
---------- ----------
$3,334,815 $3,124,367
========== ==========
|
7. DEFINED BENEFIT AND CONTRIBUTION PLANS
The Company's employees participate in the Pfizer Retirement Annuity Plan sponsored by Pfizer. Benefits under the plan are generally based on years of service and employee career earnings. Participants
STRATO/INFUSAID INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
become fully vested after five years of employment. The Company recognized pension expense related to this plan of approximately $212,000 and $800 during 1995 and 1996, respectively.
In addition, the Company's employees are eligible to participate in a defined contribution 401(k) plan maintained by Pfizer. Company matching contributions to the plan are dollar for dollar for the first 2% of employee contributions and 50% for the next 4% of employee contributions. Contribution expense recognized by the Company under this plan totaled approximately $267,000 and $282,000 during 1995 and 1996, respectively.
8. COMMITMENTS AND CONTINGENCIES
The Company leases office and equipment under operating lease agreements expiring in various years through 1999. Rent expense under various operating leases was approximately $635,000 and $518,000 in 1995 and 1996, respectively. Approximate minimum future rental payments under operating leases with remaining terms in excess of one year are as follows:
1997........................................................ $423,000
1998........................................................ 423,000
1999........................................................ 70,000
--------
$916,000
========
|
The Company is involved in a number of claims and litigation, including product liability claims and litigation considered normal in the nature of its business. In the opinion of management, the amount of ultimate liability with respect to these actions will not materially affect the financial position or results of operations of the Company.
The Company participates in Pfizer's consolidated self-insured risk management program. Pfizer charges the Company, on a monthly basis, for claims expense incurred on the Company's behalf including an amount for an estimate of claims incurred but not reported.
Effective January 1, 1995, the Company entered into a license agreement with an individual (the Licensor) for the right to manufacture and sell certain products covered by the Licensor's patents or derived from the Licensor's confidential information agreement. Payments under the agreement vary, depending upon the purchaser, and range from 5% to 15% of the Company's net sales of the covered products. Such payments shall continue until the expiration date of each corresponding Licensed Patent Right covering each product under the agreement. Payments under this license agreement totaled approximately $38,600 and $4,900 in 1995 and 1996, respectively.
9. RELATED-PARTY TRANSACTIONS
As previously noted, the Company is a wholly owned subsidiary of Pfizer. As such, Pfizer provides certain administrative services to the Company including legal services, insurance administration, corporate tax preparation and submission, regulatory consulting, employee benefits administration, and payroll data processing. Allocated costs associated with these services are charged directly to the Company by Pfizer and are reflected in the Company's financial statements. The approximate amounts of the material related party transactions for the years ended December 31, 1995 and 1996 are as follows:
1995 1996
---------- ----------
Product liability and business insurance.................. $ 417,000 $1,020,000
Group health insurance.................................... 840,000 662,000
Legal expense............................................. 1,405,000 1,143,000
---------- ----------
$2,662,000 $2,825,000
========== ==========
|
STRATO/INFUSAID INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
10. SUBSEQUENT EVENT -- SALE OF THE COMPANY
On July 15, 1997, Horizon Medical Products, Inc. ("Horizon") and Arrow International, Inc. ("Arrow"), two unrelated parties, completed a joint purchase agreement to acquire all of the stock of the Company from Pfizer for a purchase price of $21,250,000 plus the assumption by Horizon and Arrow of certain of the Company's trade debts and accrued expenses. The advances from parent were forgiven by Pfizer and converted to additional paid-in capital prior to the sale of the Company.
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
INTRODUCTION
The accompanying unaudited pro forma condensed consolidated financial statements reflect the consolidated financial position of Horizon Medical Products, Inc. (the "Company") as of December 31, 1997 and the consolidated results of its operations for the year ended December 31, 1997 after giving pro forma effect to the Consolidated Statement of Operations for (i) the purchase of the port business of Strato/Infusaid Inc. (the "Strato/Infusaid Acquisition") and (ii) the initial public offering of Common Stock by the Company (the "Offering") and the application of the net proceeds thereof as though they occurred January 1, 1997 and to the Consolidated Balance Sheet after giving effect to the Offering and application of the net proceeds thereof as though it occurred December 31, 1997. The unaudited pro forma condensed consolidated financial statements are qualified in their entirety by, and should be read in conjunction with, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the respective historical financial statements of the Company and Strato/Infusaid Inc. and related notes thereto included elsewhere in this Prospectus. The unaudited pro forma information does not purport to be indicative of actual results that would have been achieved or the financial position of the Company had the Strato/Infusaid Acquisition and Offering actually been completed as of the dates indicated in the accompanying notes thereto nor which may be achieved in the future.
HORIZON MEDICAL PRODUCTS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
STRATO
JANUARY 1, 1997
THROUGH PRO FORMA OFFERING PRO FORMA
COMPANY JULY 15, 1997(A) ADJUSTMENTS PRO FORMA ADJUSTMENTS AS ADJUSTED
-------- ----------------- ----------- --------- ----------- -----------
Net sales.................. $ 15,798 $7,020 $ -- $22,818 -- $22,818
Cost of goods sold......... 6,273 2,687 (300)(b) 8,660 -- 8,660
-------- ------- ------- ------- ------- -------
Gross profit............... 9,525 4,333 300 14,158 -- 14,158
Selling, general and 124(c)
administrative
expenses............... 6,111 2,927 (1,506)(d) 7,656 $ 455(e) 8,111
-------- ------- ------- ------- ------- -------
Operating
income.......... 3,414 1,406 1,682 6,502 (455) 6,047
Interest income
(expense)................ (3,971) -- (1,994)(f) (5,965) 6,020(g) 55
Non-recurring accretion of
value of put warrant
repurchase obligation.... (8,000) -- 8,000(h) -- -- --
Other income............... 70 -- -- 70 -- 70
-------- ------- ------- ------- ------- -------
Income (loss) before income
taxes.................... (8,487) 1,406 7,688 607 5,565 6,172
Income tax expense......... (320) (622) (170)(i) (1,112) (1,267)(i) (2,379)
-------- ------- ------- ------- ------- -------
Net income (loss).......... $ (8,807) $ 784 $ 7,518 $ (505) $ 4,298 $ 3,793
======== ======= ======= ======= ======= =======
Earnings (loss) per share--
basic and diluted........ $ (79.80) $ (4.58)(j)
======== ======= =======
Weighted average number of
common shares outstanding
basic and diluted........ 110,365 110,365(k)
======== ======= =======
|
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AS ADJUSTED
DECEMBER 31, 1997
(IN THOUSANDS)
COMPANY
COMPANY ADJUSTMENTS AS ADJUSTED
-------- ----------- -----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.............................. $ 2,894 $ 2,424(1) $ 5,318
Accounts receivable, net............................... 3,720 -- 3,720
Inventories............................................ 5,406 -- 5,406
Prepaid expenses and other current assets.............. 367 -- 367
Deferred taxes......................................... 569 -- 569
-------- -------- --------
Total current assets........................... 12,956 2,424 15,380
Property and equipment, net............................ 2,342 472 2,814
Intangible assets, net................................. 15,726 (262) 15,464
Deferred taxes......................................... 255 -- 255
Other assets........................................... 298 -- 298
-------- -------- --------
Total assets................................... $ 31,577 $ 2,634 $ 34,211
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable....................................... $ 1,726 $ -- $ 1,726
Accrued liabilities.................................... 1,682 -- 1,682
Income taxes payable................................... 410 -- 410
Current portion of long-term debt...................... 1,960 (1,761)(l) 199
Current portion of payable under non-compete and
consulting agreements............................... 336 (336)(l) --
-------- -------- --------
Total current liabilities...................... 6,114 (2,097) 4,017
Long-term debt, net of current portion................... 23,971 (23,928)(l) 43
Payable under non-compete and consulting agreements, net
of current portion..................................... 1,463 (1,463)(l) --
Put warrant repurchase obligation........................ 11,000 (11,000)(m) --
Other liabilities........................................ 179 179
-------- -------- --------
Total liabilities.............................. 42,727 (38,487) 4,239
-------- -------- --------
Commitments and contingent liabilities
SHAREHOLDERS' EQUITY (DEFICIT):
Preferred stock........................................ -- -- --
Common stock........................................... -- -- --
Additional paid-in capital............................. -- 11,000(m) 42,550
31,550(l)
Shareholders' notes receivable......................... (398) (398)
Accumulated deficit.................................... (10,752) (1,428)(n) (12,180)
-------- -------- --------
Total shareholders' equity (deficit)........... (11,150) 41,122 29,972
-------- -------- --------
Total liabilities and shareholders' equity
(deficit).................................... $ 31,577 $ 2,634 $ 34,211
======== ======== ========
|
NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(IN THOUSANDS)
The unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 1997 gives effect to the consolidated results of operations for the year ended December 31, 1997 as if the Strato/Infusaid Acquisition and the Offering occurred on January 1, 1997. The unaudited condensed consolidated balance sheet gives effect to the financial position of the Company as of December 31, 1997 as if the Offering occurred at December 31, 1997.
PRO FORMA ADJUSTMENTS FOR THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1997, ARE AS FOLLOWS:
(a) Represents the historical operating results of Strato for the period January 1, 1997 through the acquisition date of July 15, 1997.
(b) Cost of goods sold has been reduced to eliminate overhead cost allocations which have not been incurred on an ongoing basis ($300).
(c) Reflects the net increase in amortization ($124) of the cost over fair value of net assets acquired over a period of 30 years.
(d) Selling, general and administrative expenses have been reduced to eliminate salaries and related benefits from sales personnel ($1,100) and administrative personnel ($406) not retained following the acquisition.
(e) Reflects the compensation which the Chief Executive Officer and the President of the Company will begin to receive after completion of the Offering ($455).
(f) Reflects the increase in interest expense ($1,994) resulting from additional debt of $23,500 with interest at rates ranging from 9.8% to 10.8% associated with the financing of the Strato/Infusaid Acquisition and amortization of related debt issue costs.
(g) Reflects the reduction of interest expense ($6,020) resulting from the application of the net proceeds of this Offering to repay debt of the Company.
(h) Reflects the removal of the non-recurring accretion of value of put warrant repurchase obligation associated with the Company's credit facility ($8,000). See Notes 6 and 8 of the Company's Consolidated Financial Statements.
(i) Reflects applicable income tax effects of adjustments.
(j) Earnings (loss) per common share is calculated by dividing pro forma net income by weighted average number of common shares outstanding. Such pro forma net income (loss) reflects the impact of the adjustments above.
(k) Weighted average number of common shares outstanding is calculated based upon the relevant weighted average shares outstanding assuming anti dilution features which exist and assuming that the shares issuable upon exercise of the NationsCredit Commercial Corporation ("NationsCredit") warrants are outstanding for the year ended December 31, 1997.
PRO FORMA ADJUSTMENTS FOR THE UNAUDITED CONDENSED CONSOLIDATED BALANCE
SHEET AS OF DECEMBER 31, 1997, ARE AS FOLLOWS:
(l) Reflects receipt and application of the net proceeds to the Company, including repayment of indebtedness, from the sale of common stock in this Offering.
(m) Reflects the reclass of the put obligation upon the anticipated exercise of the NationsCredit warrant.
(n) The use of net proceeds of the Offering to repay outstanding indebtedness will result in an immediate write-off of $1,428 representing unamortized debt issue costs existing at December 31, 1997.
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
TABLE OF CONTENTS
PAGE
----
Prospectus Summary.................... 3
Risk Factors.......................... 7
Use of Proceeds....................... 15
Dividend Policy....................... 15
Capitalization........................ 16
Dilution.............................. 17
Selected Financial Data............... 18
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 19
Business.............................. 24
Management............................ 37
Certain Transactions.................. 42
Principal and Selling Shareholders.... 45
Description of Capital Stock.......... 46
Shares Eligible for Future Sale....... 49
Underwriting.......................... 50
Certain U.S. Federal Tax
Considerations for Non-U.S. Holders
of Common Stock..................... 51
Notice to Canadian Residents.......... 53
Legal Matters......................... 54
Experts............................... 54
Index to Financial Statements......... F-1
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HORIZON MEDICAL
PRODUCTS, INC.
[LOGO]
HMP
Shares
Common Stock
($.001 par value)
PROSPECTUS
CREDIT SUISSE FIRST BOSTON
BANCAMERICA ROBERTSON STEPHENS
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth an itemized statement of certain costs and expenses incurred in connection with the issuance and distribution of the securities being registered:
Securities and Exchange Commission registration fee......... $16,225
NASD filing fee............................................. 6,000
Nasdaq National Market listing fee.......................... *
Blue Sky fees and expenses (including counsel fees)......... *
Printing and engraving expenses............................. *
Legal fees and expenses..................................... *
Accounting fees and expenses................................ *
Registrar and Transfer Agent's fees and expenses............ *
Miscellaneous............................................... *
-------
Total.....................................................
=======
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* To be provided by Amendment.
All amounts except the Securities and Exchange Commission registration fee, the NASD filing fee and Nasdaq National Market listing fee are estimated. The Company intends to pay all expenses of registration with respect to shares being sold by the Selling Shareholders hereunder, with the exception of underwriting discounts and commissions.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Georgia Code permits a corporation to eliminate or limit the personal liability of a director to the corporation or its shareholders for monetary damages for breach of duty of care or other duty as a director, provided that no provisions shall eliminate or limit the liability of a director.
The Company's Bylaws also provide that the Company shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (including any action by or in the right of the Company), by reason of the fact that such person is or was a director or officer of the Company, or is or was serving at the request of the Company as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including reasonable attorney's fees), judgments, fines, and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Company (and with respect to any criminal action or proceeding, if such person had no reasonable cause to believe such person's conduct was unlawful), to the maximum extent permitted by, and in the manner provided by, the Georgia Code. In addition, the Bylaws provide that the Company will advance to its directors or officers reasonable expenses of any such proceeding.
Notwithstanding any provision of the Company's Articles and Bylaws to the contrary, the Georgia Code provides that the Company shall not indemnify a director or officer for any liability incurred in a proceeding in which the director or officer is adjudged liable to the Company or is subjected to injunctive relief in favor of the Company: (i) for any appropriation, in violation of his duties, of any business opportunity of the Company; (ii) for acts or omissions which involve intentional misconduct or a knowing violation of law; (iii) for unlawful corporate distributions; or (iv) for any transaction from which the director or officer received an improper personal benefit.
II-1
The Company has purchased insurance with respect to, among other things, any liabilities that may accrue under the statutory provisions referred to above.
Pursuant to the Underwriting Agreement filed as Exhibit 1.1 to this Registration Statement, the Underwriters have agreed to indemnify the directors, officers and controlling persons of the Company against certain civil liabilities that may be incurred in connection with the Offering, including certain liabilities under the Securities Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
On March 17, 1995, the Company issued to Cordova 10,100 shares of the Company's Class A Common Stock (the "Cordova Shares"), in consideration for $10.00, pursuant to the exercise by Cordova of a warrant (the "Cordova Warrant"). The Company granted the Cordova Warrant to Cordova in 1994 in connection with a $1,000,000 loan made to the Company by Cordova. The Cordova Warrant and Cordova Shares were issued pursuant to the exemption from registration provided by Section 4(2) of the Securities Act.
On September 25, 1995, in connection with a $1.5 million loan to the Company from Sirrom, the Company issued to Sirrom a warrant (the "Sirrom Warrant") for the purchase of 9,486 shares of the Company's Class A Common Stock. On July 15, 1997, the Company redeemed the Sirrom Warrant in full with $400,000 in proceeds from the Credit Facility. The Sirrom Warrant was issued pursuant to the exemption from registration provided by Section 4(2) of the Securities Act.
On December 15, 1995, the Company issued 900 shares of Class A Common Stock to J.H. Clark, a former officer of the Company, for consideration of $0.0167 per share. The shares were issued to Mr. Clark pursuant to the exercise of Mr. Clark's rights under a Stock Warrant Agreement dated May 1, 1993 between the Company and Mr. Clark. The issuance to Mr. Clark was made under the exemption from registration provided by Section 4(2) of the Securities Act.
On March 19, 1996, Cordova exercised certain anti-dilution rights relating
to the Cordova Warrant (and the shares issued pursuant thereto) to purchase 19
shares of the Company's Class A Common Stock for $.001 per share. The issuance
to Cordova was made pursuant to the exemption from registration provided by
Section 4(2) of the Securities Act.
Pursuant to the 1995 Stock Appreciation Rights Plan (the "SAR Plan"), from
June 1995 through November 1997, the Company granted an aggregate 124,200 stock
appreciation rights ("SARs") to eligible employees and eligible sales
representatives based on their achievement of certain performance targets. At
January 31, 1997, 99,600 SARs were outstanding. The Compensation Committee has
approved, effective the day immediately prior to consummation of the Offering,
(i) the cancellation of all outstanding SARs, (ii) the grant of an aggregate
99,600 options (the "SAR Conversion Options") to purchase Common Stock under the
Stock Incentive Plan for holders of SARs who are then employed by the Company
and (iii) the payment of cash compensation equal to one dollar for each SAR held
by holders of SARs who are not employed by the Company upon consummation of the
Offering. The SAR Conversion Options will be exercisable, in increments of 25%
per year over four years, commencing on the first anniversary of the date of
grant, at an exercise price per share equal to the initial pubic offering price.
The foregoing issuances will be made in reliance on Rule 701 promulgated under
the Securities Act.
Concurrently with the consummation of the Offering, the Company intends to grant an aggregate 40,000 options to outside directors under the Stock Incentive Plan. The Company intends to rely on the Rule 701 exemption from registration for such issuance.
All of the foregoing issuances were conducted without an underwriter or placement agent.
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ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits (see Exhibit Index immediately preceding the exhibits for the page number where each exhibit can be found):
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
1.1 -- Form of Underwriting Agreement between the Company and
Credit Suisse First Boston Corporation, BancAmerica
Robertson Stephens and NationsBanc Montgomery Securities LLC
as Representatives of the several underwriters*
3.1 -- Amended and Restated Articles of Incorporation of the
Company
3.2 -- Amended and Restated Bylaws of the Company
4.1 -- See Articles II, III, VII and IX of the Amended and Restated
Articles of Incorporation filed as Exhibit 3.1 and Articles
I, VII, VIII and IX of the Amended and Restated Bylaws filed
as Exhibit 3.2
4.2 -- Specimen Common Stock Certificate*
5.1 -- Opinion of King & Spalding (including consent)*
10.1 -- Promissory Note dated September 28, 1995 made by Marshall B.
Hunt to the order of the Company in the principal amount of
$77,612.43, as amended by Amendment to Promissory Note dated
September 28, 1996
10.2 -- Promissory Note dated September 28, 1995 made by William E.
Peterson, Jr. to the order of the Company in the principal
amount of $77,612.43, as amended by Amendment to Promissory
Note dated September 28, 1996
10.3 -- Promissory Note dated September 28, 1995 made by Roy C.
Mallady, Jr. to the order of the Company in the principal
amount of $77,612.43.
10.4 -- Promissory Note dated October 12, 1995 made by Marshall B.
Hunt to the order of the Company in the principal amount of
$35,000.00, as amended by Amendment to Promissory Note dated
October 12, 1995
10.5 -- Promissory Note dated October 12, 1995 made by William E.
Peterson, Jr. to the order of the Company in the principal
amount of $35,000.00, as amended by Amendment to Promissory
Note dated October 12, 1995
10.6 -- Promissory Note dated October 12, 1995 made by Roy C.
Mallady, Jr. to the order of the Company in the principal
amount of $35,000.00, as amended by Amendment to Promissory
Note dated October 12, 1995
10.7 -- Amended and Restated Secured Promissory Note dated July 15,
1997 in the original principal amount of $1.5 million made
by the Company in favor of NationsCredit Commercial
Corporation with Acknowledgment and Consent of Guarantor
10.8 -- Credit Agreement dated as of July 15, 1997 among the
Company, the Lenders referred to therein and NationsCredit
Commercial Corporation, as Agent (together with the exhibits
thereto)
10.9 -- Lease Agreement dated as of July 1, 1996 between The
Development Authority of the City of Manchester and the
Company
10.10 -- Lease Agreement dated as of August 29, 1997 between The
Development Authority of the City of Manchester and the
Company
10.11 -- 1998 Stock Incentive Plan
10.12 -- Management Agreement dated as of January 1, 1995 between the
Company and Cardiac Medical, Inc., together with
Acknowledgment of Termination of Contract with CMI
10.13 -- Loan Agreement dated as of September 25, 1995 between the
Company and Sirrom Capital Corporation*
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II-3
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
10.14 -- Stock Purchase Agreement dated June 20, 1997 among the
Company, Pfizer, Inc., Arrow International, Inc. and
Strato(R)/Infusaid(TM) Inc., as amended by Amendment to
Purchase Agreement, dated June 20, 1997*
10.15 -- Asset Purchase and Stock Redemption Agreement dated as of
July 15, 1997 among the Company, Arrow International, Inc.
and Strato(R)/Infusaid(TM) Inc.*
10.16 -- Asset Purchase Agreement dated October 24, 1995 by and among
the Company, Horizon Acquisition Corp. and NeoStar Medical
Technologies, Inc.*
10.17 -- Secured Subordinated Note dated October 24, 1995 made by
Horizon Acquisition Corp. to the order of NeoStar Medical
Technologies, Inc. in the principal amount of $2,461,017, as
amended by Amendment to Secured Subordinated Note dated July
31, 1997*
10.18 -- Agreement dated July 31, 1997 by and among Horizon
Acquisition Corp., the Company, NeoStar Holding, Inc.,
Joseph D. Pike, Thomas F. Darden, II, Williams W. Wells and
Lance J. Bronnenkant*
10.19 -- Amendment to Security Agreement dated July 31, 1997 by and
among Horizon Acquisition Corp., NeoStar Holding, Inc.,
Joseph D. Pike, Thomas F. Darden, II, William W. Wells and
Lance J. Bronnenkant*
10.20 -- Letter Agreement dated January 8, 1998 between Arrow
International, Inc. and the Company re: the Company's use of
the Norwood facility*
10.21 -- Agreement dated January 13, 1995 between the Company and ACT
Medical, Inc.*
10.22 -- Horizon Plastic Ports: Term Sheet, dated March 18, 1997*
10.23 -- Letter Agreement to Supply Agreement between CarboMedics,
Inc. and the Company, dated February 17, 1993, as amended,
Development Agreement, dated February 17, 1993, by and
between CarboMedics, Inc. and the Company, as amended, and
Equity Agreement, dated as of February 17, 1993, by and
between CarboMedics, Inc. and the Company, as amended*
10.24 -- Agreement dated May 8, 1997 between the Company and Robert
Cohen*
10.25 -- Consulting and Services Agreement dated February 1, 1996
between the Company and Healthcare Alliance, Inc. as
amended*
10.26 -- Second Amended License Agreement dated January 1, 1995
between Dr. Sakharam D. Mahurkar and NeoStar Medical(R)
Technologies, Inc.*
10.27 -- License Agreement dated July , 1995 between Dr. Sakharam
D. Mahurkar and Strato(R)/ Infusaid(TM) Inc.*
10.28 -- Additional License Agreement dated January 1, 1997 between
Dr. Sakharam D. Mahurkar and the Company*
10.29 -- Atlanta Office Purchase Agreement*
10.30 -- Employment Agreement, dated February , 1998, between
Marshall B. Hunt and the Company*
10.31 -- Employment Agreement, dated February , 1998, between
William E. Peterson, Jr. and the Company*
10.32 -- Premier Warrant*
10.33 -- Premier Group Purchasing Agreement*
21.1 -- Subsidiaries of the Company
23.1 -- Consent of King & Spalding (contained in Exhibit 5.1)*
23.2 -- Consent of Coopers & Lybrand, L.L.P.
24. -- Power of Attorney (included on the signature page hereof)
27.1 -- Financial Data Schedule (for SEC filing purposes only)
|
* To be provided by amendment.
II-4
(b) Financial Statement Schedules:
The following financial statement schedule is furnished herewith:
Valuation and Qualifying Accounts for the years ended December 31, 1995, 1996 and 1997.
All other schedules for which provision is made in the applicable accounting regulation of the Commission are not required under the related instructions or are not applicable, and therefore have been omitted.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.
Insofar as indemnification by the Registrant for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered hereunder, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
The Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-1 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Atlanta, State of Georgia, on February 13, 1998.
HORIZON MEDICAL PRODUCTS, INC.
By: /s/ MARSHALL B. HUNT
------------------------------------
Marshall B. Hunt
Chairman and Chief Executive Officer
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POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Marshall B. Hunt and William E. Peterson, Jr., and each of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, from such person and in each person's name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to the Registration Statement, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission and to sign and file any other registration statement for the same offering that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933, granting unto said attorneys-in-fact and agents, full power and authority to do and perform each and every act and thing requisite and necessary to be done as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or either of them, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the date indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ MARSHALL B. HUNT Chairman, Chief Executive February 13, 1998
----------------------------------------------------- Officer (Principal
Marshall B. Hunt Executive Officer) and
Director
/s/ ROY C. MALLADY, JR. Vice Chairman and Director February 13, 1998
-----------------------------------------------------
Roy C. Mallady, Jr.
/s/ WILLIAM E. PETERSON, JR. President and Director February 13, 1998
-----------------------------------------------------
William E. Peterson, Jr.
/s/ MARK A. JEWETT Vice President of Finance February 13, 1998
----------------------------------------------------- (Principal Financial and
Mark A. Jewett Principal Accounting
Officer)
/s/ CHARLES E. ADAIR Director February 13, 1998
-----------------------------------------------------
Charles E. Adair
/s/ ROBERT COHEN Director February 13, 1998
-----------------------------------------------------
Robert Cohen
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II-6
SIGNATURE TITLE DATE
--------- ----- ----
/s/ ROBERT J. SIMMONS Director February 13, 1998
-----------------------------------------------------
Robert J. Simmons
/s/ A. GORDON TUNSTALL Director February 13, 1998
-----------------------------------------------------
A. Gordon Tunstall
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II-7
REPORT OF INDEPENDENT ACCOUNTANTS
In connection with our audits of the consolidated financial statements of Horizon Medical Products, Inc. as of December 31, 1996 and 1997, and for each of the three years in the period ended December 31, 1997, which consolidated financial statements are included in the Prospectus, we have also audited the financial statement schedule listed in Item 16(b) herein.
In our opinion, this financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein.
COOPERS & LYBRAND L.L.P.
Birmingham, Alabama
January 29, 1998
SCHEDULE II
HORIZON MEDICAL PRODUCTS, INC.
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996, AND 1997
BEGINNING CHARGED TO ENDING
BALANCE EXPENSES WRITE OFFS DEDUCTIONS OTHER(1) BALANCE
--------- ---------- ---------- ---------- -------- --------
Year ended December 31, 1995:
Allowance for returns and
doubtful accounts............. $ 7,426 -- -- $ 6,264 -- $ 1,182
Inventory Reserve................ $ -- -- -- -- -- $ --
Year ended December 31, 1996:
Allowance for returns and
doubtful accounts............. $ 1,162 $ 5,835 $ 7,806 -- -- $ 6,997
Inventory Reserve................ $ 0 -- -- -- -- $ 0
Year ended December 31, 1997:
Allowance for returns and
doubtful accounts............. $ 6,997 $ 58,916 -- $210,098 $448,423 $304,238
Inventory Reserve................ $ -- $125,000 $225,118 -- $350,050 $249,932
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(1) Other consists of allowances and reserves acquired through acquisitions.
EXHIBIT 3.1
ARTICLES OF RESTATEMENT AND AMENDMENT TO
ARTICLES OF INCORPORATION
OF
HORIZON MEDICAL PRODUCTS, INC.
Horizon Medical Products, Inc., a corporation organized and existing under the laws of the State of Georgia, hereby certifies as follows:
1. The name of the corporation is Horizon Medical Products, Inc. (the "Corporation").
2. Pursuant to Section 14-2-1007 of the Georgia Business Corporation Code, these Articles of Incorporation restate and amend the Articles of Incorporation of the Corporation (the "Articles of Restatement and Amendment"). These Articles of Restatement and Amendment were duly adopted by the shareholders of the Corporation in accordance with the provisions of Section 14-2-1003 of the Georgia Business Corporation Code on February 11, 1998.
3. The Articles of Incorporation of the Corporation as heretofore amended or supplemented are hereby restated and further amended to read in their entirety as follows:
RESTATED AND AMENDED
ARTICLES OF INCORPORATION
OF
HORIZON MEDICAL PRODUCTS, INC.
1.
The name of the Corporation is Horizon Medical Products, Inc.
2.
Section 2.1. Common Stock. The aggregate number of common shares (referred to in these Articles of Incorporation as "Common Stock") which the Corporation shall have the authority to issue is 50,000,000, with a par value of $.001 per share. Each share of Common Stock shall have one vote on each matter submitted to a vote of the shareholders of the Corporation. Subject to the provisions of applicable law and the rights of the holders of the outstanding shares of Preferred Stock, if any, the holders of shares of Common Stock shall be entitled to receive, when and as declared by the Board of Directors of the Corporation, out of the assets of the Corporation legally available therefor, dividends or other distributions, whether payable in cash, property or securities of the Corporation. The holders of shares of Common Stock shall be entitled to receive, in proportion to the number of shares of Common Stock held, the net assets of the Corporation upon dissolution after any preferential amounts required to be paid or distributed to holders of outstanding shares of Preferred Stock, if any, are so paid or distributed.
Section 2.2. Preferred Stock. The aggregate number of preferred shares (referred to in these Articles of Incorporation as "Preferred Stock") which the Corporation shall have authority to issue is 5,000,000, with no par value. The Preferred Stock may be issued from time to time by the Board of Directors as shares of one or more series. The description of shares of each series of Preferred Stock, including any designations, preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions of redemption shall be as set forth in resolutions adopted by the Board of Directors, and articles of amendment shall be filed with the Georgia Secretary of State as required by law to be filed with respect to issuance of such Preferred Stock, prior to the issuance of any shares of such series.
The Board of Directors is expressly authorized, at any time, by adopting resolutions providing for the issuance of, or providing for a change in the number of, shares of any particular series of Preferred Stock and, if and to the extent from time to time required by
law, by filing articles of amendment which are effective without shareholder action, to increase or decrease the number of shares included in each series of Preferred Stock, but not below the number of shares then issued, and to set in any one or more respects the designations, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications, or terms and conditions of redemption relating to the shares of each such series. The authority of the Board of Directors with respect to each series of Preferred Stock shall include, but not be limited to, setting or changing the following:
(i) the dividend rate, if any, on shares of such series, the times of payment and the date from which dividends shall be accumulated, if dividends are to be cumulative;
(ii) whether the shares of such series shall be redeemable and, if so, the redemption price and the terms and conditions of such redemption;
(iii) the obligation, if any, of the Corporation to redeem shares of such series pursuant to a sinking fund;
(iv) whether shares of such series shall be convertible into, or exchangeable for, shares of stock of any other class or classes and, if so, the terms and conditions of such conversion or exchange, including the price or prices or the rate or rates of conversion or exchange and the terms of adjustment, if any;
(v) whether the shares of such series shall have voting rights, in addition to the voting rights provided by law, and, if so, the extent of such voting rights;
(vi) the rights of the shares of such series in the event of voluntary or involuntary liquidation, dissolution or winding-up of the Corporation; and
(vii) any other relative rights, powers, preferences, qualifications, limitations or restrictions thereof relating to such series.
3.
No shareholder shall have any preemptive right to subscribe for or to purchase any shares or other securities issued by the Corporation.
4.
Section 4.1. Personal Liability of Directors. No director of the Corporation shall be personally liable to the Corporation or its shareholders for monetary damages for breach of duty of care or other duty as a director, except for liability (i) for any appropriation, in violation of the director's duties, of any business opportunity of the Corporation, (ii) for acts or
omissions which involved intentional misconduct or a knowing violation of law,
(iii) for the types of liabilities set forth in Section 14-2-832 of the Georgia
Business Corporation Code, or
(iv) for any transaction from which the director derived an improper personal benefit. If the Georgia Business Corporation Code is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the Georgia Business Corporation Code, as amended.
Section 4.2. Effect of Repeal or Modification. Neither the repeal or modification of this Article 4 nor the adoption of any provision of these Articles of Incorporation inconsistent with these Articles shall eliminate or adversely affect any right or protection of a director of the Corporation existing immediately prior to such repeal, modification or adoption.
5.
Section 5.1. Number and Term of Directors. Subject to the rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, the number of directors that shall constitute the Board of Directors of the Corporation shall be determined from time to time exclusively by the Board of Directors pursuant to a resolution adopted by a majority of the entire Board. Each director shall serve for a term as described in Section 5.2.
Section 5.2. Classified Board. The directors of the Corporation (other than any directors who may be elected by holders of any series of Preferred Stock then outstanding) shall be and are divided into three classes: Class I, Class II and Class III. The number of directors in each class shall be as nearly equal as the then-authorized number of directors constituting the Board of Directors permits. Each director shall serve for a term ending on the date of the third annual meeting following the annual meeting at which such director was elected; provided, however, that the directors first elected to Class I shall serve for a term ending on the date of the annual meeting next following the end of the calendar year 1998, the directors first elected to Class II shall serve for a term ending on the date of the second annual meeting next following the end of the calendar year 1998, and the directors first elected to Class III shall serve for a term ending on the date of the third annual meeting next following the end of the calendar year 1998. Any director who may be elected by holders of any series of Preferred Stock then outstanding shall serve for a term ending on the date of the next annual meeting following the annual meeting at which such director was elected.
Section 5.3. Increase or Decrease in Authorized Number of Directors. In the event of any increase or decrease in the authorized number of directors:
(a) Each director then serving shall nevertheless continue as a director of the class of which he is a member until the expiration of his term, or his prior death, retirement, resignation or removal; and
(b) Newly-created or eliminated directorships resulting from any increase or decrease shall be apportioned by the Board of Directors among the three classes so as to keep the number of directors in each class as nearly equal as possible.
Section 5.4. Removal. Subject to the rights of the holders of any series of Preferred Stock then outstanding, any or all Directors may be removed from office at any time for cause, but only by the same affirmative vote of the shareholders required to amend this Article 5 as provided in Section 9.2 of these Articles of Incorporation.
Section 5.5. Vacancies. Subject to the rights of the holders of any series of Preferred Stock then outstanding to fill director vacancies, vacancies on the Board of Directors (including vacancies resulting from retirement, resignation, removal from office or death) shall be filled exclusively by the Board of Directors. Any director so elected shall hold office until the next annual meeting of shareholders.
6.
In discharging the duties of their respective positions and in determining what is believed to be in the best interests of the Corporation, the Board of Directors, committees of the Board of Directors, and individual directors, in addition to considering the effects of any action on the Corporation or its shareholders, may consider the interests of the employees, customers, suppliers and creditors of the Corporation and its subsidiaries, the communities in which offices or other establishments of the Corporation and its subsidiaries are located, and all other factors such directors consider pertinent; provided, however, that this provision solely grants discretionary authority to the directors and no constituency shall be deemed to have been given any right to consideration hereby.
7.
Any action required or permitted to be taken at a shareholders' meeting may be taken without a meeting if the action is taken by all of the shareholders entitled to vote on the action, or by persons who would be entitled to vote at a meeting those shares having voting power to cast not less than the minimum number (or numbers, in the case of voting by groups) of votes that would be necessary to authorize or take such actions at a meeting at which all shares entitled to vote were present and voted. The action must be evidenced by one or more written consents describing the action taken, signed by shareholders entitled to take action without a meeting and delivered to the Corporation for inclusion in the minutes or filing with the corporate records.
8.
The mailing address of the principal office of the Corporation is One Horizon Way, P.O. Drawer 627, Manchester, Georgia 31816.
9.
Section 9.1. Amendment. These Articles of Incorporation may not be amended without the affirmative vote of at least a majority of the shares entitled to vote generally in the election of directors, voting as a single voting group.
Section 9.2. Supermajority Vote Required for Certain Amendments. Notwithstanding anything to the contrary in these Articles of Incorporation or the Bylaws of the Corporation and subject to the rights of holders of any series of Preferred Stock then outstanding (and notwithstanding that a lesser percentage may be specified by law, these Articles of Incorporation or the Bylaws of the Corporation), (i) the affirmative vote of the holders of at least 75% of the outstanding shares of the Corporation shall be required to alter, amend or repeal, or adopt any provisions inconsistent with, Article 4, Article 5 or this Section 9.2 of these Articles of Incorporation, and (ii) Article II of the Bylaws of the Corporation shall not be altered, amended or repealed, and no provision inconsistent therewith shall be adopted, without the affirmative vote of a majority of the entire Board of Directors or of the holders of at least 75% of the outstanding shares of the Corporation.
IN WITNESS WHEREOF, Horizon Medical Products, Inc. has caused these Articles of Restatement and Amendment to Articles of Incorporation to be executed, its corporate seal to be affixed, and its seal and execution hereof to be attested, all by its duly authorized officers, this day of February, 1998.
HORIZON MEDICAL PRODUCTS, INC.
By:
Name:
Title:
[CORPORATE SEAL]
Attest:
Name:
Title:
EXHIBIT 3.2
AMENDED AND RESTATED BYLAWS
OF
HORIZON MEDICAL PRODUCTS, INC.
ARTICLE I
SHAREHOLDERS
Section 1. Annual Meeting. The annual meeting of the shareholders for the election of directors and for the transaction of such other business as may properly come before the meeting shall be held at such place, either within or without the State of Georgia, on such date, and at such time, as the Board of Directors may by resolution provide, or if the Board of Directors fails to provide, then such meeting shall be held at the principal office of the Corporation at 10:00 a.m., local time, on the fourth Tuesday in April of each year, if not a legal holiday under the laws of the State of Georgia, and if a legal holiday, on the next succeeding business day. The Board of Directors may specify by resolution prior to any special meeting of shareholders held within the year that such meeting shall be in lieu of the annual meeting.
Section 2. Special Meetings. Special meetings of the shareholders may be called by the Board of Directors, by the Chairman of the Board of Directors, by the President, or by the Corporation upon the written request (which request shall set forth the purpose or purposes of the meeting) of the shareholders of record (see Section 6(b) of Article I of these Bylaws) of outstanding shares representing more than 75% of all the votes entitled to be cast on any issue proposed to be considered at the proposed special meeting. In the event such meeting is called by the Board of Directors, such meeting may be held at such place, either within or without the State of Georgia, as is stated in the call and notice thereof. If such meeting is called at the request of shareholders as provided in this Section 2, then such meeting shall be held at such place in the State of Georgia as is stated in the notice thereof.
Section 3. Notice of Meetings. A written or printed notice stating the place, day and hour of the meeting, and in case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered or mailed by the Secretary of the Corporation to each holder of record of stock of the Corporation at the time entitled to vote, at his address as it appears upon the records of the Corporation, not less than 10 nor more than 60 days prior to such meeting. If the Secretary fails to give such notice within 20 days after the call of a meeting, the person calling or requesting such meeting, or any person designated by them, may give such notice. Notice of such meeting may be waived in writing by any shareholder. Notice of any adjourned meeting of the shareholders shall not be required if the time and place to which the meeting is adjourned are announced at the meeting at which the adjournment is taken, unless the Board of Directors sets a new record date for such meeting in which case notice shall be given in the manner provided in this Section 3.
Section 4. Quorum and Shareholder Vote. A quorum for action on any subject matter at any annual or special meeting of shareholders shall exist when the holders of shares entitled to vote a majority of the votes entitled to be cast on such subject matter are represented in person or by proxy at such meeting. If a quorum is present, the affirmative vote of such number of shares as is required by the Georgia Business Corporation Code (as in effect at the time the vote is taken), for approval of the subject matter being voted upon, shall be the act of the shareholders, unless a greater vote is required by the Articles of Incorporation or these Bylaws. If a quorum is not present, a meeting of shareholders may be adjourned from time to time by the vote of shares having a majority of the votes of the shares represented at such meeting, until a quorum is present. When a quorum is present at the reconvening of any adjourned meeting, and if the requirements of Section 3 of this Article I have been observed, then any business may be transacted at such reconvened meeting in the same manner and to the same extent as it might have been transacted at the meeting as originally noticed.
Section 5. Proxies. A shareholder may vote either in person or by proxy duly executed in writing by the shareholder. Unless written notice to the contrary is delivered to the Corporation by the shareholder, a proxy for any meeting shall be valid for any reconvention of any adjourned meeting.
Section 6. Fixing Record Date.
(a) Except as provided in paragraph (b) of this Section 6, for the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or entitled to receive
payment of any dividend, or in order to make a determination of shareholders for
any other proper purpose, the Board of Directors shall have the power to fix a
date, not more than 70 days prior to the date on which the particular action
requiring a determination of shareholders is to be taken, as the record date for
any such determination of shareholders. A record date for the determination of
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof shall not be set less than 10 days prior to such
meeting; provided that the record date for the determination of shareholders
entitled to notice of or to vote at any special meeting of shareholders called
by the Corporation at the request of holders of shares pursuant to Section 2 of
Article I hereof or any adjournment thereof shall be 20 days after the
"Determination Date" (as defined in paragraph (b) of this Section 6), and
provided further that such record date shall be 70 days prior to such special
meeting. In any case where a record date is set, under any provision of this
Section 6, only shareholders of record on the said date shall be entitled to
participate in the action for which the determination of shareholders of record
is made, whether the action is payment of a dividend, allotment of any rights or
any change or conversion or exchange of capital stock or other such action, and,
if the record date is set for the determination of shareholders entitled to
notice of or to vote at a meeting of shareholders, only such shareholders of
record shall be entitled to such notice or vote, notwithstanding any transfer of
any shares on the books of the Corporation after such record date.
(b) (i) In order that the Corporation may determine the
shareholders entitled to request a special meeting of the shareholders or a
special meeting in lieu of the annual meeting of the shareholders pursuant to
Section 2 of Article I hereof, the Board of Directors may fix a record date,
which record date shall not precede the date upon which the resolution fixing
the record date is adopted by the Board of Directors, and which date shall not
be more than 10 days after the date upon which the resolution fixing the record
date is adopted by the Board of Directors. Any shareholder of record seeking to
have the shareholders request such a special meeting shall, by written notice to
the Secretary, request the Board of Directors to fix a record date. The Board of
Directors shall, within 10 business days after the date on which such a request
is received, adopt a resolution fixing the record date. If no record date has
been fixed by the Board of Directors within 10 business days after the date on
which such a request is received, the record date for determining shareholders
entitled to request such a special meeting shall be the first day on which a
signed written request setting forth the request to fix a record date is
delivered to the Corporation by delivery to its principal place of business, or
any officer or agent of the Corporation having custody of the books in which
proceedings of meetings of shareholders are recorded.
(ii) Every written request for a special meeting shall bear the
date of signature of each shareholder who signs the request and no such request
shall be effective to request such a meeting unless, within 70 days after the
record date established in accordance with paragraph (b)(i) of this Section,
written requests signed by a sufficient number of record holders as of such
record date to request a special meeting in accordance with Section 2 of Article
I hereof are delivered to the Corporation in the manner prescribed in paragraph
(b)(i) of this Section.
(iii) In the event of the delivery, in the manner provided by this Section, to the Corporation of the requisite written request or requests for a special meeting and/or any related revocation or revocations, the Corporation shall promptly perform a ministerial review of the validity of the requests and revocations. For the purpose of permitting a prompt ministerial review by the Corporation, no request by shareholders for a special meeting shall be effective until the earlier of (i) five business days following delivery to the Corporation of requests signed by the holders of record (on the record date established in paragraph (b)(i) of this Section) of the requisite minimum number of shares that would be necessary to request such a meeting under Section 2 of Article I hereof, or (ii) such date as the Corporation certifies that the requests delivered to the Corporation in accordance with this Article represent at least the minimum number of shares that would be necessary to request such meeting (the earlier of such dates being herein referred to as the "Determination Date"). Nothing contained in this paragraph shall in any way be construed to suggest or imply that the Board of Directors or any shareholder shall not be entitled to contest the validity of any request or revocation thereof, whether during or after such five business day period, or to take any other action (including, without limitation, the commencement, prosecution or defense of any litigation with respect thereto).
(iv) Unless the Corporation shall deliver, on or before the Determination Date, a certificate stating that the valid requests for a special meeting submitted pursuant to paragraph (iii) above represent less than the requisite minimum number of shares that would be necessary to
request a special meeting under Section 2 of Article I hereof, the Board of Directors shall, within five business days after the Determination Date, adopt a resolution calling a special meeting of the shareholders and fixing a record date for such meeting, in accordance with Section 6(a) of Article I of these Bylaws.
Section 7. Notice of Shareholder Business. At an annual meeting of the shareholders, only such business shall be conducted as shall have been brought before the meeting (a) by or at the direction of the Board of Directors or (b) by any shareholder of the Corporation who complies with the notice procedures set forth in this Section 7 and only to the extent that such business is appropriate for shareholder action under the provisions of the Georgia Business Corporation Code. For business to be properly brought before an annual meeting by a shareholder, the shareholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a shareholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation, not less than 120 days nor more than 180 days prior to the first anniversary of the date of the Corporation's notice of annual meeting provided with respect to the prior year's annual meeting. A shareholder's notice to the Secretary shall set forth as to each matter the shareholder proposes to bring before the annual meeting (a) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (b) the name and address, as they appear on the Corporation's books, of the shareholder proposing such business, (c) the class and number of shares of stock of the Corporation which are beneficially owned by the shareholder, and (d) any material interest of the shareholder in such business. Notwithstanding anything in the Bylaws to the contrary, no business shall be conducted at an annual meeting except in accordance with the procedures set forth in this Section 7. At an annual meeting, the Chairman shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Section 7, and if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted.
Section 8. Notice of Shareholder Nominees. Except for Directors who are elected by Directors pursuant to the provisions of Section 9 of Article II of these Bylaws, only persons who are nominated in accordance with the procedures set forth in this Section 8 shall be eligible for election as Directors. Nominations of persons for election to the Board of Directors of the Corporation may be made at a meeting of shareholders (a) by or at the direction of the Board of Directors or (b) by any shareholder of the Corporation entitled to vote for the election of Directors at the meeting who complies with the notice procedures set forth in this Section 8. Such nominations, other than those made by or at the direction of the Board of Directors, shall be made pursuant to timely notice in writing to the Secretary of the Corporation. To be timely, a shareholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation not less than 120 days nor more than 180 days prior to the first anniversary of the date of the Corporation's notice of annual meeting provided with respect to the prior year's annual meeting. Such shareholder's notice shall set forth (a) as to each person whom the shareholder proposes to nominate for election or re-election as a Director, all information relating to such person that is required to be disclosed in solicitations of proxies for election of Directors, or is otherwise
required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended; and (b) as to the shareholder giving the notice (i) the name and address, as they appear on the Corporation's books, of such shareholder and (ii) the class and number of shares of stock of the Corporation which are beneficially owned by such shareholder. No person shall be eligible for election as a Director of the Corporation unless nominated in accordance with the procedures set forth in the Bylaws. The Chairman shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the procedures prescribed by the Bylaws, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded.
ARTICLE II
DIRECTORS
Section 1. Powers of Directors. The Board of Directors shall manage the business and affairs of the Corporation and, subject to any restrictions imposed by law, by the Articles of Incorporation, or by these Bylaws, may exercise all the powers of the Corporation.
Section 2. Number and Term of Directors.
(a) Subject to the rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, the number of directors that shall constitute the Board of Directors of the Corporation shall be determined from time to time exclusively by the Board of Directors pursuant to a resolution adopted by a majority of the entire Board. No decrease in the number of Directors shall shorten the term of an incumbent Director.
(b) The Directors of the Corporation (other than any Directors who may be elected by holders of any series of Preferred Stock then outstanding) shall be and are divided into three classes: Class I, Class II and Class III. The number of Directors in each class shall be as nearly equal as the then-authorized number of Directors constituting the Board of Directors permits. Each Director shall serve for a term ending on the date of the third annual meeting following the annual meeting at which such Director was elected; provided, however, that the directors first elected to Class I shall serve for a term ending on the date of the annual meeting next following the end of the calendar year 1998, the directors first elected to Class II shall serve for a term ending on the date of the second annual meeting next following the end of the calendar year 1998, and the directors first elected to Class III shall serve for a term ending on the date of the third annual meeting next following the end of the calendar year 1998. Any director who may be elected by holders of any series of Preferred Stock then outstanding shall serve for a term ending on the date of the next annual meeting following the annual meeting at which such director was elected.
(c) In the event of any increase or decrease in the authorized number of Directors:
(i) Each Director then serving shall nevertheless continue as a Director of the class of which he is a member until the expiration of his term or his prior death, retirement, resignation or removal; and
(ii) Newly-created or eliminated Directorships resulting from any increase or decrease shall be apportioned by the Board of Directors among the three classes so as to keep the number of Directors in each class as nearly equal as possible.
Section 3. Meetings of the Directors. The Board of Directors shall meet each year immediately following the annual meeting of shareholders, and the Board may by resolution provide for the time and place of other regular meetings. Special meetings of the Directors may be called by the Chairman of the Board of Directors, by the Chief Executive Officer or by the President or by any two of the Directors.
Section 4. Notice of Meetings. Notice of each meeting of the Directors shall be given by the Secretary by mailing the same at least ten days before the meeting or by telephone, telegraph, facsimile or cablegram or in person at least five days before the meeting, to each Director, except that no notice need be given of regular meetings fixed by the resolution of the Board or of the meeting of the Board held at the place of and immediately following the annual meeting of the shareholders. Any Director may waive notice, either before or after the meeting, and shall be deemed to have waived notice if he is present at the meeting.
Section 5. Action of Directors Without a Meeting. Any action required by law to be taken at a meeting of the Board of Directors, or any action which may be taken at a meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if written consent, setting forth the action so taken, shall be signed by all the Directors, or all the members of the committee, as the case may be, and be filed with the minutes of the proceedings of the Board or the committee. Such consent shall have the same force and effect as a unanimous vote of the Board or the committee, as the case may be.
Section 6. Committees. The Board of Directors may, in its discretion, appoint committees, each consisting of one or more Directors, which shall have and may exercise such delegated powers as shall be conferred on or authorized by the resolutions appointing them, except that no such committee may: (1) approve or propose to shareholders action that the Georgia Business Corporation Code requires to be approved by shareholders, (2) fill vacancies on the Board of Directors or any of its committees, (3) amend the Articles of Incorporation of the Corporation pursuant to Section 14-2-1002 of the Georgia Business Corporation Code, (4) adopt, amend or repeal these Bylaws, or (5) approve a plan of merger not requiring shareholder approval. A majority of any such committee may determine its action, fix the time and place of its meetings, and determine its rules of procedure. Each committee shall keep minutes of its proceedings and actions and shall report regularly to the Board of Directors. The Board of Directors shall have power at any time to fill vacancies in, change the membership of, or discharge any such committee.
Section 7. Compensation. The Board of Directors shall have the authority to determine from time to time the amount of compensation that shall be paid to its members for attendance at meetings of, or service on, the Board of Directors or any committee of the Board. The Board of Directors also shall have the power to reimburse Directors for reasonable expenses of attendance at Directors' meetings and committee meetings.
Section 8. Removal. Subject to the rights of the holders of any series of Preferred Stock then outstanding, any or all Directors may be removed from office at any time for cause, but only by the same affirmative vote of the shareholders required to amend this Article II as provided in the Corporation's Articles of Incorporation.
Section 9. Vacancies. Subject to the rights of the holders of any series of Preferred Stock then outstanding to fill director vacancies, vacancies on the Board of Directors (including, without limitation, vacancies resulting from retirement, resignation, removal from office (with or without cause) or death) shall be filled exclusively by the Board of Directors. Any Director so elected shall hold office until the next annual meeting of shareholders.
Section 10. Telephone Conference Meetings. Unless the Articles of
Incorporation otherwise provide, members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in a meeting of
the Board or committee by means of telephone conference or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
Section 10 shall constitute presence in person at such meeting.
ARTICLE III
OFFICERS
Section 1. Officers. The officers of the Corporation shall consist of a Chairman of the Board of Directors, a Vice Chairman of the Board of Directors, a Chief Executive Officer, a President, one or more Vice Presidents, a Secretary and a Treasurer, and such other officers or assistant officers as may be elected by the Board of Directors. More than one office may be held by the same person. The Board may designate a Vice President as an Executive Vice President or a Senior Vice President, and may designate the order in which the other Vice Presidents may act.
Section 2. Chairman of the Board of Directors. The Chairman of the Board of Directors shall preside at all meetings of the shareholders and all meetings of the Board of Directors and shall have such other duties as the Board of Directors shall from time to time prescribe.
Section 3. Vice Chairman of the Board of Directors. The Vice Chairman of the Board of Directors shall preside at all meetings of the shareholders and all meetings of the Board of
Directors in the absence of the Chairman of the Board of Directors and shall have such other duties as the Board of Directors shall from time to time prescribe.
Section 4. Chief Executive Officer. The Chief Executive Officer shall be the chief executive officer of the Corporation. He shall, under the direction of the Board of Directors, have responsibility for the general direction of the business, policies and affairs of the Corporation and shall supervise the management of the day-to-day business of the Corporation. He shall have such further powers and duties as from time to time may be conferred on him by the Board of Directors. In the absence of the Chairman of the Board of Directors and the Vice Chairman of the Board of Directors, he shall preside at all meetings of the shareholders and the Board of Directors.
Section 5. President. The President shall have responsibility for the general direction of the business, policies and affairs of the Corporation and shall supervise the management of the day-to-day business of the Corporation. He shall have such further powers and duties as from time to time may be conferred on him by and shall report to the Chief Executive Officer.
Section 6. Vice President. The Vice President shall act in the case of the absence or disability of the Chairman of the Board of Directors and the President. If there is more than one Vice President, such Vice Presidents shall act in the order of precedence, as set out by the Board of Directors.
Section 7. Treasurer. The Treasurer shall be responsible for the maintenance of proper financial books and records of the Corporation.
Section 8. Secretary. The Secretary shall keep the minutes of the meetings of the shareholders and the Directors and shall have custody of and attest the seal of the Corporation.
Section 9. Other Duties and Authorities. Each officer, employee and agent shall have such other duties and authorities as may be conferred on them by the Board of Directors.
Section 10. Removal. Any officer may be removed at any time by the Board of Directors, and such vacancy may be filled by the Board of Directors. A contract of employment for a definite term shall not prevent the removal of any officer, but this provision shall not prevent the making of a contract of employment with any officer and shall have no effect upon any cause of action which any officer may have as a result of removal in breach of a contract of employment.
Section 11. Compensation. The salaries of the officers shall be fixed from time to time by the Board of Directors. No officer shall be prevented from receiving such salary by reason of the fact that he is also a Director of the Corporation.
ARTICLE IV
DEPOSITORIES, SIGNATURE AND SEAL
Section 1. Depositories. All funds of the Corporation shall be deposited in the name of the Corporation in such depository or depositories as the Board may designate and shall be drawn out on checks, drafts or other orders signed by such officer, officers, agent or agents as the Board may from time to time authorize.
Section 2. Contracts. All contracts and other instruments shall be signed on behalf of the Corporation by the Chairman of the Board of Directors, the President, any Vice President or by such other officer, officers, agent or agents, as the Chairman of the Board of Directors or the President designates from time to time or as the Board from time to time may by resolution provide.
Section 3. Seal. The seal of the Corporation shall be as follows:
The seal may be manually affixed to any document or may be lithographed or otherwise printed on any document with the same force and effect as if it had been affixed manually. The signature of the Secretary or Assistant Secretary shall attest the seal and may be a facsimile if and to the extent permitted by law.
ARTICLE V
STOCK TRANSFERS
Section 1. Form and Execution of Certificates. The certificates of shares of capital stock of the Corporation shall be in such form as may be approved by the Board of Directors and shall be signed by the Chairman of the Board of Directors, the President or a Vice President and by the Secretary or any Assistant Secretary or the Treasurer or any Assistant Treasurer, provided that any such certificate may be signed by the facsimile signature of either or both of such officers imprinted thereon if the same is countersigned by a transfer agent of the Corporation, and provided further that certificates bearing the facsimile of the signature of such officers imprinted thereon shall be valid in all respects as if such person or persons were still in office, even though such officer or officers shall have died or otherwise ceased to be officers.
Section 2. Transfers of Shares. Shares of stock in the Corporation shall be transferable only on the books of the Corporation by proper transfer signed by the holder of record thereof or by a person duly authorized to sign for such holder of record. The Corporation or its transfer agent or agents shall be authorized to refuse any transfer unless and until it is furnished such evidence as it may reasonably require showing that the requested transfer is proper.
Section 3. Lost, Destroyed or Stolen Certificates. Where the holder of record of a share or shares of stock of the Corporation claims that the certificate representing said share has been lost, destroyed or wrongfully taken, the Board shall by resolution provide for the issuance of a certificate to replace the original if the holder of record so requests before the Corporation has notice that the certificate has been acquired by a bona fide purchaser, files with the Corporation a sufficient indemnity bond, and furnishes evidence of such loss, destruction or wrongful taking satisfactory to the Corporation, in the reasonable exercise of its discretion. The Board may authorize such officer or agent as it may designate to determine the sufficiency of such an indemnity bond and to determine reasonably the sufficiency of the evidence of loss, destruction or wrongful taking.
Section 4. Transfer Agent and Registrar. The Board may (but shall not be required to) appoint a transfer agent or agents and a registrar or registrars to transfers, and may require that all stock certificates bear the signature of such transfer agent or of such transfer agent and registrar.
ARTICLE VI
INDEMNIFICATION
Section 1. Mandatory Indemnification. The Corporation shall indemnify to the fullest extent permitted by the Georgia Business Corporation Code, and to the extent that applicable law from time to time in effect shall permit indemnification that is broader than provided in these Bylaws, then to the maximum extent authorized by law, any individual made a party to a proceeding (as defined in the Georgia Business Corporation Code) because he is or was a director or officer against liability (as defined in the Georgia Business Corporation Code), incurred in the proceeding, if he acted in a manner he believed in good faith to be in or not opposed to the best interests of the Corporation and, in the case of any criminal proceeding, he had no reasonable cause to believe his conduct was unlawful.
Section 2. Permissive Indemnification. The Corporation shall have the power to indemnify to the fullest extent permitted by the Georgia Business Corporation Code, any individual made a party to a proceeding (as defined in the Georgia Business Corporation Code) because he is or was an employee or agent of the Company against liability (as defined in the Georgia Business Corporation Code), incurred in the proceeding, if he acted in a manner he believed in good faith to be in or not opposed to the best interests of the Corporation and, in the case of any criminal proceeding, he had no reasonable cause to believe his conduct was unlawful.
Section 3. Advances for Expenses. The Corporation shall pay for or reimburse the reasonable expenses incurred by a director or officer who is a party to a proceeding, and shall have the authority to pay for or reimburse the reasonable expenses of an employee or agent of the Company who is a party to a proceeding, in each case in advance of the final disposition of a proceeding if:
(a) Such person furnishes the Corporation a written affirmation of his good faith belief that he has met the standard of conduct set forth in Section 1 or Section 2 above, as applicable; and
(b) Such person furnishes the Corporation his written undertaking to repay any funds advanced if it is ultimately determined that he is not entitled to indemnification.
The written undertaking required by paragraph (b) above must be an unlimited general obligation of such person but need not be secured and may be accepted without reference to financial ability to make repayment.
Section 4. Indemnification Not Exclusive. The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Article VI shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Articles of Incorporation, provision of these Bylaws, agreement, vote of shareholders or disinterested directors or otherwise.
Section 5. Amendment or Repeal. Any repeal or modification of the foregoing provisions of this Article VI shall not adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to the time of such repeal or modification.
ARTICLE VII
BUSINESS COMBINATIONS WITH INTERESTED SHAREHOLDERS
All of the requirements of Article 11A of the Georgia Business Corporation Code (currently codified in Sections 14-2-1131 through 14-2-1133 thereof), as may be in effect from time to time (the "Business Combination Statute"), shall apply to all "business combinations" (as defined in Section 14-2-1131 of the Georgia Business Corporation Code) involving the Corporation. The requirements of the Business Combination Statute shall be in addition to the requirements of Article VIII of these Bylaws. Nothing contained in the Business Combination Statute shall be deemed to limit the provisions contained in Article VIII of these Bylaws, and nothing contained in Article VIII of these Bylaws shall be deemed to limit the provisions contained in the Business Combination Statute.
ARTICLE VIII
FAIR PRICE PROVISIONS
All requirements of Sections 14-2-1110 through 14-2-1113 of the Georgia Business Corporation Code, as may be in effect from time to time, shall apply to the Corporation.
ARTICLE IX
AMENDMENT OF BYLAWS
Section 1. Amendment.
(a) Except as otherwise provided in the Articles of Incorporation or these Bylaws, these Bylaws may be altered, amended, repealed or new Bylaws adopted by the Board of Directors by the affirmative vote of a majority of all directors then holding office, but any bylaws adopted by the Board of Directors may be altered, amended, repealed, or any new bylaws adopted, by the shareholders at an annual or special meeting of shareholders, when notice of any such proposed alteration, amendment, repeal or addition shall have been given in the notice of such meeting. The shareholders may prescribe that any bylaw or bylaws adopted by them shall not be altered, amended or repealed by the Board of Directors. Except as otherwise provided in the Articles of Incorporation or these Bylaws, action by the shareholders with respect to these Bylaws shall be taken by an affirmative vote of a majority of all shares outstanding and entitled to vote generally in the election of directors, voting as a single voting group.
(b) Notwithstanding anything herein to the contrary, Article II of these Bylaws shall not be altered, amended or repealed, and no provision inconsistent therewith shall be adopted, without the affirmative vote of a majority of the entire Board of Directors or of the holders of at least 75% of the outstanding shares of the Corporation.
EXHIBIT 10.1
PROMISSORY NOTE
$77,612.43 September 28, 1995
FOR VALUE RECEIVED, the undersigned, MARSHALL B. HUNT hereby promises to pay to the order of HORIZON MEDICAL PRODUCTS, INC., a Georgia corporation (the "Holder"), the sum of Seventy-Seven Thousand Six Hundred Twelve and 43/100 Dollars ($77,612.43) with interest payable thereon as hereinafter provided.
This Note shall bear interest on the unpaid principal balance at a simple per annum interest rate of eight percent (8%). All interest accrued and payable hereunder shall be payable on the first, second, third and fourth anniversary dates from the date hereof with the final payment of accrued interest payable hereunder due and payable on the date on which the final payment of principal is due and payable hereunder.
The unpaid principal balance hereof shall be payable in full on September 20, 2000.
Payments hereunder shall be paid to Holder at Seven North Parkway Square, 4200 Northside Parkway, N.W., Atlanta, Georgia 30327 or at such other address as Holder may designate in writing.
The principal amount hereof may be prepaid from time to time, in whole or in part, without premium or penalty. Any prepayment received by Holder shall be applied first to accrued and unpaid interest and then to the principal balance hereof.
It is expressly agreed that should any installment payment due hereunder not be paid when due, then and in such event, the entire unpaid principal indebtedness evidenced hereby and all unpaid accrued interest shall be due and payable forthwith if such installment has not been paid within fifteen (15) days after written notice of default has been sent to the undersigned and thereafter may be collected without any further notice to or demand on the undersigned.
Time is of the essence of this Note. In the event this Note, or any part thereof, is collected by or through an attorney at law, the undersigned agrees to pay all costs of collection, including but not limited to reasonable attorney's fees.
Presentment for payment, demand, protest and notice of demand, notice of dishonor and notice of nonpayment and all other notices other than as expressly provided for above are hereby waived by the undersigned. No failure to accelerate the debt evidenced hereby by reason of default hereunder, acceptance of a past due amount, or any indulgence granted from time to time shall be construed as a novation of this Note or as a restatement of the indebtedness evidenced hereby or as a waiver of such right of acceleration or
the right of Holder hereafter to insist upon strict compliance with the terms of this Note, or to prevent the exercise by such right of acceleration or any other right granted hereunder or by applicable law. No extension of time for the payment of this Note before or after demand is made hereunder shall operate to release, discharge, modify, change or affect the original liability of the undersigned under this Note, either in whole or in part, unless Holder agrees otherwise in writing. This Note may not be changed orally, but only by agreement in writing signed by the undersigned and Holder.
This Note is intended as a contract under and shall be construed and enforced in accordance with the laws of the State of Georgia. As used herein, the terms "Holder" and "undersigned" shall be deemed to include their respective heirs, successors, legal representatives and assigns, as the case may be, whether by voluntary action of the parties or involuntary by operation of law.
IN WITNESS WHEREOF, the undersigned has caused this Note to be executed under seal on the date first above written.
/s/ Marshall B. Hunt (SEAL) -------------------- MARSHALL B. HUNT |
AMENDMENT TO PROMISSORY NOTE
THIS AMENDMENT, made and entered into as of September 28, 1996, by and between Horizon Medical Products, Inc., a Georgia corporation ("Horizon"), and Marshall B. Hunt ("Hunt");
WHEREAS, Hunt has delivered his Promissory Note dated September 28, 1995 payable to Horizon in the principal amount of Seventy Seven Thousand Six Hundred Twelve and 43/100 dollars ($77,612.43) (the "Note");
WHEREAS, accrued interest under the Note was payable to Horizon on the first anniversary date of the Note;
WHEREAS, Horizon has agreed with Hunt to change the payment date for accrued interest during the initial year of the Note from the first anniversary date to the second anniversary date of the Note;
NOW, THEREFORE, in consideration of Ten Dollars ($10.00) paid and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree to amend the Note, as follows:
1. All accrued interest under the Note from September 28, 1995 through September 28, 1996 shall be due and payable to Horizon on September 28, 1997, which is the second anniversary date of the Note.
2. Other than the amendment described above, all other provisions of the Note shall continue in full force and effect. This amendment shall be binding upon and inure to the benefit of the parties hereto and their personal representatives, successors, and assigns.
WITNESS, the execution of the undersigned effective as of the date first set forth above.
HORIZON MEDICAL PRODUCTS, INC.
By: /s/ [unreadable]
---------------------------
Title: President
------------------------
/s/ Marshall B. Hunt
------------------------------
Marshall B. Hunt
|
EXHIBIT 10.2
PROMISSORY NOTE
$77,612.43 September 28, 1995
FOR VALUE RECEIVED, the undersigned, WILLIAM E. PETERSON, Jr. hereby promises to pay to the order of HORIZON MEDICAL PRODUCTS, INC., a Georgia corporation (the "Holder"), the sum of Seventy-Seven Thousand Six Hundred Twelve and 43/100 Dollars ($77,612.43) with interest payable thereon as hereinafter provided.
This Note shall bear interest on the unpaid principal balance at a simple per annum interest rate of eight percent (8%). All interest accrued and payable hereunder shall be payable on the first, second, third and fourth anniversary dates from the date hereof with the final payment of accrued interest payable hereunder due and payable on the date on which the final payment of principal is due and payable hereunder.
The unpaid principal balance hereof shall be payable in full on September 20, 2000.
Payments hereunder shall be paid to Holder at Seven North Parkway Square, 4200 Northside Parkway, N.W., Atlanta, Georgia 30327 or at such other address as Holder may designate in writing.
The principal amount hereof may be prepaid from time to time, in whole or in part, without premium or penalty. Any prepayment received by Holder shall be applied first to accrued and unpaid interest and then to the principal balance hereof.
It is expressly agreed that should any installment payment due hereunder not be paid when due, then and in such event, the entire unpaid principal indebtedness evidenced hereby and all unpaid accrued interest shall be due and payable forthwith if such installment has not been paid within fifteen (15) days after written notice of default has been sent to the undersigned and thereafter may be collected without any further notice to or demand on the undersigned.
Time is of the essence of this Note. In the event this Note, or any part thereof, is collected by or through an attorney at law, the undersigned agrees to pay all costs of collection, including but not limited to reasonable attorney's fees.
Presentment for payment, demand, protest and notice of demand, notice of dishonor and notice of nonpayment and all other notices other than as expressly provided for above are hereby waived by the undersigned. No failure to accelerate the debt evidenced hereby by reason of default hereunder, acceptance of a past due amount, or any indulgence granted from time to time shall be construed as a novation of this Note or as a restatement of the indebtedness evidenced hereby or as a waiver of such right of acceleration or
the right of Holder hereafter to insist upon strict compliance with the terms of this Note, or to prevent the exercise by such right of acceleration or any other right granted hereunder or by applicable law. No extension of time for the payment of this Note before or after demand is made hereunder shall operate to release, discharge, modify, change or affect the original liability of the undersigned under this Note, either in whole or in part, unless Holder agrees otherwise in writing. This Note may not be changed orally, but only by agreement in writing signed by the undersigned and Holder.
This Note is intended as a contract under and shall be construed and enforced in accordance with the laws of the State of Georgia. As used herein, the terms "Holder" and "undersigned" shall be deemed to include their respective heirs, successors, legal representatives and assigns, as the case may be, whether by voluntary action of the parties or involuntary by operation of law.
IN WITNESS WHEREOF, the undersigned has caused this Note to be executed under seal on the date first above written.
/s/ William E. Peterson, Jr. ----------------------------(SEAL) WILLIAM E. PETERSON,JR. |
AMENDMENT TO PROMISSORY NOTE
THIS AMENDMENT, made and entered into as of September 28, 1996, by and between Horizon Medical Products, Inc., a Georgia corporation ("Horizon"), and William E. Peterson, Jr. ("Peterson");
WHEREAS, Peterson has delivered his Promissory Note dated September 28, 1995 payable to Horizon in the principal amount of Seventy Seven Thousand Six Hundred Twelve and 43/100 dollars ($77,612.43) (the "Note");
WHEREAS, accrued interest under the Note was payable to Horizon on the first anniversary date of the Note;
WHEREAS, Horizon has agreed with Peterson to change the payment date for accrued interest during the initial year of the Note from the first anniversary date to the second anniversary date of the Note;
NOW, THEREFORE, in consideration of Ten Dollars ($10.00) paid and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree to amend the Note, as follows:
1. All accrued interest under the Note from September 28, 1995 through September 28, 1996 shall be due and payable to Horizon on September 28, 1997, which is the second anniversary date of the Note.
2. Other than the amendment described above, all other provisions of the Note shall continue in full force and effect. This amendment shall be binding upon and inure to the benefit of the parties hereto and their personal representatives, successors, and assigns.
WITNESS, the execution of the undersigned effective as of the date first set forth above.
HORIZON MEDICAL PRODUCTS, INC.
By: /s/ [unreadable]
------------------------------
Title: CEO
---------------------------
/s/ William E. Peterson, Jr.
---------------------------------
William E. Peterson, Jr.
|
EXHIBIT 10.3
PROMISSORY NOTE
$77,612.43 September 28, 1995
FOR VALUE RECEIVED, the undersigned, ROY C. MALLADY, JR., hereby promises to pay to the order of HORIZON MEDICAL PRODUCTS, INC., a Georgia corporation (the "Holder"), the sum of Seventy-Seven Thousand Six Hundred Twelve and 43/100 Dollars ($77,612.43) with interest payable thereon as hereinafter provided.
This Note shall bear interest on the unpaid principal balance at a simple per annum interest rate of eight percent (8%). All interest accrued and payable hereunder shall be payable on the first, second, third and fourth anniversary dates from the date hereof with the final payment of accrued interest payable hereunder due and payable on the date on which the final payment of principal is due and payable hereunder.
The unpaid principal balance hereof shall be payable in full on September 20, 2000.
Payments hereunder shall be paid to Holder at Seven North Parkway Square, 4200 Northside Parkway, N.W., Atlanta, Georgia 30327 or at such other address as Holder may designate in writing.
The principal amount hereof may be prepaid from time to time, in whole or in part, without premium or penalty. Any prepayment received by Holder shall be applied first to accrued and unpaid interest and then to the principal balance hereof.
It is expressly agreed that should any installment payment due hereunder not be paid when due, then and in such event, the entire unpaid principal indebtedness evidenced hereby and all unpaid accrued interest shall be due and payable forthwith if such installment has not been paid within fifteen (15) days after written notice of default has been sent to the undersigned and thereafter may be collected without any further notice to or demand on the undersigned.
Time is of the essence of this Note. In the event this Note, or any part thereof, is collected by or through an attorney at law, the undersigned agrees to pay all costs of collection, including but not limited to reasonable attorney's fees.
Presentment for payment, demand, protest and notice of demand, notice of dishonor and notice of nonpayment and all other notices other than as expressly provided for above are hereby waived by the undersigned. No failure to accelerate the debt evidenced hereby by reason of default hereunder, acceptance of a past due amount, or any indulgence granted from time to time shall be construed as a novation of this Note or as a restatement of the indebtedness evidenced hereby or as a waiver of such right of acceleration or
the right of Holder hereafter to insist upon strict compliance with the terms of this Note, or to prevent the exercise by such right of acceleration or any other right granted hereunder or by applicable law. No extension of time for the payment of this Note before or after demand is made hereunder shall operate to release, discharge, modify, change or affect the original liability of the undersigned under this Note, either in whole or in part, unless Holder agrees otherwise in writing. This Note may not be changed orally, but only by agreement in writing signed by the undersigned and Holder.
This Note is intended as a contract under and shall be construed and enforced in accordance with the laws of the State of Georgia. As used herein, the terms "Holder" and "undersigned" shall be deemed to include their respective heirs, successors, legal representatives and assigns, as the case may be, whether by voluntary action of the parties or involuntary by operation of law.
IN WITNESS WHEREOF, the undersigned has caused this Note to be executed under seal on the date first above written.
/s/ Roy C. Mallady, Jr. -----------------------(SEAL) Roy C. Mallady, Jr. |
AMENDMENT TO PROMISSORY NOTE
THIS AMENDMENT, made and entered into as of September 28, 1996, by and between Horizon Medical Products, Inc., a Georgia corporation ("Horizon"), and Roy C. Mallady, Jr. ("Mallady");
WHEREAS, Mallady has delivered his Promissory Note dated September 28, 1995 payable to Horizon in the principal amount of Seventy Seven Thousand Six Hundred Twelve and 43/100 dollars ($77,612.43) (the "Note");
WHEREAS, accrued interest under the Note was payable to Horizon on the first anniversary date of the Note;
WHEREAS, Horizon has agreed with Mallady to change the payment date for accrued interest during the initial year of the Note from the first anniversary date to the second anniversary date of the Note;
NOW, THEREFORE, in consideration of Ten Dollars ($10.00) paid and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree to amend the Note, as follows:
1. All accrued interest under the Note from September 28, 1995 through September 28, 1996 shall be due and payable to Horizon on September 28, 1997, which is the second anniversary date of the Note.
2. Other than the amendment described above, all other provisions of the Note shall continue in full force and effect. This amendment shall be binding upon and inure to the benefit of the parties hereto and their personal representatives, successors, and assigns.
WITNESS, the execution of the undersigned effective as of the date first set forth above.
HORIZON MEDICAL PRODUCTS, INC.
By: /s/ Roy C. Mallady, Jr.
-------------------------------
Title:
---------------------------
/s/ Roy C. Mallady, Jr.
----------------------------------
Roy C. Mallady, Jr.
|
EXHIBIT 10.4
PROMISSORY NOTE
$35,000.00 October 12, 1995
FOR VALUE RECEIVED, the undersigned, MARSHALL B. HUNT, hereby promises to pay to the order of HORIZON MEDICAL PRODUCTS, INC., a Georgia corporation (the "Holder"), the sum of Thirty Five Thousand and No/100 Dollars ($35,000.00) with interest payable thereon as hereinafter provided.
This Note shall bear interest on the unpaid principal balance at a simple per annum interest rate of eight percent (8%). All interest accrued and payable hereunder shall be payable on the first, second, third and fourth anniversary dates from the date hereof with the final payment of accrued interest payable hereunder due and payable on the date on which the final payment of principal is due and payable hereunder.
The unpaid principal balance hereof shall be payable in full on October 12, 2000.
Payments hereunder shall be paid to Holder at Seven North Parkway Square, 4200 Northside Parkway, N.W., Atlanta, Georgia 30327 or at such other address as Holder may designate in writing.
The principal amount hereof may be prepaid from time to time, in whole or in part, without premium or penalty. Any prepayment received by Holder shall be applied first to accrued and unpaid interest and then to the principal balance hereof.
It is expressly agreed that should any installment payment due hereunder not be paid when due, then and in such event, the entire unpaid principal indebtedness evidenced hereby and all unpaid accrued interest shall be due and payable forthwith if such installment has not been paid within fifteen (15) days after written notice of default has been sent to the undersigned and thereafter may be collected without any further notice to or demand on the undersigned.
Time is of the essence of this Note. In the event this Note, or any part thereof, is collected by or through an attorney at law, the undersigned agrees to pay all costs of collection, including but not limited to reasonable attorney's fees.
Presentment for payment, demand, protest and notice of demand, notice of dishonor and notice of nonpayment and all other notices other than as expressly provided for above are hereby waived by the undersigned. No failure to accelerate the debt evidenced hereby by reason of default hereunder, acceptance of a past due amount, or any indulgence granted from time to time shall be construed as a novation of this Note or as a restatement of the indebtedness evidenced hereby or as a waiver of such right of acceleration or the right of Holder hereafter to insist upon strict
compliance with the terms of this Note, or to prevent the exercise by such right of acceleration or any other right granted hereunder or by applicable law. No extension of time for the payment of this Note before or after demand is made hereunder shall operate to release, discharge, modify, change or affect the original liability of the undersigned under this Note, either in whole or in part, unless Holder agrees otherwise in writing. This Note may not be changed orally, but only by agreement in writing signed by the undersigned and Holder.
This Note is intended as a contract under and shall be construed and enforced in accordance with the laws of the State of Georgia. As used herein, the terms "Holder" and "undersigned" shall be deemed to include their respective heirs, successors, legal representatives and assigns, as the case may be, whether by voluntary action of the parties or involuntary by operation of law.
IN WITNESS WHEREOF, the undersigned has caused this Note to be executed under seal on the date first above written.
/s/ Marshall B. Hunt -----------------------(SEAL) MARSHALL B. HUNT |
AMENDMENT TO PROMISSORY NOTE
THIS AMENDMENT, made and entered into as of October 12, 1996, by and between Horizon Medical Products, Inc., a Georgia corporation ("Horizon"), and Marshall B. Hunt ("Hunt");
WHEREAS, Hunt has delivered his Promissory Note dated October 12, 1995 payable to Horizon in the principal amount of Thirty Five Thousand and No/100 $35,000.00) (the "Note");
WHEREAS, accrued interest under the Note was payable to Horizon on the first anniversary date of the Note;
WHEREAS, Horizon has agreed with Hunt to change the payment date for accrued interest during the initial year of the Note from the first anniversary date to the second anniversary date of the Note;
NOW, THEREFORE, in consideration of Ten Dollars ($10.00) paid and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree to amend the Note, as follows:
1. All accrued interest under the Note from October 12, 1995 through October 12, 1996 shall be due and payable to Horizon on September 28, 1997, which is the second anniversary date of the Note.
2. Other than the amendment described above, all other provisions of the Note shall continue in full force and effect. This amendment shall be binding upon and inure to the benefit of the parties hereto and their personal representatives, successors, and assigns.
WITNESS, the execution of the undersigned effective as of the date first set forth above.
HORIZON MEDICAL PRODUCTS, INC.
By: /s/ [unreadable]
---------------------------
Title: President
------------------------
/s/ Marshall B. Hunt
------------------------------
Marshall B. Hunt
|
EXHIBIT 10.5
PROMISSORY NOTE
$35,000.00 October 12, 1995
FOR VALUE RECEIVED, the undersigned, WILLIAM E. PETERSON, JR., hereby promises to pay the order of HORIZON MEDICAL PRODUCTS, INC., a Georgia corporation (the "Holder"), the sum of Thirty Five Thousand and No/100 Dollars ($35,000.00) with interest payable thereon as hereinafter provided.
This Note shall bear interest on the unpaid principal balance at a simple per annum interest rate of eight percent (8%). All interest accrued and payable hereunder shall be payable on the first, second, third, and fourth anniversary dates from the date hereof with the final payment of accrued interest payable hereunder due and payable on the date on which the final payment of principal is due and payable hereunder.
The unpaid principal balance hereof shall be payable in full on October 12, 2000.
Payments hereunder shall be paid to Holder at Seven North Parkway Square, 4200 Northside Parkway, N.W., Atlanta, Georgia 30327, or at such other address as Holder may designate in writing.
The principal amount hereof may be prepaid from time to time, in whole or in part, without premium or penalty. Any prepayment received by Holder shall be applied first to accrued and unpaid interest and then to the principal balance hereof.
It is expressly agreed that should any installment payment due hereunder not be paid when due, then and in such event, the entire unpaid principal indebtedness evidenced hereby and all unpaid accrued interest shall be due and payable forthwith if such installment has not been paid within fifteen (15) days after written notice of default has been sent to the undersigned and thereafter may be collected without any further notice to or demand on the undersigned.
Time is of the essence of this Note. In the event this Note, or any part thereof, is collected by or through an attorney at law, the undersigned agrees to pay all costs of collection, including, but not limited to, reasonable attorney's fees.
Presentment for payment, demand, protest, and notice of demand, notice of dishonor, and notice of nonpayment and all other notices other than as expressly provided for above are hereby waived by the undersigned. No failure to accelerate the debt evidenced hereby by reason of default hereunder, acceptance of a past due amount, or any indulgence granted from time to time shall be construed as a novation of this Note or as a restatement of the indebtedness evidenced hereby or as a waiver of such right of acceleration or the right of Holder hereafter to insist upon strict
compliance with the terms of this Note, or to prevent the exercise by such right of acceleration or any other right granted hereunder or by applicable law. No extension of time for the payment of this Note before or after demand is made hereunder shall operate to release, discharge, modify, change, or affect the original liability of the undersigned under this Note, either in whole or in part, unless Holder agrees otherwise in writing. This Note may not be changed orally, but only by agreement in writing signed by the undersigned and Holder.
This Note is intended as a contract under and shall be construed and enforced in accordance with the laws of the State of Georgia. As used herein, the terms "Holder" and "undersigned" shall be deemed to include their respective heirs, successors, legal representatives, and assigns, as the case may be, whether by voluntary action of the parties or involuntary by operation of law.
IN WITNESS WHEREOF, the undersigned has caused this Note to be executed under seal on the date first above written.
/s/ WILLIAM E. PETERSON, JR.
---------------------------(SEAL)
WILLIAM E. PETERSON, JR.
|
AMENDMENT TO PROMISSORY NOTE
THIS AMENDMENT, made and entered into as of October 12, 1996, by and between Horizon Medical Products, Inc., a Georgia corporation ("Horizon"), and William E. Peterson, Jr. ("Peterson");
WHEREAS, Peterson has delivered his Promissory Note dated October 12, 1995 payable to Horizon in the principal amount of Thirty Five Thousand and No/100 Dollars ($35,000.00) (the "Note");
WHEREAS, accrued interest under the Note was payable to Horizon on the first anniversary date of the Note;
WHEREAS, Horizon has agreed with Peterson to change the payment date for accrued interest during the initial year of the Note from the first anniversary date to the second anniversary date of the Note;
NOW, THEREFORE, in consideration of Ten Dollars ($10.00) paid and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree to amend the Note, as follows:
1. All accrued interest under the Note from October 12, 1995 through October 12, 1996 shall be due and payable to Horizon on October 12, 1997, which is the second anniversary date of the Note.
2. Other than the amendment described above, all other provisions of the Note shall continue in full force and effect. This amendment shall be binding upon and inure to the benefit of the parties hereto and their personal representatives, successors, and assigns.
WITNESS, the execution of the undersigned effective as of the date first set forth above.
HORIZON MEDICAL PRODUCTS, INC.
By:/s/ [unreadable]
--------------------------------
Title: CEO
----------------------------
/s/ William E. Peterson, Jr.
-----------------------------------
William E. Peterson, Jr.
|
EXHIBIT 10.6
PROMISSORY NOTE
$35,000.00 October 12, 1995
FOR VALUE RECEIVED, the undersigned, ROY C. MALLADY, JR., hereby promises
to pay to the order of HORIZON MEDICAL PRODUCTS, INC., a Georgia corporation
(the "Holder"), the sum of Thirty Five Thousand and No/100 Dollars ($35,000.00)
with interest payable thereon as hereinafter provided.
This Note shall bear interest on the unpaid principal balance at a simple per annum interest rate of eight percent (8%). All interest accrued and payable hereunder shall be payable on the first, second, third and fourth anniversary dates from the date hereof with the final payment of accrued interest payable hereunder due and payable on the date on which the final payment of principal is due and payable hereunder.
The unpaid principal balance hereof shall be payable in full on October 12, 2000.
Payments hereunder shall be paid to Holder at Seven North Parkway Square, 4200 Northside Parkway, N.W., Atlanta, Georgia 30327 or at such other address as Holder may designate in writing.
The principal amount hereof may be prepaid from time to time, in whole or in part, without premium or penalty. Any prepayment received by Holder shall be applied first to accrued and unpaid interest and then to the principal balance hereof.
It is expressly agreed that should any installment payment due hereunder not be paid when due, then and in such event, the entire unpaid principal indebtedness evidenced hereby and all unpaid accrued interest shall be due and payable forthwith if such installment has not been paid within fifteen (15) days after written notice of default has been sent to the undersigned and thereafter may be collected without any further notice to or demand on the undersigned.
Time is of the essence of this Note. In the event this Note, or any part thereof, is collected by or through an attorney at law, the undersigned agrees to pay all costs of collection, including but not limited to reasonable attorney's fees.
Presentment for payment, demand, protest and notice of demand, notice of dishonor and notice of nonpayment and all other notices other than as expressly provided for above are hereby waived by the undersigned. No failure to accelerate the debt evidenced hereby by reason of default hereunder, acceptance of a past due amount, or any indulgence granted from time to time shall be construed as a novation of this Note or as a restatement of the indebtedness evidenced hereby or as a waiver of such right of acceleration or the right of Holder hereafter to insist upon strict
compliance with the terms of this Note, or to prevent the exercise by such right of acceleration or any other right granted hereunder or by applicable law. No extension of time for the payment of this Note before or after demand is made hereunder shall operate to release, discharge, modify, change or affect the original liability of the undersigned under this Note, either in whole or in part, unless Holder agrees otherwise in writing. This Note may not be changed orally, but only by agreement in writing signed by the undersigned and Holder.
This Note is intended as a contract under and shall be construed and enforced in accordance with the laws of the State of Georgia. As used herein, the terms "Holder" and "undersigned" shall be deemed to include their respective heirs, successors, legal representatives and assigns, as the case may be, whether by voluntary action of the parties or involuntary by operation of law.
IN WITNESS WHEREOF, the undersigned has caused this Note to be executed under seal on the date first above written.
/s/ Roy C. Mallady, Jr. -----------------------(SEAL) ROY C. MALLADY, JR. |
AMENDMENT TO PROMISSORY NOTE
THIS AMENDMENT, made and entered into as of October 12, 1996, by and between Horizon Medical Products, Inc., a Georgia corporation ("Horizon"), and Roy C. Mallady, Jr. ("Mallady");
WHEREAS, Mallady has delivered his Promissory Note dated October 12, 1996, payable to Horizon in the principal amount of Seventy Seven Thousand Six Hundred Twelve and 43/100 dollars ($77,612.43) (the "Note");
WHEREAS, accrued interest under the Note was payable to Horizon on the first anniversary date of the Note;
WHEREAS, Horizon has agreed with Mallady to change the payment date for accrued interest during the initial year of the Note from the first anniversary date to the second anniversary date of the Note;
NOW, THEREFORE, in consideration of Ten Dollars ($10.00) paid and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree to amend the Note, as follows:
1. All accrued interest under the Note from October 12, 1995 through October 12, 1996, shall be due and payable to Horizon on September 28, 1997, which is the second anniversary date of the Note.
2. Other than the amendment described above, all other provisions of the Note shall continue in full force and effect. This amendment shall be binding upon and inure to the benefit of the parties hereto and their personal representatives, successors, and assigns.
WITNESS, the execution of the undersigned effective as of the date first set forth above.
HORIZON MEDICAL PRODUCTS, INC.
By: /s/ [unreadable]
------------------------------
Title: President
---------------------------
/s/ Roy c. Mallady, Jr.
---------------------------------
Roy c. Mallady, Jr.
|
EXHIBIT 10.7
AMENDED AND RESTATED
SECURED PROMISSORY NOTE
$1,500,000.00 July 15, 1997
FOR VALUE RECEIVED, the undersigned, HORIZON MEDICAL PRODUCTS, INC., a Georgia corporation ("Maker"), promises to pay to the order of NATIONSCREDIT COMMERCIAL CORPORATION, a Delaware corporation ("PAYEE"; Payee and any subsequent holder[s] hereof are hereinafter referred to collectively as "HOLDER"), at the office of Payee at 201 Broad Street, One Canterbury Green, Stamford, Connecticut 06901, or at such other place as Holder may designate to Maker in writing from time to time, the principal sum of ONE MILLION FIVE HUNDRED THOUSAND AND NO/100THS DOLLARS ($1,500,000.00), together with interest on the outstanding principal balance hereof from the date hereof at the rate of thirteen and 75/100ths percent (13.75%) per annum (computed on the basis of a 360-day year).
Interest only on the outstanding principal balance hereof shall be due and payable monthly, in arrears, with the first installment being payable on the first (1st) day of August, 1997, and subsequent installments being payable on the first (1st) day of each succeeding month thereafter until September 25, 2000 (the "MATURITY DATE"), at which time the entire outstanding principal balance, together with all accrued and unpaid interest, shall be immediately due and payable in full.
The indebtedness evidenced hereby may be prepaid in whole or in part, at any time and from time to time, without penalty. Any such prepayments shall be credited first to any accrued and unpaid interest and then to the outstanding principal balance hereof.
Time is of the essence of this Note. It is hereby expressly agreed that in the event that any default be made in the payment of principal or interest as stipulated above, which default is not cured following the giving of any applicable notice and within five (5) days; or in the event that any default or event of default shall occur under that certain Loan Agreement, dated as of September 25, 1995, between Maker and Sirrom Capital Corporation, as assigned by Sirrom Capital Corporation to Sirrom Investments, Inc., as thereafter assigned by Sirrom Investments, Inc. to Payee (the "LOAN AGREEMENT"), which default or event of default is not cured following the giving of any applicable notice and within any applicable cure period set forth in said Loan Agreement; or should any default by Maker be made in the performance or observance of any covenants or conditions contained in any other instrument or document now or hereafter evidencing, securing or otherwise relating to the indebtedness evidenced hereby (subject to any applicable notice and cure period provisions that may be set forth therein); then, and in such event, the entire outstanding principal balance of the indebtedness evidenced hereby, together with any other sums advanced hereunder, under the Loan Agreement and/or under any other instrument or document now or hereafter evidencing, securing or in any way relating to the indebtedness evidenced hereby, together with all unpaid interest accrued thereon, shall, at the option of Holder and without notice to Maker, at once become due and payable and may be
collected forthwith, regardless of the stipulated date of maturity. Upon the occurrence of any default as set forth herein, at the option of Holder and without notice to Maker, all accrued and unpaid interest, if any, shall be added to the outstanding principal balance hereof, and the entire outstanding principal balance, as so adjusted, shall bear interest thereafter until paid at an annual rate (the "DEFAULT RATE") equal to the lesser of (i) the rate that is seven percentage points (7.0%) in excess of the above-specified interest rate, or (ii) the maximum rate of interest allowed to be charged under applicable law (the "MAXIMUM RATE"), regardless of whether or not there has been an acceleration of the payment of principal as set forth herein. All such interest shall be paid at the time of and as a condition precedent to the curing of any such default.
In the event this Note is placed in the hands of an attorney for collection, or if Holder incurs any costs incident to the collection of the indebtedness evidenced hereby, Maker and any indorsers hereof agree to pay to Holder an amount equal to all such costs, including without limitation all actual reasonable attorney's fees and all court costs.
Presentment for payment, demand, protest and notice of demand, protest and nonpayment are hereby waived by Maker and all other parties hereto. No failure to accelerate the indebtedness evidenced hereby by reason of default hereunder, acceptance of a past-due installment or other indulgences granted from time to time, shall be construed as a novation of this Note or as a waiver of such right of acceleration or of the right of Holder thereafter to insist upon strict compliance with the terms of this Note or to prevent the exercise of such right of acceleration or any other right granted hereunder or by applicable laws. No extension of the time for payment of the indebtedness evidenced hereby or any installment due hereunder, made by agreement with any person now or hereafter liable for payment of the indebtedness evidenced hereby, shall operate to release, discharge, modify, change or affect the original liability of Maker hereunder or that of any other person now or hereafter liable for payment of the indebtedness evidenced hereby, either in whole or in part, unless Holder agrees otherwise in writing. This Note may not be changed orally, but only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification or discharge is sought.
The indebtedness and other obligations evidenced by this Note are further evidenced by (i) the Loan Agreement and (ii) certain other instruments and documents, as may be required to protect and preserve the rights of Maker and Holder as more specifically described in the Loan Agreement.
All agreements herein made are expressly limited so that in no event whatsoever, whether by reason of advancement of proceeds hereof, acceleration of maturity of the unpaid balance hereof or otherwise, shall the amount paid or agreed to be paid to Holder for the use of the money advanced or to be advanced hereunder exceed the Maximum Rate. If, from any circumstances whatsoever, the fulfillment of any provision of this Note or any other agreement or instrument now or hereafter evidencing, securing or in any way relating to the indebtedness evidenced hereby shall involve the payment of interest in excess of the Maximum Rate, then, ipso facto, the obligation to pay interest hereunder shall be reduced to the Maximum Rate; and if from any circumstance whatsoever, Holder shall ever receive interest, the amount of which
would exceed the amount collectible at the Maximum Rate, such amount as would be excessive interest shall be applied to the reduction of the principal balance remaining unpaid hereunder and not to the payment of interest. This provision shall control every other provision in any and all other agreements and instruments existing or hereafter arising between Maker and Holder with respect to the indebtedness evidenced hereby.
This Note is intended as a contract under and shall be construed and enforceable in accordance with the laws of the State of Tennessee, except to the extent that federal law may be applicable to the determination of the Maximum Rate.
This Note amends and restates, and supersedes and replaces, that certain Secured Promissory Note, dated September 25, 1995, executed by Maker and made payable to the order of Sirrom Capital Corporation, in the principal face amount of One Million Five Hundred Thousand and No/100ths Dollars ($1,500,000.00), as endorsed to the order of Sirrom Investments, Inc., as thereafter endorsed to the order of Payee (the "PRIOR NOTE"). Nothing contained herein is or shall be deemed to constitute a novation of the Prior Note or of the indebtedness evidenced thereby.
As used herein, the terms "MAKER" and "HOLDER" shall be deemed to include their respective successors, legal representatives and assigns, whether by voluntary action of the parties or by operation of law.
MAKER:
HORIZON MEDICAL PRODUCTS,
INC., a Georgia corporation
By: /s/ William E. Peterson, Jr.
-------------------------------------
Title: President
-------------------------------
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ACKNOWLEDGEMENT AND CONSENT OF GUARANTOR
The undersigned does hereby (i) acknowledge and consent to the transfer
and assignment to NationsCredit Commercial Corporation ("NATIONSCREDIT") of that
certain Secured Promissory Note, dated September 25, 1995, executed by Horizon
Medical Products, Inc. payable to the order of Sirrom Capital Corporation, in
the principal face amount of One Million Five Hundred Thousand and No/100ths
Dollars ($1,500,000.00) (the "PRIOR NOTE"), and any and all documents and
instruments executed or delivered in connection therewith (including, without
limitation, the Guaranty Agreement and Security Agreement referred to below),
(ii) acknowledge and consent to the amendment and restatement of the Prior Note
by that certain Amended and Restated Secured Promissory Note, dated July 15,
1997, executed by Horizon Medical Products, Inc. payable to the order of
NationsCredit, in the principal face amount of One Million Five Hundred Thousand
and No/100ths Dollars ($1,500,000.00) (the "AMENDED AND RESTATED NOTE"), (iii)
reaffirm all of its obligations and agreements under (x) the Guaranty Agreement,
dated October 24, 1995, executed by the undersigned in favor of Sirrom Capital
Corporation to guarantee repayment of the Prior Note, as assigned to
NationsCredit (the "GUARANTY") and (y) the Security Agreement, dated October 24,
1995, executed by the undersigned in favor Sirrom Capital Corporation to secure
the undersigned's obligations under the Guaranty, as assigned to NationsCredit
(the "SECURITY AGREEMENT"), and (iv) confirm and agree that the Guaranty and the
Security Agreement are and shall remain in full force and effect after giving
effect to the transactions described above, and that such documents secure and
will continue to secure the Amended and Restated Note and the indebtedness
evidenced thereby.
IN WITNESS WHEREOF, the undersigned has executed this Acknowledgement and Consent as of the 15th day of July 1997.
HORIZON ACQUISITION CORP.,
a Georgia corporation
By: /s/ William E. Peterson, Jr.
-------------------------------------
Title: President
-------------------------------
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EXHIBIT 10.8
CREDIT AGREEMENT
DATED AS OF JULY 15, 1997
AMONG
HORIZON MEDICAL PRODUCTS, INC.,
THE LENDERS REFERRED TO HEREIN
AND
NATIONSCREDIT COMMERCIAL CORPORATION,
AS AGENT
TABLE OF CONTENTS
Page
----
ARTICLE I - DEFINITIONS................................................................................. 1
SECTION 1.01. Certain Defined Terms........................................................... 1
SECTION 1.02. Accounting Terms and Determinations.............................................18
SECTION 1.03. Other Definitional Provisions...................................................19
ARTICLE II - TRANCHE A LOANS............................................................................19
SECTION 2.01. Tranche A Loans.................................................................19
SECTION 2.02. Tranche A Notes.................................................................19
SECTION 2.03. Interest on the Tranche A Loans.................................................19
SECTION 2.04. Repayments and Prepayments of Tranche A Notes...................................19
ARTICLE III - TRANCHE B LOANS AND WARRANTS..............................................................22
SECTION 3.01. Tranche B Loans.................................................................22
SECTION 3.02. Tranche B Notes.................................................................22
SECTION 3.03. Interest on the Tranche B Loans.................................................22
SECTION 3.04. Repayments and Prepayments of Tranche B Notes...................................22
SECTION 3.05. Warrants........................................................................24
ARTICLE IV - WORKING CAPITAL LOANS......................................................................25
SECTION 4.01. Working Capital Loans and Commitments...........................................25
SECTION 4.02. Working Capital Notes...........................................................25
SECTION 4.03. Interest on the Working Capital Loans...........................................25
SECTION 4.04. Advancing Working Capital Loans.................................................25
SECTION 4.05. Mandatory Repayments and Prepayments............................................26
SECTION 4.06. Optional Prepayments............................................................26
SECTION 4.07. Application of Payments.........................................................26
ARTICLE V - CONDITIONS..................................................................................27
SECTION 5.01 Conditions to closing...........................................................27
SECTION 5.02. Conditions to Each Loan.........................................................29
ARTICLE VI - REPRESENTATIONS AND WARRANTIES.............................................................31
SECTION 6.01. Corporate Existence and Power...................................................31
SECTION 6.02. Corporate and Governmental Authorization; No Contravention......................31
SECTION 6.03. Binding Effect; Liens of Security Documents.....................................31
SECTION 6.04. Financial Information...........................................................32
SECTION 6.05. Litigation......................................................................33
SECTION 6.06. Ownership of Property, Liens....................................................33
SECTION 6.07. No Default......................................................................33
SECTION 6.08. No Burdensome Restrictions......................................................33
SECTION 6.09. Labor Matters...................................................................34
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SECTION 6.10. Subsidiaries; Other Equity Investments..........................................34
SECTION 6.11. Investment Company Act..........................................................34
SECTION 6.12. Margin Regulations..............................................................34
SECTION 6.13. Taxes...........................................................................34
SECTION 6.14. Compliance with ERISA...........................................................35
SECTION 6.15. Brokers.........................................................................35
SECTION 6.16. Related Transactions............................................................35
SECTION 6.17. Employment, Shareholders and Subscription Agreements............................35
SECTION 6.18. Full Disclosure.................................................................35
SECTION 6.19. Representations and Warranties Incorporated from Other Operative Documents......36
SECTION 6.20. Private Offering................................................................36
SECTION 6.21. Compliance with Environmental Requirements; No Hazardous Materials..............36
SECTION 6.22. Capitalization..................................................................38
SECTION 6.23. Real Property Interests.........................................................38
ARTICLE VII - AFFIRMATIVE COVENANTS.....................................................................39
SECTION 7.01. Financial Statements and Other Reports..........................................39
SECTION 7.02. Payment of Obligations..........................................................43
SECTION 7.03. Conduct of Business and Maintenance of Existence................................43
SECTION 7.04. Maintenance of Property; Insurance..............................................43
SECTION 7.05. Compliance with Laws............................................................44
SECTION 7.06. Inspection of Property, Books and Records.......................................44
SECTION 7.07. Use of Proceeds.................................................................44
SECTION 7.08. Further Assurances..............................................................45
SECTION 7.09. Board Meetings..................................................................45
SECTION 7.10. Lenders' Meetings...............................................................45
SECTION 7.11. Consummation of the Acquisition.................................................45
SECTION 7.12. Hazardous Materials; Remediation................................................45
SECTION 7.13. Landlord and Warehouseman Waivers...............................................46
SECTION 7.14. Collateral Reports..............................................................46
SECTION 7.15. Collections; Right to Notify Account Debtors....................................46
SECTION 7.16. Enforcement of Covenants Not to Compete.........................................47
SECTION 7.17. Hedging Facilities..............................................................47
ARTICLE VIII - NEGATIVE COVENANTS.......................................................................48
SECTION 8.01. Debt............................................................................48
SECTION 8.02. Negative Pledge.................................................................48
SECTION 8.03. Capital Stock...................................................................49
SECTION 8.04. Restricted Payments.............................................................49
SECTION 8.05. ERIS............................................................................50
SECTION 8.06. Consolidations, Mergers and Sales of Assets.....................................50
SECTION 8.07. Purchase of Assets, Investments.................................................51
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SECTION 8.08. Transactions with Affiliates....................................................51
SECTION 8.09. Amendments or Waivers...........................................................51
SECTION 8.10. Fiscal Year.....................................................................51
SECTION 8.11. Management Compensation.........................................................51
SECTION 8.12. Lease Payments..................................................................51
SECTION 8.13. Minimum Net Worth...............................................................52
SECTION 8.14. Capital Expenditures............................................................52
SECTION 8.15. Total Debt Coverage Ratio.......................................................52
SECTION 8.16. Leverage........................................................................52
SECTION 8.17. Minimum EBITDA..................................................................52
SECTION 8.18. Interest Coverage...............................................................53
ARTICLE IX -EVENTS OF DEFAULT...........................................................................54
SECTION 9.01. Events of Default...............................................................54
ARTICLE X - FEES, EXPENSES AND INDEMNITIES; GENERAL PROVISIONS RELATING TO PAYMENTS.....................58
SECTION 10.01. Fees...........................................................................58
SECTION 10.02. Computation of Interest and Fees...............................................58
SECTION 10.03. General Provisions Regarding Payments..........................................58
SECTION 10.04. Expenses.......................................................................59
SECTION 10.05. Indemnity......................................................................59
SECTION 10.06. Taxes..........................................................................60
SECTION 10.07. Funding Losses.................................................................60
SECTION 10.08. Maximum Interest...............................................................60
ARTICLE XI - THE AGENT..................................................................................62
SECTION 11.01. Appointment and Authorization..................................................62
SECTION 11.03. Action by Agent................................................................62
SECTION 11.04. Consultation with Experts......................................................62
SECTION 11.05. Liability of Agent.............................................................62
SECTION 11.06. Indemnification................................................................62
SECTION 11.07. Credit Decision................................................................63
SECTION 11.08. Successor Agent................................................................63
ARTICLE XII - MISCELLANEOUS.............................................................................64
SECTION 12.01. Survival.......................................................................64
SECTION 12.02. No Waivers.....................................................................64
SECTION 12.03. Notices........................................................................64
SECTION 12.04. Severability...................................................................64
SECTION 12.05. Amendments and Waivers.........................................................64
SECTION 12.06. Successors and Assigns; Registration...........................................65
SECTION 12.07. Collateral.....................................................................66
SECTION 12.08. Headings.......................................................................66
SECTION 12.09. GOVERNING LAW; SUBMISSION TO JURISDICTION......................................67
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SECTION 12.10. Notice of Breach by Agent or Lender............................................67 SECTION 12.11. WAIVER OF JURY TRIAL...........................................................67 SECTION 12.12. Counterparts...................................................................68 |
EXHIBIT A - Tranche A Note
EXHIBIT B - Tranche B Note
EXHIBIT C - Working Capital Note
EXHIBIT D - Warrant
EXHIBIT E - Warrantholders Rights Agreement
EXHIBIT F - Company Security Agreement
EXHIBIT G - Company Pledge Agreement
EXHIBIT H - Subsidiary Guaranty Agreement
EXHIBIT I - Subsidiary Security Agreement
EXHIBIT J - Shareholder Pledge Agreement
EXHIBIT K - Borrowing Base Certificate
EXHIBIT L - Opinion of Counsel to the Company
EXHIBIT M - Opinion of Kilpatrick Stockton LLP, Special Counsel
to the Agent
SCHEDULE 5.01(n) - Closing Costs to be Paid at Closing
SCHEDULE 5.01(o) - Debt to be Repaid at Closing
SCHEDULE 6.10 - Subsidiaries
SCHEDULE 6.15 - Brokers
SCHEDULE 6.17 - Employment, Shareholders' and Subscription Agreements
SCHEDULE 6.21 - Environmental Matters
SCHEDULE 6.22 - Initial Capitalization
SCHEDULE 6.23 - Real Property Interests
SCHEDULE 7.04 - Required Insurance
SCHEDULE 8.01 - Permitted Debt
SCHEDULE 8.02 - Permitted Liens
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CREDIT AGREEMENT
CREDIT AGREEMENT dated as of July 15, 1997 among HORIZON MEDICAL PRODUCTS, INC., the LENDERS listed on the signature pages hereof and NATIONSCREDIT COMMERCIAL CORPORATION, as Agent.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. CERTAIN DEFINED TERMS. The following terms have the following meanings:
"ACQUISITION" means the purchase of all of the outstanding common stock of Strato/Infusaid on or before the Closing Date as described in the Acquisition Documents.
"ACQUISITION DOCUMENTS" means (i) the Strato/Infusaid Purchase Agreement and (ii) the Arrow Purchase Agreement.
"ADJUSTED EBITDA" means, for any period, EBITDA for such period less Consolidated Capital Expenditures for such period.
"AFFILIATE" means (i) any Person that directly, or indirectly through one or more intermediaries, controls the Company (a "CONTROLLING PERSON") or (ii) any Person (other than the Company or any of its Subsidiaries) which is controlled by or is under common control with a Controlling Person. As used herein, the term "control" of a Person means the possession, directly or indirectly, of the power to vote 10% or more of any class of voting securities of such Person or to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise.
"AGENT" means NationsCredit in its capacity as agent for the Lenders hereunder, and its successors in such capacity.
"ARROW" means Arrow Interventional, Inc., a Delaware corporation.
"ARROW PURCHASE AGREEMENT" means the Asset Purchase and Stock Redemption Agreement among the Company, Arrow and Strato/Infusaid, dated as of July 15, 1997, including the exhibits and schedules thereto, and all agreements, documents and instruments executed and delivered pursuant thereto or in connection therewith.
"ASSET SALE" means any sale, lease or other disposition (including any such transaction effected by way of merger or consolidation) by the Company or any Subsidiary of any asset, but excluding (i) dispositions of inventory in the ordinary course of business, (ii) dispositions of Temporary Cash Investments and cash payments otherwise permitted under this Agreement; provided that a disposition of assets not excluded by clauses (i) or (ii) above during any Fiscal Year shall not constitute an Asset Sale unless and until (and only to the extent that) (x) the aggregate Net Cash Proceeds of such disposition of assets are not used for the purchase of reasonably equivalent replacements of such assets within 90 days thereof or (y) the aggregate Net Cash Proceeds from such disposition (if not used as provided in clause (x) above), when combined with all other such dispositions previously made during such Fiscal Year and not used as provided in clause (x) above, exceeds $100,000.
"BENEFIT ARRANGEMENT" means at any time an employee benefit plan within the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan and which is maintained or otherwise contributed to by any member of the ERISA Group.
"BORROWING BASE" means, on any date, a dollar amount equal to 80% of Eligible Domestic Receivables, 80% of Eligible Secured Foreign Receivables, 50% of Eligible Unsecured Foreign Receivables (not to exceed $500,000 of Borrowing Base availability at any time) and 50% of Eligible Inventory, each determined as of such date; provided, however, that the Receivables and Inventory of Horizon/Neostar shall be excluded for purposes of determining the Borrowing Base.
"BORROWING BASE CERTIFICATE" means a certificate, duly executed by the chief financial officer or treasurer of the Company, appropriately completed and substantially in the form of Exhibit K.
"BUSINESS DAY" means any day except a Saturday, Sunday or other day on which commercial banks in New York City are authorized by law to close.
"CAPITAL LEASE" of any Person means any lease of any property (whether real, personal or mixed) by such Person as lessee which would, in accordance with GAAP, be required to be accounted for as a capital lease on the balance sheet of such Person.
"CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C. Sections 9601 et seq.), as amended from time to time, and regulations promulgated thereunder.
"CLASS" refers, with respect to Loans, to whether such Loans are Tranche A Loans, Tranche B Loans or Working Capital Loans and, with respect to Commitments, to whether such Commitments are Tranche A Commitments, Tranche B Commitments or Working Capital Commitments.
"CLOSING DATE" means July 15, 1997, or such other date as the parties hereto agree to in writing, but in any event not later than August 15, 1997.
"CODE" means the Internal Revenue Code of 1986, as amended from time to time.
"COLLATERAL" means all property mortgaged, pledged or otherwise purported to be subjected to a Lien pursuant to the Security Documents.
"COMMITMENT" means a Tranche A Commitment, Tranche B Commitment or Working Capital Commitment, or any combination of the foregoing, as the context may require.
"COMMON STOCK" means the Voting Common Stock or the Non-Voting Common Stock, or both, as the context may require.
"COMPANY" means Horizon Medical Products, Inc., a Georgia corporation.
"COMPANY ACCOUNT" means the account specified on the signature pages hereof into which all Loans to the Company shall be made available, or such other account as the Company shall from time to time specify by notice to the Lenders.
"COMPANY PLEDGE AGREEMENT" means the Pledge Agreement dated as of the date hereof, between the Company and the Agent, substantially in the form of Exhibit G.
"COMPANY SECURITY AGREEMENT" means the Security Agreement dated as of the date hereof between the Company and the Agent, substantially in the form of Exhibit F.
"CONSOLIDATED CAPITAL EXPENDITURES" means, for any period, the aggregate amount of expenditures by the Company and its Consolidated Subsidiaries for plant, property and equipment during such period (including any such expenditure by way of acquisition of a Person or by way of assumption of indebtedness or other obligations of a Person, to the extent reflected as plant, property and equipment), but excluding any such expenditures made for the replacement or restoration of assets to the extent financed by condemnation awards or proceeds of insurance received with respect to the loss or taking of or damage to the asset or assets being replaced or restored.
"CONSOLIDATED CURRENT ASSETS" means, at any date, the consolidated current assets (excluding cash and cash equivalents) of the Company and its Consolidated Subsidiaries determined as of such date.
"CONSOLIDATED CURRENT LIABILITIES" means, at any date, (i) the consolidated current liabilities (excluding Debt) of the Company and its Consolidated Subsidiaries plus (ii) the current liabilities of any Person (other than the Company or a Consolidated Subsidiary) which are Guaranteed by the Company or a Consolidated Subsidiary, all determined as of such date.
"CONSOLIDATED FREE CASH FLOW" means, for any period, EBITDA for such period minus the following amounts:
(a) all cash payments of income taxes by the Company and its Consolidated Subsidiaries during such period;
(b) Consolidated Capital Expenditures for such period, to the
extent that such Consolidated Capital Expenditures are permitted by
Section 8.13 and are not financed during such period (and will not be
financed in any future period) with the proceeds of Debt of the Company
or any Subsidiary permitted by Section 8.01(c); and
(c) any net gain in respect of Asset Sales during such period.
"CONSOLIDATED INTEREST EXPENSE" means for any period, the aggregate amount of all interest on Debt (including payments in the nature of interest under a Capital Lease), that would, in accordance with GAAP, be deducted in determining consolidated net income for such period.
"CONSOLIDATED NET WORTH" means as of the date of any determination thereof, the amount of the shareholder's equity of the Company and its Consolidated Subsidiaries as would be shown on the consolidated balance sheet of the Company and its Consolidated Subsidiaries, determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED SUBSIDIARY" means at any date any Subsidiary or other entity the accounts of which would be consolidated with those of the Company and its consolidated financial statements if such statements were prepared as of such date.
"CONSOLIDATED TOTAL DEBT" means at any date the Debt of the Company and its Consolidated Subsidiaries, determined on a consolidated basis at such date and without giving effect to any amount attributable to original issue discount in connection with the issuance of the Warrants.
"CORDOVA WARRANT" means the Warrant to Purchase 10,000 Shares of Common Stock issued by the Company to Cordova Capital Partners, L.P. - Enhanced Appreciation, dated April 26, 1994, as amended by Agreement dated September __, 1995, among Cordova Capital Partners, L.P. - Enhanced Appreciation, the Company and the Management Stockholders.
"CREDIT PARTY" means the Company, any Subsidiary of the Company and any shareholder of the Company which is a party to a Shareholder Pledge Agreement.
"DEBT" of a Person means at any date, without duplication, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business, (iv) all Capital Leases of such Person, (v) all obligations of such Person to purchase securities (or other property) which arise out of or in connection with the sale of the same or substantially similar securities (or property), (vi) all non-contingent obligations of such Person to reimburse any bank or other Person in respect of amounts paid under a letter of
credit or similar instrument, (vii) all equity securities of such Person (other than the Warrants) subject to repurchase or redemption otherwise than at the sole option of such Person, (viii) all Debt secured by a Lien on any asset of such Person, whether or not such Debt is otherwise an obligation of such Person, and (ix) all Debt of others Guaranteed by such Person.
"DEFAULT" means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default.
"EBITDA" means, for any period, the consolidated net income of
the Company and its Consolidated Subsidiaries for such period, after all
expenses and other proper charges except depreciation, interest, amortization
and income taxes, determined in accordance with GAAP eliminating (i) all
intercompany items, (ii) all earnings attributable to equity interests in
Persons that are not Subsidiaries unless actually received by the Company or a
Consolidated Subsidiary, (iii) all income arising from the forgiveness,
adjustment, or negotiated settlement of any indebtedness, (iv) any extraordinary
items of income or expense, (v) any increase or decrease in income arising from
any change in the Company's method of accounting, subject to Section 1.02, and
(vi) any interest income; provided that, for purposes of determining EBITDA for
periods on or before December 31, 1997, there shall be excluded from such
calculation any non-recurring expenses related to the acquisition or relocation
of Strato/Infusaid.
"ELIGIBLE INVENTORY" means, at any date of determination
thereof, the aggregate value (determined at the lower of cost or market on a
basis consistent with that used in the preparation of the financial statements
referred to in Section 6.04(a)) at such date of all Inventory owned by the
Company or any Subsidiary (other than Horizon/Neostar) and located in any
jurisdiction in the United States of America as to which appropriate UCC
financing statements have been filed naming the Company or such Subsidiary as
"debtor" and the Agent as "secured party", all net of any amounts payable by the
Company or such Subsidiary in respect of commissions, processing fees or other
charges, excluding, however, without duplication (i) any such Inventory which
has been shipped to a customer, even if on a consignment or "sale or return"
basis and whether or not such Inventory has been subsequently returned by such
customer; (ii) any Inventory subject to a Lien (other than Liens created
pursuant to the Security Agreements or the Sirrom Loan Documents), including a
landlord's or warehouseman's Lien; (iii) any Inventory against which the Company
or any Subsidiary has taken a reserve; (iv) any Inventory not subject to a valid
and perfected first-priority Lien in favor of the Agent under the Security
Agreements, subject to no prior or equal Lien; (v) any Inventory not produced in
compliance with the applicable requirements of the Fair Labor Standards Act; and
(vi) any supply, scrap or obsolete Inventory and any Inventory that is not
reasonably marketable.
"ELIGIBLE DOMESTIC RECEIVABLES" means, at any date of determination thereof, the aggregate amount of all Receivables due at such date from an account debtor that is both domiciled in the United States of America and (if not a natural person) organized under the laws of the United States of America or any political subdivision thereof, to the Company or a Subsidiary of the Company (other than Horizon/Neostar), other than the following (determined without duplication):
(a) any Receivable that is due from an Affiliate of the Company and any Receivable that is not denominated and payable in U.S. dollars;
(b) any Receivable that does not comply with all applicable legal requirements, including, without limitation, all laws, rules, regulations and orders of any governmental or judicial authority (including any Receivable due from an account debtor located in the States of Indiana, New Jersey or Minnesota, unless the Company or the applicable Subsidiary (at the time the Receivable was created and at all times thereafter) (i) had filed and has maintained effective a current notice of business activities report with the appropriate office or agency of the States of Indiana, New Jersey or Minnesota, as applicable, or (ii) was and has continued to be exempt from filing such report and has provided the Agent with satisfactory evidence thereof);
(c) any Receivable in respect of which there is any unresolved dispute with the account debtor, but only to the extent of such dispute;
(d) any Receivable payable more than 90 days after the date of the issuance of the original invoice therefor;
(e) any Receivable that remains unpaid for more than 60 days from the original due date specified at the time of the issuance of the original invoice therefor;
(f) any unbilled Receivable and any Receivable in respect of goods not yet shipped or services not yet performed;
(g) any Receivable arising outside the ordinary course of business of the Credit Party whose activities gave rise thereto;
(h) any Receivable in respect of which there has been established a contra account, or which is due from an account debtor to whom the Company or any Subsidiary owes a trade payable, or that otherwise may be subject to any right of recission, set-off, recoupment, counterclaim or defense, whether or not arising out of transactions concerning the contract, in each case to the extent of such account payable, or such right of recission, set-off, recoupment, counterclaim or defense.
(i) any Receivable that is not subject to a first priority perfected Lien under the Security Agreements and any Receivable evidenced by an "instrument" (as defined in the UCC) not in the possession of the Agent;
(j) any Receivable due from an account debtor (i) as to which on such date Receivables representing more than 25% of aggregate amount of Receivables of such account debtor have remained unpaid for more than 60 days from the original due date specified at the time of the original issuance of the invoice therefor, (ii) in respect of which a credit loss has been recognized or reserved by the Company or any Subsidiary,
(iii) in respect of which the Agent shall have notified the Company that such account debtor does not have a satisfactory credit standing as determined in good faith by the Agent, (iv) that is a Subsidiary or an Affiliate of the Company, (v) that is the United States of America or any department, agency or instrumentality thereof or any state government or any department, agency or political subdivision thereof, unless the Company or the applicable Subsidiary has complied in all respects with the Federal Assignment of Claims Act of 1940 (31 U.S.C. ss.ss.3727; 41 U.S.C. ss.15) or any similar provision of applicable state law, (vi) that is the subject of a case or proceeding of the type described in clauses (h) and (i) of Section 9.01, or (vii) the prospect of payment of which, in the good faith judgment of the Lender, has been impaired;
(k) any Receivable due from an account debtor that the Company or the applicable Subsidiary has not instructed such account debtor in the invoice therefor to make payments in respect of such Receivable to a Lockbox Account (as defined in the Security Agreements) or from any account debtor that makes payments in a form that cannot be accepted in the applicable Lockbox Account;
(l) any Receivable due from an account debtor at any time, to the extent that the aggregate outstanding amount of Receivables due from such account debtor and its affiliates at such time exceeds 20% of the aggregate amount of all Receivables due to the Company and its Subsidiaries at such time, but only to the extent of such excess;
(m) any Receivable that is not the binding and enforceable obligation of the account debtor; and
(n) any Receivable that the Company or the applicable Subsidiary does not have the full and unqualified right to assign and grant a Lien on to the Agent as security for the benefit of the Agent and the Lenders hereunder.
"ELIGIBLE SECURED FOREIGN RECEIVABLES" means, at any date of determination thereof, the aggregate amount of all Receivables due at such date from an account debtor other than an account debtor that is both domiciled in the United States of America and (if not a natural person) organized under the laws of the United States of America or any political subdivision thereof, to the Company or a Subsidiary of the Company (other than Horizon/Neostar), which are secured by a letter of credit satisfactory to the Agent and the Required Lenders, other than the following (determined without duplication):
(a) any Receivable due from an account debtor that is an Affiliate of the Company and any Receivable that is not denominated and payable in U.S. dollars;
(b) any Receivable that does not comply with all applicable legal requirements, including, without limitation, all laws, rules, regulations and orders of any governmental or judicial authority;
(c) any Receivable in respect of which there is any unresolved dispute with the account debtor, but only to the extent of such dispute;
(d) any Receivable payable more than 90 days after the date of the issuance of the original invoice therefor;
(e) any Receivable that remains unpaid for more than 60 days from the original due date specified at the time of the issuance of the original invoice therefor;
(f) any unbilled Receivable and any Receivable in respect of goods not yet shipped or services not yet performed;
(g) any Receivable arising outside the ordinary course of business of the Credit Party whose activities gave rise thereto;
(h) any Receivable in respect of which there has been established a contra account, or which is due from an account debtor to whom the Company or any Subsidiary owes a trade payable, or that otherwise may be subject to any right of recission, set-off, recoupment, counterclaim or defense, whether or not arising out of transactions concerning the contract, in each case to the extent of such account payable, or such right of recission, set-off, recoupment, counterclaim or defense.
(i) any Receivable that is not subject to a first priority perfected Lien under the Security Agreements and any Receivable evidenced by an "instrument" (as defined in the UCC) not in the possession of the Agent;
(j) any Receivable due from an account debtor (i) as to which
on such date Receivables representing more than 25% of aggregate amount
of Receivables of such account debtor have remained unpaid for more
than 60 days from the original due date specified at the time of the
original issuance of the invoice therefor, (ii) in respect of which a
credit loss has been recognized or reserved by the Company or any
Subsidiary, (iii) in respect of which the Agent shall have notified the
Company that such account debtor does not have a satisfactory credit
standing as determined in good faith by the Agent, (iv) that is a
Subsidiary or an Affiliate of the Company, (v) that is the subject of a
case or proceeding of the type described in clauses (h) and (i) of
Section 9.01, or (vi) the prospect of payment of which, in the good
faith judgment of the Lender, has been impaired;
(k) any Receivable due from an account debtor that the Company or the applicable Subsidiary has not instructed such account debtor in the invoice therefor to make payments in respect of such Receivable to a Lockbox Account (as defined in the Security Agreements) or from any account debtor that makes payments in a form that cannot be accepted in the applicable Lockbox Account;
(l) any Receivable due from an account debtor at any time, to the extent that the aggregate outstanding amount of Receivables due from such account debtor and its affiliates at such time exceeds 20% of the aggregate amount of all Receivables due to the Company and its Subsidiaries at such time, but only to the extent of such excess;
(m) any Receivable that is not the binding and enforceable obligation of the account debtor; and
(n) any Receivable that the Company or the applicable Subsidiary does not have the full and unqualified right to assign and grant a Lien on to the Agent as security for the benefit of the Agent and the Lenders hereunder.
"ELIGIBLE UNSECURED FOREIGN RECEIVABLES" means, at any date of determination thereof, the aggregate amount of all Receivables (other than Eligible Secured Foreign Receivables) due at such date from an account debtor other than an account debtor that is both domiciled in the United States of America and (if not a natural person) organized under the laws of the United States of America or any political subdivision thereof, to the Company or a Subsidiary of the Company (other than Horizon/Neostar), other than the following (determined without duplication):
(a) any Receivable due from an account debtor that is an Affiliate of the Company and any Receivable that is not denominated and payable in U.S. dollars;
(b) any Receivable that does not comply with all applicable legal requirements, including, without limitation, all laws, rules, regulations and orders of any governmental or judicial authority;
(c) any Receivable in respect of which there is any unresolved dispute with the account debtor, but only to the extent of such dispute;
(d) any Receivable payable more than 90 days after the date of the issuance of the original invoice therefor;
(e) any Receivable that remains unpaid for more than 60 days from the original due date specified at the time of the issuance of the original invoice therefor;
(f) any unbilled Receivable and any Receivable in respect of goods not yet shipped or services not yet performed;
(g) any Receivable arising outside the ordinary course of business of the Credit Party whose activities gave rise thereto;
(h) any Receivable in respect of which there has been established a contra account, or which is due from an account debtor to whom the Company or any Subsidiary owes a trade payable, or that otherwise may be subject to any right of recission, set-off,
recoupment, counterclaim or defense, whether or not arising out of transactions concerning the contract, in each case to the extent of such account payable, or such right of recission, set-off, recoupment, counterclaim or defense.
(i) any Receivable that is not subject to a first priority perfected Lien under the Security Agreements and any Receivable evidenced by an "instrument" (as defined in the UCC) not in the possession of the Agent;
(j) any Receivable due from an account debtor (i) as to which
on such date Receivables representing more than 25% of aggregate amount
of Receivables of such account debtor have remained unpaid for more
than 60 days from the original due date specified at the time of the
original issuance of the invoice therefor, (ii) in respect of which a
credit loss has been recognized or reserved by the Company or any
Subsidiary, (iii) in respect of which the Agent shall have notified the
Company that such account debtor does not have a satisfactory credit
standing as determined in good faith by the Agent, (iv) that is a
Subsidiary or an Affiliate of the Company, (v) that is the subject of a
case or proceeding of the type described in clauses (h) and (i) of
Section 9.01, or (vi) the prospect of payment of which, in the good
faith judgment of the Lender, has been impaired;
(k) any Receivable due from an account debtor that the Company or the applicable Subsidiary has not instructed such account debtor in the invoice therefor to make payments in respect of such Receivable to a Lockbox Account (as defined in the Security Agreements) or from any account debtor that makes payments in a form that cannot be accepted in the applicable Lockbox Account;
(l) any Receivable due from an account debtor at any time, to the extent that the aggregate outstanding amount of Receivables due from such account debtor and its affiliates at such time exceeds 20% of the aggregate amount of all Receivables due to the Company and its Subsidiaries at such time, but only to the extent of such excess;
(m) any Receivable that is not the binding and enforceable obligation of the account debtor; and
(n) any Receivable that the Company or the applicable Subsidiary does not have the full and unqualified right to assign and grant a Lien on to the Agent as security for the benefit of the Agent and the Lenders hereunder.
"ENVIRONMENTAL LAWS" means any and all federal, state, local and foreign statutes, laws, judicial decisions, regulations, ordinances, rules, judgments, orders, decrees, codes, plans, injunctions, permits, concessions, grants, franchises, licenses, agreements and governmental restrictions, whether now or hereafter in effect, relating to human health, the environment or to emissions, discharges or releases of pollutants, contaminants, Hazardous Materials or wastes into the environment, including ambient air, surface water, ground water or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants, Hazardous Materials or wastes or the clean-up or other remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, or any successor statute.
"ERISA GROUP" means the Company, any Subsidiary and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Company or any Subsidiary, are treated as a single employer under Section 414 of the Code.
"EVENT OF DEFAULT" has the meaning set forth in Section 9.01.
"EXCESS CASH FLOW" means, for any period, an amount equal to
(i) EBITDA for such period minus (ii) the sum of (x) Consolidated Capital
Expenditures (except to the extent financed by the proceeds of Debt of the
Company or any Subsidiary permitted by Section 8.01(c)), (y) Total Debt Service
(exclusive of amortization of debt discount or premium), and (z) all amounts
accrued with respect to income taxes by the Company and its Subsidiaries, all as
determined for such period, plus (iii) any interest income for such period plus
(iv) any amounts deducted in determining Excess Cash Flow in the prior period
for accrued income taxes that were not paid in cash by the Company in such prior
period or in the period for which Excess Cash Flow is being determined.
"FINANCING DOCUMENTS" means this Agreement, the Notes, the Subsidiary Guaranty Agreement, and the Security Documents.
"FISCAL YEAR" means a fiscal year of the Company.
"GAAP" has the meaning set forth in Section 1.02.
"GUARANTEE" by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for the purpose of assuring in any other manner the obligee of such Debt or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part), provided that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning.
"HAZARDOUS MATERIALS" means (i) any "hazardous substance" as defined in CERCLA; (ii) asbestos; (iii) polychlorinated biphenyls; (iv) petroleum, its derivatives,
by-products and other hydrocarbons; and (v) any other toxic, radioactive, caustic or otherwise hazardous substance regulated under Environmental Laws.
"HAZARDOUS MATERIALS CONTAMINATION" means contamination (whether now existing or hereafter occurring) of the improvements, buildings, facilities, personalty, soil, groundwater, air or other elements on or of the relevant property by Hazardous Materials, or any derivatives thereof, or on or of any other property as a result of Hazardous Materials, or any derivatives thereof, generated on, emanating from or disposed of in connection with the relevant property.
"HORIZON/NEOSTAR" means Horizon Acquisition Corp., a Georgia corporation d/b/a Neostar Medical Technologies.
"INDEMNITEES" has the meaning set forth in Section 10.05.
"INSURANCE ACCOUNT" has the meaning set forth in the Security Agreements.
"INTEREST DETERMINATION DATE" means July 1, 1997 and the first Business Day of each calendar month thereafter.
"INVENTORY" means inventory (as defined in Article 9 of the UCC) to the extent comprised of readily marketable materials of a type manufactured, consumed or held for resale (including raw materials and work-in-process) by the Company or any Subsidiary in the ordinary course of its business as presently conducted, or as modified from time to time in a manner not prohibited by this Agreement.
"INVESTMENT" means any investment in any Person, whether by means of share purchase, capital contribution, loan, time deposit or otherwise.
"KEY-PERSON LIFE INSURANCE POLICY" has the meaning set forth in Section 7.04(e).
"LENDER" means NationsCredit and each other Person that becomes a holder of a Note pursuant to Section 12.06, and their respective successors, and "Lenders" means all of the foregoing.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind, or any other type of preferential arrangement that has the practical effect of creating a security interest, in respect of such asset, or any financing statement filed in respect of such asset. For the purposes of this Agreement and the other Financing Documents, the Company or any Subsidiary shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset.
"LOANS" means the Tranche A Loans, the Tranche B Loans and the Working Capital Loans, or any combination of the foregoing, as the context may require.
"LOCKBOX ACCOUNTS" has the meaning set forth in the Security Agreements.
"LOCKBOX AGREEMENT" means, collectively, the Lockbox Agreements each in form and substance satisfactory to Lender, entered into among the Agent, the Company and/or its Subsidiaries and the Lockbox Banks pursuant to the Security Agreements.
"LOCKBOX BANK" means, collectively, the banks or other depository institutions at which Lockbox Accounts are established and maintained.
"MAJOR CASUALTY PROCEEDS" means (i) the aggregate insurance proceeds received in connection with one or more related events by the Company or any of its Subsidiaries under any Property Insurance Policy or (ii) any award or other compensation with respect to any condemnation of property (or any transfer or disposition of property in lieu of condemnation) received by the Company or any of its Subsidiaries, if the amount of such aggregate insurance proceeds or award or other compensation exceeds $1,500,000.
"MANAGEMENT STOCKHOLDERS" means Marshall B. Hunt, William E. Peterson, Jr. and Roy C. Mallady, Jr.
"MARGIN STOCK" has the meaning assigned thereto in Regulation G, U or X of the Federal Reserve Board, as the same may be amended, supplemented or modified from time to time.
"MATERIAL ADVERSE EFFECT" shall mean (a) a material adverse
effect on the business, assets, operations, prospects or condition (financial or
otherwise) of the Company and its Consolidated Subsidiaries, taken as a whole,
(b) a material impairment of the ability of the Company or any other Credit
Party to perform any of its obligations under any Financing Document to which it
is or will be a party or (c) a material impairment of the rights of or benefits
available to the Agent or the Lenders under any Credit Document.
"MATERIAL PLAN" means at any time a Plan having Unfunded Liabilities.
"MULTIEMPLOYER PLAN" means at any time an employee pension benefit plan within the meaning of Section 4001(a)(3) of ERISA to which any member of the ERISA Group is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions, including for these purposes any Person which ceased to be a member of the ERISA Group during such five year period.
"NATIONSCREDIT" means NationsCredit Commercial Corporation, a Delaware corporation, and its successors.
"NEOSTAR" means Neostar Holding, Inc., a Delaware corporation formerly known as Neostar Medical Technologies, Inc.
"NET CASH PROCEEDS" means, with respect to any transaction, an amount equal to the cash proceeds received by the Company or any of its Subsidiaries from or in respect of such transaction (including any cash proceeds received as income or other proceeds of any non-cash proceeds of such transaction), less (x) any expenses (including commissions) reasonably incurred by such Person in respect of such transaction and (y) in the case of an Asset Sale, the amount of any Debt secured by a Lien on the related asset and discharged from the proceeds of such Asset Sale and any taxes paid or payable by such Person (as reasonably estimated by the chief financial officer of the Company) in respect of such Asset Sale.
"NON-VOTING COMMON STOCK" means Class B Common Stock, $.001 par value per share, of the Company.
"NOTES" means the Tranche A Notes, the Tranche B Notes and the Working Capital Notes, or any combination of the foregoing, as the context may require.
"NOTICE OF BORROWING" has the meaning set forth in Section 4.04.
"OFFICER'S CERTIFICATE" means a certificate executed on behalf of a Person by its chairman of the board (if an officer), chief executive officer or president or one of its vice presidents and by its chief financial officer or treasurer.
"OPERATIVE DOCUMENTS" means the Financing Documents, the Acquisition Documents, the Sirrom Loan Documents, the Warrants and the Warrantholders Rights Agreement.
"PAYMENT ACCOUNT" means, with respect to each Lender, the account specified on the signature pages hereof into which all payments by or on behalf of the Company to such Lender under the Financing Documents shall be made, or such other account as such Lender shall from time to time specify by notice to the Company.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA.
"PERMITTED CONTEST" means a contest maintained in good faith by appropriate proceedings promptly instituted and diligently conducted and with respect to which such reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made; provided that compliance with the obligation that is the subject of such contest is effectively stayed during such challenge.
"PERMITTED LIENS" means Liens permitted pursuant to Section 8.02.
"PERSON" means any natural person, corporation, limited partnership, general partnership, joint stock company, joint venture, association, limited liability company, company, trust, bank, trust company, land trust, business trust or other organization, whether or not a legal entity, and any government agency or political subdivision thereof.
"PLAN" means at any time an employee pension benefit plan (other than a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code and either (i) is maintained, or contributed to, by any member of the ERISA Group for employees of any member of the ERISA Group or (ii) has at any time within the preceding five years been maintained, or contributed to, by any Person which was at such time a member of the ERISA Group for employees of any Person which was at such time a member of the ERISA Group.
"PLEDGE AGREEMENTS" means, collectively, the Company Pledge Agreement and the Shareholder Pledge Agreements.
"PROPERTY INSURANCE POLICY" means any insurance policy maintained by the Company or any of its Subsidiaries covering losses with respect to tangible real or personal property or improvements or losses from business interruption.
"QUARTERLY DATE" means each January 1, April 1, July 1 and October 1.
"RECEIVABLE" means, as at any date of determination thereof, the unpaid portion of the obligation, as stated in the respective invoice, of a customer of the Company or a Subsidiary in respect of goods sold or leased, or services rendered, in the ordinary course of business, which amount has been earned by performance under the terms of the related contract and recognized as revenue on the books of the Company or such Subsidiary, net of any credits, rebates or offsets owed to the customer and also net of any commissions payable to Persons other than employees of the Company or its Subsidiaries.
"REQUIRED LENDERS" means at any time Lenders holding Notes evidencing at least 51% of the aggregate unpaid principal amount of the Loans or, if no Loans are outstanding, having at least 51% of the aggregate amount of the Commitments.
"RESTRICTED PAYMENT" means as to any Person (i) any dividend or other distribution on any shares of such Person's capital stock (other than dividends payable solely in shares of its capital stock), (ii) any payment on account of the principal of or premium, if any, on any Debt convertible into shares of such Person's capital stock, or (iii) any payment on account of purchase, redemption, retirement or acquisition of (A) any shares of such Person's capital stock or (B) any option, warrant or other right to acquire shares of such Person's capital stock (except an acquisition of shares of such Person's capital stock upon the conversion thereof into or the exchange thereof for other shares of such Person's capital stock).
"SECURITIES ACT" means the Securities Act of 1933, as amended from time to time, and the rules and regulations promulgated thereunder.
"SECURITY AGREEMENTS" means, collectively, the Company Security Agreement and the Subsidiary Security Agreement.
"SECURITY DOCUMENTS" means the Security Agreements, the Pledge Agreements, the Lockbox Agreements, and any other agreement pursuant to which the Company or any of its Subsidiaries or Affiliates provides a Lien on its assets in favor of the Agent for the benefit of the Lenders, and all supplementary assignments, security agreements, pledge agreements, acknowledgments or other documents delivered or to be delivered pursuant to the terms hereof or of any other Security Document.
"SHAREHOLDER PLEDGE AGREEMENTS" means the Pledge Agreements dated as of the date hereof between the Management Stockholders of the Company and the Agent, substantially in the form of Exhibit J.
"SIRROM LOAN AGREEMENT" means the Loan Agreement, dated as of September 25, 1995, between the Borrower, Sirrom Capital Corporation and Cardiac Medical, Inc., as assigned by Sirrom Capital Corporation to NationsCredit as of the Closing Date.
"SIRROM LOAN DOCUMENTS" means the Sirrom Loan Agreement and each and every promissory note, guaranty, security agreement, collateral document or other instrument, agreement, acknowledgement or other document executed or delivered in connection therewith, as assigned by Sirrom Capital Corporation to NationsCredit as of the Closing Date.
"STRATO/INFUSAID" means Strato/Infusaid, Inc., a Massachusetts corporation.
"STRATO/INFUSAID PURCHASE AGREEMENT" means the Purchase Agreement among the Company, Strato/Infusaid, Arrow and Pfizer, Inc., dated as of June 20, 1997, including the exhibits and schedules thereto, and all agreements, documents and instruments executed and delivered pursuant thereto or in connection therewith.
"SUBORDINATED DEBT" means the Debt of Horizon Acquisition Corp. evidenced by (i) that certain Subordinated Secured Note, dated October 24, 1995, executed by Horizon Acquisition Corp. in favor of Neostar in the principal amount of $2,461,017 and (ii) those certain Non-Competition and Consulting Agreements, each dated October 24, 1995, entered into between Horizon Acquisition Corp. and Thomas F. Darden II, Joseph D. Pike, Lance J. Bronnenkant and William W. Wells.
"SUBORDINATED SECURITY AGREEMENT" means the Security Agreement, dated October 24, 1995, executed by Horizon in favor of Neostar, Thomas F. Darden II, Joseph D. Pike, Lance J. Bronnenkant and William W. Wells, as Trustee of the William W. Wells Family Trust, securing the Subordinated Debt.
"SUBSIDIARY" means, with respect to any Person, any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority
of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by such Person. Unless otherwise specified or required by the context herein, the term Subsidiary shall be deemed to refer to a Subsidiary of the Company.
"SUBSIDIARY GUARANTY AGREEMENT" means the guaranty agreement between the Subsidiaries listed on Exhibit A thereto and the Agent, substantially in the form of Exhibit H.
"SUBSIDIARY SECURITY AGREEMENT" means the Security Agreement between the Subsidiaries listed on Exhibit A thereto and the Agent, substantially in the form of Exhibit I.
"TEMPORARY CASH INVESTMENT" means any Investment in (i) direct
obligations of the United States or any agency thereof, or obligations
guaranteed by the United States or any agency thereof, (ii) commercial paper
rated at least A-1 by Standard & Poor's Rating Group and P-1 by Moody's
Investors Service, Inc., (iii) time deposits with, including certificates of
deposit issued by, any office located in the United States of any bank or trust
company which is organized under the laws of the United States or any State
thereof and has capital, surplus and undivided profits aggregating at least
$500,000,000 and which issues (or the parent of which issues) certificates of
deposit or commercial paper with a rating described in clause (ii) above, or
(iv) repurchase agreements with respect to securities described in clause (i)
above entered into with an office of a bank or trust company meeting the
criteria specified in clause (iii) above, provided in each case that such
Investment matures within one year from the date of acquisition thereof by the
Company or any of its Subsidiaries.
"TOTAL DEBT SERVICE" means, for any period, the sum of: (i) the aggregate interest charges incurred by the Company and its Consolidated Subsidiaries for such period, whether expensed or capitalized, including the portion of any obligation under Capital Leases allocable to interest expense in accordance with GAAP and the portion of any debt discount or premium (but not expenses of issuance) that shall be amortized in such period, and (ii) the aggregate amount during such period of mandatory principal payments pursuant to Sections 2.04(a) and 3.04(a) and all other scheduled principal payments on all other Debt, including the portion of any payments under Capital Leases that is allocable to principal.
"TRANCHE A COMMITMENT" means, for NationsCredit as a Lender, an amount equal to $21,500,000.
"TRANCHE A LOAN" has the meaning set forth in Section 2.01.
"TRANCHE A NOTE" has the meaning set forth in Section 2.02.
"TRANCHE B COMMITMENT" means, for NationsCredit as a Lender, an amount equal to $3,500,000.
"TRANCHE B LOAN" has the meaning set forth in Section 3.01.
"TRANCHE B NOTE" has the meaning set forth in Section 3.02.
"UCC" has the meaning set forth in the Security Agreement.
"UNFUNDED LIABILITIES" means, with respect to any Plan at any time, the amount (if any) by which (i) the value of all benefit liabilities under such Plan, determined on a plan termination basis using the assumptions prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market value of all Plan assets allocable to such liabilities under Title IV of ERISA (excluding any accrued but unpaid contributions), all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of a member of the ERISA Group to the PBGC or any other Person under Title IV of ERISA.
"VOTING COMMON STOCK" means Class A Common Stock, $.001 par value per share, of the Company.
"WARRANTHOLDERS RIGHTS AGREEMENT" means the Warrantholders Rights Agreement dated as of the date hereof among the Company and the warrantholders and stockholders referred to therein, substantially in the form of Exhibit E.
"WARRANT SHARES" means the shares of Non-Voting Common Stock issuable upon exercise of the Warrants.
"WARRANTS" has the meaning set forth in Section 3.05.
"WORKING CAPITAL BORROWING" means the aggregation of Working Capital Loans of the Lenders to be made to the Company pursuant to Section 4.01 on a single date.
"WORKING CAPITAL COMMITMENT" means, (i) for NationsCredit as a Lender, initially $3,000,000, less any amount assigned to another Person that becomes a Lender after the date hereof (a "SUBSEQUENT LENDER") and (ii) for any Subsequent Lender, the amount of Working Capital Commitment assigned to such Lender.
"WORKING CAPITAL LOANS" has the meaning set forth in Section 4.01.
"WORKING CAPITAL NOTE" has the meaning set forth in Section 4.02.
SECTION 1.02. ACCOUNTING TERMS AND DETERMINATIONS. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared, in accordance with generally accepted accounting principles as in effect from time to time ("GAAP"), applied on a basis consistent (except for changes concurred in by the Company's independent public accountants) with the most recent audited consolidated financial statements of the Company and its Consolidated Subsidiaries delivered to the Lenders; provided that, if the Company notifies the Lenders that the Company wishes to amend any covenant in Article VIII or the definition of "Excess Cash Flow" or any related definition to
eliminate the effect of any change in GAAP on the operation of such covenant or the determination of "Excess Cash Flow" (or if the Agent notifies the Company that the Required Lenders wish to amend Article VIII or the definition of "Excess Cash Flow" or any related definition for such purpose), then the Company's compliance with such covenant or "Excess Cash Flow", as the case may be, shall be determined on the basis of GAAP in effect immediately before the relevant change in GAAP became effective, until either such notice is withdrawn or such covenant is amended in a manner satisfactory to the Company and the Required Lenders.
SECTION 1.03. OTHER DEFINITIONAL PROVISIONS. References in
this Agreement to "Articles", "Sections", "Schedules" or "Exhibits" shall be to
Articles, Sections, Schedules or Exhibits of or to this Agreement unless
otherwise specifically provided. Any of the terms defined in Section 1.01 may,
unless the context otherwise requires, be used in the singular or plural
depending on the reference. "Include", "includes" and "including" shall be
deemed to be followed by "without limitation" whether or not they are in fact
followed by such words or words of like import. "Writing", "written" and
comparable terms refer to printing, typing and other means of reproducing words
in a visible form. References to any agreement or contract are to such agreement
or contract as amended, modified or supplemented from time to time in accordance
with the terms hereof and thereof. References to any Person include the
successors and assigns of such Person. References "from" or "through" any date
mean, unless otherwise specified, "from and including" or "through and
including", respectively.
ARTICLE II
TRANCHE A LOANS
SECTION 2.01. TRANCHE A LOANS. Upon the terms and subject to the conditions set forth herein, NationsCredit agrees to make one senior floating rate loan to the Company on the Closing Date pursuant to this Section 2.01 in a principal amount equal to its Tranche A Commitment (such loan, or any portion thereof assigned to any other Lender in accordance with Section 12.06, a "Tranche A Loan"). Tranche A Loans are not revolving in nature and amounts of such Loans repaid or prepaid may not be reborrowed. The Tranche A Commitment shall terminate at the close of business on the Closing Date.
SECTION 2.02. TRANCHE A NOTES. Each Tranche A Loan shall be evidenced by a Tranche A Note of the Company substantially in the form of Exhibit A (each such note, a "Tranche A Note"), dated the Closing Date in a principal amount equal to the initial principal amount of such Tranche A Loan, duly executed and delivered by the Company and payable to the Lender of such Tranche A Loan.
SECTION 2.03. INTEREST ON THE TRANCHE A LOANS. Interest on each Tranche A Loan shall accrue from the Closing Date on the outstanding principal amount thereof at the rate set forth in the Tranche A Note, and shall be payable monthly in arrears as set forth therein.
SECTION 2.04. REPAYMENTS AND PREPAYMENTS OF TRANCHE A NOTES
(a) Mandatory Scheduled Repayments. There shall become due and payable and the Company shall repay an aggregate principal amount of the Tranche A Notes on each Quarterly Date, commencing with the third Quarterly Date following the Closing Date, equal to the applicable installment amount set forth below (or, if less, the aggregate outstanding principal amount of the Tranche A Notes), in each case together with accrued and unpaid interest on the principal amount being repaid to but excluding the date of payment:
Installments Principal Amount ------------ ---------------- Nos. 1 - 4 $ 537,500 Nos. 5 - 12 806,250 Nos. 13 - 24 1,075,000 |
(b) Mandatory Incremental Prepayments. There shall become due and payable, and the Company shall prepay, an aggregate principal amount of the Tranche A Notes (or, if less, the aggregate outstanding principal amount of the Tranche A Notes) in the following amounts at the following times, in the case of any prepayment of the remaining Tranche A Notes in whole, accrued and unpaid interest on the principal amount being prepaid to but excluding the date of such payment:
(i) on the 90th day following the last day of each Fiscal Year, beginning with the Fiscal Year ending December 31, 1997, an amount equal to 50% of the Excess Cash Flow for such Fiscal Year (or, in the case of the payment for the first such period, for the period beginning on the Closing Date and ending on the last day of such Fiscal Year);
(ii) on the date on which the Company or any of its Subsidiaries receives (x) any payment which constitutes Major Casualty Proceeds or (y) any payment under the Key-Person Life Insurance Policy, an amount equal to the amount of such payment, unless, in the case of Major Casualty Proceeds only, the Required Lenders shall otherwise direct (in which case the amount of such payment shall be deposited into one or more of the Insurance Accounts to be held and applied in accordance with Section 5 of the Security Agreements);
(iii) promptly upon receipt by the Company of the proceeds from the issuance and sale of common stock or other equity securities after the Closing Date, an amount equal to 100% of the Net Cash Proceeds of such issuance and sale in excess of $250,000 in the aggregate over the term of this Agreement; and
(iv) promptly upon receipt by the Company or any Subsidiary of the proceeds of any Asset Sale after the Closing Date, an amount equal to 100% of the Net Cash Proceeds of such Asset Sale.
(c) Optional Prepayments.
(i) From and after the Closing Date, the Company may prepay the Tranche A Notes in whole or in part (in principal amounts of $100,000 or in any integral multiple of $10,000 in excess thereof) upon at least 10 days' prior irrevocable written notice to the Lenders (and such amounts specified in such notice shall become due and payable on the date so specified), by paying an amount equal to the aggregate principal amount being prepaid together with any premium due pursuant to Section 2.04 (e) below, plus, in the case of any prepayment of the remaining Tranche A Notes in whole, accrued and unpaid interest on the principal amount being prepaid to but excluding the date of payment.
(ii) Notwithstanding the foregoing, the Company may not prepay the Tranche A Notes in whole pursuant to this subsection (c) with the proceeds of other Debt unless simultaneously with such prepayment the Company (A) prepays any outstanding balance of the Tranche B Notes, together with the premium due with respect thereto and accrued interest thereon, in accordance with Section 3.04(c), (B) repays all Working Capital Loans, together with any premium due with respect thereto and accrued interest thereon, in accordance with Section 4.05, and terminates the Working Capital Commitments, and (C) redeems in cash, as provided in Section 5.2 of the Warrants, the number of Warrants which any Lender holding such Warrants requests the Company in writing to redeem.
(d) Application of Payments. Each repayment or prepayment of less than all of the outstanding aggregate principal amount of the Tranche A Notes shall be applied pro rata to all the Tranche A Notes according to their respective outstanding principal amounts. The principal amount of each payment pursuant to Section 2.04(b) or (c) shall be applied to reduce each of the remaining payments required by Section 2.04(a) in the inverse order of the maturity of such installments. No payment pursuant to Section 2.04(a) or (c) shall (except as reflected in any determination of Excess Cash Flow) reduce the amount of any payment required by Section 2.04(b).
(e) Prepayment Premium. Upon each prepayment pursuant to
Section 2.04(c) prior to the second anniversary of the Closing Date, the
Borrower shall pay to the Agent for the ratable account of the Lenders, a
premium equal to 3.00% of the principal amount being prepaid; provided that no
prepayment premium shall be due as a result of a prepayment pursuant to an
underwritten public offering.
ARTICLE III
TRANCHE B LOANS AND WARRANTS
SECTION 3.01. TRANCHE B LOANS. Upon the terms and subject to the conditions set forth herein, NationsCredit agrees to make one floating rate loan to the Company on the Closing Date pursuant to this Section 3.01 in a principal amount equal to its Tranche B Commitment (such loan, or any portion thereof assigned to any other Lender in accordance with Section 12.06, a "Tranche B Loan"). Tranche B Loans are not revolving in nature and amounts of such Loans repaid or prepaid may not be reborrowed. The Tranche B Commitment shall terminate at the close of business on the Closing Date. NationsCredit may, in its discretion, use up to $1,500,000 of the Tranche B Commitment to purchase on the Closing Date the outstanding indebtedness of the Company evidenced and secured by the Sirrom Loan Documents, in which event the principal amount of Tranche B Loans advanced under the Tranche B Commitment shall be reduced by such amount and the mandatory scheduled prepayments under Section 3.04(a) below shall be reduced pro rata by such amount.
SECTION 3.02. TRANCHE B NOTES. Each Tranche B Loan shall be evidenced by a Tranche B Note of the Company substantially in the form of Exhibit B (each such note, a "Tranche B Note"), dated the Closing Date in a principal amount equal to the initial principal amount of such Tranche B Loan, duly executed and delivered by the Company and payable to the Lender of such Tranche B Loan.
SECTION 3.03. INTEREST ON THE TRANCHE B LOANS. Interest on each Tranche B Loan shall accrue from the Closing Date on the outstanding principal amount thereof at the rate set forth in the Tranche B Note, and shall be payable monthly in arrears as set forth therein.
SECTION 3.04. REPAYMENTS AND PREPAYMENTS OF TRANCHE B NOTES
(a) Mandatory Scheduled Payments. There shall become due and payable and the Company shall repay the Tranche B Notes on each Quarterly Date occurring after the earlier of: (i) the date that the Tranche A Notes have been paid in full and (ii) the sixth anniversary of the Closing Date, in an amount equal to $875,000 per quarterly installment (or such other installment amounts as may be specified in the Tranche B Notes), together with accrued and unpaid interest on the principal amount being repaid to but excluding the date of payment.
(b) Mandatory Incremental Prepayments. There shall become due and payable, and the Company shall prepay, an aggregate principal amount of the Tranche B Notes (or, if less, the aggregate outstanding principal amount of the Tranche B Notes) in the following amounts at the following times, in each case together with, in the case of any prepayment of the remaining Tranche B Notes in whole, accrued and unpaid interest on the principal amount being prepaid to but excluding the date of such payment:
(i) on the 90th day following the last day of each Fiscal
Year, beginning with the Fiscal Year ending December 31, 1997, an
amount equal to the excess (if any) of (x) 50% of Excess Cash Flow for
such Fiscal Year then ended (or, in the case of the payment for the
first such period, for the period beginning on the Closing Date and
ending on the last day of such Fiscal Year) over (y) the amount applied
to the repayment of Tranche A Notes on such date in accordance with
Section 2.04(b)(i);
(ii) on the date on which the Company or any of its Subsidiaries receives (x) any payment which constitutes Major Casualty Proceeds or (y) any payment under the Key-Person Life Insurance Policy, an amount equal to the excess (if any) of (A) the amount of such payment over (B) any amount of such payment applied to the repayment of Tranche A Notes on such date in accordance with Section 2.04(b)(ii) unless, in the case of Major Casualty Proceeds only, the Required Lenders shall otherwise direct (in which case the amount of such payment shall be deposited into one or more of the Insurance Accounts to be held and applied in accordance with Section 5 of the Security Agreements);
(iii) promptly upon receipt by the Company of the proceeds from the issuance and sale of common stock or other equity securities after the Closing Date, an amount equal to the excess (if any) of (x) 100% of the Net Cash Proceeds of such issuance and sale in excess of $250,000 in the aggregate over the term of this Agreement, over (y) any amount of such Net Cash Proceeds applied to the repayment of Tranche A Notes on such date in accordance with Section 2.04(b)(iii); and
(iv) promptly upon receipt by the Company or any Subsidiary of
the proceeds of any Asset Sale after the Closing Date, an amount equal
to the excess (if any) of (x) 100% of the Net Cash Proceeds of such
Asset Sale over (y) any amount of such Net Cash proceeds applied to the
repayment of Tranche A Notes on such date in accordance with Section
2.04(b) (iv).
(c) Optional Prepayments.
(i) From and after the date on which the Company has paid the Tranche A Notes in full, the Company may prepay the Tranche B Notes in whole or in part (in principal amounts of $100,000 or in any integral multiple of $10,000 in excess thereof) upon at least 10 days' prior irrevocable written notice to the Lenders (and such amounts specified in such notice shall become due and payable on the date so specified), by paying an amount equal to the aggregate principal amount being prepaid together with any premium due pursuant to Section 3.04(e) below, plus, in the case of any prepayment of the remaining Tranche B Notes in whole, accrued and unpaid interest on the principal amount being prepaid to but excluding the date of payment.
(ii) Notwithstanding the foregoing, the Company may not prepay the Tranche B Notes in whole pursuant to this Section 3.04(c) with the proceeds of other Debt unless simultaneously with such prepayment the Company (A) prepays any outstanding balance
of the Tranche A Notes, together with the premium due with respect thereto and accrued interest thereon, in accordance with Section 2.04(c), (B) repays all Working Capital Loans, together with any premium due with respect thereto and accrued interest thereon, in accordance with Section 4.05, and terminates the Working Capital Commitments, and (C) redeems in cash, as provided in Section 5.2 of the Warrants, the number of Warrants which any Lender holding such Warrants requests the Company in writing to redeem.
(d) Application of Payments. Each payment or prepayment of less than all the outstanding aggregate principal amount of the Tranche B Notes shall be applied pro rata to all the Tranche B Notes according to their respective outstanding principal amounts. The principal amount of each payment pursuant to Section 3.04(b) or (c) shall be applied to reduce each of the remaining payments required by Section 3.04(a) in the inverse order of the maturity of such installments. No payment pursuant to Section 3.04(a) or (c) shall (except as reflected in any determination of Excess Cash Flow) reduce the amount of any payment required by Section 3.04(b).
(e) Prepayment Premium. Upon each prepayment pursuant to
Section 3.04(c) prior to the second anniversary of the Closing Date, the
Borrower shall pay to the Agent for the ratable account of the Lenders, a
premium equal to 3.00% of the principal amount being prepaid; provided that no
prepayment premium shall be due as a result of a prepayment pursuant to an
underwritten public offering.
SECTION 3.05. WARRANTS. (a) On the Agreement Date, the Company shall deliver to NationsCredit, in consideration for executing this Agreement, warrants exercisable for 15,276 shares of Non-Voting Common Stock (the "WARRANTS"). The Warrants shall be substantially in the form of Exhibit D hereto, and shall be duly executed and registered in such name or names and in such denominations as NationsCredit shall have notified the Company. The Warrants shall be fully earned by NationsCredit by its execution hereof.
(b) The Company and NationsCredit agree that, for Federal income tax purposes (i) the Warrants together with the Revolving Credit Loans constitute an investment unit and (ii) the aggregate issue price of the Loans is $27,750,000 (or, in the event that NationsCredit shall elect to purchase the indebtedness evidenced and secured by the Sirrom Loan Documents as contemplated by Section 3.01, $26,250,000) and the aggregate purchase price of the Warrants is $250,000. Neither of the Company nor any Lender shall voluntarily take any action inconsistent with the agreement set forth in the immediately preceding sentence.
ARTICLE IV
WORKING CAPITAL LOANS
SECTION 4.01. WORKING CAPITAL LOANS AND COMMITMENTS. Upon the terms and subject to the conditions set forth herein, each Lender severally and not jointly agrees to make working capital loans ("WORKING CAPITAL LOANS") from time to time to the Company in an aggregate principal amount at any time outstanding not exceed such Lender's Working Capital Commitment. Each Working Capital Borrowing shall be in an aggregate amount of $100,000 or an integral multiple of $10,000 in excess thereof. No more than two Working Capital Borrowings shall be made within any week beginning on Monday of such week and ending on the last Business Day of such week. Within the foregoing limits, the Company may borrow under this Section 4.01, prepay or repay Working Capital Loans as required under Section 4.05(b) or to the extent permitted by Section 4.06, and reborrow pursuant to this Section 4.01.
SECTION 4.02. WORKING CAPITAL NOTES. The Working Capital Loans of each Lender shall be evidenced by a single Working Capital Note, substantially in the form of Exhibit C (each such note, a "WORKING CAPITAL NOTE"), dated the Closing Date in an aggregate principal amount equal to the amount of such Lender's Working Capital Commitment, duly executed and delivered and payable to such Lender. Each Lender shall record the date and amount of each Working Capital Loan made by it and the date and amount of each payment of principal made by the Company with respect thereto, and prior to any transfer of its Working Capital Note shall endorse on Schedule A thereto (or any continuation thereof) forming a part thereof appropriate notations to evidence the foregoing information with respect to each such Working Capital Loan then outstanding; provided that the failure of any Lender to make any such recordation or endorsement shall not affect the obligations of the Company hereunder or under the Working Capital Notes. Each Lender is hereby irrevocably authorized by the Company so to endorse its Working Capital Note and to attach to and make a part of its Working Capital Note a continuation of any such schedule as and when required.
SECTION 4.03. INTEREST ON THE WORKING CAITAL LOANS. Interest on the Working Capital Loans shall accrue on the aggregate outstanding principal amount thereof at the rate set forth in the Working Capital Note with respect thereto, and shall be payable monthly in arrears as set forth therein.
SECTION 4.04. ADVANCING WORKING CAPITAL LOANS. (a) The Company shall give each Lender notice (a "NOTICE OF BORROWING") not later than Noon (New York City time) on the Business Day immediately preceding each Working Capital Borrowing, signed by the chief financial officer or treasurer of the Company, specifying the date (which shall be a Business Day) and aggregate principal amount of such Working Capital Borrowing, and certifying as to the satisfaction of the conditions set forth in clauses (b), (c) and (d) of Section 5.02.
(b) Not later than 1:00 P.M. (New York City time) on the date of each borrowing specified in a Notice of Borrowing, each Lender shall make available its ratable share of such Working Capital Borrowing, in Federal or other immediately available funds, to the Company Account.
SECTION 4.05. MANDATORY REPAYMENTS AND PREPAYMENTS. (a) The
Working Capital Commitment of each Lender shall terminate at the opening of
business on the earlier of: (i) July 1, 2004 and (ii) the date on which both the
Tranche A Notes and the Tranche B Notes shall have been paid in full (the
"TERMINATION DATE"), and there shall become due and the Company shall pay on the
Termination Date, the entire outstanding principal amount of each Working
Capital Loan, together with accrued and unpaid interest thereon to but excluding
the Termination Date, and together with, in the case of any termination prior to
the second anniversary of the Closing Date pursuant to clause (ii) of this
Section that results from a prepayment of the Tranche A and Tranche B Notes, a
premium equal to 3.00% of the Working Capital Commitment in effect immediately
prior to such Termination; provided that no prepayment premium shall be payable
upon any termination or prepayment that results from an underwritten public
offering.
(b) If at any time the aggregate unpaid principal balance of the Working Capital Loans exceeds the Borrowing Base, then, on the next succeeding Business Day, the Company shall prepay Working Capital Loans in an aggregate principal amount equal to such excess.
SECTION 4.06. OPTIONAL PREPAYMENTS. The Company may prepay the Working Capital Loans in whole or in part (in minimum principal amounts of $100,000 or in any larger integral multiple of $10,000) upon at least one Business Day's prior irrevocable written notice to the Lenders, in an amount equal to 100% of the principal amount being prepaid. The aggregate principal amount of the Working Capital Loans designated for prepayment in any notice of optional prepayment given pursuant to this subsection shall become due and payable on the date fixed for prepayment as specified above.
SECTION 4.07. APPLICATION OF PAYMENTS. Each payment or prepayment of less than all the outstanding aggregate principal amount of the Working Capital Loans shall be applied pro rata to all the Working Capital Loans according to their respective outstanding principal amounts.
ARTICLE V
CONDITIONS
SECTION 5.01. CONDITIONS TO CLOSING. The obligation of each Lender to make Loans on the Closing Date shall be subject to the satisfaction of the following conditions precedent:
(a) receipt by the Agent of counterparts hereof signed by each of the parties hereto (or, in the case of any party as to which an executed counterpart shall not have been received, receipt by the Agent in form satisfactory to it of telegraphic, telex or other written confirmation from such party of execution of a counterpart hereof by such party);
(b) receipt by NationsCredit of a duly executed Tranche A Note, Tranche B Note and Working Capital Note for its account and of the duly executed Warrantholders Rights Agreement, each in the form provided for herein, and of certificates representing the Warrants, all duly executed and registered in such name or names and in such denominations as NationsCredit shall have requested;
(c) receipt by the Agent of duly executed counterparts of each Security Document required to be effective on the Closing Date (including the Lockbox Agreements), and each other Financing Document, together with share certificates evidencing all of the outstanding Common Stock of the Company held by Management Stockholders and all of the outstanding Common Stock of the Subsidiaries and irrevocable stock powers or transfers, duly executed in blank, and also evidence satisfactory to it in its sole good faith discretion of the effectiveness of the security contemplated thereby;
(d) receipt by NationsCredit of evidence satisfactory to it in its sole good faith discretion of the satisfaction (without waiver) of all other conditions to the closing of the Acquisition on the Closing Date, and that all transactions contemplated by the Operative Documents to be consummated on the closing date of the Acquisition will take place prior to or simultaneously with the transactions hereunder contemplated to take place on the Closing Date, and satisfaction of NationsCredit in its sole good faith discretion with the terms and conditions of the Acquisition Documents;
(e) receipt by NationsCredit of (i) evidence satisfactory to it in its sole good faith discretion of the effectiveness of all other Operative Documents, each of which shall be in form and substance satisfactory to NationsCredit in its sole good faith discretion, and (ii) each opinion, report, and other document required to be delivered pursuant to the Acquisition Documents in connection with the Acquisition, with a letter from each Person delivering any such opinion, report and other document authorizing reliance thereon by the Agent and the Lenders, all in form and substance satisfactory to NationsCredit;
(f) receipt by the Agent of the opinions of King & Spalding and Slaughter and Virgin, counsel for the Company substantially in the form of Exhibit L, and covering such additional matters relating to the transactions contemplated hereby as NationsCredit may reasonably request (by its execution and delivery of this Agreement, the Company authorizes and directs such counsel to deliver such opinions to the Agent);
(g) receipt by the Agent of an opinion of Kilpatrick Stockton LLP, special counsel for the Agent, substantially in the form of Exhibit M, and covering such additional matters relating to the transactions contemplated hereby as NationsCredit may reasonably request;
(h) receipt by NationsCredit, including in its capacity as Agent, of all fees and any other amounts due and payable hereunder (including fees and expenses payable pursuant to Section 10.04) of which the Company has received notice;
(i) receipt by NationsCredit of an environmental report prepared by an environmental consultant satisfactory to NationsCredit, certifying that the Strato/Infusaid facility located in Norwood, Massachusetts is free of Hazardous Materials Contamination and is otherwise in compliance with applicable environmental laws, and providing such detail and containing such information in support of such conclusions as NationsCredit may request;
(j) receipt by NationsCredit of any information it may request concerning the financial condition, results of operations, liabilities (contingent and otherwise, including with respect to environmental liabilities and employee and retiree benefits) and prospects of, and the financial reporting and accounting systems and the management information systems of, the Company and satisfaction of NationsCredit in its sole good faith discretion with all such information;
(k) satisfaction of NationsCredit in its sole good faith discretion as to the absence of any material adverse change in any aspect of the business, operations, properties, prospects or condition (financial or otherwise) of the Company or any Subsidiaries, or any event or condition which is reasonably likely to result in such a material adverse change;
(l) receipt by NationsCredit of a certificate signed by the chief financial officer or treasurer of the Company to the effect that, both before and immediately after the making of the Loans, the purchase of the Warrants and the consummation of the Acquisition and the other transactions contemplated to take place on the Closing Date, (i) no Default shall have occurred and be continuing and (ii) the representations and warranties of the Company made in or pursuant to the Operative Documents are true;
(m) receipt by the Agent of the written consent of Pfizer, Inc. and Arrow to the assignment by the Company of its rights and claims under the Acquisition Documents, to the Agent as collateral under the Security Documents;
(n) receipt by NationsCredit of (i) the financial statements and pro forma balance sheet referred to in Sections 6.04 (b) and (c), (ii) a statement of sources and uses of funds covering all payments reasonably expected to be made by the Company in connection with the transactions contemplated by the Operative Documents to be consummated on the Closing Date, including an itemized estimate of all fees, expenses and other closing costs in an aggregate amount not to exceed the amounts provided for such fees, expenses and closing costs that are set forth in Schedule 5.01(n) and (iii) payment instructions with respect to each wire transfer to be made by the Agent or the Company on the Closing Date setting forth the amount of such transfer, the purpose of such transfer, the name and number of the account to which such transfer is to be made, the name and ABA number of the bank or other financial institution where such account is located and the name and telephone number of an individual that can be contacted to confirm receipt of such transfer;
(o) receipt by the Agent of evidence satisfactory to it in its sole good faith discretion that all outstanding obligations of the Company and its Subsidiaries under the existing financing agreements set forth on Schedule 5.01(o) have been paid in full, all commitments thereunder have been terminated and all Liens securing such obligations and all guarantees thereof have been released;
(p) receipt by NationsCredit of evidence satisfactory to it in its sole good faith discretion that the Company shall have a Consolidated Net Worth as of the Closing Date of not less than negative One Million Five Hundred Thousand Dollars ($1,500,000);
(q) receipt by the Agent of all documents it may reasonably request relating to the existence of the Company and its Subsidiaries, the corporate authority for and the validity of the Financing Documents and the other Operative Documents, and any other matters relevant hereto, all in form and substance satisfactory to the Agent in its sole good faith discretion; and
(r) receipt by NationsCredit of such other documents, opinions and evidences as NationsCredit shall require in its sole good faith discretion.
The documents referred to in this Section shall be delivered to the Agent no
later than the Closing Date. The certificates and opinions referred to in this
Section shall be dated the Closing Date.
SECTION 5.02. CONDITIONS TO EACH LOAN. The obligation of any Lender to make a Loan on the occasion of any borrowing thereof (including on the Closing Date) is subject to the satisfaction of the following additional conditions:
(a) in the case of a Working Capital Loan, receipt by each Lender of a Notice of Borrowing in accordance with Section 4.04 and a Borrowing Base Certificate as of the close of business on the Business Day immediately preceding the date of such borrowing and, in the case of the Borrowing Base Certificate delivered in connection with the initial borrowing, on a pro forma basis after giving effect to the Acquisition;
(b) the fact that, immediately after such borrowing, the aggregate outstanding principal amount of the Working Capital Loans will not exceed the lesser of (i) the Borrowing Base and (ii) the aggregate amount of the Working Capital Commitments;
(c) the fact that, immediately before and after such borrowing, no Default shall have occurred and be continuing; and
(d) the fact that the representations and warranties of the Company contained in the Financing Documents shall be true on and as of the date of such borrowing except as such representations and warranties relate to a specified date.
Each borrowing hereunder shall be deemed to be a representation and warranty by
the Company on the date of such borrowing as to the facts specified in clauses
(b), (c) and (d) of this Section, unless a notice to the contrary specifically
captioned "Disclosure Statement" is received by the Agent from the Company prior
to 2:00 p.m. on the Business Day preceding the date of such borrowing. To the
extent that the Agent and the Required Lenders agree to make any Loan after
receipt of a Disclosure Statement in accordance with the preceding sentence, the
representations and warranties of the Company will be deemed made as modified by
the contents of such statement and repeated at the time of the making of such
Loan as so modified. Any such modification shall be effective only for the
occasion on which the Agent and the Required Lenders elect to make such Loan,
and unless expressly agreed by the Agent and the Required Lenders in writing to
the contrary as provided in Section 12.05, shall not be deemed a waiver or
modification of any condition to any future Loan.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants (including, in the case of any such representation and warranty made or deemed made before the consummation of the Acquisition, at the time such representation and warranty is made or deemed made and immediately after giving effect to the consummation of the Acquisition) that:
SECTION 6.01. CORPORATE EXISTENCE AND POWER. Each of the Company and Horizon/Neostar is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Georgia, and Strato/Infusaid is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Massachusetts, and the Company and each of its Subsidiaries has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted and as will be conducted after the Acquisition. The Company and each of its Subsidiaries is qualified to do business as a foreign corporation in each jurisdiction where the failure to qualify would be likely to result in a Material Adverse Effect.
SECTION 6.02. CORPORATE AND GOVERNMENTAL AUTHORIZATION; NO CONTRAVENTION. The execution, delivery and performance by each of the Company and its Subsidiaries of the Operative Documents to which it is a party are within the Company's or such Subsidiaries' corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official (other than the filing of UCC-1 financing statements, all of which have been made and are in full force and effect) and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of incorporation or by-laws of the Company or any of its Subsidiaries or of any agreement, judgment, injunction, order, decree or other instrument binding upon the Company or any of its Subsidiaries or result in the creation or imposition of any Lien (other than the Liens created by the Security Documents) on any asset of the Company or any of its Subsidiaries.
SECTION 6.03. BINDING EFFECT; LIENS OF SECURITY DOCUMENTS. (a) Each of the Operative Documents to which the Company is a party (other than the Notes) constitutes a valid and binding agreement of the Company, and each of the Notes when executed and delivered in accordance with this Agreement, will constitute valid and binding obligations of the Company, enforceable in accordance with its respective terms, subject to bankruptcy and insolvency laws affecting the rights of creditors generally and general principles of equity. The Warrants, when executed and delivered in accordance with this Agreement, will constitute valid and binding obligations of the Company, in each case enforceable in accordance with their respective terms, subject to bankruptcy and insolvency laws affecting the rights of creditors generally and general principles of equity. The Company has reserved and will keep available for issuance upon exercise of the Warrants the total number of Warrant Shares deliverable upon exercise of all Warrants from time to time outstanding. The issuance of the Warrant Shares has been duly and validly authorized and, when issued and sold in accordance with the Warrants, the
Warrant Shares will be duly and validly issued, fully paid and nonassessable and free of preemptive rights.
(b) Each of the Operative Documents to which any Subsidiary of the Company is a party constitutes a valid and binding agreement of such Subsidiary enforceable in accordance with its terms, subject to bankruptcy and insolvency laws affecting the rights of creditors generally and general principles of equity. The Company, for itself and on behalf of Horizon/ Neostar, acknowledges and acquisces in the transfer and assignment of the Sirrom Loan Documents to NationsCredit, and further acknowledges and agrees that, as of the Closing Date, neither the Company nor Horizon/Neostar had any claim, counterclaim, offset of defense against or with respect to the Sirrom Loan Documents or any indebtedness evidenced or secured thereby.
(c) The Security Documents create valid security interests in the Collateral purported to be covered thereby, which security interests are and will remain perfected security interests, prior to all other Liens other than Permitted Liens. Each of the representations and warranties made by the Company or any Subsidiary in the Security Documents is true and correct in all material respects.
SECTION 6.04. FINANCIAL INFORMATION. (a) The balance sheet of the Company as of December 31, 1996 and the related statements of operations, stockholders' equity and cash flows for the Fiscal Year then ended, reported on by Coopers & Lybrand LLP, copies of which will be delivered to each of the Lenders on or before July 31, 1997, shall fairly present, in conformity with GAAP, the financial position of the Company as of such date and its results of operations, changes in stockholders' equity and cash flows for such period.
(b) The unaudited balance sheet of the Company as of
April 30, 1997, and the related unaudited consolidated statements of operations
and cash flows for the four months then ended, copies of which have been
delivered to each of the Lenders, fairly present, in conformity with GAAP
applied on a basis consistent with the financial statements referred to in
Section 6.04(a), the financial position of the Company as of such date and its
consolidated results of operations and cash flows for the four months then ended
(subject to normal year-end adjustments and to the absence of footnotes).
(c) The pro forma balance sheet of the Company as of April 30, 1997, a copy of which has been delivered to each of the Lenders, fairly presents, in conformity with GAAP applied on a basis consistent with the financial statements referred to in Section 6.04(a), the consolidated financial position of the Company as of such date, adjusted to give effect (as if such events had occurred on such date) to (i) the transactions contemplated by the Acquisition Documents, (ii) the making of the Loans and the issuance of the Warrants, (iii) the application of the proceeds therefrom as contemplated by the Acquisition Documents and the Financing Documents and (v) the payment of all legal, accounting and other fees related thereto to the extent known at the time of the preparation of such balance sheet. As of the date of such balance sheet and the date hereof, neither the Company nor any of its Subsidiaries had or has any material liabilities, contingent or otherwise, including liabilities for taxes, long-term leases or forward or long-term commitments, which are not fully reflected on such balance sheet.
(d) The information contained in the most recently delivered Borrowing Base Certificate is complete and correct and the amount shown therein as "Eligible Receivables" has been determined as provided in the Financing Documents.
(e) Since December 31, 1996, there has been no material adverse change in the business, operations, properties, prospects or condition (financial or otherwise) of the Company or any of its Consolidated Subsidiaries.
SECTION 6.05. LITIGATION. There is no action, suit or proceeding pending against, or to the knowledge of the Company threatened against or affecting the Company or any Subsidiary before any court or arbitrator or any governmental body, agency or official in which there is a reasonable possibility of an adverse decision which could result in a Material Adverse Effect or which in any manner draws into question the validity of any of the Operative Documents. There is no action, suit or proceeding pending against, or to the knowledge of the Company threatened against or affecting, any party to any of the Operative Documents (other than the Company) before any court or arbitrator or any governmental body, agency or official which in any manner draws into question the validity of any of the Operative Documents.
SECTION 6.06. OWNERSHIP OF PROPERTY, LIENS. On and as of the Closing Date, after giving effect to the Acquisition, each of the Company and its Subsidiaries is the lawful owner of, has good title to and is in lawful possession of, or has valid leasehold interests in, all material properties and other material assets (real or personal, tangible, intangible or mixed) purported to be owned or leased (as the case may be) by such Person on the balance sheet referred to in Section 6.04(a), and none of such Person's material properties or material assets is subject to any Liens, except Permitted Liens. The Company and each Subsidiary conduct their respective businesses without infringement or claim of infringement of any material license, patent, trademark, trade name, service mark, copyright, trade secret or other intellectual property right of others and there is no infringement or claim of infringement by others of any material license, patent, trademark, trade name, service mark, copyright, trade secret or other intellectual property right of the Company or any Subsidiary.
SECTION 6.07. NO DEFAULT. No Default or Event of Default has occurred and is continuing and neither the Company nor any Subsidiary is in default under or with respect to any material contract, agreement, lease or other instrument to which it is a party or by which its property is bound or affected which default is reasonably likely to result in a Material Adverse Effect.
SECTION 6.08. NO BURDENSOME RESTRICTIONS. No contract, lease, agreement or other instrument to which the Company or any Subsidiary is a party or by which any of its property is bound or affected, no charge, corporate restriction, judgment, decree or order and no provision of applicable law or governmental regulation is reasonably likely to have a Material Adverse Effect.
SECTION 6.09. LABOR MATTERS. There are no strikes or other labor disputes pending or, to the best knowledge the Company, threatened, against the Company or any Subsidiary, which are reasonably likely to have a Material Adverse Effect. Hours worked and payments made to the employees of the Company and its Subsidiaries have not been in violation of the Fair Labor Standards Act or any other applicable law dealing with such matters. All payments due from the Company or any Subsidiary, or for which any claim may be made against any of them, on account of wages and employee and retiree health and welfare insurance and other benefits have been paid or accrued as a liability on the books of such Person, as the case may be. The consummation of the transactions contemplated by the Financing Documents and the other Operative Documents will not give rise to a right of termination or right of renegotiation on the part of any union under any collective bargaining agreement to which it is a party or by which it is bound.
SECTION 6.10. SUBSIDIARIES; OTHER EQUITY INVESTMENTS. Other
than as set forth on Schedule 6.10, the Company has no Subsidiaries. Each such
Subsidiary is, and, in the case of any additional corporate Subsidiaries formed
after the Closing Date, each of such additional corporate Subsidiaries will be
at each time that this representation is made or deemed to be made after the
Closing Date, a wholly-owned Subsidiary that is a corporation duly incorporated,
validly existing and in good standing under the laws of its jurisdiction of
incorporation, and has all corporate powers and all material governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted. Neither the Company nor any Subsidiary is engaged in
any joint venture or partnership with any other Person.
SECTION 6.11. INVESTMENT COMPANY ACT. The Company is not an "investment company" as defined in the Investment Company Act of 1940, as amended. The consummation of the transactions contemplated by the Operative Documents do not and will not violate any provision of such Act or any rule, regulation or order issued by the Securities and Exchange Commission thereunder.
SECTION 6.12. MARGIN REGULATIONS. None of the proceeds from the Loans have been or will be used, directly or indirectly, for the purpose of purchasing or carrying any Margin Stock, for the purpose of reducing or retiring any indebtedness which was originally incurred to purchase or carry any Margin Stock or for any other purpose which might cause any of the loans under this Agreement to be considered a "purpose credit" within the meaning of Regulation G, U or X of the Board of Governors of the Federal Reserve Board.
SECTION 6.13. TAXES. The Company's federal tax identification number is 58-1882343. All Federal, state and local tax returns, reports and statements required to be filed by or on behalf of the Company and its Subsidiaries have been filed with the appropriate governmental agencies in all jurisdictions in which such returns, reports and statements are required to be filed, and all taxes (including real property taxes) and other charges shown to be due and payable have been timely paid prior to the date on which any fine, penalty, interest, late charge or loss may be added thereto for nonpayment thereof. All state and local sales and use taxes required to be paid by the Company or any of its Subsidiaries have been paid. All Federal
and state returns have been filed by the Company and its Subsidiaries for all periods for which returns were due with respect to employee income tax withholding, social security and unemployment taxes, and the amounts shown thereon to be due and payable have been paid in full or adequate provisions therefor have been made.
SECTION 6.14. COMPLIANCE WITH ERISA. Each member of the ERISA Group has fulfilled its obligations under the minimum funding standards of ERISA and the Code with respect to each Plan and is in compliance in all material respects with the presently applicable provisions of ERISA and the Code with respect to each Plan. No member of the ERISA Group has (i) sought a waiver of the minimum funding standard under Section 412 of the Code in respect of any Plan, (ii) failed to make any contribution or payment to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement, which has resulted or could result in the imposition of a Lien or the posting of a bond or other security under ERISA or the Code or (iii) incurred any liability under Title IV of ERISA other than a liability to the PBGC for premiums under Section 4007 of ERISA.
SECTION 6.15. BROKERS. Except as described on Schedule 6.15, no broker, finder or other intermediary has brought about the obtaining, making or closing of the transactions contemplated by the Operative Documents, and neither the Company nor any Subsidiary has or will have any obligation to any Person in respect of any finder's or brokerage fees in connection herewith or therewith.
SECTION 6.16. RELATED TRANSACTIONS. The closing of the Acquisition will occur simultaneously with the making of the initial Loans and purchase of the Warrants hereunder and no party has waived, without the consent of the Required Lenders, any condition precedent to its obligations to close as set forth in the Acquisition Documents. True and complete copies of all of the Acquisition Documents have been delivered to each of the Lenders, together with a true and complete copy of each document to be delivered at the closing of the Acquisition.
SECTION 6.17. EMPLOYMENT, STOCKHOLDERS AND SUBSCRIPTION AGREEMENTS. Except for the Operative Documents and the other agreements described in Schedule 6.17, true and complete copies of which have been delivered to the Lenders, there are no (i) employment agreements covering the management of the Company or any of its Subsidiaries, (ii) collective bargaining agreements or other labor agreements covering any employees of the Company or any of its Subsidiaries, (iii) agreements for managerial, consulting or similar services to which the Company or any of its Subsidiaries is a party or by which it is bound or (iv) agreements regarding the Company or any Subsidiary, its assets or operations or any investment therein to which any of its stockholders is a party or by which it is bound.
SECTION 6.18. FULL DISCLOSURE. None of the written information (financial or otherwise) furnished by or on behalf of the Company to the Agent or any Lender in connection with the consummation of the transactions contemplated by any of the Operative Documents contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained herein or therein not misleading in the light of the circumstances
under which such statements were made. All financial projections delivered to the Lenders have been prepared on the basis of the assumptions stated therein. Such projections represent the Company's best estimate of the Company's future financial performance and such assumptions are believed by the Company to be fair in light of current business conditions.
SECTION 6.19. REPRESENTATIONS AND WARRANTIES INCORPORATED FROM OTHER OPERATIVE DOCUMENTS. As of the Closing Date, each of the representations and warranties made in the Operative Documents by each of the parties thereto is true and correct in all material respects, and such representations and warranties are hereby incorporated herein by reference with the same effect as though set forth in their entirety herein, as qualified therein.
SECTION 6.20. PRIVATE OFFERING. Neither the Company nor any
Person acting on its behalf has offered the Notes or Warrants or any similar
securities for sale to, or solicited any offer to buy any of the same from, or
otherwise approached or negotiated in respect thereof with, any Person other
than the Lenders and no more than five other institutional investors. Neither
the Company nor any Person acting on its behalf has taken, or will take, any
action that would subject the issuance or sale of the Notes or Warrant Shares to
Section 5 of the Securities Act, other than as provided in the Warrants and the
Warrantholders Rights Agreement.
SECTION 6.21. COMPLIANCE WITH ENVIRONMENTAL REQUIREMENTS; NO HAZARDOUS MATERIALS. After giving effect to the Acquisition and except as provided on Schedule 6.21 or other non-compliances which are not reasonably expected to have a Material Adverse Effect:
(a) Other than generation in compliance with all applicable Environmental Laws, no Hazardous Materials are located on any properties now owned, leased or operated by the Company or any Subsidiary or have been released into the environment, or deposited, discharged, placed or disposed of at, on, under or near any of such properties. No portion of any such property is being used for the disposal, storage, treatment, processing or other handling of Hazardous Materials (other than processing or handling incidental to the generation of Hazardous Materials in compliance with all applicable Environmental Laws), nor is any such property affected by any Hazardous Materials Contamination.
(b) Other than generation in compliance with all applicable Environmental Laws, during any period of ownership, operation, possession or control thereof by the Company or any Subsidiary, no Hazardous Materials were located on any properties previously owned, leased or operated by the Company or any Subsidiary or were released into the environment, or deposited, discharged, placed or disposed of at, on, under or near any of such properties. No portion of any such property was used during any period of ownership, operation, possession or control thereof by the Company or any Subsidiary, for the disposal, storage, treatment, processing or other handling of Hazardous Materials (other than processing or handling incidental to the generation of Hazardous Materials in compliance with all applicable Environmental Laws), nor is any such property, to the knowledge of the Company, affected by any Hazardous Materials Contamination.
(c) No asbestos or asbestos-containing materials are present on any of the properties now owned, leased or operated by the Company or any Subsidiary.
(d) No asbestos or asbestos-containing materials were present, during any period of ownership, operation, possession or control thereof by the Company or any Subsidiary, on any of the properties previously owned, leased or operated by the Company or any Subsidiary.
(e) No polychlorinated biphenyls are located on or in any properties now owned, leased or operated by the Company or any Subsidiary, in the form of electrical transformers, fluorescent light fixtures with ballasts, cooling oils or any other device or form.
(f) No polychlorinated biphenyls were, during any period of ownership, operation, possession or control thereof by the Company or any Subsidiary, located on or in any properties previously owned, leased or operated by the Company or any Subsidiary, in the form of electrical transformers, fluorescent light fixtures with ballasts, cooling oils or any other device or form.
(g) No underground storage tanks are located on any properties now owned, leased or operated by the Company or any Subsidiary, or were located on any such property and subsequently removed or filled.
(h) No underground storage tanks were, during any period of ownership, operation, possession or control thereof by the Company or any Subsidiary, located on any properties previously owned, leased or operated by the Company or any Subsidiary, or were, during any period of ownership, operation, possession or control thereof by the Company or any Subsidiary, located on any such property and subsequently removed or filled.
(i) No notice, notification, demand, request for information, complaint, citation, summons, investigation, administrative order, consent order and agreement, litigation or settlement with respect to Hazardous Materials or Hazardous Materials Contamination is in existence or, to Company's knowledge, proposed, threatened or anticipated with respect to or in connection with the operation of any properties now owned, leased or operated by the Company or any Subsidiary. All such properties and their existing and prior uses comply and at all times have complied with any applicable governmental requirements relating to environmental matters or Hazardous Materials. There is no condition on any of such properties which is in violation of any applicable governmental requirements relating to Hazardous Materials, and neither the Company nor any Subsidiary has received any communication from or on behalf of any governmental authority that any such condition exists. None of such properties nor any property to which the Company or any Subsidiary has, directly or indirectly, transported or arranged for the transportation of any material is listed or, to the Company's knowledge, proposed for listing on the National Priorities List promulgated pursuant to CERCLA, on CERCLIS (as defined in CERCLA) or on any similar federal, state or foreign list of sites requiring investigation or cleanup, nor, to the knowledge of the Company, is any such property anticipated or threatened to be placed on any such list.
(j) No notice, notification, demand, request for information, complaint, citation, summons, investigation, administrative order, consent order and agreement, litigation or settlement with respect to Hazardous Materials or Hazardous Materials Contamination is in existence or, to Company's knowledge, proposed, threatened or anticipated with respect to or in connection with the operation of any properties previously owned, leased or operated by the Company or any Subsidiary and relating to any period of ownership, operation, possession or control thereof by the Company or any Subsidiary. All such properties and their prior uses by the Company or any Subsidiary at all times complied with any applicable governmental requirements relating to environmental matters or Hazardous Materials. There is no condition on any of such properties which is in violation of any applicable governmental requirements relating to Hazardous Materials and arising from any use of such properties during any period of ownership, operation, possession or control thereof by the Company or any Subsidiary, and neither the Company nor any Subsidiary has received any communication from or on behalf of any governmental authority that any such condition exists. None of such properties nor any property to which the Company or any Subsidiary has, directly or indirectly, transported or arranged for the transportation of any material is listed or, to the Company's knowledge, proposed for listing on the National Priorities List promulgated pursuant to CERCLA, on CERCLIS (as defined in CERCLA) or on any similar federal, state or foreign list of sites requiring investigation or cleanup, nor, to the knowledge of the Company, is any such property anticipated or threatened to be placed on any such list.
(k) There has been no environmental investigation, study, audit, test, review or other analysis conducted of which the Company has knowledge in relation to the current or prior business of the Company or any Subsidiary or any property or facility now or previously owned, leased or operated by the Company or any Subsidiary which has not been delivered to the Lenders at least five days prior to the Closing Date.
(l) For purposes of this Section 6.21, the terms "Company" and "Subsidiary" shall include any business or business entity (including a corporation) which is, in whole or in part, a predecessor of the Company or any Subsidiary.
SECTION 6.22. CAPITALIZATION. Set forth on Schedule 6.22 is a schedule of the capitalization of the Company, after giving effect to the transactions contemplated to take place on the Closing Date, including the issuance of the Warrant Shares upon exercise of the Warrants, specifying each class of interest held and the amount and holder thereof.
SECTION 6.23. REAL PROPERTY INTERESTS. Except for the ownership, leasehold or other interests set forth in Schedule 6.23, the Company and its Subsidiaries have, as of the Closing Date, no ownership, leasehold or other interest in real property.
ARTICLE VII
AFFIRMATIVE COVENANTS
The Company agrees that, so long as any Lender has any Commitment hereunder or any amount payable under any Note remains unpaid:
SECTION 7.01. FINANCIAL STATEMENTS AND OTHER REPORTS. The Company will maintain a system of accounting established and administered in accordance with sound business practices to permit preparation of financial statements in accordance with GAAP, and will deliver to each of the Lenders:
(a) as soon as practicable and in any event within 30 days after the end of each month, a consolidated and consolidating balance sheet of the Company and its Consolidated Subsidiaries as at the end of such month and the related consolidated and consolidating statements of operations and cash flows for such month, and for the portion of the Fiscal Year ended at the end of such month setting forth in each case in comparative form the figures for the corresponding periods of the previous Fiscal Year and the figures for such month and for such portion of the Fiscal Year ended at the end of such month set forth in the annual operating and capital expenditure budgets and cash flow forecast delivered pursuant to Section 7.01(l), all in reasonable detail and certified by the chief financial officer of the Company, as fairly presenting the financial condition and results of operations of the Company and its Consolidated Subsidiaries and as having been prepared in accordance with GAAP applied on a basis consistent with the audited financial statements of the Company, subject to changes resulting from audit and normal year-end adjustments and subject to the absence of footnotes;
(b) as soon as practicable and in any event within 45 days after the end of each of the first 3 fiscal quarters of each Fiscal Year, a consolidated and consolidating balance sheet of the Company and its Consolidated Subsidiaries as at the end of such quarter and the related consolidated and consolidating statements of operations and cash flows for such fiscal quarter, and for the portion of the Fiscal Year ended at the end of such quarter setting forth in each case in comparative form the figures for the corresponding periods of the previous Fiscal Year and the figures for such quarter and for such portion of the Fiscal Year ended at the end of such quarter set forth in the annual operating and capital expenditure budgets and cash flow forecast delivered pursuant to Section 7.01(l), all in reasonable detail and certified by the chief financial officer of the Company as fairly presenting the financial condition and results of operations of the Company and its Consolidated Subsidiaries and as having been prepared in accordance with GAAP applied on a basis consistent with the audited financial statements of the Company delivered pursuant to Section 6.04(a), subject to changes resulting from audit and normal year-end adjustments and subject to the absence of footnotes;
(c) on or before July 31, 1997, for the Fiscal Year ended December 31, 1996, and as soon as available and in any event within 120 days after the end of each subsequent Fiscal Year, a consolidated and consolidating balance sheet of the Company and its Consolidated Subsidiaries as of the end of such Fiscal Year and the related consolidated and consolidating
statements of operations, stockholders' equity and cash flows for such Fiscal Year, setting forth in each case in comparative form the figures for the previous Fiscal Year and the figures for such Fiscal Year set forth in the annual operating and capital expenditure budgets and cash flow forecasts delivered pursuant to Section 7.01(l), in each case certified (solely with respect to such consolidated statements) without qualification by Coopers & Lybrand LLP or other independent public accountants of nationally recognized standing;
(d) (i) together with each delivery of financial statements pursuant to (a), (b) and (c) above, an Officer's Certificate for the Company stating that the officers executing such certificate have reviewed the terms of this Agreement and have made, or caused to be made under their supervision, a review in reasonable detail of the transactions and condition of the Company and its Consolidated Subsidiaries during the accounting period covered by such financial statements and that such review has not disclosed the existence during or at the end of such accounting period, and that such officers do not have knowledge of the existence as at the date of such Officers' Certificate, of any Default, or, if any such Default existed or exists, specifying the nature and period of existence thereof and what action the Company has taken or is taking or proposes to take with respect thereto; (ii) together with each delivery of financial statements pursuant to (b) or (c) above, a compliance certificate of the chief financial officer or treasurer of the Company (x) providing details of all transactions between the Company and any Person referred to in Section 8.08, (y) demonstrating in reasonable detail compliance during and at the end of such accounting period with the restrictions contained in Sections 8.11 through 8.18, and (z) if not specified in the financial statements delivered pursuant to (b) or (c) above, as the case may be, specifying the aggregate amount of interest paid or accrued and the aggregate amount of depreciation and amortization charged, during such accounting period; and (iii) together with each delivery of financial statements pursuant to (c) above, a statement setting forth in reasonable detail the computation of Excess Cash Flow, if any, for such Fiscal Year, certified by the chief financial officer of the Company as having been prepared from such financial statements in accordance with this Agreement;
(e) together with each delivery of financial statements
pursuant to (c) above, a written statement by the independent public accountants
giving the report thereon (i) stating that their audit examination has included
a review of the terms of this Agreement as it relates to accounting matters,
(ii) stating whether, in connection with their audit examination, any Default
has come to their attention, and if such a condition or event has come to their
attention, specifying the nature and period of existence thereof, and (iii)
stating that based on their audit examination nothing has come to their
attention which causes them to believe that the information contained in the
certificates delivered therewith pursuant to (d) above is not correct and that
the matters set forth in the compliance certificate delivered therewith pursuant
to clause (ii) of (d) above for the applicable Fiscal Year are not stated in
accordance with the terms of this Agreement;
(f) promptly upon receipt thereof, copies of all reports submitted to the Company by independent public accountants in connection with each annual, interim or special audit of the financial statements of the Company or any of its Subsidiaries made by such
accountants, including the comment letter submitted by such accountants to management in connection with their annual audit;
(g) promptly upon their becoming available, copies of (i)
all financial statements, reports, notices and proxy statements sent or made
available generally by the Company to its security holders, (ii) all regular and
periodic reports and all registration statements and prospectuses filed by the
Company with any securities exchange or with the Securities and Exchange
Commission or any governmental authority succeeding to any of its functions and
(iii) all press releases and other statements made available generally by the
Company to the public concerning material developments in the business of the
Company or any Subsidiary;
(h) promptly upon any officer of the Company obtaining
knowledge (i) of the existence of any default with respect to any Debt of the
Company or any Subsidiary, that singly or that when aggregated with other Debt
in default has an aggregate outstanding principal amount greater than or equal
to $100,000, or that the holder of any such Debt has given any notice or taken
any other action with respect to a claimed default thereunder, (ii) of any
change in the Company's certified accountant or any resignation, or decision not
to stand for re-election, by any member of the Company's board of directors,
(iii) that any Person has given any notice to the Company or taken any other
action with respect to a claimed default under any material agreement or
instrument (other than the Financing Documents) to which the Company or any
Subsidiary is a party or by which any of their material assets are bound or (iv)
of the institution of any litigation or arbitration involving an alleged
liability of the Company or any Subsidiary equal to or greater than $100,000, or
any adverse determination in any litigation or arbitration involving a potential
liability of the Company or any Subsidiary equal to or greater than $100,000, an
Officers' Certificate of the Company specifying the nature and period of
existence of any such condition or event, or specifying the notice given or
action taken by such holder or Person and the nature of such claimed default
(including any Default), event or condition, and what action the Company has
taken, is taking or proposes to take with respect thereto;
(i) if and when any member of the ERISA Group (i) gives
or is required to give notice to the PBGC of any "reportable event" (as defined
in Section 4043 of ERISA) with respect to any Plan which might constitute
grounds for a termination of such Plan under Title IV of ERISA, or knows that
the plan administrator of any Plan has given or is required to give notice of
any such reportable event, a copy of the notice of such reportable event given
or required to be given to the PBGC; (ii) receives notice of complete or partial
withdrawal liability under Title IV of ERISA or notice that any Multiemployer
Plan is in reorganization, is insolvent or has been terminated, a copy of such
notice; (iii) receives notice from the PBGC under Title IV of ERISA of an intent
to terminate, impose liability (other than for premiums under Section 4007 of
ERISA) in respect of, or appoint a trustee to administer any Plan, a copy of
such notice; (iv) applies for a waiver of the minimum funding standard under
Section 412 of the Code, a copy of such application; (v) gives notice of intent
to terminate any Plan under Section 4041(c) of ERISA, a copy of such notice and
other information filed with the PBGC; (vi) gives notice of withdrawal from any
Plan pursuant to Section 4063 of ERISA, a copy of such notice; or (vii) fails to
make any payment or contribution to any Plan or Multiemployer Plan or in respect
of any
Benefit Arrangement or makes any amendment to any Plan or Benefit Arrangement which has resulted or could result in the imposition of a Lien or the posting of a bond or other security, a certificate of the chief financial officer or the chief accounting officer of the Company setting forth details as to such occurrence and action, if any, which the Company or applicable member of the ERISA Group is required or proposes to take;
(j) copies of any material reports or notices related to taxes and any other material reports or notices received by the Company from, or filed by the Company with, any Federal, state or local governmental agency or body regulating the activities of the Company;
(k) within 30 days prior to the conclusion of each Fiscal Year, the Company's annual operating and capital expenditure budgets and cash flow forecast for the following Fiscal Year presented on a monthly basis, which shall be in a format reasonably consistent with projections, budgets and forecasts theretofore provided to the Lenders;
(l) together with each Notice of Borrowing and on the first Business Day of each week, a Borrowing Base Certificate as of the close of business of the immediately preceding Business Day;
(m) within two Business Days after any request therefor, such information in such detail concerning the amount, composition and manner of calculation of the Borrowing Base as the Agent may reasonably request;
(n) within ten days after the end of each month, a report, in form and substance acceptable to the Agent, as to all accounts receivable of the Company and its Subsidiaries outstanding as of the last day of such month (a "RECEIVABLES REPORT"), which shall set forth in summary form an aging of such receivables and which shall, if the Agent so requests, include a detailed aged trial balance of all such receivables specifying the names, face amount and dates of all invoices for each account debtor obligated on a receivable so listed; upon the reasonable request of the Agent and to the extent available, each Receivables Report shall be accompanied by copies of customer statements, and all documents, including repayment histories and present status reports, relating to the receivables so scheduled and such other matters and information relating to the status of any receivables as the Agent shall reasonably request;
(o) together with the next delivery of a Receivables Report after the Company becomes aware thereof, notice of any dispute between any account debtor and the Company or the applicable Subsidiary with respect to any amounts due and owing in excess of $100,000 in the aggregate, with an explanation in reasonable detail of the reason for the dispute, all claims related thereto and the amount in controversy;
(q) together with each delivery of financial statements pursuant to (a), (b) and (c) above, a management discussion of the comparison between budget and actual performance and of performance versus performance for the prior year in form and in substance satisfactory to the Agent in its sole good faith discretion; and
(r) with reasonable promptness, such other information and data with respect to the Company or any Subsidiary, as from time to time may be reasonably requested by the Agent.
SECTION 7.02. PAYMENT OF OBLIGATIONS. The Company (i) shall pay and discharge, and cause each Subsidiary to pay and discharge, at or before maturity, all of their respective material obligations and liabilities, including tax liabilities, except where the same may be the subject of a Permitted Contest, (ii) shall maintain, and cause each of its Subsidiaries to maintain, in accordance with GAAP, appropriate reserves for the accrual of any of the same and (iii) shall not breach or permit any Subsidiary to breach, in any material respect, or permit to exist any material default under, the terms of any lease, commitment, contract, instrument or obligation to which it is a party, or by which its properties or assets are bound where such breach or default would be reasonably likely to have a Material Adverse Effect.
SECTION 7.03. CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. The Company will continue, and will cause each Subsidiary to continue, to engage in business of the same general type as now conducted by it and each Subsidiary, and will preserve, renew and keep in full force and effect, and will cause each Subsidiary to preserve, renew and keep in full force and effect their respective corporate existences and their respective rights, privileges and franchises necessary or desirable in the normal conduct of business.
SECTION 7.04. MAINTENANCE OF PROPERTY; INSURANCE. (a) The Company will keep, and will cause each Subsidiary to keep, all property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted.
(b) The Company will maintain, and will cause each Subsidiary to maintain, (i) physical damage insurance on all real and personal property on an all risks basis (including the perils of flood and quake), covering the repair and replacement cost of all such property and consequential loss coverage for business interruption and extra expense, covering such risks, for amounts not less than those, and with deductible amounts not greater than those, set forth in Part I of Schedule 7.04, (ii) public liability insurance (including products/completed operations liability coverage) covering such risks, for amounts not less than those, and with deductible amounts not greater than those, set forth in Part II of Schedule 7.04 and (iii) such other insurance coverage in such amounts and with respect to such risks as the Required Lenders may reasonably request. All such insurance shall be provided by insurers having an A.M. Best policyholders rating of not less than B+ or such other insurers as the Required Lenders may approve in writing.
(c) On or prior to the Closing Date, the Company shall cause the Agent to be named as an additional insured or loss payee, as applicable, on each insurance policy required to be maintained by it pursuant to this Section 7.04. The Company will deliver to the Lenders (i) on the Closing Date, a certificate from the Company's insurance broker dated such date showing the amount of coverage as of such date, and certifying that, in the opinion of such broker, such amounts are reasonable and customary for companies of established repute engaged in the same or a similar business, that such policies will include effective waivers (whether under the terms of any such policy or otherwise) by the insurer of all claims for insurance premiums against all
loss payees and additional insureds and all rights of subrogation against all
loss payees and additional insureds, and that if all or any part of such policy
is canceled, terminated or expires, the insurer will forthwith give notice
thereof to each additional insured and loss payee and that no cancellation,
reduction in amount or material change in coverage thereof shall be effective
until at least 30 days after receipt by each additional insured and loss payee
of written notice thereof, (ii) upon the request of the Agent from time to time
full information as to the insurance carried, (iii) within five days of receipt
of notice from any insurer, a copy of any notice of cancellation, nonrenewal or
material change in coverage from that existing on the date of this Agreement and
(iv) forthwith, notice of any cancellation or nonrenewal of coverage by the
Company.
(d) The Company hereby appoints the Agent as its attorney-in-fact to make proof of loss, claim for insurance and adjustments with insurers, and to execute or endorse all documents, checks or drafts in connection with payments under Property Insurance Policies.
(e) The Company will within thirty (30) days after the Closing Date obtain, and shall thereafter maintain, a term life insurance policy in form and substance and issued by a life insurance company, in each case acceptable to the Agent in its sole good faith discretion, with respect to Marshall P. Hunt and William E. Peterson, Jr., in an amount not less than $1,000,000 for each such individual (the "KEY-PERSON LIFE INSURANCE POLICY"). Any Net Cash Proceeds payable to the Company under the Key-Person Life Insurance Policy shall be paid to the Agent for application in accordance with this Agreement and Section 5 of the Security Agreement.
SECTION 7.05. COMPLIANCE WITH LAWS. The Company will comply, and cause each Subsidiary to comply, in all material respects with all applicable laws, ordinances, rules, regulations, and requirements of governmental authorities (including Environmental Laws and ERISA and the rules and regulations thereunder).
SECTION 7.06. INSPECTION OF PROPERTY, BOOKS AND RECORDS. The Company will keep and will cause each Subsidiary to keep, proper books of record and account in which full, true and correct entries shall be made of all dealings and transactions in relation to its business and activities; and will permit, and will cause each of its Subsidiaries to permit, representatives of any Lender at such Lender's expense to visit and inspect any of their respective properties, to examine and make abstracts or copies from any of their respective books and records, to conduct a collateral audit and analysis of their respective inventories and accounts receivable and to discuss their respective affairs, finances and accounts with their respective officers, employees and independent public accountants, all at such reasonable times and as often as may reasonably be desired.
SECTION 7.07. USE OF PROCEEDS. The Company will use the proceeds of the Tranche A Loans solely for payment of amounts due under the Acquisition Documents and transaction fees incurred in connection with the Operative Documents. The Company will use the proceeds of the Tranche B Loans solely for the refinancing of existing indebtedness to Sirrom Capital and Columbus Bank & Trust. The proceeds of Working Capital Loans shall be used by
the Company solely for working capital needs of the Company. None of the proceeds of any Loan provided hereunder will be used in violation of any applicable law or regulation.
SECTION 7.08. FURTHER ASSURANCES. The Company will, and will cause each Subsidiary to, at its own cost and expense, cause to be promptly and duly taken, executed, acknowledged and delivered all such further acts, documents and assurances (x) as may from time to time be necessary or as the Required Lenders may from time to time reasonably request in order to carry out the intent and purposes of the Financing Documents and the transactions contemplated thereby, including all such actions to establish, preserve, protect and perfect the estate, right, title and interest of the Lenders to the Collateral (including Collateral acquired after the date hereof), including first priority Liens thereon, subject only to Permitted Liens and (y) as the Required Lenders may from time to time reasonably request, to establish, preserve, protect and perfect first priority Liens in favor of the Lenders on any and all assets of the Company and the Subsidiaries, now owned or hereafter acquired, that are not Collateral on the date hereof. The Company shall promptly give notice to the Agent of the acquisition after the Closing Date by the Company of any real property (including leaseholds in respect of real property), trademark, copyright or patent.
SECTION 7.09. BOARD MEETINGS. The Company will notify the Lenders of all meetings and actions by written consent of the board of directors of the Company and each committee thereof at the same time and in the same manner as notice of any meeting of such board or committee (if any) is required to be given to its directors who do not waive such notice (or, if such action requires no notice, then 10 days written notice thereof describing the matters upon which action is to be taken). The Lenders shall have the right to send two representatives selected by them to each such meeting, who shall be permitted to attend such meeting and any adjournments thereof (other than any portion of such meeting devoted to discussion of the Lenders solely in their respective capacities as holders of the Notes).
SECTION 7.10. LENDERS' MEETINGS. Within 10 days following any request therefore by the Agent, the Company will conduct a meeting of the Lenders to discuss the results of any prior fiscal period and the financial condition of the Company at which shall be present the chief executive officer and the chief financial officer of the Company and such other officers of the Company as the Company's chief executive officer shall designate. Such meetings shall be held at a time and place convenient to the Lenders and the Company.
SECTION 7.11. CONSUMMATION OF THE ACQUISITION. The Company will cause the closing of the Acquisition to occur concurrently with the making of the Loans on the Closing Date, and will not without the prior written consent of the Agent waive any condition to its obligations to consummate the Acquisition.
SECTION 7.12. HAZARDOUS MATERIALS; REMEDIATION. The Company will (i) promptly give notice to the Lenders in writing of any complaint, order, citation, notice or other written communication from any Person with respect to, or if the Company becomes aware of, (x) the existence or alleged existence of a material violation of any applicable Environmental Law or the incurrence of any material liability, obligation, loss, damage, cost, expense, fine,
penalty or sanction or the requirement to commence any material remedial action resulting from or in connection with any air emission, water discharge, noise emission, Hazardous Material or any other environmental, health or safety matter at, upon, under or within any of the properties now or previously owned, leased or operated by it or any Subsidiary or due to operations or activities of it or the operations or activities of any Subsidiary of the Company, or any other Person on or in connection with any such property or any part thereof or (y) any release on any of such properties of Hazardous Materials in a quantity that is reportable under any applicable Environmental Law; (ii) promptly comply and cause each Restricted Subsidiary to comply with any governmental requirements requiring the removal, treatment or disposal of such Hazardous Materials or Hazardous Materials Contamination and provide evidence satisfactory to the Required Lenders of such compliance; and (iii) provide the Lenders, within 30 days after demand therefor by the Required Lenders, with a bond, letter of credit or similar financial assurance evidencing to the satisfaction of the Required Lenders that sufficient funds are available to pay the cost of removing, treating and disposing of such Hazardous Materials or Hazardous Materials Contamination and discharging any assessment which may be established on any such property as a result thereof.
SECTION 7.13. LANDLORD AND WAREHOUSEMAN WAIVERS. The Company shall use its reasonable best efforts to deliver to the Agent waivers of contractual and statutory landlord's, landlord's mortgagee's and warehouseman's Liens in form and substance satisfactory to the Agent under each existing lease, warehouse agreement or similar agreement to which the company or any Subsidiary is a party; provided that the Company will use its reasonable best efforts to assure that such waivers will be incorporated when the existing lease, warehouse agreement or similar agreement is amended, renewed or extended and the Company will use its reasonable best efforts to obtain waivers of both contractual and statutory landlord's, landlord's mortgagee's and warehouseman's Liens in form and substance satisfactory to the Agent in connection with each new lease, warehouse agreement or similar agreement entered into by the Company or any Subsidiary. Without limiting the obligations of the Company under this Section 7.13, it is understood and agreed that any Inventory that is subject to a landlord's, landlord's mortgagee's or warehouseman's Lien or any other Lien not created by the Security Documents shall not be included in Eligible Inventory.
SECTION 7.14. COLLATERAL REPORTS. The Company shall keep accurate and complete records of its accounts receivable in at least so much detail as to enable the Company to provide the Receivables Reports and other information described in Section 7.01.
SECTION 7.15. COLLECTIONS; RIGHT TO NOTIFY ACCOUNT DEBTORS. At any time following the occurrence of an Event of Default and during the continuance thereof, in addition to the Lenders' rights under the Security Documents, the Company hereby authorizes the Agent, at any time, to (i) notify any or all account debtors that the accounts receivable of the Company and its Subsidiaries have been assigned to the Agent and that the Agent has a security interest therein and (ii) direct such account debtors to make all payments due from them to the Company or any Subsidiary upon such accounts receivable directly to the Agent or to a lockbox designated by the Agent. The Agent shall promptly furnish the Company with a copy of any such notice
sent. Any such notice, in the Agent's sole discretion, may be sent on the Company's stationery, in which event the Company shall, if requested by the Agent, co-sign such notice with the Agent.
SECTION 7.16. ENFORCEMENT OF COVENANTS NOT TO COMPETE. The Company and each Subsidiary shall preserve, protect and defend, to the extent permitted by applicable law and to the extent commercially reasonable, all of its rights, if any, with respect to any covenant not to compete contained in any of the material contracts of such Person or contained in any employment agreement with any employee whose annual salary and other compensation payable by the Company or any Subsidiary is $100,000 or more.
SECTION 7.17. HEDGING FACILITIES. Not later than sixty (60) days following the Closing Date, the Company will, at its sole cost and expense, enter into and thereafter maintain in full force and effect an interest rate cap agreement for a term of three (3) years, in an initial notional amount of $15,000,000 and thereafter amortizing on a pro rata basis with the Tranche A Loans, with a strike price at 8.8% per annum, or upon such other terms as may be agreed to by the Agent in its sole discretion.
ARTICLE VIII
NEGATIVE COVENANTS
The Company agrees that, so long as any Lender has any Commitment hereunder or any amount payable under any Note remains unpaid:
SECTION 8.01. DEBT. The Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, create, incur, assume, guarantee or otherwise become or remain directly or indirectly liable with respect to, any Debt, except for:
(a) Debt of the Company outstanding on the date of this Agreement as set forth in Schedule 8.01;
(b) Debt of the Company under the Financing Documents;
(c) Debt of the Company or any Subsidiary incurred or assumed for the purpose of financing all or any part of the cost of acquiring any fixed asset (including through Capital Leases), in an aggregate principal amount at any time outstanding not greater than $1,000,000;
(d) Debt of the Company or any Subsidiary to a wholly-owned Subsidiary of the Company, or of any Subsidiary of the Company to the Company;
(e) the Subordinated Debt, provided such Debt is fully subordinated to the Obligations on terms satisfactory to the Agent and the Required Lenders;
(f) Debt in respect of the Hedging Facilities required pursuant to Section 7.17;
(g) Debt of the Company or any Subsidiary outstanding under the Sirrom Loan Documents;
(h) other Debt of the Company or any Subsidiary in an aggregate principal amount at any time outstanding not greater than $50,000; and
(i) extensions, refinancings, replacements and renewals of any of the foregoing Debt described in clauses (a) or (c) of this Section 8.01, provided that the principal amount thereof is not increased and such extension, refinancing, replacement or renewal does not impose more burdensome terms upon the Company or any Subsidiary, as the case may be, than the Debt being extended, refinanced, replaced or renewed.
SECTION 8.02. NEGATIVE PLEDGE. (a) Neither the Company nor any Subsidiary will create, assume or suffer to exist any Lien on any asset now owned or hereafter acquired by it, except:
(i) any Lien on any asset securing Debt permitted under
Section 8.01(c) incurred or assumed for the purpose of financing all or
any part of the cost of acquiring such asset, provided that such Lien
attaches to such asset concurrently with or within 90 days after the
acquisition thereof;
(ii) Liens listed on Schedule 8.02 and existing on the date of
this Agreement securing Debt outstanding on such date permitted by
Section 8.01(a) and specified on Schedule 8.02;
(iii) Liens arising in the ordinary course of its business which (A) do not secure Debt, (B) do not secure any single obligation in an amount exceeding $50,000 or which in the aggregate do not secure obligations in excess $200,000 and (C) do not in the aggregate materially detract from the value of its assets or materially impair the use thereof in the operation of its business;
(iv) Liens created by the Sirrom Loan Documents; and
(v) Liens created by the Security Documents.
(b) Other Negative Pledges. Neither the Company nor any Subsidiary will enter into any agreement or contract which restricts the Company or such Subsidiary from granting a Lien on any of such Person's assets.
SECTION 8.03. CAPITAL STOCK. The Company shall not issue any capital stock that under its certificate of incorporation is entitled to a preference over the Common Stock as to payment of dividends or distributions, and shall not issue any of its Common Stock except pursuant to the Warrants, the anti-dilution provisions of the Cordova Warrant or in an underwritten public offering; provided that the Company shall be permitted to issue (x) (i) Common Stock in an amount of up to one percent (1%) of the outstanding Common Stock of the Company (on a fully diluted basis) for consideration (net of any expenses (including commissions) reasonably incurred in connection with such stock issuance) not to exceed $500,000, (ii) up to 3,000 shares of Common Stock to employees, officers and directors of the Company or its Subsidiaries as part of incentive or compensation packages and (iii) up to 2.4% of the outstanding shares of Common Stock of the Company pursuant to the Consulting and Services Agreement, dated February 1, 1996, between Healthcare Alliance, Inc. and the Company, on the condition that any and all such Common Stock issued to the Company pursuant to clauses (i) and (ii) shall be pledged by the recipient or other holder thereof to secure the Obligations on terms satisfactory to the Agent and the Lenders, and (y) in an underwritten public offering only, shares to Robert Cohen pursuant to his consulting agreement with the Company dated May 8, 1997. No Subsidiary shall issue any shares of capital stock except shares of capital stock issued by any Subsidiary to the Company.
SECTION 8.04. RESTRICTED PAYMENTS. (a) The Company will not, directly or indirectly, declare, order, pay, make or set apart any sum for any Restricted Payment; provided
that the foregoing shall not restrict or prohibit purchases or redemptions of the Warrants under the terms thereof.
(b) Without the prior written consent of the Required Lenders, neither the Company nor any of its Subsidiaries will (i) consent to the transfer of the Subordinated Note or (ii) pay, repay, redeem, purchase, acquire or make any other payment in respect of the Subordinated Note, except as specifically provided therein and expressly permitted thereby and by the Subordination Agreement.
SECTION 8.05. ERISA. The Company will not, nor will it permit any Subsidiary to:
(a) engage in any transaction in connection with which the Company
or any Subsidiary could be subject to any material liability arising from either
a civil penalty assessed pursuant to Section 502(i) of ERISA or a tax imposed by
Section 4975 of the Code;
(b) terminate any Plan in a manner, or take any other action, which could result in any material liability of any member of the ERISA Group to the PBGC;
(c) fail to make full payment when due of all amounts which, under the provisions of any Plan, it is required to pay as contributions thereto, or permit to exist any accumulated funding deficiency, whether or not waived, with respect to any Plan;
(d) permit the present value of all benefit liabilities under all Plans to exceed the fair market value of the assets of such Plans; or
(e) fail to make any payments to any Multiemployer Plan that it may be required to make under any agreement relating to such Multiemployer Plan or any law pertaining thereto.
SECTION 8.06. CONSOLIDATIONS, MERGERS AND SALES OF ASSETS. The Company will not and will not permit any Subsidiary to consolidate or merge with or into any other Person, or sell, lease or otherwise transfer, directly or indirectly, any of its assets, other than (v) sales of inventory in the ordinary course of business, (w) dispositions of Temporary Cash Investments, (x) mergers or consolidations of any Subsidiary with the Company (provided that the Company shall be the surviving corporation therefrom) or any other Subsidiary, (y) the transfer to Arrow on or after the Closing Date of those assets of Strato/Infusaid relating to its pump product business, as provided in and subject to the terms of the Arrow Purchase Agreement, and (z) dispositions for cash or fair value of assets that the board of directors of the Company determines in good faith are no longer used or useful in the business of the Company or such Subsidiary, provided that immediately after any such disposition, the aggregate fair market value of all such assets disposed of pursuant to this clause (z) after the date hereof does not exceed $500,000 and the aggregate fair market value of all such assets during the Fiscal Year in which such disposition is made does not exceed $100,000.
SECTION 8.07. PURCHASE OF ASSETS, INVESTMENTS. The Company will not, and will not permit any Subsidiary to, acquire any assets other than in the ordinary course of business. The Company will not, and will not permit any Subsidiary to, make, acquire or own any Investment in any Person other than Temporary Cash Investments. Without limiting the generality of the foregoing, the Company will not, and will not permit any Subsidiary to, (i) acquire or create any Subsidiary without the consent of the Required Lenders (which may be given or withheld in their sole good faith discretion) and arrangements satisfactory to the Required Lenders for (x) a pledge of the stock of such Subsidiary to the Agent for the benefit of the Lenders, (y) a guaranty by such Subsidiary of the obligations of the Company hereunder and (z) a grant of a Lien on all of the assets of such Subsidiary to the Agent for the benefit of the Lenders to secure such guaranty or (ii) engage in any joint venture or partnership with any other Person.
SECTION 8.08. TRANSACTIONS WITH AFFILIATES. The Company will not, and will not permit any Subsidiary to, directly or indirectly, enter into or permit to exist any transaction (including the purchase, sale, lease or exchange of any property or service or the rendering of any service) with, or for the benefit of, any Affiliate of the Company, any stockholder of the Company who directly or indirectly owns or controls, or whose family members directly or indirectly own or control 10% or more of the issued and outstanding shares of the Company (a "COMPANY AFFILIATED PERSON") or any affiliate or family member of any such stockholder, except upon terms not less favorable to the Company or any Subsidiary than if the relationship of Affiliate or stockholder did not exist.
SECTION 8.09. AMENDMENTS OR WAIVERS. Without the prior written consent of the Required Lenders, the Company will not, nor will it permit any Subsidiary to, agree to (i) any amendment to or waiver of or in respect of the certificate of incorporation of the Company or any amendment or waiver of or in respect of any Operative Document or the Subordinated Note, or (ii) any other amendment to or waiver of any provision of any material contract constituting a part of the Collateral.
SECTION 8.10. FISCAL YEAR. The Company shall not change its fiscal year from a fiscal year ending December 31.
SECTION 8.11. MANAGEMENT COMPENSATION. The Company shall not, and shall not permit any Subsidiary to, directly or indirectly, pay or become obligated to pay, any compensation for services in any form to or for the account of any Company Affiliated Person, except (i) from and after the date the Company shall demonstrate compliance with the financial covenants contained herein for the fiscal quarter ended December 31, 1997, aggregate compensation in an amount not to exceed $250,000 for any consecutive 12 month period, or (ii) upon such other terms as shall have been previously disclosed to and approved by the Agent and the Required Lenders in writing.
SECTION 8.12. LEASE PAYMENTS. The Company will not, and will not permit any Subsidiary to, incur or assume (whether pursuant to a Guarantee or otherwise) any liability for rental payments under a lease with a lease term (as defined in Financial Accounting Standards
Board Statement No. 13, as in effect on the date hereof) of one year or more if, after giving effect thereto, the aggregate amount of minimum lease payments that the Company and its Consolidated Subsidiaries have so incurred or assumed will exceed, on a consolidated basis, $250,000 for any calendar year under any such leases (excluding Capital Leases).
SECTION 8.13. MINIMUM NET WORTH. At no time after the Closing Date, will the Company permit Consolidated Net Worth to be less than the amount of Consolidated Net Worth as of the Closing Date, plus 75% of the positive amount of the consolidated net income of the Company and its Consolidated Subsidiaries for each complete month ended on or after such date, plus the amount of any increase in Consolidated Net Worth resulting from the issuance of stock, corporate reorganizations, recapitalizations or any similar event.
SECTION 8.14. CAPITAL EXPENDITURES. The aggregate amount of Capital Expenditures for any Fiscal Year shall not exceed the amounts set forth below for such Fiscal Year:
Fiscal Year Ending Amount ------------------ ------ 12/31/97 $700,000 12/31/98 $700,000 All Fiscal Yeast thereafter $500,000 |
SECTION 8.15. TOTAL DEBT SERVICE COVERAGE RATIO. The Company shall not permit the ratio on the last day of any fiscal quarter of (i) Consolidated Free Cash Flow to (ii) Total Debt Service, in each case for the twelve-month period then ended (or, in the case of any fiscal quarter ending prior to the first anniversary of the Closing Date, for the period commencing on the Closing Date and ending on the last day of such fiscal quarter) to be less than 1.25 to 1.0.
SECTION 8.16. LEVERAGE. At no time shall the ratio of (i) Consolidated Total Debt at such time to (ii) Adjusted EBITDA for the four consecutive fiscal quarters then most recently ended (considered as a single accounting period; provided that for the purposes of compliance on any date prior to the date that four complete fiscal quarters have elapsed since the Closing Date, Adjusted EBITDA for the relevant period shall equal the sum of Adjusted EBITDA for each fiscal quarter completed since the Closing Date, annualized), exceed 3.50 to 1.0.
SECTION 8.17. MINIMUM EBITDA. At no time during any period specified below arising after September 30, 1997, shall EBITDA for the four consecutive fiscal quarters then most recently ended (or, in the case of any fiscal quarter ending prior to the first anniversary of the Closing Date, for the period commencing on the Closing Date and ending on the last day of such fiscal quarter), considered as a single accounting period, be less than the corresponding amount set forth below:
Period Amount ------ ------ through 12/31/97 $ 4,000,000 through 3/31/98 $ 7,000,000 thereafter through 12/31/98 $10,000,000 thereafter through 12/31/99 $11,000,000 All times thereafter $12,000,000 |
SECTION 8.18. INTEREST COVERAGE. The Company shall not permit
the ratio, calculated on the last day of any fiscal quarter for the number of
consecutive fiscal quarters then most recently ended since the Closing
(considered as a single accounting period, but not to exceed four quarters), of
(i) Consolidated Free Cash Flow to (ii) the aggregate interest charges incurred
by the Company and its Consolidated Subsidiaries for such period, whether
expensed or capitalized, including the portion of any obligation under Capital
Leases allocable to interest expenses in accordance with GAAP and the portion of
any debt discount or premium (but not expenses of issuance) that shall be
amortized in such period, to be less than the ratio set forth below opposite the
period in which such last day shall fall:
PERIOD RATIO Closing Date through 12/31/97 2.25:1.0 1/1/98 through 6/30/98 2.50:1.0 All times thereafter 3.00:1.0 |
ARTICLE IX
EVENTS OF DEFAULT
SECTION 9.01. EVENTS OF DEFAULT. If any one or more of the following events (each an "EVENT OF DEFAULT") shall occur and be continuing for any reason whatsoever (whether voluntary or involuntary, by operation of law or otherwise):
(a) the Company shall fail to pay any principal, interest or premium on any Note or any fees payable hereunder when due, or any other amount payable hereunder within five Business Days of when due;
(b) the Company or any Subsidiary shall fail to observe or
perform any covenant contained in Article VIII hereof, or Section 5 or Sections
4(a), (e) or (i) of the Security Agreement or shall fail to perform any
covenant contained in Section 3(b) of the Pledge Agreement;
(c) the Company or any Subsidiary shall fail to observe or perform any covenant or agreement contained in the Financing Documents (other than those covered by clause (a) or (b) above) for 15 days after notice thereof has been given to the Company by the Agent;
(d) the Company shall, during any period that NationsCredit
shall be the holder of any Warrants, fail to observe or perform any covenant or
agreement contained in the Warrants or the Warrantholders Rights Agreement for
15 days after notice thereof has been given to the Company by the Agent
(provided that no default shall occur hereunder by reason of the Company's
failure to comply with Section 5.2 of the Warrants if compliance with such
Section shall cause an Event of Default hereunder, unless such other Event of
Default shall be waived by the Agent and the Required Lenders as provided
herein);
(e) any representation, warranty, certification or statement made by the Company or any Subsidiary in any Financing Document or in any certificate, financial statement or other document delivered pursuant to the Financing Documents shall prove to have been incorrect in any respect (or in any material respect if such representation, warranty, certification or statement is not by its terms already qualified as to materiality) when made (or deemed made);
(f) the Company or any Subsidiary shall fail to make any payment in respect of any Debt (other than the Notes) that singly, or that when aggregated with all other Debt with respect to which such Person has failed to make a payment, has an aggregate outstanding principal amount of $150,000 or greater;
(g) any event or condition shall occur that (i) results in the acceleration of the maturity of any Debt (other than the Notes) of the Company or any Subsidiary that singly, or when aggregated with all other Debt of any such Person with respect to which such an event or condition shall have occurred, has an aggregate outstanding principal amount of $150,000 or
greater, or (ii) enables (or, with the giving of notice or lapse of time or both, would enable) the holder of such Debt or any Person acting on such holder's behalf to accelerate the maturity thereof, or (iii) results in a violation of, or a default under, any provision of the certificate of incorporation of the Company or any Subsidiary;
(h) the Company or any Subsidiary shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidation, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing;
(i) an involuntary case or other proceeding shall be commenced against the Company or any Subsidiary seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 90 days; or an order for relief shall be entered against the Company or any Subsidiary under the federal bankruptcy laws as now or hereafter in effect;
(j) any member of the ERISA Group shall fail to pay when due an amount or amounts aggregating in excess of $150,000 which it shall have become liable to pay under Title IV of ERISA; or notice of intent to terminate a Material Plan shall be filed under Title IV of ERISA by any member of the ERISA Group, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate, to impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or to cause a trustee to be appointed to administer any Material Plan; or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any Material Plan must be terminated; or there shall occur a complete or partial withdrawal from, or a default, within the meaning of Section 4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which could cause one or more members of the ERISA Group to incur a current payment obligation in excess of $150,000;
(k) a judgment or order for the payment of money in excess of $150,000 shall be rendered against the Company or any Subsidiary and such judgment or order shall continue unsatisfied and unstayed for a period of 10 days or the staying of such judgment or order shall require the posting of a bond in excess of $150,000.
(l) except as the result of any transfer made pursuant to the Company Pledge Agreement, the Company shall cease to be the record and beneficial owner of 100% of the issued and outstanding capital stock of any Subsidiary; and person or group of persons (within the meaning of Rule 13d-3 promulgated by the Securities and Exchanges Commission under the
Securities Exchange Act of 1934, as amended), other than Management Stockholders or NationsCredit, shall have acquired beneficial ownership (within the meaning of such Rule 13d-3) of more than 5% of the Common Stock; or Marshall B. Hunt shall cease to be chief executive officer of the Company or William E. Peterson, Jr. shall cease to be president of the Company and, in either case, a successor shall not have been appointed by the Company and approved by the Required Lenders within 90 days thereafter, which approval shall not be unreasonably withheld; or Marshall B. Hunt, William E. Peterson, Jr. or Roy C. Mallady, Jr. shall cease to own beneficially at least the number of shares (determined assuming the exercise of all options or warrants to purchase Common Stock held by such Person and adjusted for stock splits, combinations and similar events) of Common Stock owned by such Person on the Closing Date (determined as aforesaid); or Marshall B. Hunt shall cease to be a director of the Company and a successor shall not have been appointed by the Company and approved by the Required Lenders within 90 days thereafter, which approval shall not be unreasonably withheld;
(m) any auditor's report or reports on the audited statements delivered pursuant to Section 7.01 shall include any material qualification (including with respect to the scope of audit) or exception (including without limitation any adverse statement as to the ability of the Company to continue as a going concern);
(n) the Lien created by any of the Security Documents shall at any time fail to constitute a valid and perfected Lien on all of the Collateral purported to be secured thereby, subject to no prior or equal Lien except Permitted Liens, or the Company or any of its Subsidiaries shall so assert in writing;
(o) the Company or any Subsidiary of shall be prohibited or otherwise materially restrained from conducting the business theretofore conducted by it by virtue of any determination, ruling, decision, decree or order of any court or regulatory authority of competent jurisdiction and such determination, ruling, decision, decree or order remains unstayed and in effect for any period of 10 days beyond any period for which any business interruption insurance policy shall provide full coverage of any losses and lost profits;
(p) any of the Operative Documents shall for any reason fail to constitute the valid and binding agreement of any party thereto, or any such party shall so assert in writing; or
(q) subject to Section 12.13 hereof, an Event of Default under (and as defined in) the Sirrom Loan Agreement shall occur;
then, and in every such event and at any time thereafter during the continuance of such event, the Agent shall if requested by the Required Lenders, (i) by notice to the Company terminate the Commitments and they shall thereupon terminate, (ii) by notice to the Company declare the Notes (together with accrued interest thereon) and all other obligations of the Company hereunder and under the other Financing Documents to be, and the Notes and such other obligations shall thereupon become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company and/or (iii) exercise any rights or remedies provided herein, under any other Financing Document, or
otherwise; provided that in the case of any of the Events of Default specified in clause (h) or (i) above with respect to the Company, without any notice to the Company or any other act by the Agent or the Lenders, the Commitments shall thereupon terminate and all of the Notes (together with accrued interest thereon) and all other obligations of the Company under the other Financing Documents shall become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company.
ARTICLE X
FEES, EXPENSES AND INDEMNITIES;
GENERAL PROVISIONS RELATING TO PAYMENTS
SECTION 10.01. FEES. (a) Participation Fees. On the Closing Date, the Company shall pay to each Lender a fee in an amount equal to 1.25% of the sum of such Lender's Tranche A Commitment, Tranche B Commitment and Working Capital Commitment.
(b) Closing Fees. On the Closing Date, the Company shall pay to the Lenders a fee in an aggregate amount (for all Lenders) equal to the sum of (i) $300,000, minus (ii) the balance, if any, of the good faith deposit of $30,000 previously paid by the Company in connection with the initial proposal letter and the fee previously paid by the Company in connection with the Commitment Letter, in each case after payment of all costs and expenses of the negotiation, preparation and execution of the Financing Documents and the consummation of the transactions contemplated thereby.
(c) Unused Commitment Fee. During the period from the Closing Date through the date on which the Working Capital Commitments are terminated, the Company shall pay to each Lender a fee at the rate of .38% per annum on the daily average amount by which the amount of such Lender's Working Capital Commitment exceeds the aggregate outstanding principal amount of its Working Capital Outstandings. Accrued fees under this Section shall be payable quarterly in arrears on each Quarterly Date prior to the date on which the Working Capital Commitments are terminated and on the date of such termination.
SECTION 10.02. COMPUTATION OF INTEREST AND FEES. Commitment fees pursuant to Section 10.01(c) and all interest hereunder and under the Notes shall be calculated on the basis of a 360-day year for the actual number of days elapsed.
SECTION 10.03. GENERAL PROVISIONS REGARDING PAYMENTS. All payments (including prepayments) to be made by the Company under any Financing Document, including payments of principal of and premium and interest on the Notes, fees, expenses and indemnities, shall be made without set-off or counterclaim and in immediately available funds. If any payment hereunder becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension. The Company shall make all payments in immediately available funds to each Lender's Payment Account before 11:00 A.M. (New York City time) on the date when due. Each payment (including prepayments) by the Company on account of principal of and interest on any Loans shall be made pro rata according to the respective outstanding principal amounts of such Class of Loans held by each Lender. All amounts payable by the Company hereunder or under any other Financing Document not paid when due (other than payments of principal and interest on the Notes, which shall bear interest as set forth therein) shall bear interest, payable on demand, for each day until paid at a rate per annum equal to 2% plus the rate announced by NationsBank,
N.A. from time to time as its prime rate (calculated on the basis of a 360-day year for the actual number of days elapsed).
SECTION 10.04. EXPENSES. Whether or not the transactions
contemplated hereby shall be consummated, the Company agrees to pay on demand
(i) all reasonable costs and expenses of preparation of this Agreement, the
other Financing Documents and the Warrants and of the Company's performance of
and compliance with all agreements and conditions contained herein and therein,
(ii) the reasonable fees, expenses and disbursements of counsel (including the
reasonable allocation of the compensation, costs and expenses of in-house
counsel, based upon time spent) to, and independent appraisers and consultants
retained by, the Lenders in connection with the negotiation, preparation,
execution and administration of this Agreement, the other Financing Documents
and the Warrants and any amendments hereto or thereto and waivers hereof and
thereof, (iii) all costs and expenses of creating, perfecting and maintaining
Liens pursuant to the Financing Documents, including filing and recording fees
and expenses, the costs of any bonds required to be posted in respect of future
filing and recording fees and expenses, title investigations and fees and
expenses of such local counsel as the Agent shall request, (iv) the reasonable
fees, expenses and disbursements of independent accountants or other experts
retained by the Agent in connection with not more than two accounting and
collateral audits or reviews of the Company and its affairs during any calendar
year and (v) if an Event of Default occurs, all out-of-pocket expenses incurred
by the Agent and each Lender, including reasonable fees and disbursements of
counsel (including the reasonable allocation of the compensation, costs and
expenses of in-house counsel, based upon time spent), in connection with such
Event of Default and collection, bankruptcy, insolvency and other enforcement
proceedings resulting therefrom.
SECTION 10.05. INDEMNITY. Whether or not the transactions
contemplated hereby shall be consummated, the Company agrees to indemnify, pay
and hold harmless the Agent and each Lender and any subsequent holder of any of
the Notes, Warrants or Warrant Shares and the officers, directors, employees
and agents of the Agent, each Lender and such holders (collectively called the
"INDEMNITEES") from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs, expenses and
disbursements of any kind or nature whatsoever (including the reasonable fees
and disbursements of counsel for such Indemnitee) in connection with any
investigative, administrative or judicial proceeding, whether or not such
Indemnitee shall be designated a party thereto and including any such
proceeding initiated by or on behalf of an Obligor, and the expenses of
investigation by engineers, environmental consultants and similar technical
personnel and any commission, fee or compensation claimed by any broker (other
than any broker retained by NationsCredit) asserting any right to payment for
the transactions contemplated hereby, which may be imposed on, incurred by or
asserted against such Indemnitee as a result of or in connection with the
transactions contemplated hereby or by the other Operative Documents (including
(i)(A) as a direct or indirect result of the presence on or under, or escape,
seepage, leakage, spillage, discharge, emission or release from, any property
now or previously owned, leased or operated by the Company or any of its
Subsidiaries of any Hazardous Materials or any Hazardous Materials
Contamination, (B) arising out of or relating to the offsite disposal of any
materials generated or present on any such property or (C) arising out of or
resulting from the
environmental condition of any such property or the applicability of any governmental requirements relating to Hazardous Materials, whether or not occasioned wholly or in part by any condition, accident or event caused by any act or omission of the Company or any of its Subsidiaries, and (ii) proposed and actual extensions of credit under this Agreement) and the use or intended use of the proceeds of the Notes and Warrants, except that the Company shall have no obligation hereunder to an Indemnitee with respect to any liability resulting from the gross negligence or willful misconduct of such Indemnitee. To the extent that the undertaking set forth in the immediately preceding sentence may be unenforceable, the Company shall contribute the maximum portion which it is permitted to pay and satisfy under applicable law to the payment and satisfaction of all such indemnified liabilities incurred by the Indemnitees or any of them. Without limiting the generality of any provision of this Section, to the fullest extent permitted by law, the Company hereby waives all rights for contribution or any other rights of recovery with respect to liabilities, losses, damages, costs and expenses arising under or relating to Environmental Laws that it might have by statute or otherwise against any Indemnitee.
SECTION 10.06. TAXES. The Company agrees to pay all governmental assessments, charges or taxes (except income or other similar taxes imposed on any Lender or any holder of a Note), including any interest or penalties thereon, at any time payable or ruled to be payable in respect of the existence, execution or delivery of this Agreement, the other Financing Documents or the Warrants, or the issuance of the Notes, the Warrants or the Warrant Shares, and to indemnify and hold each Lender and each and every holder of the Notes, Warrants and Warrant Shares harmless against liability in connection with any such assessments, charges or taxes.
SECTION 10.07. FUNDING LOSSES. If the Company fails to borrow any Working Capital Loans after notice has been given to any Lender in accordance with Section 4.04 or make any payment when due (including pursuant to a notice of optional prepayment), the Company shall reimburse each Lender within 15 days after demand for any resulting loss or expense incurred by it (or by an existing or prospective participant in the related Loan), including any loss incurred in obtaining, liquidating or employing deposits from third parties, but excluding loss of margin for the period after any such payment or failure to borrow; provided that such Lender shall have delivered to the Company a certificate as to the amount of such loss or expense, which certificate shall be conclusive in the absence of manifest error.
SECTION 10.08. MAXIMUM INTEREST. (a) In no event shall the interest charged with respect to the Notes or any other obligations of the Company under the Financing Documents exceed the maximum amount permitted under the laws of the State of Georgia or of any other applicable jurisdiction.
(b) Notwithstanding anything to the contrary herein or elsewhere, if at any time the rate of interest payable for the account of any Lender hereunder or under any Note or other Financing Document (the "STATED RATE") would exceed the highest rate of interest permitted under any applicable law to be charged by such Lender (the "MAXIMUM LAWFUL RATE"), then for so long as the Maximum Lawful Rate would be so exceeded, the rate of interest payable for the account of such Lender shall be equal to the Maximum Lawful Rate; provided,
that if at any time thereafter the Stated Rate is less than the Maximum Lawful Rate, the Company shall, to the extent permitted by law, continue to pay interest for the account of such Lender at the Maximum Lawful Rate until such time as the total interest received by such Lender is equal to the total interest which such Lender would have received had the Stated Rate been (but for the operation of this provision) the interest rate payable. Thereafter, the interest rate payable for the account of such Lender shall be the Stated Rate unless and until the Stated Rate again would exceed the Maximum Lawful Rate, in which event this provision shall again apply.
(c) In no event shall the total interest received by any Lender exceed the amount which such Lender could lawfully have received had the interest been calculated for the full term hereof at the Maximum Lawful Rate with respect to such Lender.
(d) In computing interest payable with reference to the Maximum Lawful Rate applicable to any Lender, such interest shall be calculated at a daily rate equal to the Maximum Lawful Rate divided by the number of days in the year in which such calculation is made.
(e) If any Lender has received interest hereunder in excess of the Maximum Lawful Rate with respect to such Lender, such excess amount shall be applied to the reduction of the principal balance of its Loans or to other amounts (other than interest) payable hereunder, and if no such principal or other amounts are then outstanding, such excess or part thereof remaining shall be paid to the Company.
ARTICLE XI
THE AGENT
SECTION 11.01. APPOINTMENT AND AUTHORIZATION. Each Lender irrevocably appoints and authorizes the Agent to enter into each of the Security Documents on its behalf and to take such action as agent on its behalf and to exercise such powers under the Financing Documents as are delegated to the Agent by the terms thereof, together with all such powers as are reasonably incidental thereto.
SECTION 11.02. AGENT AND AFFILIATES. NationsCredit shall have the same rights and powers under the Financing Documents as any other Lender and may exercise or refrain from exercising the same as though it were not the Agent, and NationsCredit and its affiliates may lend money to and generally engage in any kind of business with the Company or any Subsidiary or affiliate of the Company as if it were not the Agent hereunder.
SECTION 11.03. ACTION BY AGENT. The obligations of the Agent hereunder are only those expressly set forth herein and under the other Financing Documents. Without limiting the generality of the foregoing, the Agent shall not be required to take any action with respect to any Default, except as expressly provided in Article IX.
SECTION 11.04. CONSULTATION WITH EXPERTS. The Agent may consult with legal counsel (who may be counsel for the Company), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts.
SECTION 11.05. LIABILITY OF AGENT. Neither the Agent nor any
of its directors, officers, agents or employees shall be liable for any action
taken or not taken by it in connection with the Financing Documents (i) with
the consent or at the request of the Required Lenders or (ii) in the absence of
its own gross negligence or willful misconduct. Neither the Agent nor any of
its directors, officers, agents or employees shall be responsible for or have
any duty to ascertain, inquire into or verify (i) any statement, warranty or
representation made in connection with any Financing Document or any borrowing
hereunder; (ii) the performance or observance of any of the covenants or
agreements of the Company; (iii) the satisfaction of any condition specified in
Article V, except receipt of items required to be delivered to the Agent; or
(iv) the validity, effectiveness, sufficiency or genuineness of any Financing
Document or any other instrument or writing furnished in connection therewith.
The Agent shall not incur any liability by acting in reliance upon any notice,
consent, certificate, statement, or other writing (which may be a bank wire,
telex, facsimile transmission or similar writing) believed by it to be genuine
or to be signed by the proper party or parties.
SECTION 11.06. INDEMNIFICATION. Each Lender shall, ratably in accordance with its Working Capital Commitment (whether or not the Working Capital Commitments have been terminated), indemnify the Agent (to the extent not reimbursed by the Company) against
any cost, expense (including counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from the Agent's gross negligence or willful misconduct) that the Agent may suffer or incur in connection with the Financing Documents or any action taken or omitted by the Agent hereunder or thereunder.
SECTION 11.07. CREDIT DECISION. Each Lender acknowledges that it has, independently and without reliance upon the Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action under the Financing Documents.
SECTION 11.08. SUCCESSOR AGENT. The Agent may resign at any time by giving written notice thereof to the Lenders and the Company. Upon any such resignation, the Required Lenders shall have the right to appoint a successor Agent. If no successor Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within 30 days after the retiring Agent gives notice of resignation, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent, which shall be an institution organized or licensed under the laws of the United States of America or of any State thereof. Upon the acceptance of its appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. After any retiring Agent's resignation hereunder as Agent, the provisions of this Article shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent.
ARTICLE XII
MISCELLANEOUS
SECTION 12.01. SURVIVAL. All agreements, representations and warranties made herein shall survive the execution and delivery of this Agreement and the other Operative Documents and the execution, sale and delivery of the Notes, Warrants and Warrant Shares. The indemnities and agreements set forth in Articles X and XI shall survive the payment of the Notes, the exercise, redemption or expiration of the Warrants and the termination of this Agreement.
SECTION 12.02. NO WAIVERS. No failure or delay by the Agent or any Lender in exercising any right, power or privilege under any Financing Document shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein and therein provided shall be cumulative and not exclusive of any rights or remedies provided by law.
SECTION 12.03. NOTICES. All notices, requests and other communications to any party hereunder shall be in writing (including prepaid overnight courier, telex, facsimile transmission or similar writing) and shall be given to such party at its address or telecopy or telex number set forth on the signature pages hereof (or, in the case of any such Lender who becomes a Lender after the date hereof, in a notice delivered to the Company and the Agent by the assignee Lender forthwith upon such assignment) or at such other address or telecopy or telex number as such party may hereafter specify for the purpose by notice to the Agent and the Company. Each such notice, request or other communication shall be effective (i) if given by telex or telecopy, when such telex or telecopy is transmitted to the telex or telecopy number specified in this Section and the appropriate answer back is received (in the case of telex) or telephonic confirmation of receipt thereof is obtained (in the case of telecopy) or (ii) if given by mail, prepaid overnight courier or any other means, when received at the address specified in this Section or when delivery at such address is refused.
SECTION 12.04. SEVERABILITY. In case any provision of or obligation under this Agreement or the Notes or any other Financing Document shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.
SECTION 12.05. AMENDMENTS AND WAIVERS. Any provision of this Agreement or the Notes may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the Company and the Required Lenders (and, if the rights or duties of the Agent are affected thereby, by the Agent); provided that no such amendment or waiver shall, unless signed by all the Lenders, (i) increase or decrease any Commitment of any Lender (except for a ratable decrease in the Commitments of all Lenders) or subject any Lender to any additional obligation, (ii) reduce the principal of or rate of interest on any Loan or any fees hereunder, (iii)
postpone the date fixed for any payment of principal of any Loan pursuant to
Section 2.04(a), 3.04(a) or 4.05(a), or of interest on any Loan or any fees
hereunder or for any termination of any Commitment or (iv) change the
percentage of the Commitments or of the aggregate unpaid principal amount of
the Notes which shall be required for the Lenders or any of them to take any
action under this Section or any other provision of this Agreement.
SECTION 12.06. SUCCESSORS AND ASSIGNS; REGISTRATION. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns (including any transferee of any Note or Warrant), except that the Company may not assign or otherwise transfer any of its rights under this Agreement without the prior written consent of all Lenders.
(b) The terms and provisions of this Agreement shall inure to the benefit of any transferee or assignee of any Note or Warrant and, in the event of such transfer or assignment, the rights and privileges herein conferred upon the assigning Lender shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions hereof. Any assignment shall be for an equal percentage of each Class of such assignor Lender's Loans and its Working Capital Commitment, and any such assignee Lender shall, upon its registration in the Note Register referred to below, become a "Lender" for all purposes hereunder. Upon any such assignment, the assignor Lender shall be released from its Working Capital Commitment to the extent assigned to and assumed by the assignee Lender.
(c) Upon any assignment of any Note(s), the assigning Lender shall surrender its Note(s) to the Company for exchange or registration of transfer, and the Company will promptly execute and deliver in exchange therefor a new Note or Note(s) of the same tenor and registered in the name of the assignor Lender (if less than all of such Lender's Notes are assigned) and the name of the assignee Lender.
(d) The Company shall maintain a register (the "NOTE REGISTER") of the Lenders and all assignee Lenders that are the holders of all the Notes issued pursuant to this Agreement. The Company will allow any Lender to inspect and copy such list at the Company's principal place of business during normal business hours. Prior to the due presentment for registration of transfer of any Note, the Company may deem and treat the Person in whose name a Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and premium and interest on such Note and for all other purposes whatsoever, and the Company shall not be affected by notice to the contrary.
(e) Each Lender (including any assignee Lender at the time of such assignment) represents that it (i) is acquiring its Notes solely for investment purposes and not with a view toward, or for sale in connection with, any distribution thereof, (ii) has received and reviewed such information as it deems necessary to evaluate the merits and risks of its investment in the Notes, (iii) is an "accredited investor" within the meaning of Rule 501(a) under the Securities Act and (iv) has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of its investment in the Notes, including a complete loss of its investment.
(f) Each Lender understands that the Notes are being offered only in a transaction not involving any public offering within the meaning of the Securities Act, and that, if in the future such Lender decides to resell, pledge or otherwise transfer any of the Notes, such Notes may be resold, pledged or transferred only (i) to the Company, (ii) to a person who such Lender reasonably believes is a qualified institutional buyer that purchases for its own account or for the account of a qualified institutional buyer to whom notice is given that such resale, pledge or transfer is being made in reliance on Rule 144A under the Securities Act or (iii) pursuant to an exemption from registration under the Securities Act.
(g) Each Lender understands that the Notes will, unless otherwise agreed by the Company and the holder thereof, bear a legend to the following effect:
THIS SECURITY IS NOT BEING REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY
PURCHASING THIS SECURITY, AGREES FOR THE BENEFIT OF THE ISSUER THAT
THIS SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY
(1) TO THE COMPANY, (2) TO A PERSON WHO THE SELLER REASONABLY BELIEVES
IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER THAT IS AWARE THAT THE
RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE
144A OR (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT.
(h) If any Note becomes mutilated and is surrendered by the Lender with respect thereto to the Company, or if any Lender claims that any of its Notes has been lost, destroyed or wrongfully taken, the Company shall execute and deliver to such Lender a replacement Note, upon the affidavit of such Lender attesting to such loss, destruction or wrongful taking with respect to such Note and such lost, destroyed, mutilated, surrendered or wrongfully taken Note shall be deemed to be canceled for all purposes hereof. Such affidavit shall be accepted as satisfactory evidence of the loss, wrongful taking or destruction thereof and no indemnity shall be required as a condition of the execution and delivery of a replacement Note. Any costs and expenses of the Company in replacing any such Note shall be for the account of such Lender.
SECTION 12.07. COLLATERAL. Each of the Lenders represents to the Agent and each of the other Lenders that it in good faith is not relying upon any Margin Stock as collateral in the extension or maintenance of the credit provided for in this Agreement.
SECTION 12.08. HEADINGS. Headings and captions used in the Financing Documents (including the Exhibits and Schedules hereto and thereto) are included herein and therein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose or be given any substantive effect.
SECTION 12.09. GOVERNING LAW; SUBMISSION TO JURISDICTION. THIS AGREEMENT AND EACH NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF GEORGIA. THE COMPANY HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA AND OF ANY GEORGIA STATE COURT SITTING IN ATLANTA FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. THE COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH OF THE PARTIES HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 12.03. NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY TO THIS AGREEMENT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
SECTION 12.10. NOTICE OF BREACH BY AGENT OR LENDER. The Company agrees to give the Agent and the Lenders notice of any action or inaction by the Agent or any Lender or any agent or attorney of the Agent or any Lender in connection with this Agreement or any other Financing Document or the obligations of the Company under this Agreement or any other Financing Document that may be actionable against the Agent or any Lender or any agent or attorney of the Agent or any Lender or a defense to payment of any obligations of the Company under this Agreement or any other Financing Document for any reason, including commission of a tort or violation of any contractual duty or duty implied by law. The Company agrees, to the fullest extent that it may lawfully do so, that unless such notice is given promptly (and in any event within ten (10) days after the Company has knowledge, or with the exercise of reasonable diligence could have had knowledge, of any such action or inaction), the Company shall not assert, and the Company shall be deemed to have waived, any claim or defense arising therefrom to the extent that the Agent or any Lender could have mitigated such claim or defense after receipt of such notice.
SECTION 12.11. WAIVER OF JURY TRIAL. EACH OF THE COMPANY, THE AGENT AND THE LENDERS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THE FINANCING DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY AND TO THE FULLEST EXTENT PERMITTED BY LAW WAIVES ANY RIGHTS THAT IT MAY HAVE TO CLAIM OR RECEIVE CONSEQUENTIAL OR SPECIAL DAMAGES IN CONNECTION WITH ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THE FINANCING DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY.
SECTION 12.12. COUNTERPARTS. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement, the other Financing Documents, the Warrantholders Rights Agreement and the Warrants constitute the entire agreement and understanding among the parties hereto and supersede any and all prior agreements and understandings, oral or written, relating to the subject matter hereof.
SECTION 12.13. SIRROM LOAN DOCUMENTS. The Company acknowledges and acquisces in the purchase by and the transfer and assignment to NationsCredit of the Sirrom Loan Documents and the indebtedness evidenced thereby, and agrees with NationsCredit to perform the obligations and agreements of the Company contained therein in accordance with the terms thereof, subject to the amendments thereto set forth herein. The Company and NationsCredit hereby agree that to the extent any of the representations and warranties and affirmative and negative covenants contained in the Sirrom Loan Agreement shall be inconsistent with the representations and warranties and affirmative and negative covenants of the Company set forth in this Agreement, such representations and warranties and affirmative and negative covenants are and shall be deemed superseded and replaced by the representations and warranties and affirmative and negative covenants contained in this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.
BORROWER:
HORIZON MEDICAL PRODUCTS, INC.
By: /s/ [Unreadable]
-----------------------------------------
President
|
Address: Seven North Parkway Square
4200 Northside Parkway
Atlanta, Georgia 30327
Attention: President
|
Telecopy No.: (404) 233-0171
LENDERS:
NATIONSCREDIT COMMERCIAL
CORPORATION
By: /s/ Edward M. Alt
-----------------------------------------
Authorized Signatory
|
Address: 201 Broad Street
One Canterbury Green
Stamford, Connecticut 06901
Attention: Horizon Medical Products, Inc.,
Account Officer
|
Telecopy No.: (203) 352-4102
AGENT:
NATIONSCREDIT COMMERCIAL
CORPORATION
By: /s/ Edward M. Alt
----------------------------------------
Authorized Signatory
|
Address: 201 Broad Street
One Canterbury Green
Stamford, Connecticut 06901
Attention: Horizon Medical Products, Inc.,
Account Officer
|
Telecopy No.: (203) 352-4102
Payment Account Information:
First National Bank of Chicago
Account No.: 52-56933
ABA Routing No.: 071000013
Account Name: NationsCredit
Commercial Corporation
Ref.: Horizon Medical Products, Inc.
Company Account Information:
Bank Name: Columbus Bank and Trust
Account No.: 22 33 800
ABA Routing No.: 061100606
Ref.: Horizon Medical Products, Inc.
EXHIBIT A
THIS SECURITY IS NOT BEING REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY
PURCHASING THIS SECURITY, AGREES FOR THE BENEFIT OF THE ISSUER THAT
THIS SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY
(1) TO THE COMPANY, (2) TO A PERSON WHO THE SELLER REASONABLY BELIEVES
IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER THAT IS AWARE THAT THE
RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE
144A OR (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT.
HORIZON MEDICAL PRODUCTS, INC.
TRANCHE A NOTE
$21,500,000 July 15, 1997
HORIZON MEDICAL PRODUCTS, INC., a Georgia corporation
(together with its successors, the "COMPANY"), for value received, promises to
pay NATIONSCREDIT COMMERCIAL CORPORATION (the "LENDER"), or registered assigns,
an aggregate principal amount of Twenty-One Million Five Hundred Thousand
Dollars ($21,500,000), by paying on each of the installment dates set forth in
Schedule A attached hereto the aggregate principal amount set forth on Schedule
A opposite such date in accordance with Section 2.04(a) of the Credit Agreement
referred to below, together with accrued and unpaid interest thereon to but
excluding the date of payment, and to pay in arrears on the first Business Day
of each calendar month, commencing with August 1, 1997, interest (computed on
the basis of the actual number of days elapsed over a year of 360 days) on the
aggregate unpaid principal amount hereof from time to time at a per annum rate
equal to the sum of (i) the Commercial Paper Rate (as hereinafter defined) plus
(ii) 4.25%, and to pay on demand interest at a rate equal to the sum of the
foregoing rate plus 2.00% per annum (in each case subject to Section 10.08 of
the Credit Agreement referred to below) on any overdue principal, premium and
interest from the due date thereof to the date of actual payment (after as well
as before judgment and during any bankruptcy proceeding). Changes in the rate
of interest applicable hereto shall occur as of the opening of business on any
day on which the Commercial Paper Rate changes.
"COMMERCIAL PAPER RATE" means for any day in any calendar month, the rate of interest equivalent to the money market yield for the Interest Determination Date falling in such
month on the one month Commercial Paper Rate for dealer-placed commercial paper of issuers whose corporate bonds are rated "AA" or its equivalent by a nationally recognized rating agency, as such rate is made available on a discount basis or otherwise by the Federal Reserve Bank of New York and published weekly by the Board of Governors of the Federal Reserve System in its H.15 report, or any successor publication published by the Board of Governors of the Federal Reserve System or, if such rate for such date is not yet published in such statistical release, the rate for that date will be the rate set forth in the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. "Interest Determination Date" means July 1, 1997 and the first Business Day of each calendar month thereafter.
This Note is one of the Tranche A Notes referred to in the Credit Agreement dated as of July 15, 1997 (as amended from time to time, the "CREDIT AGREEMENT") among the Company, the lenders referred to therein and NationsCredit Commercial Corporation, as Agent. The Credit Agreement and the Security Documents referred to therein contain additional rights of the holder of, and the security for, this Note. Capitalized terms used but not defined herein have the meanings assigned thereto in the Credit Agreement.
If an Event of Default shall occur and be continuing, the unpaid balance of the principal of this Note together with all accrued but unpaid interest hereon may become or be declared forthwith due and payable in the manner and with the effect provided in the Credit Agreement.
This Note also may and must be prepaid as provided in the Credit Agreement, together with any premiums set forth therein, under the circumstances therein described.
Payments of principal hereof and interest and premium hereon shall be made in lawful money of the United States of America.
Presentment, demand and notice of any kind are hereby waived by the undersigned.
This Note shall be governed by, and construed in accordance with, the laws of the State of Georgia in all respects, including all matters of construction, validity and performance, without regard to the choice of law provisions thereof.
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed as of the day and year first above written.
HORIZON MEDICAL PRODUCTS, INC.
SCHEDULE A
TO TRANCHE A NOTE
Amortization Schedule
Quarterly Date Installment Principal Amount Nos. 1 - 4 $ 537,500 Nos. 5 - 12 806,250 Nos. 13 - 24 1,075,000 |
As used herein, "Quarterly Date" means each January 1, April 1, July 1 and October 1 occurring on or after April 1, 1998.
EXHIBIT B
THIS SECURITY IS NOT BEING REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY
PURCHASING THIS SECURITY, AGREES FOR THE BENEFIT OF THE ISSUER THAT
THIS SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY
(1) TO THE COMPANY, (2) TO A PERSON WHO THE SELLER REASONABLY BELIEVES
IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER THAT IS AWARE THAT THE
RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE
144A OR (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT.
HORIZON MEDICAL PRODUCTS, INC.
TRANCHE B NOTE
$2,000,000 July 15, 1997
HORIZON MEDICAL PRODUCTS, INC., a Georgia corporation (together with its successors, the "COMPANY"), for value received, promises to pay NATIONSCREDIT COMMERCIAL CORPORATION (the "LENDER"), or registered assigns, an aggregate principal amount of Two Million Dollars ($2,000,000), by paying on each of the installment dates set forth in Schedule A attached hereto the aggregate principal amount set forth on Schedule A opposite such date in accordance with Section 3.04(a) of the Credit Agreement referred to below, together with accrued and unpaid interest thereon to but excluding the date of payment, and to pay in arrears on the first Business Day of each calendar month, commencing with August 1, 1997, interest (computed on the basis of the actual number of days elapsed over a year of 360 days) on the aggregate unpaid principal amount hereof from time to time at a per annum rate equal to the sum of (i) the Commercial Paper Rate (as hereinafter defined) plus (ii) 5.25%, and to pay on demand interest at a rate equal to the sum of the foregoing rate plus 2.00% per annum (in each case subject to Section 10.08 of the Credit Agreement referred to below) on any overdue principal, premium and interest from the due date thereof to the date of actual payment (after as well as before judgment and during any bankruptcy proceeding). Changes in the rate of interest applicable hereto shall occur as of the opening of business or any day on which the Commercial Paper Rate changes.
"COMMERCIAL PAPER RATE" means for any day in any calendar month, the rate of interest equivalent to the money market yield for the Interest Determination Date falling in such month on the one month Commercial Paper Rate for dealer-placed commercial paper of issuers whose corporate bonds are rated "AA" or its equivalent by a nationally recognized rating agency, as such rate is made available on a discount basis or otherwise by the Federal Reserve Bank of New York and published weekly by the Board of Governors of the Federal Reserve System in its H.15 report, or any successor publication published by the Board of Governors of the Federal Reserve System or, if such rate for such date is not yet published in such statistical release, the rate for that date will be the rate set forth in the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. "Interest Determination Date" means July 1, 1997 and the first Business Day of each calendar month thereafter.
This Note is one of the Tranche B Notes referred to in the Credit Agreement dated as of July 15, 1997 (as amended from time to time, the "CREDIT AGREEMENT") among the Company, the lenders referred to therein and NationsCredit Commercial Corporation, as Agent. The Credit Agreement and the Security Documents referred to therein contain additional rights of the holder of, and the security for, this Note. Capitalized terms used but not defined herein have the meanings assigned thereto in the Credit Agreement.
If an Event of Default shall occur and be continuing, the unpaid balance of the principal of this Note together with all accrued but unpaid interest hereon may become or be declared forthwith due and payable in the manner and with the effect provided in the Credit Agreement.
This Note also may and must be prepaid as provided in the Credit Agreement, together with any premium set forth therein, under the circumstances therein described.
Payments of principal hereof and interest and premium hereon shall be made in lawful money of the United States of America.
Presentment, demand and notice of any kind are hereby waived by the undersigned.
This Note shall be governed by, and construed in accordance with, the laws of the State of Georgia in all respects, including all matters of construction, validity and performance, without regard to the choice of law provisions thereof.
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed as of the day and year first above written.
HORIZON MEDICAL PRODUCTS, INC.
SCHEDULE A
TO TRANCHE B NOTE
AMORTIZATION SCHEDULE
Tranche B Quarterly
Date Installment Principal Amount
Nos. 1-4 $500,000
|
As used herein, "Tranche B Quarterly Date" means each January 1, April 1, July 1 and October 1 occurring after the earlier of (i) the sixth (6th) anniversary of the Closing Date and (ii) the date on which the Tranche A Notes shall have been repaid in their entirety.
EXHIBIT C
THIS SECURITY IS NOT BEING REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY
PURCHASING THIS SECURITY, AGREES FOR THE BENEFIT OF THE ISSUER THAT
THIS SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY
(1) TO THE COMPANY, (2) TO A PERSON WHO THE SELLER REASONABLY BELIEVES
IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER THAT IS AWARE THAT THE
RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE
144A OR (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT.
HORIZON MEDICAL PRODUCTS, INC.
WORKING CAPITAL NOTE
$3,000,000 July 15, 1997
HORIZON MEDICAL PRODUCTS, INC., a Georgia corporation (together with its successors, the "COMPANY"), for value received, promises to pay NATIONSCREDIT COMMERCIAL CORPORATION (the "LENDER"), or registered assigns, the principal amount of Three Million Dollars ($3,000,000) or the aggregate outstanding principal amount of the Working Capital Loans made by the Lender, whichever is less, on the Working Capital Termination Date (as herein defined), and to pay in arrears on the first Business Day of each calendar month, commencing with August 1, 1997, until the Working Capital Termination Date and on the Working Capital Termination Date, interest (computed on the basis of the actual number of days elapsed over a year of 360 days) on the aggregate unpaid principal amount hereof on each day from time to time at a per annum rate equal to the sum of (i) the Commercial Paper Rate (as hereinafter defined) plus (ii) 4.25%, and to pay on demand interest at a rate equal to the rate otherwise applicable to this Working Capital Note plus 2.00% per annum (in each case subject to Section 10.08 of the Credit Agreement referred to below) on any overdue principal and interest from the due date thereof to the date of actual payment (after as well as before judgment and during any bankruptcy proceeding). Changes in the rate of interest applicable hereto shall occur as of the opening of business on any day on which the Commercial Paper Rate changes.
"WORKING CAPITAL TERMINATION DATE" means the earlier of July 1, 2004 and the date on which all of the Tranche A Notes and the Tranche B Notes shall have been paid in full in accordance with their terms.
"COMMERCIAL PAPER RATE" means for any day in any calendar month, the rate of interest equivalent to the money market yield for the Interest Determination Date falling in such month on the one month Commercial Paper Rate for dealer-placed commercial paper of issuers whose corporate bonds are rated "AA" or its equivalent by a nationally recognized rating agency, as such rate is made available on a discount basis or otherwise by the Federal Reserve Bank of New York and published weekly by the Board of Governors of the Federal Reserve System in its H.15 report, or any successor publication published by the Board of Governors of the Federal Reserve System or, if such rate for such date is not yet published in such statistical release, the rate for that date will be the rate set forth in the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. "Interest Determination Date" means July 1, 1997 and the first Business Day of each calendar month thereafter.
This Note is one of the Working Capital Notes referred to in the Credit Agreement dated as of July 15, 1997 (as amended from time to time, the "CREDIT AGREEMENT"), among the Company, the lenders referred to therein and NationsCredit Commercial Corporation, as Agent. The Credit Agreement and the Security Documents referred to therein contain additional rights of the holder of, and the security for, this Note. Capitalized terms used but not defined herein have the meanings assigned thereto in the Credit Agreement.
If an Event of Default shall occur and be continuing, the unpaid balance of the principal of this Note together with all accrued but unpaid interest hereon may become or be declared forthwith due and payable in the manner and with the effect provided in the Credit Agreement.
Each holder hereof is authorized to endorse on the grid attached hereto, or on a continuation thereof, each Working Capital Loan made by the Lender and each payment and prepayment with respect thereto. Failure of the Lender or any holder hereof to make any such endorsement shall not affect the obligations of the Company hereunder or under the Credit Agreement.
This Note also may and must be prepaid as provided in the Credit Agreement, together with any premiums set forth therein, under the circumstances therein described.
Payments of principal hereof and interest hereon shall be made in lawful money of the United States of America.
Presentment, demand, protest and notice of any kind are hereby waived by the undersigned.
This Note shall be governed by, and construed in accordance with, the laws of the State of Georgia in all respects, including all matters of construction, validity and performance, without regard to the choice of law provisions thereof.
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed as of the day and year first above written.
HORIZON MEDICAL PRODUCTS, INC.
EXHIBIT D
THIS WARRANT AND THE SHARES OF NON-VOTING COMMON STOCK PURCHASABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD OR OFFERED FOR SALE OR TRANSFERRED UNLESS REGISTERED UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. THIS WARRANT AND THE SHARES OF NON-VOTING COMMON STOCK PURCHASABLE HEREUNDER ARE SUBJECT TO AND HAVE THE BENEFIT OF A WARRANTHOLDERS RIGHTS AGREEMENT DATED AS OF JULY 15, 1997, AMONG HORIZON MEDICAL PRODUCTS, INC. AND THE STOCKHOLDERS AND WARRANTHOLDERS LISTED ON THE SIGNATURE PAGES THEREOF, A COPY OF WHICH IS ON FILE WITH HORIZON MEDICAL PRODUCTS, INC.
Dated: July 15, 1997
WARRANT
TO PURCHASE 15,276 SHARES OF NON-VOTING COMMON STOCK OF
HORIZON MEDICAL PRODUCTS, INC.
EXPIRING JULY 15, 2007
THIS IS TO CERTIFY THAT, for value received, NATIONSCREDIT COMMERCIAL CORPORATION or registered assigns ("HOLDER") is entitled to purchase from HORIZON MEDICAL PRODUCTS, INC., a Georgia corporation (the "COMPANY"), at any time or from time to time after 9:00 a.m., New York City time, on the date hereof and prior to 5:00 p.m., New York City time, on the earlier of July 15, 2007, and the Business Day preceding the date of redemption of this Warrant, at the place where the Warrant Agency is located, at the Exercise Price, the number of shares of Class B Common Stock, par value $.001 per share (the "NON-VOTING COMMON STOCK") of the Company, all subject to adjustment and upon the terms and conditions hereinafter provided, and is entitled also to exercise the other appurtenant rights, powers and privileges hereinafter described.
This Warrant is one of one or more warrants (the "WARRANTS") of the same form and having the same terms as this Warrant, entitling the holders initially to purchase up to an aggregate of 15,276 shares of Non-Voting Common Stock. The Warrants have
been issued pursuant to the Credit Agreement dated as of July 15, 1997 (as amended from time to time, the "CREDIT AGREEMENT") among the Company, the Lenders listed on the signature pages thereof and NationsCredit Commercial Corporation ("NATIONSCREDIT"), as Agent, and the Holder is entitled to certain benefits as set forth therein and to certain benefits described in the Warrantholders Rights Agreement. The Company shall keep a copy of the Credit Agreement and the Warrantholders Rights Agreement, and any amendments thereto, at the Warrant Agency and shall furnish, without charge, copies thereof to the Holder upon request.
Certain terms used in this Warrant are defined in Article VI.
ARTICLE I
EXERCISE OF WARRANTS
1.1. METHOD OF EXERCISE. To exercise this Warrant in whole or
in part, the Holder shall deliver on any Business Day to the Company, at the
Warrant Agency, (a) this Warrant, (b) a written notice of such Holder's
election to exercise this Warrant, which notice shall specify the number of
shares of Non-Voting Common Stock to be purchased (which shall be a whole
number of shares if for less than all the shares then issuable hereunder), the
denominations of the share certificate or certificates desired and the name or
names in which such certificates are to be registered, and (c) payment of the
Exercise Price with respect to such shares. Such payment may be made, at the
option of the Holder, either (a) by cash, certified or bank cashier's check or
wire transfer in an amount equal to the product of (i) the Exercise Price times
(ii) the number of Warrant Shares as to which this Warrant is being exercised
or (b) by receiving from the Company the number of Warrant Shares equal to (i)
the number of Warrant Shares as to which this Warrant is being exercised minus
(ii) the number of Warrant Shares having a value, based on the Closing Price on
the trading day immediately prior to the date of such exercise, equal to the
product of (x) the Exercise Price times (y) the number of Warrant Shares as to
which this Warrant is being exercised.
The Company shall, as promptly as practicable and in any event within seven days after receipt of such notice and payment, execute and deliver or cause to be executed and delivered, in accordance with such notice, a certificate or certificates representing the aggregate number of shares of Non-Voting Common Stock specified in said notice together with cash in lieu of any fractions of a share as provided in Section 1.3. The share certificate or certificates so delivered shall be in such denominations as may be specified in such notice, and shall be issued in the name of the Holder or such other name or names as shall be designated in such notice. This Warrant shall be deemed to have been exercised and such certificate or certificates shall be deemed to have been issued, and such Holder or any other Person so designated to be named therein shall be deemed for all purposes to have become a holder of record of shares, as of the date the aforementioned notice and payment is received by the Company. If this Warrant shall
have been exercised only in part, the Company shall, at the time of delivery of such certificate or certificates, deliver to the Holder a new Warrant evidencing the rights to purchase the remaining shares of Non-Voting Common Stock called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant, or, at the request of the Holder, appropriate notation may be made on this Warrant which shall then be returned to the Holder. The Company shall pay all expenses, taxes and other charges payable in connection with the preparation, issuance and delivery of share certificates and new Warrants, except that, if share certificates or new Warrants shall be registered in a name or names other than the name of the Holder, funds sufficient to pay all transfer taxes payable as a result of such transfer shall be paid by the Holder at the time of delivery of the aforementioned notice of exercise or promptly upon receipt of a written request of the Company for payment.
1.2. SHARES TO BE FULLY PAID AND NONASSESSABLE. All shares of Non-Voting Common Stock issued upon the exercise of this Warrant and all shares of Voting Common Stock issued upon the conversion of such Non-Voting Common Stock shall be validly issued, fully paid and nonassessable.
1.3. NO FRACTIONAL SHARES REQUIRED TO BE ISSUED. The Company
shall not be required to issue fractions of shares of Non-Voting Common Stock
upon exercise of this Warrant. If any fraction of a share would, but for this
Section, be issuable upon final exercise of this Warrant, in lieu of such
fractional share the Company shall pay to the Holder, in cash, an amount equal
to the same fraction of the Fair Market Value of the Company per share of
outstanding Common Stock on the Business Day immediately prior to the date of
such exercise.
1.4. ACKNOWLEDGEMENT REGARDING REGISTRATION. The Holder of
this Warrant and any transferee hereof of the shares of the Non-Voting Common
Stock issuable upon the exercise of this Warrant, by their acceptance hereof or
thereof, hereby acknowledge and agree that this Warrant and the shares of
Non-Voting Common Stock issuable upon the exercise hereof and any shares of
Voting Common Stock issued upon the conversion of such Non-Voting Common Stock
have not been registered under the Securities Act or any state securities laws
and shall not be sold, pledged, hypothecated, donated or otherwise transferred
unless registered under the Securities Act and any applicable state securities
laws or upon the issuance to the Company of an opinion of counsel reasonably
satisfactory to the Company to the effect that any such transfer shall not be
in violate of the Securities Act or any applicable state securities laws.
1.5. SHARE LEGEND. Each certificate for shares of Non-Voting Common Stock issued upon exercise of this Warrant, unless at the time of exercise such shares are registered under the Securities Act, shall bear the following legend:
"This security has not been registered under the Securities Act of 1933 as amended or any state securities laws and may not be sold or offered for sale or transferred
unless registered under said Act and any applicable state securities laws or unless an exemption from such registration is available. This security is also subject to and has the benefit of a Warrantholders Rights Agreement dated as of July 15, 1997, among Horizon Medical Products, Inc. and the Stockholders and Warrantholders listed on the signature pages thereof, copies of which are on file with Horizon Medical Products, Inc."
Any certificate issued at any time in exchange or substitution for any certificate bearing such legend (except a new certificate issued upon completion of a public offering pursuant to a registration statement under the Securities Act) shall also bear such legend unless, in the opinion of counsel selected by the holder of such certificate (who may be an employee of such holder) and reasonably acceptable to the Company, the securities represented thereby need no longer be subject to restrictions on resale under the Securities Act.
1.6. RESERVATION; AUTHORIZATION; CAPITALIZATION. The Company
has duly reserved, and will keep available for issuance upon exercise of the
Warrants, the total number of Warrant Shares deliverable from time to time upon
exercise of all Warrants from time to time outstanding and the total number of
shares of Voting Common Stock deliverable upon conversion of such Warrant
Shares to Voting Common Stock. The Company will not take any actions during the
term of this Warrant that would result in any adjustment of the number of
shares of Common Stock issuable upon the exercise of the Warrant if (i) the
total number of shares of Common Stock issuable after such action upon exercise
of this Warrant, (ii) all shares of Common Stock issued and outstanding and
(iii) all shares then issuable (x) upon the exercise of all Options and (y)
upon the conversion or exchange of all Convertible Securities, would exceed the
total number of shares of Common Stock then authorized for issuance by the
Company. The Company will not change the Non-Voting Common Stock from par value
$.001 per share to any higher par value which exceeds the Exercise Price then
in effect, and will reduce the par value of the Non-Voting Common Stock upon
any event described in Article IV that provides for an increase in the number
of shares of Non-Voting Common Stock subject to purchase upon exercise of this
Warrant, in inverse proportion to and effective at the same time as such number
of shares is increased. At July 15, 1997, the Company had outstanding (i)
102,277 shares of Voting Common Stock, (ii) 0 shares of Non-Voting Common
Stock, (iii) options and warrants to acquire an additional 0 shares of Voting
Common Stock and (iv) no other shares of capital stock or any securities
convertible into or exchangeable for shares of capital stock or any rights,
options or warrants to purchase any shares of capital stock or any securities
convertible into or exchangeable for shares of capital stock, except as set
forth on Schedule 1 attached hereto. Neither the issuance of this Warrant nor
the issuance of Warrant Shares upon exercise of this Warrant violates or
conflicts with the Company's certificate of incorporation or bylaws or any
agreement to which the Company is a party.
1.7. REDUCTION OF WARRANT SHARES. (a) In the event the Company shall complete a Qualified IPO on or before December 31, 1998, or shall achieve
EBITDA of not less than $10,000,000 for its fiscal year ending December 31, 1998 (as certified by the Company's independent public accountants), the number of Warrant Shares issuable hereunder shall be reduced to such number as shall represent 7.5% of the Common Stock of the Company on a Fully-Diluted Basis.
(b) In the event the Company shall complete a Qualified IPO after December 31, 1998 but on or before the second anniversary of the Closing Date, or shall achieve EBITDA of not less than $14,000,000 for the twelve consecutive months most recently ended prior to the second anniversary of the Closing Date (as certified by the Company's independent public accountants), the number of Warrant Shares issuable hereunder shall be reduced to such number as shall represent 10.0% of the Common Stock of the Company on a Fully-Diluted Basis.
ARTICLE II
WARRANT AGENCY; TRANSFER, EXCHANGE AND
REPLACEMENT OF WARRANTS
2.1. WARRANT AGENCY. As long as any of the Warrants remain outstanding, the Company shall perform the obligations of and be the warrant agency with respect to the Warrants (the "WARRANT AGENCY") at its address set forth in Section 12.03 of the Credit Agreement or at such other address as the Company shall specify by notice to all Warrantholders.
2.2. OWNERSHIP OF WARRANT. The Company may deem and treat the person in whose name this Warrant is registered as the holder and owner hereof (notwithstanding any notations of ownership or writing hereon made by any person other than the Company) for all purposes and shall not be affected by any notice to the contrary, until due presentment of this Warrant for registration of transfer as provided in this Article II.
2.3. TRANSFER OF WARRANT. The Company agrees to maintain at the Warrant Agency books for the registration of transfers of the Warrants, and transfer of this Warrant and all rights hereunder shall be registered, in whole or in part, on such books, upon surrender of this Warrant at the Warrant Agency, together with a written assignment of this Warrant duly executed by the Holder or its duly authorized agent or attorney, with (if the Holder is a natural person) signatures guaranteed by a bank or trust company or a broker or dealer registered with the NASD, and funds sufficient to pay any transfer taxes payable upon such transfer. Upon surrender and, if required, such payment, and compliance with Section 1.4, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denominations specified in the instrument of assignment (which shall be whole numbers of shares only) and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be canceled.
2.4. DIVISION OR COMBINATION OF WARRANTS. This Warrant may be
divided or combined with other Warrants upon presentment hereof and of any
Warrant or Warrants with which this Warrant is to be combined at the Warrant
Agency, together with a written notice specifying the names and denominations
(which shall be whole numbers of shares only) in which the new Warrant or
Warrants are to be issued, signed by the holders hereof and thereof or their
respective duly authorized agents or attorneys. Subject to compliance with
Section 2.3 as to any transfer or assignment which may be involved in the
division or combination, the Company shall execute and deliver a new Warrant or
Warrants in exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice.
2.5. LOSS, THEFT, DESTRUCTION OF WARRANT CERTIFICATES. Upon receipt of evidence satisfactory to the Company of the ownership of and the loss, theft, destruction or mutilation of any Warrant and, in the case of any such loss, theft or destruction, upon receipt of indemnity or security satisfactory to the Company (it being understood and agreed that if the holder of such Warrant is NationsCredit, then a written agreement of indemnity given by NationsCredit alone shall be satisfactory to the Company and no further security shall be required) or, in the case of any such mutilation, upon surrender and cancellation of such Warrant, the Company will make and deliver, in lieu of such lost, stolen, destroyed or mutilated Warrant, a new Warrant of like tenor and representing the right to purchase the same aggregate number of shares of Non-Voting Common Stock.
2.6. EXPENSES OF DELIVERY OF WARRANTS. The Company shall pay all expenses, taxes (other than transfer taxes) and other charges payable in connection with the preparation, issuance and delivery of Warrants hereunder.
ARTICLE III
CERTAIN RIGHTS
3.1. RIGHTS AND OBLIGATIONS UNDER THE WARRANTHOLDERS RIGHTS AGREEMENT. This Warrant is entitled to the benefits and subject to the terms of the Warrantholders Rights Agreement dated as of July 15, 1997, among the Company and the Stockholders and Warrantholders listed on the signature pages thereof (as amended from time to time, the "WARRANTHOLDERS RIGHTS AGREEMENT"). The Company shall keep or cause to be kept a copy of the Warrantholders Rights Agreement, and any amendments thereto, at the Warrant Agency and shall furnish, without charge, copies thereof to the Holder upon request.
3.2. DETERMINATION OF FAIR MARKET VALUE. Subject to Section 3.3 hereof, each determination of Fair Market Value hereunder shall be made in good faith by the Company. Upon each determination of Fair Market Value by the Company
hereunder, the Company shall promptly give notice thereof to all Warrantholders, setting forth in reasonable detail the calculation of such Fair Market Value and the method and basis of determination thereof (the "COMPANY DETERMINATION").
3.3. CONTEST AND APPRAISAL RIGHTS. (a) If the holders of Warrants entitling such holders to purchase a majority of the Non-Voting Common Stock subject to purchase upon exercise of Warrants at the time outstanding (exclusive of Warrants then owned by the Company or any Subsidiary (as defined in the Credit Agreement) or Affiliate (as defined in the Credit Agreement) thereof) (the "REQUIRED INTEREST") shall disagree with the Company Determination and shall by notice to the Company given within 30 days after the Company's notice of the Company Determination (an "APPRAISAL NOTICE") elect to dispute the Company Determination, such dispute shall be resolved as set forth in subsection (b) of this Section.
(b) The Company shall within 30 days after an Appraisal Notice shall have been given pursuant to subsection (a) of this Section engage an investment bank or other qualified appraisal firm acceptable to the Required Interest (the "APPRAISER") to make an independent determination of Fair Market Value (the "APPRAISER DETERMINATION"). The Appraiser Determination shall be final and binding on the Company and all Warrantholders. If the Company Determination and the Appraiser Determination differ by an amount of 15% or less of the Company Determination, then the costs of conducting the appraisal shall be borne equally by the Company and the Warrantholders; if the Company Determination is greater than the Appraiser Determination by more than 15% of the Company Determination, then the costs of conducting the appraisal shall be borne entirely by the Warrantholders; and if the Appraiser Determination is greater than the Company Determination by more than 15% of the Company Determination, then the costs of conducting the appraisal shall be borne entirely by the Company; provided that in each case costs separately incurred by the Company and any Warrantholders shall be separately borne by them.
3.4. BOARD MEETINGS. The Company shall give to NationsCredit, so long as it shall be the holder of any Warrants, notice of all meetings and actions by written consent of its board of directors and each committee thereof (if any), at the same time and in the same manner as notice of any meetings of such board or committees is required to be given to directors who do not waive such notice (or, if such action requires no notice, then 10 days written notice thereof describing the matters upon which action is to be taken). NationsCredit, so long as it shall be the holder of any Warrants, shall have the right to send two representatives selected by it to each such meeting, who shall be permitted to attend such meeting and any adjournments thereof (other than any portion of such meeting devoted to discussion of NationsCredit solely in its capacity as holder of the Warrants).
3.5 FINANCIAL STATEMENTS AND OTHER INFORMATION. Promptly upon transmission thereof, the Company will deliver to NationsCredit, so long as it shall be the
holder of any Warrants, copies of any and all financial statements, proxy statements, notices and other reports as it may send to its public stockholders and copies of all registration statements and all reports which it files with the Securities and Exchange Commission (or any governmental body or agency succeeding to its functions). The Company also will, and will cause its Subsidiaries to, deliver to NationsCredit, so long as it shall be the holder of any Warrants, with reasonable promptness, such other information or data with respect to the Company or any of its Subsidiaries as from time to time may be reasonably requested by NationsCredit.
3.6 LIMITATION OF RIGHTS. The Warrantholders shall not, by virtue of the Warrants, be entitled to any rights of a shareholder in the Company, either at law or in equity, until the exercise of the Warrants as provided therein. The Warrantholders, as such, shall not be entitled to vote or receive dividends or be deemed the holder of Non-Voting Common Stock for any purpose, nor shall anything contained in the Warrants be construed to confer upon the Warrantholders, as such, any other rights of a shareholder of the Company, including, but not limited to, any right to vote, give or withhold consent to any action by the Company, whether upon recapitalization, issuance of stock, reclassification of stock, consolidation, merger, share exchange, conveyance or otherwise, receive notice of meetings or other action affecting shareholders, or receive subscription rights, except as expressly provided herein or in the Warrantholders Rights Agreement.
ARTICLE IV
ANTIDILUTION PROVISIONS
4.1. ADJUSTMENT GENERALLY. The Exercise Price and the number of shares of Non-Voting Common Stock (or other securities or property) issuable upon exercise of this Warrant shall be subject to adjustment from time to time upon the occurrence of certain events as provided in this Article IV; provided that notwithstanding anything to the contrary contained herein, the Exercise Price shall not be less than the par value of the Non-Voting Common Stock, as such par value is reduced from time to time in accordance with Section 1.6.
4.2. COMMON STOCK REORGANIZATION. If the Company shall subdivide its outstanding shares of Common Stock (or any class thereof) into a greater number of shares or consolidate its outstanding shares of Common Stock (or any class thereof) into a smaller number of shares (any such event being called a "COMMON STOCK REORGANIZATION"), then (a) the Exercise Price shall be adjusted, effective immediately after the effective date of such Common Stock Reorganization, to a price determined by multiplying the Exercise Price in effect immediately prior to such effective date by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding on such effective date before giving effect to such Common Stock Reorganization and the denominator of which shall be the number of shares of Common Stock outstanding after giving effect to such Common Stock Reorganization, and (b) the
number of shares of Non-Voting Common Stock subject to purchase upon exercise of this Warrant shall be adjusted, effective at such time, to a number determined by multiplying the number of shares of Non-Voting Common Stock subject to purchase immediately before such Common Stock Reorganization by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding after giving effect to such Common Stock Reorganization and the denominator of which shall be the number of shares of Common Stock outstanding immediately before such Common Stock Reorganization.
4.3. COMMON STOCK DISTRIBUTION. (a) If the Company shall issue, sell or otherwise distribute any shares of Common Stock (other than Excluded Shares), other than pursuant to a Common Stock Reorganization (which is governed by Section 4.2 hereof) (any such event, including any event described in paragraphs (b) and (c) below, being herein called a "COMMON STOCK DISTRIBUTION"), for a consideration per share less than the Fair Market Value of the Company per share of outstanding Common Stock on a Fully Diluted Basis on the date of such Common Stock Distribution (before giving effect to such Common Stock Distribution), then, effective upon such Common Stock Distribution, the Exercise Price shall be reduced, if such consideration per share shall be less than such Fair Market Value per share, to the lowest of the prices (calculated to the nearest one-thousandth of one cent) determined as provided in clauses (i), (ii) and (iii) below:
(i) if the Company shall receive any consideration for the Common Stock issued, sold or distributed in such Common Stock Distribution, the consideration per share of Common Stock received by the Company upon such issue, sale or distribution;
(ii) by dividing (A) an amount equal to the sum of (1) the number of shares of Common Stock outstanding immediately prior to such Common Stock Distribution multiplied by the then existing Exercise Price, plus (2) the consideration, if any, received by the Company upon such Common Stock Distribution by (B) the total number of shares of Common Stock outstanding immediately after such Common Stock Distribution; and
(iii) by multiplying the Exercise Price in effect immediately prior to such Common Stock Distribution by a fraction, the numerator of which shall be the sum of (A) the number of shares of Common Stock outstanding immediately prior to such Common Stock Distribution multiplied by such Fair Market Value per share on the date of such Common Stock Distribution, plus (B) the consideration, if any, received by the Company upon such Common Stock Distribution, and the denominator of which shall be the product of (1) the total number of shares of Common Stock outstanding immediately after such Common Stock Distribution multiplied by (2) such Fair Market Value per share on the date of such Common Stock Distribution.
If any Common Stock Distribution shall require an adjustment to the
Exercise Price pursuant to the foregoing provisions of this paragraph (a), including by operation of paragraph (b) or (c) below, then, effective at the time such adjustment is made, the number of shares of Non-Voting Common Stock subject to purchase upon exercise of this Warrant shall be increased to a number determined by multiplying the number of shares of Non-Voting Common Stock subject to purchase immediately before such Common Stock Distribution by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately after giving effect to such Common Stock Distribution and the denominator of which shall be the sum of the number of shares outstanding immediately before giving effect to such Common Stock Distribution (both calculated on a Fully Diluted Basis) plus the number of shares of Common Stock which the aggregate consideration received by the Company with respect to such Common Stock Distribution would purchase at the Fair Market Value of the Company per share of outstanding Common Stock on a Fully Diluted Basis on the date of such Common Stock Distribution (before giving effect to such Common Stock Distribution). In computing adjustments under this paragraph, fractional interests in Common Stock shall be taken into account to the nearest one-thousandth of a share.
The provisions of this paragraph (a), including by operation of paragraph (b) or (c) below, shall not operate to increase the Exercise Price or reduce the number of shares of Non-Voting Common Stock subject to purchase upon exercise of this Warrant.
(b) If the Company shall issue, sell, distribute or otherwise
grant in any manner (including by assumption) any rights to subscribe for or to
purchase, or any warrants or options for the purchase of Common Stock or any
stock or securities convertible into or exchangeable for Common Stock (other
than Excluded Shares) (such rights, warrants or options being herein called
"OPTIONS" and such convertible or exchangeable stock or securities being herein
called "CONVERTIBLE SECURITIES"), whether or not such Options or the rights to
convert or exchange any such Convertible Securities in respect of such Options
are immediately exercisable, and the price per share for which Common Stock is
issuable upon the exercise of such Options or upon conversion or exchange of
such Convertible Securities in respect of such Options (determined by dividing
(i) the aggregate amount, if any, received or receivable by the Company as
consideration for the granting of such Options, plus the minimum aggregate
amount of additional consideration payable to the Company upon the exercise of
all such Options, plus, in the case of Options to acquire Convertible
Securities, the minimum aggregate amount of additional consideration, if any,
payable upon the issuance or sale of such Convertible Securities and upon the
conversion or exchange thereof, by (ii) the total maximum number of shares of
Common Stock issuable upon the exercise of such Options or upon the conversion
or exchange of all such Convertible Securities issuable upon the exercise of
such Options) shall be less than the Fair Market Value of the Company per share
of outstanding Common Stock on a Fully Diluted Basis on the date of granting
such Options (before giving effect to such grant), then, for purposes of
paragraph (a) above, the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon conversion or exchange of
the total maximum amount
of such Convertible Securities issuable upon the exercise of such Options shall be deemed to have been issued as of the date of granting of such Options and thereafter shall be deemed to be outstanding and the Company shall be deemed to have received as consideration of such price per share, determined as provided above, therefor. Except as otherwise provided in paragraph (d) below, no additional adjustment of the Exercise Price shall be made upon the actual exercise of such Options or upon conversion or exchange of such Convertible Securities.
(c) If the Company shall issue, sell or otherwise distribute (including by assumption) any Convertible Securities (other than Excluded Shares), whether or not the rights to exchange or convert thereunder are immediately exercisable, and the price per share for which Common Stock is issuable upon such conversion or exchange (determined by dividing (i) the aggregate amount received or receivable by the Company as consideration for the issuance, sale or distribution of such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Company upon the conversion or exchange thereof, by (ii) the total maximum number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities) shall be less than the Fair Market Value of the Company per share of outstanding Common Stock on a Fully Diluted Basis on the date of such issuance, sale or distribution (before giving effect to such issuance, sale or distribution), then, for purposes of paragraph (a) above, the total maximum number of shares of Common Stock issuable upon conversion or exchange of all such Convertible Securities shall be deemed to have been issued as of the date of the issuance, sale or distribution of such Convertible Securities and thereafter shall be deemed to be outstanding and the Company shall be deemed to have received as consideration such price per share, determined as provided above, therefor. Except as otherwise provided in paragraph (d) below, no additional adjustment of the Exercise Price shall be made upon the actual conversion or exchange of such Convertible Securities.
(d) If (i) the purchase price provided for in any Option (other than Excluded Shares) referred to in paragraph (b) above or the additional consideration, if any, payable upon the conversion or exchange of any Convertible Securities (other than Excluded Shares) referred to in paragraph (b) or (c) above or the rate at which any Convertible Securities (other than Excluded Shares) referred to in paragraph (b) or (c) above are convertible into or exchangeable for Common Stock shall change at any time (other than under or by reason of provisions designed to protect against dilution upon an event which results in a related adjustment pursuant to this Article IV), or (ii) any of such Options or Convertible Securities shall have terminated, lapsed or expired, the Exercise Price then in effect shall forthwith be readjusted (effective only with respect to any exercise of this Warrant after such readjustment) to the Exercise Price which would then be in effect had the adjustment made upon the issuance, sale, distribution or grant of such Options or Convertible Securities been made based upon such changed purchase price, additional consideration or conversion rate, as the case may be (in the case of any event referred to in clause (i) of this paragraph (d)) or had such adjustment not been made (in
the case of any event referred to in clause (ii) of this paragraph (d)).
(e) If the Company shall pay a dividend or make any other distribution upon any capital stock of the Company payable in Common Stock, Options or Convertible Securities, then, for purposes of paragraph (a) above, such Common Stock, Options or Convertible Securities shall be deemed to have been issued or sold without consideration.
(f) If any shares of Common Stock, Options or Convertible Securities shall be issued, sold or distributed for cash, the consideration received therefor shall be deemed to be the amount received by the Company therefor, after deduction therefrom of any expenses incurred in connection therewith. If any shares of Common Stock, Options or Convertible Securities (other than Excluded Shares) shall be issued sold or distributed for a consideration other than cash, the amount of the consideration other than cash received by the Company shall be deemed to be the Fair Market Value of such consideration, after deduction of any expenses incurred in connection therewith. If any shares of Common Stock, Options or Convertible Securities (other than Excluded Shares) shall be issued in connection with any merger in which the Company is the surviving corporation, the amount of consideration therefor shall be deemed to be the Fair Market Value of such portion of the assets and business of the non-surviving corporation as shall be attributable to such Common Stock, Options or Convertible Securities, as the case may be. If any Options (other than Excluded Shares) shall be issued in connection with the issuance and sale of other securities of the Company, together comprising one integral transaction in which no specific consideration is allocated by the Company to such Options by the parties thereto, such Options shall be deemed to have been issued without consideration.
4.4. SPECIAL DIVIDENDS. If the Company shall issue or distribute to any holder or holders of shares of Common Stock evidences of indebtedness, any other securities of the Company or any cash, property or other assets (excluding a Common Stock Reorganization or a Common Stock Distribution), whether or not accompanied by a purchase, redemption or other acquisition of shares of Common Stock (any such nonexcluded event being herein called a "SPECIAL DIVIDEND"), (a) the Exercise Price shall be decreased, effective immediately after the effective date of such Special Dividend, to a price determined by multiplying the Exercise Price then in effect by a fraction, the numerator of which shall be the Fair Market Value of the Company per share of outstanding Common Stock as of such effective date less any cash and the then Fair Market Value of any evidences of indebtedness, securities or property or other assets issued or distributed in such Special Dividend with respect to one share of Common Stock, and the denominator of which shall be such Fair Market Value per share and (b) the number of shares of Non-Voting Common Stock subject to purchase upon exercise of this Warrant shall be increased to a number determined by multiplying the number of shares of Non-Voting Common Stock subject to purchase immediately before such special Dividend by a fraction, the numerator of which shall be the Exercise Price in
effect immediately before such Special Dividend and the denominator of which shall be the Exercise Price in effect immediately after such Special Dividend. A reclassification of Common Stock (other than a change in par value, or from par value to no par value or from no par value to par value) into shares of Common Stock and shares of any other class of stock shall be deemed a distribution by the Company to the holders of such Common Stock of such shares of such other class of stock and, if the outstanding shares of Common Stock shall be changed into a larger or smaller number of shares of Common Stock as part of such reclassification, a Common Stock Reorganization.
4.5. CAPITAL REORGANIZATIONS. If there shall be any consolidation or merger to which the Company is a party, other than a consolidation or a merger of which the Company is the continuing corporation and which does not result in any reclassification of, or change (other than a Common Stock Reorganization) in, outstanding shares of Common Stock, or any sale or conveyance of the property of the Company as an entirety or substantially as an entirety, or any recapitalization of the Company (any such event being called a "CAPITAL REORGANIZATION"), then, effective upon the effective date of such Capital Reorganization, the Holder shall no longer have the right to purchase Non-Voting Common Stock, but shall have instead the right to purchase, upon exercise of this Warrant, the kind and amount of shares of stock and other securities and property (including cash) which the Holder would have owned or have been entitled to receive pursuant to such Capital Reorganization if this Warrant had been exercised immediately prior to the effective date of such Capital Reorganization. As a condition to effecting any Capital Reorganization, the Company or the successor or surviving corporation, as the case may be, shall (a) execute and deliver to each Warrantholder and to the Warrant Agency an agreement as to the Warrantholders' rights in accordance with this Section 4.5, providing, to the extent of any right to purchase equity securities hereunder, for subsequent adjustments as nearly equivalent as may be practicable to the adjustments provided for in this Article IV and (b) provide each Regulation Y Holder with an opinion of counsel reasonably satisfactory to such Regulation Y Holder and such other assurances as any Regulation Y Holder may reasonably request to the effect that the ownership and exercise by any Regulation Y Holder of this Warrant after giving effect to such Capital Reorganization shall not be prohibited by the BHC Act or the regulations thereunder. The provisions of this Section 4.5 shall similarly apply to successive Capital Reorganizations.
4.6. ADJUSTMENT RULES. Any adjustments pursuant to this Article IV shall be made successively whenever an event referred to herein shall occur, except that, notwithstanding any other provision of this Article IV, no adjustment shall be made to the number of shares of Non-Voting Common Stock to be delivered to each Warrantholder (or to the Exercise Price) if such adjustment represents less than 1% of the number of shares previously required to be so delivered, but any lesser adjustment shall be carried forward and shall be made at the time and together with the next subsequent adjustment which together with any adjustments so carried forward shall amount to 1% or more of the number of shares to be so delivered. No adjustment shall be made pursuant to this
Article IV in respect of the issuance from time to time of shares of Common Stock upon the exercise of any of the Warrants. If the Company shall take a record of the holders of its Common Stock for any purpose referred to in this Article IV, then (i) such record date shall be deemed to be the date of the issuance, sale, distribution or grant in question and (ii) if the Company shall legally abandon such action prior to effecting such action, no adjustment shall be made pursuant to this Article IV in respect of such action.
4.7. PROCEEDINGS PRIOR TO ANY ACTION REQUIRING ADJUSTMENT. As a condition precedent to the taking of any action which would require an adjustment pursuant to this Article IV, the Company shall take any action which may be necessary, including obtaining regulatory approvals or exemptions, in order that (a) the Company may thereafter validly and legally issue as fully paid and nonassessable all shares of Non-Voting Common Stock which any Warrantholder is entitled to receive upon exercise thereof and (b) the ownership and exercise of any Warrant by any Regulation Y Holder shall not be prohibited by the BHC Act or the regulations thereunder.
4.8. NOTICE OF ADJUSTMENT. Not less than 10 nor more than 30 days prior to the record date or effective date, as the case may be, of any action which requires or might require an adjustment or readjustment pursuant to this Article IV, the Company shall give notice to each Warrantholder of such event, describing such event in reasonable detail and specifying the record date or effective date, as the case may be, and, if determinable, the required adjustment and the computation thereof. If the required adjustment is not determinable at the time of such notice, the Company shall give notice to each Warrantholder of such adjustment and computation promptly after such adjustment becomes determinable.
ARTICLE V
PURCHASE, REDEMPTION AND CANCELLATION OF WARRANTS
5.1. PURCHASE OF WARRANTS BY THE COMPANY. The Company shall have the right or obligation to purchase or otherwise acquire Warrants at such times, in such manner and for such consideration as set forth below.
5.2. MANDATORY REDEMPTION OF WARRANTS. The Holder may (a) at any time and from time to time on or after the fourth anniversary of the Closing Date, (b) at any time and from time to time on or after the repayment in full of all principal of and premium and interest on the Notes (as defined in the Credit Agreement) and the termination of the Commitments under the Credit Agreement and (c) on or within 30 days after the date on which the Company shall have delivered a Refinancing Notice, by notice to the Company (any such redemption pursuant to this clause (c), a "REFINANCING REDEMPTION"), demand a determination of the Redemption Price (a "DETERMINATION NOTICE") for purposes of this Section 5.2. Within 30 days (or, in the case of a Refinancing Redemption, 5 days) after the receipt of any Determination Notice from the
Holder, the Company shall give to the Holder notice of the Redemption Price, including a reasonably detailed description of the method of calculation thereof, determined as of the day preceding such notice of the Redemption Price. At any time within 30 days (or, in the case of a Refinancing Redemption, 15 days) after receipt of notice of the Redemption Price the Holder may demand redemption of this Warrant, in whole or in part, at the Redemption Price by notice to the Company, payable on the third Business Day after receipt of notice of such demand (or, in the case of a Refinancing Redemption, on the closing date of such refinancing) (any such date, the "REDEMPTION DUE DATE") in immediately available funds to the Holder upon surrender of this Warrant at the Warrant Agency or, if requested by the Holder, without surrender of this Warrant, by wire transfer to any account in New York City specified by notice to the Company. Thereupon, the right to purchase shares of Non-Voting Common Stock theretofore represented by this Warrant as to which the Holder has demanded (and the Company may effect) redemption shall terminate, and this Warrant shall represent the right of the Holder to receive the full Redemption Price from the Company in accordance with this Section. The Holder's right to demand redemption of this Warrant pursuant to this Section 5.2 shall be referred to hereinafter as the Holder's "MANDATORY REDEMPTION RIGHT".
5.3. OPTIONAL REDEMPTION. At any time and from time to time after the fifth anniversary of the Closing Date, the Company shall have the right to redeem all, but not less than all, of the outstanding Warrants at the Optional Redemption Price, determined as of the day preceding the notice of redemption. Irrevocable notice of such right of redemption shall be given by the Company to all Warrantholders not more than 30 days nor less than 15 days prior to the date scheduled for redemption, stating the date and price, including a reasonably detailed description of the method of calculation thereof, of redemption. Warrantholders may not exercise the Warrants after any such notice of redemption unless the Company shall fail to redeem the Warrants as provided herein, the right to purchase shares of Non-Voting Common Stock theretofore represented by this Warrant shall terminate, and this Warrant shall represent the right of the Holder to receive the Optional Redemption Price from the Company in immediately available funds upon surrender of this Warrant at the Warrant Agency. If the Optional Redemption Price shall be disputed pursuant to Section 3.3, the Company shall pay to the affected Warrantholders on the redemption date the Optional Redemption Price initially determined by it and shall thereafter make supplemental payment of any increase (and the affected Warrantholder shall remit to the Company any decrease) in the Optional Redemption Price upon resolution of such dispute.
5.4. CANCELLATION OF Warrants. All Warrants purchased, redeemed or otherwise acquired by the Company shall thereupon be canceled and retired. The Warrant Agency shall cancel any Warrant surrendered for exercise or registration of transfer or exchange and deliver such canceled Warrants to the Company.
5.5. NOTICE OF REFINANCING. The Company shall give notice to each of the Warrantholders of any intent by the Company to refinance in their entirety the Notes
(as defined in the Credit Agreement) not less than 30 days prior to the proposed closing date of such refinancing, setting forth such proposed closing date and notifying each Warrantholder of its rights under Section 5.2 (such notice, the "REFINANCING NOTICE").
ARTICLE VI
DEFINITIONS
The following terms, as used in this Warrant, have the following meanings:
"APPRAISAL NOTICE" has the meaning set forth in Section
3.3(a).
"APPRAISER" has the meaning set forth in Section 3.3(b).
"APPRAISER DETERMINATION" has the meaning set forth in
Section 3.3(b).
"BHC ACT" means the Bank Holding Company Act of 1956, as amended.
"BUSINESS DAY" means any day excluding Saturday, Sunday and any day on which banking institutions located in New York are authorized by law or other governmental action to be closed, unless there shall have been an offering of Common Stock registered under the Securities Act, in which case "Business Day" means (a) if Common Stock is listed or admitted to trading on a national securities exchange, a day on which the principal national securities exchange on which the Common Stock is listed or admitted to trading is open for business or (b) if Common Stock is not so listed or admitted to trading, a day on which the New York Stock Exchange is open for business.
"CAPITAL REORGANIZATION" has the meaning set forth in Section 4.5.
"CLOSING DATE" has the meaning specified in the Credit Agreement.
"CLOSING PRICE" on any day means (a) if Common Stock is listed or admitted for trading on a national securities exchange, the reported last sales price regular way or, if no such reported sale occurs on such day, the average of the closing bid and asked prices regular way on such day, in each case on the principal national securities exchange on which Common Stock is listed or admitted to trading, or (b) if Common Stock is not listed or admitted to trading on any national securities exchange, the average of the closing bid and asked prices in the over-the-counter market on such day as reported by NASDAQ or any comparable system or, if not so reported, as reported by any New York Stock Exchange member firm selected by the Company for such purpose.
"COMMON STOCK" means the Voting Common Stock or the Non-Voting Common Stock, or both, as the context may require.
"COMMON STOCK DISTRIBUTION" has the meaning set forth in
Section 4.3(a).
"COMMON STOCK REORGANIZATION" has the meaning set forth in
Section 4.2.
"COMPANY" means Horizon Medical Products, Inc., a Georgia corporation, and its successors.
"CONSOLIDATED TOTAL DEBT" has the meaning specified in the Credit Agreement.
"CONVERTIBLE SECURITIES" has the meaning set forth in
Section 4.3(b).
"CREDIT AGREEMENT" has the meaning set forth in the second paragraph of this Warrant.
"DETERMINATION NOTICE" has the meaning set forth in Section 5.2.
"EBITDA" has the meaning specified in the Credit Agreement.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and any successor Federal statute, and the rules and regulations of the Securities and Exchange Commission (or its successor) thereunder, all as the same shall be in effect at the time.
"EXCLUDED Shares" means up to 3,000 shares of Common Stock issued by the Company to employees, officers and directors as a part of incentive or compensation packages.
"EXERCISE PRICE" means $.01 per share of the Non-Voting Common Stock, subject to adjustment pursuant to Article IV.
"FAIR MARKET VALUE" as at any date of determination means the fair market value of the business or property or services in question as of such date, as determined in good faith by the Board of Directors of the Company or otherwise in accordance with Section 3.3 hereof. The Fair Market Value of the Company as at any date of determination shall be the greatest of (i) the Fair Market Value at such date of the Company and its Subsidiaries as a going concern, (ii) the liquidation value at such date of the Company and its Subsidiaries, (iii) the consolidated net worth of the Company and its Subsidiaries as shown on its latest available consolidated balance sheet of the Company and (iv) the result of (A) EBITDA for the twelve consecutive months most recently ended prior to such date multiplied by six (6) plus (B) cash and cash equivalents at such date
minus (C) Consolidated Total Debt at such date. Notwithstanding the foregoing, if, at any date of determination of the Fair Market Value of the Company, the Common Stock shall then be publicly traded, the Fair Market Value of the Company on such date shall be the greater of (a) the amount determined in accordance with the immediately preceding sentence and (b) the Market Price on such date multiplied by the number of shares of Common Stock then outstanding. Determination of the Fair Market Value of the Company per share of Common Stock, shall be made without giving effect to any discount for (i) minority interest, (ii) any lack of liquidity of the Common Stock due to the fact that there may be no public market for the Common Stock, or (iii) the voting status of the Non-Voting Common Stock.
"FULLY DILUTED BASIS" means, with respect to any determination or calculation, that such determination or calculation is performed on a fully diluted basis determined in accordance with generally accepted accounting principles as in effect from time to time.
"HOLDER" has the meaning set forth in the first paragraph of this Warrant.
"COMPANY DETERMINATION" has the meaning set forth in
Section 3.2(a).
"MANDATORY REDEMPTION RIGHT" has the meaning set forth in
Section 5.2.
"MARKET PRICE" as at any date of determination means the average of the daily Closing Prices of a share of Common Stock for the shorter of (i) the 20 consecutive Business Days ending on the most recent Business Day prior to the Time of Determination and (ii) the period commencing on the date next succeeding the first public announcement of the issuance, sale, distribution, grant or exercise in question through such most recent Business Day prior to the Time of Determination. "TIME OF DETERMINATION" means the time and date of the earliest of (x) the determination of the stockholders entitled to receive such issuance, sale, distribution or grant, (y) the determination of the Holders or the Company to exercise their respective rights set forth in Sections 5.2 or 5.3 hereof and (z) the commencement of "ex-dividend" trading in respect thereof.
"NASD" means The National Association of Securities Dealers, Inc.
"NASDAQ" means The National Association of Securities Dealers, Inc. Automated Quotation System.
"NATIONSCREDIT" has the meaning set forth in the second paragraph of this Warrant.
"NON-VOTING COMMON STOCK" has the meaning set forth in the first
paragraph of this Warrant, subject to change pursuant to Article IV.
"OPTIONAL REDEMPTION PRICE" means, as of any date of determination, a price for each share of Non-Voting Common Stock issuable upon exercise of the Warrants equal to 110% of the Redemption Price, determined as of such date.
"OPTIONS" has the meaning set forth in Section 4.3(b).
"PERSON" means any natural person, corporation, limited partnership, general partnership, joint stock company, joint venture, association, company, trust, bank, trust company, land trust, business trust or other organization, whether or not a legal entity, and any government agency or political subdivision thereof.
"QUALIFIED IPO" means any sale of shares of Common Stock by and for the account of the Company pursuant to an underwritten initial public offering registered under the Securities Act; provided that the proceeds to the Company (net of underwriters' discount, fees and other expenses incurred by the "Company" in connection therewith) from such sale of shares exceeds $25,000,000.
"REDEMPTION DUE DATE" has the meaning set forth in Section 5.2 hereof.
"REDEMPTION Price" means, as of any date of determination, a price for each share of Non-Voting Common Stock issuable upon exercise of the Warrants equal to the excess of (a)(i) the Fair Market Value of the Company plus the aggregate Exercise Price of all Warrants either being redeemed or then outstanding and not being redeemed divided by (ii) the number of shares of Common Stock outstanding on a Fully Diluted Basis over (b) the Exercise Price then in effect.
"REFINANCING NOTICE" has the meaning set forth in Section 5.5 hereof.
"REGULATION Y HOLDER" means the Holder or a holder of Warrant Shares, if such Holder or holder of Warrant Shares is a bank holding company within the meaning of the BHC Act or a subsidiary thereof subject to Regulation Y under the BHC Act.
"REQUIRED INTEREST" has the meaning set forth in Section 3.3(a).
"SECURITIES ACT" means the Securities Act of 1933, as amended, and rules and regulations of the Securities and Exchange Commission thereunder.
"SPECIAL DIVIDEND" has the meaning set forth in Section 4.4.
"SUBSIDIARY" of any Person means any corporation, partnership, joint venture, association or other business entity of which more than 50% of the total voting
power of shares of stock or other interests therein entitled to vote in the election of members of the board of directors, partnership committee, board of managers or trustees or other managerial body thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of such Person or a combination thereof. Unless otherwise specified, "Subsidiary" means a Subsidiary of the Company and "Subsidiaries" means all Subsidiaries of the Company.
"VOTING COMMON STOCK" means the Class A common stock, par value $.001 per share, of the Company.
"WARRANT AGENCY" has the meaning set forth in Section 2.1.
"WARRANT SHARES" means the shares of Non-Voting Common Stock issuable upon the exercise of the Warrants.
"WARRANTHOLDER" means a holder of a Warrant.
"WARRANTHOLDERS RIGHTS AGREEMENT" has the meaning set forth in Section 3.1.
"WARRANTS" has the meaning set forth in the second paragraph of this Warrant.
All references herein to "DAYS" shall mean calendar days unless otherwise specified.
ARTICLE VII
MISCELLANEOUS
7.1. NOTICES. Notices and other communications provided for herein shall be in writing and may be given by mail, courier, confirmed telex or facsimile transmission and shall, unless otherwise expressly required, be deemed given when received or, if mailed, four Business Days after being deposited in the United States mail with postage prepaid and properly addressed. In the case of the Holder, such notices and communications shall be addressed to its address as shown on the books maintained by the Warrant Agency, unless the Holder shall notify the Warrant Agency that notices and communications should be sent to a different address (or telex or facsimile number), in which case such notices and communications shall be sent to the address (or telex or facsimile number) specified by the Holder.
7.2. WAIVERS; AMENDMENTS. No failure or delay of the Holder in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. No notice
or demand on the Company in any case shall entitle the Company to any other or
future notice or demand in similar or other circumstances. The rights and
remedies of the Holder are cumulative and not exclusive of any rights or
remedies which it would otherwise have. The provisions of this Warrant may be
amended, modified or waived with (and only with) the written consent of the
Company and the holders of Warrants entitling such holders to purchase a
majority of the Non-Voting Common Stock subject to purchase upon exercise of
such Warrants at the time outstanding (exclusive of Warrants then owned by the
Company or any Subsidiary (as defined in the Credit Agreement) or Affiliate (as
defined in the Credit Agreement) thereof); provided, however, that no such
amendment, modification or waiver shall, without the written consent of each
holder of Warrants at the time outstanding affected thereby, (a) change the
number of shares of Non-Voting Common Stock subject to purchase upon exercise
of this Warrant, the Exercise Price or provisions for payment thereof or (b)
amend, modify or waive the provisions of this Section or Article III or IV or
Section 1.5, 5.2, 5.3 or 5.5. The provisions of the Credit Agreement and the
Warrantholders Rights Agreement may be amended, modified or waived only in
accordance with the respective provisions thereof.
Any such amendment, modification or waiver effected pursuant to and in accordance with the provisions of this Section or the applicable provisions of the Credit Agreement or the Warrantholders Rights Agreement shall be binding upon the holders of all Warrants and Warrant Shares, upon each future holder thereof and upon the Company. In the event of any such amendment, modification or waiver the Company shall give prompt notice thereof to all holders of Warrants and Warrant Shares and, if appropriate, notation thereof shall be made on all Warrants thereafter surrendered for registration of transfer or exchange.
7.3. GOVERNING LAW. THIS WARRANT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF GEORGIA (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW).
7.4. TRANSFER; COVENANTS TO BIND SUCCESSOR AND ASSIGNS. All covenants, stipulations, promises and agreements in this Warrant contained by or on behalf of the Company or the Holder shall bind its successors and assigns, whether so expressed or not. This Warrant shall be transferable and assignable by the Holder hereof in whole or from time to time in part to any other Person and the provisions of this Warrant shall be binding upon and inure to the benefit of the Holder hereof and its successors and assigns.
7.5. SEVERABILITY. In case any one or more of the provisions contained in this Warrant shall be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any
way be affected or impaired thereby. The parties shall endeavor in good faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.
7.6. SECTION HEADINGS. The section headings used herein are for convenience of reference only, are not part of this Warrant and are not to affect the construction of or be taken into consideration in interpreting this Warrant.
7.7. TAX BASIS. The Company and the Holder agree pursuant to Proposed Treasury Regulation Section 1.1273-2 that, for Federal income tax purposes, the aggregate issue price of the Tranche B Loans (as defined in the Credit Agreement) and the aggregate purchase price for the Warrants are those set forth in Section 3.05 of the Credit Agreement. Neither the Company nor the Holder hereof shall voluntarily take (nor shall the Company permit the Company voluntarily to take) any action inconsistent with the agreement set forth in this Section 7.7.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed in its corporate name by one of its officers thereunto duly authorized, and its corporate seal to be hereunto affixed, attested by its Secretary or an Assistant Secretary, all as of the day and year first above written.
HORIZON MEDICAL PRODUCTS, INC.
[Corporate Seal]
Attest:
EXHIBIT E
WARRANTHOLDERS RIGHTS AGREEMENT
WARRANTHOLDERS RIGHTS AGREEMENT dated as of July 15, 1997, among HORIZON MEDICAL PRODUCTS, INC., a Georgia corporation (together with its successors, the "COMPANY"), MARSHALL B. HUNT, ROY C. MALLADY, JR. and WILLIAM E. PETERSON, JR. (together with their respective successors, the "MANAGEMENT STOCKHOLDERS"), and NATIONSCREDIT COMMERCIAL CORPORATION ("NATIONSCREDIT") (the Management Stockholders, together with any holder of Conversion Shares (as defined herein) and such other stockholders of the Company as may, from time to time, become parties to this Agreement in accordance with the provisions hereof, the "STOCKHOLDERS"; and NationsCredit and such other warrantholders of the Company as may, from time to time, become parties to this Agreement in accordance with the provisions hereof, the "WARRANTHOLDERS").
WHEREAS, on the date hereof, the Management Stockholders are collectively the beneficial owners of 98,091 shares of Common Stock (as defined herein), and NationsCredit has purchased and is the beneficial owner of the Warrants (as defined herein) to purchase 15,276 shares of Non-Voting Common Stock; and
WHEREAS, the Company and each Stockholder (other than the holders of the Conversion Shares) wish to provide to the Warrantholders and the holders of the Conversion Shares the rights described herein;
NOW THEREFORE the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITIONS. Unless otherwise defined herein, the following terms used in this Agreement shall have the meanings specified below.
"AFFILIATE" means, with respect to any Person, any of (i) a director or executive officer of such Person, (ii) a spouse, parent, sibling or descendant of such Person (or a spouse, parent, sibling or descendant of any director or executive officer of such Person) and (iii) any other Person that, directly or indirectly, controls, or is controlled by or is under common control with such Person. For the purpose of this
definition, "CONTROL" (including the terms "controlling", "controlled by" and "under common control with"), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities or by contract or agency or otherwise.
"BHC ACT" means the Bank Holding Company Act of 1956, as amended.
"COMMISSION" means the Securities and Exchange Commission or any other Federal agency at the time administering the Securities Act.
"COMMON STOCK" means the Voting Common Stock or the Non-Voting Common Stock, or both, as the context may require.
"CONVERSION SHARES" means (i) any shares of Non-Voting Common Stock or other securities issued upon the exercise of any Warrants and (ii) any securities issued with respect to any of such shares or other securities referred to in clause (i) upon the conversion thereof into other securities (including Voting Common Stock) or by way of stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization or otherwise; provided that any of such securities shall cease to be Conversion Shares when such securities shall have (x) been disposed of pursuant to a Public Sale or (y) ceased to be outstanding.
"CREDIT AGREEMENT" means the Credit Agreement dated as of July 15, 1997, among the Company, the lenders named therein and NationsCredit, as Agent, as amended from time to time.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, or any successor Federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. Reference to a particular section of the Securities Exchange Act of 1934 shall include a reference to the comparable section, if any, of any such successor Federal statute.
"INITIAL PUBLIC OFFERING" means the first registration of an offering of shares of Common Stock under the Securities Act which becomes effective (other than by a registration on Form S-4 or S-8 or any successor or similar forms).
"INITIATING HOLDERS" has the meaning set forth in Section 3.1 hereof.
"NON-VOTING COMMON STOCK" means the Class B common stock, par value $.001 per share, of the Company.
"OTHER SHARES" has the meaning set forth in Section 3.1.
"PERSON" means a corporation, an association, a partnership, a limited liability company, an organization, a business, an individual, a trust, a government or a subdivision thereof or a governmental agency.
"PUBLIC SALE" means any sale of Common Stock to the public pursuant to an offering registered under the Securities Act or to the public through a broker, dealer or market maker pursuant to the provisions of Rule 144 (or any successor provision then in effect) adopted under the Securities Act.
"QUALIFIED IPO" has the meaning given such term in the Warrants.
"REGISTRABLE SECURITIES" means any Conversion Shares until the date (if any) on which such Conversion Shares shall have been transferred or exchanged and new certificates for them not bearing a legend restricting further transfer shall have been delivered by the Company and subsequent disposition of them shall not require registration or qualification of them under the Securities Act or any similar state law then in force.
"REGISTRATION EXPENSES" means all expenses incident to the
Company's performance of or compliance with Sections 3.1 through 3.5 hereof,
including (i) all registration, filing and NASD fees, (ii) all fees and expenses
of complying with securities or blue sky laws, (iii) all word processing,
duplicating and printing expenses, (iv) all messenger and delivery expenses, (v)
the fees and disbursements of counsel for the Company and of its independent
public accountants, including the expenses of any special audits or "cold
comfort" letters required by or incident to such performance and compliance,
(vi) the fees and disbursements of any one counsel retained by the holder or
holders of more than 50% of the Registrable Securities being registered (or, in
the case of any registration effected pursuant to Section 3.1, as the Initiating
Holders shall have selected to represent all holders of the Registrable
Securities being registered), (vii) premiums and other costs of policies of
insurance (if any) against liabilities arising out of the public offering of the
Registrable Securities being registered if the Company desires such insurance
and (viii) any fees and disbursements of underwriters customarily paid by
issuers or sellers of securities, but not including underwriting discounts and
commissions and transfer taxes, if any, provided that, in any case where
Registration Expenses are not to be borne by the Company, such expenses shall
not include (i) salaries of the Company personnel or general overhead expenses
of the Company, (ii) auditing fees, (iii) premiums or other expenses relating to
liability insurance required by underwriters of the Company or (iv) other
expenses for the preparation of financial statements or other data, to the
extent that any of the foregoing either is normally prepared by the Company in
the ordinary course of its business or would have been incurred by the Company
had no public offering taken place.
"REGULATION Y HOLDER" means any Warrant Securityholder that is a bank holding company within the meaning of the BHC Act, or a subsidiary thereof subject to Regulation Y under the BHC Act.
"REGULATORY CHANGE" means, with respect to any Regulation Y Holder, (i) any change on or after the date hereof in United States federal or state or foreign laws or regulations (including the BHC Act and Regulation Y thereunder); (ii) the adoption on or after the date hereof of any interpretation or ruling applying to such Regulation Y Holder, individually or as a member of a class, under any United States federal or state or foreign laws or regulations by any court or governmental or regulatory authority charged with the interpretation or administration thereof; or (iii) the modification on or after the date hereof of any agreement or commitment with any such governmental or regulatory authority that is applicable to or binding upon such Regulation Y Holder.
"RESTRICTED SECURITIES" means the Warrants, the Conversion Shares and any securities obtained upon exchange for or upon conversion or transfer of or as a distribution on Warrants, the Conversion Shares or any such securities; provided that particular securities shall cease to be Restricted Securities when such securities shall have (x) been disposed of pursuant to a Public Sale, (y) been otherwise transferred or exchanged and new certificates for them not bearing a legend restricting further transfer shall have been delivered by the Company and subsequent disposition of them shall not require registration or qualification of them under the Securities Act or any similar state law then in force or (z) ceased to be outstanding. Whenever any particular securities cease to be Restricted Securities, the holder thereof shall be entitled to receive from the issuer thereof or its transfer agent, without expense (other than transfer taxes, if any), new securities of like tenor not bearing a legend of the character set forth in Section 2.2.
"SECURITIES ACT" means the Securities Act of 1933, or any similar Federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. Reference to a particular section of the Securities Act of 1933 shall include a reference to the comparable section, if any, of any such similar Federal statute.
"STOCKHOLDER" has the meaning set forth in the introductory paragraph.
"VOTING COMMON STOCK" means the Class A common stock, par value $.001 per share, of The Company.
"WARRANT SECURITYHOLDER" means at any time any Warrantholder or any holder of Conversion Shares.
"WARRANTHOLDERS" has the meaning set forth in the introductory paragraph (and for purposes of Section 2.6 shall include any Person that held Warrants that were redeemed pursuant to Section 5.3 of the Warrants).
"WARRANTS" means the Warrant or Warrants originally issued to NationsCredit, as such Warrants may be transferred or otherwise assigned, but only to the
extent not theretofore exercised, redeemed or expired in accordance with their respective terms.
All references herein to "DAYS" shall mean calendar days unless otherwise specified.
ARTICLE II
TRANSFER OF SHARES;
PAYMENTS TO WARRANT SECURITYHOLDERS
SECTION 2.1 GENERAL. Except as otherwise provided in this Agreement or by law, each Stockholder may transfer its shares of Common Stock at any time to any Person.
SECTION 2.2 RESTRICTIONS ON TRANSFER; LEGEND ON CERTIFICATES.
(a) Except as otherwise provided in this Agreement, Restricted Securities shall
not be transferable except (i) pursuant to an effective registration statement
under the Securities Act, (ii) pursuant to Rule 144 or 144A (or any successor
provisions) under the Securities Act or (iii) pursuant to a transaction that is
otherwise exempt from the registration requirements of the Securities Act and
any applicable state securities laws.
(b) Unless otherwise expressly provided herein, each certificate for Restricted Securities and each certificate issued in exchange for or upon transfer of any thereof shall be stamped or otherwise imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD OR OFFERED FOR SALE OR TRANSFERRED UNLESS REGISTERED UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO AND HAVE THE BENEFIT OF A WARRANTHOLDERS RIGHTS AGREEMENT DATED AS OF JULY 15, 1997, AMONG HORIZON MEDICAL PRODUCTS, INC. AND THE STOCKHOLDERS AND WARRANTHOLDERS PARTIES THERETO, COPIES OF WHICH ARE ON FILE WITH HORIZON MEDICAL PRODUCTS, INC."
(c) Any other provision of this Agreement to the contrary notwithstanding, no transfer of any Restricted Securities other than pursuant to a Public
Sale may be made to any Person unless such Person shall have agreed in writing that such Person, as a holder of Restricted Securities, and the Restricted Securities it acquires shall be bound by and be entitled to the benefits of all the provisions of this Agreement applicable to such Restricted Securities (and upon such agreement such Person shall be entitled to such benefits). Any purported transfer of Restricted Securities without compliance with the applicable provisions of this Agreement shall be void and of no effect, and the purported transferee shall have no rights as a Warrantholder or Stockholder (as applicable) or under this Agreement. In the event of such non-complying transfer, the Company shall not transfer any such Restricted Securities on its books or recognize the purported transferee as a shareholder or warrantholder, as the case may be, for any purpose, until all applicable provisions of this Agreement have been complied with.
SECTION 2.3 PERMITTED TRANSFERS. The restrictions on transfer
provided in Section 2.2(a) shall not be applicable to (i) any transfer in
compliance with federal and all applicable state securities laws to an Affiliate
of the holder of Restricted Securities, from an Affiliate of such holder to such
holder or between Affiliates of such holder (if any such Affiliate to whom
shares of Restricted Securities have been transferred by a holder thereof ceases
to be an Affiliate of such holder of Restricted Securities, such Restricted
Securities shall immediately be transferred back to the transferor thereof),
(ii) any transfer upon the death of any holder of Restricted Securities to such
holder's executors, administrators or testamentary trustees or (iii) any
transfer to a trust the beneficiaries of which include only the holder of such
Restricted Securities or such holder's spouse, parents, siblings or descendants
(any transferee referred to in (i), (ii) or (iii) above being referred to herein
as a "PERMITTED TRANSFEREE"); provided that no such transfer shall be made to
any Permitted Transferee unless such Permitted Transferee shall have agreed in
writing that such Permitted Transferee, as a Stockholder or Warrantholder (as
the case may be), and the shares of Common Stock or Warrants it acquires shall
be bound by and be entitled to the benefits of all the provisions of this
Agreement applicable to Common Stock or Warrants (as the case may be), and upon
such agreement such Permitted Transferee shall be entitled to such benefits.
SECTION 2.4 TAG-ALONG RIGHTS. If, at any time prior to a Qualified IPO, any Stockholder or any of its Affiliates (any such Person for purposes of this Section 2.4, the "TRANSFEROR") wishes to transfer its shares of Common Stock or any portion thereof to any Person (the "TRANSFEREE"), the Transferor shall first give to the Company and each Warrant Securityholder (pursuant to a list provided by the Company) a written notice (a "TRANSFER NOTICE"), executed by it and the Transferee and containing (i) the number of shares of Common Stock that the Transferee proposes to acquire from the Transferor, (ii) the name and address of the Transferee, (iii) the proposed purchase price, terms of payment and other material terms and conditions of such proposed transfer, (iv) an estimate, in the Transferor's reasonable judgment, of the fair market value of any non-cash consideration offered by the Transferee and (v) an offer by the Transferee or Transferor to purchase, upon the purchase by the Transferee of any shares of Common Stock owned by the Transferor and for the same per share consideration, that
number of Conversion Shares (or if such number is not an integral number, the next integral number which is greater than such number) of each Warrant Securityholder which shall be the product of (x) the aggregate number of Conversion Shares either then owned, or issuable upon exercise of Warrants then owned, by such Warrant Securityholder and (y) a fraction, the numerator of which shall be the number of shares of Common Stock indicated in the Transfer Notice as subject to purchase by the Transferee and the denominator of which shall be the sum of (A) the total number of shares of Common Stock then owned by the Transferor and its Affiliates plus (B) the total number of Conversion Shares either then owned, or issuable upon exercise of Warrants then owned, by each Warrant Securityholder. Each Warrant Securityholder shall have the right, for a period of 20 days after the Transfer Notice is given, to accept such offer in whole or in part, exercisable by delivering a written notice to the Transferor and the Company within such 20-day period, stating therein the number of shares of Common Stock (which may be the number of shares set forth in the offer by the Transferor or Transferee, as the case may be, or a portion thereof) to be sold by such Warrant Securityholder to the Transferor or Transferee, as the case may be. Prior to the earlier of (x) the end of such 20-day period or (y) the acceptance or rejection by each Warrant Securityholder of the Transferee's or Transferor's offer, as the case may be, neither the Transferor nor its Affiliates will complete any sale of shares of Common Stock to the Transferee. Thereafter, for a period of 60 days after the prohibition under the preceding sentence shall have terminated, the Transferor may sell to the Transferee for the consideration stated and on the terms set forth in the Transfer Notice the shares of Common Stock stated in the Transfer Notice as subject to purchase by the Transferee, provided that the Transferor or Transferee, as the case may be, shall simultaneously purchase the number of shares of Common Stock as calculated above from those Warrant Securityholders who have accepted the Transferor's or Transferee's offer, as the case may be. The provisions of this Section 2.4 shall not apply to transfers between the Transferor and any of its Permitted Transferees.
SECTION 2.5 RESTRICTIONS ON TRANSFER BY REGULATION Y HOLDERS.
(a) No Regulation Y Holder may transfer any Warrant or any Conversion Shares;
provided that such Regulation Y Holder may transfer such Warrant or Conversion
Shares (i) to the Company, (ii) to the public in an offering registered under
the Securities Act, (iii) in a transaction pursuant to Rule 144 or Rule 144A (or
any successor provisions) under the Securities Act or otherwise exempt from the
registration requirements of the Securities Act in which no single purchaser
receives an interest (treating any such Warrant as exercised and any Non-Voting
Common Stock as converted to Voting Common Stock) equivalent to more than two
percent of the outstanding Voting Common Stock or (iv) in a single transaction
to a third party who acquires at least a majority of the Voting Common Stock
without regard to the transfer of such Warrant or Conversion Shares. In the
event of a Regulatory Change, the effect of which is to permit such Regulation Y
Holder to transfer such Warrant or Conversion Shares in any other manner, the
foregoing proviso shall be deemed modified to permit a transfer of such Warrant
or Conversion Shares in such other manner.
(b) Nothing in Section 2.4 of this Agreement shall require any Regulation Y Holder to make a transfer of Warrants or Conversion Shares in a manner not permitted by Section 2.5(a) (an "IMPERMISSIBLE TRANSFER"). If Section 2.4 of this Agreement would otherwise require any Regulation Y Holder to make an Impermissible Transfer as a condition precedent to making a transfer of Warrants or Conversion Shares in a manner permitted by Section 2.5(a) (a "PERMISSIBLE TRANSFER"), then such Regulation Y Holder shall not be required to make such Impermissible Transfer as a condition precedent to making such Permissible Transfer.
SECTION 2.6 ADJUSTMENT EVENT FEE. If (a) any Adjustment Event
shall occur within 365 days after the Optional Redemption Date and (b) the
Consideration Per Share for such Adjustment Event is greater than the Redemption
Price Per Share then, immediately upon the occurrence of such Adjustment Event,
the Company shall pay to each Warrant Securityholder an amount equal to the
product of (x) the number of shares of Non-Voting Common Stock issuable upon
exercise of the Warrants of such Warrant Securityholder that were redeemed and
(y) the difference between the Consideration Per Share for such Adjustment Event
and the Redemption Price Per Share paid to such Warrant Securityholder.
"ADJUSTMENT EVENT" means:
(a) the completion of an Initial Public Offering by the Company; or
(b) 25% or more of the:
(i) Common Stock on a Fully Diluted Basis (as defined in the Warrants) on an aggregate basis is sold, exchanged, transferred or otherwise disposed of by the Company or any stockholder of the Company (as part of a single sale or a series of sales) to any Person or group or Persons other than an Affiliate of the Company or such stockholder, as the case may be; or
(ii) capital stock of the Company issued and outstanding on the Optional Redemption Date is sold, exchanged, transferred or otherwise disposed of by the Company (as part of a single sale or a series of sales) to any Person or group of Persons other than an Affiliate of the Company or such stockholder, as the case may be; or
(iii) assets of the Company and its Subsidiaries on a consolidated basis are, directly or indirectly, sold, exchanged, leased, transferred or otherwise disposed of as an entirety or substantially as an entirety (in one transaction or a series of transactions) to any Person or group of Persons other than any Affiliate of the Company.
"CONSIDERATION PER SHARE" means:
(i) in the case of any Adjustment Event described in clause
(a) or (b)(i) of the definition of Adjustment Event, the highest consideration
per share (if any) received by the Company or any stockholder of the Company
from the sale, exchange, transfer or other disposition by it of Common Stock in
connection with such Adjustment Event; and
(ii) in the case of any other Adjustment Event, the highest consideration per share of Common Stock that would be received by any stockholder of the Company upon the disposition of all or substantially all of the Common Stock or of the assets of the Company (determined by reference to all of the consideration received by the stockholders of the Company (as stockholders) for that portion actually disposed of in connection with such Adjustment Event, or which would be received by such shareholders if the Company were liquidated immediately following receipt of the consideration received by the Company in connection with such Adjustment Event),
in each case net of underwriting commissions and other appropriate costs and expenses deducted from such consideration.
"OPTIONAL REDEMPTION DATE" means the date of any redemption of the Warrants pursuant to Section 5.3 of the Warrants.
"REDEMPTION PRICE PER SHARE" means the Optional Redemption Price (as defined in the Warrants) which was paid to the Warrant Securityholders pursuant to Section 5.3 of the Warrants (determined on a per share basis by reference to the number of shares of Non-Voting Common Stock issuable upon exercise of the Warrants that were redeemed).
SECTION 2.7 NO INCONSISTENT AGREEMENTS. The Company has not entered into and will not enter into any registration rights agreement or similar arrangements the performance by the Company of the terms of which would in any manner conflict with, restrict or be inconsistent with the performance by the Company of its obligations under this Agreement.
ARTICLE III
REGISTRATION RIGHTS
SECTION 3.1 REGISTRATION ON REQUEST. (a) At any time or from
time to time after the date of consummation of an Initial Public Offering, upon
the written request of the holder or holders of a majority of all outstanding
Conversion Shares and Warrants (such majority determined, for purposes of this
Section 3.1, by calculating the number of Conversion Shares for which such
Warrants are then exercisable) (the "INITIATING HOLDERS"), requesting that the
Company effect the registration under the Securities Act of all or part of such
Initiating Holders' Registrable Securities and specifying the intended method of
disposition thereof, the Company will promptly give written notice of such
requested registration to all holders of Warrants and Registrable Securities,
and thereupon the Company will use its reasonable efforts to effect the
registration under the Securities Act of:
(i) the Registrable Securities which the Company has been so requested to register by such Initiating Holders for disposition in accordance with the intended method of disposition stated in such request;
(ii) all other Registrable Securities the holders of which shall have made a written request to the Company for registration thereof within 30 days after the giving of such written notice by the Company (which request shall specify the intended method of disposition of such Registrable Securities); and
(iii) all shares of Common Stock which the Company may elect to register in connection with the offering of Registrable Securities pursuant to this Section 3.1, whether for its own account or for the account of a holder of Common Stock,
all to the extent requisite to permit the disposition (in accordance with the intended methods thereof as aforesaid) of the Registrable Securities and the additional shares of Common Stock, if any, to be so registered, provided that the Warrant Securityholders as a class shall be entitled to not more than two registrations upon request pursuant to this Section 3.1.
(b) Registrations under this Section 3.1 shall be on such appropriate registration form of the Commission (i) as shall be selected by the Company and (ii) as shall permit the disposition of such Registrable Securities in accordance with the intended method or methods of disposition specified in their request for such registration. The Company agrees to include in any such registration statement all information which holders of Registrable Securities being registered shall reasonably request.
(c) The Company will pay all Registration Expenses in connection with one registration requested pursuant to this Section 3.1, provided that, in addition, the Company shall pay all Registration Expenses in connection with any registration upon request pursuant to which less than 50% of the Registrable Shares requested to be registered by such Initiating Holders are registered, but no such registration shall be counted as a requested registration for purposes of this Section 3.1. The Registration Expenses (and underwriting discounts and commissions and transfer taxes, if any, allocable to the Registrable Shares requested to be registered by the Initiating Holders) in connection with each other registration requested under this Section 3.1 shall be paid for by the Initiating Holders requesting such registration.
(d) A registration requested pursuant to this Section 3.1 shall not be deemed to have been effected (i) unless a registration statement with respect thereto has become effective; provided that a registration which does not become effective after the Company has filed a registration statement with respect thereto solely by reason of the refusal to proceed by the Initiating Holders (other than a refusal to proceed based upon the advice of counsel relating to a matter with respect to the Company) shall be deemed to have been effected by the Company at the request of the Initiating Holders unless the Initiating Holders shall have elected to pay all Registration Expenses in connection with such registration, (ii) if, after it has become effective, such registration is interfered with by any stop order, injunction or other order or requirement of the Commission or other governmental agency or court for any reason, other than by reason of some act or omission by any Warrantholder or Warrant Securityholder, or (iii) the conditions to closing specified in the purchase agreement or underwriting agreement entered into in connection with such registration are not satisfied, other than by reason of some act or omission by any Warrantholder or Warrant Securityholder.
(e) If a requested registration pursuant to this Section 3.1 involves an underwritten offering, the underwriter or underwriters thereof shall be selected by the Company and shall be reasonably satisfactory to the holders of at least a majority (by a number of shares) of the Registrable Securities as to which registration has been requested.
(f) If a requested registration pursuant to this Section 3.1 involves an underwritten offering, and the managing underwriter shall advise the Company (with a copy of any such notice to each holder of Registrable Securities requesting registration) that, in its opinion, the number of securities requested to be included in such registration (including securities proposed to be sold for the account of the Company) exceeds the number which can be sold in such offering within a price range acceptable to the Initiating Holders, the Company will include in such registration, to the extent of the number which the Company is so advised can be sold in such offering, (i) first, Registrable Securities requested to be included in such registration by the holder or holders of Registrable Securities, pro rata among such holders requesting such registration on the basis of the number of such securities requested to be included by such holders, (ii) second, all shares proposed to be included by the Company in such
registration and (iii) third, all shares other than Registrable Shares (any such shares with respect to any registration, "OTHER SHARES") requested to be included in such registration by the holder or holders thereof.
SECTION 3.2 INCIDENTAL REGISTRATION. (a) If the Company at any time proposes to register any of its securities under the Securities Act (other than (x) by a registration on Form S-4 or S-8 or any successor or similar forms or (y) pursuant to Section 3.1) whether for its own account or for the account of the holder or holders of any Other Shares, it will each such time give prompt written notice to all Warrant Securityholders of its intention to do so and of such holders' rights under this Section 3.2. Upon the written request of any such holder made within 20 days after the receipt of any such notice (which request shall specify the Registrable Securities intended to be disposed of by such holder and the intended method of disposition thereof), the Company will use its reasonable efforts to effect the registration under the Securities Act of all Registrable Securities which the Company has been so requested to register by the holders thereof, to the extent requisite to permit the disposition (in accordance with the intended methods thereof as aforesaid) of the Registrable Securities so to be registered, by inclusion of such Registrable Securities in the registration statement which covers the securities which the Company proposes to register; provided that if, at any time after giving written notice of its intention to register any securities and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason either not to register or to delay registration of such securities, the Company may, at its election, give written notice of such determination to each holder of Registrable Securities and, thereupon, (i) in the case of a determination not to register, shall be relieved of its obligation to register any Registrable Securities in connection with such registration (but not from its obligation to pay the Registration Expenses in connection therewith), without prejudice, however, to the rights of any Warrant Securityholder or Warrant Securityholders entitled to do so to request that such registration be effected as a registration under Section 3.1, and (ii) in the case of a determination to delay registering, shall be permitted to delay registering any Registrable Securities, for the same period as the delay in registering such other securities. No registration effected under this Section 3.2 shall relieve the Company of its obligation to effect any registration upon request under Section 3.1, nor shall any such registration hereunder be deemed to have been effected pursuant to Section 3.1. The Company will pay all Registration Expenses in connection with each registration of Registrable Securities pursuant to this Section 3.2.
(b) If the Company at any time proposes to register any of its securities under the Securities Act as contemplated by Section 3.2 and such securities are to be distributed by or through one or more underwriters, the Company will, if requested by any holder of Registrable Securities as provided in this Section 3.2, use its reasonable efforts to arrange for such underwriters to include all the Registrable Securities to be offered and sold by such holder among the securities to be distributed by such underwriters, provided that if the managing underwriter of such underwritten offering shall inform the Company and holders of the Registrable Securities requesting such
registration and all other holders of any other shares of Common Stock which shall have exercised, in respect of such underwritten offering, registration rights comparable to the rights under this Section 3.2 by letter of its belief that inclusion in such distribution of all or a specified number of such securities proposed to be distributed by such underwriters would interfere with the successful marketing of the securities being distributed by such underwriters (such letter to state the basis of such belief and the approximate number of such Registrable Securities and such Other Shares proposed so to be registered which may be distributed without such effect), then the Company may, upon written notice to all holders of such Registrable Securities and holders of such Other Shares, reduce pro rata (if and to be extent stated by such managing underwriter to be necessary to eliminate such effect) the number of such Registrable Securities and Other Shares the registration of which shall have been requested by each holder thereof so that the resultant aggregate number of such Registrable Securities and Other Shares so included in such registration, together with the number of securities to be included in such registration for the account of the Company, shall be equal to the number of shares stated in such managing underwriter's letter.
SECTION 3.3 REGISTRATION PROCEDURES. (a) If and whenever the Company is required to effect the registration of any Registrable Securities under the Securities Act as provided in Sections 3.1 and 3.2, the Company shall, as expeditiously as possible:
(i) prepare and (within 75 days after the end of the period within which requests for registration may be given to the Company or in any event as soon thereafter as possible; provided that, in the case of a registration pursuant to Section 3.1, such filing to be made within 75 days after the initial request of an Initiating Holder of Registrable Securities or in any event as soon thereafter as possible) file with the Commission the requisite registration statement to effect such registration (including such audited financial statements as may be required by the Securities Act) and thereafter use its best efforts to cause such registration statement to become and remain effective for the Distribution Period as provided below; provided further that the Company may discontinue any registration of its securities which are not Registrable Securities at any time prior to the effective date of the registration statement relating thereto; provided further that before filing such registration statement or any amendments thereto, the Company will furnish to the counsel selected by the holders of Registrable Securities which are to be included in such registration copies of all such documents proposed to be filed, which documents will be subject to the review of such counsel;
(ii) prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective and to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement for the Distribution Period (for purposes hereof, "Distribution Period" shall mean (i) in a firm commitment
underwritten public offering, the period of time until each underwriter
has completed the distribution of all securities purchased by it and
(ii) for any other registration, the period of time until the earlier
of (x) the sale of all Registrable Securities covered by such
registration or (y)(1) in the case of a registration pursuant to
Section 3.1, the expiration of 120 days after such registration
statement becomes effective, or (2) in the case of a registration
pursuant to Section 3.2, the expiration of 90 days after such
registration statement becomes effective);
(iii) furnish to each seller of Registrable Securities covered by such registration statement and each underwriter, if any, of the securities being sold by such seller such number of conformed copies of such registration statement and of each such amendment and supplement thereto (in each case including all exhibits), such number of copies of the prospectus contained in such registration statement (including each preliminary prospectus and any summary prospectus) and any other prospectus filed under Rule 424 under the Securities Act, in conformity with the requirements of the Securities Act, and such other documents, as such seller and underwriter, if any, may reasonably request in order to facilitate the public sale or other disposition of the Registrable Securities owned by such seller;
(iv) use reasonable efforts to register or qualify all Registrable Securities and other securities covered by such registration statement under blue sky or similar laws of such jurisdictions as any underwriter of the securities being sold shall reasonably request, to keep such registrations or qualifications in effect for so long as such registration statement remains in effect, and take any other action which may be reasonably necessary or advisable to enable such underwriter to consummate the disposition in such jurisdictions of such securities, except that the Company shall not for any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction wherein it would not but for the requirements of this subdivision (iv) be obligated to be so qualified, to subject itself to taxation in any such jurisdiction or to consent to general service of process in any such jurisdiction;
(v) use reasonable efforts to cause all Registrable Securities covered by such registration statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof to consummate the disposition of such Registrable Securities;
(vi) furnish to each seller of Registrable Securities a signed counterpart, addressed to such seller and the underwriters, if any, of
(x) an opinion of counsel for the Company, dated the effective date of such registration statement (and, if such registration includes an underwritten public offering, an opinion dated the date of the closing
under the underwriting agreement), reasonably satisfactory in form and substance to counsel for the underwriters and counsel to such seller, and
(y) a "comfort" letter, dated the effective date of such registration statement (and, if such registration includes an underwritten public offering, a letter dated the date of the closing under the underwriting agreement), signed by the independent public accountants who have certified the Company's financial statements included in such registration statement,
covering substantially the same matters with respect to such registration statement (and the prospectus included therein) and, in the case of the accountants' letter, with respect to events subsequent to the date of such financial statements, as are customarily covered in opinions of issuer's counsel and in accountants' letters delivered to the underwriters in underwritten public offerings of securities;
(vii) notify the holders of Registrable Securities and the managing underwriter or underwriters, if any, promptly and confirm such advice in writing promptly thereafter:
(A) when the registration statement, the prospectus or any prospectus supplement related thereto or post-effective amendment to the registration statement has been filed, and, with respect to the registration statement or any post-effective amendment thereto, when the same has become effective;
(B) of any request by the Commission for amendments or supplements to the registration statement or the prospectus or for additional information;
(C) of the issuance by the Commission of any stop order suspending the effectiveness of the registration or the initiation of any proceedings by any Person for that purpose; and
(D) of the receipt by the Company of any notification with respect to the suspension of the qualification of any Registrable Securities for sale under the securities or blue sky laws of any jurisdiction or the initiation or threat of any proceeding for such purpose;
(viii) notify each seller of Registrable Securities covered by such registration statement, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, upon the Company's discovery that, or upon the happening of any event as a result of which, the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the circumstances then existing, and at the request of any such seller promptly prepare and furnish to such seller and each underwriter, if any, a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing;
(ix) make every reasonable effort to obtain the withdrawal of any order suspending the effectiveness of the registration statement at the earliest possible moment;
(x) otherwise use reasonable efforts to comply with all applicable rules and regulations of the Commission, and make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve months, but not more than eighteen months, beginning with the first full calendar quarter after the effective date of such registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act;
(xi) make available for inspection by a representative of the holders of Registrable Securities participating in the offering, any underwriter participating in any disposition pursuant to the registration and any attorney or accountant retained by such selling holders or underwriter (each, an "INSPECTOR"), all financial and other records, pertinent corporate documents and properties of the Company (the "RECORDS"), and cause the Company's officers, directors and employees to supply all information reasonably requested by any such Inspector in connection with such registration; provided that the Company shall not be required to comply with this subdivision (xi) if there is a reasonable likelihood, in the judgment of the Company, that such delivery could result in the loss of any attorney-client privilege related thereto; and provided further that Records which the Company determines, in good faith, to be confidential and which it notifies the Inspectors are confidential shall not be disclosed by the Inspectors (other than to any holder of Registrable Securities participating in the offering) unless (x) such Records have become generally available to the public or (y) the disclosure of such Records may be necessary or appropriate (A) to comply with any law, rule, regulation or order applicable to any such Inspectors or holder of Registrable Securities, (B) in response to any subpoena or other legal process or (C) in connection with any litigation to which such Inspectors or any holder of Registrable Securities is a party (provided that the Company is provided with reasonable notice of such proposed disclosure and a reasonable opportunity to seek a protective order or other appropriate remedy with respect to such Records);
(xii) provide and cause to be maintained a transfer agent and registrar for all Registrable Securities covered by such registration statement from and after a date not later than the effective date of such Registration Statement;
(xiii) use reasonable efforts to list all Registrable Securities covered by such registration statement on any securities exchange on which any of the Common Stock is then listed and, if not so listed, to be listed on the NASD automated quotation system and, if listed on the NASD automated quotation system, use its best efforts to secure designation of all such Registrable Securities covered by such registration statement as a NASDAQ "national market system security" within the meaning of Rule 11Aa2-1 of the Securities and Exchange Commission or, failing that, to secure NASDAQ authorization for such Registrable Securities and, without limiting the generality of the foregoing, to arrange for at least two market makers to register as such with respect to such Registrable Securities with the NASD; and
(xiv) use reasonable efforts to provide a CUSIP number for the Registrable Securities, not later than the effective date of the registration.
The Company may require each seller of Registrable Securities as to which any registration is being effected to furnish the Company such information regarding such seller and the distribution of such securities as the Company may from time to time reasonably request in writing for purposes of preparing the relevant registration statement and amendments and supplements thereto.
(b) Each holder of Registrable Securities agrees by
acquisition of such Registrable Securities that, upon receipt of any notice from
the Company of the occurrence of any event of the kind described in subdivision
(viii) of Section 3.3(a), such holder will forthwith discontinue such holder's
disposition of Registrable Securities pursuant to the registration statement
relating to such Registrable Securities until such holder's receipt of the
copies of the supplemented or amended prospectus contemplated by subdivision
(viii) of Section 3.3(a). In the event the Company shall give any such notice,
the periods specified in subdivision (ii) of Section 3.3(a) shall be extended by
the length of the period from and including the date when each seller of any
Registrable Securities covered by such registration statement shall have
received such notice to the date on which each such seller has received the
copies of the supplemented or amended prospectus contemplated by subdivision
(viii) of Section 3.3(a).
(c) If any such registration or comparable statement refers to any holder of Registrable Securities by name or otherwise as the holder of any securities of the Company, then such holder shall have the right to require, in the event that such reference to such holder by name or otherwise is not required by the Securities Act or any similar federal statute then in force, the deletion of the reference to such holder.
SECTION 3.4 UNDERWRITTEN OFFERINGS. (a) If requested by the underwriters for any underwritten offering by holders of Registrable Securities pursuant to a registration requested under Section 3.1, the Company will enter into an underwriting agreement with such underwriters for such offering, such agreement to be satisfactory in substance and form to the Company, each such holder and the underwriters, and to contain such representations and warranties by the Company and such other terms as are generally prevailing in agreements of such type, including, without limitation, indemnities to the effect and to the extent provided in Section 3.5. The holders of the Registrable Securities will cooperate with the Company in the negotiation of the underwriting agreement.
(b) Each holder of Registrable Securities agrees by acquisition of such Registrable Securities not to sell, make any short sale of, loan, grant any option for the purchase of, effect any public sale or distribution of or otherwise dispose of any equity securities of the Company, during the ten days prior to and the 90 days after the effective date of any underwritten registration pursuant to Section 3.1 or 3.2 has become effective, except as part of such underwritten registration, whether or not such holder participates in such registration, and except as otherwise permitted by the managing underwriter of such underwriting (if any). Each holder of Registrable Securities agrees that the Company may instruct its transfer agent to place stop transfer notations in its records to enforce this Section 3.4(b).
(c) No Person may participate in any underwritten offering hereunder unless such Person (i) agrees to sell such Person's securities on the basis provided in any underwriting arrangements approved, subject to the terms and conditions hereof, by the Person or a majority of the Persons entitled to approve such arrangements and (ii) completes and executes all agreements, questionnaires, indemnities and other documents (other than powers of attorney) required under the terms of such underwriting arrangements.
SECTION 3.5 INDEMNIFICATION. (a) The Company agrees to indemnify and hold harmless each holder of Registrable Securities whose Registrable Securities are covered by any registration statement, its directors and officers and each other Person, if any, who controls such holder within the meaning of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which any such indemnified party may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such securities were registered under the Securities Act, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and the Company will reimburse each such indemnified party for any legal or any other expenses reasonably incurred by them in connection with investigating or defending any
such loss, claim, liability, action or proceeding; provided that the Company shall not be liable in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, any such preliminary prospectus, final prospectus, summary prospectus, amendment or supplement in reliance upon and in conformity with written information furnished to the Company by or on behalf of such holder specifically for use in the preparation thereof. In addition, the Company shall indemnify any underwriter of such offering and each other Person, if any, who controls any such underwriter within the meaning of the Securities Act in substantially the same manner and to substantially the same extent as the indemnity herein provided to each Indemnified Party. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such holder or any such director, officer, underwriter or controlling person and shall survive the transfer of such securities by such holder.
(b) Each prospective seller of Registrable Securities hereunder shall indemnify and hold harmless (in the same manner and to the same extent as set forth in subdivision (a) of this Section 3.5) the Company, each director of the Company, each officer of the Company and each other person, if any, who controls the Company within the meaning of the Securities Act, with respect to any statement or alleged statement in or omission or alleged omission from such registration statement, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereof, if such statement or alleged statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by or on behalf of such seller specifically for use in the preparation of such registration statement, preliminary prospectus, final prospectus, summary prospectus, amendment or supplement. Any such indemnity shall remain in full force and effect, regardless of any investigation made by or on behalf of the Company or any such director, officer or controlling person and shall survive the transfer of such securities by such seller.
(c) Promptly after receipt by an indemnified party of notice of the commencement of any action or proceeding involving a claim referred to in the preceding subdivisions of this Section 3.5, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party, give written notice to the latter of the commencement of such action; provided that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under the preceding subdivisions of this Section 3.5, except to the extent that the indemnifying party is actually prejudiced by such failure to give notice. In case any such action is brought against an indemnified party, unless in such indemnified party's reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist in respect of such claim, the indemnifying party shall be entitled to participate in and to assume the defense thereof, jointly with any other indemnifying party similarly notified, to the extent that the indemnifying party may wish, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to
such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof. No indemnifying party shall, without the consent of the indemnified party, consent to entry of any judgment or enter into any settlement of any such action which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation. No indemnified party shall consent to entry of any judgment or enter into any settlement of any such action the defense of which has been assumed by an indemnifying party without the consent of such indemnifying party.
(d) If the indemnification provided for in the preceding
subdivisions of this Section 3.5 is unavailable to an indemnified party in
respect of any expense, loss, claim, damage or liability referred to therein,
then each indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such expense, loss, claim, damage or liability (i) in such proportion
as is appropriate to reflect the relative benefits received by the Company on
the one hand and the holder or underwriter, as the case may be, on the other
from the distribution of the Registrable Securities or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company on the one
hand and of the holder or underwriter, as the case may be, on the other in
connection with the statements or omissions which resulted in such expense,
loss, damage or liability, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the holder or underwriter, as the case may be, on the other in connection
with the distribution of the Registrable Securities shall be deemed to be in the
same proportion as the total net proceeds received by the Company from the
initial sale of the Registrable Securities by the Company to the purchaser bear
to the gain realized by the selling holder or the underwriting discounts and
commissions received by the underwriter, as the case may be. The relative fault
of the Company on the one hand and of the holder or underwriter, as the case may
be, on the other shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or omission to
state a material fact relates to information supplied by the Company, by the
holder or by the underwriter and parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission;
provided that the foregoing contribution agreement shall not inure to the
benefit of any indemnified party if indemnification would be unavailable to such
indemnified party by reason of the proviso contained in the first sentence of
subdivision (a) of this Section 3.5, and in no event shall the obligation of any
indemnifying party to contribute under this subdivision (d) exceed the amount
that such indemnifying party would have been obligated to pay by way of
indemnification if the indemnification provided for under subdivisions (a) or
(b) of this Section 3.5 had been available under the circumstances.
The Company and the holders of Registrable Securities agree
that it would not be just and equitable if contribution pursuant to this
subdivision (d) were determined by pro rata allocation (even if the holders and
any underwriters were treated as one entity for such purpose) or by any other
method of allocation that does not take account of the equitable considerations
referred to in the immediately preceding paragraph and subdivision (c) of this
Section 3.5. The amount paid or payable by an indemnified party as a result of
the losses, claims, damages and liabilities referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subdivision (d), no underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities purchased by it and distributed to the public were offered to the public exceeds, in any such case, the amount of any damages that such holder or underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.
SECTION 3.6 RULE 144; RULE 144A. (a) If the Company shall have filed a registration statement pursuant to Section 12 of the Exchange Act or a registration statement pursuant to the Securities Act, the Company will file the reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the Commission thereunder and will take such further action as any holder of Registrable Securities may reasonably request, all to the extent required from time to time to enable such holder to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144 under the Securities Act, as such Rule may be amended from time to time, or (b) any similar rule or regulation hereafter adopted by the Commission. Upon the request of any holder of Registrable Securities, the Company will deliver to such holder a written statement as to whether it has complied with such requirements.
(b) The Company represents and warrants that as of the date
hereof, the Common Stock is not, and is not part of a class of securities that
is, listed on a national securities exchange registered under Section 6 of the
Exchange Act or quoted in an automated inter-dealer quotation system. For so
long as any shares of Registrable Securities are restricted securities within
the meaning of Rule 144(a)(3) under the Securities Act, the Company covenants
and agrees that it shall, during any period in which it is not subject to
Section 13 or 15(d) of the Exchange Act, make available to any holder of
Registrable Securities in connection with the sale of such holder Registrable
Securities and any prospective purchaser of Registrable Securities from such, in
each case upon request, the information specified in, and meeting the
requirements of, Rule 144A(d)(4) under the Securities Act.
ARTICLE IV
MISCELLANEOUS
SECTION 4.1 NOTICES. All notices and other communications provided for hereunder shall be dated and in writing and shall be deemed to have been given (i) if given by telecopy, when such telecopy is transmitted to the telecopy number specified in this Section and telephonic confirmation of receipt thereof is obtained or (ii) if given by mail, prepaid overnight courier or any other means, when received at the address specified in this Section or when delivery at such address is refused. Such notices shall be addressed to the appropriate party to the attention of the person who executed this Agreement at the address or telecopy number set forth under such party's signature below (or to the attention of such other person or to such other address or telecopy number as such party shall have furnished to each other party in accordance with this Section 4.1).
SECTION 4.2 BINDING NATURE OF AGREEMENT. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto or their successors in interest, except as expressly otherwise provided herein.
SECTION 4.3 DESCRIPTIVE HEADINGS. The descriptive headings of the several sections and paragraphs of this Agreement are inserted for reference only and shall not limit or otherwise affect the meaning hereof.
SECTION 4.4 SPECIFIC PERFORMANCE. Without limiting the rights of each party hereto to pursue all other legal and equitable rights available to such party for the other parties' failure to perform their obligations under this Agreement, the parties hereto acknowledge and agree that the remedy at law for any failure to perform their obligations hereunder would be inadequate and that each of them, respectively, shall be entitled to specific performance, injunctive relief or other equitable remedies in the event of any such failure.
SECTION 4.5 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAWS OF THE STATE OF GEORGIA, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA AND OF ANY GEORGIA STATE COURT SITTING IN ATLANTA, GEORGIA FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
LAW, ANY OBJECTION WHICH SUCH PARTY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH OF THE PARTIES HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 4.1. NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY TO THIS AGREEMENT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
SECTION 4.6 COUNTERPARTS. This Agreement may be executed simultaneously in any number of counterparts, each of which shall be deemed an original, but all such counterparts shall together constitute one and the same instrument.
SECTION 4.7 SEVERABILITY. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be in any way impaired thereby, it being intended that all of the rights and privileges of the parties hereto shall be enforceable to the fullest extent permitted by law.
SECTION 4.8 ENTIRE AGREEMENT. This Agreement is intended by the parties hereto as a final and complete expression of their agreement and understanding in respect to the subject matter contained herein. This Agreement supersedes all prior agreement and understandings, written or oral, between the parties with respect to such subject matter.
SECTION 4.9 AMENDMENT AND WAIVER. Any provision of this Agreement may be amended if, but only if, such amendment is in writing and is signed by the Company and Stockholders and Warrantholders owning, or having Warrants exercisable for, at least a majority of shares of Common Stock either then outstanding or issuable upon the exercise of all outstanding Warrants, provided that no such amendment may adversely affect the rights of any Warrant Securityholder unless signed by such Warrant Securityholder. Any provision may be waived if, but only if, such waiver is in writing and is signed by the party or parties waiving such provision and for whose benefit such provision is intended.
SECTION 4.10 NO THIRD PARTY BENEFICIARIES. Nothing in this Agreement shall convey any rights upon any person or entity which is not a party or an assignee of a party to this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered as of the date first above written.
COMPANY:
HORIZON MEDICAL PRODUCTS,
INC.
Address:
Seven North Parkway Square
4200 Northside Parkway, N.W.
Atlanta, Georgia 30327
Facsimile: (404) 233-0171
MANAGEMENT STOCKHOLDERS
Address:
c/o Horizon Medical Products, Inc.
Seven North Parkway Square
4200 Northside Parkway, N.W.
Atlanta, Georgia 30327
Facsimile: (404) 233-0171
Address:
c/o Horizon Medical Products, Inc.
Seven North Parkway Square
4200 Northside Parkway, N.W.
Atlanta, Georgia 30327
Facsimile: (404) 233-0171
Address:
c/o Horizon Medical Products, Inc.
Seven North Parkway Square
4200 Northside Parkway, N.W.
Atlanta, Georgia 30327
Facsimile: (404) 233-0171
WARRANTHOLDER:
NATIONSCREDIT COMMERCIAL
CORPORATION
Address:
201 Broad Street
One Canterbury Green
Stamford, Connecticut 06901
Attn: Horizon Medical Products, Inc.
Account Officer
Facsimile: (203) 352-4102
EXHIBIT F
SECURITY AGREEMENT
AGREEMENT dated as of July 15, 1997 between HORIZON MEDICAL PRODUCTS, INC., a Georgia corporation (together with its successors, the "COMPANY"), and NATIONSCREDIT COMMERCIAL CORPORATION, as Agent for the Lenders referred to below (the "AGENT").
W I T N E S S E T H:
WHEREAS, the Company, certain lenders (the "LENDERS") and the Agent are parties to a Credit Agreement of even date herewith (as the same may be amended from time to time, the "CREDIT AGREEMENT"); and
WHEREAS, in order to induce the Lenders and the Agent to enter into the Credit Agreement, the Company has agreed to grant a continuing security interest in and to the Collateral (as hereafter defined) to secure its obligations under the Financing Documents referred to in the Credit Agreement;
NOW THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS.
Terms defined in the Credit Agreement and not otherwise defined herein have, as used herein, the respective meanings provided for therein. The following additional terms, as used herein, have the following respective meanings:
"ACCOUNTS" means all "accounts" (as defined in the UCC) now owned or hereafter acquired by the Company, and shall also mean and include all accounts receivable, contract rights, book debts, notes, drafts and other obligations or indebtedness owing to the Company arising from the sale, lease or exchange of goods or other property by it and/or the performance of services by it (including any such obligation which might be characterized as an account, contract right or general intangible under the Uniform Commercial Code in effect in any jurisdiction) and all of the Company's rights in, to and under all purchase orders for goods, services or other property, and all of the Company's rights to any goods, services or other property represented by any of the foregoing (including returned or repossessed goods and unpaid sellers' rights of rescission, replevin, reclamation and rights to stoppage in transit) and all monies due to or to become due to the Company under all contracts for the sale, lease or
exchange of goods or other property and/or the performance of services by it (whether or not yet earned by performance on the part of the Company), in each case whether now in existence or hereafter arising or acquired including, without limitation, the right to receive the proceeds of said purchase orders and contracts and all collateral security and guarantees of any kind given by any Person with respect to any of the foregoing.
"COLLATERAL" has the meaning set forth in Section 3.
"COLLATERAL ACCOUNTS" means the Lockbox Accounts .
"DOCUMENTS" means all "documents" (as defined in the UCC) or other receipts covering, evidencing or representing goods, now owned or hereafter acquired by the Company.
"EQUIPMENT" means all "equipment" (as defined in the UCC) now owned or hereafter acquired by the Company, including without limitation all motor vehicles, trucks, trailers, railcars and barges.
"GENERAL INTANGIBLES" means all "general intangibles" (as
defined in the UCC) now owned or hereafter acquired by the Company, including
(i) all obligations or indebtedness owing to the Company (other than Accounts)
from whatever source arising, (ii) all patents, patent licenses, trademarks,
trademark licenses, rights in intellectual property, goodwill, trade names,
service marks, trade secrets, copyrights, permits and licenses, (iii) all rights
or claims in respect of refunds for taxes paid and (iv) all rights in respect of
any pension plan or similar arrangement maintained for employees of any member
of the ERISA Group.
"INSTRUMENTS" means all "instruments", "chattel paper" or "letters of credit" (each as defined in the UCC), including those evidencing, representing, arising from or existing in respect of, relating to, securing or otherwise supporting the payment of, any of the Accounts, including (but not limited to) promissory notes, drafts, bills of exchange and trade acceptances, now owned or hereafter acquired by the Company.
"INVENTORY" means all "inventory" (as defined in the UCC), now owned or hereafter acquired by the Company, wherever located, and shall also mean and include all raw materials and other materials and supplies, work-in-process and finished goods and any products made or processed therefrom and all substances, if any, commingled therewith or added thereto.
"LIQUID INVESTMENTS" has the meaning set forth in Section 5(D).
"LOCKBOX ACCOUNTS" has the meaning set forth in Section 5(A).
"LOCKBOX AGREEMENTS" has the meaning set forth in Section 5(A).
"LOCKBOX BANKS" means the banks or investment firms listed opposite each Lockbox Account on Exhibit A hereto.
"PERFECTION CERTIFICATE" means a certificate substantially in the form of Exhibit B, completed and supplemented with the schedules and attachments contemplated thereby to the satisfaction of the Agent, and duly executed by the chief executive officer or chief legal officer of the Company.
"PERMITTED LIENS" means the Security Interests and the Liens
on the Collateral permitted to be created, to be assumed or to exist pursuant to
Section 8.02 of the Credit Agreement.
"PROCEEDS" means all proceeds of, and all other profits, products, rents or receipts, in whatever form, arising from the collection, sale, lease, exchange, assignment, licensing or other disposition of, or other realization upon, Collateral, including all claims of the Company against third parties for loss of, damage to or destruction of, or for proceeds payable under, or unearned premiums with respect to, policies of insurance in respect of, any Collateral, and any condemnation or requisition payments with respect to any Collateral, in each case whether now existing or hereafter arising.
"SECURED OBLIGATIONS" means the obligations secured under this
Agreement which include (a) all principal of and interest (including any
interest which accrues after the commencement of any case, proceeding or other
action relating to the bankruptcy, insolvency or reorganization of the Company,
whether or not allowed or allowable as a claim in any such proceeding) on any
Loan under, or any Note issued pursuant to, the Credit Agreement, (b) all other
amounts payable by the Company hereunder or under any other Financing Document,
(c) all other Obligations and (d) any amendments, restatements, renewals,
extensions or modifications of any of the foregoing.
"SECURED PARTIES" means the Agent and the Lenders.
"SECURITY INTERESTS" means the security interests in the Collateral granted hereunder securing the Secured Obligations.
"UCC" means the Uniform Commercial Code as in effect on the date hereof in the State of Georgia; provided that if by reason of mandatory provisions of law, the perfection or the effect of perfection or non-perfection of the Security Interests in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than Georgia, "UCC" means the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection.
SECTION 2. REPRESENTATIONS AND WARRANTIES.
The Company represents and warrants as follows:
(A) The Company has good and marketable title to all of the Collateral, free and clear of any Liens other than the Permitted Liens. The Company has taken all actions necessary under the UCC to perfect its interest in any Accounts purchased or otherwise acquired by or granted to it, as against its assignors and grantors and creditors of its assignors and grantors.
(B) The Company has not performed any acts which might prevent the Agent from enforcing any of the terms of this Agreement or which would limit the Agent in any such enforcement. Other than financing statements or other similar or equivalent documents or instruments with respect to the Security Interests and Permitted Liens, no financing statement, mortgage, security agreement or similar or equivalent document or instrument covering all or any part of the Collateral is on file or of record in any jurisdiction in which such filing or recording would be effective to perfect a Lien on such Collateral. No Collateral is in the possession of any Person (other than the Company) asserting any claim thereto or security interest therein, except that the Agent or its designee may have possession of Collateral as contemplated hereby.
(C) The information set forth in the Perfection Certificate delivered to the Agent prior to the Closing Date is correct and complete as of the Closing Date.
(D) The Security Interests constitute valid security interests under the UCC securing the Secured Obligations. When UCC financing statements in the form specified in Schedule 6 to the Perfection Certificate shall have been filed in the offices specified in the Perfection Certificate, the Security Interests shall constitute perfected security interests in the Collateral (except Inventory in transit) to the extent that a security interest therein may be perfected by filing pursuant to the UCC, prior to all other Liens and rights of others therein except for the Permitted Liens.
(E) The Inventory and Equipment are insured in accordance with the requirements of the Credit Agreement.
(F) Exhibit A (as updated by the Company from time to time with the consent of the Agent, such consent not to be unreasonably withheld) lists each bank account, money market account and investment account of the Company.
SECTION 3. THE SECURITY INTERESTS.
(A) In order to secure the full and punctual payment and performance of the Secured Obligations in accordance with the terms thereof, the Company hereby grants to the Agent for the ratable benefit of the Secured Parties a continuing security interest in and to all of the following property of the Company, whether now owned or existing or hereafter acquired or arising and regardless of where located (all being collectively referred to as the "COLLATERAL"):
(1) Accounts;
(2) Inventory;
(3) General Intangibles;
(4) Documents;
(5) Instruments;
(6) Equipment;
(7) The Lockbox Accounts, all cash deposited in any of the foregoing from time to time, the Liquid Investments made pursuant to Section 5(D) or otherwise and other monies and property of any kind of the Company in the possession or under the control of the Agent;
(8) All books and records (including customer lists, credit files, computer programs, printouts and other computer materials and records) of the Company pertaining to any of the Collateral;
(9) Insurance policies of the Company; and
(10) All Proceeds of all or any of the Collateral described in Clauses 1 through 9 hereof.
(B) The Security Interests are granted as security only and shall not subject any Secured Party to, or transfer or in any way affect or modify, any obligation or liability of the Company with respect to any of the Collateral or any transaction in connection therewith.
SECTION 4. FURTHER ASSURANCES; COVENANTS.
(A) The Company will not change its name, identity or form of organization in any manner unless it shall have given the Agent prior notice thereof and delivered an opinion of counsel with respect thereto in accordance with Section 4(L). The Company will not change the location of (i) its chief executive office or chief place of business or (ii) the locations where it keeps or holds any Collateral or any records relating thereto from the applicable location described in the Perfection Certificate unless it shall have given the Agent prior notice thereof and delivered an opinion of counsel with respect thereto in accordance with Section 4(L). The Company shall not in any event change the location of any Collateral without the prior written consent of the Agent if such change would cause the Security Interests in such Collateral to lapse or cease to be perfected.
(B) The Company shall not in any event change the location of any Collateral without the prior written consent of the Agent if such change would cause the Security Interests to lapse or cease to be perfected.
(C) To the extent permitted under applicable law, the Company will, from time to time, at its expense, execute, deliver, file and record any statement, assignment, instrument, document, agreement or other paper and take any other action (including any filings of financing or continuation statements under the UCC) that from time to time may be necessary or desirable, or that the Agent may request, in order to create, preserve, perfect, confirm or validate the Security Interests or to enable the Secured Parties to obtain the full benefits of this Agreement, or to enable the Agent to exercise and enforce any of its rights, powers and remedies hereunder with respect to any of the Collateral. To the extent permitted by applicable law, the Company hereby authorizes the Agent, and appoints the Agent as its true and lawful attorney (with full power of substitution, in the name of the Company, the Secured Parties or otherwise, for the sole use and benefit of the Secured Parties), to execute and file financing statements or continuation statements without the Company's signature appearing thereon. The Company agrees that a carbon, photographic, photostatic or other reproduction of this Agreement or of a financing statement is sufficient as a financing statement. The Company shall pay the costs of, or incidental to, any recording or filing of any financing or continuation statements concerning the Collateral.
(D) If any Collateral is at any time in the possession or control of any warehouseman, bailee or any of the Company's agents or processors, the Company shall notify such warehouseman, bailee, agent or processor of the Security Interests created hereby and to hold all such Collateral for the Agent's account subject to the Agent's instructions.
(E) The Company shall keep full and accurate books and records relating to the Collateral, and stamp or otherwise mark such books and records in such manner as the Agent may reasonably require in order to reflect the Security Interests.
(F) The Company will immediately deliver and pledge each Instrument to the Agent, appropriately endorsed to the Agent, provided that so long as no Event of Default shall have occurred and be continuing, the Company may retain for collection in the ordinary course any Instruments (other than checks and drafts constituting payments in respect of Accounts, as to which the provisions of Section 5(B) shall apply) received by it in the ordinary course of business and the Agent shall, promptly upon request of the Company, make appropriate arrangements for making any other Instrument pledged by the Company available to it for purposes of presentation, collection or renewal (any such arrangement to be effected, to the extent deemed appropriate to the Agent, against trust receipt or like document).
(G) The Company shall use its best efforts to cause to be collected from its account debtors, as and when due, any and all amounts owing under or on account of each Account (including Accounts which are delinquent, such Accounts to be collected in accordance with lawful collection procedures and the Company's customary practices) and shall apply forthwith upon receipt thereof all such amounts as are so collected to the outstanding balance of
such Account. Subject to the rights of the Secured Parties hereunder upon the occurrence and during the continuance of an Event of Default, the Company may allow in the ordinary course of business as adjustments to amounts owing under its Accounts (i) an extension or renewal of the time or times of payment, or settlement for less than the total unpaid balance, which the Company finds appropriate in accordance with sound business judgment unless such extension, renewal or settlement results in causing such Account to not be an Eligible Receivable and thereby causes the aggregate unpaid balance of Working Capital Loans to exceed the Borrowing Base and (ii) a refund or credit due as a result of returned or damaged merchandise or as a discount for prompt payment, all in accordance with the Company's ordinary course of business consistent with its historical collection practices. The costs and expenses (including attorney's fees) of collection, whether incurred by the Company or the Agent, shall be borne by the Company.
(H) Upon the occurrence and during the continuance of any Event of Default, upon request of the Required Lenders through the Agent, to the extent permitted by applicable law the Company will promptly notify (and the Company hereby authorizes the Agent so to notify) each account debtor in respect of any Account or Instrument that such Collateral has been assigned to the Agent hereunder, and that any payments due or to become due in respect of such Collateral are to be made directly to the Agent or its designee.
(I) The Company shall not permit any items of Equipment to become a fixture to real estate (unless the Agent has a first priority Lien thereon) or an accession to other personal property.
(J) Without the prior written consent of the Agent and except in the ordinary course of business, the Company will not sell, lease, exchange, assign or otherwise dispose of, or grant any option with respect to, any Collateral except, subject to the rights of the Secured Parties hereunder if an Event of Default shall have occurred and be continuing, as permitted under the Credit Agreement including Section 8.06, whereupon, in the case of such a sale or exchange, the Security Interests created hereby in such item (but not in any Proceeds arising from such sale or exchange) shall cease immediately without any further action on the part of the Agent, except the execution of UCC-3 termination statements.
(K) The Company will, promptly upon request, provide to the Agent all information and evidence it may reasonably request concerning the Collateral to enable the Agent to enforce the provisions of this Agreement.
(L) Not more than six months nor less than 30 days prior
to each date on which the Company proposes to take any action contemplated by
Section 4(A), the Company shall give notice to the Agent of such proposed
action, and, at the Company's cost and expense, cause to be delivered to the
Secured Parties with such notice, an opinion of counsel, reasonably satisfactory
to the Agent and substantially in the form of Exhibit C to the effect that all
financing statements and amendments or supplements thereto, continuation
statements and other documents required to be recorded or filed in order to
perfect and protect the Security Interests
have been filed in each filing office necessary for such purpose and that all filing fees and taxes, if any, payable in connection with such filings have been paid in full.
(M) The Company shall not open or maintain any bank account, money market account or investment account unless such account is first listed on Exhibit A (as updated by the Company from time to time with the consent of the Agent, such consent not to be unreasonably withheld) and is subject to a Lockbox Agreement.
(N) The Company shall (i) upon the occurrence of an Event of Default and (ii) within 10 days after the aggregate value of all Equipment consisting of motor vehicles, trucks and trailers owned by the Company and its Subsidiaries shall exceed $150,000, deliver to the Agent any and all certificates of title, applications for title or similar evidence of ownership of such Equipment and shall cause the Agent to be named as lienholder on any such certificate of title or other evidence of ownership.
SECTION 5. LOCKBOX ACCOUNT AND INSURANCE ACCOUNT.
(A) On the Closing Date, the Company shall deliver to the Agent for each account listed on Exhibit A hereto (each a "LOCKBOX ACCOUNT"), a lockbox agreement substantially in form of Exhibit D hereto or in such other form as shall be satisfactory to the Agent (each a "LOCKBOX AGREEMENT"), which shall establish such account in the name "NationsCredit Commercial Corporation, as Agent", and under the exclusive control of the Agent. From and after the Closing Date, there shall be deposited from time to time into the Lockbox Accounts the cash Proceeds of the Collateral required to be delivered to the Agent pursuant to subsection (B) of this Section 5 or any other provision of this Agreement. Any income received with respect to the balance from time to time standing to the credit of each Lockbox Account, including any interest or capital gains on Liquid Investments, may be withdrawn from such Lockbox Account in accordance with subsection (C) below. All right, title and interest in and to the cash amounts on deposit from time to time in the Lockbox Accounts together with any Liquid Investments from time to time made pursuant to subsection (D) of this Section shall vest in the Agent (pursuant to the Lockbox Agreement for each Lockbox Account), shall constitute part of the Collateral hereunder and shall not constitute payment of the Secured Obligations until applied thereto as hereinafter provided.
(B) The Company shall instruct all account debtors and other Persons obligated in respect of all Accounts, to make all payments in respect of such Accounts and shall use its reasonable best efforts to cause such account debtors and other Persons to remit all such payments directly to a Lockbox Account (if paid by wire transfer). In addition to the foregoing, the Company agrees that if the proceeds of any Collateral hereunder (including the payments made in respect of Accounts) shall be received by it, the Company shall as promptly as possible deposit such proceeds into a Lockbox Account. Until so deposited, all such proceeds shall be held in trust by the Company for and as the property of the Secured Parties and shall not be commingled with any other funds or property of the Company.
(C) The balance from time to time standing to the credit
of the Lockbox Accounts shall, except upon the occurrence and continuation of an
Event of Default, be distributed to the Company in accordance with the
provisions of each Lockbox Agreement. If immediately available cash on deposit
in the Lockbox Accounts is not sufficient to make any distribution to the
Company referred to in the previous sentence of this Section 5(C), the Agent
shall cause to be liquidated as promptly as practicable Liquid Investments in
the Lockbox Accounts designated by the Company as required to obtain sufficient
cash to make such distribution and, notwithstanding any other provision of this
Section 5, such distribution shall not be made until such liquidation has taken
place. Upon the occurrence and continuation of an Event of Default, the Agent
shall, if so instructed by the Required Lenders, apply or cause to be applied
(subject to collection) any or all of the balance from time to time standing to
the credit of any Lockbox Accounts in the manner specified in Section 9.
(D) Amounts on deposit in the Lockbox Accounts shall be invested and re-invested from time to time in such Liquid Investments as the Company shall determine, which Liquid Investments shall be held in the name and be under the control of the Agent; provided that, if an Event of Default has occurred and is continuing, the Agent shall, if instructed by the Required Lenders, cause such Liquid Investments to be liquidated and apply or cause to be applied the proceeds thereof to the payment of the Secured Obligations in the manner specified in Section 9. For this purpose, "Liquid Investments" means Temporary Cash Investments; provided that (i) each Liquid Investment shall mature within 30 days after it is acquired by the Agent and (ii) in order to provide the Agent, for the benefit of the Secured Parties, with a perfected security interest therein, each Liquid Investment shall be either:
(i) evidenced by negotiable certificates or instruments, or if non-negotiable then issued in the name of the Agent, which (together with any appropriate instruments of transfer) are delivered to, and held by, the Agent or an agent thereof (which shall not be the Company or any of its Affiliates) in the State of Georgia; or
(ii) in book-entry form and issued by the United States and subject to pledge under applicable state law and Treasury regulations and as to which (in the opinion of counsel to the Agent) appropriate measures shall have been taken for perfection of the Security Interests.
SECTION 6. GENERAL AUTHORITY.
The Company hereby irrevocably appoints the Agent its true and lawful attorney, with full power of substitution, in the name of the Company, the Secured Parties or otherwise, for the sole use and benefit of the Secured Parties, but at the Company's expense, to the extent permitted by law to exercise, at any time and from time to time while an Event of Default has occurred and is continuing, all or any of the following powers with respect to all or any of the Collateral:
(i) to demand, sue for, collect, receive and give acquittance for any and all monies due or to become due thereon or by virtue thereof,
(ii) to settle, compromise, compound, prosecute or defend any action or proceeding with respect thereto,
(iii) to sell, transfer, assign or otherwise deal in or with the same or the proceeds or avails thereof, as fully and effectually as if the Agent were the absolute owner thereof, and
(iv) to extend the time of payment of any or all thereof and to make any allowance and other adjustments with reference thereto;
provided that the Agent shall give the Company not less than ten days' prior written notice of the time and place of any sale or other intended disposition of any of the Collateral, except any Collateral which is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market. The Company agrees that such notice constitutes "reasonable notification" within the meaning of Section 9-504(3) of the UCC.
SECTION 7. REMEDIES UPON EVENT OF DEFAULT.
(A) If any Event of Default has occurred and is
continuing, the Agent may exercise on behalf of the Secured Parties all rights
of a secured party under the UCC (whether or not in effect in the jurisdiction
where such rights are exercised) and, in addition, the Agent may, without being
required to give any notice, except as herein or in the Credit Agreement or any
other Financing Document provided or as may be required by mandatory provisions
of law, (i) withdraw all cash and Liquid Investments in the Collateral Accounts
and apply such cash and Liquid Investments and other cash, if any, then held by
it as Collateral as specified in Section 9 and (ii) if there shall be no such
cash or Liquid Investments or if such cash and Liquid Investments shall be
insufficient to pay all the Secured Obligations in full, sell the Collateral or
any part thereof at public or private sale, for cash, upon credit or for future
delivery, and at such price or prices as the Agent may deem satisfactory. The
Agent or any other Secured Party may be the purchaser of any or all of the
Collateral so sold at any public sale (or, if the Collateral is of a type
customarily sold in a recognized market or is of a type which is the subject of
widely distributed standard price quotations, at any private sale). The Company
will execute and deliver such documents and take such other action as the Agent
deems necessary or advisable in order that any such sale may be made in
compliance with law. Upon any such sale the Agent shall have the right to
deliver, assign and transfer to the purchaser thereof the Collateral so sold.
Each purchaser at any such sale shall hold the Collateral so sold to it
absolutely and free from any claim or right of whatsoever kind, including any
equity or right of redemption of the Company which may be waived, and the
Company, to the extent permitted by law, hereby specifically waives all rights
of redemption, stay or appraisal which it has or may have under any law now
existing or hereafter adopted. The notice (if any) of such sale required by
Section 6 shall (1) in case of a public sale, state the time and place fixed for
such sale, and (2) in the case of a private sale, state the day after which such
sale may be consummated. Any such public sale shall be held at such time or
times within ordinary business hours and at such place or places as the Agent
may fix in the notice of such sale. At any such sale the Collateral may be sold
in one lot as an
entirety or in separate parcels, as the Agent may determine. The Agent shall not be obligated to make any such sale pursuant to any such notice. The Agent may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for the sale, and such sale may be made at any time or place to which the same may be so adjourned. In case of any sale of all or any part of the Collateral on credit or for future delivery, the Collateral so sold may be retained by the Agent until the selling price is paid by the purchaser thereof, but the Agent shall not incur any liability in case of the failure of such purchaser to take up and pay for the Collateral so sold and, in case of any such failure, such Collateral may again be sold upon like notice. The Agent, instead of exercising the power of sale herein conferred upon it, may proceed by a suit or suits at law or in equity to foreclose the Security Interests and sell the Collateral, or any portion thereof, under a judgment or decree of a court or courts of competent jurisdiction.
(B) For the purpose of enforcing any and all rights and
remedies under this Agreement the Agent may (i) require the Company to, and the
Company agrees that it will, at its expense and upon the request of the Agent,
forthwith assemble all or any part of the Collateral as directed by the Agent
and make it available at a place designated by the Agent which is, in its
opinion, reasonably convenient to the Agent and the Company, whether at the
premises of the Company or otherwise, (ii) to the extent permitted by applicable
law, enter, with or without process of law and without breach of the peace, any
premise where any of the Collateral is or may be located, and without charge or
liability to it seize and remove such Collateral from such premises, (iii) have
access to and use the Company's books and records relating to the Collateral and
(iv) prior to the disposition of the Collateral, store or transfer it without
charge in or by means of any storage or transportation facility owned or leased
by the Company, process, repair or recondition it or otherwise prepare it for
disposition in any manner and to the extent the Agent deems appropriate and, in
connection with such preparation and disposition, use without charge any
trademark, trade name, copyright, patent or technical process used by the
Company.
SECTION 8. LIMITATION ON DUTY OF AGENT IN RESPECT OF COLLATERAL.
Beyond the exercise of reasonable care in the custody thereof, the Agent shall have no duty as to any Collateral in its possession or control or in the possession or control of any agent or bailee or any income thereon or as to the preservation of rights against prior parties or any other rights pertaining thereto. The Agent shall be deemed to have exercised reasonable care in the custody of the Collateral in its possession if the Collateral is accorded treatment substantially equal to that which it accords its own property, and shall not be liable or responsible for any loss or damage to any of the Collateral, or for any diminution in the value thereof, by reason of the act or omission of any warehouseman, carrier, forwarding agency, consignee or other agent or bailee selected by the Agent in good faith.
SECTION 9. APPLICATION OF PROCEEDS.
Upon the occurrence and during the continuance of an Event of Default, the proceeds of any sale of, or other realization upon, all or any part of the Collateral and any cash held in the Collateral Accounts shall be applied by the Agent in the following order of priorities:
first, to payment of the expenses of such sale or other realization, including reasonable compensation to agents and counsel for the Agent, and all expenses, liabilities and advances incurred or made by the Agent in connection therewith, and any other unreimbursed expenses for which the Agent or any other Secured Party is to be reimbursed pursuant to Section 10.04 of the Credit Agreement or Section 12 hereof and unpaid fees owing to the Agent under the Credit Agreement;
second, to the ratable payment of accrued but unpaid interest on the Secured Obligations in accordance with the provisions of the Credit Agreement;
third, to the ratable payment of unpaid principal of the Secured Obligations;
fourth, to the ratable payment of all other Secured Obligations, until all Secured Obligations shall have been paid in full; and
finally, to payment to the Company or its successors or assigns, or as a court of competent jurisdiction may direct, of any surplus then remaining from such proceeds.
The Agent may make distributions hereunder in cash or in kind or, on a ratable basis, in any combination thereof.
SECTION 10. CONCERNING THE AGENT.
The provisions of Section 10.05 and Article XI of the Credit Agreement shall inure to the benefit of the Agent in respect of this Agreement and shall be binding upon the parties to the Credit Agreement in such respect. In furtherance and not in derogation of the rights, privileges and immunities of the Agent therein set forth:
(A) The Agent is authorized to take all such action as is provided to be taken by it as Agent hereunder and all other action reasonably incidental thereto. As to any matters not expressly provided for herein (including the timing and methods of realization upon the Collateral), the Agent shall act or refrain from acting in accordance with written instructions from the Required Lenders or, in the absence of such instructions, in accordance with its discretion.
(B) The Agent shall not be responsible for the existence, genuineness or value of any of the Collateral or for the validity, perfection, priority or enforceability of the Security Interests in any of the Collateral, whether impaired by operation of law or by reason of any action or omission to act on its part hereunder. The Agent shall have no duty to ascertain or inquire as to the performance or observance of any of the terms of this Agreement by the Company.
SECTION 11. APPOINTMENT OF CO-AGENTS.
At any time or times, in order to comply with any legal requirement in any jurisdiction, the Agent may appoint another bank or trust company or one or more other persons, either to act as co-agent or co-agents, jointly with the Agent, or to act as separate agent or agents on behalf of the Secured Parties with such power and authority as may be necessary for the effectual operation of the provisions hereof and may be specified in the instrument of appointment (which may, in the discretion of the Agent, include provisions for the protection of such co-agent or separate agent similar to the provisions of Section 10).
SECTION 12. EXPENSES.
In the event that the Company fails to comply with the provisions of the Credit Agreement or this Agreement, such that the value of any Collateral or the validity, perfection, rank or value of any Security Interest is thereby diminished or potentially diminished or put at risk, the Agent if requested by the Required Lenders may, but shall not be required to, effect such compliance on behalf of the Company, and the Company shall reimburse the Agent for the costs thereof on demand. All insurance expenses and all expenses of protecting, storing, warehousing, appraising, insuring, handling, maintaining, and shipping the Collateral, any and all excise, property, sales, and use taxes imposed by any state, federal, or local authority on any of the Collateral, or in respect of periodic appraisals and inspections of the Collateral to the extent the same may be requested by the Required Lenders from time to time as provided in the Credit Agreement, or in respect of the sale or other disposition thereof shall be borne and paid by the Company; and if the Company fails to promptly pay any portion thereof when due, the Agent or any other Secured Party may, at its option, but shall not be required to, pay the same and charge the Company's account therefor, and the Company agrees to reimburse the Agent or such other Secured Party therefor on demand. All sums so paid or incurred by the Agent or any other Secured Party for any of the foregoing and any and all other sums for which the Company may become liable hereunder and all costs and expenses (including attorneys' fees, legal expenses and court costs) reasonably incurred by the Agent or any other Secured Party in enforcing or protecting the Security Interests or any of their rights or remedies under this Agreement, shall, together with interest thereon until paid as provided in Section 10.03 of the Credit Agreement, be additional Secured Obligations hereunder.
SECTION 13. TERMINATION OF SECURITY INTERESTS; RELEASE OF COLLATERAL.
Upon the repayment in full of all Secured Obligations (other than contingent indemnity or similar claims not yet asserted) and the termination of the Commitment under the Credit Agreement, the Security Interests shall terminate and all rights to the Collateral shall revert to the Company. At any time and from time to time prior to such termination of the Security Interests, the Agent may release any of the Collateral with the prior written consent of the Required Lenders. Upon any such termination of the Security Interests or release of Collateral, the Agent will, at the expense of the Company, promptly execute and deliver to the Company such documents as the Company shall reasonably request to evidence the termination of the Security Interests or the release of such Collateral, as the case may be.
SECTION 14. NOTICES.
All notices, communications and distributions hereunder shall be given in accordance with Section 12.03 of the Credit Agreement.
SECTION 15. WAIVERS, NON-EXCLUSIVE REMEDIES.
No failure on the part of the Agent to exercise, and no delay in exercising and no course of dealing with respect to, any right under this Agreement shall operate as a waiver thereof; nor shall any single or partial exercise by the Agent or any Secured Party of any right under the Credit Agreement, any of the other Financing Documents or this Agreement preclude any other or further exercise thereof or the exercise of any other right. The rights in this Agreement, the Credit Agreement and the other Financing Documents are cumulative and are not exclusive of any other remedies provided by law.
SECTION 16. SUCCESSORS AND ASSIGNS.
This Agreement is for the benefit of the Agent and the Secured Parties and their successors and assigns, and in the event of an assignment of all or any of the Secured Obligations, the rights hereunder, to the extent applicable to the indebtedness so assigned, may be transferred with such indebtedness. This Agreement shall be binding on the Company and its successors and assigns.
SECTION 17. CHANGES IN WRITING.
Neither this Agreement nor any provision hereof may be changed, waived, discharged or terminated orally, but only in writing signed by the Company and the Agent with the consent of the Required Lenders.
SECTION 18. GEORGIA LAW.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF GEORGIA (WITHOUT REFERENCE TO PRINCIPLES OR CONFLICTS OF LAW), EXCEPT AS OTHERWISE REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT REMEDIES PROVIDED BY THE LAWS OF ANY JURISDICTION OTHER THAN GEORGIA ARE GOVERNED BY THE LAWS OF SUCH JURISDICTION.
SECTION 19. SEVERABILITY.
If any provision hereof is invalid or unenforceable in any jurisdiction, then, to the fullest extent permitted by law, (i) the other provisions hereof shall remain in full force and effect in such jurisdiction and shall be liberally construed in favor of the Agent and the other Secured Parties in order to carry out the intentions of the parties hereto as nearly as may be possible; and
(ii) the invalidity or unenforceability of any provision hereof in any jurisdiction shall not affect the validity or enforceability of such provision in any other jurisdiction.
SECTION 20. COUNTERPARTS.
This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their respective authorized officers as of the day and year first above written.
HORIZON MEDICAL PRODUCTS, INC.
NATIONSCREDIT COMMERCIAL
CORPORATION, as Agent
EXHIBIT A
LIST OF ACCOUNTS
Account Bank ------- ---- |
[TO BE COMPLETED BY BORROWER]
EXHIBIT B
PERFECTION CERTIFICATE
The undersigned, __________________ of Horizon Medical Products, Inc., a Georgia corporation (the "COMPANY"), hereby certifies with reference to the Security Agreement dated as of July ____, 1997, between the Company and NationsCredit Commercial Corporation, as Agent (terms defined therein being used herein as therein defined), to the Agent and each Lender as follows:
1. Names. (a) The exact corporate name of the Company as it appears in its certificate of incorporation is as follows:
Horizon Medical Products, Inc.
(b) Set forth below is each other corporate name the Company has had since its organization, together with the date of the relevant change:
(c) The Company has not changed its identity or form of organization in any way within the past five years.
(d) The following is a list of all other names (including trade names or similar appellations) used by the Company or any of its divisions or other business units at any time during the past five years:
[Names of Company]
2. Current Locations. (a) The chief executive office of the Company is located at the following address:
Mailing Address County State --------------- ------ ----- |
(b) The following are all the locations where the Company maintains any books or records relating to any Accounts:
Mailing Address County State --------------- ------ ----- |
(c) The following are all the places of business of the Company not identified above:
Name Mailing Address County State ---- --------------- ------ ----- |
(d) The following are all the locations where the Company maintains any Inventory not identified above:
Name Mailing Address County State ---- --------------- ------ ----- |
(e) The following are the names and addresses of all Persons other than the Company which have possession of any of the Company's Inventory:
Name Mailing Address County State ---- --------------- ------ ----- |
3. Prior Locations. (a) Set forth below is the information required by subparagraphs (a), (b) and (c) of paragraph 2 with respect to each location or place of business maintained by the Company at any time during the past five years:
(b) Set forth below is the information required by subparagraphs (d) and (e) of paragraph 2 with respect to each location or bailee where or with whom Inventory has been lodged at any time during the past four months:
4. Unusual Transactions. All Accounts have been originated by the Company and all Inventory and Equipment has been acquired by the Company in the ordinary course of its business.
5. File Search Reports. Attached hereto as Schedule 5(A) is a true copy of a file search report from the Uniform Commercial Code filing officer in each jurisdiction identified in paragraph 2 or 3 above with respect to each name set forth in paragraph 1 above. Attached hereto as Schedule 5(B) is a true copy of each financing statement or other filing identified in such file search reports.
6. UCC Filings. Duly signed financing statements on Form UCC-1 attached as Schedule 6 hereto have been duly filed in the Uniform Commercial Code filing office in each jurisdiction identified in paragraph 2 hereof and each such filing has been duly acknowledged by the filing officer.
7. Schedule of Filings. Attached hereto as Schedule 7 is a schedule setting forth filing information with respect to the filings described in paragraph 6 above.
8. Filing Fees. All filing fees and taxes payable in connection with the filings described in paragraph 6 above have been paid.
9. Patents, Trademarks, Copyrights. All patents, trademarks and copyrights owned by the Company as of the date hereof and all patent licenses, trademark licenses and copyright licenses to which the Company is a party as of the date hereof are listed on Schedule 9 hereto.
IN WITNESS WHEREOF, we have hereunto set our hands this ____ day of July, 1997.
EXHIBIT G
PLEDGE AGREEMENT
AGREEMENT dated as of July 15, 1997, between HORIZON MEDICAL PRODUCTS, INC., a Georgia corporation (the "COMPANY") and NATIONSCREDIT COMMERCIAL CORPORATION, as agent for the Lenders referred to below (the "AGENT").
W I T N E S S E T H:
WHEREAS, the Company is the sole stockholder of all of the outstanding shares of every class of capital stock of the corporations described on Schedule I attached hereto (collectively, the "SUBSIDIARIES"); and
WHEREAS, the Company, certain Lenders (the "LENDERS") and the Agent are parties to a Credit Agreement of even date herewith (as the same may be amended from time to time, the "CREDIT AGREEMENT"); and
WHEREAS, in order to induce the Lenders and the Agent to enter into the Credit Agreement, the Company has agreed to grant a continuing security interest in and to the Collateral (as hereafter defined) to secure obligations of the Company under the Credit Agreement and the Notes issued pursuant thereto and the other Financing Documents;
NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS.
Terms defined in the Credit Agreement and not otherwise defined herein have, as used herein, the respective meanings provided for therein. The following additional terms, as used herein, have the following respective meanings:
"COLLATERAL" has the meaning assigned to such term in Section 3(A).
"PLEDGED SECURITIES" means the Pledged Stock.
"PLEDGED STOCK" means the Subsidiaries Shares and any other capital stock required to be pledged to the Agent pursuant to Section 3(B).
"SECURED OBLIGATIONS" means the obligations secured under this Agreement which include (a) all principal of and interest (including any interest which accrues after the commencement of any case, proceeding or other action relating to the bankruptcy, insolvency or reorganization of the Company, whether or not allowed or allowable as a claim in any such proceeding) on any Loan under, or any Note issued pursuant to, the Credit Agreement, (b) all other amounts payable by the Company under any Financing Document, (c) all other Obligations, and (d) any amendments, restatements, renewals, extensions or modifications of any of the foregoing.
"SECURED PARTIES" means the Lenders and the Agent.
"SECURITY AGREEMENT" means that certain Security Agreement dated the date hereof executed by the Company in favor of the Agent for the benefit of the Agent and the Lenders.
"SECURITY INTERESTS" means the security interests in the Collateral granted hereunder securing the Secured Obligations.
"SUBSIDIARIES SHARES" means one hundred percent (100%) of the issued and outstanding shares of any class of capital stock of each Subsidiary that the Company may now or hereafter own, control or hold, which stock as of this date is described on Schedule I attached hereto.
"UCC" has the meaning given such term in the Security Agreement.
Unless otherwise defined herein, or unless the context otherwise requires, all terms used herein which are defined in the Georgia UCC as in effect on the date hereof shall have the meanings therein stated.
SECTION 2. REPRESENTATIONS AND WARRANTIES.
Company represents and warrants as follows:
(A) Title to Pledged Securities. Company owns all of the Pledged Securities, free and clear of any Liens other than the Security Interests. All of the Pledged Stock has been duly authorized and validly issued, and is fully paid and non-assessable, and is subject to no options to purchase or similar rights of any Person. Company is not and will not become a party to or otherwise bound by any agreement, other than this Agreement, which restricts in any manner the rights of any present or future holder of any of the Pledged Securities with respect thereto.
(B) Validity, Perfection and Priority of Security Interests. Upon the delivery of certificates representing the Pledged Stock to the Agent in accordance with Section 4 hereof, the Agent will have valid and perfected security interests in the Collateral subject to no prior Lien. No registration, recordation or filing with any governmental body, agency or official is
required in connection with the execution or delivery of this Agreement or necessary for the validity or enforceability hereof or for the perfection or enforcement of the Security Interests. Neither the Company nor the Subsidiaries has performed or will perform any acts which might prevent the Agent from enforcing any of the terms and conditions of this Agreement or which would limit the Agent in any such enforcement.
(C) UCC Filing Locations. The chief executive office of the Company is located at its address set forth on the signature pages of the Credit Agreement. Under the Uniform Commercial Code as in effect in the state in which such office is located, no local filing is required to perfect a security interest in collateral consisting of general intangibles.
SECTION 3. THE SECURITY INTERESTS.
In order to secure the full and punctual payment and performance of the Secured Obligations in accordance with the terms thereof, and to secure the performance of all the obligations of the Company hereunder:
(A) The Company hereby assigns and pledges to and with the Agent for the benefit of the Secured Parties and grants to the Agent for the benefit of the Secured Parties a security interest in the Pledged Securities, and all of its rights and privileges with respect to the Pledged Securities, and all income and profits thereon, and all interest, dividends and other payments and distributions with respect thereto, and all proceeds of the foregoing (the "COLLATERAL"). Contemporaneously with the execution and delivery hereof, the Company is delivering the certificates representing the Subsidiaries Shares in pledge hereunder.
(B) In the event that the Subsidiaries at any time issue any additional or substitute shares of capital stock of any class or owes any other Debt to the Company, the Company will immediately pledge and deposit with the Agent certificates representing all such shares or an instrument evidencing such other Debt as additional security for the Secured Obligations. All such shares and instruments constitute Pledged Securities and are subject to all provisions of this Agreement.
(C) The Security Interests are granted as security only and shall not subject any Secured Party to, or transfer or in any way affect or modify, any obligation or liability of the Company or the Subsidiaries with respect to any of the Collateral or any transaction in connection therewith.
SECTION 4. DELIVERY OF PLEDGED SECURITIES.
All certificates representing Pledged Stock delivered to the Agent by the Company pursuant hereto shall be in suitable form for transfer by delivery, or shall be accompanied by duly executed instruments of transfer or assignment in blank, and accompanied by any required transfer tax stamps, all in form and substance satisfactory to the Agent.
SECTION 5. FILING; FURTHER ASSURANCES.
(A) The Company agrees that it will, at its expense and in such manner and form as the Agent may require, execute, deliver, file and record any financing statement, specific assignment or other paper and take any other action that may be necessary or desirable, or that the Agent may request, in order to create, preserve, perfect or validate any Security Interest or to enable the Agent to exercise and enforce its rights hereunder with respect to any of the Collateral. To the extent permitted by applicable law, the Company hereby authorizes the Agent to execute and file, in the name of the Company or otherwise, UCC financing statements (which may be carbon, photographic, photostatic or other reproductions of this Agreement or of a financing statement relating to this Agreement) which the Agent in its sole discretion may deem necessary or appropriate to further perfect the Security Interests.
(B) The Company agrees that it will not change (i) its name, identity or form of organization in any manner or (ii) the location of its chief executive office unless it shall have given the Agent not less than 30 days' prior notice thereof.
SECTION 6. RECORD OWNERSHIP OF PLEDGED STOCK.
The Agent may at any time or from time to time, upon the occurrence and during the continuance of an Event of Default, in its sole discretion, cause any or all of the Pledged Stock to be transferred of record into the name of the Agent or its nominee. The Company will promptly give to the Agent copies of any notices or other communications received by it with respect to Pledged Stock registered in the name of the Company and the Agent will promptly give to the Company copies of any notices and communications received by the Agent with respect to Pledged Stock registered in the name of the Agent or its nominee.
SECTION 7. RIGHT TO RECEIVE DISTRIBUTIONS ON COLLATERAL.
Upon the occurrence and during the continuance of any Event of Default, the Agent shall have the right to receive and to retain as Collateral hereunder all dividends, interest and other payments and distributions made upon or with respect to the Collateral and the Company shall take all such action as the Agent may deem necessary or appropriate to give effect to such right. Upon the occurrence and during the continuance of an Event of Default, all such dividends, interest and other payments and distributions which are received by the Company shall be received in trust as Collateral for the benefit of the Agent and the Secured Parties and, if the Agent so directs, shall be segregated from other funds of the Company and shall, forthwith upon demand by the Agent during the continuance of an Event of Default, be paid over to the Agent as Collateral in the same form as received (with any necessary endorsement). After all Events of Default that shall have occurred have been cured, the Agent's right to retain dividends, interest and other payments and distributions under this Section 7 shall cease and the Agent shall pay over to the Company any such Collateral retained by the Agent during the continuance of an Event of Default.
SECTION 8. RIGHT TO VOTE PLEDGED STOCK.
Unless an Event of Default shall have occurred and be continuing, the Company shall have the right, from time to time, to vote and to give consents, ratifications and waivers with respect to the Pledged Stock, and the Agent shall, upon receiving a written request from the Company accompanied by a certificate signed by its principal financial officer stating that no Event of Default has occurred and is continuing, deliver to the Company or as specified in such request such proxies, powers of attorney, consents, ratifications and waivers in respect of any of the Pledged Stock which is registered in the name of the Agent or its nominee as shall be specified in such request and be in form and substance satisfactory to the Agent.
If an Event of Default shall have occurred and be continuing, the Agent shall have the right to the extent permitted by law and the Company shall take all such action as may be necessary or appropriate to give effect to such right, to vote and to give consents, ratifications and waivers, and take any other action with respect to any or all of the Pledged Stock with the same force and effect as if the Agent were the absolute and sole owner thereof.
SECTION 9. GENERAL AUTHORITY.
The Company hereby irrevocably appoints the Agent its true and lawful attorney, with full power of substitution, in the name of the Company, the Agent, the Secured Parties or otherwise, for the sole use and benefit of the Agent and Secured Parties, but at the expense of the Company, to the extent permitted by law to exercise, at any time and from time to time while an Event of Default has occurred and is continuing, all or any of the following powers with respect to all or any of the Collateral:
(i) to demand, sue for, collect, receive and give acquittance for any and all monies due or to become due upon or by virtue thereof,
(ii) settle, compromise, compound, prosecute or defend any action or proceeding with respect thereto,
(iii) to sell, transfer, assign or otherwise deal in or with the same or the proceeds or avails thereof, as fully and effectually as if the Agent were the absolute owner thereof, and
(iv) to extend the time of payment of any or all thereof and to make any allowance and other adjustments with reference thereto;
provided that the Agent shall give the Company not less than ten days' prior written notice of the time and place of any sale or other intended disposition of any of the Collateral except any Collateral which is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market. The Agent and the Company agree that such notice constitutes "reasonable notification" within the meaning of Section 9-504(3) of the UCC.
SECTION 10. REMEDIES UPON EVENT OF DEFAULT.
If any Event of Default shall have occurred and be continuing, the Agent may exercise on behalf of the Secured Parties all the rights of a secured party under the UCC (whether or not in effect in the jurisdiction where such rights are exercised) and, in addition, the Agent may, without being required to give any notice, except as herein provided or as may be required by mandatory provisions of law, (i) apply the cash, if any, then held by it as Collateral as specified in Section 13 and (ii) if there shall be no such cash or if such cash shall be insufficient to pay all the Secured Obligations in full, sell the Collateral or any part thereof at public or private sale or at any broker's board or on any securities exchange, for cash, upon credit or for future delivery, and at such price or prices as the Agent may deem satisfactory. Any Secured Party may be the purchaser of any or all of the Collateral so sold at any public sale (or, if the Collateral is of a type customarily sold in a recognized market or is of a type which is the subject of widely distributed standard price quotations, at any private sale). The Agent is authorized, in connection with any such sale, if it deems it advisable so to do, (i) to restrict the prospective bidders on or purchasers of any of the Pledged Securities to a limited number of sophisticated investors who will represent and agree that they are purchasing for their own account for investment and not with a view to the distribution or sale of any of such Pledged Securities, (ii) to cause to be placed on certificates for any or all of the Pledged Securities or on any other securities pledged hereunder a legend to the effect that such security has not been registered under the Securities Act of 1933 and may not be disposed of in violation of the provision of said Act, and (iii) to impose such other limitations or conditions in connection with any such sale as the Agent deems necessary or advisable in order to comply with said Act or any other law. The Company covenants and agrees that it will execute and deliver such documents and take such other action as the Agent deems necessary or advisable in order that any such sale may be made in compliance with law. Upon any such sale the Agent shall have the right to deliver, assign and transfer to the purchaser thereof the Collateral so sold. Each purchaser at any such sale shall hold the Collateral so sold absolutely and free from any claim or right of whatsoever kind, including any equity or right of redemption of the Company which may be waived, and the Company, to the extent permitted by law, hereby specifically waives all rights of redemption, stay or appraisal which it has or may have under any law now existing or hereafter adopted. The notice (if any) of such sale required by Section 9 shall (1) in case of a public sale, state the time and place fixed for such sale, (2) in case of sale at a broker's board or on a securities exchange, state the board or exchange at which such sale is to be made and the day on which the Collateral, or the portion thereof so being sold, will first be offered for sale at such board or exchange, and (3) in the case of a private sale, state the day after which such sale may be consummated. Any such public sale shall be held at such time or times within ordinary business hours and at such place or places as the Agent may fix in the notice of such sale. At any such sale the Collateral may be sold in one lot as an entirety or in separate parcels, as the Agent may determine. The Agent shall not be obligated to make any such sale pursuant to any such notice. The Agent may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for the sale, and such sale may be made at any time or place to which the same may be so adjourned. In case of any sale of all or any part of the Collateral on credit or for future delivery, the Collateral so sold may be retained by the Agent until the selling price is paid by the purchaser thereof, but the Agent
shall not incur any liability in case of the failure of such purchaser to take up and pay for the Collateral so sold and, in case of any such failure, such Collateral may again be sold upon like notice. The Agent, instead of exercising the power of sale herein conferred upon it, may proceed by a suit or suits at law or in equity to foreclose the Security Interests and sell the Collateral, or any portion thereof, under a judgment or decree of a court or courts of competent jurisdiction.
SECTION 11. EXPENSES.
The Company agrees that it will forthwith upon demand pay to the Agent:
(i) the amount of any taxes which the Agent may have been required to pay by reason of the Security Interests or to free any of the Collateral from any Lien thereon, and
(ii) the amount of any and all out-of-pocket expenses, including the reasonable fees and disbursements of counsel and of any other experts, which the Agent may incur in connection with (w) the administration or enforcement of this Agreement, including such expenses as are incurred to preserve the value of the Collateral and the validity, perfection, rank and value of any Security Interest, (x) the collection, sale or other disposition of any of the Collateral, (y) the exercise by the Agent of any of the rights conferred upon it hereunder or (z) any Default or Event of Default.
Any such amount not paid on demand shall bear interest as provided in Section 10.03 of the Credit Agreement.
SECTION 12. LIMITATION ON DUTY OF AGENT IN RESPECT OF COLLATERAL.
Beyond the exercise of reasonable care in the custody thereof, the Agent shall have no duty as to any Collateral in its possession or control or in the possession or control of any agent or bailee or any income thereon or as to the preservation of rights against prior parties or any other rights pertaining thereto. The Agent shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral in its possession if the Collateral is accorded treatment substantially equal to that which it accords its own property, and shall not be liable or responsible for any loss or damage to any of the Collateral, or for any diminution in the value thereof, by reason of the act or omission of any agent or bailee selected by the Agent in good faith.
SECTION 13. APPLICATION OF PROCEEDS.
Upon the occurrence and during the continuance of an Event of Default, the proceeds of any sale of, or other realization upon, all or any part of the Collateral and any cash held shall be applied by the Agent in the following order of priorities:
first, to payment of the expenses of such sale or other realization, including reasonable compensation to agents and counsel for the Agent, and all expenses, liabilities
and advances incurred or made by the Agent in connection therewith, and any other unreimbursed expenses for which the Agent or any Secured Party is to be reimbursed pursuant to Section 10.04 of the Credit Agreement or Section 11 hereof and unpaid fees owing to the Agent under the Credit Agreement;
second, to the ratable payment of accrued but unpaid interest on the Secured Obligations in accordance with the provisions of the Credit Agreement;
third, to the ratable payment of unpaid principal of the Secured Obligations;
fourth, to the ratable payment of all other Secured Obligations, until all Secured Obligations shall have been paid in full; and
finally, to payment to the Company or its successors or assigns, or as a court of competent jurisdiction may direct, of any surplus then remaining from such proceeds.
SECTION 14. CONCERNING THE AGENT.
The provisions of Article IX of the Credit Agreement shall inure to the benefit of the Agent in respect of this Agreement and shall be binding upon the parties to the Credit Agreement in such respect. In furtherance and not in derogation of the rights, privileges and immunities of the Agent therein set forth:
(A) The Agent is authorized to take all such action as is provided to be taken by it as Agent hereunder and all other action reasonably incidental thereto. As to any matters not expressly provided for herein (including, without limitation, the timing and methods of realization upon the Collateral) the Agent shall act or refrain from acting in accordance with written instructions from the Required Lenders or, in the absence of such instructions, in accordance with its discretion.
(B) The Agent shall not be responsible for the existence, genuineness or value of any of the Collateral or for the validity, perfection, priority or enforceability of the Security Interests in any of the Collateral, whether impaired by operation of law or by reason of any action or omission to act on its part hereunder. The Agent shall have no duty to ascertain or inquire as to the performance or observance of any of the terms of this Agreement by the Company.
SECTION 15. APPOINTMENT OF CO-AGENTS.
At any time or times, in order to comply with any legal requirement in any jurisdiction, the Agent may appoint another bank or trust company or one or more other persons, either to act as co-agent or co-agents, jointly with the Agent, or to act as separate agent or agents on behalf of the Secured Parties with such power and authority as may be necessary for the effectual operation of the provisions hereof and may be specified in the instrument of
appointment (which may, in the discretion of the Agent, include provisions for
the protection of such co-agent or separate agent similar to the provisions of
Section 14).
SECTION 16. TERMINATION OF SECURITY INTERESTS; RELEASE OF COLLATERAL.
Upon the repayment in full of all Secured Obligations (other than contingent indemnity or similar claims not yet asserted) and the termination of the Commitment under the Credit Agreement, the Security Interests shall terminate and all rights to the Collateral shall revert to the Company. At any time and from time to time prior to such termination of the Security Interests, the Agent may release any of the Collateral with the prior written consent of the Lenders. Upon any such termination of the Security Interests or release of Collateral, the Agent will, at the expense of the Company, execute and deliver to the Company such documents as the Company shall reasonably request to evidence the termination of the Security Interests or the release of such Collateral, as the case may be.
SECTION 17. NOTICES.
All notices, communications and distributions hereunder shall be given in accordance with Section 12.03 of the Credit Agreement.
SECTION 18. WAIVERS, NON-EXCLUSIVE REMEDIES.
No failure on the part of the Agent to exercise, and no delay in exercising and no course of dealing with respect to, any right under this Agreement shall operate as a waiver thereof; nor shall any single or partial exercise by the Agent of any right under the Credit Agreement, any other Financing Document or this Agreement preclude any other or further exercise thereof or the exercise of any other right. The rights in this Agreement, the other Security Documents and the Credit Agreement are cumulative and are not exclusive of any other remedies provided by law.
SECTION 19. SUCCESSORS AND ASSIGNS.
This Agreement is for the benefit of the Agent and the other Secured Parties and their successors and assigns, and in the event of an assignment of all or any of the Secured Obligations, the rights hereunder, to the extent applicable to the indebtedness so assigned, may be transferred with such indebtedness. This Agreement shall be binding on the Company and its successors and assigns.
SECTION 20. CHANGES IN WRITING.
Neither this Agreement nor any provision hereof may be changed, waived, discharged or terminated orally, but only in writing signed by the Company and the Agent with the consent of the Required Lenders (or in the case of Section 16, all of the Lenders).
SECTION 21. GEORGIA LAW.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF GEORGIA (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW), EXCEPT AS OTHERWISE REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT REMEDIES PROVIDED BY THE LAWS OF ANY JURISDICTION OTHER THAN GEORGIA ARE GOVERNED BY THE LAWS OF SUCH JURISDICTION.
SECTION 22. SEVERABILITY.
If any provision hereof is invalid or unenforceable in any jurisdiction, then, to the fullest extent permitted by law, (i) the other provisions hereof shall remain in full force and effect in such jurisdiction and shall be liberally construed in favor of the Agent and the Secured Parties in order to carry out the intentions of the parties hereto as nearly as may be possible; and (ii) the invalidity or unenforceability of any provision hereof in any jurisdiction shall not affect the validity or enforceability of such provision in any other jurisdiction.
SECTION 23. COUNTERPARTS.
This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.
[Remainder of page intentionally left blank]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their respective authorized officers as of the day and year first above written.
HORIZON MEDICAL PRODUCTS,
INC.
NATIONSCREDIT COMMERCIAL
CORPORATION
SCHEDULE I
PLEDGED STOCK
NUMBER AND PERCENTAGE OF
NAME OF CORPORATION CLASS OF SHARES HARES OF SUCH CLASS
------------------- --------------- -------------------
Horizon Acquisition Corp. 1,000 100%
Strato/Infusaid, Inc. 275,294 100%
|
EXHIBIT I
SUBSIDIARY SECURITY AGREEMENT
AGREEMENT dated as of July 15, 1997, among the CORPORATIONS listed in Exhibit A attached hereto and incorporated herein by reference (hereinafter referred to individually as the "PLEDGOR" and collectively as the "PLEDGORS") and NATIONSCREDIT COMMERCIAL CORPORATION, as Agent for the Lenders referred to below (the "AGENT").
W I T N E S S E T H :
WHEREAS, Horizon Medical Products, Inc., a Georgia corporation (the "COMPANY"), certain lenders (the "LENDERS") and the Agent are parties to a Credit Agreement of even date herewith (as the same may be amended from time to time, the "CREDIT AGREEMENT"); and
WHEREAS, the Company and the Pledgors share an identity of interests as members of a consolidated group of companies engaged in substantially similar businesses; the Company provides certain centralized financial, account and management services to the Pledgors; and the making of Loans to the Company under the Credit Agreement from time to time will enhance the overall financial strength and stability of the Company's corporate group.
WHEREAS, in order to induce such Lenders and the Agent to enter into the Credit Agreement and as a condition precedent to the Lenders' obligation to make Loans from time to time to the Company under the Credit Agreement, the Pledgors have agreed to guaranty the repayment of such Loans and other Obligations of the Company pursuant to that certain Subsidiary Guaranty Agreement, dated of the date hereof (the "GUARANTY"), and to execute and deliver to Lender this Agreement to secure the Guaranty;
NOW THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS.
Terms defined in the Credit Agreement and not otherwise defined herein have, as used herein, the respective meanings provided for therein. The following additional terms, as used herein, have the following respective meanings:
"ACCOUNTS" means all "accounts" (as defined in the UCC) now owned or hereafter acquired by any Pledgor, and shall also mean and include all accounts receivable, contract rights, book debts, notes, drafts and other obligations or indebtedness owing to any Pledgor arising from the sale, lease or exchange of goods or other property by such Pledgor
and/or the performance of services by such Pledgor (including any such obligation which might be characterized as an account, contract right or general intangible under the Uniform Commercial Code in effect in any jurisdiction) and all of any Pledgor's rights in, to and under all purchase orders for goods, services or other property, and all of any Pledgor's rights to any goods, services or other property represented by any of the foregoing (including returned or repossessed goods and unpaid sellers' rights of rescission, replevin, reclamation and rights to stoppage in transit) and all monies due to or to become due to such Pledgor under all contracts for the sale, lease or exchange of goods or other property and/or the performance of services by it (whether or not yet earned by performance on the part of such Pledgor), in each case whether now in existence or hereafter arising or acquired including, without limitation, the right to receive the proceeds of said purchase orders and contracts and all collateral security and guarantees of any kind given by any Person with respect to any of the foregoing.
"COLLATERAL" has the meaning set forth in Section 3.
"COLLATERAL ACCOUNTS" means the Lockbox Accounts.
"DOCUMENTS" means all "documents" (as defined in the UCC) or other receipts covering, evidencing or representing goods, now owned or hereafter acquired by any Pledgor.
"EQUIPMENT" means all "equipment" (as defined in the UCC) now owned or hereafter acquired by any Pledgor, including without limitation all motor vehicles, trucks, trailers, railcars and barges.
"GENERAL INTANGIBLES" means all "general intangibles" (as
defined in the UCC) now owned or hereafter acquired by any Pledgor, including
(i) all obligations or indebtedness owing to such Pledgor (other than Accounts)
from whatever source arising, (ii) all patents, patent licenses, trademarks,
trademark licenses, rights in intellectual property, goodwill, trade names,
service marks, trade secrets, copyrights, permits and licenses, (iii) all rights
or claims in respect of refunds for taxes paid and (iv) all rights in respect of
any pension plan or similar arrangement maintained for employees of any member
of the ERISA Group.
"INSTRUMENTS" means all "instruments", "chattel paper" or "letters of credit" (each as defined in the UCC), including those evidencing, representing, arising from or existing in respect of, relating to, securing or otherwise supporting the payment of, any of the Accounts, including (but not limited to) promissory notes, drafts, bills of exchange and trade acceptances, now owned or hereafter acquired by any Pledgor.
"INVENTORY" means all "inventory" (as defined in the UCC), now owned or hereafter acquired by any Pledgor, wherever located, and shall also mean and include all raw materials and other materials and supplies, work-in-process and finished goods and any products made or processed therefrom and all substances, if any, commingled therewith or added thereto.
"LIQUID INVESTMENTS" has the meaning set forth in Section 5(D).
"LOCKBOX ACCOUNTS" has the meaning assigned to such term in
Section 5(A).
"LOCKBOX AGREEMENTS" has the meaning assigned to such term in
Section 5(A).
"LOCKBOX BANKS" means the banks or investment firms listed opposite each Lockbox Account on Exhibit B hereto.
"PERFECTION CERTIFICATE" means, collectively, each certificate substantially in the form of Exhibit C, completed and supplemented with the schedules and attachments contemplated thereby to the satisfaction of the Agent, and duly executed by the chief executive officer or chief legal officer of each Pledgor.
"PERMITTED LIENS" means the Security Interests and the Liens
on the Collateral permitted to be created, to be assumed or to exist pursuant to
Section 8.02 of the Credit Agreement.
"PROCEEDS" means all proceeds of, and all other profits, products, rents or receipts, in whatever form, arising from the collection, sale, lease, exchange, assignment, licensing or other disposition of, or other realization upon, Collateral, including all claims of any Pledgor against third parties for loss of, damage to or destruction of, or for proceeds payable under, or unearned premiums with respect to, policies of insurance in respect of, any Collateral, and any condemnation or requisition payments with respect to any Collateral, in each case whether now existing or hereafter arising.
"SECURED OBLIGATIONS" means the obligations secured under this Agreement which include (a) all principal of and interest (including any interest which accrues after the commencement of any case, proceeding or other action relating to the bankruptcy, insolvency or reorganization of the Company, whether or not allowed or allowable as a claim in any such proceeding) on any Loan under, or any Note issued pursuant to, the Credit Agreement, (b) all other Obligations of the Company, (c) all Guaranteed Obligations, under and as defined in the Guaranty and (d) any amendments, restatements, renewals, extensions or modifications of any of the foregoing.
"SECURED PARTIES" means the Agent and the Lenders.
"SECURITY INTERESTS" means the security interests in the Collateral granted hereunder securing the Secured Obligations.
"UCC" means the Uniform Commercial Code as in effect on the date hereof in the State of Georgia; provided that if by reason of mandatory provisions of law, the perfection or the effect of perfection or non-perfection of the Security Interests in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than Georgia, "UCC" means the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection.
SECTION 2. REPRESENTATIONS AND WARRANTIES.
Each Pledgor represents and warrants as follows:
(A) Each Pledgor has good and marketable title to all of the Collateral, free and clear of any Liens other than the Permitted Liens. Each Pledgor has taken all actions necessary under the UCC to perfect its interest in any Accounts purchased or otherwise acquired by or granted to it, as against its assignors and grantors and creditors of its assignors and grantors.
(B) No Pledgor has performed any acts which might prevent the Agent from enforcing any of the terms of this Agreement or which would limit the Agent in any such enforcement. Other than financing statements or other similar or equivalent documents or instruments with respect to the Security Interests and Permitted Liens, no financing statement, mortgage, security agreement or similar or equivalent document or instrument covering all or any part of the Collateral is on file or of record in any jurisdiction in which such filing or recording would be effective to perfect a Lien on such Collateral. No Collateral is in the possession of any Person (other than a Pledgor or the Company) asserting any claim thereto or security interest therein, except that the Agent or its designee may have possession of Collateral as contemplated hereby.
(C) The information set forth in each Perfection Certificate delivered to the Agent prior to the Closing Date is correct and complete as of the Closing Date.
(D) The Security Interests constitute valid security interests under the UCC securing the Secured Obligations. When UCC financing statements in the form specified in Schedule 6 to the Perfection Certificate shall have been filed in the offices specified in each Perfection Certificate, the Security Interests shall constitute perfected security interests in the Collateral (except Inventory in transit) to the extent that a security interest therein may be perfected by filing pursuant to the UCC, prior to all other Liens and rights of others therein except for the Permitted Liens.
(E) The Inventory and Equipment are insured in accordance with the requirements of the Credit Agreement.
(F) Exhibit B (as updated by such Pledgor from time to time with the consent of the Agent, such consent not to be unreasonably withheld) lists each bank account, money market account and investment account for each Pledgor.
SECTION 3. THE SECURITY INTERESTS.
(A) In order to secure the full and punctual payment and performance of the Secured Obligations in accordance with the terms thereof, each Pledgor hereby grants to the Agent for the ratable benefit of the Secured Parties a continuing security interest in and to all of the following property of such Pledgor, whether now owned or existing or hereafter acquired or arising and regardless of where located (all being collectively referred to as the "COLLATERAL"):
(1) Accounts;
(2) Inventory;
(3) General Intangibles;
(4) Documents;
(5) Instruments;
(6) Equipment;
(7) The Lockbox Accounts, all cash deposited in any of the
foregoing from time to time, the Liquid Investments made pursuant to
Section 5(D) and other monies and property of any kind of such Pledgor
in the possession or under the control of the Agent;
(8) All books and records (including customer lists, credit files, computer programs, printouts and other computer materials and records) of such Pledgor pertaining to any of the Collateral;
(9) Insurance policies of such Pledgor; and
(10) All Proceeds of all or any of the Collateral described in Clauses 1 through 9 hereof.
(B) The Security Interests are granted as security only and shall not subject any Secured Party to, or transfer or in any way affect or modify, any obligation or liability of any Pledgor with respect to any of the Collateral or any transaction in connection therewith.
SECTION 4. FURTHER ASSURANCES; COVENANTS.
(A) No Pledgor will change its name, identity or form of organization in any manner unless it shall have given the Agent prior notice thereof and delivered an opinion of counsel with respect thereto in accordance with Section 4(L). No Pledgor will change the location of (i) its chief executive office or chief place of business or (ii) the locations where it keeps or holds any Collateral or any records relating thereto from the applicable location described in the Perfection Certificate of such Pledgor unless it shall have given the Agent prior
notice thereof and delivered an opinion of counsel with respect thereto in accordance with Section 4(L).
(B) No Pledgor shall in any event change the location of any Collateral without the prior written consent of the Agent if such change would cause the Security Interests in such Collateral to lapse or cease to be perfected.
(C) Each Pledgor will, from time to time, at its expense, execute, deliver, file and record any statement, assignment, instrument, document, agreement or other paper and take any other action (including any filings of financing or continuation statements under the UCC) that from time to time may be necessary or desirable, or that the Agent may request, in order to create, preserve, perfect, confirm or validate the Security Interests or to enable the Secured Parties to obtain the full benefits of this Agreement, or to enable the Agent to exercise and enforce any of its rights, powers and remedies hereunder with respect to any of the Collateral. To the extent permitted by applicable law, each Pledgor hereby authorizes the Agent, and appoints the Agent as its true and lawful attorney (with full power of substitution, in the name of such Pledgor, the Secured Parties or otherwise, for the sole use and benefit of the Secured Parties), to execute and file financing statements or continuation statements without such Pledgor's signature appearing thereon. Each Pledgor agrees that a carbon, photographic, photostatic or other reproduction of this Agreement or of a financing statement is sufficient as a financing statement. Each Pledgor shall pay the costs of, or incidental to, any recording or filing of any financing or continuation statements concerning the Collateral.
(D) If any Collateral is at any time in the possession or control of any warehouseman, bailee or any of any Pledgor's agents or processors, such Pledgor shall notify such warehouseman, bailee, agent or processor of the Security Interests created hereby and to hold all such Collateral for the Agent's account subject to the Agent's instructions.
(E) Each Pledgor shall keep full and accurate books and records relating to the Collateral, and stamp or otherwise mark such books and records in such manner as the Agent may reasonably require in order to reflect the Security Interests.
(F) Each Pledgor will immediately deliver and pledge each Instrument to the Agent, appropriately endorsed to the Agent, provided that so long as no Event of Default shall have occurred and be continuing, such Pledgor may retain for collection in the ordinary course any Instruments.
(G) Each Pledgor shall use its reasonable best efforts to cause to be collected from its Account Debtors, as and when due, any and all amounts owing under or on account of each Account (including Accounts which are delinquent, such Accounts to be collected in accordance with lawful collection procedures and such Pledgor's customary practices) and shall apply forthwith upon receipt thereof all such amounts as are so collected to the outstanding balance of such Account. Subject to the rights of the Secured Parties hereunder upon the occurrence and during the continuance of an Event of Default, each Pledgor may allow in the ordinary course of business as adjustments to amounts owing under its Accounts (i) an extension
or renewal of the time or times of payment, or settlement for less than the total unpaid balance, which such Pledgor finds appropriate in accordance with sound business judgment unless such extension, renewal or settlement results in causing such Account to not be an Eligible Receivable and thereby causes the aggregate unpaid balance of Working Capital Loans to exceed the Borrowing Base and (ii) a refund or credit due as a result of returned or damaged merchandise or as a discount for prompt payment, all in accordance with such Pledgor's ordinary course of business consistent with its historical collection practices. The costs and expenses (including attorney's fees) of collection, whether incurred by any Pledgor or the Agent, shall be borne by such Pledgor.
(H) Upon the occurrence and during the continuance of any Event of Default, upon request of the Required Lenders through the Agent, to the extent permitted by applicable law each Pledgor will promptly notify (and hereby authorizes the Agent so to notify) each Account Debtor in respect of any Account or Instrument that such Collateral has been assigned to the Agent hereunder, and that any payments due or to become due in respect of such Collateral are to be made directly to the Agent or its designee.
(I) Each Pledgor shall not permit any items of Equipment to become a fixture to real estate (unless the Agent has a first priority Lien thereon) or an accession to other personal property.
(J) Without the prior written consent of the Agent and except in the ordinary course of any Pledgor's business, no Pledgor will sell, lease, exchange, assign or otherwise dispose of, or grant any option with respect to, any Collateral except, subject to the rights of the Secured Parties hereunder if an Event of Default shall have occurred and be continuing, as permitted under the Credit Agreement including Section 6.06, whereupon, in the case of such a sale or exchange, the Security Interests created hereby in such item (but not in any Proceeds arising from such sale or exchange) shall cease immediately without any further action on the part of the Agent.
(K) Each Pledgor will, promptly upon request, provide to the Agent all information and evidence it may reasonably request concerning the Collateral to enable the Agent to enforce the provisions of this Agreement.
(L) Not more than six months nor less than 30 days prior to
each date on which any Pledgor proposes to take any action contemplated by
Section 4(A), such Pledgor shall give notice to the Agent of such proposed
action, and, at such Pledgor's cost and expense, cause to be delivered to the
Secured Parties with such notice, an opinion of counsel, satisfactory to the
Agent and substantially in the form of Exhibit D to the effect that all
financing statements and amendments or supplements thereto, continuation
statements and other documents required to be recorded or filed in order to
perfect and protect the Security Interests have been filed in each filing office
necessary for such purpose and that all filing fees and taxes, if any, payable
in connection with such filings have been paid in full.
(M) No Pledgor shall open or maintain any bank account, money market account or investment account unless such account shall first be listed on Exhibit B (as updated by such Pledgor from time to time with the consent of the Agent, such consent not to be unreasonably withheld) and, if the Agent requires in its sole discretion, shall be subject to a Lockbox Agreement.
(N) Each Pledgor shall (i) upon the occurrence of an Event of Default and (ii) within 10 days after the aggregate value of all Equipment consisting of motor vehicles, trucks and trailers owned by the Company and its Subsidiaries shall exceed $150,000, deliver to the Agent any and all certificates of title, applications for title or similar evidence of ownership of such Equipment and shall cause the Agent to be named as lienholder on any such certificate of title or other evidence of ownership.
SECTION 5. LOCKBOX ACCOUNT.
(A) On the Closing Date, each Pledgor shall deliver to the Agent for each account listed for such Pledgor on Exhibit B hereto (each a "LOCKBOX ACCOUNT"), a lockbox agreement substantially in form of Exhibit E hereto or in such other form as shall be satisfactory to the Agent (each a "LOCKBOX AGREEMENT") which shall establish such account in the name "NationsCredit Commercial Corporation, as Agent", and under the exclusive control of the Agent. From and after the Closing Date, there shall be deposited from time to time into the Lockbox Accounts the cash Proceeds of the Collateral required to be delivered to the Agent pursuant to subsection (B) of this Section 5 or any other provision of this Agreement and all other funds of such Pledgor. Any income received with respect to the balance from time to time standing to the credit of each Lockbox Account, including any interest or capital gains on Liquid Investments, may be withdrawn by the Company from such Lockbox Account in accordance with subsection (C) below. All right, title and interest in and to the cash amounts on deposit from time to time in the Lockbox Accounts together with any Liquid Investments from time to time made pursuant to subsection (D) of this Section shall vest in the Agent (pursuant to the Lockbox Agreement for each Lockbox Account), shall constitute part of the Collateral hereunder and shall not constitute payment of the Secured Obligations until applied thereto as hereinafter provided.
(B) Each Pledgor shall instruct all Account Debtors and other Persons obligated in respect of all Accounts, to make all payments in respect of such Accounts and shall use its reasonable best efforts to cause such Account Debtors and other Persons to remit all such payments directly to a Lockbox Account of such Pledgor (if paid by wire transfer). In addition to the foregoing, each Pledgor agrees that if the proceeds of any Collateral hereunder (including the payments made in respect of Accounts) shall be received by such Pledgor, such Pledgor shall as promptly as possible deposit such proceeds into its Lockbox Account. Until so deposited, all such proceeds shall be held in trust by such Pledgor for and as the property of the Secured Parties and shall not be commingled with any other funds or property of such Pledgor.
(C) The balance from time to time standing to the credit of the Lockbox Accounts shall, except upon the occurrence and continuation of an Event of Default, be
distributed to each Pledgor in accordance with the provisions of each Lockbox Agreement. If immediately available cash on deposit in the Lockbox Accounts is not sufficient to make any distribution to any Pledgor referred to in the previous sentence of this Section 5(C), the Agent shall cause to be liquidated as promptly as practicable Liquid Investments in the Lockbox Accounts designated by the Pledgors as required to obtain sufficient cash to make such distribution and, notwithstanding any other provision of this Section 5, such distribution shall not be made until such liquidation has taken place. Upon the occurrence and continuation of an Event of Default, the Agent shall, if so instructed by the Required Lenders, apply or cause to be applied (subject to collection) any or all of the balance from time to time standing to the credit of any Lockbox Accounts in the manner specified in Section 9.
(D) Amounts on deposit in the Lockbox Accounts shall be invested and re-invested from time to time in such Liquid Investments as the Pledgors shall determine, which Liquid Investments shall be held in the name and be under the control of the Agent; provided that, if an Event of Default has occurred and is continuing, the Agent shall, if instructed by the Required Lenders, cause such Liquid Investments to be liquidated and apply or cause to be applied the proceeds thereof to the payment of the Secured Obligations in the manner specified in Section 9. For this purpose, "Liquid Investments" means Temporary Cash Investments; provided that (i) each Liquid Investment shall mature within 30 days after it is acquired by the Agent and (ii) in order to provide the Agent, for the benefit of the Secured Parties, with a perfected security interest therein, each Liquid Investment shall be either:
(i) evidenced by negotiable certificates or instruments, or if non-negotiable then issued in the name of the Agent, which (together with any appropriate instruments of transfer) are delivered to, and held by, the Agent or an agent thereof (which shall not be the Company or any of its Affiliates) in the State of Georgia; or
(ii) in book-entry form and issued by the United States and subject to pledge under applicable state law and Treasury regulations and as to which (in the opinion of counsel to the Agent) appropriate measures shall have been taken for perfection of the Security Interests.
SECTION 6. GENERAL AUTHORITY.
Each Pledgor hereby irrevocably appoints the Agent its true and lawful attorney, with full power of substitution, in the name of such Pledgor, the Secured Parties or otherwise, for the sole use and benefit of the Secured Parties, but at such Pledgor's expense, to the extent permitted by law to exercise, at any time and from time to time while an Event of Default has occurred and is continuing, all or any of the following powers with respect to all or any of the Collateral:
(i) to demand, sue for, collect, receive and give acquittance for any and all monies due or to become due thereon or by virtue thereof,
(ii) to settle, compromise, compound, prosecute or defend any action or proceeding with respect thereto,
(iii) to sell, transfer, assign or otherwise deal in or with the same or the proceeds or avails thereof, as fully and effectually as if the Agent were the absolute owner thereof, and
(iv) to extend the time of payment of any or all thereof and to make any allowance and other adjustments with reference thereto;
provided that the Agent shall give such Pledgor not less than ten days' prior written notice of the time and place of any sale or other intended disposition of any of the Collateral, except any Collateral which is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market. Each Pledgor agrees that such notice constitutes "reasonable notification" within the meaning of Section 9-504(3) of the UCC.
SECTION 7. REMEDIES UPON EVENT OF DEFAULT.
(A) If any Event of Default has occurred and is continuing,
the Agent may exercise on behalf of the Secured Parties all rights of a secured
party under the UCC (whether or not in effect in the jurisdiction where such
rights are exercised) and, in addition, the Agent may, without being required to
give any notice, except as herein or in the Credit Agreement or any other
Financing Document provided or as may be required by mandatory provisions of
law, (i) withdraw all cash and Liquid Investments in the Collateral Accounts and
apply such cash and Liquid Investments and other cash, if any, then held by it
as Collateral as specified in Section 9 and (ii) if there shall be no such cash
or Liquid Investments or if such cash and Liquid Investments shall be
insufficient to pay all the Secured Obligations in full, sell the Collateral or
any part thereof at public or private sale, for cash, upon credit or for future
delivery, and at such price or prices as the Agent may deem satisfactory. The
Agent or any other Secured Party may be the purchaser of any or all of the
Collateral so sold at any public sale (or, if the Collateral is of a type
customarily sold in a recognized market or is of a type which is the subject of
widely distributed standard price quotations, at any private sale). Each Pledgor
will execute and deliver such documents and take such other action as the Agent
deems necessary or advisable in order that any such sale may be made in
compliance with law. Upon any such sale the Agent shall have the right to
deliver, assign and transfer to the purchaser thereof the Collateral so sold.
Each purchaser at any such sale shall hold the Collateral so sold to it
absolutely and free from any claim or right of whatsoever kind, including any
equity or right of redemption of any Pledgor which may be waived, and each
Pledgor, to the extent permitted by law, hereby specifically waives all rights
of redemption, stay or appraisal which it has or may have under any law now
existing or hereafter adopted. The notice (if any) of such sale required by
Section 6 shall (1) in case of a public sale, state the time and place fixed for
such sale, and (2) in the case of a private sale, state the day after which such
sale may be consummated. Any such public sale shall be held at such time or
times within ordinary business hours and at such place or places as the Agent
may fix in the notice of such sale. At any such sale the Collateral may be sold
in one lot as an entirety or in separate parcels, as the Agent may determine.
The Agent shall not be obligated to
make any such sale pursuant to any such notice. The Agent may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for the sale, and such sale may be made at any time or place to which the same may be so adjourned. In case of any sale of all or any part of the Collateral on credit or for future delivery, the Collateral so sold may be retained by the Agent until the selling price is paid by the purchaser thereof, but the Agent shall not incur any liability in case of the failure of such purchaser to take up and pay for the Collateral so sold and, in case of any such failure, such Collateral may again be sold upon like notice. The Agent, instead of exercising the power of sale herein conferred upon it, may proceed by a suit or suits at law or in equity to foreclose the Security Interests and sell the Collateral, or any portion thereof, under a judgment or decree of a court or courts of competent jurisdiction.
(B) For the purpose of enforcing any and all rights and
remedies under this Agreement the Agent may (i) require each Pledgor to, and
each Pledgor agrees that it will, at its expense and upon the request of the
Agent, forthwith assemble all or any part of the Collateral as directed by the
Agent and make it available at a place designated by the Agent which is, in its
opinion, reasonably convenient to the Agent and such Pledgor, whether at the
premises of such Pledgor or otherwise, (ii) to the extent permitted by
applicable law, enter, with or without process of law and without breach of the
peace, any premise where any of the Collateral is or may be located, and without
charge or liability to it seize and remove such Collateral from such premises,
(iii) have access to and use any Pledgor's books and records relating to the
Collateral and (iv) prior to the disposition of the Collateral, store or
transfer it without charge in or by means of any storage or transportation
facility owned or leased by any Pledgor, process, repair or recondition it or
otherwise prepare it for disposition in any manner and to the extent the Agent
deems appropriate and, in connection with such preparation and disposition, use
without charge any trademark, trade name, copyright, patent or technical process
used by any Pledgor.
SECTION 8. LIMITATION ON DUTY OF AGENT IN RESPECT OF COLLATERAL.
Beyond the exercise of reasonable care in the custody thereof, the Agent shall have no duty as to any Collateral in its possession or control or in the possession or control of any agent or bailee or any income thereon or as to the preservation of rights against prior parties or any other rights pertaining thereto. The Agent shall be deemed to have exercised reasonable care in the custody of the Collateral in its possession if the Collateral is accorded treatment substantially equal to that which it accords its own property, and shall not be liable or responsible for any loss or damage to any of the Collateral, or for any diminution in the value thereof, by reason of the act or omission of any warehouseman, carrier, forwarding agency, consignee or other agent or bailee selected by the Agent in good faith.
SECTION 9. APPLICATION OF PROCEEDS.
Upon the occurrence and during the continuance of an Event of Default, the proceeds of any sale of, or other realization upon, all or any part of the Collateral and any cash held in the Collateral Accounts shall be applied by the Agent in the following order of priorities:
first, to payment of the expenses of such sale or other realization, including reasonable compensation to agents and counsel for the Agent, and all expenses, liabilities and advances incurred or made by the Agent in connection therewith, and any other unreimbursed expenses for which the Agent or any other Secured Party is to be reimbursed pursuant to Section 8.04 of the Credit Agreement or Section 12 hereof and unpaid fees owing to the Agent under the Credit Agreement;
second, to the ratable payment of accrued but unpaid interest on the Secured Obligations in accordance with the provisions of the Credit Agreement;
third, to the ratable payment of unpaid principal of the Secured Obligations;
fourth, to the ratable payment of all other Secured Obligations, until all Secured Obligations shall have been paid in full; and
finally, to payment to the Pledgors or their successors or assigns, or as a court of competent jurisdiction may direct, of any surplus then remaining from such proceeds.
The Agent may make distributions hereunder in cash or in kind or, on a ratable basis, in any combination thereof.
SECTION 10. CONCERNING THE AGENT.
The provisions of Section 10.05 and Article XI of the Credit Agreement shall inure to the benefit of the Agent in respect of this Agreement and shall be binding upon the parties to the Credit Agreement in such respect. In furtherance and not in derogation of the rights, privileges and immunities of the Agent therein set forth:
(A) The Agent is authorized to take all such action as is provided to be taken by it as Agent hereunder and all other action reasonably incidental thereto. As to any matters not expressly provided for herein (including the timing and methods of realization upon the Collateral), the Agent shall act or refrain from acting in accordance with written instructions from the Required Lenders or, in the absence of such instructions, in accordance with its discretion.
(B) The Agent shall not be responsible for the existence, genuineness or value of any of the Collateral or for the validity, perfection, priority or enforceability of the Security Interests in any of the Collateral, whether impaired by operation of law or by reason of any action or omission to act on its part hereunder. The Agent shall have no duty to ascertain or inquire as to the performance or observance of any of the terms of this Agreement by the Pledgor.
SECTION 11. APPOINTMENT OF CO-AGENTS.
At any time or times, in order to comply with any legal requirement in any jurisdiction, the Agent may appoint another bank or trust company or one or more other persons, either to act as co-agent or co-agents, jointly with the Agent, or to act as separate agent or agents on behalf of the Secured Parties with such power and authority as may be necessary for the effectual operation of the provisions hereof and may be specified in the instrument of appointment (which may, in the discretion of the Agent, include provisions for the protection of such co-agent or separate agent similar to the provisions of Section 10).
SECTION 12. EXPENSES.
In the event that any Credit Party shall fail to comply with the provisions of the Credit Agreement or this Agreement, such that the value of any Collateral or the validity, perfection, rank or value of any Security Interest is thereby diminished or potentially diminished or put at risk, the Agent if requested by the Required Lenders may, but shall not be required to, effect such compliance on behalf of the Credit Parties, and the Pledgors shall reimburse the Agent for the costs thereof on demand. All insurance expenses and all expenses of protecting, storing, warehousing, appraising, insuring, handling, maintaining, and shipping the Collateral, any and all excise, property, sales, and use taxes imposed by any state, federal, or local authority on any of the Collateral, or in respect of periodic appraisals and inspections of the Collateral to the extent the same may be requested by the Required Lenders from time to time as provided in the Credit Agreement, or in respect of the sale or other disposition thereof shall be borne and paid by the Pledgors; and if any Pledgor fails to promptly pay any portion thereof when due, the Agent or any other Secured Party may, at its option, but shall not be required to, pay the same, and such Pledgor agrees to reimburse the Agent or such other Secured Party therefor on demand. All sums so paid or incurred by the Agent or any other Secured Party for any of the foregoing and any and all other sums for which the Pledgors may become liable hereunder and all costs and expenses (including reasonable attorney's fees, legal expenses and court costs) reasonably incurred by the Agent or any other Secured Party in enforcing or protecting the Security Interests or any of their rights or remedies under this Agreement, shall, together with interest thereon until paid as provided in Section 10.03 of the Credit Agreement, be additional Secured Obligations hereunder.
SECTION 13. TERMINATION OF SECURITY INTERESTS; RELEASE OF COLLATERAL.
Upon the repayment in full of all Secured Obligations (other than contingent indemnity or similar claims not yet asserted) and the termination of the Commitment under the Credit Agreement, the Security Interests shall terminate and all rights to the Collateral shall revert to the Pledgors. At any time and from time to time prior to such termination of the Security Interests, the Agent may release any of the Collateral with the prior written consent of the Required Lenders. Upon any such termination of the Security Interests or release of Collateral, the Agent will, at the expense of the Pledgors, execute and deliver to the Pledgors such documents as the Pledgors shall reasonably request to evidence the termination of the Security Interests or the release of such Collateral, as the case may be.
SECTION 14. OBLIGATIONS UNCONDITIONAL; DISCHARGE OF OBLIGATIONS, ETC.
(a) The Security Interests and the obligations of each Pledgor hereunder shall not be released, discharged or otherwise affected by:
(i) any extension, renewal, settlement, compromise, waiver or release in respect of any obligation of the Company or any other Person under any Financing Document, by operation of law or otherwise;
(ii) any modification or amendment of or supplement to any Financing Document;
(iii) any release, non-perfection or invalidity of any direct or indirect security for any obligation of the Company or any other Person under any Financing Document;
(iv) any change in the corporate existence, structure or ownership of the Company or any insolvency, bankruptcy, reorganization or other similar proceeding affecting the Company or any other Person or any of their respective assets or any resulting release or discharge of any obligation of the Company or any other Person contained in any Financing Document;
(v) the existence of any claim, set-off or other rights which such Pledgor may have at any time against the Agent, any Lender or any other Person, whether in connection herewith or any unrelated transactions, provided that nothing herein shall prevent the assertion of any such claim by separate suit or compulsory counterclaim;
(vi) any invalidity or unenforceability relating to or against the Company or any other Person for any reason of any Financing Document, or any provision of applicable law or regulation purporting to prohibit the payment by the Company of the principal of or interest on any Note or any other amount payable by the Company or any other Person under any Financing Document; or
(vii) any other act or omission to act or delay of any kind by the Agent, any Lender or any other Person or any other circumstance whatsoever which might, but for the provisions of this paragraph, constitute a legal or equitable discharge of the obligations of a surety.
(b) Each Pledgor irrevocably waives acceptance hereof, presentment, demand, protest and any notice not provided for herein, as well as any requirement that at any time any action be taken by any corporation or Person against the Company or any other corporation or Person.
(c) Each Pledgor hereby waives any right or claim of exoneration, reimbursement, subrogation, contribution or indemnity and any other similar right or claim arising out of this Agreement.
(d) If acceleration of the time for payment of any amount payable by the Company under the Credit Agreement or any Note is stayed upon the insolvency, bankruptcy or reorganization of the Company, the Security Interests and the obligations of each Pledgor hereunder may nonetheless be enforced as fully as if such acceleration were effective.
SECTION 15. NOTICES.
All notices, communications and distributions hereunder to the Agent shall be given in accordance with Section 12.03 of the Credit Agreement. All notices, communications and distributions hereunder to any Pledgor shall be given in accordance with Section 12.03 of the Credit Agreement and sent to the address of the Borrower set forth on the signature page of the Credit Agreement.
SECTION 16. WAIVERS, NON-EXCLUSIVE REMEDIES.
No failure on the part of the Agent to exercise, and no delay in exercising and no course of dealing with respect to, any right under this Agreement shall operate as a waiver thereof; nor shall any single or partial exercise by the Agent or any Secured Party of any right under the Credit Agreement, any of the other Financing Documents or this Agreement preclude any other or further exercise thereof or the exercise of any other right. The rights in this Agreement, the Credit Agreement and the other Financing Documents are cumulative and are not exclusive of any other remedies provided by law.
SECTION 17. SUCCESSORS AND ASSIGNS.
This Agreement is for the benefit of the Agent and the Secured Parties and their successors and assigns, and in the event of an assignment of all or any of the Secured Obligations, the rights hereunder, to the extent applicable to the indebtedness so assigned, may be transferred with such indebtedness. This Agreement shall be binding on the Pledgor and their respective successors and assigns.
SECTION 18. CHANGES IN WRITING.
Neither this Agreement nor any provision hereof may be changed, waived, discharged or terminated orally, but only in writing signed by the Pledgors and the Agent with the consent of the Required Lenders.
SECTION 19. GEORGIA LAW.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF GEORGIA (WITHOUT
REFERENCE TO PRINCIPLES OR CONFLICTS OF LAW), EXCEPT AS OTHERWISE REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT REMEDIES PROVIDED BY THE LAWS OF ANY JURISDICTION OTHER THAN GEORGIA ARE GOVERNED BY THE LAWS OF SUCH JURISDICTION.
SECTION 20. SEVERABILITY.
If any provision hereof is invalid or unenforceable in any jurisdiction, then, to the fullest extent permitted by law, (i) the other provisions hereof shall remain in full force and effect in such jurisdiction and shall be liberally construed in favor of the Agent and the other Secured Parties in order to carry out the intentions of the parties hereto as nearly as may be possible; and (ii) the invalidity or unenforceability of any provision hereof in any jurisdiction shall not affect the validity or enforceability of such provision in any other jurisdiction.
SECTION 21. COUNTERPARTS.
This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their respective authorized officers as of the day and year first above written.
PLEDGORS:
STRATO/INFUSAID, INC.
AGENT:
NATIONSCREDIT COMMERCIAL
CORPORATION, as Agent
EXHIBIT A
PLEDGORS
Strato/Infusaid, Inc.
Notice Address for Pledgors:
c/o Horizon Medical Products, Inc.
Seven North Parkway Square
4200 Northside Parkway, N.W.
Atlanta, Georgia 30327
Attn: President
Telecopy No.: (404) 233-0171
EXHIBIT B
LIST OF ACCOUNTS
ACCOUNT BANK
EXHIBIT C
PERFECTION CERTIFICATE
The undersigned, chief executive officer or chief legal officer, of ______________________, a _________ corporation (the "Pledgor"), hereby certifies with reference to the Subsidiary Security Agreement dated as of July ___, 1997 between the Pledgors and NationsCredit Commercial Corporation, as Agent (terms defined therein being used herein as therein defined), to the Agent and each Lender as follows:
1. Names. (a) The exact corporate name of the Pledgor as it appears in its certificate of incorporation is as follows:
[Name of Pledgor]
(b) Set forth below is each other corporate name the Pledgor has had since its organization, together with the date of the relevant change:
(c) The Pledgor has not changed its identity or form of organization in any way within the past five years.
(d) The following is a list of all other names (including trade names or similar appellations) used by the Pledgor or any of its divisions or other business units at any time during the past five years:
[Names of Pledgor]
2. Current Locations. (a) The chief executive office of the Pledgor is located at the following address:
Mailing Address County State --------------- ------ ----- |
(b) The following are all the locations where the Pledgor maintains any books or records relating to any Accounts:
Mailing Address County State --------------- ------ ----- |
(c) The following are all the places of business of the Pledgor not identified above:
Name Mailing Address County State ---- --------------- ------ ----- |
(d) The following are all the locations where the Pledgor maintains any Inventory not identified above:
Name Mailing Address County State ---- --------------- ------ ----- |
(e) The following are the names and addresses of all Persons other than the Pledgor which have possession of any of the Pledgor's Inventory:
Name Mailing Address County State ---- --------------- ------ ----- |
3. Prior Locations. (a) Set forth below is the information required by subparagraphs (a), (b) and (c) of paragraph 2 with respect to each location or place of business maintained by the Pledgor at any time during the past five years:
(b) Set forth below is the information required by subparagraphs (d) and (e) of paragraph 2 with respect to each location or bailee where or with whom Inventory has been lodged at any time during the past four months:
4. Unusual Transactions. All Accounts have been originated by the Pledgor and all Inventory and Equipment has been acquired by the Pledgor in the ordinary course of its business.
5. File Search Reports. Attached hereto as Schedule 5(A) is a true copy of a file search report from the Uniform Commercial Code filing officer in each jurisdiction identified in paragraph 2 or 3 above with respect to each name set forth in paragraph 1 above. Attached hereto as Schedule 5(B) is a true copy of each financing statement or other filing identified in such file search reports.
6. UCC Filings. Duly signed financing statements on Form UCC-1 attached as Schedule 6 hereto have been duly filed in the Uniform Commercial Code filing office in each jurisdiction identified in paragraph 2 hereof and each such filing has been duly acknowledged by the filing officer.
7. Schedule of Filings. Attached hereto as Schedule 7 is a schedule setting forth filing information with respect to the filings described in paragraph 6 above.
8. Filing Fees. All filing fees and taxes payable in connection with the filings described in paragraph 6 above have been paid.
9. Patents, Trademarks, Copyrights. All patents, trademarks and copyrights owned by the Pledgor as of the date hereof and all patent licenses, trademark licenses and copyright licenses to which the Pledgor is a party as of the date hereof are listed on Schedule 9 hereto.
IN WITNESS WHEREOF, we have hereunto set our hands this ____ day of July, 1997.
SCHEDULE 6
TO PERFECTION CERTIFICATE
Description of Collateral
All accounts, chattel paper, contract rights, general intangibles, inventory, equipment and documents, and all other property of the Pledgor all as more particularly described on Exhibit A attached hereto, now owned or hereafter acquired, wherever located, and all proceeds thereof.
SCHEDULE 7
TO PERFECTION CERTIFICATE
SCHEDULE OF FILINGS
Date
Pledgor Filing Officer File Number of Filing
--------------------------------------------------------------------------------------
|
* Indicate lapse date, if other than fifth anniversary.
EXHIBIT D
OPINION OF
COUNSEL FOR THE PLEDGOR
* * * *
1. The Security Agreement creates a valid security interest, for the benefit of the Secured Parties, in all the Pledgor's right, title and interest in all Collateral to the extent the UCC is applicable thereto (the "Security Interest").
2. UCC financing statements and amendments thereto
(collectively, the "Financing Statements") have been filed in the filing offices
listed in Schedule 7 to the Perfection Certificate (the "Filing Jurisdictions"),
which are all of the offices in which filings are required to perfect the
Security Interest, to the extent the Security Interest may be perfected by
filing under the UCC, and no further filing or recording of any document or
instrument or other action will be required so to perfect the Security Interest
in the Collateral in which a security interest may be perfected by filing a
financing statement under the UCC, except that (i) continuation statements with
respect to each Financing Statement must be filed in accordance with the UCC;
(ii) additional filings may be necessary if the Pledgor changes its name,
identity or corporate structure or the jurisdiction in which its places of
business, its chief executive office or the Collateral are located; and (iii) we
express no opinion on the perfection of, or need for further filing or recording
to perfect, the Security Interest in goods now or hereafter located in any
jurisdiction other than the Filing Jurisdictions.
3. There are
(i) based on [describe search reports], as of the date of such reports, no UCC financing statements which name the Pledgor as Pledgor or seller and cover any of the Collateral, other than the Financing Statements, [and the financing statements with respect to Permitted Liens annexed as Schedule 5(A) to the Perfection Certificate], listed in the available records in the UCC filing offices set forth in paragraphs 2 and 3 of the Perfection Certificate, which, based on the information provided to us as to the location of the Collateral, the Company and its banks and records, include all of the offices prescribed under the UCC as the offices in which filings should have been made to perfect security interests in the Collateral; and
(ii) based on [describe search reports], as of the date of such reports, no notices of the filing of any federal tax lien (filed pursuant to Section 6323 of the Internal Revenue Code) or any lien of the Pension Benefit Guaranty Corporation (filed pursuant to Section 4068 of ERISA) covering any of the Collateral listed in the available records in the [UCC filing office in state of Pledgor's chief executive office], which is the only office having files which must be searched in order to fully determine the existence of notices of the filing of federal tax liens (filed pursuant to Section 6323 of the Internal
Revenue Code) on the Collateral and liens of the Pension Benefit Guaranty Corporation (filed pursuant to Section 4068 of ERISA) on the Collateral.
4. The Security Interest validly secures the guaranty by the Pledgor of the payment of all future Loans made by the Lenders to the Company, whether or not at the time such Loans are made an Event of Default or other event not within the control of the Lenders has relieved or may relieve the Lenders from their obligations to make such Loans, and is perfected to the extent set forth in paragraph 2 above with respect to such future Loans. Insofar as the priority thereof is governed by the UCC, the Security Interest has the same priority with respect to such future Loans as it does with respect to Loans made on the date hereof.
Such opinion may contain such assumptions, qualifications and limitations as the opinions of counsel for the Company delivered in connection with the making of the initial Loan under the Credit Agreement.
EXHIBIT E
FORM OF LOCKBOX AGREEMENT
EXHIBIT J
SHAREHOLDER PLEDGE AGREEMENT
AGREEMENT dated as of December [_____], 1997, between the undersigned Pledgor (the "PLEDGOR") and NATIONSCREDIT COMMERCIAL CORPORATION, as agent for the Lenders referred to below (the "AGENT").
W I T N E S S E T H:
WHEREAS, the Pledgor is the owner of the outstanding shares of capital stock of Vista Hospice Care, Inc., a [__________] corporation (the "COMPANY"), described on Schedule I attached hereto; and
WHEREAS, the Company, certain Lenders (the "LENDERS") and the Agent are parties to a Credit Agreement of even date herewith (as the same may be amended from time to time, the "CREDIT AGREEMENT"); and
WHEREAS, in order to induce the Lenders and the Agent to enter into the Credit Agreement, the Pledgor has agreed to grant a continuing security interest in and to the Collateral (as hereafter defined) to secure obligations of the Company under the Credit Agreement and the Notes (as defined in the Credit Agreement) issued pursuant thereto and the other Financing Documents;
NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS.
Terms defined in the Credit Agreement and not otherwise defined herein have, as used herein, the respective meanings provided for therein. The following additional terms, as used herein, have the following respective meanings:
"COLLATERAL" has the meaning assigned to such term in Section 3(A).
"COMPANY SHARES" means the issued and outstanding shares of capital stock of the Company that the Pledgor may now or hereafter own, control or hold, which stock as of this date is described on Schedule I attached hereto.
"PLEDGED SECURITIES" means the Pledged Stock.
"PLEDGED STOCK" means the Company Shares and any other capital stock required to be pledged to the Agent pursuant to Section 3(B).
"SECURED OBLIGATIONS" means the obligations secured under this Shareholder Pledge Agreement including (a) all principal of and interest (including any interest which accrues after the commencement of any case, proceeding or other action relating to the bankruptcy, insolvency or reorganization of the Company, whether or not allowed or allowable as a claim in any such proceeding) on any Loan under, or any Note issued pursuant to, the Credit Agreement, (b) all other amounts payable by the Company under any Financing Document, (c) all other Obligations, and (d) any amendments, restatements, renewals, extensions or modifications of any of the foregoing.
"SECURED PARTIES" means the Lenders and the Agent.
"SECURITY INTERESTS" means the security interests in the Collateral granted hereunder securing the Secured Obligations.
"UCC" has the meaning given such term in the Security Agreements.
Unless otherwise defined herein, or unless the context otherwise requires, all terms used herein which are defined in the Georgia UCC as in effect on the date hereof shall have the meanings therein stated.
SECTION 2. REPRESENTATIONS AND WARRANTIES.
The Pledgor represents and warrants as follows:
(A) Title to Pledged Securities. The Pledgor owns all of the Pledged Securities, free and clear of any Liens other than the Security Interests. All of the Pledged Stock has been duly authorized and validly issued, and is fully paid and non-assessable, and is subject to no options to purchase or similar rights of any Person. The Pledgor is not and will not become a party to or otherwise bound by any agreement, other than this Shareholder Pledge Agreement, which restricts in any manner the rights of any present or future holder of any of the Pledged Securities with respect thereto.
(B) Validity, Perfection and Priority of Security Interests. Upon the delivery of certificates representing the Pledged Stock to the Agent in accordance with Section 4 hereof, the Agent will have valid and perfected security interests in the Collateral subject to no prior Lien. No registration, recordation or filing with any governmental body, agency or official is required in connection with the execution or delivery of this Shareholder Pledge Agreement or necessary for the validity or enforceability hereof or for the perfection or enforcement of the Security Interests. Neither the Pledgor nor the Company has performed or will perform any acts which might prevent the Agent from enforcing any of the terms and conditions of this Shareholder Pledge Agreement or which would limit the Agent in any such enforcement.
(C) UCC Filing Locations. The chief executive office of (or, if an individual, the residence address of) the Pledgor is located at its address set forth on the signature page hereof. Under the Uniform Commercial Code as in effect in the state in which such office is located, no local filing is required to perfect a security interest in collateral consisting of general intangibles.
SECTION 3. THE SECURITY INTERESTS.
In order to secure the full and punctual payment and performance of the Secured Obligations in accordance with the terms thereof, and to secure the performance of all the obligations of the Pledgor hereunder:
(A) The Pledgor hereby assigns and pledges to and with the Agent for the benefit of the Secured Parties and grants to the Agent for the benefit of the Secured Parties a security interest in the Pledged Securities, and all of its rights and privileges with respect to the Pledged Securities, and all income and profits thereon, and all interest, dividends and other payments and distributions with respect thereto, and all proceeds of the foregoing (the "COLLATERAL"). Contemporaneously with the execution and delivery hereof, the Pledgor is delivering the certificates representing the Company Shares in pledge hereunder.
(B) In the event that the Company at any time issues any additional or substitute shares of capital stock of any class or owes any other Debt to the Pledgor, the Pledgor will immediately pledge and deposit with the Agent certificates representing all such shares or an instrument evidencing such other Debt as additional security for the Secured Obligations. All such shares and instruments constitute Pledged Securities and are subject to all provisions of this Shareholder Pledge Agreement.
(C) The Security Interests are granted as security only and shall not subject any Secured Party to, or transfer or in any way affect or modify, any obligation or liability of the Pledgor or the Company with respect to any of the Collateral or any transaction in connection therewith.
SECTION 4. DELIVERY OF PLEDGED SECURITIES.
All certificates representing Pledged Stock delivered to the Agent by the Pledgor pursuant hereto shall be in suitable form for transfer by delivery, or shall be accompanied by duly executed instruments of transfer or assignment in blank, and accompanied by any required transfer tax stamps, all in form and substance satisfactory to the Agent.
SECTION 5. FILING; FURTHER ASSURANCES.
(A) The Pledgor agrees that it will, at its expense and in such manner and form as the Agent may require, execute, deliver, file and record any financing statement, specific assignment or other paper and take any other action that may be necessary or desirable, or that the Agent may request, in order to create, preserve, perfect or validate any Security Interest or to
enable the Agent to exercise and enforce its rights hereunder with respect to any of the Collateral. To the extent permitted by applicable law, the Pledgor hereby authorizes the Agent to execute and file, in the name of the Pledgor or otherwise, UCC financing statements (which may be carbon, photographic, photostatic or other reproductions of this Shareholder Pledge Agreement or of a financing statement relating to this Shareholder Pledge Agreement) which the Agent in its sole discretion may deem necessary or appropriate to further perfect the Security Interests.
(B) The Pledgor agrees that it will not change (i) its name, identity or form of organization in any manner or (ii) the location of its chief executive office (or if an individual, its residence) unless it shall have given the Agent not less than 30 days' prior notice thereof.
SECTION 6. RECORD OWNERSHIP OF PLEDGED STOCK.
The Agent may at any time or from time to time, upon the occurrence and during the continuance of an Event of Default, in its sole discretion, cause any or all of the Pledged Stock to be transferred of record into the name of the Agent or its nominee. The Pledgor will promptly give to the Agent copies of any notices or other communications received by it with respect to Pledged Stock registered in the name of the Pledgor and the Agent will promptly give to the Pledgor copies of any notices and communications received by the Agent with respect to Pledged Stock registered in the name of the Agent or its nominee.
SECTION 7. RIGHT TO RECEIVE DISTRIBUTIONS ON COLLATERAL.
Upon the occurrence and during the continuance of any Event of Default, the Agent shall have the right to receive to retain as Collateral hereunder all dividends, interest and other payments and distributions made upon or with respect to the Collateral and the Pledgor shall take all such action as the Agent may deem necessary or appropriate to give effect to such right. Upon the occurrence and during the continuance of any Event of Default, all such dividends, interest and other payments and distributions which are received by the Pledgor shall be received in trust as Collateral for the benefit of the Agent and the Secured Parties and, if the Agent so directs, shall be segregated from other funds of the Pledgor and shall, forthwith upon demand by the Agent during the continuance of an Event of Default, be paid over to the Agent as Collateral in the same form as received (with any necessary endorsement). After all Events of Default that shall have occurred have been cured, the Agent's right to retain dividends, interest and other payments and distributions under this Section 7 shall cease and the Agent shall pay over to the Pledgor any such Collateral retained by the Agent during the continuance of an Event of Default.
SECTION 8. RIGHT TO VOTE PLEDGED STOCK.
Unless an Event of Default shall have occurred and be continuing, the Pledgor shall have the right, from time to time, to vote and to give consents, ratifications and waivers with respect to the Pledged Stock, and the Agent shall, upon receiving a written request from the Pledgor accompanied by a certificate signed by its principal financial officer stating that no Event of Default has occurred and is continuing, deliver to the Pledgor or as specified in such request such proxies, powers of attorney, consents, ratifications and waivers in respect of any of the Pledged Stock which is registered in the name of the Agent or its nominee as shall be specified in such request and be in form and substance satisfactory to the Agent.
If an Event of Default shall have occurred and be continuing, the Agent shall have the right to the extent permitted by law and the Pledgor shall take all such action as may be necessary or appropriate to give effect to such right, to vote and to give consents, ratifications and waivers, and take any other action with respect to any or all of the Pledged Stock with the same force and effect as if the Agent were the absolute and sole owner thereof.
SECTION 9. GENERAL AUTHORITY.
The Pledgor hereby irrevocably appoints the Agent its true and lawful attorney, with full power of substitution, in the name of the Pledgor, the Agent, the Secured Parties or otherwise, for the sole use and benefit of the Agent and Secured Parties, but at the expense of the Pledgor, to the extent permitted by law to exercise, at any time and from time to time while an Event of Default has occurred and is continuing, all or any of the following powers with respect to all or any of the Collateral:
(i) to demand, sue for, collect, receive and give acquittance for any and all monies due or to become due upon or by virtue thereof,
(ii) settle, compromise, compound, prosecute or defend any action or proceeding with respect thereto,
(iii) to sell, transfer, assign or otherwise deal in or with the same or the proceeds or avails thereof, as fully and effectually as if the Agent were the absolute owner thereof, and
(iv) to extend the time of payment of any or all thereof and to make any allowance and other adjustments with reference thereto;
provided that the Agent shall give the Pledgor not less than ten days' prior written notice of the time and place of any sale or other intended disposition of any of the Collateral except any Collateral which is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market. The Agent and the Pledgor agree that such notice constitutes "reasonable notification" within the meaning of Section 9-504(3) of the UCC.
SECTION 10. REMEDIES UPON EVENT OF DEFAULT.
If any Event of Default shall have occurred and be continuing, the Agent may exercise on behalf of the Secured Parties all the rights of a secured party under the UCC (whether or not in effect in the jurisdiction where such rights are exercised) and, in addition, the Agent may, without being required to give any notice, except as herein provided or as may be required by mandatory provisions of law, (i) apply the cash, if any, then held by it as Collateral as specified in Section 13 and (ii) if there shall be no such cash or if such cash shall be insufficient to pay all the Secured Obligations in full, sell the Collateral or any part thereof at public or private sale or at any broker's board or on any securities exchange, for cash, upon credit or for future delivery, and at such price or prices as the Agent may deem satisfactory. Any Secured Party may be the purchaser of any or all of the Collateral so sold at any public sale (or, if the Collateral is of a type customarily sold in a recognized market or is of a type which is the subject of widely distributed standard price quotations, at any private sale). The Agent is authorized, in connection with any such sale, if it deems it advisable so to do, (i) to restrict the prospective bidders on or purchasers of any of the Pledged Securities to a limited number of sophisticated investors who will represent and agree that they are purchasing for their own account for investment and not with a view to the distribution or sale of any of such Pledged Securities, (ii) to cause to be placed on certificates for any or all of the Pledged Securities or on any other securities pledged hereunder a legend to the effect that such security has not been registered under the Securities Act of 1933 and may not be disposed of in violation of the provision of said Act, and (iii) to impose such other limitations or conditions in connection with any such sale as the Agent deems necessary or advisable in order to comply with said Act or any other law. The Pledgor covenants and agrees that it will execute and deliver such documents and take such other action as the Agent deems necessary or advisable in order that any such sale may be made in compliance with law. Upon any such sale the Agent shall have the right to deliver, assign and transfer to the purchaser thereof the Collateral so sold. Each purchaser at any such sale shall hold the Collateral so sold absolutely and free from any claim or right of whatsoever kind, including any equity or right of redemption of the Pledgor which may be waived, and the Pledgor, to the extent permitted by law, hereby specifically waives all rights of redemption, stay or appraisal which it has or may have under any law now existing or hereafter adopted. The notice (if any) of such sale required by Section 9 shall (1) in case of a public sale, state the time and place fixed for such sale, (2) in case of sale at a broker's board or on a securities exchange, state the board or exchange at which such sale is to be made and the day on which the Collateral, or the portion thereof so being sold, will first be offered for sale at such board or exchange, and (3) in the case of a private sale, state the day after which such sale may be consummated. Any such public sale shall be held at such time or times within ordinary business hours and at such place or places as the Agent may fix in the notice of such sale. At any such sale the Collateral may be sold in one lot as an entirety or in separate parcels, as the Agent may determine. The Agent shall not be obligated to make any such sale pursuant to any such notice. The Agent may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for the sale, and such sale may be made at any time or place to which the same may be so adjourned. In case of any sale of all or any part of the Collateral on credit or for future delivery, the Collateral so sold may be retained by the Agent until the selling price is paid by the purchaser thereof, but the Agent
shall not incur any liability in case of the failure of such purchaser to take up and pay for the Collateral so sold and, in case of any such failure, such Collateral may again be sold upon like notice. The Agent, instead of exercising the power of sale herein conferred upon it, may proceed by a suit or suits at law or in equity to foreclose the Security Interests and sell the Collateral, or any portion thereof, under a judgment or decree of a court or courts of competent jurisdiction.
SECTION 11. EXPENSES.
The Pledgor agrees that it will forthwith upon demand pay to the Agent:
(i) the amount of any taxes which the Agent may have been required to pay by reason of the Security Interests or to free any of the Collateral from any Lien thereon, and
(ii) the amount of any and all out-of-pocket expenses, including the reasonable fees and disbursements of counsel and of any other experts, which the Agent may incur in connection with (w) the administration or enforcement of this Shareholder Pledge Agreement, including such expenses as are incurred to preserve the value of the Collateral and the validity, perfection, rank and value of any Security Interest, (x) the collection, sale or other disposition of any of the Collateral, (y) the exercise by the Agent of any of the rights conferred upon it hereunder or (z) any Default or Event of Default.
Any such amount not paid on demand shall bear interest as provided in Section 8.03 of the Credit Agreement.
SECTION 12. LIMITATION ON DUTY OF AGENT IN RESPECT OF COLLATERAL.
Beyond the exercise of reasonable care in the custody thereof, the Agent shall have no duty as to any Collateral in its possession or control or in the possession or control of any agent or bailee or any income thereon or as to the preservation of rights against prior parties or any other rights pertaining thereto. The Agent shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral in its possession if the Collateral is accorded treatment substantially equal to that which it accords its own property, and shall not be liable or responsible for any loss or damage to any of the Collateral, or for any diminution in the value thereof, by reason of the act or omission of any agent or bailee selected by the Agent in good faith.
SECTION 13. APPLICATION OF PROCEEDS.
Upon the occurrence and during the continuance of an Event of Default, the proceeds of any sale of, or other realization upon, all or any part of the Collateral and any cash held shall be applied by the Agent in the following order of priorities:
first, to payment of the expenses of such sale or other realization, including reasonable compensation to agents and counsel for the Agent, and all expenses, liabilities
and advances incurred or made by the Agent in connection therewith, and any other unreimbursed expenses for which the Agent or any Secured Party is to be reimbursed pursuant to Section 8.04 of the Credit Agreement or Section 11 hereof and unpaid fees owing to the Agent under the Credit Agreement;
second, to the ratable payment of accrued but unpaid interest on the Secured Obligations in accordance with the provisions of the Credit Agreement;
third, to the ratable payment of unpaid principal of the Secured Obligations;
fourth, to the ratable payment of all other Secured Obligations, until all Secured Obligations shall have been paid in full; and
finally, to payment to the Pledgor or its successors or assigns, or as a court of competent jurisdiction may direct, of any surplus then remaining from such proceeds.
SECTION 14. PLEDGOR'S OBLIGATIONS ABSOLUTE, ETC.
(a) The obligations of the Pledgor under this Shareholder
Pledge Agreement shall be absolute and unconditional in accordance with its
terms and shall remain in full force and effect without regard to, and shall not
be released, suspended, discharged, terminated or otherwise affected by, any
circumstance or occurrence whatsoever, including, without limitation any of the
following (whether or not the Pledgor consents thereto or has notice thereof):
(i) any change in the time, place or manner of payment of, or in any other term
of, all or any of the Secured Obligations, any waiver, indulgence, renewal,
extension, amendment or modification of or addition, consent or supplement to or
deletion from or any other action or inaction under or in respect of any of the
Secured Obligations or any documents, instruments or agreements relating to the
Secured Obligations or any assignment or transfer of any thereof, (ii) any lack
of validity or enforceability of any of the Secured Obligations or any
documents, instruments or agreements relating to any of the Secured Obligations
or any assignment or transfer of any thereof, (iii) any furnishing of any
additional security to any Secured Party for any of the Secured Obligations, or
its assignees, or any acceptance thereof or any release of any other security
for any of the Secured Obligations by any Secured Party, (iv) any bankruptcy,
insolvency, reorganization, composition, adjustment, dissolution, liquidation or
other like proceeding relating to the Pledgor or the Company, or any action
taken with respect to this Shareholder Pledge Agreement by any trustee or
receiver, or by any court, in any such proceeding, whether or not the Pledgor
shall have notice or knowledge of any of the foregoing, (v) any exchange,
release or nonperfection of any collateral, or any release, or amendment or
waiver of or consent to departure from any guaranty or security, for all or any
of the Secured Obligations, (vi) the failure of any Secured Party to assert any
claim or demand or to enforce any right or remedy in respect of any of the
Secured Obligations against the Company or any other Credit Party under the
provisions of the Financing Documents or otherwise, or (vii) any other act or
failure to act by any Secured Party which may adversely affect the Pledgor.
(b) Pledgor hereby waives: (i) notice of acceptance of this Shareholder Pledge Agreement by the Agent, (ii) notice of the creation, existence, acquisition, extension or renewal of
any of the Secured Obligations, (iii) notice of the amount of the Secured Obligations outstanding at any one time, (iv) notice of any default or event of default with respect to any of the Secured Obligations or notice of any other adverse change in the Company's financial condition or means or ability to pay any of the Secured Obligations or perform its obligations or notice of any other fact which might increase the Pledgor's risk hereunder, (v) notice of presentment, demand, protest and notice of dishonor or non-payment as to any of the Secured Obligations, (vi) notice of any acceleration or other demand for payment of any of the Secured Obligations, and (vii) all other notices and demands to which the Pledgor might otherwise be entitled with respect to any of the Secured Obligations. The Pledgor further waives any right the Pledgor may have, by statute or otherwise, to require that the Secured Parties (or any of them) seek recourse first against the Company or any other Credit Party or obligor, or to realize upon any collateral for any of the Secured Obligations other than the Collateral pledged hereunder, as a condition precedent to enforcing the Agent's rights and remedies under this Agreement in the Collateral, and the Pledgor further waives any defense arising by reason of any incapacity or other disability of the Company or by reason of any other defense which the Company may have against the Secured Parties (or any of them) on any of the Secured Obligations. The Pledgor further consents and agrees that, without notice to or consent by the Pledgor and without affecting or impairing this Shareholder Pledge Agreement and the lien, security interest and security title granted hereunder, the Secured Parties may compromise or settle, extend the period of duration or the time for the payment, discharge or performance of any of the Secured Obligations or may refuse to enforce or may release the Company or any of the Credit Parties or any other obligor or any other collateral therefor, or may grant other indulgences to the Company or any of the Credit Parties or any other obligor in respect thereof, or may waive, amend or supplement in any manner the provisions of any document, instrument, guaranty, or agreement relating to or securing any of the Secured Obligations (other than this Shareholder Pledge Agreement) or may release, surrender, exchange, modify or compromise any and all collateral securing any of the Secured Obligations (other than the Collateral) or in which any of the Secured Parties may at any time have a lien, or may refuse to enforce its rights or may make any compromise or settlement or agreement therefor, in respect of any or all of such collateral.
SECTION 15. EXCULPATION.
Notwithstanding anything in this Shareholder Pledge Agreement to the contrary, the Pledgor shall have no personal liability to the Agent or the Lenders under this Shareholder Pledge Agreement for the Secured Obligations or any of the Pledgor's respective covenants, obligations or other liabilities under this Shareholder Pledge Agreement beyond the rights, titles and interests of the Pledgor in the Collateral covered by this Shareholder Pledge Agreement and the Agent and the Lenders shall not sue or otherwise proceed against the Pledgor to collect any deficiency which may remain owing on the Secured Obligations or any of such other covenants, obligations or liabilities after the exercise by the Agent of its rights and remedies hereunder with respect to the Collateral. The foregoing provisions concern only the personal liability of the Pledgor under this Shareholder Pledge Agreement and do not in any manner, and shall not be interpreted or construed to, diminish, affect, impede, impair or otherwise modify in any manner whatsoever the rights, titles and interests of the Agent or any Lender in and to the Collateral under this Shareholder Pledge Agreement, or the pursuit or exercise by the Agent or any Lender of its
rights and remedies with respect to the Collateral under this Shareholder Pledge Agreement, the priority and enforceability of the Agent's rights, titles and interests in and to the Collateral under this Agreement, or any other rights or remedies which the Agent or any Lender may have against the Company or any other Credit Party or any other obligor, or any other rights or remedies the the Agent or the Lenders may have against the Company or any other Credit Party under the Credit Agreement or the other Financing Documents.
SECTION 16. WAIVER OF CERTAIN RIGHTS.
The Pledgor expressly postpones, and temporarily waives any right to exercise, any and all rights of subrogation, reimbursement, indemnity, exoneration or contribution or any other claim which the Pledgor may now or hereafter have against the Company or against any property of the Company arising from the existence or enforcement of the Agent's rights and remedies or the Pledgor's obligations and liabilities under this Shareholder Pledge Agreement until the Secured Obligations are indefeasibly paid in full.
SECTION 17. SUBORDINATION OF THE COMPANY'S OBLIGATIONS TO GUARANTOR.
As an independent covenant, the Pledgor hereby expressly covenants and agrees for the benefit of the Agent and the Lenders that all present or future indebtedness, obligations and liabilities of the Company to the Pledgor of whatsoever description (collectively, the "JUNIOR CLAIMS") shall be subordinate and junior in right of payment to all Secured Obligations (collectively, the "SENIOR CLAIMS"), effective upon the occurrence and during the continuance of an Event of Default under the Credit Agreement. If an Event of Default under the Credit Agreement shall occur and be continuing, then, unless and until the Event of Default shall have been cured or shall have ceased to exist, no direct or indirect payment (in cash, property, securities by set-off or otherwise) shall be made by the Company to the Pledgor on account of or in any manner in respect of any Junior Claim except such payments and distributions the proceeds of which shall be applied to the Senior Claims. In the event of a Proceeding (as hereinafter defined), all Senior Claims shall first be paid in full before any direct or indirect payment or distribution (in cash, property, securities by set-off or otherwise) shall be made to the Pledgor on account of or in any manner in respect of any Junior Claim except such payments and distributions the proceeds of which shall be applied to the Senior Claims. For the purposes of the previous sentence, a "PROCEEDING" shall occur if the Company shall make an assignment for the benefit of creditors, file a petition in bankruptcy, have entered against or in favor of it an order for relief under the Bankruptcy Code (11 U.S.C. ss.ss. 101 et. seq.), as amended, or similar law of any other jurisdiction, generally fail to pay its debts as they come due (either as to number or amount), admit in writing its inability to pay its debts generally as they mature, make a voluntary assignment for the benefit of creditors, commence any proceeding relating to it under any reorganization, arrangement, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction, whether now or hereafter in effect, or by any act, indicate its consent to, approval of or acquiescence in any such proceeding or in the appointment of any receiver of, or trustee or custodian (as defined in the Bankruptcy Code) for itself, or any substantial part of its property, or a trustee or a receiver shall be appointed for the Company or for a substantial part of the property of the Company and such appointment remains in effect for more than sixty (60) days or the
Company shall indicate its consent thereto, approval therefor or acquiescence therein, or a petition under any bankruptcy, reorganization, arrangement, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction (whether now or hereafter in effect) shall be filed against the Company and such petition shall not be dismissed within sixty (60) days after such filing, an order for relief shall be entered in such proceeding, or the Company shall indicate its consent thereto, approval therefor or acquiescence therein. In the event any direct or indirect payment or distribution is made to the Pledgor in contravention of this Section, such payment or distribution shall be deemed received in trust for the benefit of the Agent and the Lenders and shall be immediately paid over to the Agent for application against the Secured Obligations. The Pledgor agrees to execute such additional documents as the Agent may reasonably request to evidence the subordination provided for in this Section.
SECTION 18. CONCERNING THE AGENT.
The provisions of Section 8.05 and Article IX of the Credit Agreement shall inure to the benefit of the Agent in respect of this Shareholder Pledge Agreement and shall be binding upon the parties to the Credit Agreement in such respect. In furtherance and not in derogation of the rights, privileges and immunities of the Agent therein set forth:
(A) The Agent is authorized to take all such action as is provided to be taken by it as Agent hereunder and all other action reasonably incidental thereto. As to any matters not expressly provided for herein (including, without limitation, the timing and methods of realization upon the Collateral) the Agent shall act or refrain from acting in accordance with written instructions from the Required Lenders or, in the absence of such instructions, in accordance with its discretion.
(B) The Agent shall not be responsible for the existence, genuineness or value of any of the Collateral or for the validity, perfection, priority or enforceability of the Security Interests in any of the Collateral, whether impaired by operation of law or by reason of any action or omission to act on its part hereunder. The Agent shall have no duty to ascertain or inquire as to the performance or observance of any of the terms of this Shareholder Pledge Agreement by the Pledgor.
SECTION 19. APPOINTMENT OF CO-AGENTS.
At any time or times, in order to comply with any legal requirement in any jurisdiction, the Agent may appoint another bank or trust company or one or more other persons, either to act as co-agent or co-agents, jointly with the Agent, or to act as separate agent or agents on behalf of the Secured Parties with such power and authority as may be necessary for the effectual operation of the provisions hereof and may be specified in the instrument of appointment (which may, in the discretion of the Agent, include provisions for the protection of such co-agent or separate agent similar to the provisions of Section 18).
SECTION 20. TERMINATION OF SECURITY INTERESTS; RELEASE OF COLLATERAL.
Upon the repayment in full of all Secured Obligations (other than contingent indemnity or similar claims not yet asserted) and the termination of the Commitment under the Credit Agreement, the Security Interests shall terminate and all rights to the Collateral shall revert to the Pledgor. At any time and from time to time prior to such termination of the Security Interests, the Agent may release any of the Collateral with the prior written consent of the Lenders. Upon any such termination of the Security Interests or release of Collateral, the Agent will, at the expense of the Pledgor, execute and deliver to the Pledgor such documents as the Pledgor shall reasonably request to evidence the termination of the Security Interests or the release of such Collateral, as the case may be.
SECTION 21. NOTICES.
All notices, communications and distributions hereunder shall be given in accordance with Section 10.03 of the Credit Agreement. With respect to the Pledgor, all such notices, communications and distributions hereunder shall be given to the Pledgor at its address or telecopy or telex number set forth on their signature pages hereof or at such other address or telecopy or telex number as the Pledgor may hereafter specify for the purpose by notice to the Agent and the Company.
SECTION 22. WAIVERS, NON-EXCLUSIVE REMEDIES.
No failure on the part of the Agent to exercise, and no delay in exercising and no course of dealing with respect to, any right under this Shareholder Pledge Agreement shall operate as a waiver thereof; nor shall any single or partial exercise by the Agent of any right under the Credit Agreement, any other Financing Document or this Shareholder Pledge Agreement preclude any other or further exercise thereof or the exercise of any other right. The rights in this Shareholder Pledge Agreement, the other Security Documents and the Credit Agreement are cumulative and are not exclusive of any other remedies provided by law.
SECTION 23. SUCCESSORS AND ASSIGNS.
This Shareholder Pledge Agreement is for the benefit of the Agent and the other Secured Parties and their successors and assigns, and in the event of an assignment of all or any of the Secured Obligations, the rights hereunder, to the extent applicable to the indebtedness so assigned, may be transferred with such indebtedness. This Shareholder Pledge Agreement shall be binding on the Pledgor and its successors and assigns.
SECTION 24. CHANGES IN WRITING.
Neither this Shareholder Pledge Agreement nor any provision hereof may be changed, waived, discharged or terminated orally, but only in writing signed by the Pledgor and the Agent with the consent of the Required Lenders (or in the case of Section 20, all of the Lenders).
SECTION 25. GEORGIA LAW.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF GEORGIA (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW), EXCEPT AS OTHERWISE REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT REMEDIES PROVIDED BY THE LAWS OF ANY JURISDICTION OTHER THAN GEORGIA ARE GOVERNED BY THE LAWS OF SUCH JURISDICTION.
SECTION 26. SEVERABILITY.
If any provision hereof is invalid or unenforceable in any jurisdiction, then, to the fullest extent permitted by law, (i) the other provisions hereof shall remain in full force and effect in such jurisdiction and shall be liberally construed in favor of the Agent and the Secured Parties in order to carry out the intentions of the parties hereto as nearly as may be possible; and (ii) the invalidity or unenforceability of any provision hereof in any jurisdiction shall not affect the validity or enforceability of such provision in any other jurisdiction.
SECTION 27. COUNTERPARTS.
This Shareholder Pledge Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Shareholder Pledge Agreement to be duly executed and delivered by their respective authorized officers as of the day and year first above written.
PLEDGOR:
Address for Notices:
Telecopy No. (____) ___________________
Telephone No. (____) __________________
NATIONSCREDIT COMMERCIAL
CORPORATION, AS AGENT
SECTION 17 OF THE FOREGOING
AGREEMENT ACKNOWLEDGED
AND AGREED TO:
VISTA HOSPICE CARE, INC.
SCHEDULE I
PLEDGED STOCK
NUMBER AND PERCENTAGE OF
NAME OF CORPORATION CLASS OF SHARES SHARES OF SUCH CLASS
------------------- --------------- --------------------
Vista Hospice Care, Inc.
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EXHIBIT K
BORROWING BASE CERTIFICATE
I, ________________, the ____________ of Horizon Medical Products, Inc. (the "COMPANY"), DO HEREBY CERTIFY, pursuant to the Credit Agreement dated as of July 15, 1997 (as amended from time to time, the "CREDIT AGREEMENT") among the Company, the Lenders referred to therein and NationsCredit Commercial Corporation, as Agent, that attached hereto as Exhibit A is a true and accurate calculation of the Borrowing Base of the Company as of __________, 19__, determined in accordance with the requirements of the Credit Agreement.
Capitalized terms used herein and not otherwise defined herein have the meanings assigned to them in the Credit Agreement.
IN WITNESS WHEREOF, I have signed this certificate as of this ___ day of ____________, 19__.
Title:
Exhibit A
to
BORROWING BASE CERTIFICATE
(all numbers in thousands)
As at ____________, 19__
************************************************************
DOMESTIC ACCOUNTS RECEIVABLE
Gross Domestic Accounts Receivable ________
Less:
(a) Accounts not denominated in US dollars ________
(b) Receivables that do not comply with all applicable ________
legal requirements
(c) Receivables subject to an unresolved dispute (to the ________
extent of such dispute)
(d) Receivables payable more than 90 days after the date ________
of the issuance of the original invoice
(e) Receivables that remain unpaid for more than 60 days ________
from the original due date specified in the original
invoice
(f) Unbilled Receivables, and Receivables for unshipped ________
goods or services not yet performed
(g) Receivables arising outside the ordinary course of ________
business of the Company
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(h) Receivables for which there has been established a ________
contra account, due from an account debtor to whom
the Company owes a trade payable, or otherwise
subject to a setoff or counterclaim, but only to the
extent of such trade payable, setoff or counterclaim
(i) Receivables not subject to a first priority perfected ________
Lien under the Security Agreement and Receivables
evidenced by an "instrument" (as defined in the
Uniform Commercial Code) not in possession of the
Agent
(j) Receivables due from an ineligible account debtor(1) ________
(k) Receivables due from an account debtor that the ________
Company has not instructed in its invoice to make
payments on such receivables to the Lockbox Account
(as defined in the Security Agreement) or from any
account debtor that makes payments in a form that
cannot be accepted in the Lockbox Account
(l) Receivables due from an account debtor from whom more ________
than 20% of the aggregate Receivables of the Company
are due, but only to the extent of such excess Total
Ineligible Domestic Receivables
ELIGIBLE DOMESTIC RECEIVABLES $______ X 80% = ______
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FOREIGN SECURED ACCOUNTS RECEIVABLE
Gross Foreign Secured Accounts Receivable ________
Less:
(a) Accounts not denominated in US dollars ________
(b) Receivables that do not comply with all applicable ________
legal requirements
(c) Receivables subject to an unresolved dispute (to the ________
extent of such dispute)
(d) Receivables payable more than 90 days after the date ________
of the issuance of the original invoice
(e) Receivables that remain unpaid for more than 60 days ________
from the original due date specified in the original
invoice
(f) Unbilled Receivables, and Receivables for unshipped ________
goods or services not yet performed
(g) Receivables arising outside the ordinary course of ________
business of the Company
(h) Receivables for which there has been established a ________
contra account, due from an account debtor to whom
the Company owes a trade payable, or otherwise
subject to a setoff or counterclaim, but only to the
extent of such trade payable, setoff or counterclaim
(i) Receivables not subject to a first priority perfected ________
Lien under the Security Agreement and Receivables
evidenced by an "instrument" (as defined in the
Uniform Commercial Code) not in possession of the
Agent
(j) Receivables due from an ineligible account debtor(2) ________
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(k) Receivables due from an account debtor that the ________
Company has not instructed in its invoice to make
payments on such receivables to the Lockbox Account
(as defined in the Security Agreement) or from any
account debtor that makes payments in a form that
cannot be accepted in the Lockbox Account
(l) Receivables due from an account debtor from whom more ________
than 20% of the aggregate Receivables of the Company
are due, but only to the extent of such excess Total
Ineligible Foreign Secured Receivables
ELIGIBLE FOREIGN SECURED RECEIVABLES $______ X 80% = ______
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FOREIGN UNSECURED ACCOUNTS RECEIVABLE
Gross Foreign Unsecured Accounts Receivable ________
Less:
(a) Accounts not denominated in US dollars ________
(b) Receivables that do not comply with all applicable ________
legal requirements
(c) Receivables subject to an unresolved dispute (to the ________
extent of such dispute)
(d) Receivables payable more than 90 days after the date ________
of the issuance of the original invoice
(e) Receivables that remain unpaid for more than 60 days ________
from the original due date specified in the original
invoice
(f) Unbilled Receivables, and Receivables for unshipped ________
goods or services not yet performed
(g) Receivables arising outside the ordinary course of ________
business of the Company
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(h) Receivables for which there has been established a ________
contra account, due from an account debtor to whom
the Company owes a trade payable, or otherwise
subject to a setoff or counterclaim, but only to the
extent of such trade payable, setoff or counterclaim
(i) Receivables not subject to a first priority perfected ________
Lien under the Security Agreement and Receivables
evidenced by an "instrument" (as defined in the
Uniform Commercial Code) not in possession of the
Agent
(j) Receivables due from an ineligible account debtor(3) ________
(k) Receivables due from an account debtor that the ________
Company has not instructed in its invoice to make
payments on such receivables to the Lockbox Account
(as defined in the Security Agreement) or from any
account debtor that makes payments in a form that
cannot be accepted in the Lockbox Account
(l) Receivables due from an account debtor from whom more ________
than 20% of the aggregate Receivables of the Company
are due, but only to the extent of such excess Total
Ineligible Foreign Unsecured Receivables
ELIGIBLE FOREIGN UNSECURED RECEIVABLES $______(4) X 50% = ______
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(4) Not to exceed $500,000.
INVENTORY
Value (determined at the lower of cost or market on a
basis consistent with that used in the preparation of
the financial statements referred to in Section
6.04(a) of the Credit Agreement) of all Inventory
owned by the Company and located in any jurisdiction
in the United States of America as to which
appropriate UCC financing statements have been filed
naming the Company as "debtor" and the Agent as
"secured party", all net of any amounts payable by
the Company in respect of commissions, processing
fees or other charges ________
Less:
(i) Inventory shipped to a provider of services, or to a
customer, even if on a consignment or "sale or
return" basis ________
(ii) Inventory that is subject to a Lien (other than Liens
created pursuant to the Security Documents) ________
(iii) Inventory against which a reserve has been taken ________
(iv) Inventory not subject to a perfected first priority
lien under the Security Agreement, and subject to no
prior or equal Lien ________
(v) Inventory not produced in compliance with the
applicable requirements of the Fair Labor Standards
Act ________
(vi) Supply, scrap or obsolete Inventory and Inventory not
reasonably marketable ________
Total Ineligible Inventory ________
ELIGIBLE INVENTORY $______ X 50% = ______
BORROWING BASE TOTAL $_______________
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EXHIBIT L
OPINION OF
COUNSEL FOR THE COMPANY
* * * *
1. The Security Agreement creates a valid security interest, for the benefit of the Secured Parties, in all the Company's right, title and interest in all Collateral to the extent the UCC is applicable thereto (the "SECURITY INTEREST").
2. UCC financing statements and amendments thereto
(collectively, the "FINANCING STATEMENTS") have been filed in the filing offices
listed in Schedule 7 to the Perfection Certificate (the "FILING JURISDICTIONS"),
which are all of the offices in which filings are required to perfect the
Security Interest, to the extent the Security Interest may be perfected by
filing under the UCC, and no further filing or recording of any document or
instrument or other action will be required so to perfect the Security Interest
in the Collateral in which a security interest may be perfected by filing a
financing statement under the UCC, except that (i) continuation statements with
respect to each Financing Statement must be filed in accordance with the UCC;
(ii) additional filings may be necessary if the Company changes its name,
identity or corporate structure or the jurisdiction in which its places of
business, its chief executive office or the Collateral are located; and (iii) we
express no opinion on the perfection of, or need for further filing or recording
to perfect, the Security Interest in goods now or hereafter located in any
jurisdiction other than the Filing Jurisdictions.
3. There are
(i) Based on [describe search reports], as of that date of such reports, no UCC financing statements which name the Company as debtor or seller and cover any of the Collateral, other than the Financing Statements, [and the financing statements with respect to Permitted Liens annexed as Schedule 5(A) to the Perfection Certificate], listed in the available records in the UCC filing offices set forth in paragraphs 2 and 3 of the Perfection Certificate, which, based on the information provided to us as to the location of the Collateral, the Company and its books and records, include all of the offices prescribed under the UCC as the offices in which filings should have been made to perfect security interests in the Collateral; and
(ii) Based on [describe search reports], as of that date of such reports, no notices of the filing of any federal tax lien (filed pursuant to Section 6323 of the Internal Revenue Code) or any lien of the Pension Benefit Guaranty Corporation (filed pursuant to Section 4068 of ERISA) covering any of the Collateral listed in the available records in the [UCC filing office in state of Company's chief executive office], which is the only office having files which must be searched in order to fully determine the existence of notices of the filing of federal tax liens (filed pursuant to Section 6323 of the Internal
Revenue Code) on the Collateral and liens of the Pension Benefit Guaranty Corporation (filed pursuant to Section 4068 of ERISA) on the Collateral.
4. The Security Interest validly secures the payment of all future Loans made by the Lenders to the Company, whether or not at the time such Loans are made an Event of Default or other event not within the control of the Lenders has relieved or may relieve the Lenders from their obligations to make such Loans, and is perfected to the extent set forth in paragraph 2 above with respect to such future Loans. Insofar as the priority thereof is governed by the UCC, the Security Interest has the same priority with respect to such future Loans as it does with respect to Loans made on the date hereof.
Such opinion may contain such assumptions, qualifications and limitations as the opinion of counsel for the Company delivered in connection with the making of the initial Loan under the Credit Agreement.
EXHIBIT D
FORM OF LOCKBOX AGREEMENT
SCHEDULE 6
Description of Collateral
All accounts, chattel paper, contract rights, general intangibles, inventory, equipment and documents, and all other property of the Debtor all as more particularly described on Exhibit A attached hereto, now owned or hereafter acquired, wherever located, and all proceeds thereof.
SCHEDULE 7
SCHEDULE OF FILINGS
Date
Debtor Filing Office File Number of Filing
------------------------------------------------------------------------------------------------
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* Indicate lapse date, if other than fifth anniversary.
EXHIBIT 10.9
LEASE AGREEMENT
THE DEVELOPMENT AUTHORITY OF THE CITY OF MANCHESTER
AND
HORIZON MEDICAL PRODUCTS, INC.
Dated as of July 1, 1996
This Lease Agreement (including the Trustee's rights but excluding certain rights of The Development Authority of the City of Manchester) has been assigned to Synovus Trust Company, Columbus, Georgia, as Trustee, and is subject to a security interest in favor of the Trustee under the Indenture of Trust dated as of the date hereof by and between The Development Authority of the City of Manchester and the Trustee.
LEASE AGREEMENT
Table of Contents
(The Table of Contents is not a part of the Lease Agreement but is for convenience of reference only)
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions ............................................................................... 1
SECTION 1.2. Rules of Construction ..................................................................... 6
ARTICLE II
AGREEMENTS AND REPRESENTATIONS
SECTION 2.1. Representations by the Issuer ............................................................. 7
SECTION 2.2. Representations by the Company ............................................................ 8
ARTICLE III
LEASING CLAUSES AND WARRANTY OF TITLE
SECTION 3.1. Agreement to Acquire, Construct, Install, Improve and
Equip the Project .........................................................................13
SECTION 3.2. Lease of the Project ......................................................................14
SECTION 3.3. Issuer to Pursue Remedies Against Suppliers, Contractors
and Subcontractors and Their Sureties .....................................................14
SECTION 3.4. Quiet Enjoyment ...........................................................................15
SECTION 3.5. Restrictions on Sale of Project by Issuer .................................................15
ARTICLE IV
ISSUANCE OF THE BONDS
SECTION 4.1. Agreement to Issue Bonds: Application of Bond Proceeds;
Additional Bonds ..........................................................................15
SECTION 4.2. Disbursements from the Construction Fund ..................................................16
SECTION 4.3. Authorized Company's Representative .......................................................18
SECTION 4.4. Authorized Issuer's Representative ........................................................19
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ARTICLE V
EFFECTIVE DATE OF THIS AGREEMENT; DURATION OF
AGREEMENT TERM; REPAYMENT PROVISIONS
SECTION 5.1. Effective Date of this Agreement; Duration of Agreement Term ............................. 20
SECTION 5.2. Lease Payments Payable ................................................................... 20
SECTION 5.3. Payment of Lease Payments ................................................................ 21
SECTION 5.4. Obligations Unconditional ................................................................ 21
ARTICLE VI
MAINTENANCE, MODIFICATIONS, OPERATION, LIENS,
AFTER-ACQUIRED PROPERTY, INSURANCE AND
OTHER COVENANTS OF THE COMPANY
SECTION 6.1. Maintenance of Project .................................................................. 23
SECTION 6.2. Removal and Substitution of Project Fixtures ............................................ 24
SECTION 6.3. No Abatement of Lease Payments .......................................................... 24
SECTION 6.4. Liens and Encumbrances .................................................................. 24
SECTION 6.5. Permitted Contests ...................................................................... 25
SECTION 6.6. Notice of Event of Default .............................................................. 25
SECTION 6.7. Inspections, Reports and Financial Statements............................................ 26
SECTION 6.8. Other Financial Information ............................................................. 27
SECTION 6.9. Insurance ............................................................................... 27
SECTION 6.10. Additional Provisions Respecting Insurance .............................................. 28
SECTION 6.11. Damage, Destruction or Loss of Property; Obligation to
Rebuild; Use of Insurance Proceeds and Condemnation Awards................................28
SECTION 6.12. Assignment, Subleasing and Sale; Release ................................................ 30
SECTION 6.13. Proceeds from Title Insurance ........................................................... 32
SECTION 6.14. Maintenance of Corporate Existence ...................................................... 32
SECTION 6.15. Hazardous Substances .................................................................... 32
ARTICLE VII
SPECIAL COVENANTS
SECTION 7.1. Issuer's Expenses; Release and Indemnification Provisions ................................ 33
SECTION 7.2. Compliance With All Laws ................................................................. 34
SECTION 7.3. Arbitrage; Preservation of Tax-Exemption ................................................. 34
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SECTION 7.4. Certain Covenants with Respect to Compliance
with Arbitrage Requirements for Investments in
Nonpurpose Investments and Rebate to the United
States of America ........................................................................ 34
SECTION 7.5. Covenant as to Use of Bond Proceeds and Other Matters,
Payback Provision ........................................................................ 35
SECTION 7.6. Special Covenants Related to the Project ................................................. 36
ARTICLE VIII
REDEMPTION OF BONDS; PUT OPTION; ADDITIONAL LEASE
PAYMENTS; OBLIGATION CONTINUES; PREPAYMENT AND
ABATEMENT
SECTION 8.1. Redemption of Bonds ...................................................................... 37
SECTION 8.2. Permissible Prepayment of Lease Payments ................................................. 37
SECTION 8.3. Mandatory Prepayment of Lease Payments ................................................... 37
SECTION 8.4. [Intentionally Omitted] .................................................................. 38
SECTION 8.5. Vesting of Interest in Issuer ............................................................ 38
SECTION 8.6. References to Bonds Ineffective After Bonds Paid ......................................... 38
SECTION 8.7. Options .................................................................................. 38
ARTICLE IX
EVENTS OF DEFAULT AND REMEDIES
SECTION 9.1. Events of Default Defined ................................................................ 40
SECTION 9.2. Remedies on Default ...................................................................... 41
SECTION 9.3. Authorization to Foreclose ............................................................... 42
SECTION 9.4. No Remedy Exclusive ...................................................................... 42
SECTION 9.5. Agreement to Pay Attorneys' Fees and Expenses ............................................ 43
SECTION 9.6. No Additional Waiver Implied by One Waiver ............................................... 43
SECTION 9.7. Issuer's Right to Advance Funds upon Default;
Reimbursement of Same .................................................................... 43
ARTICLE X
MISCELLANEOUS
SECTION 10.1. Notices .................................................................................. 44
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SECTION 10.2. Binding Effect; Controlling Law ....................................................... 45
SECTION 10.3. Severability .......................................................................... 45
SECTION 10.4. Amounts Remaining in Funds ............................................................ 45
SECTION 10.5. Complete Agreement; Supplements or Amendment ......................................... 45
SECTION 10.6. Controlling Law; Members of Issuer Not Liable ......................................... 45
SECTION 10.7. Company Approval of Indenture ......................................................... 45
SECTION 10.8. Further Assurances .................................................................... 46
SECTION 10.9. Rights not Extinguished ............................................................... 46
SECTION 10.10. Agreed to and Accepted by Original Purchase ........................................... 46
SECTION 10.11. Execution of Counterparts ............................................................. 46
SECTION 10.12. No Warranty of Condition or
Suitability by Issuer ................................................................. 46
SECTION 10.13. Net Lease ............................................................................. 46
SECTION 10.14. Recording ............................................................................. 46
Exhibit A Project Description
Exhibit B Project Site
Exhibit C Project Fixtures
Exhibit D Permitted Encumbrances
Exhibit E Plans and Specifications
Exhibit F Basic Contract
Exhibit G General Contract
Exhibit H Commitment Letter
Exhibit I Budget
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LEASE AGREEMENT
THIS LEASE AGREEMENT, made and entered into as of the 1st day of July, 1996, between THE DEVELOPMENT AUTHORITY OF THE CITY OF MANCHESTER (the "Issuer"), a public body corporate and politic organized and existing under the laws of the State of Georgia, and HORIZON MEDICAL PRODUCTS, INC., a Georgia corporation (the "Company").
WITNESSETH:
In consideration of the respective representations and agreements hereinafter contained, the parties hereto agree as follows (provided, that in the performance of the agreements of the Issuer herein contained, any obligation it may thereby incur for the payment of money shall not be a general debt, liability or obligation of the City of Manchester, the Issuer or of the State of Georgia or any political subdivision thereof but shall be payable solely out of the rents, payments and revenues derived from or pursuant to this Lease Agreement and the other collateral expressly pledged and encumbered therefor and from the sale of the Bonds referred to in Section 4.1 hereof):
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. Unless otherwise defined in the Indenture or some other meaning is plainly intended, the following terms shall have the following definitions:
"Act" means the Constitution of the State of Georgia and an act of the General Assembly of the State of Georgia which is codified at O.C.G.A. Section 36-62-1, et seq., as amended and an activating resolution of the City Council of the City of Manchester adopted on December 8, 1975, and other applicable provisions of law.
"Additional Bonds" means any additional parity Bonds authorized to be issued by the Issuer pursuant to the Indenture.
"Agreement" means this Lease Agreement and any amendments and supplements hereto.
"Agreement Term" means the duration of this Agreement as specified in
Section 5.1 hereof, subject to any options to extend or terminate this Agreement
in Section 8.7 herein.
"Architect" means Hal Herndon & Associates, P.C. and its successors and assigns.
"Authorized Company's Representative" means the person at the time designated to act on behalf of the Company by written certificate furnished to the Issuer and the Trustee containing the specimen signature of such person, which certificate may designate an alternate or alternates.
"Authorized Issuer Representative" means the person at the time designated to act on behalf of the Issuer by written certificate furnished to the Trustee containing the specimen signature of such person, which certificate may designate an alternate or alternates.
"Basic Contract" means a certain contract relating to infrastructure improvements between and among the Issuer, the Company and the Langford Construction Company of LaGrange, Georgia dated March 15, 1996 and attached hereto as Exhibit F.
"Bond Counsel" means counsel experienced in matters relating to the validity of, and the exclusion from gross income for federal income tax purposes of interest on, obligations of states and their political subdivisions.
"Bondholder" means the registered owner (or its authorized representative) of any Bonds at any time outstanding.
"Bond Registrar" means the registrar appointed by the Issuer, from time to time, under the provisions of Section 2.05 of the Indenture.
"Bonds" means the 1996 Bonds and any Additional Bonds issued under the Indenture.
"1996 Bonds" means the $705,000 The Development Authority of the City of Manchester Industrial Development Revenue Bonds (Horizon Medical Products, Inc. Project), Series 1996.
"Bond Year" means initially, the period commencing on July 2, 1996 and ending July 1, 1997, and thereafter means the period commencing on the 2nd day of July of any calendar year and ending on the 1st day of June of the next succeeding year.
"Budget" means the budget as set forth in Exhibit I of this Agreement and attached hereto.
"Business Day" means any day other than (i) a Saturday or Sunday, (ii) a day on which banking institutions in the State of Georgia are authorized by law or executive order to close, (iii) a day on which the New York Stock Exchange is closed, or (iv) a day on which the payment system of the Federal Reserve Bank is not operational.
"Chairman" means the Chairman or Vice Chairman of the Issuer.
"City" means the City of Manchester, Georgia.
"Code" or "1986 Code" means the Internal Revenue Code of 1986, as amended, or any corresponding provision of any future laws of the United States of America relating to federal income taxation, and except as otherwise provided herein or required by the context hereof, includes interpretations thereof contained or set forth in the applicable regulations of the Department of the Treasury (including applicable final regulations, temporary regulations and proposed regulations), the applicable rulings of the Internal Revenue Service (including published Revenue Rulings and private letter rulings) and applicable court decisions.
"Commitment Letter" means the Commitment Letter, dated March 11, 1996, from the Issuer to the Company, attached hereto as Exhibit H.
"Company" means Horizon Medical Products, Inc. and its successors and assigns.
"Construction Fund" means the fund so designated created by Section 5.01 of the Indenture.
"Cost" or "Costs" means any item of cost within any proper definition of such term under the Act.
"County" means Meriwether County, a political subdivision of the State of Georgia.
"Deed to Secure Debt" means the Deed to Secure Debt, dated as of July 1, 1996, or modified or amended from the Issuer to the Trustee.
"Facility" means that certain building or portion thereof or improvements thereof and all other facilities and improvements forming a part of the Project to be constructed on the Project Site and not constituting part of the Project Fixtures, as they may at any time exist, which is generally described in Exhibit A hereto; provided, however, any improvements or other facilities and structures constructed by the Company on the Project Site outside of the Facility as permitted by the Agreement shall not constitute a part of the Facility.
"Federal Tax Rate" means the maximum incremental percentage rate of federal income tax applicable to the taxable income of corporations.
"General Contract" means a certain contract between and among the Issuer, the Company and Langford Construction Company of LaGrange, Georgia, dated March 15, 1996, and attached hereto as Exhibit G.
"Guarantors" means Cardiac Medical, Inc., and Individual Guarantors.
"Guaranty Agreement" means the Guaranty Agreement, dated as of July 1, 1996, from the Guarantors to the Trustee and the Original Purchaser, guarantying the obligations of the Company under the Agreement.
"Hazardous Substance" means and includes those elements, wastes, compounds, materials or substances contained in the list of hazardous substances adopted by the EPA or the list of toxic pollutants designated by the United States Congress or the EPA or defined by any other Federal, state or local statute, law, ordinance, code, rule, regulation, order or decree regulating, relating to, or imposing liability or standards of conduct concerning any hazardous, toxic of dangerous waste, substance or material.
"Indenture" means the Indenture of Trust between the Issuer and the Trustee, of even date herewith, pursuant to which (i) the Bonds are authorized to be issued and (ii) the Issuer's interest in this Agreement and the Lease Payments and other revenues received by the Issuer are to be pledged and assigned to the Trustee, and includes any indenture supplemental thereto.
"Individual Guarantors" means, collectively, Marshall B. Hunt, William E. Peterson, Jr. and Roy C. Mallady, Jr.
"Issuance Costs" means all costs that are treated as costs of issuing or carrying the Bonds under existing U.S. Treasury Department regulations and rulings.
"Issuance Date" means the date that the Project is certified by the contractor and the Architect, as having been completed according to the Plans and Specifications, unless disputed by the Company, in which case, as determined by the Architect, whose determination shall be binding on the Issuer and the Company.
"Issuer" means The Development Authority of the City of Manchester, a public corporate and politic organized and existing under the laws of the State of Georgia, and its successors and assigns.
"Lease Payments" means the payments described in Article V hereof and required to be paid under the terms hereof.
"Net Proceeds" means the proceeds from the sale of the Bonds advanced from time to time as set forth herein.
"Original Purchaser" means Columbus Bank and Trust Company.
"Permitted Encumbrances" means, as of any particular time, those items shown on Exhibit D.
"Plans and Specifications" means the plans and specifications for the expansion of and additions to the Facility, submitted to the Issuer by the Company, which shall have been approved by the Company, which comprise the basis of the contracts and which is attached as Exhibit E.
"Project" means the acquisition, installation, construction, improving and equipping of the Facility and the Project Fixtures on the Project Site, for the manufacture of medical products, all more particularly described in Exhibit "A" attached hereto.
"Project Fixtures" means the property, if any, which is described generally in Exhibit C hereto as shown on the Plans and Specifications, fixtures and any items of machinery, equipment or other tangible property acquired in substitution for, or as a renewal or replacement of or a modification or improvement to, such property.
"Project Site" means the real property described in Exhibit "B" attached hereto and to the Indenture, together with easements and other appurtenances thereto.
"Qualified Project Costs" means Costs of the Project paid or incurred with respect to the Project:
(a) for the acquisition, construction, reconstruction, or improvement
(i) of land or (ii) of property that is subject to exhaustion, wear and tear, or
obsolescence, that has a useful life in the hands of the Company of more than
one year, and that is otherwise of a character subject to the allowance for
depreciation under the Code; and
(b) that, under the Code, are chargeable to the Project's capital account or would be so chargeable either (i) with a proper election by the Company (for example, under Section 266 of the Code), or (ii) but for a proper election by the Company to deduct such amounts.
However, Costs paid prior to January 6, 1996 are not Qualified Project Costs. Further, neither working capital expenditures nor the financing of inventory nor Issuance Costs are Qualified Project Costs. Interest costs accruing during the construction period shall be allocated between Qualified Project Costs and other Costs to be paid from the proceeds of the Bonds. Interest costs accruing after the Construction Period are not Qualified Project Costs.
"Rebate Amount" means the excess of the future value, as of a computation date, of all receipts on nonpurpose investments (as defined in Section 1.148-3 of the Income Tax Regulations) over the future value, as of that date, of all payments on nonpurpose investments, all as provided by regulations under the Code implementing Section 148 thereof.
"Reimbursement Resolution" means the resolution of the Issuer adopted on March 6, 1995, expressing the intent of the Issuer to allow the Company to reimburse itself from proceeds of tax exempt bonds for amounts previously expended on the Project by the Company.
"Reserved Rights" means the rights of the Issuer under Sections 6.11, 6.15, 6.18, 7.1, 7.6, 9.5 and 9.7 hereof and its right to receive notices hereunder.
"Resolution" means the Resolution adopted by the Issuer on June 24, 1996.
"RLF Loan" means the loan from the Meriwether County/City of Manchester Joint Revolving Loan Fund to the Issuer in the original principal amount of $150,000.
"Sinking Fund" means The Development Authority of the City of Manchester Industrial Development Revenue Bonds (Horizon Medical Products, Inc. Project) Sinking Fund created by Section 6.02 of the Indenture.
"State" means the State of Georgia.
"Substantially all" means ninety-five percent (95%) or more, unless an opinion of Bond Counsel is rendered indicating that such term, as used herein, can have a different meaning.
"Trustee" means Synovus Trust Company, a Georgia trust company having its principal office in Columbus, Georgia, as the initial Trustee, and its corporate successors, and such other duly appointed trustee at any time serving as such under the Indenture.
"Yield" shall have the meaning given it by Section 1.148-l(b) of the Regulations and the "issue price" of the Bonds (within the meaning of Sections 1273(b) and 1274 of the 1986 Code and Section 1.148-l(b) of the Regulations) shall be used in calculating Yield.
SECTION 1.2. Rules of Construction. Words of the masculine gender shall be deemed and construed to include correlative words of the feminine and neuter genders. Unless the context shall clearly indicate to the contrary:
(a) The words "Bond," "holder," and "person" shall include the plural as well as the singular number;
(b) The word "person" shall include corporations and associations, including public bodies, as well as natural persons;
(c) "Herein", "hereby", "hereunder", "hereof", "hereinbefore", "hereinafter" and other equivalent words refer to this Agreement and not solely to the particular portion thereof in which any such word is used:
(d) All references herein to particular Articles or Sections are references to Articles or Sections of this Agreement: and
(e) All references herein to specific sections of the 1986 Code refer to such sections of the 1986 Code and all amendments to such sections and all successor or replacement provisions thereto.
ARTICLE II
AGREEMENTS AND REPRESENTATIONS
SECTION 2.1. Representations by the Issuer. The Issuer makes the following representations as the basis for the undertakings on its part herein contained:
(a) The Issuer is a public body corporate and politic organized and existing under the laws of the State of Georgia, and is duly authorized under the provisions of the Act to enter into, execute and deliver this Agreement and the Deed to Secure Debt, to issue the Bonds and to undertake the transactions contemplated by this Agreement and the Deed to Secure Debt and to carry out its obligations hereunder. By the duly adopted Resolution, the Issuer has duly authorized the execution and delivery of this Agreement and the Deed to Secure Debt and the Indenture.
(b) After reasonable public notice given by publication at least 14 days in advance in The Meriwether County Vindicator, a newspaper in general circulation in Meriwether County, Georgia, the Issuer held a public hearing on May 6,1996, concerning the issuance of the 1996 Bonds and the nature and location of the Project.
(c) On May 6, 1996, following such public hearing, the Mayor of the City of Manchester, Georgia, the chief elected official of Manchester, Georgia, approved the issuance of the 1996 Bonds. Manchester, Georgia has jurisdiction over the entire area in which the Project is located.
(d) The Issuer covenants that it will not pledge the amounts derived from this Agreement other than as contemplated by the Indenture.
(e) The Issuer has good and marketable title to that certain real property specifically described in Exhibit "B" attached hereto and incorporated herein by reference, subject only to Permitted Encumbrances.
(f) The real property specifically described in Exhibit "B" is located wholly within the jurisdictional limits of the City.
(g) There are no actions, suits, proceedings, inquiries or investigations pending, or to the knowledge of the Issuer threatened, against or affecting the Issuer in any court or before any governmental authority or arbitration board or tribunal, which involve the possibility of materially and adversely affecting the transactions contemplated by this Agreement or the Indenture or which, in any way, would adversely affect the validity or enforceability of the Bonds, the Indenture, this Agreement or any agreement or instrument to which the Issuer is a party and which is used or contemplated for use in the consummation of the transactions contemplated hereby or thereby.
(h) The issuance and sale of the Bonds and the execution and delivery by the Issuer of this Agreement and the Indenture, and the compliance by the Issuer with all of the provisions of each thereof and of the Bonds (i) are within the purposes, powers and authority of the Issuer, (ii) have been done in full compliance with the provisions of the Act, are legal and will not conflict with or constitute on the part of the Issuer a violation of or a breach of or default under, or result in the creation of any lien, charge or encumbrance upon any property of the Issuer (other than as contemplated by this Agreement and the Indenture) under the provisions of, any charter instrument, by-law, indenture, mortgage, deed of trust, note agreement or other agreement or instrument to which the Issuer is a party or by which the Issuer is bound, or any license, judgment, decree, law, statute, order, rule or regulation of any court or governmental agency or body having jurisdiction over the Issuer or any of its activities or properties, and (iii) have been duly authorized by all necessary corporate action on the part of the Issuer.
(i) Neither the nature of the Issuer nor any of its activities or properties, nor any relationship between the Issuer and any other person, nor any circumstance in connection with the offer, issue, sale or delivery of any of the Bonds is such as to require the consent, approval or authorization of, or the filing, registration or qualification with, any governmental authority on the part of the Issuer in connection with the execution, delivery and performance of this Agreement and the Indenture or the offer, issue, sale or delivery of the Bonds, other than those already obtained.
(j) No event has occurred and no condition exists with respect to the Issuer which would constitute an "event of default" as defined in this Agreement or the Indenture or which, with the lapse of time or with the giving of notice or both, would become an "event of default" under this Agreement or the Indenture. The Issuer is not in default under the Act or under any charter instrument, by-law or other agreement or instrument to which it is a party or by which it is bound.
SECTION 2.2. Representations by the Company. The Company makes the following representations as the basis for the undertakings on its part herein contained:
(a) The Company is a corporation duly organized and validly existing under the laws of the State of Georgia. The Company is not in violation of any provision of their operating agreements as amended, has the corporate power to enter into and perform this Agreement, and has duly authorized by proper corporate action the execution and delivery of this Agreement, and is qualified to do business and is in good standing under the laws of the State.
(b) The Company agrees that during the Term of Agreement it will maintain its existence, will not dissolve or otherwise dispose of all or substantially all of its assets and will not consolidate with or merge into another legal entity or permit one or more other legal entities to consolidate with or merge into it, without the prior written consent of the Issuer and the Bondholders which will not be unreasonably withheld or delayed; provided, however, no consent of the Issuer is required, if the surviving entity after any consolidation or merger as described above shall have substantially the same net worth or greater net worth as the Company prior to such consolidation or merger.
(c) To the best knowledge of the Company and its principals, based upon due diligence, neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby and thereby, nor the fulfillment of or compliance with the terms and conditions hereof or thereof conflicts with or results in a breach of the articles of incorporation, operating agreements or the bylaws, as applicable, of the Company or the terms, conditions, or provisions of any agreement or instrument to which the Company is now a party or by which the Company is bound, or constitutes a default under any of the foregoing, or results in the creation or imposition of any lien, charge or encumbrance whatsoever upon any of the property or assets of the Company under the terms of any such instrument or agreement.
(d) There is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, public board or body, known (to the Company and its principals) to be pending or threatened against or affecting the Company or any of its officers, nor to the best knowledge of the Company is there any basis therefor, wherein an unfavorable decision, ruling, or finding would materially adversely affect the transactions contemplated by this Agreement or which would adversely affect, in any way, the validity or enforceability of the Bonds, this Agreement or any agreement or instrument to which the Company is a party, used or contemplated for use in the consummation of the transactions contemplated hereby.
(e) The Project is of the type authorized and permitted by the Act, and its estimated Cost is not less than $705,000.
(f) The Net Proceeds from the sale of the Bonds will be used only for payment of Costs of the Project and to pay a portion of the costs of issuance of the Bonds. None of the Net Proceeds from the sale of the Bonds will be used as working capital or to finance inventory.
(g) The Company will use due diligence to cause the Project to be operated in accordance with the laws, rulings, regulations and ordinances of the State and the departments, agencies and political subdivisions thereof. The Company has obtained or will cause to be obtained all requisite approvals of the State and of other federal, state, regional and local governmental bodies for the acquisition, construction, improving and equipping of the Project.
(h) The Company will fully and faithfully perform all the duties and obligations which the Issuer has covenanted and agreed in the Indenture to cause the Company to perform, any
duties and obligations which the Company is required in the Indenture to perform and any delegable or assignable duties and obligations which the Issuer is required in the Indenture to perform. The foregoing shall not apply to any duty or undertaking of the Issuer which by its nature cannot be delegated or assigned.
(i) Except for any architectural. engineering, surveying, soil testing, or similar preliminary activities occurring earlier, the commencement of the construction, improvement and equipping of the Project, and each of the several components thereof, occurred on or after January 6, 1996, the date which is sixty (60) days prior to adoption by the Issuer of the Reimbursement Resolution. No proceeds of the 1996 Bonds will be used to reimburse the Company or the Issuer for amounts paid prior to such date other than for "preliminary expenditures" as defined in Section 1.150-2(f) of the Income Tax Regulations.
(j) The Project presently constitutes and at the completion thereof and until the expiration of the Agreement Term will constitute a "project" within the meaning of the Act.
(k) The Company has entered into various contracts providing for the acquisition, construction, improvement and equipping of the Project and the amounts required to be paid under said contracts exceed five percent (5%) of the net sale proceeds of the portion of the 1996 Bonds financing the Project.
(1) The Project consists of land and/or property subject to the allowance for depreciation under the Code, and Substantially All of the Net Proceeds of the 1996 Bonds, including earnings from the investment thereof, will be used to pay Qualified Project Costs.
(m) Based on current facts, estimates and circumstances, it is presently expected that:
(1) the acquisition construction, improvement and equipping of the Project and the expenditure of all Bond proceeds will be completed by August 1, 1996;
(2) the Company will proceed with due diligence toward completion of the Project and the expenditure of the Net Proceeds of the Bonds in connection with the Project;
(3) the Net Proceeds from the issuance of the 1996 Bonds are needed for the purpose of paying all or a part of the Cost of the Project; and
(4) the Project will not be sold or disposed of in a manner producing proceeds which, together with accumulated proceeds or earnings thereon, would not be sufficient, if paid by the Company to the Issuer, to
enable the issuer to retire substantially all of the Bonds prior to the maturity of the Bonds.
(n) As of the date of execution and delivery of this Agreement, there exists no default or any condition or event which would constitute, or with the passage of time or the giving of notice, or both, would constitute a default hereunder.
(o) The average maturity of the 1996 Bonds financing the Project does not exceed one hundred twenty percent (120%) of the average reasonably expected economic life of the Project, with the average reasonably expected economic life of each component of the Project being measured from the later of the date of issuance of the 1996 Bonds or the date such asset is reasonably expected to be placed in service and by taking into account the respective cost of each asset being financed.
(p) (i) The payment of principal or interest with respect to the 1996
Bonds is not guaranteed (in whole or in part) by the United States (or any
agency or instrumentality thereof); (ii) five percent or more of the proceeds of
the 1996 Bonds will not be (A) used in making loans the payment of principal and
interest with respect to which are to be guaranteed (in whole or in part) by the
United States (or any agency or instrumentality thereof), or (B) invested
(directly or indirectly) in federally insured deposits or accounts as defined in
Section 149(b) of the Code; and (iii) the payment of principal or interest on
the 1996 Bonds is not otherwise indirectly guaranteed (in whole or in part) by
the United States (or any agency or instrumentality thereof).
The foregoing provisions of this subsection shall not apply to proceeds
of the Bonds being (u) invested for an initial temporary period until such
proceeds are needed for the purpose for which such issue was issued; (v)
invested in a bona fide debt service fund; (w) investments of a reserve which
meets the requirements of Section 148(d) of the Code with respect to reasonably
required reserve or replacement funds; (x) investments held in a refunding
escrow (i.e. a fund containing proceeds of a refunding bond issue established to
provide for the payment of principal or interest on one or more prior bond
issues); (y) invested in obligations issued by the United States Treasury; or
(z) invested in other investments permitted under regulations promulgated
pursuant to Section 149(b)(3)(B)(v) of the Code.
(q) Any information supplied by the Company that has been relied upon by the Issuer, the Trustee and by Bond Counsel with respect to the eligibility of the 1996 Project and the exclusion from gross income for federal income tax purposes of interest on the Bonds is true and correct.
(r) All proceeds of the Bonds will be used to pay the "cost" of the Project.
(s) All components of the Project are or will be located wholly within the boundaries of the Project Site, and the Project Site is located completely within the areas of the City.
(t) This Agreement constitutes valid and binding obligations of the Company enforceable against the Company in accordance with its terms.
(u) There is no other bond or issue of bonds, the interest on which is
tax exempt pursuant to Section 144(a) of the Code or Section 103(b)(6) of the
Internal Revenue Code of 1954, as amended, part or all of the net proceeds of
which are to be used with part or all of the net proceeds of the 1996 Bonds with
respect to a single building, an enclosed shopping mall, or a strip of offices,
stores or warehouses using substantial common facilities, as contemplated by
Section 144(a)(9) of the Code. There are no common entrances, plazas, malls,
lobbies, parking, elevators or stairways shared by the Project and any other
facility financed with tax-exempt bonds for use by employees or patrons of the
Project and such facility.
(v) Neither the Company, nor persons related (as such term is used in the Code) to the Company are owners or principal users (as such term is used in the Code) of any facility (other than the Project) in the areas of the City, or outside of, but contiguous with, the areas of the City.
(w) The Project is not integrated with any facility located outside of the areas of the City.
(x) (i) The aggregate authorized face amount of the 1996 Bonds allocated to any test-period beneficiary (as such term is used in the Code), when increased by the outstanding tax-exempt facility-related bonds (within the meaning of Section 144(a)(10) of the Code) of such beneficiary, does not exceed $40,000,000. (ii) For purposes of applying subparagraph (i) above, with respect to any issue, the outstanding tax-exempt facility-related bonds of any person who is a test-period beneficiary, as such term is used in the Code, with respect to such issue is the aggregate face amount of all tax-exempt bonds which, within the meaning of Section 144(a)(10)(B)(ii) of the Code, are exempt facility bonds, qualified small issue bonds and qualified redevelopment bonds or industrial development bonds (as defined in Section 103(b)(2) of the Internal Revenue Code of 1954, as in effect on the date before the date of enactment of the Tax Reform Act of 1986) to which Section 141(a) of the Code does not apply: (A) which are allocated to such beneficiary, and (B) which are outstanding on the date of issuance of the Bonds (not including as outstanding any obligation which is to be redeemed from the proceeds of the Bonds). (iii) The amount of any issue shall be allocated so that: (y) except as may otherwise be provided in regulations promulgated under Section 144(a)(10)(C) of the Code, the portion of the face amount of any issue allocated to any test-period beneficiary of the facility financed by the proceeds of such issue (other than an owner of such facility) is an amount which bears the same relationship to the entire face amount of such issue as the portion of such facility used by such beneficiary bears to the entire facility; and (z) except as otherwise provided in regulations promulgated under Section 144(a)(10)(C) of the Code, the portion of the face amount of an issue allocated to any test period beneficiary who is an owner a facility financed by the proceeds of such issue is an amount which bears the same relationship to the entire face amount of such issue as the portion of such facility owned by such beneficiary bears to the entire facility.
(y) The information furnished by the Company and used by the Issuer in making its election to issue the 1996 Bonds pursuant to Section 144(a)(4) of the Code was true and complete as of the date hereof.
(z) No customer of the Company is expected to purchase ten percent (10%) or more of the Company's annual output from the Project during the first three years after the initial issuance of 1996 Bonds which would constitute a "principal user" of the Project within the meaning of Section 144(a)(4) of the Code.
(aa) The Project constitutes a "manufacturing facility" within the meaning and contemplation of Section 144(a)(12) of the Code, and any office space included as part of the 1996 Project will be (i) located at or within the Project, (ii) directly related to the day-to-day manufacturing operations at the Project and (iii) de minimis in size and cost in relation to the size and cost of the Project.
(bb) None of the proceeds from the issuance of the Bonds shall be used to provide any airplane, skybox or other private luxury box any facility primarily used for gambling, or any store the principal business of which is the sale of alcoholic beverages for consumption off premises. No more than 2% of the proceeds of the portion of the Bonds financing the Project will be used for Issuance Costs of that portion of the Bonds and no more than 2% of the proceeds of the Bonds will be used for Issuance Costs of the Bonds.
(cc) The Company is financially responsible and fully capable and willing to fulfill its obligations under this Agreement, including the obligations to make payments in the amounts and at the times required hereunder; to operate, repair and maintain at its own expense the Project; and to serve the purposes of the Act and this Agreement.
All of the above representations, warranties and covenants shall survive the making of this Lease Agreement.
ARTICLE III
LEASING CLAUSES AND WARRANTY OF TITLE
SECTION 3.1. Agreement to Acquire Construct Install Improve and Equip the Project. The Issuer agrees to make all contracts, including the Basic Contract and the General Contract and do all things necessary for the acquisition, construction, improving, and equipping of the Project, upon written instructions from the Company, with or without advertising for bids, and the Issuer agrees that it will cause the Facility to be constructed, modified or improved on the Project Site substantially in accordance with the Plans and Specifications prepared by or at the direction of the Company and the Project Fixtures to be installed therein. The Issuer, upon written instructions
from the Company, shall make such change orders as the Company deems necessary or desirable within the budget for the Project or if paid by the Company.
The Issuer and the Company agree that all items described as a part of the Commitment Letter attached as Exhibit H hereto have been obtained to the satisfaction of the Issuer, the Company, the Trustee and the Original Purchaser.
The Issuer further agrees that it will acquire, construct, improve, and equip the Project with all reasonable dispatch and use its best efforts to cause acquisition, construction, improving, equipping, and occupancy of the Project to be completed by September 1, 1996, or as soon thereafter as may be practicable, delays caused by force majeure only excepted; but if for any reason such acquisition, construction, improving and equipping is not completed by said date there shall be no resulting liability on the part of the Issuer and no diminution in or postponement of the payments required in Section 5.2 hereof to be paid by the Company.
The Issuer further agrees that it will acquire and install in the Facility or on the Project Site, the Project Fixtures and such other items of machinery, equipment and related property as in the Company's judgment may be necessary for the operation of the Project, as long as the same is within the budget for the Project or paid by the Company. The Project Fixtures shall be the property of the Issuer and subject to the terms hereof.
The Issuer further agrees to pay relocation and leasehold improvement costs upon invoice from the Company in the amount of $209,000.00. The Company will invoice the Issuer from time to time for such relocation and leasehold improvement costs incurred by the Company.
SECTION 3.2. Lease of the Project. The Issuer hereby demises and leases to the Company, subject to Permitted Encumbrances, and the Company hereby leases from the Issuer, subject to Permitted Encumbrances, for and during the Agreement Term, the Project.
SECTION 3.3. Issuer to Pursue Remedies Against Suppliers. Contractors and Subcontractors and Their Sureties. At the direction and sole cost of the Company, the Issuer will promptly proceed, either separately or in conjunction with others, to exhaust the remedies of the Issuer against any defaulting supplier, contractor or subcontractor and against any surety therefor, for the performance of any contract made in connection with the Project. If the Company shall so notify the Issuer, the Company may, in its own name or in the name of the Issuer, prosecute or defend any action or proceeding or take any other action involving any such supplier, contractor, subcontractor or surety which the Company deems reasonably necessary, and in such event the Issuer agrees to cooperate fully with the Company and to take all action necessary, to the extent it might lawfully do so, to effect the substitution of the Company for the Issuer in any such action or proceeding. In addition, the Issuer recognizes that it may be entitled to a refund of certain sales, use or other taxes levied and paid on goods and merchandise which are used in the construction of the Project and which become an integral part thereof. The Issuer agrees that it will, at the request and expense of the Company, take all necessary action to obtain any such refund to which it is entitled.
SECTION 3.4. Quiet Enjoyment. The Issuer warrants and agrees that it will defend the Company in the quiet enjoyment and peaceable possession of the Project, free from all claims of all persons claiming by, through or under the Issuer, throughout the Agreement Term, so long as the Company shall perform the agreements to be performed by it hereunder, or so long as the period for remedying any failure in such performance shall not have expired.
SECTION 3.5. Restrictions on Sale of Project by Issuer. Except as set forth in the Indenture, the Issuer agrees that it shall not (a) encumber, sell, assign, transfer or convey the Project during the Agreement Term, or (b) take any other action which might reasonably be construed as tending to cause or induce the levy or assessment of ad valorem taxes on the Project or on its title in and to the Project. If the laws of the State at the time permit such action to be taken, nothing contained in this Section shall prevent the consolidation of the Issuer with, or the merger of the Issuer into, or the transfer of the Project as an entirety to, any public corporation whose property and income are not subject to taxation and which has corporate authority to carry on the business of owning and leasing the Project: provided (i) that no such action shall be taken without the prior written consent of the Company which consent shall not be unreasonably withheld, unless such action shall be required by law, and (ii) that upon any such consolidation, merger or transfer, the due and punctual performance and observance of all the agreements hereof to be kept and performed by the Issuer shall be expressly assumed in writing by the corporation resulting from such consolidation or surviving such merger or to which the Project shall be transferred as an entirety.
ARTICLE IV
ISSUANCE OF THE BONDS
SECTION 4.1. Agreement to Issue Bonds: Application of Bond Proceeds; Additional Bonds.
(a) In order to provide funds to the Company and the Issuer to be used, together with other funds of the Company or the Issuer, to finance the Project, the Issuer agrees that it will, concurrently herewith, sell and cause to be delivered to the Original Purchaser the 1996 bonds in the original aggregate principal amount of Seven Hundred and Five Thousand Dollars ($705,000), in each case bearing interest and maturing as provided in the Indenture; and it will thereupon deposit the proceeds thereof in the manner provided by the Indenture.
(b) The Issuer may authorize the issuance of Additional Bonds for the purposes, upon the terms and conditions provided in the Indenture. If the Company is not in default hereunder, the Issuer agrees, at the request of the Company, from time to time, to consider the issuance of the amount of Additional Bonds specified by the Company (within the limits and under the conditions specified above and in the Indenture), provided that (i) the terms, manner of issuance, purchase price and disposition of proceeds of the sale of such Additional Bonds shall have been approved in writing
by the Company, (ii) the Company and the Issuer shall have entered into an amendment to this Agreement to provide for an increase in the amounts available hereunder and providing for Lease Payments in an amount at least sufficient to pay the principal of, premium, if any, and interest on the Additional Bonds as the same shall mature and become due, and to make all other required payments under such amendment, and (iii) the Issuer shall have otherwise complied with the provisions of the Indenture with respect to the issuance of such Additional Bonds. Such amendment will provide that any improvements or additions to the Project financed with the proceeds of Additional Bonds shall become a part of the Project and shall be included under this Agreement to the same extent as if originally included hereunder.
(c) The Issuers failure to issue Additional Bonds, whether or not such failure is the result of the Issuer's breach of its obligations under this Section, will not release the Company from the obligation to pay the Lease Payments or from any of the Company's other obligations under this Agreement.
SECTION 4.2. Disbursements from the Construction Fund. The Trustee will use the moneys in the Construction Fund for the payment of the Cost of the Project, or for such other purposes as may be provided in any amendment or supplement hereto executed in connection with the issuance of Additional Bonds or as otherwise provided herein. Each requisition for payment from the Construction Fund shall be subject to the prior written approval of the Original Purchaser and shall be in accordance with the Budget.
Before any of the payments from the Construction Fund for the acquisition, construction and equipping of the Project may be made, the Original Purchaser shall have by the signature of its authorized signatory approved such payment, and the Authorized Company's Representative or Authorized Issuer Representative shall certify with respect to each such payment that:
(i) such obligation is a permitted Cost of the Project, is a proper charge against the Construction Fund and none of the items for which the payment is proposed to be made has formed the basis for any payment theretofore made from the Construction Fund;
(ii) each item for which the payment is proposed to be made is or was appropriate in connection with the acquisition, construction and equipping of the Project;
(iii)(a) If all disbursements from the Construction Fund to be used to pay Issuance Costs have not yet been made, the disbursement requested will be used only to pay either Qualified Project Costs or Issuance Costs.
(b) If all Issuance Costs to be paid with disbursements from the Construction Fund have previously been requisitioned but the aggregate Qualified Project Costs paid with previous advances and disbursements and to be paid with the disbursement requested do not equal or exceed Substantially All of the Costs of the Project paid (or to be paid) with the requested disbursements, the disbursement requested will be used only for Qualified Project Costs.
(c) If all Issuance Costs to be paid with disbursements from the Construction Fund have previously been requisitioned and the aggregate Qualified Project Costs paid with disbursements equals or exceeds Substantially All of the Costs of the Project paid with those previous disbursements, the disbursement requested, when added to all advances of Bond proceeds and disbursements under previous requisitions, will not result in less than Substantially All of the total of such disbursements having been used to pay Qualified Project Costs;
(iv) all requested disbursements related to Issuance Costs of the Bonds, when added to all advances and disbursements for such Issuance Costs under previous requisitions, will not result in more than two percent (2%) of the proceeds of the Bonds having been drawn from the Construction Fund or otherwise used to pay such Issuance Costs.
(v) there has not been recorded or filed with or served upon the Company or the Issuer, notice of any lien, right to lien or attachment upon or claim affecting the right to receive payment of, any of the moneys payable to any of the persons or firms named in such requisition, which has not been released or will not be released simultaneously with the payment of such obligation;
(vi) such requisition contains no item representing payment on account of any portion of such obligation which the Company or the Issuer are, as of the date of such requisition, entitled to retain under any retained percentage agreement;
(vii) insofar as such obligation was incurred for labor, services, material, supplies or equipment, (a) such labor and services were actually performed in a satisfactory manner in connection with the acquisition, construction, and equipping of the Project and (b) such materials, supplies and equipment were actually used in connection with the acquisition, construction, and equipping of the Project or were delivered to the Project Site (and remain at the Project Site) for that purpose;
(viii) all sums previously disbursed by the Trustee have been used solely for the purposes permitted by this Agreement and the specific disbursement which is the subject of the Company's or the Issuer's requisition will be so used; and
(ix) there exists no event of default under this Agreement, or any circumstance which, with the passage of time or the giving of notice, would become an event of default under this Agreement.
Each requisition shall be accompanied by invoices or other appropriate documentation supporting the payments or reimbursements requested by the Company or the Issuer and such other information as the Original Purchaser or the Trustee may reasonably require.
All moneys remaining in the Construction Fund after completion of any construction or equipping of, or additions or improvements to the Project and after the Trustee with the approval of the Authorized Company's Representative or the Authorized Issuer Representative has retained amounts for payment of items related thereto but not then due and payable, shall be segregated by the Trustee and used by the Trustee (i) to deposit such funds in the Redemption Account in the Sinking Fund to be fully used to redeem the Bonds at the earliest redemption date permitted by the Indenture on which a premium or penalty for redemption is not required: or (ii) for any other purpose with the approval of the Trustee and the Original Purchaser, provided that the Trustee and the Original Purchaser are furnished with an opinion of Bond Counsel to the effect that such use is lawful under the Act and will not adversely affect the exclusion from gross income for federal income tax purposes of interest on any of the Bonds. Until used to redeem the 1996 Bonds or a portion thereof as provided in subsection (i) above, or until use under subsection (ii) above is approved, such segregated amount may be invested as permitted by this Agreement and the Indenture but may not be invested (without an opinion of Bond Counsel to the effect that such investment will not adversely affect the exclusion from gross income for federal income tax purposes of interest on any of the Bonds) to produce a Yield on such amount greater than the Yield on the Bonds, all in accordance with Section 148 of the Code. The Company and the Issuer Agree to cooperate with the Trustee and take all required action necessary to redeem the Bonds (or appropriate portion thereof) or to accomplish any other purpose contemplated by this Section.
SECTION 4.3. Authorized Company's Representative. Prior to the delivery of the 1996 Bonds, the Company shall by a written certificate furnished to the Issuer and the Trustee appoint an Authorized Company's Representative for the purpose of taking all actions and making all certificates required to be taken and made by the Authorized Company's Representative under the provisions of this Agreement, and the Company may appoint one or more alternate Authorized Company's Representatives to take any such action or make any such certificate if the same is not taken or made by the Authorized Company's Representative. Said certificate shall contain the specimen signature of the Authorized Company's Representative and of any alternate Authorized Company's Representative and shall be furnished to the Issuer and the Trustee. In the event either of said persons, or any successor appointed pursuant to provisions of this Section, should resign, become unavailable or unable to take any action or make any certificate provided for in this
Agreement, another Authorized Company's Representative or alternate Authorized Company's Representative shall thereupon be appointed by the Company.
Whenever under the provisions of this Agreement the approval of the Company is required or the Issuer is required to take some action at the request or direction of the Company, such approval or such request shall be made by the Authorized Company's Representative unless otherwise specified in this Agreement, and the Issuer and the Trustee shall be authorized to act and conclusively rely on any such approval, request or direction and the Company shall have no complaint against the Issuer or the Trustee as a result of any such action taken.
SECTION 4.4. Authorized Issuer's Representative. Prior to the delivery of the 1996 Bonds, the Issuer shall by a written certificate furnished to the Trustee appoint an Authorized Issuer Representative for the purpose of taking all actions and making all certificates required to be taken and made by the Authorized Issuer Representative under the provisions of this Agreement, and the Issuer may appoint one or more alternate Authorized Issuer Representatives to take any such action or make any such certificate if the same is not taken or made by the Authorized Issuer Representative. Said certificate shall contain the specimen signature of the Authorized Issuer Representative and of any alternate Authorized Issuer Representative and shall be furnished to the Trustee. In the event either of said persons, or any successor appointed pursuant to provisions of this Section, should resign, become unavailable or unable to take any action or make any certificate provided for in this Agreement, another Authorized Issuer Representative or alternate Authorized Issuer Representative shall thereupon be appointed by the Issuer.
Whenever under the provisions of this Agreement the approval of the Issuer is required or the Company is required to take some action at the request or direction of the Issuer, such approval or such request shall be made by the Authorized Issuer Representative unless otherwise
specified in this Agreement, and the Company and the Trustee shall be authorized to act and conclusively rely on any such approval, request or direction and the Issuer shall have no complaint against the Company or the Trustee as a result of any such action taken.
ARTICLE V
EFFECTIVE DATE
OF THIS AGREEMENT; DURATION OF
AGREEMENT TERM; REPAYMENT PROVISIONS
SECTION 5.1. Effective Date of this Agreement; Duration of Agreement Term. This Agreement shall become effective upon its delivery, and, subject to the provisions of this Agreement, shall expire on such date that all of the Bonds and the RLF Loan have been fully paid and retired (or provision for such payment for the Bonds shall have been made as provided in the Indenture), and all payments required to be made by the Company under Sections 5.2, 7.1, 7.6, 9.5 and 9.7 hereof have been paid in full, subject to any options to extend or terminate this Agreement in Section 8.7 herein. The Company and the Issuer acknowledge that the RLF Loan as separate and distinct from the Bonds and that the proceeds of the Bonds will not be commingled with the proceeds of the RLF Loan.
SECTION 5.2. Lease Payments Payable. The Company agrees to pay the Lease Payments required by subsection (a) of this Section.
(a) The Company hereby covenants and agrees to make the following Lease Payments for the use and occupancy of the Project, as follows:
(i) Rent is due and owing by the Company in advance hereunder from the period beginning on the Issuance Date and extending through a period of one year from the Issuance Date in the amount of $42,300 payable in four equal installments every three months; provided, further, such payments under this Section 5.2(a)(i) herein shall be paid on the first day of the calendar month following the Issuance Date and on the first day of every third month thereafter;
(ii) Rent for the Project is due and payable in advance on or before the first day of each month commencing from the first anniversary date of the Issuance Date through the next 151 months thereafter in the amount of $7833.33 per month; and
(iii) In the event this Agreement commences or terminates during a month, the monthly rent shall be prorated on a monthly basis (on the basis of a month containing thirty (30) days) to reflect the date of termination.
In the event the Company should fail to make any of the rental payments required in this Section 5.2, the item or installment so in default shall continue as an obligation of the Company until the amount in default shall have been fully paid, and the Company agrees to pay the same with interest thereon, to the extent permitted by law, from the date when such payment was due, at the rate of interest equal to the "prime rate" charged by Columbus Bank and Trust Company at its principal office in Columbus, Georgia.
SECTION 5.3. Payment of Lease Payments. That portion of the Lease Payments provided for in Section 5.2(a) hereof for payment of principal and interest on the Bonds shall be paid directly to the Trustee in immediately available funds of the Trustee's locality for the account of the Issuer and shall be deposited in the Sinking Fund. That portion of the Lease Payments provided for in Section 5.2(a) hereof for payment of principal of and interest on the RLF Loan shall be paid directly to the Issuer.
SECTION 5.4. Obligations Unconditional. Until such time as the principal of
and interest on the Bonds and the other payments required hereunder shall have
been fully paid or provision for the payment thereof shall have been made in
accordance with the Indenture, the obligations of the Company to make its Lease
Payments and to perform and observe the other agreements contained herein shall
be absolute and unconditional and shall not be subject to any defense or any
right of setoff, counterclaim or recoupment arising out of any breach by the
Issuer of any obligation to the Company, whether hereunder or otherwise, or out
of any indebtedness or liability at any time owing to the Company by the Issuer,
and the Company (i) will not suspend or discontinue its Lease Payments, (ii)
will perform and observe all other agreements contained in this Agreement; and
(iii) except as otherwise provided herein, will not terminate the Agreement Term
for any cause, including, without limiting the generality of the foregoing:
(a) any delay or failure of the Project to be operating or operable, or any defect in the title, quality, condition, design, operation or fitness for use of, or any damage to, or loss of, or loss of use of, or destruction or theft of, all or any part of the Project from any cause whatsoever;
(b) any acts or circumstances that may constitute failure of consideration;
(c) commercial frustration of purpose;
(d) any abatement, suspension, deferment, reduction, set off, defense, counterclaim or recoupment whatsoever, or any right to any thereof, that the Company may now or hereafter have against the Issuer or any Bondholder;
(e) any insolvency, composition, bankruptcy, reorganization, arrangement, liquidation or similar proceedings relating to the Issuer or the Company;
(f) any change in the tax or other laws of the United States of America or of the State of Georgia or any political subdivision of either thereof or any failure of the Issuer to perform and observe any agreement, whether express or implied, or any duty, liability or obligation arising out of or connected with this Agreement;
(g) any interruption or prohibition of the use or possession by the Company of, or any ouster or dispossession by paramount title or otherwise of the Company from, all or any part of the Project, or any interference with such use or possession by any governmental agency or authority or other person or otherwise;
(h) the invalidity or unenforceability or disaffirmance, in whole or in part, of this Agreement, the Indenture or the Bonds or any failure, omission, delay or inability of the Issuer to perform any of its obligations contained in this Agreement or the Indenture;
(i) any amendment, extension or other change of, or any assignment or encumbrance of any rights or obligations under, this Agreement, the Indenture or the Bonds, or any waiver or other action or inaction, or any exercise or non-exercise of any right or remedy, under or in respect of this Agreement, the Indenture or the Bonds;
(j) any sale, release, impairment, substitution, exchange or other action or inaction with respect to any security relating to this Agreement; or
(k) any other circumstance, happening or event whatsoever, whether foreseeable or unforeseeable and whether similar or dissimilar to the foregoing, it being the intention of the parties hereto that all amounts payable by the Company in respect of this Agreement shall continue to be payable in all events in the manner and at the time herein provided.
The Company hereby waives, to the extent permitted by applicable law, any and all rights which it may now have or which may at any time hereafter be conferred upon them, by statute or otherwise, to terminate, cancel, quit or surrender any of their obligations under this Agreement and agrees that if, for any reason whatsoever, this Agreement shall be terminated in whole or in part by operation of law or otherwise, the Company will nonetheless promptly pay to the Trustee amounts equal to all such amounts which shall become due and payable in respect of this Agreement, to the same extent as if this Agreement had not been terminated in whole or in part. Nothing contained in this Section shall be construed to release the Issuer from the performance of any of the agreements on its part herein contained; and in the event the Issuer should fail to perform any such agreement on its part, the Company may institute such action against the Issuer as the Company may deem necessary to compel performance thereof (subject, however, to the limitation as to source of revenues for damages noted in the second paragraph of this Agreement) so long as such action shall not diminish the amounts required to be paid by the Company pursuant to Section 5.2 hereof. The Company may, however, at its own cost and expense and in its own name or in the name of the Issuer, prosecute or defend any action or proceeding or take any other action involving third persons which the Company deems reasonably necessary in order to secure or protect the Company's right of possession,
occupancy and use of the Project hereunder, and in such event the Issuer hereby agrees to cooperate fully with the Company and to take all action necessary to effect the substitution of the Company for the Issuer in any action or proceeding if the Company shall so request.
ARTICLE VI
MAINTENANCE, MODIFICATIONS, OPERATION, LIENS,
AFTER-ACQUIRED PROPERTY, INSURANCE AND
OTHER COVENANTS OF THE COMPANY
SECTION 6.1. Maintenance of Project. (a) Throughout the Agreement Term, the Company shall (i) keep the Project in as reasonably safe condition as the operation thereof will permit, and (ii) keep, or cause to be kept, the Project Fixtures, the Facility and all other improvements forming a part of the Project in good repair and in good operating condition, making from time to time all necessary repairs thereto and renewals and replacements thereof.
(b) So long as no default exists hereunder and subject to the provisions of Section 6.2, the Company may from time to time, in its sole discretion and at its own expense, make any additions, modifications or improvements to the Project, including installation of additional machinery, equipment and related property in the Facility or on the Project Site, which it may deem desirable for its business purposes; provided that such additions, modifications and improvements do not adversely affect or impair the structural integrity of the Facility or change the Project's character and all such additions, modifications and improvements are located within the boundary lines of the Project Site. All such machinery, equipment and related property installed by the Company pursuant to this subsection shall remain the sole property of the Company and shall not be subject to the provisions of this Agreement.
(c) The Company shall pay, or cause to be paid, as the same become lawfully due and payable,
(1) all taxes and governmental charges of any kind whatsoever upon or with respect to the Company's interest in the Project,
(2) all taxes and governmental charges of any kind whatsoever upon or with respect to the Project or any machinery, equipment or related property installed or brought by the Company or any sublessee of the Company therein or thereon,
(3) all utility and other charges incurred in the operation, maintenance, use, occupancy and upkeep of the Project, and
(4) all assessments and charges made by any governmental body for public improvements that may be secured by a lien or charge on the Project;
provided, (i) that there will be no ad valorem tax liability with respect to the Company's interest in and to the Project Site and the Project Fixtures leased hereunder (but that personal property owned by the Company and located on the Project Site or in the Facility shall be subject to ad valorem taxes) and provided further (ii) that with respect to special assessments or other governmental charges that may lawfully be paid in installments over a period of years, the Company shall be obligated to pay only such installments as they become due and payable.
The Company may, at its own expense and in its own name and behalf, in good faith contest any such taxes, assessments and other charges and, in the event of any such contest, may permit the taxes, assessments and other charges so contested to remain unpaid during the period of such contest and any appeal therefrom, unless the Issuer shall notify the Company that, in the opinion of Bond Counsel, because of nonpayment of any such items the Project will be materially endangered or the Project or any part thereof will be subject to loss or forfeiture, in which event such taxes, assessments or charges shall be paid promptly.
SECTION 6.2. Removal and Substitution of Project Fixtures. If the Company, in its sole discretion, determines that any items of the Project Fixtures have become inadequate, obsolete, worn out, unsuitable, undesirable, inappropriate or unnecessary for its purposes at any time, the Company may remove such items from the Facility and the Project Site and sell, trade in, or otherwise dispose of them (as a whole or in part) without any responsibility or accountability to the Issuer, provided that the Company shall substitute and install within the Facility or on the Project Site other machinery, equipment and related property having equal or greater value (but not necessarily having the same function or utility) in the operation of the Project as an industrial facility (provided such removal and substitution shall not impair operating utility), all of which substituted machinery, equipment and related property shall be free of any other liens and encumbrances and shall become a part of the Project Fixtures and shall be subject to this Agreement. The removal from the Project of any portion of the Project Fixtures pursuant to the provisions of this Section shall not entitle the Company to any diminution in or postponement or abatement of the payments payable pursuant to Section 5.2.
SECTION 6.3. No Abatement of Lease Payments. The demolition, substitution or removal of any property shall not result in any abatement or diminution of Lease Payments payable under this Agreement.
SECTION 6.4. Liens and Encumbrances. The Company and the Issuer represent and warrant that, as of the date of execution of this Agreement, there exists no lien, charge or encumbrance other than the Permitted Encumbrances, upon the Project. Except as otherwise permitted by the provisions of this Agreement, the Company or the Issuer will not create or suffer to be created any lien, encumbrance or charge upon the Project, other than the Permitted Encumbrances, and subject to the provisions of Section 6.5 hereof relating to permitted contests, the Company or the Issuer will satisfy or cause to be discharged, or will make adequate provision to satisfy and discharge, within sixty (60) days after the Company or the Issuer is notified or become aware of the same, all lawful claims and demands for labor, materials, supplies or other items which,
if not satisfied, might by law become a lien upon the Project. If any such lien shall be filed or asserted against the Project by reason of work, labor, services or materials supplied or claimed to have been supplied the Company or the Issuer shall, subject to the provisions of Section 6.5 hereof relating to permitted contests, within thirty (30) days after the Company or the Issuer receives notice of the filling thereof or the assertion thereof, cause the same to be discharged of record, or effectively prevent the enforcement or foreclosure thereof against the Company or the Issuer by contest, payment, deposit, bond, order of court or otherwise. Nothing contained in this Section 6.4 shall be construed as prohibiting the Company or the Issuer from purchasing items (from other than Bond proceeds) of machinery, equipment or other personal property that do not constitute part of the Project but are placed or installed on the Project Site under an installment purchase and security agreement, purchase money mortgage agreement, lease-purchase agreement or similar contractual obligation in which the seller retains a security interest.
SECTION 6.5. Permitted Contests. The Company or the Issuer shall
not be required to pay any tax, charge, assessment or imposition referred to in
Section 6.1 hereof, so long as the Company or the Issuer shall contest or there
shall be contested on the Company's or the Issuer's behalf, in good faith and at
the Company's or the Issuer's own cost and expense, the amount or validity
thereof, in an appropriate manner or by appropriate proceedings which shall
operate during the pendency thereof to prevent the collection of or other
realization upon the tax, assessment, levy, fee, rent, charge, lien or
encumbrance so contested, and the sale, forfeiture, or loss of the Project or
any part thereof or interest therein, to satisfy the same; provided, that no
such contest shall subject the Trustee to the risk of any liability. Each such
contest shall be promptly prosecuted to final conclusion (subject to the right
of the Company or the Issuer to settle any such contest), and in any event the
Company and the Issuer will save the Trustee harmless against all losses,
judgments, decrees and costs (including attorneys' fees and expenses in
connection therewith) and will, promptly after the final determination of such
contest or settlement thereof, pay and discharge the amounts which shall be
levied, assessed or imposed or determined to be payable therein, together with
all penalties, fines, interest, costs and expenses thereon or in connection
therewith. The Company and the Issuer shall give the Issuer or the Company, as
applicable, and Trustee prompt written notice of any such contest.
If the Trustee shall notify the Company that, in Trustee's reasonable determination, by nonpayment of any of the foregoing items, the Project, or any substantial part thereof, will be materially endangered, subject to imminent loss or forfeiture or the obligations of the Company under this Agreement shall be materially impaired, then the Company shall promptly pay all such unpaid items and cause them to be satisfied and discharged.
SECTION 6.6. Notice of Event of Default. Immediately upon becoming aware of the existence of any condition or event which constitutes or with the passage of time or the giving of notice, or both, would constitute an event of default as defined in Section 9.1 of this Agreement, the Company shall cause to be furnished to the Trustee, the Original Purchaser and the Issuer a written notice specifying the nature and period of existence thereof and what action the Company is taking and proposes to take with respect thereto.
SECTION 6.7. Inspections, Reports and Financial Statements. The Trustee and any holder of twenty-five percent (25%) or more in aggregate principal amount of Bond outstanding, through its or their officers, employees, consultants, attorneys and other authorized representatives, shall have free and unobstructed access at all reasonable times to the Project and records of the Company and the Issuer with respect thereto for purposes of inspection; provided, however, the Company and the Issuer must receive written notice at least forty-eight (48) hours in advance. The Company or the Issuer will at any and all times, upon the prior written request, given at least forty eight (48) hours in advance, of the Trustee or any holder of twenty-five percent (25%) or more in aggregate principal amount of any series of Bonds outstanding, permit the Trustee or such Bondholder, by its or their officers, employees, consultants, attorneys and authorized representatives, to inspect the books of account, records, reports and other papers of the Company and the Issuer with respect to the Project, and to take copies and extracts therefrom, and will afford a reasonable opportunity to such persons to make any such inspection and to discuss the affairs, finances and accounts of the Company with respect to the Project with their officers and independent accountants, and the Company and the Issuer will furnish to the Trustee any and all such other information as the Trustee may reasonably request with respect to the performance by the Company of its covenants under this Agreement. The Company and the Issuer will supply to the Trustee within sixty (60) days after receipt by the Company and the Issuer, a copy of all reports of inspections and accompanying recommendations of all regulatory, licensing and permitting agencies which inspect the Project. The Trustee and the Bondholders recognize that certain of the books, papers and records on the premises of the Company or supplied to the Trustee or the Bondholders may contain confidential and proprietary information, and agree to keep all such confidential and proprietary information obtained hereunder in strictest confidence.
The Company covenants that it will keep proper books of record and account in which full, true and correct entries shall be made of all dealings or transactions of or in relation to the Project, in accordance with generally accepted accounting principles consistently applied, and will furnish to the Trustee, the Georgia Department of Community Affairs and to any requesting holder of twenty-five percent (25%) or more in aggregate principal amount of any series of Bonds outstanding:
(a) Audited Annual Statements and Other Reports -- As soon as practicable after the end of each fiscal year, and in any event within one hundred eighty-five (185) days thereafter, duplicate copies of balance sheets of the Company, as of the end of such Fiscal Year, and statements of revenues and expenses and changes in financial position of the Company for such fiscal year setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail and accompanied by an opinion or opinions thereon of Coopers & Lybrand or such other an independent certified public accountant acceptable to the Trustee, which opinion or opinions shall state that such audited financial statements have been prepared in accordance with generally accepted accounting principles consistently applied (except for changes in application in which such accountants concur); and promptly upon receipt thereof, one copy of each report relating to the financial affairs or financial condition of the Company which is submitted to the Company by
independent accountants in connection with any annual, interim or special audit made by them on the books of the Company;
Provided, further, that the Company shall furnish within sixty (60) days after the end of each fiscal year, copies of the unaudited annual financial statements containing a balance sheet, income statement and cash flows, and such financial statements shall be submitted to the Georgia Department of Community Affairs at the address shown in Section 10.1 hereof; and
(b) Quarterly Unaudited Statements -- Within thirty (30) days after the end of each quarterly fiscal period in each fiscal year, except the last quarterly fiscal period in each fiscal year, copies of the balance sheet of the Company and statement of income and retained earnings of the Company for such quarter all in reasonable detail, setting forth figures for that period and for the corresponding period in the preceding fiscal year, certified by the Company or accountants employed by them for the purpose to have been prepared in accordance with generally accepted accounting principles consistently applied (except to the extent otherwise noted therein).
(c) Annual Budget -- Within sixty (60) days after the beginnings of each fiscal year, an annual budget projection of revenues and expenses of the Company for such fiscal year in a form, and including such detail as shall be satisfactory to the Trustee; and
(d) Other -- such other information as reasonably requested by the Trustee or the holders of twenty-five percent (25%) or more in aggregate principal amount of any series of Bonds outstanding.
SECTION 6.8. Other Financial Information. The Company covenants to provide to the Georgia Department of Community Affairs an updated financial statement through March 31, 1996, which document shall be satisfactory to the Georgia Department of Community Affairs, that there has been no adverse change in the Company's financial situation which could, in the opinion of the Georgia Department of Community Affairs, adversely effect the ability of the Company to perform as stipulated in the Employment Incentive Program Application, applicable contracts, agreements as under this Agreement.
SECTION 6.9. Insurance. Throughout the Agreement Term the Company shall keep, or cause to be kept, the Project continuously insured against such risks as are customarily insured against by businesses of like size and type (other than business interruption insurance), paying (except as otherwise provided herein) as the same become due, all premiums in respect thereto, including, but not necessarily limited to:
(a) insurance to the full insurable replacement value of the Project as determined by the Company, without deduction for depreciation, against loss from damage by fire and lightning, with a uniform standard extended coverage endorsement limited only as may be provided in the standard form of extended coverage endorsement at the time in use in the State (provided that such insurance
may provide for a deductible provision of not in excess of $100,000 with respect to direct damage applicable to each separate instance of loss insured against); and
(b) if the Project is comprised in part of a boiler (or boilers) and/or a pressure vessel (or pressure vessels), boiler and pressure vessel (including pressure pipes) explosion insurance in an amount at least equal to replacement cost of the Project and its contents as determined by the Company (with deductible provisions not to exceed $1,000) against loss from damage with respect to all boilers and pressure vessels and pressure pipes which may be installed in the Project; and
(c) general public liability insurance against claims for bodily injury, death or property damage occurring on the Project, such insurance to afford protection of not less than $3,000,000 per occurrence and $4,000,000 in the aggregate with respect to bodily injury and property damage; and
(d) throughout the Agreement Term, the Company shall maintain, or cause to be maintained in connection with the Project, workers' compensation coverage required by then applicable law.
(e) business interruption insurance that is customary insured against by businesses of like size and type engaged in same or similar operations.
SECTION 6.10. Additional Provisions Respecting Insurance. All
insurance required in Section 6.9 shall be taken out and maintained in generally
recognized responsible insurance companies selected by the Company and
authorized to do business in the State of Georgia. All policies evidencing such
insurance shall provide for payment of the losses for coverage required by
Section 6.9(a) to the Issuer and the Company, as their respective interests may
appear; provided, however, that all claims regardless of amount may be adjusted
by the Issuer with the insurers, subject to the prior written approval of the
Company, as to settlement of any claim which is an amount which would require
payment to the Issuer as aforesaid. The insurance hereby required may be
contained in blanket policies now or hereafter maintained by the Company, so
long as such blanket policies contain standard mortgage clauses that comply with
the provisions of this Section, and provided further that the policies
evidencing such insurance also show as loss payees the Issuer, the City,
Meriwether County, Georgia, the Trustee and the Original Purchaser, as the
respective interests may appear.
SECTION 6.11. Damage. Destruction or Loss of Property; Obligation to Rebuild; Use of Insurance Proceeds and Condemnation Awards. If prior to full payment of all Bonds (or provision for payment thereof having been made in accordance with the provisions of the Indenture) the Project or the Project Site, or any part or component of the Project or the Project Site, shall be damaged or destroyed, by whatever cause, or shall be taken by any public authority or entity in the exercise of or acquired under the threat of the exercise of its power of eminent domain, there shall be no abatement or reduction in the Lease Payments payable under this Agreement, and the Issuer will apply any insurance proceeds or condemnation awards resulting from claims for such losses or takings as provided in this Section 6.1.1.
If prior to full payment of all Bonds (or provision for payment thereof having been made in accordance with the provisions of the Indenture), the Project or the Project Site, or any part or component of the Project or the Project Site shall be damaged, destroyed, or taken by eminent domain or the threat of exercise of eminent domain, the Issuer shall promptly give, or cause to be given, written notice thereof the Trustee. All proceeds received from such property insurance and all condemnation awards shall be deposited with the Trustee to the credit of the Construction Fund. Following the occurrence of such an event, the Company shall have the option of (1) continuing to pay Lease Payments and to the extent permitted below proceeding promptly to repair, rebuild, restore or replace the property damaged, destroyed or taken, with such changes, alterations and modifications (including the substitution and addition of other property) as may be desired by the Company, and the Trustee will deposit such proceeds to the credit of the Construction Fund and make such disbursements therefrom, in accordance with Article V of the Indenture and Article IV of this Agreement, as may be necessary to pay the cost of such repair, rebuilding or restoration, either on completion thereof or as the work progresses or (2) requesting the Issuer to cause Bonds to be redeemed as hereinafter provided.
The Company or the Issuer may elect, pursuant to the preceding paragraph,
to repair, rebuild, restore or replace the Project or the portion thereof so
damaged, destroyed or taken only if they deliver to the Trustee, within sixty
(60) days (unless extended for any additional period in the reasonable judgment
of the Trustee) following the event causing the damage or destruction or the
completion of proceedings by which title is taken by the exercise or threat of
eminent domain, written notice of its election to do so accompanied by a
certificate from the Authorized Company's Representative or the Authorized
Issuer Representative and the Architect stating that the proceeds of insurance
or condemnation awards deposited into the Construction Fund will be sufficient
to repair, rebuild, replace or restore such property to substantially the same
condition as it was in prior to condemnation or destruction (taking into
consideration such changes, alterations and modifications as may be desired by
the Company). If the certificate described above is not rendered because funds
on deposit in the Construction Fund are insufficient for such purposes, the
Company or the Issuer may deposit other available funds in the Construction Fund
in an amount required to enable the Authorized Company's Representative or the
Authorized Issuer Representative and the Architect to render the certificate.
After delivering the foregoing certificate to the Trustee, the Company or the Issuer may proceed to repair, rebuild, restore or replace the property damaged, destroyed or taken in accordance with the Plans and Specifications, and the Trustee shall make disbursements from the Construction Fund therefor, in accordance with Article V of the Indenture and Article IV of this Agreement as may be necessary to pay the cost of such repair, rebuilding, restoration or replacement. The Company shall not, by reason of the payment of costs in excess of insurance proceeds or condemnation awards, be entitled to any reimbursement from the Issuer or any diminution in or postponement of the Lease Payments payable under this Agreement.
Upon completion of such repair, rebuilding, restoration or replacement, funds in the Construction Fund not required to pay or create reserves for the payment of the cost thereof will be
distributed first to the Issuer or the Company to reimburse them for any moneys they deposited in the Construction Fund other than from Bond proceeds, insurance proceeds or condemnation awards. Any remaining excess funds in the Construction Fund will be disposed of in the manner described in Section 4.2 of this Agreement.
If the Company or the Issuer shall not or are unable to elect to cause the Project to be repaired, rebuilt, restored or replaced or if after such election the Company or the Issuer are prevented from causing the Project to be repaired, rebuilt, restored or replaced by virtue of its inability to obtain any required approvals from federal, state or other governmental authorities having jurisdiction in the premises after the exhaustion of any administrative remedies or judicial appeals incident to the obtaining of such approvals, the Trustee shall deposit the insurance proceeds and condemnation awards into the Redemption Account and the Company or the Issuer shall thereupon promptly pay to the Trustee a sum of money which, when added to the insurance proceeds, condemnation awards and all other funds held by the Trustee and available for such purpose, will be sufficient (together with interest earnings thereon) to pay the principal of and interest on the Bonds and the RLF Loan as the same become due or to redeem the same as provided in the Indenture, and to pay all other costs, fees and expenses due hereunder, and in such event the Issuer shall direct the Trustee in writing so to apply the same and upon the payment or retirement thereof under the Indenture, the Company's obligation to pay the Lease Payments for the remainder of the Agreement Term (except for the Company's obligations under Sections 7.1, 7.6, 9.5 and 9.7 of this Agreement) shall abate.
Nothing in this Agreement shall be construed (i) as obligating the Issuer
in any way or to any extent to repair, restore or replace the Project, or any
part thereof, except from funds made available as provided in this Article or to
issue any required approvals to authorize repair, restoration or replacement, or
(ii) as relieving any contractor or other third party from any obligation or
duty it may have respecting the repair, restoration or replacement of any part
of the Project.
SECTION 6.12. Assignment, Subleasing and Sale; Release.
(a) This Agreement may not be assigned in whole or in part, and the Project may not be transferred, conveyed, subleased or sold as a whole or in part by the Company without the written consent of the Issuer, the Trustee and the Bondholders of all Bonds then Outstanding, which consent shall not be unreasonably withheld. The Company or the Issuer, as applicable, shall provide the Trustee and the Bondholders with all financial information regarding any proposed transferee, lessee or purchaser reasonably requested by the Trustee or any Bondholder prior to requesting the consent of the Trustee or any Bondholder to any such transfer, conveyance, sub-lease or sale. If the Company is subleasing the Project, all information and consents required to be given or received in this Section shall also be given to or received from the Issuer, as applicable.
(b) Any sale. sublease or disposition of the Project or assignment of all or a portion of this Agreement by the Company or the Issuer to which the Trustee and the Bondholders shall have consented, shall be subject to each of the following conditions:
(i) Unless specifically consented to by the Bondholders, no assignment, transfer, sublease or sale shall relieve the Company or the Issuer from liability for any of its obligations hereunder, and in the event of any such assignment. transfer, sublease or sale, the Company shall continue to remain primarily liable for the payments required to be made pursuant to Section 5.2 hereof and for the performance of the other agreements on its part herein contained.
(ii) The assignee, transferee, sublessee or buyer shall assume (without
release of the Company) the obligations of the Company or the
Issuer hereunder to the extent of the interest assigned,
transferred, subleased or sold, and affirm the representations
made under subsections (d), (f), (h), (i), (n), (o), (r), (v),
(w), (z) and (cc) of Section 2.3 of this Agreement as if such
representations were by their terms representations of such
assignee, transferee, lessee or buyer and were being made
effective as of the date of such assignment, transfer, sublease or
sale.
(iii) Each sublease, agreement of sale, transfer or assignment shall provide that the sublessee, buyer or assignee (a) shall be bound by the obligations, agreements and covenants of the Company or the Issuer hereunder, including, without limitation, under Article X and under Sections 7.1, 7.2. 7.3, 7.4, 7.5 and 7.6 hereof, and (b) shall not utilize the Project in a manner that would result in the occurrence of, or provide a basis for the occurrence of, a Determination of Taxability or that would result in an event of default under any provision of this Agreement.
(iv) The Company or the Issuer shall, not later than ten (10) days prior to delivery thereof, furnish or cause to be furnished to the Trustee a true and complete copy of the form of each such assignment, transfer, sublease or sale, as the case may be, in form and substance satisfactory to the Trustee.
(v) The Company or the Issuer shall, prior to the execution of any such assignment, transfer, sublease or sale, furnish or cause to be furnished to the Trustee an opinion of Bond Counsel to the effect that such assignment, transfer, sublease or sale will not cause the interest on the 1996 Bonds to become includable in gross income for Federal tax purposes.
(vi) The assignee, transferee, sublessee or purchaser shall continue to use the Project as a "project," as that term is defined in the Act, and the Bonds shall continue to qualify as a "qualified small issue bond," as that term is used in the Code, after such assignment, transfer, sublease or sale, or as otherwise may be permitted pursuant to an opinion of bond counsel.
(vii) Unless the Original Purchaser or the Issuer consents in writing such consent not to be unreasonably withheld, the Company shall not merge with or into another legal entity or permit one or more legal entities to consolidate with or merge into it,
provided, (i) such merger shall not affect the tax-exempt status of the Bonds (and the Company shall provide the Original Purchaser or the Issuer, as applicable, with an opinion of Bond Counsel to such effect); (ii) that the surviving or resulting legal entity shall be a legal entity organized and existing under the laws of one of the state of the United States of America and shall be qualified to do business in the State; and (iii) such surviving or resulting entity shall assume all of the obligations of the Company under this Agreement, in which event the Issuer shall release the Company in writing, concurrently with such merger.
SECTION 6.13. Proceeds from Title Insurance. The Issuer and the
Company covenant and agree to cooperate with the Trustee in collecting the
mortgagee's title insurance policy for the Project Site delivered to the Trustee
pursuant to Section 4.1 of this Agreement. In the event the Trustee receives any
proceeds under said title insurance policy, the Authorized Company
Representative shall, within forty-five (45) days after receiving notice of the
Trustee's receipt thereof, provide the Trustee with a certificate stating that
such proceeds shall be applied by the Trustee to either (a) clear title to the
Project Site, which title as cleared shall be subject to the lien of the Deed to
Secure Debt and any other applicable security interest, (b) redeem Bonds
pursuant to Section 3.02(c) of the Indenture, or (c) a combination of (a) and
(b) above.
SECTION 6.14. Maintenance of Corporate Existence. The Company agrees that during the Agreement Term it will maintain its existence, will not dissolve or otherwise dispose of all or substantially all of its assets and will not consolidate with or merge into another legal entity or permit one or more other legal entities to consolidate with or merge into it, without the prior written consent of the Issuer and the Original Purchaser which consents will not be unreasonably withheld or delayed; provided, however, no consent of the Issuer is required, if the surviving entity after any consolidation or merger as described above shall have substantially the same net worth or greater net worth as the Company prior to such consolidation or merger. Notwithstanding anything to the contrary contained herein, the Company agrees that during the Agreement Term it will not effect any transaction that will not cause the interest on the 1996 Bonds to become includable in gross income for Federal tax purposes by any such merger, acquisition or sale without an opinion from Bond Counsel stating that such transaction will not cause the 1996 Bonds to be includable in gross income for Federal tax purposes.
SECTION 6. 15. Hazardous Substances. The Company represents that neither the Company nor, to the best of their knowledge, any person or entity has ever used the Project or the Project Site, and the Company covenants that they will never use the Project or the Project Site, for the storage or use of any Hazardous Substances, except such Hazardous Substances which were, or will be properly used and disposed of in accordance with applicable federal, state and local environmental laws, rules and regulations. The Company covenants and agrees to indemnify and hold harmless the Issuer and the Trustee for any damages, costs or expenses incurred by the Issuer or the Trustee, including reasonable attorneys' fees (including those relating to appellate proceedings), as a result of the breach of this provision or the release of Hazardous Substances on the Project Site.
ARTICLE VII
SPECIAL COVENANTS
SECTION 7.1. Issuer's Expenses; Release and Indemnification Provisions. The Company agrees, whether or not the transactions contemplated by this Agreement and the Indenture shall be consummated and whether or not the Lease Payments otherwise may be deemed hereunder to have been paid:
(a) [Intentionally Omitted].
(b) Except for fees and expenses related to the issuance of the Bonds
and any fees and expenses of the Trustee, to protect, indemnify and save the
Issuer and the Trustee and the officers, agents, attorneys and employees of each
harmless from and against all liability, losses, damages, costs, expenses
(including attorneys' fees), taxes, causes of action, suits, claims, demands and
judgments of any nature or from, by or on behalf of any person, firm,
corporation or other legal entity arising in any manner from the transaction of
which this Agreement is a part or arising in any manner in connection with the
Project including, without limiting the generality of the foregoing, arising
from (i) the operation of the Project during the Agreement Term, or (ii) any
breach or default on the part of the Company in the performance of any of its
obligations under this Agreement, or (iii) the Project or any part thereof, or
(iv) any violation of contract, agreement or restriction by the Company relating
to the Project, or (v) any violation of law, ordinance or regulation by the
Company affecting the Project or any part thereof or the ownership or occupancy
or use thereof, or (vi) any statement or information relating to the Project or
the Company or the expenditure of the proceeds of the Bonds contained in any
document furnished by the Company to the Issuer, the Trustee or any Bondholder
(including, but not limited to, the Form 8038 referred to in Section 4.1 hereof)
which, at the time made, is misleading, untrue or incorrect in any material
respect, or any omission from any such statement or information of any statement
or information which should be contained therein for the purpose for which the
same is to be used, or which is necessary to make such statement or information
not misleading in any material respect. Upon notice from the Issuer, the Company
shall defend the Issuer in any action or proceeding brought in connection with
any of the above.
(c) It is the intention of the parties that the Issuer and its officers, agents, attorneys and employees shall not incur pecuniary liability by reason of the terms of this Agreement or by reason of the undertakings required of the Issuer or its officers hereunder in connection with the issuance of the Bonds, the execution of the Indenture, the performance of any act required of the Issuer or its officers by this Agreement, or the performance of any act requested by the issuer or its of officers by the Company or in any way arising from the transaction of which this Agreement is a part or arising in any manner in connection with the Project or the financing of the Project; nevertheless, if the Issuer or its officers, agents, attorneys and employees should incur any such pecuniary liability, then in such event the Company shall indemnify and hold the Issuer and its officers, agents, attorneys and employees harmless against all claims by or on behalf of any person, firm or
corporation or other legal entity, arising out of the same, and all costs and expenses incurred in connection with any such claim or in connection with any action or proceeding brought thereon, and upon the written request of the Issuer, the Company shall defend the Issuer and its officers, agents, attorneys and employees in any such action or proceeding.
(d) The provisions of this Section shall not apply to any claim or liability resulting from the Trustee's or the Issuer's acts of gross negligence, bad faith, fraud or deceit or for any claim which the Company were not given an opportunity to contest due to the bad faith, gross negligence, fraud or deceit of the Trustee or the Issuer or their officers, agents, attorneys or employees.
SECTION 7.2. Compliance With All Laws. The Company will comply with all laws, ordinances, governmental rules and regulations pertaining to the ownership, use and operation of the Project and all activities associated therewith (subject to good faith contests by the Company which do not materially adversely affect the operation of the Project or the financial condition of the Company), and will not fail to obtain any licenses, permits, franchises or other governmental authorizations necessary to the ownership of the Project or the conduct of its activities with respect thereto, which violation or failure to obtain might materially adversely affect the Project or the use and operation thereof.
SECTION 7.3. Arbitrage; Preservation of Tax-Exemption. The
Issuer and the Company each agrees and covenants that neither the proceeds of
the Bonds nor the funds held by the Trustee under the Indenture will be used in
such manner as to cause any Bond to be an "arbitrage bond" within the meaning of
Section 148 of the 1986 Code, as amended, as implemented by such proposed,
temporary and permanent Regulations as have been or may hereafter be adopted by
the United States Treasury Department thereunder. The Company further agrees and
covenants not to take any action, the result of which would cause or be likely
to cause the interest payable with respect to the Bonds not to be excluded from
gross income for federal income tax purposes. The Company will comply with the
applicable requirements of Section 103 and Part IV of Subchapter B of Chapter 1
of the 1986 Code to the extent necessary to preserve the exclusion of interest
on the Bonds from gross income of the Bondholders thereof for federal income tax
purposes.
SECTION 7.4. Certain Covenants with Respect to Compliance with Arbitrage Requirements for Investments in Nonpurpose Investments and Rebate to the United States of America. Section 148(f) of the 1986 Code, as implemented by Sections 1.148-1 to 1.148-11 of the Income Tax Regulations (the "Rebate Provisions"), requires that, with certain exceptions, the Issuer pay to the United States of America the Rebate Amount. The Company hereby assumes and agrees to make all payments for deposit into the Rebate Account, in accordance with the terms of Section 6.08 of the Indenture, to pay the Rebate Amount, consents to the payment of the Rebate Amount by the Trustee in accordance with the terms and provisions of Section 6.08 of the Indenture, and agrees to pay any amounts in addition to the Rebate Amount, including all interest and penalties, if any, related thereto to the extent that funds available therefor held by the Trustee under the Indenture are not sufficient for such purpose. The Company agrees to indemnify, protect and hold harmless the
Issuer with respect to any nonpayment of the Rebate Amount and such interest and penalties, and the Trustee with respect to the unavailability or insufficiency of funds with which to make such payments, and with respect to any expenses or costs incurred by the Trustee in complying with the terms of Section 6.08 of the Indenture. The Company hereby agrees to fully and timely comply with the requirements of Section 6.08 of the Indenture.
SECTION 7.5. Covenant as to Use of Bond Proceeds and Other Matters, Payback Provision. The Company and the Issuer covenant and agree that:
(a) Substantially All of the Net Proceeds of the Bonds and the investment earnings thereon disbursed from the Construction Fund will be used for payment of Qualified Project Costs.
(b) (i) until disbursements from the Construction Fund have been made of all Issuance Costs to be paid from proceeds of the Bonds, the Company or the Issuer will not submit to the Trustee any requisition for a disbursement from the Construction Fund unless the expenditure of such disbursement will either be for Qualified Project Costs or for Issuance Costs;
(ii) after all Issuance Costs to be paid with proceeds of the Bonds have been requisitioned and until the date on which the aggregate Qualified Project Costs paid as of that date equals or exceeds Substantially All of the Costs of the Project paid as of that date from proceeds of the Bonds, including investment earnings thereon, the Company or the Issuer will not submit to the Trustee any requisition for a disbursement from the Construction Fund unless the expenditure of such disbursement will be for Qualified Project Costs; and
(iii) after such date, the Company or the Issuer will not submit to the Trustee any requisition for a disbursement from the Construction Fund if, after the expenditure of such disbursement less than Substantially All of the Net Proceeds of the Bonds and investment earnings thereon actually disbursed to that time would have been used to pay Qualified Project Costs;
(c) the Company or the Issuer will not submit to the Trustee any requisition for a disbursement from the Construction Fund for Issuance Costs if, after the expenditure of such disbursement, more than two percent (2%) of the proceeds of the Bonds actually disbursed to that time would have been used to pay Issuance Costs; and
(d) in the event a disbursement from the Construction Fund is made which results in the covenant in subsections (a), (b) or (c) above being violated, the Company or the Issuer will promptly repay to the Trustee for deposit in the
Construction Fund such amount as may be necessary for the Company or the Issuer to again be in compliance with subsections (a), (b) or (c) above.
SECTION 7.6. Special Covenants Related to the Project.
(a) The Company agrees that at least thirty-five (35) new permanent full time jobs will be created, and that of those jobs created by the Project, fifty-one percent (51%) will be offered to persons whose household income fits the definition of low income as defined by the Georgia Department of Community Affairs, if such number of persons complete an application for employment and are otherwise qualified for employment. However, in no event shall the number of new jobs created fall below eighteen (18) jobs, of which at least fifty-one percent must be documented to be held by persons whose household income fits the definition of low income as defined by the Georgia Department of Community Affairs.
The Company shall maintain a summary of low and moderate income job creation every three (3) months commencing from the date of this Agreement following the closing of the Employment Incentive Program Grant. The Company's low and moderate income benefit documentation shall consist of individual certification for each employee which documents that person's family low and moderate income status prior to employment.
(b) The Company agrees that the jobs described above will be in place
not later than two years into the Agreement Term; provided, however, such
failure shall not constitute an Event of Default. A job is defined as one that
requires a 40-hour work week or its equivalent, such as two part time jobs of
20-hours each. In the event the Company fails to meet the requirements of this
Section 7.6(a) and (b) and penalties (including the repayment of the outstanding
principal amount of the RLF Loan if required by the Georgia Department of
Community Affairs as a result of such failure) are assessed against the Issuer,
the City, or Meriwether County, Georgia, those penalties will be assumed and
paid by the Company.
(c) The Company will have exclusive right to use the Project Site, other than the ingress and egress and parking requirements which a subsequent lease of the remaining 20,000 square feet may entail. The Issuer will not use the lot in any other manner during the Agreement Term and will not make any improvements to it; provided, however, the issuer shall have the right to lease or use the remaining 20,000 square feet of the unfinished building located on Lot 12 of the Manchester Industrial Park not constituting the Project Site subject to the options provided in Section 8.7 herein. The Company may make any improvements at its own expense on the Project Site and such improvements shall not be part of the Project or be subject to any additional rent hereunder. The Issuer would request that any plans for improvements be reviewed and approved by the Issuer. The Issuer agrees to cooperate with the Company in subordinating its lease and to work diligently and in good faith with the Company toward obtaining local financing of such improvements.
ARTICLE VIII
REDEMPTION OF BONDS; PUT OPTION; ADDITIONAL LEASE PAYMENTS;
OBLIGATION CONTINUES; PREPAYMENT AND ABATEMENT
SECTION 8.1. Redemption of Bonds. At the time the aggregate moneys in the Sinking Fund are sufficient to redeem all Bonds or portions thereof, the Issuer has provided in the Indenture for the Trustee to forthwith take all steps that may be necessary under the applicable redemption provisions of the Indenture to effect redemption of all or such part of the outstanding Bonds as may then be subject to redemption.
SECTION 8.2. Permissible Prepayment of Lease Payments. The Company shall have the option to prepay the Lease Payments and its other obligations hereunder at the times and in the amounts as necessary to exercise its option to cause the Bonds to be redeemed as set forth in the Indenture and in the Bonds. The Issuer, at the request of the Company, shall forthwith take all steps (other than the payment of the money required for such redemption) necessary under the applicable redemption provisions of the Indenture to effect redemption of all or part of the Outstanding Bonds, as may be specified by the Company, on the date established for such redemption.
SECTION 8.3. Mandatory Prepayment of Lease Payments. The Company hereby agrees that they shall prepay the Lease Payments and its other obligations hereunder at the times and in the amounts as necessary to accomplish the regularly scheduled mandatory redemption of the Bonds as set forth in the Indenture and in the Bonds.
The Company shall prepay, in whole or in part, to the extent necessary to carry out the redemption of Bonds in accordance with Section 3.02 of the Indenture, the Lease Payments and other amounts payable under Section 5.2 hereof, and the Issuer agrees that the Trustee shall accept such prepayments of Lease Payments when the same shall be tendered by the Company, upon the occurrence of any of the following events:
(a) If, as a result of any legislative or nonappealable administrative action (whether state or federal), or of any changes in the Constitution of the State of Georgia or the Constitution of the United States of America, or of a final, nonappealable decree, judgment or order of any court or administrative body (whether state or federal), this Agreement, the Indenture, the Deed to Secure Debt or any Bonds shall become void or unenforceable or impossible of performance in any material respect in accordance with the intent and purposes of the Company and the Issuer expressed in this Agreement or as otherwise expressed in the Indenture;
(b) To the extent required pursuant to Section 6.11 or Section 6.13 of this Agreement; or
(c) Upon the occurrence of a Determination of Taxability:
The Company shall notify the Issuer and the Trustee in writing of
the occurrence of any condition described in (a), (b) or (c) above as soon as it
becomes aware of same. Upon the occurrence of any condition described in (a),
(b) and (c) above, Lease Payments (or the applicable portion thereof) shall
immediately become due and payable in such manner as may be required by the
Indenture and upon written notice to the Company from the Trustee. No prepayment
in part shall permit a Bond to remain Outstanding in other than a denomination
authorized under the Indenture.
SECTION 8.4. [Intentionally Omitted].
SECTION 8.5. Vesting of Interest in Issuer. The Company and the Issuer agree and covenant that this Agreement, when executed and delivered, will create in and vest in the Issuer such interests and rights to enable the Issuer to issue the Bonds, secure the repayment of the Bonds, and loan funds for financing of the Project with repayment therefor to be made by the Company in installments, in the manner provided by, and in full compliance with, the Act.
SECTION 8.6. References to Bonds Ineffective After Bonds Paid. Upon payment in full of the Bonds (or provision for payment thereof having been made in accordance with the provisions of the Indenture) and all fees, charges and expenses of the Trustee and the Issuer and all amounts due under Section 6.08 of the Indenture, all references in this Agreement to the Bonds, and the Trustee shall be ineffective and neither the Trustee nor the Bondholders shall thereafter have any rights hereunder, excepting those that shall have theretofore vested.
SECTION 8.7. Options. The Company shall have the following options:
(a) The Company shall have the right to renew the Agreement Term for one additional five-year term on the same terms and conditions as contained in this Agreement.
(b) The Company shall have for five years the option to amend this Agreement or to enter into a separate lease agreement for the remaining 20,000 square feet of the Facility on an as is basis at a rental paid monthly, of $20,000 per year. The Company may make improvements in such space at its expense with the approval of the Issuer, which approval shall not be unreasonably withheld. The Issuer agrees to work diligently and in good faith with the Company towards obtaining bond or other financing of such construction. In the event such financing is obtained by the Issuer for such improvements, the rent for the additional space will be adjusted to reflect an amount and term that would completely amortize the costs of the improvements to the Facility, including transaction costs.
(c) For the period beginning five years after the end of the five-year period described in (b) above, the Company shall have the right of first refusal to the additional 20,000 square feet to the Facility and shall have the right to rent the same upon the same terms and conditions as any bona fide offer or, in the alternative, to rent the same on an as is basis for the annual rental of $20,000, paid monthly. The Company may make improvements to that space at its expense with the approval of the Issuer, which approval
shall not be unreasonably withheld. The Issuer agrees to work diligently and in good faith with the Company towards obtaining bond or other financing of such construction. In the event such financing is obtained by the Issuer for such improvements, the rent for the additional space will be adjusted to reflect an amount and that would completely amortize the costs of the improvements, including transaction costs.
(d) For the five-year period beginning at the end of the five-year period described in (c) above, the Company shall have a first refusal right to the 20,000 square foot of the Facility and shall have the right to rent the same upon the same terms and conditions as any bona fide offer or, in the alternative, to rent the same on an as is basis for an annual rental of $50,000.00, paid monthly. The Company may make improvements in that space at its expense with the approval of the Issuer, which approval shall not be unreasonably withheld. The Issuer agrees to work diligently and in good faith with the Company toward obtaining bond or other financing of such construction. In the event such financing is obtained by the Issuer for such improvements, the rent for the additional space will be adjusted to reflect an amount and term that would completely amortize the cost of the improvements including transaction costs.
(e) The Company shall have the right to purchase Lot 11 in the Manchester Industrial Park (8.91 acres) from the Issuer at any time during the Agreement Term for the sum of $6,500.00 per acre. This right may be assigned by the Company.
(f) The Company shall have the right at any time during the Agreement Term, or any renewals of the Agreement Term, to purchase the Facility and the Project Site for the cash price which shall be composed of the following sums:
(1) the remaining balance on the bonded indebtedness of $705,000.00; plus
(2) the RLF Loan of $150,000.00 less the amount of the rental payment of the Company which has been applied to the principal of said loan as of the date of purchase; plus
(3) the equity of the Issuer in the building in the amount of $730,000.00.
(g) Upon (i) the exercise of any option of the Company to purchase the Project from the Issuer hereunder or (ii) the exercise and fulfillment of the obligation of the Company to purchase the Project from the Issuer hereunder, each upon payment of the purchase price set forth in this Section 8.7 in cash, the Issuer will, by bills of sale and statutory warranty deed or other appropriate instruments, transfer and convey the Project (in its then condition, whatever that may be) to the Company, subject only to such liens, encumbrances and exceptions to which title thereto was subject when this Agreement was delivered (including, but not limited to, the Deed to Secure Debt), those to the creation or
suffering of which the Company expressly consented (except for this Agreement) and those resulting from the failure of the Company to perform or observe any of the agreements or covenants on its part herein contained.
ARTICLE IX
EVENTS OF DEFAULT AND REMEDIES
SECTION 9.1. Events of Default Defined. The following shall be "events of default" under this Agreement, and the terms "event of default" or "default" shall mean, whenever they are used in this Agreement, any one or more of the following events:
(a) Failure by the Company or the Issuer to pay or cause to be
paid when due that portion of the Lease Payments required to be paid under
Section 5.2(a) hereof for a period of five days after such amount is due.
(b) Failure by the Company to pay or cause to be paid when due its obligations under Sections 9.5 or 9.7 hereof.
(c) Failure by the Company to observe and perform in any material respect any covenant, condition or agreement in this Agreement or any other document contemplated hereby on the Company's or the Issuer's part to be observed or performed or the conditions and obligations which are imposed upon the Company or the Issuer as contemplated by the Indenture or any other certificate or document contemplated hereby in connection with the issuance or sale of the Bonds on the Company's or Issuer's part to be observed or performed, other than as referred to in subsections (a) and (b) of this Section, and such failure shall continue unremedied for a period of thirty (30) days after written notice, specifying such failure and requesting that it be remedied, given to the Company or the Issuer by the Trustee, unless the Company or the Issuer shall commence to remedy such failure within thirty (30) days after the occurrence of such failure and shall diligently pursue such remedy until completion thereof.
(d) The commencement by the Company of a voluntary case under the federal bankruptcy laws, or failure by the Company promptly to institute judicial proceedings to lift any execution, garnishment or attachment of such consequence as will materially impair the Company's obligations hereunder, or the entry of an order for relief in a case instituted under the federal bankruptcy laws with respect to the Company and dismissal of such case is not obtained within ninety (90) days of the entry of such order, or the making of any general assignment by the Company for the benefit of its creditors, or the entry by the Company into an agreement of composition with its creditors.
(e) The occurrence of an event of default under the Indenture, without cure within any applicable grace period.
(f) The occurrence of any default or event of default under the Deed to Secure Debt, without cure within any applicable grace period.
(g) Any material representation or warranty by the Company in this Agreement, as contemplated by the Indenture, or as provided in any other certificate, document or agreement given by the Company in connection with the issuance or sale of the Bonds shall have been untrue in any material respect at the time such representation or warranty was given or made, the result of which would have a material adverse effect upon the ability of the Company to perform the Company's obligations under such documents.
(h) After the twelfth anniversary date of the Issuance Date, the Issuer shall be limited to the right to re-enter and take possession of the Project without any liability to the Company for such entry and possession, as its sole remedy.
(i) The dissolution or liquidation of the Company, except as authorized by this Agreement, or the voluntary initiation by the Company of any proceeding under any federal or state law relating to bankruptcy, insolvency, arrangement, reorganization, readjustment of debt or any other form of debtor relief, or the initiation against the Company of any such proceeding which shall remain undismissed for sixty (60) days, or failure by the Company to promptly have discharged any execution. garnishment or attachment of such consequence as would impair the ability of the Company to carry on its operations at the Project, or assignment by the Company for the benefit of creditors, or the entry by the Company into an agreement of composition with its creditors.
SECTION 9.2. Remedies on Default. In the event any of the Bonds shall at the time be outstanding and unpaid and provision for the payment thereof shall not have been made in accordance with the provisions of the Indenture, whenever any event of default referred to in Section 9.1 hereof shall have happened and be subsisting, the Trustee and the Original Purchaser, or the Issuer if the Trustee shall have resigned and its successor shall not then have been appointed, may take any one or more of the following remedial steps:
(a) Declare all Lease Payments payable under Section 5.2 hereof and all amounts payable under the Agreement for the remainder of the Agreement Term to be immediately due and payable, whereupon the same shall become immediately due and payable.
(b) Foreclose on the Deed to Secure Debt, enter into possession of the project, the Project Site or any part thereof without notice or demand and sell or lease the Secured Property (as defined in the Deed to Secure Debt).
(c) Inspect, examine and make copies of the books and records and any and all accounts and data of the Company relating to the use and operation of the Project.
(d) Exercise any remedies granted under the Deed to Secure Debt.
(e) Take all other actions and pursue all other remedies available under any other contract or agreement or otherwise by statute, at law or in equity, whether or not inconsistent with the foregoing, that may appear necessary or appropriate to collect the sums then due and thereafter to become due from the Company by reason of this Agreement, or to enforce specific performance and observance of any obligation, agreement or covenant of the Company under this Agreement.
(f) The Issuer may re-enter and take possession of the Project without terminating this Agreement and without any liability to the Company for such entry and repossession, and sublease the Project for the account of the Company, holding the Company liable for the difference in the rents and other amounts payable by such subleases in such subleasing and the rents and other amounts payable by the Company hereunder;
(g) The Issuer may require the Company to assemble the Project Fixtures and make the same available at a place or places to be designated and shall have the right, without notice, demand or legal process, to come upon the Project Site and take possession of all or any of the Project Fixtures in such manner and as and on such terms as it may choose, and otherwise the Issuer may exercise with respect to the Project Fixtures the rights of a secured party under the U.C.C.;
(h) The Issuer may terminate the Agreement Term, exclude the company from possession of the Project and use its best efforts to lease the Project to another for the account of the Company, holding the Company liable for all rents and other amounts payable by the Company hereunder up to the effective date of such leasing;
Any amounts collected pursuant to action taken under this Section, after subtracting all costs and expenses and other deductions herein contemplated, shall be paid into the Sinking Fund and applied in accordance with the provisions of the Indenture.
SECTION 9.3. Authorization to Foreclose. In order to further and more fully secure the payment of the principal of and interest on the Bonds upon the happening of any event of default as herein provided, the Issuer and the Company hereby authorize and permit the Trustee for and on behalf and in the name of the Issuer to foreclose the Company's and the Issuer's interest in the project and Project Site and to take possession of the Project and Project Site by foreclosure or other proceedings with respect to fixtures and personally in the manner provided by the Georgia Statutes, which remedy shall be in addition to the other remedies provided in any other applicable provisions of this Agreement.
SECTION 9.4. No Remedy Exclusive. No remedy herein conferred upon or reserved to the Issuer or the Trustee is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Agreement or now or hereafter existing at law or in equity or by statute. No delay or omission to exercise any right or power accruing upon any default shall impair any such right or
power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle the Issuer or the Trustee to exercise any remedy reserved to either in this Article, it shall not be necessary to give any notice, other than such notice as may be herein expressly required. Such rights and remedies as are given the Issuer hereunder shall also extend to the Trustee, and the Trustee and the holders of the Bonds issued under the Indenture shall be deemed third party beneficiaries of all covenants and agreements herein contained.
SECTION 9.5. Agreement to Pay Attorney's Fees and Expenses. If the Company default under any of the provisions of this Agreement and the Issuer and the Trustee or either of them, should employ attorneys or incur other expenses for the collection of the Lease Payments or the enforcement of performance or observance of any obligation or agreement of the Company herein contained, the Company agree that the Company will on demand therefor pay to the Issuer or the Trustee or both or either of them, as the case may be, the reasonable fees of such attorneys (including fees on appeal or in any bankruptcy proceeding) and such other expenses so incurred by the Issuer and/or the Trustee, together with interest thereon at the lesser of two (2) percent over the prime rate of the Original Purchaser or maximum lawful rate from the date of demand to the date of payment.
SECTION 9.6. No Additional Waiver Implied bv One Waiver. In the event any agreement contained in this Agreement should be breached by either party and thereafter waived by the other party, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other breach hereunder. No waiver granted by the Issuer with respect to the Project or the rights or remedies hereunder or under the Indenture which would adversely affect the rights and interests of the Trustee or the Bondholders shall be effective without the written consent of the Trustee.
SECTION 9.7. Issuer's Right to Advance Funds upon Default; Reimbursement of Same. Immediately upon either the Issuer's or the Trustee's obtaining knowledge of the occurrence of any event of default it shall give written notice of such occurrence to the other and to the Company. With respect to any default by the Company of the type described in Section 9.1 of this Agreement, the Issuer and the Trustee shall have the right (but may never be required) to advance from any funds, except any funds in the Indenture, legally available for such purpose the sum required to cure such default; and the Issuer and the Trustee shall be entitled to receive from the Company reimbursement of such sum upon demand, together with interest thereon from the date of such advance to the date of reimbursement at the lesser of two (2) percent over the prime rate of the Original Purchaser and the maximum lawful rate, and expenses of collecting the same, including reasonable attorneys' fees whether suit be brought or not.
ARTICLE X
MISCELLANEOUS
SECTION 10.1. Notices. All notices, certificates or other communications hereunder shall be sufficiently given and shall be deemed given on the third day following the day on which the same shall have been mailed by first class mail, postage prepaid, or, if to the Issuer, the Company or the Trustee, on the day given if given by telefax, telecopy or telegram, confirmed in writing, addressed as follows:
If the Bondholders, addressed to their addresses as they appear on the registration books provided for in the Indenture.
If to the Issuer: The Development Authority of the
City of Manchester
Post Office Box 585
Manchester, Georgia 31816
Attention: Chairman
If to the Company: Horizon Medical Products, Inc.
Seven North Parkway Square
4200 Northside Parkway, N.W.
Atlanta, Georgia 30327
Attention: President
If to the Trustee: Synovus Trust Company
Post Office Box 120
1148 Broadway, 2nd Floor
Columbus, Georgia 31902
Attention: Corporate Trust Department
If to the Georgia The Georgia Department of Community Affairs
Department of c/o EIP Program
Community Affairs: 1200 Equitable Building
100 Peachtree Street
Atlanta, Georgia 30303
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A duplicate copy of each notice, certificate or other communication given hereunder by either the Issuer or the Company to the other shall also be given to the Trustee. The Issuer, the Company and the Trustee may, by notice given hereunder, designate any further or different addresses to which subsequent notices, certificates or other communications shall be sent.
SECTION 10.2. Binding Effect; Controlling Law. This Agreement shall inure to the benefit of and shall be binding upon the Issuer, the Company and their respective successors and assigns, and shall be governed by and construed in accordance with the laws of the State of Georgia.
SECTION 10.3. Severability. In the event any provision of this Agreement shall be held invalid or unenforceable by any court of competent jurisdiction, the remainder of this Agreement shall not be affected thereby if such remainder would then continue to conform to the requirements of applicable law.
SECTION 10.4. Amounts Remaining in Funds. It is agreed by the parties hereto that any amounts remaining in the Sinking Fund, the Construction Fund or the Rebate Fund upon expiration or sooner termination of the Agreement Term, as provided in this Agreement, after payment in full of the Bonds (or provision for payment thereof having been made in accordance with the provisions of the Indenture) and the fees, charges and expenses of the Trustee, the bond registrar, the paying agents and the Issuer in accordance with the Indenture, and the payment of all amounts due under Section 6.08 of the Indenture, shall belong to and be paid to the Issuer by the Trustee as overpayment.
SECTION 10.5. Complete Agreement; Supplements or Amendment. This Agreement represents the entire agreement between the parties. This Agreement may be supplemented, modified or amended only in the manner either as provided in this Agreement or as provided by Article XV of the Indenture, subsequent to the issuance of the Bonds and prior to the payment in full of the Bonds (or provision for the payment thereof having been made in accordance with the provisions of the Indenture), and this Agreement may not be effectively amended, changed, modified, altered or terminated without the concurring written consent of the Trustee, given in accordance with the provisions of the Indenture or this Agreement.
SECTION 10.6. Controlling Law; Members of Issuer Not Liable. All covenants, stipulations, obligations and agreements of the Issuer contained in this Agreement shall be deemed to be covenants, stipulations, obligations and agreements of the Issuer to the full extent authorized by the Act and provided by the Constitution and laws of the State. No covenant, stipulation, obligation or agreement contained herein shall be deemed to be a covenant, stipulation, obligation or agreement of any present or future member, agent or employee of the Issuer in his individual capacity, and neither the members of the Issuer nor any official executing this Agreement shall be subject to any personal liability or accountability by reason of the execution by the Issuer or such members thereof.
SECTION 10.7. Company Approval of Indenture. The Company has reviewed the Indenture and the forms of the Bonds and the Company hereby approves the forms of the Indenture and the Bonds and covenant that they will faithfully perform at all times any and all covenants, undertakings, stipulations and provisions contained in the Indenture, in the Bonds authenticated and delivered thereunder and in all proceedings of the Issuer pertaining thereto, on their part to be observed or performed, whether express or implied.
SECTION 10.8. Further Assurances. The Company shall, at their expense, promptly and duly execute, acknowledge and deliver to the Trustee and to the Issuer, as appropriate, such further documents, instruments, financing and similar statements and assurances and take such further action as may from time to time be reasonably required or requested by the Trustee and/or the Issuer in order more effectively to carry out the intent and purposes of this Agreement, the Indenture, and the Bonds issued thereunder and other instruments contemplated thereby.
SECTION 10.9. Rights not Extinguished. Any right, interest or remedy which shall have accrued during the Agreement Term shall not be terminated or extinguished by the expiration or termination of this Agreement but may be enforced by the party for whose benefit such right, interest or remedy shall have accrued and may be enforceable by such party in accordance with the terms of this Agreement as if it had not terminated or expired or otherwise in accordance with law.
SECTION 10.10. Agreed to and Accepted by Original Purchaser. By agreeing to and accepting this Agreement, the Original Purchaser agrees to make advances in the manner set forth herein.
SECTION 10.11. Execution of Counterparts. This Agreement may be simultaneously executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.
SECTION 10.12. NO WARRANTY OF CONDITION OR SUITABILITY BY ISSUER. THE ISSUER MAKES NO WARRANTY, EITHER EXPRESS OR IMPLIED, AS TO THE PROJECT OR THE CONDITION THEREOF, OR THAT THE PROJECT WILL BE SUITABLE FOR THE PURPOSES OR NEEDS OF THE COMPANY. THE ISSUER MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, THAT THE COMPANY WILL HAVE QUIET AND PEACEFUL POSSESSION OF THE PROJECT. THE ISSUER MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO THE MERCHANTABILITY, CONDITION OR WORKMANSHIP OF ANY PART OF THE PROJECT OR ITS SUITABILITY FOR THE COMPANY'S PURPOSES.
SECTION 10.13. Net Lease. This Agreement shall be deemed a "net lease," and the Company shall pay absolutely net during the Agreement Term the rents specified herein, without abatement, deduction or set-off other than those herein expressly provided.
SECTION 10.14. Recording. This Agreement, or a Memorandum of this Agreement describing the relevant terms and conditions and the options provided in Section 8.7 hereof, and every assignment (except the assignment to the Trustee) and modification hereof shall be recorded in the Clerk's Office of the Superior Court of the County, or in such other office as may be at the time provided by law as the proper place for such recordation.
IN WITNESS WHEREOF, the Issuer has cased this Agreement to be executed by its Chairman and the seal of the Issuer to be hereto affixed and attested by its Assistant Secretary, and the Company has duly caused this Agreement to be executed by two of its duly authorized officers, all as of the date first above written.
Signed, sworn to and delivered THE DEVELOPMENT AUTHORITY before me this 1st day of July, 1996 OF THE CITY OF MANCHESTER /s/ Gwen ? By: /s/ ? Elliott -------------------------------- --------------------------- Unofficial Witness Chairman /s/ Beverly B. Phillips Attest: /s/ Judy T. Foster -------------------------------- ----------------------- Notary Public Title: Secretary My Commission Expires: 5/30/2000 -------------------------------- [NOTARIAL SEAL] |
Signed, sworn to and delivered HORIZON MEDICAL PRODUCTS, INC. before me this 1st day of July, 1996 /s/ By: /s/ ------------------------------------ -------------------------- Unofficial Witness Title: President /s/ Alice Walker Attest: /s/ ------------------------------------ ---------------------- Notary Public Title: Secretary My Commission Expires: ------------------------------------ [NOTARIAL SEAL] |
AGREED TO AND ACCEPTED BY:
COLUMBUS BANK AND TRUST
COMPANY, as the
Original Purchaser
By: /s/ J. Theodore Edgar
---------------------------
Name: J. Theodore Edgar
------------------------
Title: Vice President
------------------------
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EXHIBIT "A"
PROJECT DESCRIPTION
The Project includes an approximately 20,000 square feet of space located in the building constituting the Manchester Industrial Park and related fixtures.
EXHIBIT "B"
PROJECT SITE
All that tract or parcel of land lying and being in Land Lot 12 of the First Land District of Meriwether County, Georgia, and in the City of Manchester, containing 10.557 acres, and more particularly described as follows: To obtain a point of beginning start at the intersection of the East right of way of State Route 85E with the centerline of Pigeon Creek and proceed in a southerly direction along the East right of way of State Route 85E a distance of 2,280 feet to an iron pin which is the Point of Beginning. FROM SAID POINT OF BEGINNING proceed South 73 degrees 28 minutes 25 seconds East 730 feet to an iron pin; thence South 16 degrees 31 minutes 35 seconds West 325 feet to an iron pin; thence proceed along a curve which has a radius of 2,834.79 feet, an arc of 331.96 feet and a chord of South 19 degrees 52 minutes 52 seconds West 331.77 feet to an iron pin; thence proceed North 69 degrees 01 minutes 25 seconds West 730.18 feet to an iron pin on the East right of way of State Route 85E; thence proceed in a northerly direction along the East right of way of State Route 85E in a curve which has a radius of 5,768.21 feet, an arc of 448.00 feet and a chord of North 18 degrees 45 minutes 05 seconds East 447.89 feet to a right of way monument; thence continue along the East right of way of State Route 85E North 16 degrees 31 minutes 35 seconds East 152 feet to the iron pin which marks the Point of Beginning.
Said property is bounded on the North by Delano Drive; on the East by an unnamed street; on the South by Lot 11 of the Manchester Development Authority Industrial Park; and on the West by State Route 85E.
Said property is more particularly shown as Lot 12 on a plat of survey for the Manchester Development Authority by Edward A. Bruner, registered surveyor, which plat is dated December 12, 1995, and recorded in plat Book 16, Page 223, in the Office of the Clerk of Meriwether Superior Court.
EXHIBIT "C"
PROJECT FIXTURES
1. Process piping/Chill water/Compressed air system
2. Electrical upgrade to handle 230 volt equipment
3. Plumbing floor drains for equipment
4. HVAC: Additional tonnage for clean-rooms
EXHIBIT "D"
PERMITTED ENCUMBRANCES
1. Defects, liens, encumbrances, adverse claims or other matters, if any,
created, first appearing in the public records or attaching subsequent to
the effective date hereof but prior to the date the proposed Insured
acquires for value of record the estate or interest or mortgage covered
by this Commitment.
2. Rights or claims of parties in possession not shown by the public
records.
3. Easements, or claims of easements, not shown by the public records.
4. Encroachments, overlaps, boundary line disputes, or other matters which
would be disclosed by an accurate survey or inspection of the premises.
5. Any lien, or right to a lien, for services, labor, or material heretofore
or hereafter furnished, imposed by law and not shown by the public
records.
6. Any adverse claim to any portion of said land which has been created by
artificial means or has accreted to any such portion so created and
riparian rights, if any.
7. Taxes or special assessments which are not shown as existing liens by
public records.
8. Any prior reservation or conveyance, together with release of damages, of
minerals of every kind and character, including, but not limited to oil,
gas, sand, and gravel in, on, and under subject property.
9. The mortgage, if any, referred to in Schedule A. (This exception does NOT
apply to Loan Policies.)
10. General and special taxes or assessments for 1996 and subsequent years
not yet due and payable.
ll. An Easement to Georgia Power Company dated May 22, l95l, and recorded in
Deed Book 50, Page 294, in the Office of the Clerk of Meriwether Superior
Court.
12. A Deed to Secure Debt from The Development Authority of the City of
Manchester to F & M Bank and Trust Company dated March 15, 1996, and
recorded March 20, 1996, in Deed Book 358, Page 120, in the Office of the
Clerk of Meriwether Superior Court.
EXHIBIT "E"
PLANS AND SPECIFICATIONS
A copy of the Plans and Specifications are filed as of record with The Development Authority of the City of Manchester.
EXHIBIT "F"
BASIC CONTRACT
THE AMERICAN INSTITUTE OF ARCHITECTS
with or without a Guaranteed Maximum Price
1987 EDITION
THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES;
CONSULTATION WITH AN ATTORNEY IS ENCOURAGED WITH
RESPECT TO ITS COMPLETION OR MODIFICATION.
The 1987 Edition of AIA Document A201. General Conditions of the Contract for Construction, is adopted in this document by reference. Do not use with other general conditions unless this document is modified.
AGREEMENT
made as of the day of in the year of
Nineteen Hundred and
BETWEEN the Owner: The Development Authority of the City of Manchester &
(Name and address) Horizon Medical Products
c/o Tyron Elliott
P.O. Drawer 389
Manchester, Georgia 31816
and the Contractor: Langford Construction Company
(Name and address) 314 Greenville Street
P.O. Box 1287
LaGrange, Georgia 30241
the Project is: New 40,000 s.f. Office/Manufacturing/Warehouse
(Name and address) Facility
Manchester Industrial Park
Manchester, Georgia 31816
the Architect is: Hal Herndon & Associates, PC
(Name and address) 2780 Bert Adams Road
Suite 300
Atlanta, Georgia 30339
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The Owner and Contractor agree as set forth below.
A111-1987 1
ARTICLE 1
THE CONTRACT DOCUMENTS
1.1 The Contract Documents consist of this Agreement, Conditions of the Contract (General, Supplementary and other Conditions), Drawings, Specifications, addenda issued prior to execution of this Agreement, other documents listed in this Agreement and Modifications issued after execution of this Agreement: these form the Contract, and are as fully a part of the Contract as if attached to this Agreement or repeated herein. The Contract represents the entire and integrated agreement between the parties hereto and supersedes prior negotiations, representations or agreements, either written or oral. An enumeration of the Contract Documents, other than Modifications, appears in Article 16. If anything in the other Contract Documents is inconsistent with this Agreement, this Agreement shall govern.
ARTICLE 2
THE WORK OF THIS CONTRACT
2.1 The Contractor shall execute the entire Work described in the Contract Documents, except to the extent specifically indicated in the Contract Documents to be the responsibility of others, or as follows:
Excludes all manufacturing equipment
Includes all work per estimate detail report
Excludes all mezzanines (provisions for future wooden mezzanine @ office
included)
ARTICLE 3
RELATIONSHIP OF THE PARTIES
3.1 The Contractor accepts the relationship of trust and confidence established by this Agreement and covenants with the Owner to cooperate with the Architect and utilize the Contractor's best skill, efforts and judgment in furthering the interests of the Owner; to furnish efficient business administration and supervision; to make best efforts to furnish at all times an adequate supply of workers and materials; and to perform the Work in the best way and most expeditious and economical manner consistent with the interests of the Owner. The Owner agrees to exercise best efforts to enable the Contractor to perform the Work in the best way and most expeditious manner by furnishing and approving in a timely way information required by the Contractor and making payments to the Contractor in accordance with requirements of the Contract Documents.
ARTICLE 4
DATE OF COMMENCEMENT AND SUBSTANTIAL COMPLETION
4.1 The date of commencement is the date from which the Contract Time of Subparagraph 4.2 is measured; it shall be the date of this Agreement, as first written above, unless a different date is stated below or provision is made for the date to be fixed in a notice to proceed issued by the Owner.
(Insert the date of commencement, if it differs from the date of this Agreement or, if applicable, state that the date will be fixed in a notice to proceed.)
Date will be fixed in a notice to proceed.
Unless the date of commencement is established by a notice to proceed issued by the Owner, the Contractor shall notify the Owner in writing not less than five days before commencing the Work to permit the timely filing of mortgages, mechanic's liens and other security interests.
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4.2 The Contractor shall achieve Substantial Completion of the entire Work not later than June 30,1996
(Insert the calendar date or number of calendar days after the date of Commencement. Also insert any requirements for earlier Substantial Completion of certain portions of the Work, if not stated elsewhere in the Contract Documents.)
or 120 days from notice to proceed
, subject to adjustments of this Contract Time as provided in the Contract Documents.
(Insert provisions, if any, for liquidated damages relating to failure to complete on time.)
ARTICLE 5
CONTRACT SUM
5.1 The Owner shall pay the Contractor in current funds for the Contractor's performance of the Contract the Contract Sum consisting of the Cost of the Work as defined in Article 7 and the Contractor's Fee determined as follows:
(State a lump sum, percentage of Cost of the Work or other provision for determining the Contractor's Fee, and explain how the Contractor's Fee is to be adjusted for changes in the Work.)
Standard Build-out $150,000.00
- Completion of Tenant Finishes of $877,000.00 to be under separate contract
- Contractor's Fee to be adjusted at same rates based on any approved Change Order if required
5.2 GUARANTEED MAXIMUM PRICE (IF APPLICABLE)
5.2.1 The sum of the Cost of the Work and the Contractor's Fee is guaranteed by the Contractor not to exceed One hundred fifty thousand & 00/100 Dollars $150,000.00), subject to additions and deductions by Change Order as provided in the Contract Documents. Such maximum sum is referred to in the Contract Documents as the Guaranteed Maximum Price. Costs which would cause the Guaranteed Maximum Price to be exceeded shall be paid by the Contractor without reimbursement by the Owner.
(Insert specific provisions if the Contractor is to participate in any savings.)
Savings to be split 50% to Horizon Medical Products and 50% to Contractor
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5.2.2 The Guaranteed Maximum Price is based upon the following alternates, if any, which are described in the Contract Documents and are hereby accepted by the Owner:
(State the numbers or other identification of accepted alternates, but only if a Guaranteed Maximum Price is inserted in Subparagraph 5.2.1. If decisions on other alternates are to be made by the Owner subsequent to the execution of this Agreement, attach a schedule of such other alternates showing the amount for each and the date until which that amount is valid.)
Estimate Detail Report dated 2/14/96 (See Attachment)
Memo concerning changes dated 2/13/96 (See Attachment)
Balance of $877,000.00 for completion of Tenant Finishes to be under separate contract is included in Estimate Detail Report dated 2/14/96
5.2.3 The amounts agreed to for unit prices, if any, are as follows:
(State unit prices only if a Guaranteed Maximum Price is inserted in Subparagraph 5.2.1.)
ARTICLE 6
CHANGES IN THE WORK
6.1 CONTRACTS WITH A GUARANTEED MAXIMUM PRICE
6.1.1 Adjustments to the Guaranteed Maximum Price on account of changes in the Work may be determined by any of the methods listed in Subparagraph 7.3.3 of the General Conditions.
6.1.2 In calculating adjustments to subcontracts (except those awarded with the Owner's prior consent on the basis of cost plus a fee), the terms "cost" and "fee" as used in Clause 7.3.3.3 of the General Conditions and the terms "costs" and "a reasonable allowance for overhead and profit" as used in Subparagraph 7.3.6 of the (General Conditions shall have the meanings assigned to them in the General Conditions and shall not be modified by Articles 5, 7 and 8 of this Agreement. Adjustments to subcontracts awarded with the Owner's prior consent on the basis of cost plus a fee shall be calculated in accordance with the terms of those subcontracts.
6.1.3 In calculating adjustments to this Contract, the terms "cost" and "costs" as used in the above-referenced provisions of the General Conditions shall mean the Cost of the Work as defined in Article 7 of this Agreement and the terms "fee" and "a reasonable allowance for overhead and profit" shall mean the Contractor's Fee as defined in Paragraph 5.1 of this Agreement.
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6.2 CONTRACTS WITHOUT A GUARANTEED MAXIMUM PRICE
6.2.1 Increased costs for the items set forth in Article 7 which result from changes in the Work shall become part of the Cost of the Work, and the Contractor's Fee shall be adjusted as provided in Paragraph 5.1.
6.3 ALL CONTRACTS
6.3.1 If no specific provision is made in Paragraph 5.1 for adjustment of the Contractor's Fee in the case of changes in the Work, or if the extent of such changes is such, in the aggregate, that application of the adjustment provisions of Paragraph 5.1 will cause substantial inequity to the Owner or Contractor, the Contractor's Fee shall be equitably adjusted on the basis of the Fee established for the original Work.
ARTICLE 7
COSTS TO BE REIMBURSED
7.1 The term Cost of the Work shall mean costs necessarily incurred by the Contractor in the proper performance of the Work. Such costs shall be at rates not higher than the standard paid at the place of the Project except with prior consent of the Owner. The Cost of the Work shall include only the items set forth in this Article 7.
7.1.1 LABOR COSTS
7.1.1.1 Wages of construction workers directly employed by the Contractor to perform the construction of the Work at the site or, with the Owner's agreement, at off-site workshops.
7.1.1.2 Wages or salaries of the Contractor's supervisory and administrative personnel when stationed at the site with the Owner's agreement.
(If it is intended that the wages or salaries of certain personnel stationed at the Contractor's principal or other offices shall be included in the cost of the Work, identify in Article 14 the personnel to be included and whether for all or only part of their time.)
7.1.1.3 Wages and salaries of the Contractor's supervisory or administrative personnel engaged, at factories, workshops or on the road, in expediting the production or transportation of materials or equipment required for the Work, but only for that portion of their time required for the Work.
7.1.1.4 Costs paid or incurred by the Contractor for taxes, insurance, contributions, assessments and benefits required by law or collective bargaining agreements and, for personnel not covered by such agreements, customary benefits such as sick leave, medical and health benefits, holidays, vacations and pensions, provided such costs are based on wages and salaries included in the Cost of the Work under Clauses 7.1.1.1 through 7.1.1.3.
7.1.2 SUBCONTRACT COSTS
Payments made by the Contractor to Subcontractors in accordance with the requirements of the subcontracts.
7.1.3 COSTS OF MATERIALS AND EQUIPMENT INCORPORATED IN THE COMPLETED CONSTRUCTION
7.1.3.1 Costs, including transportation, of materials and equipment incorporated or to be incorporated in the completed construction.
7.1.3.2 Costs of materials described in the preceding Clause 7.1.3.1 in excess of those actually installed but required to provide reasonable allowance for waste and for spoilage. Unused excess materials, if any, shall be handed over to the Owner at the completion of the Work or, at the Owner's option, shall be sold by the Contractor; amounts realized, if any, from such sales shall be credited to the Owner as a deduction from the Cost of the Work.
7.1.4 COSTS OF OTHER MATERIALS AND EQUIPMENT, TEMPORARY FACILITIES AND RELATED ITEMS
7.1.4.1 Costs, including transportation, installation, maintenance, dismantling and removal of materials, supplies, temporary facilities, machinery, equipment, and hand tools not customarily owned by the construction workers, which are provided by the Contractor at the site and fully consumed in the performance of the Work; and cost less salvage value on such items if not fully consumed, whether sold to others or retained by the Contractor. Cost for items previously used by the Contractor shall mean fair market value.
7.1.4.2 Rental charges for temporary facilities, machinery, equipment, and hand tools not customarily owned by the construction workers, which are provided by the Contractor at the site, whether rented from the Contractor or others, and costs of transportation, installation, minor repairs and replacements, dismantling and removal thereof. Rates and quantities of equipment rented shall be subject to the Owner's prior approval.
7.1.4.3 Costs of removal of debris from the site.
7.1.4.4 Costs of telegrams and long-distance telephone calls, postage and parcel delivery charges, telephone service at the site and reasonable petty cash expenses of the site office.
7.1.4.5 That portion of the reasonable travel and subsistence expenses of the Contractor's personnel incurred while traveling in discharge of duties connected with the Work.
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7.1.5 MISCELLANEOUS COSTS
7.1.5.1 That portion directly attributable to this Contract of premiums for insurance and bonds.
7.1.5.2 Sales, use or similar taxes imposed by a governmental authority which are related to the Work and for which the Contractor is liable.
7.1.5.3 Fees and assessments for the building permit and for other permits, licenses and inspections for which the Contractor is required by the Contract Documents to pay.
7.1.5.4 Fees of testing laboratories for tests required by the Contract Documents, except those related to defective or nonconforming Work for which reimbursement is excluded by Subparagraph 13.5.3 of the General Conditions or other provisions of the Contract Documents and which do not fall within the scope of Subparagraphs 7.2.2 through 7.2.4 below.
7.1.5.5 Royalties and license fees paid for the use of a particular design, process or product required by the Contract Documents; the cost of defending suits or claims for infringement of patent rights arising from such requirement by the Contract Documents; payments made in accordance with legal judgments against the Contractor resulting from such suits or claims and payments of settlements made with the Owner's consent; provided, however, that such costs of legal defenses, judgment and settlements shall not be included in the calculation of the Contractor's Fee or of a Guaranteed Maximum Price, if any, and provided that such royalties, fees and costs are not excluded by the last sentence of Subparagraph 3.17.1 of the General Conditions or other provisions of the Contract Documents.
7.1.5.6 Deposits lost for causes other than the Contractor's fault or negligence.
7.1.6 OTHER COSTS
7.1.6.1 Other costs incurred in the performance of the Work if and to the extent approved in advance in writing by the Owner.
7.2 EMERGENCIES: REPAIRS TO DAMAGED, DEFECTIVE OR NONCONFORMING WORK
The Cost of the Work shall also include costs described in Paragraph 7.1 which are incurred by the Contractor:
7.2.1 In taking action to prevent threatened damage, injury or loss in case of an emergency affecting the safety of persons and property, as provided in Paragraph 10.3 of the General Conditions.
7.2.2 In repairing or correcting Work damaged or improperly executed by construction workers in the employ of the Contractor, provided such damage or improper execution did not result from the fault or negligence of the Contractor or the Contractor's foremen, engineers or superintendents, or other supervisory, administrative or managerial personnel of the Contractor.
7.2.3 In repairing damaged Work other than that described in Subparagraph 7.2.2. provided such damage did not result from the fault or negligence of the Contractor or the Contractor's personnel, and only to the extent that the cost of such repairs is not recoverable by the Contractor from others and the Contractor is not compensated therefor by insurance or otherwise.
7.2.4 In correcting defective or nonconforming Work performed or supplied by a Subcontractor or material supplier and not corrected by them, provided such defective or nonconforming Work did not result from the fault or neglect of the Contractor or the Contractor's personnel adequately to supervise and direct the Work of the Subcontractor or material supplier, and only to the extent that the cost of correcting the defective or nonconforming Work is not recoverable by the Contractor from the Subcontractor or material supplier.
ARTICLE 8
COSTS NOT TO BE REIMBURSED
8.1 The Cost of the Work shall not include:
8.1.1 Salaries and other compensation of the Contractor's personnel stationed at the Contractor's principal office or offices other than the site office, except as specifically provided in Clauses 7.1.1.2 and 7.1.1.3 or as may be provided in Article 14.
8.1.2 Expenses of the Contractor's principal office and offices other than the site office.
8.1.3 Overhead and general expenses, except as may be expressly included in Article 7.
8.1.4 The Contractor's capital expenses, including interest on the Contractor's capital employed for the Work.
8.1.5 Rental costs of machinery and equipment, except as specifically provided in Clause 7.1.4.2.
8.1.6 Except as provided in Subparagraphs 7.2.2 through 7.2.4 and Paragraph 13.5 of this Agreement, costs due to the fault or negligence of the Contractor, Subcontractors, anyone directly or indirectly employed by any of them, or for whose acts any of them may be liable, including but not limited to costs for the correction of damaged, defective or nonconforming Work, disposal and replacement of materials and equipment incorrectly ordered or supplied, and making good damage to property not forming part of the Work.
8.1.7 Any cost not specifically and expressly described in Article 7.
8.1.8 Costs which would cause the Guaranteed Maximum Price, if any, to be exceeded.
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ARTICLE 9
DISCOUNTS, REBATES AND REFUNDS
9.1 Cash discounts obtained on payments made by the Contractor shall accrue to the Owner if (1) before making the payment, the Contractor included them in an Application for Payment and received payment therefor from the Owner, or (2) the Owner has deposited funds with the Contractor with which to make payments; otherwise, cash discounts shall accrue to the Contractor. Trade discounts, rebates, refunds and amounts received from sales of surplus materials and equipment shall accrue to the Owner, and the Contractor shall make provisions so that they can be secured.
9.2 Amounts which accrue to the Owner in accordance with the provisions of Paragraph 9.1 shall be credited to the Owner as a deduction from the Cost of the Work.
ARTICLE 10
SUBCONTRACTS AND OTHER AGREEMENTS
10.1 Those portions of the Work that the Contractor does not customarily perform with the Contractor's own personnel shall be performed under subcontracts or by other appropriate agreements with the Contractor. The Contractor shall obtain bids from Subcontractors and from suppliers of materials or equipment fabricated especially for the Work and shall deliver such bids to the Architect. The Owner will then determine, with the advice of the Contractor and subject to the reasonable objection of the Architect, which bids will be accepted. The Owner may designate specific persons or entities from whom the Contractor shall obtain bids; however, if a Guaranteed Maximum Price has been established, the Owner may not prohibit the Contractor from obtaining bids from others. The Contractor shall not be required to contract with anyone to whom the Contractor has reasonable objection.
10.2 If a Guaranteed Maximum Price has been established and a specific bidder among those whose bids are delivered by the Contractor to the Architect (1) is recommended to the Owner by the Contractor; (2) is qualified to perform that portion of the Work; and (3) has submitted a bid which conforms to the requirements of the Contract Documents without reservations or exceptions, but the Owner requires that another bid be accepted; then the Contractor may require that a Change Order be issued to adjust the Guaranteed Maximum Price by the difference between the bid of the person or entity recommended to the Owner by the Contractor and the amount of the subcontract or other agreement actually signed with the person or entity designated by the Owner.
10.3 Subcontracts or other agreements shall conform to the payment provisions of Paragraphs 12.7 and 12.8, and shall not be awarded on the basis of cost plus a fee without the prior consent of the Owner.
ARTICLE 11
ACCOUNTING RECORDS
11.1 The Contractor shall keep full and detailed accounts and exercise such controls as may be necessary for proper financial management under this Contract; the accounting and control systems shall be satisfactory to the Owner. The Owner and the Owner's accountants shall be afforded access to the Contractor's records, books, correspondence, instructions, drawings, receipts, subcontracts, purchase orders, vouchers, memoranda and other data relating to this Contract, and the Contractor shall preserve these for a period of three years after final payment, or for such longer period as may be required by law.
ARTICLE 12
PROGRESS PAYMENTS
12.1 Based upon Applications for Payment submitted to the Architect by the Contractor and Certificates for Payment issued by the Architect, the Owner shall make progress payments on account of the Contract Sum to the Contractor as provided below and elsewhere in the Contract Documents.
12.2 The period covered by each Application for Payment shall be one calendar month ending on the last day of the month, or as follows:
12.3 Provided an Application for Payment is received by the Architect not later than the 25th day of a month, the Owner shall make payment to the Contractor not later than the 10th day of the month. If an Application for Payment is received by the Architect after the application date fixed above, payment shall be made by the Owner not later than 15 days after the Architect receives the Application for Payment.
12.4 With each Application for Payment the Contractor shall submit payrolls, petty cash accounts, receipted invoices or invoices with check vouchers attached, and any other evidence required by the Owner or Architect to demonstrate that cash disbursements already made by the Contractor on account of the Cost of the Work equal or exceed (1) progress payments already received by the Contractor; less (2) that portion of those payments attributable to the Contractor's Fee; plus (3) payrolls for the period covered by the present Application for Payment; plus (4) retainage provided in Subparagraph 12.5.4, if any, applicable to prior progress payments.
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12.5 CONTRACTS WITH A GUARANTEED MAXIMUM PRICE
12.5.1 Each Application for Payment shall be based upon the most recent schedule of values submitted by the Contractor in accordance with the Contract Documents. The schedule of values shall allocate the entire Guaranteed Maximum Price among the various portions of the Work, except that the Contractor's Fee shall be shown as a single separate item. The schedule of values shall be prepared in such form and supported by such data to substantiate its accuracy as the Architect may require. This schedule, unless objected to by the Architect, shall be used as a basis for reviewing the Contractor's Applications for Payment.
12.5.2 Applications for Payment shall show the percentage completion of each portion of the Work as of the end of the period covered by the Application for Payment. The percentage completion shall be the lesser of (1) the percentage of that portion of the Work which has actually been completed or (2) the percentage obtained by dividing (a) the expense which has actually been incurred by the Contractor on account of that portion of the Work for which the Contractor has made or intends to make actual payment prior to the next Application for Payment by (b) the share of the Guaranteed Maximum Price allocated to that portion of the Work in the schedule of values.
12.5.3 Subject to other provisions of the Contract Documents, the amount of each progress payment shall be computed as follows:
12.5.3.1 Take that portion of the Guaranteed Maximum Price properly allocable to completed Work as determined by multiplying the percentage completion of each portion of the Work by the share of the Guaranteed Maximum Price allocated to that portion of the Work in the schedule of values. Pending final determination of cost to the Owner of changes in the Work, amounts not in dispute may be included as provided in Subparagraph 7.3.7 of the General Conditions, even though the Guaranteed Maximum Price has not yet been adjusted by Change Order.
12.5.3.2 Add that portion of the Guaranteed Maximum Price properly allocable to materials and equipment delivered and suitably stored at the site for subsequent incorporation in the Work or, if approved in advance by the Owner, suitably stored off the site at a location agreed upon in writing.
12.5.3.3 Add the Contractor's Fee, less retainage of N/A percent (N/A %). The Contractor's Fee shall be computed upon the Cost of the Work described in the two preceding Clauses at the rate stated in Paragraph 5.1 or, if the Contractor's Fee is stated as a fixed sum in that Paragraph, shall be an amount which bears the same ratio to that fixed-sum Fee as the Cost of the Work in the two preceding Clauses bears to a reasonable estimate of the probable Cost of the Work upon its completion.
12.5.3.4 Subtract the aggregate of previous payments made by the Owner.
12.5.3.5 Subtract the shortfall, if any, indicated by the Contractor in the documentation required by Paragraph 12.4 to substantiate prior Applications for Payment, or resulting from errors subsequently discovered by the Owner's accountants in such documentation.
12.5.3.6 Subtract amounts, if any, for which the Architect has withheld or nullified a Certificate for Payment as provided in Paragraph 9.5 of the General Conditions.
12.5.4 Additional retainage, if any, shall be as follows:
(If it is intended to retain additional amounts from progress payments to the Contractor beyond (1) the retainage from the Contractor's Fee provided in Clause 12.5.3.3, (2) the retainage from Subcontractors provided in Paragraph 12.7 below, and (3) the retainage, if any, provided by other provisions of the Contract, insert provision for such additional retainage here. Such provision, if made, should also describe any arrangement for limiting or reducing the amount retained after the Work reaches a certain state of completion.)
12.6 CONTRACTS WITHOUT A GUARANTEED MAXIMUM PRICE
12.6.1 Applications for Payment shall show the Cost of the Work actually incurred by the Contractor through the end of the period covered by the Application for Payment and for which the Contractor has made or intends to make actual payment prior to the next Application for Payment.
12.6.2 Subject to other provisions of the Contract Documents, the amount of each progress payment shall be computed as follows:
12.6.2.1 Take the Cost of the Work as described in Subparagraph 12.6.1.
12.6.2.2 Add the Contractor's Fee, less retainage of percent ( %). The Contractor's Fee shall be computed upon the Cost of the Work described in the preceding Clause 12.6.2.1 at the rate stated in Paragraph 5.1 or, if the Contractor's Fee is stated as a fixed sum in that Paragraph, an amount which bears the same ratio to that fixed-sum Fee as the Cost of the Work in the preceding Clause bears to a reasonable estimate of the probable Cost of the Work upon its completion.
12.6.2.3 Subtract the aggregate of previous payments made by the Owner.
12.6.2.4 Subtract the shortfall, if any, indicated by the Contractor in the documentation required by Paragraph 12.4 or to substantiate prior Applications for Payment or resulting from errors subsequently discovered by the Owner's accountants in such documentation.
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12.6.2.5 Subtract amounts, if any, for which the Architect has withheld or withdrawn a Certificate for Payment as provided in the Contract Documents.
12.6.3 Additional retainage, if any, shall be as follows:
12.7 Except with the Owner's prior approval, payments to Subcontractors included in the Contractor's Applications for Payment shall not exceed an amount for each Subcontractor calculated as follows:
12.7.1 Take that portion of the Subcontract Sum properly allocable to completed Work as determined by multiplying the percentage completion of each portion of the Subcontractor's Work by the share of the total Subcontract Sum allocated to that portion in the Subcontractor's schedule of values, less retainage of percent ( %). Pending final determination of amounts to be paid to the Subcontractor for changes in the Work, amounts not in dispute may be included as provided in Subparagraph 7.3.7 of the General Conditions even though the Subcontract Sum has not yet been adjusted by Change Order.
12.7.2 Add that portion of the Subcontract Sum properly allocable to materials and equipment delivered and suitably stored at the site for subsequent incorporation in the Work or, if approved in advance by the Owner, suitably stored off the site at a location agreed upon in writing, less retainage of percent ( %)
12.7.3 Subtract the aggregate of previous payments made by the Contractor to the Subcontractor.
12.7.4 Subtract amounts, if any, for which the Architect has withheld or nullified a Certificate for Payment by the Owner to the Contractor for reasons which are the fault of the Subcontractor.
12.7.5 Add, upon Substantial Completion of the entire Work of the Contractor, a sum sufficient to increase the total payments to the Subcontractor to percent ( %) of the Subcontract Sum, less amounts, if any, for incomplete Work and unsettled claims; and, if final completion of the entire Work is thereafter materially delayed through no fault of the Subcontractor, add any additional amounts payable on account of Work of the Subcontractor in accordance with Subparagraph 9.10.3 of the General Conditions.
(If it is intended, prior to Substantial Completion of the entire Work of the Contractor, to reduce or limit the retainage from Subcontractors resulting from the percentages inserted in Subparagraphs 12.7.1 and 12.7.2 above, and this is not explained elsewhere in the Contract Documents, insert here provisions for such reduction or limitation).
The Subcontract Sum is the total amount stipulated in the subcontract to be paid by the Contractor to the Subcontractor for the Subcontractor's performance of the subcontract.
12.8 Except with the Owner's prior approval, the Contractor shall not make advance payments to suppliers for materials or equipment which have not been delivered and stored at the site.
12.9 In taking action on the Contractor's Applications for Payment, the Architect shall be entitled to rely on the accuracy and completeness of the information furnished by the Contractor and shall not be deemed to represent that the Architect has made a detailed examination, audit or arithmetic verification of the documentation submitted in accordance with Paragraph 12.4 or other supporting data; that the Architect has made exhaustive or continuous on-site inspections or that the Architect has made examinations to ascertain how or for what purposes the Contractor has used amounts previously paid on account of the Contract. Such examinations, audits and verifications, if required by the Owner, will be performed by the Owner's accountants acting in the sole interest of the Owner.
ARTICLE 13
FINAL PAYMENT
13.1 Final payment shall be made by the Owner to the Contractor when ( 1 ) the Contract has been fully performed by the Contractor except for the Contractor's responsibility to correct defective or nonconforming Work, as provided in Subparagraph 12.2.2 of the General Conditions, and to satisfy other requirements, if any, which necessarily survive final payment; (2) a final Application for Pay-
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ment and a final accounting for the Cost of the Work have been submitted by the Contractor and reviewed by the owner's accountants; and (3) a final Certificate for Payment has then been issued by the Architect; such final payment shall be made by the Owner not more than 30 days after the issuance of the Architect's final Certificate for Payment, or as follows:
13.2 The amount of the final payment shall be calculated as follows: 100% of final approved pay request
13.2.1 Take the sum of the Cost of the Work substantiated by the Contractor's final accounting and the Contractor's Fee; but not more than the Guaranteed Maximum Price, if any.
13.2.2 Subtract amounts, if any, for which the Architect withholds, in whole or in part, a final Certificate for Payment as provided in Subparagraph 9.5.1 of the General Conditions or other provisions of the Contract Documents.
13.2.3 Subtract the aggregate of previous payments made by the Owner.
If the aggregate of previous payments made by the Owner exceeds the amount due the Contractor, the Contractor shall reimburse the difference to the Owner.
13.3 The Owner's accountants will review and report in writing on the Contractor's final accounting within 30 days after delivery of the final accounting to the Architect by the Contractor. Based upon such Cost of the Work as the Owner's accountants report to be substantiated by the Contractor's final accounting, and provided the other conditions of Paragraph 13.1 have been met, the Architect will, within seven days after receipt of the written report of the Owner's accountants, either issue to the Owner a final Certificate for Payment with a copy to the Contractor, or notify the Contractor and Owner in writing of the Architect's reasons for withholding a certificate as provided in Subparagraph 9.5.1 of the General Conditions. The time periods stated in this Paragraph 13.3 supersede those stated in Subparagraph 9.4.1 of the General Conditions.
13.4 If the Owner's accountants report the Cost of the Work as substantiated by the Contractor's final accounting to be less than claimed by the Contractor, the Contractor shall be entitled to demand arbitration of the disputed amount without a further decision of the Architect. Such demand for arbitration shall be made by the Contractor within 30 days after the Contractor's receipt of a copy of the Architect's final Certificate for Payment; failure to demand arbitration within this 30-day period shall result in the substantiated amount reported by the Owner's accountants becoming binding on the Contractor. Pending a final resolution by arbitration, the Owner shall pay the Contractor the amount certified in the Architect's final Certificate for Payment.
13.5 If, subsequent to final payment and at the Owner's request, the Contractor incurs costs described in Article 7 and not excluded by Article 8 to correct defective or nonconforming Work, the Owner shall reimburse the Contractor such costs and the Contractor's Fee applicable thereto on the same basis as if such costs had been incurred prior to final payment, but not in excess of the Guaranteed Maximum Price, if any. If the Contractor has participated in savings as provided in Paragraph 5.2, the amount of such savings shall be recalculated and appropriate credit given to the Owner in determining the net amount to be paid by the Owner to the Contractor.
ARTICLE 14
MISCELLANEOUS PROVISIONS
14.1 Where reference is made in this Agreement to a provision of the General Conditions or another Contract Document, the reference refers to that provision as amended or supplemented by other provisions of the Contract Documents.
14.2 Payments due and unpaid under the Contract shall bear interest from the date payment is due at the rate stated below, or in the absence thereof, at the legal rate prevailing from time to time at the place where the Project is located.
(Insert rate of interest agreed upon, if any.)
14.3 Contractor and Owner acknowledge and agree that Horizon Medical Products, Inc., the Tenant of the Project structure, is shown as a party to this Contract solely for the purpose of having the right to pursue appropriate legal remedies for any breach, including without limitation, any claim for defective workmanship. Horizon shall have no direct responsibility to the Contractor for payment of any construction contract costs arising hereunder.
(Usury laws and requirements under the Federal Truth in Lending Act, similar state and local consumer credit laws and other regulations at the Owner's and Contractor's principal places of business, the location of the Project and elsewhere may affect the validity of this provision. Legal advice should be obtained with respect to deletions or modifications, and also regarding requirements such as written disclosures or waivers.)
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14.4 Other provisions:
ARTICLE 15
TERMINATION OR SUSPENSION
15.1 The Contract may be terminated by the Contractor as provided in Article 14 of the General Conditions; however, the amount to be paid to the Contractor under Subparagraph 14.1.2 of the General Conditions shall not exceed the amount the Contractor would be entitled to receive under Paragraph 15.3 below, except that the Contractor's Fee shall be calculated as if the Work had been fully completed by the Contractor, including a reasonable estimate of the Cost of the Work for Work not actually completed.
15.2 If a Guaranteed Maximum Price is established in Article 5, the Contract may be terminated by the Owner for cause as provided in Article 14 of the General Conditions; however, the amount, if any, to be paid to the Contractor under Subparagraph 14.2.4 of the General Conditions shall not cause the Guaranteed Maximum Price to be exceeded, nor shall it exceed the amount the Contractor would be entitled to receive under Paragraph 15.3 below.
15.3 If no Guaranteed Maximum Price is established in Article 5, the Contract may be terminated by the Owner for cause as provided in Article 14 of the General Conditions; however, the Owner shall then pay the Contractor an amount calculated as follows:
15.3.1 Take the Cost of the Work incurred by the Contractor to the date of termination.
15.3.2 Add the Contractor's Fee computed upon the Cost of the Work to the date of termination at the rate stated in Paragraph 5.1 or, if the Contractor's Fee is stated as a fixed sum in that Paragraph, an amount which bears the same ratio to that fixed-sum Fee as the Cost of the Work at the time of termination bears to a reasonable estimate of the probable Cost of the Work upon its completion.
15.3.3 Subtract the aggregate of previous payments made by the Owner.
The Owner shall also pay the Contractor fair compensation, either by purchase or rental at the election of the Owner, for any equipment owned by the Contractor which the Owner elects to retain and which is not otherwise included in the Cost of the Work under Subparagraph 15.3.1. To the extent that the Owner elects to take legal assignment of subcontracts and purchase orders (including rental agreements), the Contractor shall, as a condition of receiving the payments referred to in this Article 15, execute and deliver all such papers and take all such steps, including the legal assignment of such subcontracts and other contractual rights of the Contractor, as the Owner may require for the purpose of fully vesting in the Owner the rights and benefits of the Contractor under such subcontracts or purchase orders.
15.4 The Work may be suspended by the Owner as provided in Article 14 of the General Conditions; in such case, the Guaranteed Maximum Price, if any, shall be increased as provided in Subparagraph 14.3.2 of the General Conditions except that the term "cost of performance of the Contract" in that Subparagraph shall be understood to mean the Cost of the Work and the term "profit" shall be understood to mean the Contractor's Fee as described in Paragraphs 5.1 and 6.3 of this Agreement.
ARTICLE 16
ENUMERATION OF CONTRACT DOCUMENTS
16.1 The Contract Documents, except for Modifications issued after execution of this Agreement, are enumerated as follows:
16.1.1 The Agreement is this executed Standard Form of Agreement Between Owner and Contractor, AIA Document A111, 1987 Edition.
16.1.2 The General Conditions are the General Conditions of the Contract for Construction, AIA Document A201, 1987 Edition.
A111-1987 11
16.1.3 The Supplementary and other Conditions of the Contract are those contained in the Project Manual dated , and are as follows:
DOCUMENT TITLE PAGES -------- ----- ----- Not Applicable |
16.1.4 The Specifications are those contained in the Project Manual dated as in Paragraph 16.1.3, and are as follows:
(Either list the Specifications here or refer to an exhibit attached to this Agreement.)
SECTION TITLE PAGES ------- ----- ----- Not Applicable |
A111-1987 12
16.1.5 The Drawings are as follows, and are dated unless a different date is shown below:
(Either list the Drawings here or refer to an exhibit attached to this Agreement.)
NUMBER TITLE DATE ------ ----- ---- A-1.0 General Notes 23 January 1996 A-3.0 Overall floor plan 23 January 1996 A-3.1 Partial floor plan 23 January l996 A-3.2 Partial floor plan 23 January 1996 A-3.5 Reflected ceiling and lighting plan 23 January 1996 A-4.0 Door schedule and details 23 January 1996 A-5.0 Finish schedule, partition types, misc. details 23 January 1996 M-1.O HVAC 23 January 1996 E-1.0 Electrical Power 23 January 1996 P-1.0 Plumbing 23 January 1996 Pr-1.0 Process piping 23 January 1996 |
Note: Plans will be updated to reflect changes agreed upon.
16.1.6 The addenda, if any, are as follows:
NUMBER DATE PAGES ------ ---- ----- Not Applicable |
Portions of Addenda relating to bidding requirements are not part of the Contract Documents unless the bidding requirements are also enumerated in this Article 16.
A111-1987 13
16.1.7 Other Documents, if any, forming part of the Contract Documents are as follows:
(List here any additional documents which are intended to form part of the Contract Documents. The General Conditions provide that bidding requirements such as advertisement or invitation to bid, Instructions to Bidders, sample forms and the Contractor's bid are not part of the Contract Documents unless enumerated in this Agreement. They should be listed here only if intended to be part of the Contract Documents.)
This Agreement is entered into as of the day and year first written above and is executed in at least three original copies of which one is to be delivered to the Contractor, one to the Architect for use in the administration of the Contract, and the remainder to the Owner.
0WNER The Development Authority of the CONTRACTOR Langford Construction Company
City of Manchester & Horizon Medical
Products
/s/ /s/ A. PHILIP LANGFORD
--------------------------------------------- ------------------------------------------
(Signature) Chairman Manchester Development (Signature)
Authority
/s/ A. Philip Langford
--------------------------------------------- ------------------------------------------
(Printed name and title) President of Horizon (Printed name and title)
|
[AIA LOGO] CAUTION: YOU SHOULD SIGN AN ORIGINAL AIA DOCUMENT WHICH HAS THIS CAUTION PRINTED IN RED. AN ORIGINAL ASSURES THAT CHANGES WILL NOT BE OBSCURED AS MAY OCCUR WHEN DOCUMENTS ARE REPRODUCED.
A111-1987 14
FILE ID - 9601 ESTIMATE DETAIL REPORT PAGE - 1
PROJECT JOB NO. - 9601 ** ITEM CODE SEQUENCE ** DATE - 02/14/96
PROJECT NAME - NEW OFFICE/MANUFACTURING FACILITY TIME - 12:22:31
PROJECT SIZE - 40,000 SF HORIZON MEDICAL PRODUCTS
SEVEN NORTH PARKWAY SQUARE
ATLANTA, GA 30327
-----------------------------------------------------------------------------------------------------------------------------------
: TAX & INS INCLUDED
REF S ITEM UNIT LAB UNIT MAT/EQP/ TOTAL TOTAL MAT/: TOT UNIT TOTAL
NO. D SC ELEM CODE DESCRIPTION MEAS QUANTITY PRICE SUB UNIT LABOR EQUIP/SUB : PRICE PRICE
-----------------------------------------------------------------------------------------------------------------------------------
GENERAL REQUIREMENTS
JOB PERSONNEL
109 103.110 JOB SUPERINTENDENT WK 17 800.000 13,600 1120.000 19,040
---------------- -------
**TOTAL JOB PERSONNEL 13,600 19,040
REGULATORY REQUIREMENTS
110 106.000 PERMIT LS 1 1500.000 S 1,500 S 1500.000 1,500
**TOTAL REGULATORY REQUIREMENTS --------------- -------
1,500 S 1,500
MISC GENERAL REQUIREMENTS
111 107.100 JOB CLEAN UP - LABOR SQFT 40.000 .172 6,880 .241 9,640
112 107.101 JOB CLEAN UP - EQUIP. SF 40.000 .050 E 2,000 E .050 2,000
113 107.103 TRASH DUMP FEE MO 4 750.000 S 3,000 S 750.000 3,000
114 107.104 FINAL CLEAN UP - LABOR SF 40.000 .057 2,280 .080 3,200
115 107.105 FINAL CLEAN UP - EQUIP. SF 40.000 .015 E 600 E .015 600
116 107.106 FINAL CLEAN UP - SUB LS 1 2400.000 S 2,400 S 2400.000 2,400
117 107.120 TEMP. SANITARY TOILET MO 4 125.000 S 500 S 125.000 500
-------------- ------
**TOTAL MISC GENERAL REQUIREMENTS 9,160 2,600 E 21,340
5,900 S
TEMPORARY UTILITIES
118 150.110 JOB TELEPHONE MO 4 250.000 S 1,000 S 250.000 1,000
119 150.120 TEMP. ELECT. SERVICE MO 4 250.000 S 1,000 S 250.000 1,000
120 150.121 TEMP. LIGHTING LS 1 500.000 E 500 E 500.000 500
121 150.130 TEMPORARY WATER MO 4 50.000 S 200 S 50.000 200
-------------- ------
**TOTAL TEMPORARY UTILITIES 500 E 2,700
2,200 S
JOB EQUIPMENT
122 151.000 SMALL TOOLS MO 4 100.000 E 400 E 100.000 400
123 151.320 PICK-UP TRUCK RENTAL MO 4 324.000 E 1,296 E 324.000 1,296
124 151.330 EQUIPMENT RENTAL MO 4 1000.000 E 4,000 E 1000.000 4,000
-------------- ------
**TOTAL JOB EQUIPMENT 5,696 E 5,696
PROJECT SIGNS
125 158.150 JOB SIGN - LABOR EACH 1 50.000 50 70.000 70
126 158.152 JOB SIGN - SUB EA 1 400.000 S 400 S 400.000 400
-------------- ------
**TOTAL PROJECT SIGNS 50 400 S 470
FIELD OFFICES & SHEDS
127 159.100 OFFICE TRAILER MO 4 325.000 S 1,300 S 325.000 1,300
128 159.101 TRAILER SET UP - LABOR EA 1 100.000 100 140.000 140
|
FILE ID - 9601 ESTIMATE DETAIL REPORT PAGE - 2
PROJECT JOB NO. - 9601 ** ITEM CODE SEQUENCE ** DATE - 02/14/96
PROJECT NAME - NEW OFFICE/MANUFACTURING FACILITY TIME - 12:22:31
PROJECT SIZE - 40,000 SF HORIZON MEDICAL PRODUCTS
SEVEN NORTH PARKWAY SQUARE
ATLANTA, GA 30327
-----------------------------------------------------------------------------------------------------------------------------------
: TAX & INS INCLUDED
REF S ITEM UNIT LAB UNIT MAT/EQP/ TOTAL TOTAL MAT/: TOT UNIT TOTAL
NO. D SC ELEM CODE DESCRIPTION MEAS QUANTITY PRICE SUB UNIT LABOR EQUIP/SUB : PRICE PRICE
-----------------------------------------------------------------------------------------------------------------------------------
GENERAL REQUIREMENTS
FIELD OFFICES & SHEDS
129 159.102 TRAILER SET UP-SUB EA 1 250,000 S 250 S 250.000 250
---------------- --------
** TOTAL FIELD OFFICES & SHEDS 100 1,550 S 1,690
OTHER GENERAL REQUIREMENTS
130 180.001 JOB DESIGN COST LS 1 40,000 S 40,000 S 40,000 40,000
131 180.002 PLANS & PRINTS LS 1 200.00 S 200 S 200.000 200
132 180.003 A.G.C. DUES LS 1 840.00 S 840 S 840.000 840
---------------- --------
** TOTAL OTHER GENERAL REQUIREMENTS 41,040 S 41,040
*** TOTAL GENERAL REQUIREMENTS 22,910 8,796 E 93,476
52,590 S
MISC OVERHEAD
133 190.000 SUPERINTENDENT BONUS LS 1 2608.000 S 2,608 S 2608.000 2,608
---------------- --------
*** TOTAL MISC OVERHEAD 2,608 S 2,608
CONTINGENCY
134 199.000 CONTINGENCIES LS 1 2500.000 2500.000 M 2,500 2,500 M 11,150 11,150
5000.000 S 5,000 S
---------------- --------
*** TOTAL CONTINGENCY 2,500 2,500 M 11,150
5,000 S
EXCAV, GRADING & BACKFILL
EXCAVATION & BACKFILL
1 0211 222.001 FINE GRADE FLOOR BY HAND SQFT 37,839 .014 530 .020 757
2 0211 222.022 WASHED GRAVEL SLAB FILL CUYD 532 1.787 11,470 M 951 6,102 M 18,573 9,881
3,913 S 2,082 S
3 E 0111 222.101 HAND EXCAV CONTINUOUS FIG CUYD 10 5.575 56 7.800 78
4 M 0112 222.110 MACH EXCAV COLUMN FIG CUYD 45 5.574 6,467 E 251 291 E 14.267 642
6 E 0111 222.131 HAND BACKFILL CONTINUOUS FIG CUYD 3 1.078 3 1.667 5
7 M 0112 222.141 HAND BACKFILL @ COLUMN FIG CUYD 32 1.078 34 1.500 48
---------------- --------
** TOTAL EXCAVATION & BACKFILL 1,825 6,102 M 11,411
291 E
2,082 S
SOIL TREATMENT
8 0211 225.000 SUBSOIL TERMITE TREATMENT SQFT 37,839 .080 S 3,027 S .080 3,027
---------------- --------
** TOTAL SOIL TREATMENT 3,027 S 3,027
*** TOTAL EXCAV, GRADING & BACKFILL 1,825 6,102 M 14,438
291 E
5,109 S
|
FILE ID - 9601 ESTIMATE DETAIL REPORT PAGE - 3
PROJECT JOB NO. - 9601 ** ITEM CODE SEQUENCE ** DATE - 02/14/96
PROJECT NAME - NEW OFFICE/MANUFACTURING FACILITY TIME - 12:22:31
PROJECT SIZE - 40,000 SF HORIZON MEDICAL PRODUCTS
SEVEN NORTH PARKWAY SQUARE
ATLANTA, GA 30327
-----------------------------------------------------------------------------------------------------------------------------------
: TAX & INS INCLUDED
REF S ITEM UNIT LAB UNIT MAT/EQP/ TOTAL TOTAL MAT/: TOT UNIT TOTAL
NO. D SC ELEM CODE DESCRIPTION MEAS QUANTITY PRICE SUB UNIT LABOR EQUIP/SUB : PRICE PRICE
-----------------------------------------------------------------------------------------------------------------------------------
ROADS & WALKS
ASPHALT PAVING
9 261.080 STRIPE PARKING LINES LS 1 250.000 $ 250 S 250.000 250
--------------- ---------
**TOTAL ASPHALT PAVING 250 S 250
CURB & GUTTERS
10 262.065 CURB & GUTTER (S) LF 400 8.500 $ 3,400 S 8.500 3,400
--------------- ---------
**TOTAL CURB & GUTTERS 3,400 S 3,400
WALKS
11 1222 263.000 **CONC IN SIDEWALKS** ****
12 E 1222 263.000 **CONC IN SIDEWALKS** ****
13 1222 263.001 3000 PSI DIRECT CUYD 14 53.000 M 742 M 56.214 787
14 E 1222 263.001 3000 PSI DIRECT CUYD 14 53.000 M 742 M 56.214 787
15 1222 263.120 ER SIDEWALK EDGE FORMS LNFT 310 .655 .124 M 203 38 M 1.048 325
16 E 1222 263.120 ER SIDEWALK EDGE FORMS LNFT 270 .655 .124 M 177 33 M 1.048 283
17 1222 263.130 WRK SIDEWALK EDGE FORMS LNFT 310 .118 37 .165 51
18 E 1222 263.130 WRK SIDEWALK EDGE FORMS LNFT 270 .118 32 .167 45
19 1222 263.140 ER THICKENED SLAB EDGE FORM LNFT 102 1.965 .375 M 200 38 M 3.157 322
20 E 1222 263.140 ER THICKENED SLAB EDGE FORM LNFT 103 1.965 .375 M 202 39 M 3.146 324
21 1222 263.150 WRK THICKENED SLAB EDGE FORM LF 102 .351 36 .490 50
22 E 1222 263.150 WRK THICKENED SLAB EDGE FORM LF 103 .351 36 .495 51
23 1222 263.200 FINE GRADE FOR SIDEWALK SQFT 884 .050 44 .070 62
24 E 1222 263.200 FINE GRADE FOR SIDEWALK SQFT 894 .050 45 .070 63
25 1222 263.260 EXCAV & THICKENED SLAB EDGE CUYD 5 7.094 35 10.000 50
26 E 1222 263.260 EXCAV & THICKENED SLAB EDGE CUYD 5 7.094 35 10.000 50
27 1222 263.270 BACKFILL & THICKENED SLAB EDGE CUYD 3 3.054 9 4.333 13
28 E 1222 263.270 BACKFILL & THICKENED SLAB EDGE CUYD 3 3.054 9 4.333 13
29 E 1222 263.300 TROWEL & BROOM SIDEWALK SQFT 894 .280 S 250 S .280 250
30 1222 263.320 SCREEN FINISH SIDEWALK SQFT 884 .362 320 .507 448
33 1222 263.400 6X6-10/10 MESH SDS 10 2.555 6.000 M 26 60 M 10.000 100
34 E 1222 263.400 6X6-10/10 MESH SDS 10 2.555 6.000 M 26 60 M 10.000 100
35 1222 263.440 SIDEWALK REINFORCING CWT 2 11.872 25.000 M 24 50 M 43.000 86
36 E 1222 263.440 SIDEWALK REINFORCING CWT 2 11.872 25.000 M 24 50 M 43.000 86
--------------- ---------
**TOTAL WALKS 1,520 1,852 M 4,346
250 S
CONCRETE PAVING
37 265.065 ASPHALT PAVING (S) SY 1.208 12.000 S 14,496 S 12.000 14,496
38 265.065 ASPHALT PAVING (S) SY 2.007 17.000 S 34,153 S 17.000 34,153
39 265.066 GRAVEL PARKING (S) SY 400 7.000 S 2,800 S 7.000 2,800
--------------- ---------
**TOTAL CONCRETE PAVING 51.449 S 51.449
|
FILE ID - 9601 ESTIMATE DETAIL REPORT PAGE - 4
PROJECT JOB NO. - 9601 ** ITEM CODE SEQUENCE ** DATE - 02/14/96
PROJECT NAME - NEW OFFICE/MANUFACTURING FACILITY TIME - 12:22:31
PROJECT SIZE - 40,000 SF HORIZON MEDICAL PRODUCTS
SEVEN NORTH PARKWAY SQUARE
ATLANTA, GA 30327
-----------------------------------------------------------------------------------------------------------------------------------
: TAX & INS INCLUDED
REF S ITEM UNIT LAB UNIT MAT/EQP/ TOTAL TOTAL MAT/: TOT UNIT TOTAL
NO. D SC ELEM CODE DESCRIPTION MEAS QUANTITY PRICE SUB UNIT LABOR EQUIP/SUB : PRICE PRICE
-----------------------------------------------------------------------------------------------------------------------------------
ROADS & WALKS
CONCRETE PAVING
***TOTAL ROADS & WALKS 1.520 1.852 M 59.445
55.349 S
SITE IMPROVEMENTS
MISC SITE IMPROVEMENTS
40 270.001 GEN. SITEWORK SUB LS 1 3500.000 S 3.500 S 3500.000 3.500
---------------- --------
**TOTAL MISC SITE IMPROVEMENTS 3.500 S 3.500
***TOTAL SITE IMPROVEMENTS 3.500 S 3.500
LAWNS & PLANTING
41 280.010 LANDSCAPING/IRRIGATION LS 1 30.000 S 30.000 S 30.000 30.000
---------------- --------
***TOTAL LAWNS & PLANTING 30.000 S 30.000
CONCRETE FINISHING
CONCRETE FINISHER
42 0312 301.019 TROWEL CEMENT FINISH SQFT 37.839 .280 S 10.585 S .280 10.595
43 0312 301.050 PROTECT & CURE SQFT 37.839 .007 .023 M 265 870 M .034 1.286
44 301.300 CONTROL JOINT LNFT 650 .250 .420 M 163 273 M .795 517
45 301.301 SAW CUT JOINT LNFT 5.655 .500 S 2.828 S .500 2.828
---------------- --------
**TOTAL CONCRETE FINISHER 428 1.143 M 15.226
13.423 S
***TOTAL CONCRETE FINISHING 428 1.143 M 15.226
13,423 S
FORM WORK
FORM WORK
46 M 0112 311.120 ER COLUMN FIG EDGE FORM SQFT 535 1.973 1.060 M 1.056 567 M 3.886 2.079
47 M 0112 311.121 WRK COLUMN FIG EDGE FORM SQFT 535 .273 146 .381 204
48 0211 311.300 ER FLOOR EDGE W/1.5 PM/SF SQFT 293 1.973 .867 M 578 254 M 3.679 1.078
49 0211 311.301 WRK FLOOR EDGE W/1.5 PM/SF SQFT 293 .273 80 .382 112
51 311.304 EXPANSION JOINT LNFT 1.200 .200 .200 M 240 240 M .492 590
52 311.304 EXPANSION JOINT LNFT 20 .200 .200 M 4 4 M .500 10
---------------- --------
**TOTAL FORM WORK 2.104 1.065 M 4.073
MISC FORM WORK
53 M 319.100 INSTALL ANCHOR BOLTS EACH 40 10.000 10.000 M 400 400 M 24.600 984
---------------- --------
**TOTAL MISC FORM WORK 400 400 M 984
***TOTAL FORM WORK 2.504 1.465 M 5.057
|
FILE ID - 9601 ESTIMATE DETAIL REPORT PAGE - 5
PROJECT JOB NO - 9601 ** ITEM CODE SEQUENCE ** DATE - 02/14/96
PROJECT NAME - NEW OFFICE/MANUFACTURING FACILITY TIME - 12:22:31
PROJECT SIZE - 40,000 SF HORIZON MEDICAL PRODUCTS
SEVEN NORTH PARKWAY SQUARE
ATLANTA, GA 30327
------------------------------------------------------------------------------------------------------------------------------------
: TAX & INS INCLUDED
REF S ITEM UNIT LAB UNIT MAT/EQP/ TOTAL TOTAL MAT/: TOT UNIT TOTAL
NO. D SC ELEM CODE DESCRIPTION MEAS QUANTITY PRICE SUB UNIT LABOR EQUIP/SUB : PRICE PRICE
------------------------------------------------------------------------------------------------------------------------------------
REINFORCING STEEL
RE-BARS
54 E 0111 321.100 RE-STEEL @ CONTINUOUS FTG CWT 5 10.739 25.000 M 54 125 M 41.600 208
55 M 0112 321.110 RE-STEEL @ COLUMN FOOTING CWT 6 10.739 25.000 M 64 150 M 41.500 249
--------------- ---------
** TOTAL RE-BARS 118 275 M 457
*** TOTAL REINFORCING STEEL 118 275 M 457
CAST-IN-PLACE CONCRETE
CAST-IN-PLACE CONCRETE
56 E 0111 331.100 **CONC IN CONTINUOUS FOOTING ** ****
57 E 0111 331.101 3000 PSI DIRECT CUYD 8 6.000 53.000 M 48 424 M 64.500 516
58 M 0112 331.150 **CONC IN COLUMN FOOTING ** ****
59 M 0112 331.151 3000 PSI DIRECT CUYD 11 6.000 53.000 M 66 583 M 64.545 710
60 0211 331.300 **CONC IN SLAB ON GRADE** ****
61 0211 331.342 MIX A W/PUMP CUYD 736 58.500 M 43.056 M 66.010 48.583
4.000 E 2.944 E
--------------- ---------
** TOTAL CAST-IN-PLACE CONCRETE 114 44.063 M 49.809
2.944 E
*** TOTAL CAST-IN-PLACE CONCRETE 114 44.063 M 49.809
2.944 E
GROUT
62 M 360.000 GROUT COL BASE PLATES EA 40 3.000 3.000 M 120 120 M 7.375 295
*** TOTAL GROUT --------------- ---------
120 120 M 295
MASONRY
63 E 0411 400.001 MORTAR CUYD 1 50.000 M 200 M 53.000 212
64 E 0411 400.102 FILL VOIDS W/CONCRETE CUYD 2 19.784 56.500 M 40 113 M 87.500 175
65 E 0411 405.402 8X8X16 SPLIT FACE BLOCK PCS 588 1.800 M 1.058 M 3.908 2.298
2.000 S 1.176 S
66 E 0411 405.412 8" ROUND BEAM SPLIT FACE BLOCK PCS 70 2.500 M 175 M 4.657 326
2.000 S 140 S
67 E 0411 425.102 8" DUR-A-WALL LNFT 379 .134 M 51 M .142 54
68 E 0411 425.122 RE-STEEL & MASONRY CWT 1 12.300 25.000 M 12 25 M 44.000 44
69 0622 426.001 BRICK PAVERS SQFT 884 .448 .850 M 396 751 M 1.527 1.350
--------------- ---------
*** TOTAL MASONRY 448 2.373 M 4.459
1.316 S
|
FILE ID - 9601 ESTIMATE DETAIL REPORT PAGE - 6
PROJECT JOB NO. - 9601 ** ITEM CODE SEQUENCE ** DATE - 02/14/96
PROJECT NAME - NEW OFFICE/MANUFACTURING FACILITY TIME - 12:22:31
PROJECT SIZE - 40,000 SF HORIZON MEDICAL PRODUCTS
SEVEN NORTH PARKWAY SQUARE
ATLANTA, GA 30327
-----------------------------------------------------------------------------------------------------------------------------------
: TAX & INS INCLUDED
REF S ITEM UNIT LAB UNIT MAT/EQP/ TOTAL TOTAL MAT/: TOT UNIT TOTAL
NO. D SC ELEM CODE DESCRIPTION MEAS QUANTITY PRICE SUB UNIT LABOR EQUIP/SUB : PRICE PRICE
-----------------------------------------------------------------------------------------------------------------------------------
STRUCTURAL METALS
STRUCTURAL METALS
70 M 500.010 STRUCT. STEEL MATERIAL LS 1 6000.000 M 6,000 M 6360.000 6,360
71 M 500.011 STRUCT. STEEL ERECTION EA 40 25.000 1.000 35.000 1,400
------------------- ----------
** TOTAL STRUCTURAL METALS 1.000 6,000 M 7,760
*** TOTAL STRUCTURAL METALS 1.000 6,000 M 7,760
MISC & ORNAMENTAL METAL
EXPANSION CONTROL
72 580.001 MISC. NAILS, ETC. LS 1 2500.000 M 2,500 M 2650.000 2,650
------------------- ----------
** TOTAL EXPANSION CONTROL 2,500 M 2,650
*** TOTAL MISC & ORNAMENTAL METAL 2,500 M 2,650
ROUGH CARPENTRY
73 M 601.093 F.T. 2" X 12" - 12' BF 7,526 .280 .560 M 2.107 4,215 M .986 7,420
------------------- ---------
*** TOTAL ROUGH CARPENTRY 2.107 4,215 M 7,420
FINISH CARPENTRY
INTERIOR TRIM
74 620.106 WOOD BASE LF 500 .500 .380 M 250 190 M 1.104 552
75 620.107 CROWN MOULD LF 460 .750 .390 M 345 179 M 1.463 673
------------------- ---------
** TOTAL INTERIOR TRIM 595 369 M 1,225
EXTERIOR TRIM
76 M 623.046 1/2" CDX PLYWOOD SH 12 13.000 12.780 M 156 153 M 31.750 381
77 M 623.500 5/8" T&G PLYWOOD SH 100 13.000 17.100 M 1,300 1,710 M 36.330 3,633
------------------- ----------
** TOTAL EXTERIOR TRIM 1,456 1,863 M 4,014
*** TOTAL FINISH CARPENTRY 2,051 2,232 M 5,239
CUSTOM WOODWORK
78 640.010 MILLWORK LS 1 10.000 S 10,000 S 10.000 10,000
------------------ ---------
*** TOTAL CUSTOM WOODWORK 10,000 S 10,000
WATERPROOF & DAMPPROOF
79 0211 719.001 6MIL VISQUEEN SUBGRADE PAPER SQS 417 1.900 M 792 M 2.014 840
------------------- ---------
*** TOTAL WATERPROOF & DAMPPROOF 792 M 840
|
FILE ID - 9601 ESTIMATE DETAIL REPORT PAGE - 7
PROJECT JOB NO. - 9601 ** ITEM CODE SEQUENCE ** DATE - 02/14/96
PROJECT NAME - NEW OFFICE/MANUFACTURING FACILITY TIME - 12:22:31
PROJECT SIZE - 40,000 SF HORIZON MEDICAL PRODUCTS
SEVEN NORTH PARKWAY SQUARE
ATLANTA, GA 30327
-----------------------------------------------------------------------------------------------------------------------------------
: TAX & INS INCLUDED
REF S ITEM UNIT LAB UNIT MAT/EQP/ TOTAL TOTAL MAT/: TOT UNIT TOTAL
NO. D SC ELEM CODE DESCRIPTION MEAS QUANTITY PRICE SUB UNIT LABOR EQUIP/SUB : PRICE PRICE
-----------------------------------------------------------------------------------------------------------------------------------
METAL DOORS & FRAMES
80 800.005 HOLLOW METAL-MATERIAL LS 1 2000.000 M 2,000 M 2120.000 2,120
81 800.005 HOLLOW METAL-MATERIAL LS 1 4000.000 M 4,000 M 4240.000 4,240
82 800.005 HOLLOW METAL-MATERIAL LS 1 5000.000 M 5,000 M 5300.000 5,300
83 800.005 HOLLOW METAL-MATERIAL LS 1 7548.000 M 7,548 M 8001.000 8,001
84 800.010 HOLLOW METAL FRAMES-LABOR EAS 60 21.842 1,311 30.583 1,835
85 800.012 HOLLOW METAL DOORS-LABOR EA 44 16.619 731 23.273 1,024
86 800.013 H.M. WINDOW FRAMES (L) EA 26 21.842 568 30.577 795
87 800.020 SOLID CORE WOOD DOORS (M) LS 1 2743,000 M 2,743 M 2908.000 2,908
88 800.021 SOLID CORE WOOD DOORS (L) EA 21 26.783 562 37.476 787
---------------- --------
*** TOTAL METAL DOORS & FRAMES 3,172 21,291 M 27,010
HARDWARE
89 871.018 FINISH HARDWARE-LABOR EA 61 12.250 747 17.148 1,046
90 871.019 FINISH HARDWARE-MATERIAL LS 1 9862.000 M 9,862 M 10.454 10,454
---------------- --------
*** TOTAL HARDWARE 747 9,862 M 11,500
GLASS & GLAZING
GLAZING
91 880.000 GLASS & GLAZING LS 1 2000.000 S 2,000 S 2000.000 2,000
---------------- --------
** TOTAL GLAZING 2,000 S 2,000
*** TOTAL GLASS & GLAZING 2,000 S 2,000
GYPSUM DRYWALL
92 925.025 WD STUD/D.WALL/ACOUSTIC LS 1 108,749 S 108,749 S 108.749 108,749
---------------- --------
*** TOTAL GYPSUM DRYWALL 108,749 S 108,749
FLOORING
SPECIAL FLOORING
93 970.010 FLOOR COVERING (S) LS 1 22,499 S 22,500 S 22.500 22,500
---------------- --------
** TOTAL SPECIAL FLOORING 22,500 S 22,500
*** TOTAL FLOORING 22,500 S 22,500
PAINTING & WALL COVERING
PAINTING
94 990.100 PAINTING LS 1 25,129 S 25,130 S 25.130 25,130
---------------- --------
** TOTAL PAINTING 25,130 S 25,130
|
FILE ID - 9601 ESTIMATE DETAIL REPORT PAGE - 8
PROJECT JOB NO - 9601 ** ITEM CODE SEQUENCE ** DATE - 02/14/96
PROJECT NAME - NEW OFFICE/MANUFACTURING FACILITY TIME - 12:22:31
PROJECT SIZE - 40,000 SF HORIZON MEDICAL PRODUCTS
SEVEN NORTH PARKWAY SQUARE
ATLANTA, GA 30327
--------------------------------------------------------------------------------------------------------------------------------
: TAX & INS INCLUDED
REF S ITEM UNIT LAB UNIT MAT/EQP/ TOTAL TOTAL MAT/: TOT UNIT TOTAL
NO. D SC ELEM CODE DESCRIPTION MEAS QUANTITY PRICE SUB UNIT LABOR EQUIP/SUB : PRICE PRICE
--------------------------------------------------------------------------------------------------------------------------------
PAINTING & WALL COVERING
WALL COVERING
95 995.000 VINYL WALL COVERING ALLO RLS 40 34.000 M 1,360 M 46.050 1,842
10.000 S 400 S
------------------ ----------
** TOTAL WALL COVERING 1,360 M 1,842
400 S
*** TOTAL PAINTING & WALL COVERING 1,360 M 26,972
25,530 S
SPECIALTIES
COMPARTMENTS & CUBICLES
96 1018.300 TOILET PARTITIONS-LABOR EA 10 70.000 700 98.000 980
97 1018.350 TOILET PARTITIONS-MATERI LS 1 4120.000 M 4,120 M 4367.000 4,367
------------------ ----------
** TOTAL COMPARTMENTS & CUBICLES 700 4,120 M 5,347
LOCKERS
98 1050.015 METAL LOCKERS (S) LS 1 8000.000 S 8,000 S 8000.000 8,000
------------------ ----------
** TOTAL LOCKERS 8,000 S 8,000
TOILET & BATH ACCESSORIES
99 1080.010 TOILET ACCESSORIES-LABOR EA 46 5.000 230 7.000 322
100 1080.015 TOILET ACCESSORIES-MATER LS 1 1762.000 M 1,762 M 1868.000 1,868
------------------ ----------
** TOTAL TOILET & BATH ACCESSORIES 230 1,762 M 2,190
*** TOTAL SPECIALTIES 930 5,882 M 15,537
8,000 S
EQUIPMENT
FOOD SERVICE EQUIPMENT
101 1140.100 KITCHEN EQUIPMENT (S) LS 1 3134.000 S 3,134 S 3134.000 3,134
------------------ ----------
** TOTAL FOOD SERVICE EQUIPMENT 3,134 S 3,134
*** TOTAL EQUIPMENT 3,134 S 3,134
PLUMBING SYSTEMS & EQUIP
MISC PLBG SYSTEMS & EQUIP
102 1546.010 PROCESS PIPING LS 1 27.561 S 27,561 S 27.561 27,561
------------------ ----------
** TOTAL MISC PLBG SYSTEMS & EQUIP 27,561 S 27,561
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FILE ID - 9601 ESTIMATE DETAIL REPORT PAGE - 9
PROJECT JOB NO - 9601 ** ITEM CODE SEQUENCE ** DATE - 02/14/96
PROJECT NAME - NEW OFFICE/MANUFACTURING FACILITY TIME - 12:22:31
PROJECT SIZE - 40,000 SF HORIZON MEDICAL PRODUCTS
SEVEN NORTH PARKWAY SQUARE
ATLANTA, GA 30327
--------------------------------------------------------------------------------------------------------------------------------
: TAX & INS INCLUDED
REF S ITEM UNIT LAB UNIT MAT/EQP/ TOTAL TOTAL MAT/: TOT UNIT TOTAL
NO. D SC ELEM CODE DESCRIPTION MEAS QUANTITY PRICE SUB UNIT LABOR EQUIP/SUB : PRICE PRICE
--------------------------------------------------------------------------------------------------------------------------------
PLUMBING SYSTEMS & EQUIP
PLUMBING SYSTEMS
103 1549.000 PLUMBING LS 1 39.778 S 39,779 S 39.779 39,779
------------------ ----------
** TOTAL PLUMBING SYSTEMS 39,779 S 39,779
*** TOTAL PLUMBING SYSTEMS & EQUIP 67,340 S 67,340
HVAC SYSTEMS & EQUIPMENT
HVAC SYSTEMS & EQUIP
104 1599.000 H.V.A.C. LS 1 159.999 S 160,000 S 160.000 160,000
------------------ ----------
** TOTAL HVAC SYSTEMS & EQUIP 160,000 S 160,000
*** TOTAL HVAC SYSTEMS & EQUIPMENT 160,000 S 160,000
ELEC SYSTEMS & EQUIPMENT
MISC ELECTRIC SYSTEMS
105 1666.000 COMPUTER CABLING LS 1 7000.000 S 7,000 S 7000.000 7,000
------------------ ----------
** TOTAL MISC ELECTRIC SYSTEMS 7,000 S 7,000
TELEPHONE SYSTEMS
106 1680.000 TELEPHONE SYSTEM LS 1 15.000 S 15,000 S 15.000 15,000
------------------ ----------
** TOTAL TELEPHONE SYSTEMS 15,000 S 15,000
SECURITY, ALARM & DETECTION
107 1691.010 SECURITY SYSTEM LS 1 5000.000 S 5,000 S 5000.000 5,000
------------------ ----------
** TOTAL SECURITY, ALARM & DETECTION 5,000 S 5,000
ELECTRICAL SYSTEMS
108 1699.000 ELECTRICAL CONTRACT LS 1 156.999 S 157,000 S 157.000 157,000
------------------ ----------
** TOTAL ELECTRICAL SYSTEMS 157,000 S 157,000
*** TOTAL ELEC SYSTEMS & EQUIPMENT 184,000 S 184,000
***** GRAND TOTAL 42,494 114,027 M 952,571
12,031 E
760,148 S
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FILE ID - 9601 GENERAL CONTRACTOR SUMMARY OF ESTIMATE PAGE - 1
PROJECT JOB NO. - 9601 ** ITEM CODE SEQUENCE ** DATE - 02/14/96
PROJECT NAME - NEW OFFICE/MANUFACTURING FACILITY TIME - 12:22:31
PROJECT SIZE - 40,000 SF HORIZON MEDICAL PRODUCTS
SEVEN NORTH PARKWAY SQUARE
ATLANTA, GA 30327
-----------------------------------------------------------------------------------------------------------------------------------
ESTIMATE TOTALS
Labor 42,494
Labor burden & Total labor 40.00 17,035 59,529
Material 114,027
Sales tax & Total material 6.00 6,836 120,863
Subcontract 760,148
Equipment 12,031
Equipment surcharge
Other expenses
Gross cost 952,571
Gross receipts tax
Overhead 8.0% OF GROSS COST 76,205
Fee 7.0% OF GROSS COST 66,679
Builder's risk insurance .15 1,661
General contractor's bond 10,867
Subcontract bond
Total bid 1,107,984
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[LANGFORD CONSTRUCTION CO. LETTERHEAD]
MEMORANDUM
TO: Marshall Hunt
FROM: Phil Langford
DATE: 02/13/96
RE: HORIZON MEDICAL PRODUCTS
MANCHESTER, GEORGIA
Please find changes to pricing for the aforementioned project as follows:
Omit curb & gutter: Install bumpers (2,260.00)
Omit employee walks: Provide gravel (3,676.00)
Omit additional parking: work within original cost (18,449.00)
Omit additional sawn joints (1,541.00)
Omit form work @ mezzanine footings (2,293.00)
Omit anchor bolts & mezzanine (984.00)
Omit rebar @ mezzanine & HVAC curtain wall (457.00)
Omit concrete @ HVAC curtain wall (516.00)
Omit concrete @ mezzanine footings (710.00)
Omit grout @ mezzanine footings (295.00)
Omit masonry @ HVAC curtain walls (3,109.00)
Omit structural steel @ mezzanine (7,760.00)
Omit metal lockers (provide benches only) (6,643.87)
Omit exterior lighting (18,000.00)
Reduce cost for 230 volt process power (6,000.00)
All allowance for special finishes (10,000.00)
Minimum electrical in 20,000 s.f. space (4,500.00)
Reduce Bond to $705,000.00 (3,227.00)
Changes to date (70,420.87)
15% OH & Profit (10,563.17)
-------------
Total changes (80,984.00)
Current Estimate Detail Report 1,107,984.00
Total Changes 80,984.00
-------------
Total contract amount $1,027,000.00
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Please review and advise.
Thanks,
/s/ A. Philip Langford
----------------------
A. Philip Langford
|
EXHIBIT "G"
GENERAL CONTRACT
THE AMERICAN INSTITUTE OF ARCHITECTS
[LOGO]
Standard Form of Agreement
Between Owner and Contractor
where the basis of payment is the
COST OF THE WORK PLUS A FEE
with or without a Guaranteed Maximum Price
1987 EDITION
THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES; CONSULTATION WITH AN ATTORNEY IS ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION.
The 1987 Edition of AIA Document A201. General Conditions of the Contract for Construction, is adopted in this Document by reference. Do not use with other general conditions unless this document is modified.
AGREEMENT
made as of the day of in the year of
Nineteen Hundred and
BETWEEN the Owner: The Development Authority of the City of Manchester &
(Name and Address) Horizon Medical Products
c/o Tyron Elliott
P.O. Drawer 389
Manchester, Georgia 31816
and the Contractor: Langford Construction Company
(Name and address) 314 Greenville Street
P.O. Box 1287
LaGrange, Georgia 30241
the Project is: New 40,000 s.f. Office/Manufacturing/Warehouse Facility
(Name and address) Manchester Industrial Park
Manchester, Georgia 31816
the Architect is: Hal Herndon & Associates, PC
(Name and address) 2780 Bert Adams Road
Suite 300
Atlanta, Georgia 30339
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The Owner and Contractor agree as set forth below.
Copyright 1920, 1925, 1951, 1958, 1961, 1963, 1967, 1974, 1978, (C) 1987 by The American Institute of Architects, 1735 New York Avenue, N.W., Washington, D.C. 20006. Reproduction of the material herein or substantial quotation of its provisions without written permission of the AIA violates the copyright laws of the United States and will be subject to legal prosecution.
A111-1987 1
ARTICLE 1
THE CONTRACT DOCUMENTS
1.1 The Contract Documents consist of this Agreement. Conditions of the Contract (General. Supplementary and other Conditions). Drawings, Specifications, addenda issued prior to execution of this Agreement, other documents listed in this Agreement and Modifications issued after execution of this Agreement; these form the Contract, and are as fully a part of the Contracts if attached to this Agreement or repeated herein. The Contract represents the entire and integrated agreement between the parties hereto and supersedes prior negotiations, representations or agreements, either written or oral. An enumeration of the Contract Documents, other than Modifications, appears in Article 16. If anything in the other Contract Documents is inconsistent with this Agreement, this Agreement shall govern.
ARTICLE 2
THE WORK OF THIS CONTRACT
2.1 The Contractor shall execute the entire Work described in the Contract Documents, except to the extent specifically indicated in the Contract Documents to be the responsibility of others, or as follows:
Excludes all manufacturing equipment Includes all work per estimate detail report Excludes all mezzanines (provisions for future wooden mezzanine @ office included)
ARTICLE 3
RELATIONSHIP OF THE PARTIES
3.1 The Contractor accepts the relationship of trust and confidence established by this Agreement and covenants with the Owner to cooperate with the Architect and utilize the Contractor's best skill, efforts and judgment in furthering the interests of the Owner: to furnish efficient business administration and supervision; to make best efforts to furnish at all times an adequate supply of workers and materials; and to perform the Work in the best way and most expeditious and economical manner consistent with the interests of the Owner. The Owner agrees to exercise best efforts to enable the Contractor to perform the Work in the best way and most expeditious manner by furnishing and approving in a timely way information required by the Contractor and making payments to the Contractor in accordance with requirements of the Contract Documents.
ARTICLE 4
DATE OF COMMENCEMENT AND SUBSTANTIAL COMPLETION
4.1 The date of commencement is the date from which the Contract Time of Subparagraph 4.2 is measured: it shall be the date of this Agreement, as first written above, unless a different date is stated below or provision is made for the date to be fixed in a notice to proceed issued by the Owner.
(Insert the date of commencement, if it differs from the date of this Agreement or, if applicable, state that the date will be fixed in a notice to proceed.
Date will be fixed in a notice to proceed.
Unless the date of commencement is established by notice to proceed issued by the Owner, the Contractor shall notify the Owner in writing not less than five days before commencing the Work to permit the timely filing of mortgages, mechanics liens and other security interests.
A111-1987 2
4.2 The Contractor shall achieve Substantial Completion of the entire Work not later than June 30, 1996
(insert the calender date or number of calender days after the date of commencement. Also insert any requirements for earlier Substantial Completion of certain portions of the Work, if not stated in the Contract Documents.)
or 120 days from notice to proceed
, subject to adjustments of this Contract Time as provided in the Contract
Documents.
(Insert provisions, if any, for liquidated damages relating to failure to
complete on time.)
ARTICLE 5
CONTRACT SUM
5.1 The Owner shall pay the Contractor in current funds for the Contractor's
performance of the Contract the Contract Sum consisting of the Cost of the Work
as defined in Article 7 and the Contractor's Fee determined as follows:
(State a lump sum, percentage of Cost of the Work or other provision for
determining the Contractor's Fee, and explain how the Contractor's Fee is to be
adjusted for changes in the Work.)
Tenant Finishes $877,000.00
- Completion of standard build-out of $150,000.00 to be under separate contract
- Contractor's Fee to be adjusted at same rate based on any approved Change
Order if required
5.2 GUARANTEED MAXIMUM PRICED (IF APPLICABLE)
5.2.1 The sum of the Cost of the Work and the Contractor's Fee is guaranteed by the Contractor not to exceed Eight hundred seventy-seven thousand & 00/100 Dollars ($ 877,000.00), subject to additions and deductions by Change Order as provided in the Contract Documents. Such maximum sum is referred to in the Contract Documents as the Guaranteed Maximum Price. Costs which would cause the Guaranteed Maximum Price to be exceeded shall be paid by the Contractor without reimbursement by the Owner.
(Insert specific provisions of the Contractor is to participate in any savings.)
Savings to be split 50% to Horizon Medical Products and 50% to the Contractor
A111-1987 3
5.2.2 The Guaranteed Maximum Price is based upon the following alternates, if any, which are described in the Contract Documents and are hereby accepted by the Owner:
(State the numbers or other identification of accepted alternates, but only if a Guaranteed Maximum Price is inserted in Subparagraph 5.2.1. If decision on other alternates are to be made by the Owner subsequent to the execution of this Agreement, attach a schedule of such other alternates showing the amount for each and the date until which that amount is valid.)
Estimate Detail Report dated 2/14/96 (See attachment)
Memo concerning changed dated 2/13/96 (See attachment)
Balance of $150,000.00 for completion of Standard Build-out to be under separate contract is included in Estimate Detail Report dated 2/14/96
5.2.3 The amounts agreed to for unit prices, if any, are as follows:
(State unit prices only if a Guaranteed Maximum Price is inserted in
Subparagraph 5.2.1.)
ARTICLE 6
CHANGES IN THE WORK
6.1 CONTRACTS WITH A GUARANTEED MAXIMUM PRICE
6.1.1 Adjustments to the Guaranteed Maximum Price on account of changes in the Work may be determined by any of the methods listed in Subparagraph 7.3.3 of the General Conditions.
6.1.2 In calculating adjustments to subcontracts (except those awarded with the Owner's prior consent on the basis of cost plus a fee), the terms "cost" and "fee" as used in Clause 7.3.3.3 of the General Conditions and the terms "costs" and "a reasonable allowance for overhead and profit" as used in Subparagraph 7.3.6 of the General Conditions shall have the meanings assigned to them in the General Conditions and shall not be modified by Articles 5, 7 and 8 of this Agreement. Adjustments to subcontracts awarded with the Owner's prior consent on the basis of cost plus a fee shall be calculated in accordance with the terms of those subcontracts.
6.1.3 In calculating adjustments to this Contract, the terms "cost" and "costs" as used in the above-referenced provisions of the General Conditions shall mean the Cost of the Work as defined in Article 7 of this Agreement and the terms "fee" and "a reasonable allowance for overhead and profit" shall means the Contractor's Fee as defined in Paragraph 5.1 of this Agreement.
A111-1987 4
6.2 CONTRACTS WITHOUT A GUARANTEED MAXIMUM PRICE
6.2.1 Increased costs for the items set forth in Article 7 which result from changes in the Work shall become part of the Cost of the Work, and the Contractor's Fee shall be adjusted as provided in Paragraph 5.1.
6.3 ALL CONTRACTS
6.3.1 If not specific provision is made in Paragraph 5.1 for adjustment of the Contractor's Fee in the case of changes in the Work, or if the extent of such changes is such, in the aggregate, that application of the adjustment provisions of Paragraph 5.1 will cause substantial inequity to the Owner or Contractor, the Contractor's Fee shall be shall be equitably adjusted on the basis of the Fee established for the original Work.
ARTICLE 7
COSTS TO BE REIMBURSED
7.1. The term Cost of the Work shall means costs necessary incurred by the Contractor in the proper performance of the Work. Such costs shall be at rates not higher than the standard paid at the place of the Project except with prior consent of the Owner. The Cost of the Work shall include only the items set forth in this Article 7.
7.1.1 LABOR COSTS
7.1.1.1 Wages of construction workers directly employed by the Contractor to perform the construction of the Work at the site or, with the Owner's agreement, at off-site workshops.
7.1.1.2 Wages or salaries of the Contractor's supervisory and administrative personnel when stationed at the site with the Owner's agreement. (If it is intended that the wages or salaries of certain personnel stationed at the Contractor's principal or other offices shall be included in the Cost of the Work, identify in Article 14 the personnel to be included and whether for all or only part of their time.)
7.1.1.3 Wages and salaries of the Contractor's supervisory or administrative personnel engaged, at factories, workshops or on the road, in expediting the production or transportation of materials or equipment required for the Work, but only for that portion of their time required for the Work.
7.1.1.4 Costs paid or incurred by the Contractor for taxes, insurance, contributions, assessments and benefits required by law or collective bargaining agreements and, for personnel not covered by such agreements, customary benefits such as sick leave, medical and health benefits, holidays, vacations and pensions, provided such costs are based on wages and salaries included in the Cost of the Work under Clauses 7.1.1.1 through 7.1.1.3.
7.1.2 SUBCONTRACT COSTS
Payments made by the Contractor to Subcontractors in accordance with the requirements of the subcontracts.
7.1.3 COSTS OF MATERIALS AND EQUIPMENT INCORPORATED IN THE COMPLETED
CONSTRUCTION
7.1.3.1 Costs, including transportation, of materials and equipment
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incorporated or to be incorporated in the completed construction.
7.1.3.2 Costs of materials described in the preceding Clause 7.1.3.1 in excess of those actually installed but required to provide reasonable allowance for waste and for spoilage. Unused excess materials, if any, shall be handed over to the Owner at the completion of the Work or, at the Owner's option, shall be sold by the Contractor: amounts realized, if any, from such sales shall be credited to the Owner as a deduction from the Cost of the Work.
7.1.4 COSTS OF OTHER MATERIALS AND EQUIPMENT, TEMPORARY FACILITIES AND
RELATED ITEMS
7.1.4.1 Costs, including transportation, installation, maintenance,
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dismantling and removal of materials, supplies, temporary facilities, machinery, equipment, and hand tools not customarily owned by the construction workers, which are provided by the Contractor at the site and fully consumed in the performance of the Work: and cost less salvage value on such items if not fully consumed, whether sold to others or retained by the Contractor. Cost for items previously used by the Contractor shall mean fair market value.
7.1.4.2 Rental charges for temporary facilities, machinery, equipment, and hand tools not customarily owned by the construction workers, which are provided by the Contractor at the site, whether rented from the Contractor or others, and costs of transportation, installation, minor repairs and replacements, dismantling and removal thereof. Rates and quantities of equipment rented shall be subject to the Owner's prior approval.
7.1.4.3 Costs of removal of debris from the site.
7.1.4.4 Costs of telegrams and long-distance telephone calls, postage and parcel delivery charges, telephone service at the site and reasonable petty cash expenses of the site office.
7.1.4.5 That portion of the reasonable travel and subsistence expenses of the Contractor's personnel incurred while traveling in discharge of duties connected with the Work.
A111-1987 5
7.1.5 MISCELLANEOUS COSTS
7.1.5.1 That portion directly attributable to this Contract of premiums for insurance and bonds.
7.1.5.2 Sales, use or similar taxes imposed by a governmental authority which are related to the Work and for which the Contractor is liable.
7.1.5.3 Fees and assessments for the building permit and for other permits, licenses and inspections for which the Contractor is required by the Contract Documents to pay.
7.1.5.4 Fees of testing laboratories for tests required by the Contract Documents, except those related to defective or nonconforming Work for which reimbursement is excluded by Subparagraph 13.5.3 of the General Conditions or other provisions of the Contract Documents and which do not fall within the scope of Subparagraphs 7.2.2 through 7.2.4 below.
7.1.5.5 Royalties and license fees paid for the use of a particular design, process or product required by the Contract Documents; the cost of defending suits or claims for infringement of patent rights arising from such requirement by the Contract Documents; payments made in accordance with legal judgments against the Contractor resulting from such suits or claims and payments of settlements made with the Owner's consent; provided, however, that such costs of legal defenses, judgment and settlements shall not be included in the calculation of the Contractor's Fee or of a Guaranteed Maximum Price, if any, and provided that such royalties, fees and costs are not excluded by the last sentence of Subparagraph 3.17.1 of the General Conditions or other provisions of the Contract Documents.
7.1.5.6 Deposits lost for causes other that the Contractor's fault or negligence.
7.1.6 OTHER COSTS
7.1.6.1 Other costs incurred in the performance of the Work if and to the extent approved in advance in writing by the Owner.
7.2 EMERGENCIES: REPAIRS TO DAMAGED, DEFECTIVE OR NONCONFORMING WORK
The Cost of the Work shall also include costs described in Paragraph 7.1 which are incurred by the Contractor:
7.2.1 In taking action to prevent threatened damage, injury or loss in case of an emergency affecting the safety of persons and property, as provided in Paragraph 10.3 of the General Conditions.
7.2.2 In repairing or correcting Work damaged or improperly executed by construction workers in the employ of the Contractor, provided such damage or improper execution did not result from the fault or negligence of the Contractor or the Contractor's foremen, engineers or superintendents, or other supervisory, administrative or managerial personnel of the Contractor.
7.2.3 In repairing damaged Work other than that described in Subparagraph 7.2.2, provided such damage did not result from the fault or negligence of the Contractor or the Contractor's personnel, and only to the extent that the cost of such repairs is not recoverable by the Contractor from others and the Contractor is not compensated therefor by insurance or otherwise.
7.2.4 In correcting defective or nonconforming Work performed or supplied by a Subcontractor or material supplier and not corrected by them, provided such defective or nonconforming Work did not result from the fault or neglect of the Contractor or the Contractor's personnel adequately to supervise and direct the Work of the Subcontractor or material supplier, and only to the extent that the cost of correcting the defective or nonconforming Work is not recoverable by the Contractor from the Subcontractor or material supplier.
ARTICLE 8
COSTS NOT TO BE REIMBURSED
8.1 The Cost of the Work shall not include:
8.1.1 Salaries and other compensation of the Contractor's personnel stationed at the Contractor's principal office or offices other that the site office, except as specifically provided in Clauses 7.1.1.2 and 7.1.1.3 or as may be provided in Article 14.
8.1.2 Expenses of the Contractor's principal office and offices other than the site office.
8.1.3 Overhead and general expenses, except as may be expressly included in Article 7.
8.1.4 The Contractor's capital expenses, including interest on the Contractor's capital employed for the Work.
8.1.5 Rental costs of machinery and equipment, except as specifically provided in Clause 7.1.4.2.
8.1.6 Except as provided in Subparagraphs 7.2.2 through 7.2.4 and Paragraph 13.5 of this Agreement, costs due to the fault or negligence of the Contractor, Subcontractors, anyone directly or indirectly employed by any of them, or for whose acts any of them may be liable, including but not limited to costs for the correction of damaged, defective or nonconforming Work, disposal and replacement of materials and equipment incorrectly ordered or supplied, and making good damage to property not forming part of the Work.
8.1.7 Any cost not specifically and expressly described in Article 7. 8.1.8 Costs which would cause the Guaranteed Maximum Price, if any, to be exceeded. |
A111-1987 6
ARTICLE 9
DISCOUNTS, REBATES AND REFUNDS
9.1 Cash discounts obtained on payments made by the Contractor shall accrue to the Owner if (1) before making the payment, the Contractor included them in an Application for Payment and received payment therefor from the Owner, or (2) the Owner has deposited funds with the Contractor with which to make payments; otherwise, cash discounts shall accrue to the Contractor. Trade discounts, rebates, refunds and amounts received from sales of surplus materials and equipment shall accrue to the Owner, and the Contractor shall make provisions so that they can be secured.
9.2 Amounts which accrue to the Owner in accordance with the provisions of Paragraph 9.1 shall be credited to the Owner as a deduction from the Cost of the Work.
ARTICLE 10
SUBCONTRACTS AND OTHER AGREEMENTS
10.1 Those portions of the Work that the Contractor does not customarily perform with the Contractor's own personnel shall be performed under subcontracts or by other appropriate agreements with the Contractor. The Contractor shall obtain bids from Subcontractors and from suppliers of materials or equipment fabricated especially for the Work and shall deliver such bids to the Architect. The Owner will then determine, with the advice of the Contractor and subject to the reasonable objection of the Architect, which bids will be accepted. The Owner may designate specific persons or entities from whom the Contractor shall obtain bids; however, if a Guaranteed Maximum Price has been established, the Owner may not prohibit the Contractor from obtaining bids from others. The Contractor shall not be required to contract with anyone to whom the Contractor has reasonable objection.
10.2 If a Guaranteed Maximum Price has been established and a specific
bidder among those whose bids are delivered by the Contractor to the Architect
(1) is recommended to the Owner by the Contractor; (2) is qualified to perform
that portion of the Work; and (3) has submitted a bid which conforms to the
requirements of the Contract Documents without reservations or exceptions, but
the Owner requires that another bid be accepted; then the Contractor may
require that a Change Order be issued to adjust the Guaranteed Maximum Price by
the difference between the bid of the person or entity recommended to the Owner
by the Contractor and the amount of the subcontract or other agreement actually
signed with the person or entity designated by the Owner.
10.3 Subcontracts or other agreements shall conform to the payment provisions of Paragraphs 12.7 and 12.8, and shall not be awarded on the basis of cost plus a fee without the prior consent of the Owner.
ARTICLE 11
ACCOUNTING RECORDS
11.1 The Contractor shall keep full and detailed accounts and exercise such controls as may be necessary for proper financial management under this Contract; the accounting and control systems shall be satisfactory to the Owner. The Owner and the Owner's accountants shall be afforded access to the Contractor's records, books, correspondence, instructions, drawings, receipts, subcontracts, purchase orders, vouchers, memoranda and other data relating to this Contract, and the Contractor shall preserve these for a period of three years after final payment, or for such longer period as may be required by law.
ARTICLE 12
PROGRESS PAYMENTS
12.1 Based upon Applications for Payments submitted to the Architect by the Contractor and Certificates for Payment issued by the Architect, the Owner shall make progress payments on account of the Contract Sum to the Contractor as provided below and elsewhere in the Contract Documents.
12.2 The period covered by each Application for Payment shall be one calendar month ending on the last day of the month, or as follows:
12.3 Provided an Application for Payment is received by the Architect not later than the 25th day of a month, the Owner shall make payment to the Contractor not later than the 10th day of the month. If an Application for Payment is received by the Architect after the application date fixed above, payment shall be made by the Owner not later than 15 days after the Architect receives the Application for Payment.
12.4 With each Application for Payment the Contractor shall submit payrolls, petty cash accounts, receipted invoices or invoices with check vouchers attached, and any other evidence required by the Owner or Architect to demonstrate that cash disbursements already made by the Contractor on account of the Cost of the Work equal or exceed (1) progress payments already received by the Contractor; less (2) that portion of those payments attributable to the Contractor's Fee; plus (3) payrolls for the period covered by the present Application for Payment; plus (4) retainage provided in Subparagraph 12.5.4, if any, applicable to prior progress payments.
12.5 CONTRACTS WITH A GUARANTEED MAXIMUM PRICE
12.5.1 Each Application for Payment shall be based upon the most recent schedule of values submitted by the Contractor in accordance with the Contract Documents. The schedule of values shall allocate the entire Guaranteed Maximum Price among the various portions of the Work, except that the Contractor's Fee shall be shown as a single separate item. The schedule of values shall be prepared in such form and supported by such data to substantiate its accuracy as the Architect may require. This schedule, unless objected to by the Architect, shall be used as a basis for reviewing the Contractor's Applications for Payment.
12.5.2 Applications for Payment shall show the percentage completion of each portion of the Work as of the end of the period covered by the Application for Payment. The percentage completion shall be the lesser of (1) the percentage of that portion of the Work which has actually been completed or (2) the percentage obtained by dividing (a) the expense which has actually been incurred by the Contractor on account of that portion of the Work for which the Contractor has made or intends to make actual payment prior to the next Application for Payment by (b) the share of the Guaranteed Maximum Price allocated to that portion of the Work in the schedule of values.
12.5.3 Subject to other provisions of the Contract Documents, the amount of each progress payment shall be computed as follows:
12.5.3.1 Take that portion of the Guaranteed Maximum Price properly allocable to completed Work as determined by multiplying the percentage completion of each portion of the Work by the share of the Guaranteed Maximum Price allocated to that portion of the Work in the schedule of values. Pending final determination of cost to the Owner of changes in the Work, amounts not in dispute may be included as provided in Subparagraph 7.3.7 of the General Conditions, even though the Guaranteed Maximum Price has not yet been adjusted by Change Order.
12.5.3.2 Add that portion of the Guaranteed Maximum Price properly allocable to materials and equipment delivered and suitably stored at the site for subsequent incorporation in the Work or, if approved in advance by the Owner, suitably stored off the site at a location agreed upon in writing.
12.5.3.3 Add the Contractor's Fee, less retainage of N/A percent (N/A %). The Contractor's Fee shall be computed upon the Cost of the Work described in the two preceding Clauses at the rate stated in Paragraph 5.1 or, if the Contractor's Fee is stated as a fixed sum in that Paragraph, shall be an amount which bears the same ratio to that fixed-sum Fee as the Cost of the Work in the two preceding Clauses bears to a reasonable estimate of the probable Cost of the Work upon its completion.
12.5.3.4 Subtract the aggregate of previous payments made by the Owner.
12.5.3.5 Subtract the shortfall, if any, indicated by the Contractor in the document required by Paragraph 12.4 to substantiate prior Applications for Payment, or resulting from errors subsequently discovered by the Owner's accountants in such documentation.
12.5.3.6 Subtract amounts, if any, for which the Architect has withheld or nullified a Certificate for Payment as provided in Paragraph 9.5 of the General Conditions.
12.5.4 Additional retainage, if any, shall be as follows:
(If it is intended to retain additional amounts from progress payments to the
Contractor beyond (1) the retainage from the Contractor's Fee provided in
Clause 12.5.3.3.(2) the retainage from Subcontractors provided in Paragraph
12.7 below and (3) the retainage, if any, provided by other provisions of the
Contract, insert provision for such additional retainage here. Such provision,
if made, should also describe any arrangement for limiting or reducing the
amount retained after the Work reaches a certain state of completion.)
12.6 CONTRACTS WITHOUT A GUARANTEED MAXIMUM PRICE
12.6.1 Applications for Payment shall show the Cost of the Work actually incurred by the Contractor through the end of the period covered by the Application for Payment and for which the Contractor has made or intends to make actual payment prior to the next Application for Payment.
12.6.2 Subject to other provisions of the Contract Documents, the amount of each progress payment shall be computed as follows:
12.6.2.1 Take the Cost of the Work as described in Subparagraph 12.6.1.
12.6.2.2 Add the Contractor's Fee, less retainage of percent ( %). The Contractor's Fee shall be computed upon the Cost of the Work described in the preceding Clause 12.6.2.1 at the rate stated in Paragraph 5.1 or, if the Contractor's Fee is stated as fixed sum in that Paragraph, an amount which bears the same ratio to that fixed-sum Fee as the Cost of the Work in the preceding Clause bears to a reasonable estimate of the probable Cost of the Work upon its completion.
12.6.2.3 Subtract the aggregate of previous payments made by the Owner.
12.6.2.4 Subtract the shortfall, if any, indicated by the Contractor in the documentation required by Paragraph 12.4 or to substantiate prior Applications for Payment or resulting from errors subsequently discovered by the Owner's accountants in such documentation.
A111-1987 8
12.6.2.5 Subtract amounts, if any, for which the Architect has withheld or withdrawn a Certificate for Payment as provided in the Contract Documents.
12.6.3 Additional retainage, if any, shall be as follows:
12.7 Except with the Owner's prior approval, payments to Subcontractors included in the Contractor's Applications for Payment shall not exceed an amount for each Subcontractor calculated as follows:
12.7.1 Take that portion of the Subcontract Sum properly allocable to completed Work as determined by multiplying the percentage completion of each portion of the Subcontractor's Work by the share of the total Subcontract Sum allocated to that portion in the Subcontractor's schedule of values, less retainage of percent ( %). Pending final determination of amounts to be paid to the Subcontractor for changes in the Work, amounts not in dispute may be included as provided in Subparagraph 7.3.7 of the General Conditions even though the Subcontract Sum has not yet been adjusted by Change Order.
12.7.2 Add that portion of the Subcontract Sum properly allocable to materials and equipment delivered and suitably stored at the site for subsequent incorporation in the Work or, if approved in advance by the Owner, suitably stored off the site at a location agreed upon in writing, less retainage of percent ( %).
12.7.3 Subtract the aggregate of previous payments made by the Contractor to the Subcontractor.
12.7.4 Subtract amounts, if any, for which the Architect has withheld or nullified a Certificate for Payment by the Owner to the Contractor for reasons which are the fault of the Subcontractor.
12.7.5 Add, upon Substantial Completion of the entire Work of the Contractor, a sum sufficient to increase the total payments to the Subcontractor to percent ( %) of the Subcontract Sum, less amounts, if any, for incomplete Work and unsettled claims; and, if final completion of the entire Work is thereafter materially delayed through no fault of the Subcontractor, add any additional amounts payable on account of Work of the Subcontractor in accordance with Subparagraph 9.10.3 of the General Conditions.
(If it is intended, prior to Substantial Completion of the entire Work of the Contractor, to reduce or limit the retainage from Subcontractors resulting from the percentages inserted in Subparagraphs 12.7.1 and 12.7.2 above, and this is not explained elsewhere in the Contract Documents, insert here provisions for such reduction or limitation.)
The Subcontract Sum is the total amount stipulated in the subcontract to be paid by the Contractor to the Subcontractor for the Subcontractor's performance of the subcontract.
12.8 Except with the Owner's prior approval, the Contractor shall not make advance payments to suppliers for materials or equipment which have not been delivered and stored at the site.
12.9 In taking action on the Contractor's Applications for Payment, the Architect shall be entitled to rely on the accuracy and completeness of the information furnished by the Contractor and shall not be deemed to represent that the Architect has made a detailed examination, audit or arithmetic verification of the documentation submitted in accordance with Paragraph 12.4 or other supporting data; that the Architect has made exhaustive or continuous on-site inspections or that the Architect has made examinations to ascertain how or for what purposes the Contractor has used amounts previously paid on account of the Contract. Such examinations, audits and verifications, if required by the Owner, will be performed by the Owner's accountants acting in the sole interest of the Owner.
ARTICLE 13
FINAL PAYMENT
13.1 Final payment shall be made by the Owner to the Contractor when (1) the Contract has been fully performed by the Contractor except for the Contractor's responsibility to correct defective or nonconforming Work, as provided in Subparagraph 12.2.2 of the General Conditions, and to satisfy other requirements, if any, which necessarily survive final payment; (2) a final Application for Pay-
A111-1987 9
ment and final accounting for the Cost of the Work have been submitted by the Contractor and reviewed by the Owner's accountants; and (3) a final Certificate for Payment has then been issued by the Architect; such final payment shall be made by the Owner not more than 30 days after the issuance of the Architect's final Certificate for Payment, or as follows:
13.2 The amount of the final payment shall be calculated as follows: 100% of final approved pay request
13.2.1 Take the sum of the Cost of the Work substantiated by the Contractor's final accounting and the Contractor's Fee; but not more than the Guaranteed Maximum Price, if any.
13.2.2 Subtract amount, if any, for which the Architect withholds, in whole or in part, a final Certificate for Payment as provided in Subparagraph 9.5.1 of the General Conditions or other provisions of the Contract Documents.
13.2.3 Subtract the aggregate of previous payments made by the Owner.
If the aggregate of previous payments made by the Owner exceeds the amount due the Contractor, the Contractor shall reimburse the difference to the Owner.
13.3 The Owner's accountants will review and report in writing on the Contractor's final accounting within 30 days after delivery of the final accounting to the Architect by the Contractor. Based upon such Cost of the Work as the Owner's accountants report to be substantiated by the Contractor's final accounting, and provided the other conditions of Paragraph 13.1 have been met, the Architect will, within seven days after receipt of the written report of the Owner's accountants, either issue to the Owner a final Certificate for Payment with a copy to the Contractor, or notify the Contractor and Owner in writing of the Architect's reasons for withholding a certificate as provided in Subparagraph 9.5.1. of the General Conditions. The time periods stated in this Paragraph 13.3 supersede those stated in Subparagraph 9.4.1 of the General Conditions.
13.4 If the Owner's accountants report the Cost of the Work as substantiated by the Contractor's final accounting to be less than claimed by the Contractor, the Contractor shall be entitled to demand arbitration of the disputed amount without a further decision of the Architect. Such demand for arbitration shall be made by the Contractor within 30 days after the Contractor's receipt of a copy of the Architect's final Certificate for Payment; failure to demand arbitration within this 30-day period shall result in the substantiated amount reported by the Owner's accountants becoming binding on the Contractor. Pending a final resolution by arbitration, the Owner shall pay the Contractor the amount certified in the Architect's final Certificate for Payment.
13.5 If, subsequent to final payment and at the Owner's request, the Contractor incurs costs described in Article 7 and not excluded by Article 8 to correct defective or nonconforming Work, the Owner shall reimburse the Contractor such costs and the Contractor's Fee applicable thereto on the same basis as if such costs had been incurred prior to final payment, but not in excess of the Guaranteed Maximum Price, if any. If the Contractor has participated in savings as provided in Paragraph 5.2, the amount of such savings shall be recalculated and appropriate credit given to the Owner in determining the net amount to be paid by the Owner to the Contractor.
ARTICLE 14
MISCELLANEOUS PROVISIONS
14.1 Where reference is made in this Agreement to a provision of the General Conditions or another Contract Document, the reference refers to that provision as amended or supplemented by other provisions of the Contract Documents.
14.2 Payments due and unpaid under the Contract shall bear interest from the date payment is due at the rate stated below, or in the absence thereof, at the legal rate prevailing from time to time at the place where the Project is located.
(Insert rate of interest agreed upon, if any.)
14.3 Contractor and Owner acknowledge and agree that Horizon Medical Products, Inc., the Tenant of the Project structure, is shown as a party to this Contract solely for the purpose of having the right to pursue appropriate legal remedies for any breach, including without limitation, any claim for defective workmanship. Horizon shall have no direct responsibility to the Contractor for payment of any construction contract costs arising hereunder.
(Usury laws and requirements under the Federal Truth in Lending Act, similar state and local consumer credit laws and other regulations at the Owner's and Contractor's principal places of business, the location of the Project and elsewhere may affect the validity of this provision. Legal advice should be obtained with respect to deletions or modifications, and also regarding requirements such as written disclosures or waivers.)
A111-1987 10
14.4 Other provisions:
ARTICLE 15
TERMINATION OR SUSPENSION
15.1 The Contract may be terminated by the Contractor as provided in Article 14 of the General Conditions; however, the amount to be paid to the Contractor under Subparagraph 14.1.2 of the General Conditions shall not exceed the amount the Contractor would be entitled to receive under Paragraph 15.3 below, except that the Contractor's Fee shall be calculated as if the Work had been fully completed by the Contractor, including a reasonable estimate of the Cost of the Work for Work not actually completed.
15.2 If a Guaranteed Maximum Price is established in Article 5, the Contract may be terminated by the Owner for cause as provided in Article 14 of the General Conditions; however, the amount, if any, to be paid to the Contractor under Subparagraph 14.2.4 of the General conditions shall not cause the Guaranteed Maximum Price to be exceeded, nor shall it exceed the amount the Contractor would be entitled to receive under Paragraph 15.3 below.
15.3. If no Guaranteed Maximum Price is established in Article 5, the Contract may be terminated by the Owner for cause as provided in Article 14 of the General Conditions; however, the Owner shall then pay the Contractor an amount calculated as follows:
15.3.1 Take the Cost of the Work incurred by the Contractor to the date of termination.
15.3.2. Add the Contractor's Fee computed upon the Cost of the Work to the date of termination at the rate stated in Paragraph 5.1 or, if the Contractor's Fee is stated as a fixed sum in that Paragraph, an amount which bears the same ratio to that fixed-sum Fee as the Cost of the Work at the time of termination bears to a reasonable estimate of the probable Cost of the Work upon its completion.
15.3.3. Subtract the aggregate of previous payments made by the Owner.
The Owner shall also pay the Contractor fair compensation, either by purchase or rental at the election of the Owner, for any equipment owned by the Contractor which the Owner elects to retain and which is not otherwise included in the Cost of the Work under Subparagraph 15.3.1. To the extent that the Owner elects to take legal assignment of subcontracts and purchase orders (including rental agreements), the Contractor shall, as a condition of receiving the payments referred to in this Article 15, execute and deliver all such papers and take all such steps, including the legal assignment of such subcontracts and other contractual rights of the Contractor, as the Owner may require for the purpose of fully vesting in the Owner the rights and benefits of the Contractor under such subcontracts or purchase orders.
15.4 The Work may be suspended by the Owner as provided in Article 14 of the General Conditions; in such case, the Guaranteed Maximum Price, if any, shall be increased as provided in Subparagraph 14.3.2 of the General Conditions except that the term "cost of performance of the Contract" in that Subparagraph shall be understood to mean the Cost of the Work and the term "profit" shall be understood to mean the Contractor's Fee as described in Paragraphs 5.1 and 6.3 of this Agreement.
ARTICLE 16
ENUMERATION OF CONTRACT DOCUMENTS
16.1 The Contract Documents, except for Modifications issued after execution of this Agreement, are enumerated as follows:
16.1.1 The Agreement is this executed Standard Form of Agreement between Owner and Contractor, AIA Document A111, 1987 Edition.
16.1.2 The General Conditions are the General Conditions of the Contract for Construction, AIA Document A201, 1987 Edition.
A111-1987 11
16.1.3 The Supplementary and other Conditions of the Contract are those contained in the Project Manual dated , and are as follows:
DOCUMENT TITLE PAGES
Not Applicable
16.1.4 The Specifications are those contained in the Project Manual dated as in Paragraph 16.1.3, and are as follows: (Either list the Specifications here or refer to an exhibit attached to this Agreement.)
SECTION TITLE PAGES
Not Applicable
A111-1987 12
16.1.5 The Drawings are as follows, and are dated unless a different date is shown below: (Either list the Drawings here or refer to an exhibit attached to this Agreement.)
NUMBER TITLE DATE A-1.0 General Notes 23 January 1996 A-3.0 Overall floor plan 23 January 1996 A-3.1 Partial floor plan 23 January 1996 A-3.2 Partial floor plan 23 January 1996 A-3.5 Reflected ceiling and lighting plan 23 January 1996 A-4.0 Door schedule and details 23 January 1996 A-5.0 Finish schedule, partition types, misc. details 23 January 1996 M-1.0 HVAC 23 January 1996 E-1.0 Electrical Power 23 January 1996 P-1.0 Plumbing 23 January 1996 Pr-1.0 Process Piping 23 January 1996 Note: Plans will be updated to reflect changes agreed upon |
16.1.6 The addenda, if any, are as follows:
NUMBER DATE PAGES
Not applicable
A111-1987 13
|
Portions of Addenda relating to bidding requirements are not part of the Contract Documents unless the bidding requirements are also enumerated in this Article 16.
16.1.7 Other Documents, if any, forming part of the Contract Documents are as
follows:
(List here any additional documents which are intended to form part of the
Contract Documents. The General Conditions provide that bidding requirements
such as advertisement or invitation to bid. Instructions to Bidders, sample
forms and the Contractor's bid are not part of the Contract Documents unless
enumerated in this Agreement. They should be listed here only if intended to
be part of the Contract Documents.)
This Agreement is entered into as of the day and year first written above and is executed in at least three original copies of which one is to be delivered to the Contractor, one to the Architect for use in the administration of the Contract, and the remainder to the Owner.
OWNER The Development Authority of the CONTRACTOR Langford Construction Company
City of Manchester & Horizon Medical
Products
/s/ Chairman /s/ A. Philip Langford
------------------------------------------- --------------------------------------------
(Signature) of MANCHESTER DEVELOPMENT (Signature)
AUTHORITY
/s/ as President of A. Philip Langford
------------------------------------------- ---------------------------------------------
(Printed name and title) Horizon (Printed name and title)
|
CAUTION: YOU SHOULD SIGN AN ORIGINAL AIA DOCUMENT WHICH HAS THIS CAUTION PRINTED IN RED. AN ORIGINAL ASSURES THAT CHANGES WILL NOT BE OBSCURED AS MAY OCCUR WHEN DOCUMENTS ARE REPRODUCED.
A111-1987 14
FILE ID - 9601 ESTIMATE DETAIL REPORT PAGE - 1
PROJECT JOB NO. - 9601 ** ITEM CODE SEQUENCE ** DATE - 02/14/96
PROJECT NAME - NEW OFFICE/MANUFACTURING FACILITY TIME - 12:22:31
PROJECT SIZE - 40,000 SF HORIZON MEDICAL PRODUCTS
SEVEN NORTH PARKWAY SQUARE
ATLANTA, GA 30327
-----------------------------------------------------------------------------------------------------------------------------------
: TAX & INS INCLUDED
REF S ITEM UNIT LAB UNIT MAT/EQP/ TOTAL TOTAL MAT/: TOT UNIT TOTAL
NO. D SC ELEM CODE DESCRIPTION MEAS QUANTITY PRICE SUB UNIT LABOR EQUIP/SUB : PRICE PRICE
-----------------------------------------------------------------------------------------------------------------------------------
GENERAL REQUIREMENTS
JOB PERSONNEL
109 103.110 JOB SUPERINTENDENT WK 17 800.000 13,600 1120.000 19,040
--------- --------- -------
**TOTAL JOB PERSONNEL 13,600 19,040
REGULATORY REQUIREMENTS
110 106.000 PERMIT LS 1 1500.000 S 1,500 S 1500.000 1,500
**TOTAL REGULATORY REQUIREMENTS -------- ------- ------
1,500 S 1,500
MISC GENERAL REQUIREMENTS
111 107.100 JOB CLEAN UP - LABOR SQFT 40.000 .172 6,880 .241 9,640
112 107.101 JOB CLEAN UP - EQUIP. SF 40.000 .050 E 2,000 E .050 2,000
113 107.103 TRASH DUMP FEE MO 4 750.000 S 3,000 S 750.000 3,000
114 107.104 FINAL CLEAN UP - LABOR SF 40.000 .057 2,280 .080 3,200
115 107.105 FINAL CLEAN UP - EQUIP. SF 40.000 .015 E 600 E .015 600
116 107.106 FINAL CLEAN UP - SUB LS 1 2400.000 S 2,400 S 2400.000 2,400
117 107.120 TEMP. SANITARY TOILET MO 4 125.000 S 500 S 125.000 500
-------------- -------
**TOTAL MISC GENERAL REQUIREMENTS 9,160 2,600 E 21,340
5,900 S
TEMPORARY UTILITIES
118 150.110 JOB TELEPHONE MO 4 250.000 S 1,000 S 250.000 1,000
119 150.120 TEMP. ELECT. SERVICE MO 4 250.000 S 1,000 S 250.000 1,000
120 150.121 TEMP. LIGHTING LS 1 500.000 E 500 E 500.000 500
121 150.130 TEMPORARY WATER MO 4 50.000 S 200 S 50.000 200
--------------- -------
**TOTAL TEMPORARY UTILITIES 500 E 2,700
2,200 S
JOB EQUIPMENT
122 151.000 SMALL TOOLS MO 4 100.000 E 400 E 100.000 400
123 151.320 PICK-UP TRUCK RENTAL MO 4 324.000 E 1,296 E 324.000 1,296
124 151.330 EQUIPMENT RENTAL MO 4 1000.000 E 4,000 E 1000.000 4,000
--------------- -------
**TOTAL JOB EQUIPMENT 5,696 E 5,696
PROJECT SIGNS
125 158.150 JOB SIGN - LABOR EACH 1 50.000 50 70.000 70
126 158.152 JOB SIGN - SUB EA 1 400.000 S 400 S 400.000 400
--------------- -------
**TOTAL PROJECT SIGNS 50 400 S 470
FIELD OFFICES & SHEDS
127 159.100 OFFICE TRAILER MO 4 325.000 S 1,300 S 325.000 1,300
128 159.101 TRAILER SET UP - LABOR EA 1 100.000 100 140.000 140
|
FILE ID - 9601 ESTIMATE DETAIL REPORT PAGE - 2
PROJECT JOB NO. - 9601 ** ITEM CODE SEQUENCE ** DATE - 02/14/96
PROJECT NAME - NEW OFFICE/MANUFACTURING FACILITY TIME - 12:22:31
PROJECT SIZE - 40,000 SF HORIZON MEDICAL PRODUCTS
SEVEN NORTH PARKWAY SQUARE
ATLANTA, GA 30327
-----------------------------------------------------------------------------------------------------------------------------------
: TAX & INS INCLUDED
REF S ITEM UNIT LAB UNIT MAT/EQP/ TOTAL TOTAL MAT/: TOT UNIT TOTAL
NO. D SC ELEM CODE DESCRIPTION MEAS QUANTITY PRICE SUB UNIT LABOR EQUIP/SUB : PRICE PRICE
-----------------------------------------------------------------------------------------------------------------------------------
GENERAL REQUIREMENTS
FIELD OFFICES & SHEDS
129 159.102 TRAILER SET UP-SUB EA 1 250,000 S 250 S 250.000 250
---------------- --------
** TOTAL FIELD OFFICES & SHEDS 100 1,550 S 1,690
OTHER GENERAL REQUIREMENTS
130 180.001 JOB DESIGN COST LS 1 40,000 S 40,000 S 40.000 40,000
131 180.002 PLANS & PRINTS LS 1 200,000 S 200 S 200.000 200
132 180.003 A.G.C. DUES LS 1 840,000 S 840 S 840.000 840
---------------- --------
** TOTAL OTHER GENERAL REQUIREMENTS 41,040 S 41,040
*** TOTAL GENERAL REQUIREMENTS 22,910 8,796 E 93,476
52,590 S
MISC OVERHEAD
133 190.000 SUPERINTENDENT BONUS LS 1 2608,000 S 2,608 S 2608.000 2,608
---------------- --------
*** TOTAL MISC OVERHEAD 2,608 S 2,608
CONTINGENCY
134 199.000 CONTINGENCIES LS 1 2500.000 2500,000 M 2,500 2,500 M 11.150 11,150
5000,000 S 5,000 S
---------------- --------
*** TOTAL CONTINGENCY 2,500 2,500 M 11,150
5,000 S
EXCAV, GRADING & BACKFILL
EXCAVATION & BACKFILL
1 0211 222.001 FINE GRADE FLOOR BY HAND SQFT 37,839 .014 530 .020 757
2 0211 222.022 WASHED GRAVEL SLAB FILL CUYD 532 1.787 11,470 M 951 6,102 M 18.573 9,881
3,913 S 2,082 S
3 E 0111 222.101 HAND EXCAV CONTINUOUS FIG CUYD 10 5.575 56 7.800 78
4 M 0112 222.110 MACH EXCAV COLUMN FIG CUYD 45 5.574 6,467 E 251 291 E 14.267 642
6 E 0111 222.131 HAND BACKFILL CONTINUOUS FIG CUYD 3 1.078 3 1.667 5
7 M 0112 222.141 HAND BACKFILL @ COLUMN FIG CUYD 32 1.078 34 1.500 48
---------------- --------
** TOTAL EXCAVATION & BACKFILL 1,825 6,102 M 11,411
291 E
2,082 S
SOIL TREATMENT
8 0211 225.000 SUBSOIL TERMITE TREATMENT SQFT 37,839 .080 S 3,027 S .080 3,027
---------------- --------
** TOTAL SOIL TREATMENT 3,027 S 3,027
*** TOTAL EXCAV, GRADING & BACKFILL 1,825 6,102 M 14,438
391 E
5,109 S
|
FILE ID - 9601 ESTIMATE DETAIL REPORT PAGE - 3
PROJECT JOB NO. - 9601 ** ITEM CODE SEQUENCE ** DATE - 02/14/96
PROJECT NAME - NEW OFFICE/MANUFACTURING FACILITY TIME - 12:22:31
PROJECT SIZE - 40,000 SF HORIZON MEDICAL PRODUCTS
SEVEN NORTH PARKWAY SQUARE
ATLANTA, GA 30327
-----------------------------------------------------------------------------------------------------------------------------------
: TAX & INS INCLUDED
REF S ITEM UNIT LAB UNIT MAT/EQP/ TOTAL TOTAL MAT/: TOT UNIT TOTAL
NO. D SC ELEM CODE DESCRIPTION MEAS QUANTITY PRICE SUB UNIT LABOR EQUIP/SUB : PRICE PRICE
-----------------------------------------------------------------------------------------------------------------------------------
ROADS & WALKS
ASPHALT PAVING
9 261.080 STRIPE PARKING LINES LS 1 250.000 $ 250 S 250.000 250
--------------- ---------
**TOTAL ASPHALT PAVING 250 S 250
CURB & GUTTERS
10 262.065 CURB & GUTTER (S) LF 400 8.500 $ 3.400 S 8.500 3.400
--------------- ---------
**TOTAL CURB & GUTTERS 3.400 S 3.400
WALKS
11 1222 263.000 **CONC IN SIDEWALKS** ****
12 E 1222 263.000 **CONC IN SIDEWALKS** ****
13 1222 263.001 3000 PSI DIRECT CUYD 14 53.000 M 742 M 56.214 787
14 E 1222 263.001 3000 PSI DIRECT CUYD 14 53.000 M 742 M 56.214 787
15 1222 263.120 ER SIDEWALK EDGE FORMS LNFT 310 .655 .124 M 203 38 M 1.048 325
16 E 1222 263.120 ER SIDEWALK EDGE FORMS LNFT 270 .655 .124 M 177 33 M 1.048 283
17 1222 263.130 WRK SIDEWALK EDGE FORMS LNFT 310 .118 37 .165 51
18 E 1222 263.130 WRK SIDEWALK EDGE FORMS LNFT 270 .118 32 .167 45
19 1222 263.140 ER THICKENED SLAB EDGE FORM LNFT 102 1.965 .375 M 200 38 M 3.157 322
20 E 1222 263.140 ER THICKENED SLAB EDGE FORM LNFT 103 1.965 .375 M 202 39 M 3.146 324
21 1222 263.150 WRK THICKENED SLAB EDGE FORM LF 102 .351 36 .490 50
22 E 1222 263.150 WRK THICKENED SLAB EDGE FORM LF 103 .351 36 .495 51
23 1222 263.200 FINE GRADE FOR SIDEWALK SQFT 884 .050 44 .070 62
24 E 1222 263.200 FINE GRADE FOR SIDEWALK SQFT 894 .050 45 .070 63
25 1222 263.260 EXCAV & THICKENED SLAB EDGE CUYD 5 7.094 35 10.000 50
26 E 1222 263.260 EXCAV & THICKENED SLAB EDGE CUYD 5 7.094 35 10.000 50
27 1222 263.270 BACKFILL & THICKENED SLAB EDGE CUYD 3 3.054 9 4.333 13
28 E 1222 263.270 BACKFILL & THICKENED SLAB EDGE CUYD 3 3.054 9 4.333 13
29 E 1222 263.300 TROWEL & BROOM SIDEWALK SQFT 874 .280 S 250 S .280 250
30 1222 263.320 SCREEN FINISH SIDEWALK SQFT 884 .362 320 .507 448
33 1222 263.400 6X6-10/10 MESH SDS 10 2.555 6.000 M 26 60 M 10.000 100
34 E 1222 263.400 6X6-10/10 MESH SDS 10 2.555 6.000 M 26 60 M 10.000 100
35 1222 263.440 SIDEWALK REINFORCING CVT 2 11.872 25.000 M 24 50 M 43.000 86
36 E 1222 263.440 SIDEWALK REINFORCING CVT 2 11.872 25.000 M 24 50 M 43.000 86
--------------- ---------
**TOTAL WALKS 1.520 1.852 M 4.346
250 S
CONCRETE PAVING
37 265.065 ASPHALT PAVING (S) SY 1.208 12.000 S 14.496 S 12.000 14.496
38 265.065 ASPHALT PAVING (S) SY 2,009 17.000 S 34.153 S 17.000 34.153
39 265.066 GRAVEL PARKING (S) SY 400 7.000 S 2.800 S 7.000 2.800
--------------- ---------
**TOTAL CONCRETE PAVING 51.449 S 51.449
|
FILE ID - 9601 ESTIMATE DETAIL REPORT PAGE - 4
PROJECT JOB NO. - 9601 ** ITEM CODE SEQUENCE ** DATE - 02/14/96
PROJECT NAME - NEW OFFICE/MANUFACTURING FACILITY TIME - 12:22:31
PROJECT SIZE - 40,000 SF HORIZON MEDICAL PRODUCTS
SEVEN NORTH PARKWAY SQUARE
ATLANTA, GA 30327
-----------------------------------------------------------------------------------------------------------------------------------
: TAX & INS INCLUDED
REF S ITEM UNIT LAB UNIT MAT/EQP/ TOTAL TOTAL MAT/: TOT UNIT TOTAL
NO. D SC ELEM CODE DESCRIPTION MEAS QUANTITY PRICE SUB UNIT LABOR EQUIP/SUB : PRICE PRICE
-----------------------------------------------------------------------------------------------------------------------------------
ROADS & WALKS
CONCRETE PAVING
***TOTAL ROADS & WALKS 1.520 1.852 M 59.445
55.349 S
SITE IMPROVEMENTS
MISC SITE IMPROVEMENTS
40 270.001 GEN. SITEWORK SUB LS 1 3500.000 S 3.500 S 3500.000 3.500
---------------- --------
**TOTAL MISC SITE IMPROVEMENTS 3.500 S 3.500
***TOTAL SITE IMPROVEMENTS 3.500 S 3.500
LAWNS & PLANTING
41 280.010 LANDSCAPING/IRRIGATION LS 1 30.000 S 30.000 S 30.000 30.000
---------------- --------
***TOTAL LAWNS & PLANTING 30.000 S 30.000
CONCRETE FINISHING
CONCRETE FINISHER
42 0312 301.019 TROWEL CEMENT FINISH SQFT 37.839 .280 S 10,595 S .280 10.595
43 0312 301.050 PROTECT & CURE SQFT 37.839 .007 .023 M 265 870 M .034 1.286
44 301.300 CONTROL JOINT LNFT 650 .250 .420 M 163 273 M .795 517
45 301.301 SAW CUT JOINT LNFT 5.655 .500 S 2.828 S .500 2.828
---------------- --------
**TOTAL CONCRETE FINISHER 428 1.143 M 15.226
13.423 S
***TOTAL CONCRETE FINISHING 428 1.143 M 15.226
13,423 S
FORM WORK
FORM WORK
46 M 0112 311.120 ER COLUMN FIG EDGE FORM SQFT 535 1.973 1.060 M 1.056 567 M 3.886 2.079
47 M 0112 311.121 WRK COLUMN FIG EDGE FORM SQFT 535 .273 146 .381 204
48 0211 311.300 ER FLOOR EDGE W/1.5 PM/SF SQFT 293 1.973 .867 M 578 M 254 M 3.679 1.078
49 0211 311.301 WRK FLOOR EDGE W/1.5 PM/SF SQFT 293 .273 80 .382 112
51 311.304 EXPANSION JOINT LNFT 1.200 .200 .200 M 240 240 M .492 590
52 311.304 EXPANSION JOINT LNFT 20 .200 .200 M 4 4 M .500 10
---------------- --------
**TOTAL FORM WORK 2.104 1.065 M 4.073
MISC FORM WORK
53 M 319.100 INSTALL ANCHOR BOLIS EACH 40 10.000 10.000 M 400 400 M 24.600 984
---------------- --------
**TOTAL MISC FORM WORK 400 400 M 984
***TOTAL FORM WORK 2.504 1.465 M 5.057
|
FILE ID - 9601 ESTIMATE DETAIL REPORT PAGE - 5
PROJECT JOB NO - 9601 ** ITEM CODE SEQUENCE ** DATE - 02/14/96
PROJECT NAME - NEW OFFICE/MANUFACTURING FACILITY TIME - 12:22:31
PROJECT SIZE - 40,000 SF HORIZON MEDICAL PRODUCTS
SEVEN NORTH PARKWAY SQUARE
ATLANTA, GA 30327
------------------------------------------------------------------------------------------------------------------------------------
: TAX & INS INCLUDED
REF S ITEM UNIT LAB UNIT MAT/EQP/ TOTAL TOTAL MAT/: TOT UNIT TOTAL
NO. D SC ELEM CODE DESCRIPTION MEAS QUANTITY PRICE SUB UNIT LABOR EQUIP/SUB : PRICE PRICE
------------------------------------------------------------------------------------------------------------------------------------
REINFORCING STEEL
RE-PARS
54 E 0111 321.100 RE-STEEL @ CONTINUOUS FTG CWT 5 10.739 25.000 M 54 125 M 41.600 208
55 M 0112 321.110 RE-STEEL & COLUMN FOOTING CWT 6 10.739 25.000 M 64 150 M 41.500 249
--------------- ---------
** TOTAL RE-BARS 118 275 M 457
*** TOTAL REINFORCING STEEL 118 275 M 457
CASH-IN-PLACE CONCRETE
CAST-IN-PLACE CONCRETE
56 E 0111 331.100 **CONC IN CONTINUOUS FOOTING ** ****
57 E 0111 331.101 3000 PSI DIRECT CUYD 8 6.000 53.000 M 48 424 M 64.500 516
58 M 0112 331.150 **CONC IN COLUMN FOOTING ** ****
59 M 0112 331.151 3000 PSI DIRECT CUYD 11 6.000 53.000 M 66 583 M 64.545 710
60 0211 331.300 **CONC IN SLAB ON GRADE** ****
61 0211 331.342 MIX A W/PUMP CUYD 736 58.500 M 43.056 M 66.010 48.583
4.000 E 2.944 E
--------------- ---------
** TOTAL CAST-IN-PLACE CONCRETE 114 44.063 M 49.809
2.944 E
*** TOTAL CAST-IN-PLACE CONCRETE 114 44.063 M 49.809
2.944 E
GROUT
62 M 360.000 GROUT COL BASE PLATES EA 40 3.000 3.000 M 120 120 M 7.375 295
** TOTAL GROUT --------------- ---------
120 120 M 295
MASONRY
63 E 0411 400.001 MORTAR CUYD 1 50.000 M 200 M 53.000 212
64 E 0411 400.102 FILL VOIDS W/ CONCRETE CUYD 2 19.784 56.500 M 40 113 M 87.500 175
65 E 0411 405.402 8X8X16 SPLIT FACE BLOCK PCS 588 1.800 M 1.058 M 3.908 2.298
2.000 S 1.176 S
66 E 0411 405.412 8" ROUND BEAM SPLIT FACE BLOCK PCS 70 2.500 M 175 M 4.657 326
2.000 S 140 S
67 E 0411 425.102 8" DUR-A-WALL LNFT 379 .134 M 51 M .142 54
68 E 0411 425.122 RE-STEEL & MASONRY CWT 1 12.300 25.000 M 12 25 M 44.000 44
69 0622 426.001 BRICK PAVERS SQFT 884 .448 .850 M 396 751 M 1.527 1.350
--------------- ---------
*** TOTAL MASONRY 448 2.373 M 4.459
1.316 S
|
FILE ID - 9601 ESTIMATE DETAIL REPORT PAGE - 6
PROJECT JOB NO. - 9601 ** ITEM CODE SEQUENCE ** DATE - 02/14/96
PROJECT NAME - NEW OFFICE/MANUFACTURING FACILITY TIME - 12:22:31
PROJECT SIZE - 40,000 SF HORIZON MEDICAL PRODUCTS
SEVEN NORTH PARKWAY SQUARE
ATLANTA, GA 30327
-----------------------------------------------------------------------------------------------------------------------------------
: TAX & INS INCLUDED
REF S ITEM UNIT LAB UNIT MAT/EQP/ TOTAL TOTAL MAT/: TOT UNIT TOTAL
NO. D SC ELEM CODE DESCRIPTION MEAS QUANTITY PRICE SUB UNIT LABOR EQUIP/SUB : PRICE PRICE
-----------------------------------------------------------------------------------------------------------------------------------
STRUCTURAL METALS
STRUCTURAL METALS
70 M 500.010 STRUCT. STEEL MATERIAL LS 1 600.000 M 6,000 M 6360.000 6,360
71 M 500.011 STRUCT. STEEL ERECTION EA 40 25.000 1.000 35.000 1,400
------------------- ---------
** TOTAL STRUCTURAL METALS 1.000 6,000 M 7,760
*** TOTAL STRUCTURAL METALS 1.000 6,000 M 7,760
MISC & ORNAMENTAL METAL
EXPANSION CONTROL
72 580.001 MISC. NAILS, ETC. LS 1 2500.000 M 2,500 M 2650.000 2,650
------------------- ---------
** TOTAL EXPANSION CONTROL 2,500 M 2,650
*** TOTAL MISC & ORNAMENTAL METAL 2,500 M 2,650
ROUGH CARPENTRY
73 601.093 F.T. 2" X 12" - 12' BF 7,526 .280 .560 M 2.107 4,215 M .986 7,420
------------------- ---------
*** TOTAL ROUGH CARPENTRY 2.107 4,215 M 7,420
FINISH CARPENTRY
INTERIOR TRIM
74 M 620.106 WOOD BASE LF 500 .500 .380 M 250 190 M 1.104 552
75 M 620.107 CROWN MOULD LF 460 .750 .390 M 345 179 M 1.463 673
------------------- ---------
** TOTAL INTERIOR TRIM 595 369 M 1,225
EXTERIOR TRIM
76 M 623.046 1/2" COX PLYWOOD SH 12 13.000 12.780 M 156 153 M 31.750 381
77 M 623.500 5/8" T&G PLYWOOD SH 100 13.000 17.100 M 1,300 1,710 M 36.330 3,633
------------------- ----------
** TOTAL EXTERIOR TRIM 1,456 1,863 M 4,014
*** TOTAL FINISH CARPENTRY 2,051 2,232 M 5,239
CUSTOM WOODWORK
78 640.010 MILLWORK LS 1 10.000 S 10,000 S 10.000 10,000
------------------- ----------
*** TOTAL CUSTOM WOODWORK 10,000 S 10,000
WATERPROOF & DAMPPROOF
79 0211 719.001 6MIL VISQUEEN SUBGRADE PAPER SQS 417 1.900 M 792 M 2.014 840
------------------- ----------
*** TOTAL WATERPROOF & DAMPPROOF 792 M 840
|
FILE ID - 9601 ESTIMATE DETAIL REPORT PAGE - 7
PROJECT JOB NO. - 9601 ** ITEM CODE SEQUENCE ** DATE - 02/14/96
PROJECT NAME - NEW OFFICE/MANUFACTURING FACILITY TIME - 12:22:31
PROJECT SIZE - 40,000 SF HORIZON MEDICAL PRODUCTS
SEVEN NORTH PARKWAY SQUARE
ATLANTA, GA 30327
-----------------------------------------------------------------------------------------------------------------------------------
: TAX & INS INCLUDED
REF S ITEM UNIT LAB UNIT MAT/EQP/ TOTAL TOTAL MAT/: TOT UNIT TOTAL
NO. D SC ELEM CODE DESCRIPTION MEAS QUANTITY PRICE SUB UNIT LABOR EQUIP/SUB : PRICE PRICE
-----------------------------------------------------------------------------------------------------------------------------------
METAL DOORS & FRAMES
80 800.005 HOLLOW METAL-MATERIAL LS 1 2000,000 M 2,000 M 2120.000 2,120
81 800.005 HOLLOW METAL-MATERIAL LS 1 4000,000 M 4,000 M 4240.000 4,240
82 800.005 HOLLOW METAL-MATERIAL LS 1 5000,000 M 5,000 M 5300.000 5,300
83 800.005 HOLLOW METAL-MATERIAL LS 1 7548,000 M 7,548 M 8001.000 8,001
84 800.010 HOLLOW METAL FRAMES-LABOR EAS 60 21.842 1,311 30.583 1,835
85 800.012 HOLLOW METAL DOORS-LABOR EA 44 16.619 731 23.273 1,024
86 800.013 H.M. WINDOW FRAMES (L) EA 26 21.842 568 30.577 795
87 800.020 SOLID CORE WOOD DOORS (M) LS 1 2743,000 M 2,743 M 2908.000 2,908
88 800.021 SOLID CORE WOOD DOORS (L) EA 21 26.783 562 37.476 787
---------------- --------
*** TOTAL METAL DOORS & FRAMES 3,172 21,291 M 27,010
HARDWARE
89 871.018 FINISH HARDWARE-LABOR EA 61 12.250 747 17.148 1,046
90 871.019 FINISH HARDWARE-MATERIAL LS 1 9862,000 M 9,862 M 10.454 10,454
---------------- --------
*** TOTAL HARDWARE 747 9,862 M 11,500
GLASS & GLAZING
GLAZING LS
91 880.000 GLASS & GLAZING 1 2000,000 S 2,000 S 2000.000 2,000
---------------- --------
** TOTAL GLAZING 2,000 S 2,000
*** TOTAL GLASS & GLAZING 2,000 S 2,000
GYPSUM DRYWALL
92 925.025 WD STUD/D.WALL/ACOUSTIC LS 1 108,749 S 108,749 S 108.749 108,749
-------- -------- --------
*** TOTAL GYPSUM DRYWALL 108,749 S 108,749
FLOORING
SPECIAL FLOORING
93 970.010 FLOOR COVERING (S) LS 1 22,499 S 22,500 S 22.500 22,500
---------------- --------
** TOTAL SPECIAL FLOORING 22,500 S 22,500
*** TOTAL FLOORING 22,500 S 22,500
PAINTING & WALL COVERING
PAINTING
94 990.100 PAINTING LS 1 25,129 S 25,130 S 25.130 25,130
---------------- --------
** TOTAL PAINTING 25,130 S 25,130
|
FILE ID - 9601 ESTIMATE DETAIL REPORT PAGE - 8
PROJECT JOB NO - 9601 ** ITEM CODE SEQUENCE ** DATE - 02/14/96
PROJECT NAME - NEW OFFICE/MANUFACTURING FACILITY TIME - 12:22:31
PROJECT SIZE - 40,000 SF HORIZON MEDICAL PRODUCTS
SEVEN NORTH PARKWAY SQUARE
ATLANTA, GA 30327
--------------------------------------------------------------------------------------------------------------------------------
: TAX & INS INCLUDED
REF S ITEM UNIT LAB UNIT MAT/EQP/ TOTAL TOTAL MAT/: TOT UNIT TOTAL
NO. D SC ELEM CODE DESCRIPTION MEAS QUANTITY PRICE SUB UNIT LABOR EQUIP/SUB : PRICE PRICE
--------------------------------------------------------------------------------------------------------------------------------
PAINTING & WALL COVERING
WALL COVERING
95 995.000 VINYL WALL COVERING ALLO RLS 40 34.000 M 1,360 M 46.050 1,842
10.000 S 400 S
------------------ ----------
** TOTAL WALL COVERING 1,360 M 1,842
400 S
*** TOTAL PAINTING & WALL COVERING 1,360 M 26,972
25,530 S
SPECIALTIES
COMPARTMENTS & CUBICLES
96 1018.300 TOILET PARTITIONS-LABOR EA 10 70.000 700 98.000 980
97 1018.350 TOILET PARTITIONS-MATERI LS 1 4120.000 M 4,120 M 4367.000 4,367
------------------ ----------
** TOTAL COMPARTMENTS & CUBICLES 700 4,120 M 5,347
LOCKERS
98 1050.015 METAL LOCKERS (S) LS 1 8000.000 S 8,000 S 8000.000 8,000
------------------ ----------
** TOTAL LOCKERS 8,000 S 8,000
TOILET & BATH ACCESSORIES
99 1080.010 TOILET ACCESSORIES-LABOR EA 46 5.000 230 7.000 322
100 1080.015 TOILET ACCESSORIES-MATER LS 1 1762.000 M 1,762 M 1868.000 1,868
------------------ ----------
** TOTAL TOILET & BATH ACCESSORIES 230 1,762 M 2,190
*** TOTAL SPECIALTIES 930 5,882 M 15,537
8,000 S
EQUIPMENT
FOOD SERVICE EQUIPMENT
101 1140.100 KITCHEN EQUIPMENT (S) LS 1 3134.000 S 3,134 S 3134.000 3,134
------------------ ----------
** TOTAL FOOD SERVICE EQUIPMENT 3,134 S 3,134
*** TOTAL EQUIPMENT 3,134 S 3,134
PLUMBING SYSTEMS & EQUIP
MISC PLBG SYSTEMS & EQUIP
102 1546.010 PROCESS PIPING LS 1 27.561 S 27,561 S 27.561 27,561
------------------ ----------
** TOTAL MISC PLBG SYSTEMS & EQUIP 27,561 S 27,561
|
FILE ID - 9601 ESTIMATE DETAIL REPORT PAGE - 9
PROJECT JOB NO - 9601 ** ITEM CODE SEQUENCE ** DATE - 02/14/96
PROJECT NAME - NEW OFFICE/MANUFACTURING FACILITY TIME - 12:22:31
PROJECT SIZE - 40,000 SF HORIZON MEDICAL PRODUCTS
SEVEN NORTH PARKWAY SQUARE
ATLANTA, GA 30327
--------------------------------------------------------------------------------------------------------------------------------
: TAX & INS INCLUDED
REF S ITEM UNIT LAB UNIT MAT/EQP/ TOTAL TOTAL MAT/: TOT UNIT TOTAL
NO. D SC ELEM CODE DESCRIPTION MEAS QUANTITY PRICE SUB UNIT LABOR EQUIP/SUB : PRICE PRICE
--------------------------------------------------------------------------------------------------------------------------------
PLUMBING SYSTEMS & EQUIP
PLUMBING SYSTEMS
103 1549.000 PLUMBING LS 1 39.778 S 39,779 S 39.779 39,779
------------------ ----------
** TOTAL PLUMBING SYSTEMS 39,779 S 39,779
*** TOTAL PLUMBING SYSTEMS & EQUIP 67,340 S 67,340
HVAC SYSTEMS & EQUIPMENT
HVAC SYSTEMS & EQUIP
104 1599.000 H.V.A.C. LS 1 159.999 S 160,000 S 160,000 160,000
------------------ ----------
** TOTAL HVAC SYSTEMS & EQUIP 160,000 S 160,000
*** TOTAL HVAC SYSTEMS & EQUIPMENT 160,000 S 160,000
ELEC SYSTEMS & EQUIPMENT
MISC ELECTRIC SYSTEMS
105 1666.000 COMPUTER CABLING LS 1 7000.000 S 7,000 S 7000.000 7,000
------------------ ----------
** TOTAL MISC ELECTRIC SYSTEMS 7,000 S 7,000
TELEPHONE SYSTEMS
106 1680.000 TELEPHONE SYSTEM LS 1 15.000 S 15,000 S 15,000 15,000
------------------ ----------
** TELEPHONE SYSTEMS 15,000 S 15,000
SECURITY, ALARM & DETECTION
107 1691.000 SECURITY SYSTEM LS 1 5000.000 S 5,000 S 5000.000 5,000
------------------ ----------
** TOTAL SECURITY, ALARM DETECTION 5,000 S 5,000
ELECTRICAL SYSTEMS
108 1699.000 ELECTRICAL CONTRACT LS 1 156.999 S 157,000 S 157,000 157,000
------------------ ----------
** TOTAL ELECTRICAL SYSTEMS 157,000 S 157,000
*** TOTAL ELEC SYSTEMS & EQUIPMENT 184,000 S 184,000
***** GRAND TOTAL 42,494 114,027 M 952,571
12,031 E
760,148 S
|
FILE ID - 9601 GENERAL CONTRACTOR SUMMARY OF ESTIMATE PAGE - 1
PROJECT JOB NO. - 9601 ** ITEM CODE SEQUENCE ** DATE - 02/14/96
PROJECT NAME - NEW OFFICE/MANUFACTURING FACILITY TIME - 12:22:31
PROJECT SIZE - 40,000 SF HORIZON MEDICAL PRODUCTS
SEVEN NORTH PARKWAY SQUARE
ATLANTA, GA 30327
-----------------------------------------------------------------------------------------------------------------------------------
ESTIMATE TOTALS
Labor 42,494
Labor burden & Total labor 40.00 17,035 59,529
Material 114,027
Sales tax & Total material 6.00 6,836 120,863
Subcontract 760,148
Equipment 12,031
Equipment surcharge
Other expenses
Gross cost 952,571
Gross receipts tax
Overhead 8.0% OF GROSS COST 76,205
Fee 7.0% OF GROSS COST 66,679
Builder's risk insurance .15 1,661
General contractor's bond 10,867
Subcontract bond
Total bid 1,107,984
|
[LANGFORD CONSTRUCTION CO. LETTERHEAD]
MEMORANDUM
To: Marshall Hunt
From: Phil Langford
Date: 02/13/96
Re: Horizon Medical Products
Manchester, Georgia
|
Please find changes to pricing for the aforementioned project as follows:
Omit curb & gutter: Install bumpers (2,260.00)
Omit employee walks: Provide gravel (3,676.00)
Omit additional parking: work within original cost (18,449.00)
Omit additional sawn joints (1,541.00)
Omit form work @ mezzanine footings (2,293.00)
Omit anchor bolts @ mezzanine (984.00)
Omit rebar @ mezzanine & HVAC curtain wall (457.00)
Omit concrete @ HVAC curtain wall (516.00)
Omit concrete @ mezzanine footings (710.00)
Omit grout @ mezzanine footings (295.00)
Omit masonry @ HVAC curtain walls (3,109.00)
Omit structural steel @ mezzanine (7,760.00)
Omit metal lockers (provide benches only) (6,643.87)
Omit exterior lighting (18,000.00)
Reduce cost for 230 volt process power (6,000.00)
All allowance for special finishes (10,000.00)
Minimum electrical in 20,000 s.f. space (4,500.00)
Reduce Bond to $705,000.00 (3,227.00)
Changes to date (70,420.87)
15% OH & Profit (10,563.17)
-------------
Total changes (80,984.00)
Current Estimate Detail Report 1,107,984.00
Total Changes 80,984.00
-------------
Total contract amount $1,027,000.00
|
Please review and advise.
Thanks,
/s/ A. PHILIP LANGFORD
----------------------
A. Philip Langford
|
EXHIBIT "H"
COMMITMENT LETTER
Manchester Development Authority P.O. Box 583 Manchester, Georgia 31816
706 846-8438
DIRECTORS: DIRECTORS:
Tyron Elliott, CHAIRMAN Greg Hale
Judy Foster, SECRETARY Willie Holloway
David Jordan, TREASURER Ben W. Key, Jr.
Harry Barnes Leonard R. Meadows
M. B. Guy, Jr. Jimmy NeSmith
March 11, 1996
Horizon Medical Products, Inc.
Seven North Parkway Square
4200 Northside Parkway, N.W.
Atlanta, Georgia 30327
Re: Letter of Intent
|
Gentlemen:
This letter of intent supersedes all previous negotiations, agreements and understandings, whether or not written, and specifically our letters of November 30, 1995, December 1, 1995 and December 4, 1995.
This letter will serve as a summary of the agreements reached in a series of meetings among your company, the Manchester Development Authority ("MDA"), Columbus Bank and Trust Company ("CB&T"), F&M Bank of Manchester ("F&M") and the Meriwether County Industrial Development Authority ("Meriwether") and shall serve as the memorialization of our understanding regarding improvements to our building in the Manchester Industrial Park, the financing of same, your lease of the lot and a portion of the building and your relocation of your facility to our building ("the Project").
LEASEHOLD IMPROVEMENTS
1.0 Your company has been in consultation in recent weeks with Langford Construction Company of Lagrange, Georgia ("Langford"). They are preparing at your direction plans and specifications for the buildout of 20,000 square feet of our 40,000 square foot building in Lot 12 of the Manchester Industrial Park. These plans include both basic improvements to the entire building, including a concrete slab, and other similar items, as well as very specific improvements necessary for your use of the building to manufacture medical products. These plans are being drawn to your specifications and will comprise the basis for two contracts we will let for these improvements and will be the subject of the formal lease agreement we will enter with you.
1.2 One contract ("the basic contract", a proposed copy of which is attached hereto) will be in the amount of $150,000.00 for the infrastructure improvements to our building. While we expect that contract to be with Langford, we are required to competitively bid this Contract for grant purposes.
1.3 The basic contract will be funded by a loan to the MDA from what will be the Meriwether County/City of Manchester Joint Revolving Loan Fund ("RLF"). This loan (in the amount of $150,000.00) shall be amortized over 14 years at 3.75% interest and shall require annual payments of $14,000.00. The MDA shall use a portion of the lease payments made by Horizon for this repayment. This loan will be secured by a second Deed To Secure Debt on the real estate (Lot 12).
1.4 It is understood by the parties that in order to fund the RLF the City of Manchester and Meriwether County will apply for an Employment Incentive Program ("EIP") grant in the amount of $157,895.00 which (except for an administrative fee of $7,895.00) shall fund the RLF account.
1.5 The grant process is expected to take two to three months, and the Construction Funds must flow directly from the revolving loan account to the contractor for direct improvements. This source will be used to fully fund the basic contract.
1.6 Horizon agrees to use its best efforts in the documentation necessary for this grant. As part of the grant conditions, fifty jobs will be created, thirty eight of which will be new local jobs, and of those jobs, fifty one (51%) per cent will be offered to persons whose household income fits the definition of low income as defined by the Department of Community Affairs, if such number of persons make application for employment and are otherwise qualified for employment.
1.7 These jobs must be in place not later than two years after the date the building is certified for occupancy by the Contractor and Architect. A job is defined as one that requires a 40 hour work week or its equivalent, such as two part-time jobs of twenty (20) hours each. In the event Horizon fails to meet this requirement and penalties are assessed against the MDA, those penalties will be assumed and paid by Horizon.
1.8 The second contract ("the general contract", a proposed copy of which is attached) will be in the amount of $877,000.00 and will also be with Langford. It will provide for the detailed completion of the portion of our building to be leased to you, and will be based upon the exact plans and specification drafted by Hal Herndon & Associates at your direction and approved by you. It will be set forth in both construction contracts that Horizon is a party (tenant) for the purpose of asserting claims against the contractor for damages from breach of the contracts; however, it will be
clearly stated that Horizon has no financial obligation to the contractor and that the MDA ("owner") is responsible for payment of construction contract costs.
1.9 The MDA will receive the balance of Project financing from three (3) sources. The primary source will be tax-exempt revenue bonds issued by the MDA, which will be discussed herein, in the amount of $705,000.00; the secondary source will be a REBA grant in the amount of $80,000.00; and the third source will be part of a private loan of $528,000.00 to be made to the MDA by the F & M Bank and Trust Company of Manchester (F&M), in joint participation with CB&T.
1.10 Subject to approval by all parties based upon approved plans, both the basic and general contracts will be let simultaneously with the execution of this agreement, provided, all other financing is firmly committed. The requirements for financing include an executed lease agreement by and between the MDA and Horizon. The lease agreement is dependent upon approval of the plans and specifications prepared by Hal Herndon & Associates, P.C. by all parties and issuance of all necessary development permits and licenses. During construction, in lieu of plan approval and inspections by the City of Manchester, the City requires your architect, Hal Herndon & Associates, P.C., provide the City with affidavits of construction compliance in accordance with Article 1 of the Standard Building Code. Any fees or charges for this service shall be fully borne by Horizon, at no additional cost to the MDA or City of Manchester. This procedure will expedite the construction process and allow the City to issue building permits in order that construction may begin immediately.
1.11 The private financing will be in accordance with a commitment letter from F&M which is being prepared simultaneously with this document and which, by reference, is made a part of this document.
1.12 The private loan will be closed in accordance with the commitment letter from F&M based upon the following schedule:
(a) It is anticipated that the plans and specifications for our building will be completed and approved by all parties no later than the date this document is executed by the parties.
(b) It is anticipated that the two (2) construction contracts will be finalized and executed by the parties no later than March 15, 1996.
(c) It is anticipated that an interim lease agreement (as distinguished from the bond lease agreement) between the MDA and Horizon will be prepared and executed no later than March 15, 1996.
(d) Application for the EIP/REBA grants will be filed with DCA no later than March 15, 1996.
(e) The private loan will be closed upon completion of items (a), (b), (c) and (d) above, and upon compliance with the terms of the commitment letter from F&M no later than March 15, 1996; and
(f) The Tax-Exempt Revenue Bond will be closed no later than May 1, 1996, unless otherwise extended by the parties hereto.
These completion and execution dates set forth above are good faith estimates, and we will employ our best efforts to expedite the closing as much as possible.
RELOCATION AND LEASEHOLD IMPROVEMENT COSTS
2.0 The MDA will reimburse Horizon for relocation and leasehold improvements costs in an amount not to exceed $209,000.00. Horizon shall submit to the MDA an invoice detailing the nature, amount, and to whom such costs are owed or have been paid. We will pay this item from our private loan from F&M as described above.
TRANSACTION COSTS
3.0 Since the total amount of the bond proceeds of $705,000.00 will be applied to construction costs, the various transaction costs (outlined below) associated with the project will be paid by us from our loan from F&M. In addition to the $301,000.00 previously mentioned, that loan will contain provision for the following payments of transaction costs which are our total commitment in this area other than filing/recording costs and miscellaneous expenses relating to the closings, which may vary:
King & Spalding (bond fees) $ 25,000.00
King & Spalding (lease preparation) 5,000.00
Dan McRae (Meriwether legal) 5,000.00
Bond Trustee 7,500.00
Mullins & Whalen (MDA legal) 15,000.00
Allen Kamensky (CB&T legal) 12,500.00
Nat Slaughter (Horizon legal) 12,500.00
Reid Davidson (Horizon real estate
commissions on the lease) 41,000.00
Title Insurance 2,500.00
Filing and Recording Costs
Miscellaneous Expenses
-----------
TOTAL $126,000.00
|
TAX LEVY AGREEMENT WITH CITY
4.0 Our existing debt on the building and Lot 12 in the amount of approximately $101,000.00 will be refinanced as part of the private loan from F&M. We will issue to F&M a deed to secure debt (which will be subordinate to the bond issue and the RLF loan) and fund the repayment of the private loan from our operating revenues, provided under a Tax Levy Agreement with the City of Manchester which, based on current taxable value, should yield approximately $80,000.00 per annum. Those revenues will be paid to us for an 11 year period or until the F&M loan is repaid, whichever is occurs first, beginning January 1, 1997.
INTERGOVERNMENTAL CONTRACT
5.0 The MDA also has a commitment to enter into an intergovernmental contract with the Meriwether Industrial Development Authority providing for payments to the MDA of $15,000.00 per year for ten (10) years or until the F&M loan of $528,000.00 is repaid, whichever occurs first. These payments will also begin January 1, 1997. As a condition of this contract, the MDA, through covenants in its lease with Horizon, must provide sufficient new job opportunities within Meriwether County.
REVENUE BONDS
6.0 The MDA will issue $705,000.00 in tax-exempt revenue bonds through King & Spalding as bond counsel, which bonds shall be purchased by CB&T, who is committed to buy the entire issue, and shall bear interest at a rate not to exceed six (6%) per cent per annum. A formal bond lease will be executed by the parties which will be identical in all material respects with the terms of the interim lease. Since only quarterly payments of interest will be made during the first year from the date of certification of the building for occupancy, the principal and interest will be amortized over the next 151 months through revenues derived solely from the lease with Horizon. The repayment of the bonds will be based upon $80,000.00 of each year's lease payments (years 2 through 13).
6.1 All bond payments will be personally and unconditionally guaranteed by Cardiac Medical, Inc., Marshall B. Hunt, William E. Peterson, Jr., and Roy C. Mallady, Jr.; and further secured by the following collateral: stock in Cardiac pledged by Peterson; assignment of life insurance policies in the amount of $250,000.00 on Hunt; and a Deed To Secure Debt on realty in Walton County, Georgia, owned by Mallady; upon the same terms as previously pledged to CB&T.
LEASE AGREEMENT
7.1 We commit to lease 20,000 square feet of our building and our entire Lot 12 in the industrial park to you on the following terms:
7.2 The lease term shall begin immediately upon its execution by all parties, but no rent will be due until the date the building is certified for occupancy by the contractor and by the architect, Hal Herndon & Associates, P.C., as having been completed according to the plans and specifications attached to the interim lease (the "construction period"). If you dispute their determination of that fact, we agree that the matter will be referred to Hal Herndon & Associates, the architects, whose determination shall be binding on the parties. We agree that the sole test for occupancy is whether or not the building has been completed according to the plans and specifications, and not whether any particular certification has been given by the FDA or any other governmental agency.
7.3 In addition to the construction period, the lease will run for 163 months from the date the building is certified for occupancy by the Contractor and Architect. Rent during the first twelve (12) months will consist of four quarterly payments of interest only, in the approximate amount of $10,575.00 each, due August 1, 1996, November 1, 1996, February 1, 1997 and May 1, 1997. Beginning on the first anniversary of the date the building is certified for occupancy by the Contractor and Architect on the first day of each of the next 150 months thereafter, rental payments of $7,833.33 per month will be required ($94,000.00 total per year). From the total annual lease payments, the MDA will apply $80,000.00 per year to amortize the bonds and $14,000.00 to amortize the RLF loan. Horizon shall have the option to terminate the lease after the eleventh (llth) year (from the date the building is certified for occupancy) with no further recourse against Horizon by the MDA, other than its remedy under the lease of dispossession.
7.4 During the lease term, Horizon will maintain the facility and grounds, and shall keep in place a fire and casualty insurance policy in an amount equal to the replacement value of the facility, and shall show the loss payees as the MDA, CB&T, F&M, County of Meriwether, Georgia, and City of Manchester, Georgia, as their interest may appear. Such policy shall be in force and include the construction stage.
7.5 Horizon shall also maintain general liability insurance in an amount acceptable to the MDA, and shall agree to indemnify and hold harmless the MDA from any and all claims arising from the use and occupancy of the leased premises.
7.6 It is contemplated that there will be no ad valorem tax liability, either to the MDA or Horizon's interest in the real property subject to the lease, but there will be tax liability to Horizon for its personal property located on the premises.
7.7 The lease will provide that Horizon shall have exclusive right to use Lot 12 (outside of the building), other than the ingress and egress and parking requirements which a subsequent lease of the remaining 20,000 square feet may entail. Except for parking, the MDA shall not use the lot in any other manner during the lease and shall not make any improvements to it; however, subject to options granted to Horizon, the MDA reserves the right to use and occupy the remaining 20,000 square feet of its building. Horizon may make any improvements at its own expense on Lot 12, provided plans for improvements are first approved in writing by the MDA. This right may be assigned. The MDA agrees to cooperate with Horizon in subordinating its lease and to work diligently and in good faith with Horizon toward obtaining local financing of such improvements.
OPTIONS
The MDA shall grant to Horizon the following options:
8.0 RENEWAL OF LEASE. Horizon shall have the right to renew the lease for one
(1) additional five (5) year term on the same terms and conditions in the lease
for the original term.
8.1 ADDITIONAL SPACE. YEARS ONE (1) THROUGH FIVE (5). Horizon shall have for five (5) years (beginning on the date of the commencement of the lease term for the improved 20,000 square feet.), the option to lease the remaining 20,000 square feet of the building on Lot 12 on an as-is basis at a price of $20,000.00 per year (paid monthly). Horizon may make improvements in that space at its expense with MDA approval, which shall not be unreasonably withheld. MDA agrees to work diligently and in good faith with Horizon toward obtaining revenue bond or other financing of such construction. In the event such financing is obtained by the MDA for such improvements, the rent for the additional space will be adjusted to reflect an amount and term that would completely amortize the cost fo the improvements including transaction costs.
8.2 ADDITIONAL SPACE. YEARS SIX (6) THROUGH TEN (10). For an additional five (5) years, Horizon shall have a first refusal right to the space and shall have the right to rent the same upon the same terms and conditions as any bona fide offer or, in the alternative, to rent the same on an "as is" basis for an annual rental of $20,000.00, paid monthly. Horizon may make improvements in that space at its expense with MDA approval, which shall not be unreasonably withheld. MDA agrees to work diligently and in good faith with Horizon toward obtaining local bond or other financing of such construction. In the event such financing is obtained by the MDA for such improvements, the rent for the additional space will be adjusted to reflect an amount and term that would completely amortize the cost of the improvements including transaction costs.
8.3 ADDITIONAL SPACE. YEARS ELEVEN (11) THROUGH SIXTEEN (16). For an additional six (6) years, Horizon shall have a first refusal right to the space and shall have the right to the space and shall have the right to rent the same upon the same terms and conditions as any bona fide offer or, in the alternative, to rent the same on an as-is basis for an annual rental of $50,000.00, paid monthly. Horizon may make improvements in that space at its expense with MDA approval, which shall not be unreasonably withheld. MDA agrees to work diligently and in good faith with Horizon toward obtaining local bond or other financing of such construction. In the event such financing is obtained by the MDA for such improvements, the rent for the additional space will be adjusted to reflect an amount and term that would completely amortize the cost of the improvements including transaction costs.
8.4 OPTION TO PURCHASE LOT 11. Horizon shall have the right to purchase Lot 11 in the Manchester Industrial Park (8.91 acres) from the MDA at any time during the lease for the sum of $6,500.00 per acre This right may be assigned by Horizon.
8.5 OPTION TO PURCHASE BUILDING AND LOT 12. Horizon shall have the right at any time during the lease, or any renewals of the lease, to purchase the building and Lot 12 for the cash price which shall be composed of the following sums:
(a) the remaining balance on the bonded indebtedness; plus
(b) the RLF loan of $150,000.00, less the amount of the lease payments by Horizon which have been applied to the principal of said loan as of the date of purchase; plus
(c) the equity of the MDA in the building in the amount of $730,000,00 (from which the payoff of the F&M loan will be made).
NOTICES
9.0 The lease will provide that all notices, including the exercise of options, shall be in writing, shall be sent to the addresses shown on the lease, and shall be given not later than 60 days before the end of a term for renewal and purchase options.
A copy of the legal description of Lot 12 was attached to our previous letter and will not be included again since everyone has a copy.
We will promptly have prepared and finalized, each with your approval, (i) a letter of commitment from CB&T to purchase the $705,000.00 Tax-Exempt Revenue Bonds described above to be issued by the MDA, (ii) a commitment letter from F&M for the $528,000.00 loan described above, (iii) a tax levy contract with the City of Manchester agreeing to levy and collect up to 3.0 mills of ad valorem tax per annum and turn the proceeds over to the MDA for
operating purposes (this levy shall be for eleven (11) years or until the private loan is fully repaid); and (iv) a commitment letter from the Meriwether County Development Authority to enter into an intergovernmental agreement with the MDA providing for the payment of $15,000.00 per year for ten (10) years or until the private loan is repaid.
This Project is contingent on the timely approval and funding of the EIP and REBA grants, in the full amounts applied for. In the event either or both grants are not approved, or funds therefor are not timely available, the MDA will be unable to complete the transactions as contemplated. As a contingency plan, should these grants not be approved or fully funded, the Authority anticipates its tax levy from the City, together with that portion of schedule lease payments intended to be available for repayment of the RLF loan, will allow it to borrow the difference required. We have your assurance that Horizon and its principals (Cardiac Medical, Inc., Marshall B. Hunt, William E. Peterson, Jr., and Roy C. Mallady, Jr.) will, consent to co-sign such additional note as a maker. It is understood that neither CB&T or F&M have made any commitment to the MDA for such additional financing at this time, nor has the City of Manchester agreed to any extension of the tax levy agreement beyond 11 years.
Sincerely,
Manchester Development Authority
/s/ Tyron Elliott
--------------------------------
Tyron Elliott, Chairman
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Accepted by:
HORIZON MEDICAL PRODUCTS, INC.
By: /s/ William E. Peterson, Jr.
----------------------------
William E. Peterson, Jr.
President
Attest: /s/
-------------------------
(Seal) Secretary
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COLUMBUS BANK & TRUST COMPANY
By: /s/ J. Theodore Edgar, Jr.
-------------------------------
J. Theodore Edgar, Jr., V-P
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F & M BANK & TRUST COMPANY OF
MANCHESTER
By: /s/ Brent Kersey
-------------------------------
Brent Kersey, President
County of Meriwether, Georgia City of Manchester, Georgia
By: /s/ Carl Garner By: /s/ Dorsey Wilson
-------------------------- --------------------------------
Carl Garner, Chairman Dorsey Wilson, Mayor
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Meriwether County Development Authority
By: /s/ Ken Barnes
--------------------------
Ken Barnes, Chairman
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EXHIBIT "I"
BUDGET
SOURCES AND USES OF FUNDS
SOURCES
Private Loan from F&M $ 528,000.00
Revenue Bonds (CB&T) 705,000.00
RLF Loan (EIP grant) 150,000.00
REBA grant (leasehold improvements) 85,000.00
-------------
Total Project Revenues $1,468,000.00
USES OF FUNDS
General Contract $ 877,000.00
Basic Contract 150,000.00
Relocation Costs to Horizon 209,000.00
Payoff - F&M existing loan 101,765.00
Transaction Fees & Costs:
King & Spalding - bond counsel 25,000.00
King & Spalding - interim lease 5,000.00
Self, Mullins - fees 12,500.00
Slaughter & Virgin - fees 12,500.00
Mullins & Whalen - fees 15,000.00
Chamberlain, - fees 5,000.00
Davidson Associates, Inc. 41,000.00
Bond Trustee's fees 7,500.00
Title Certificate/Insurance 2,500.00
-------------
Total Project Costs $1,463,376.00
Net Revenue over Expenses $ 4,235.00
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EXHIBIT 10.10
LEASE AGREEMENT
THIS LEASE is made and entered into as of August 29, 1997, by and between The Development Authority of the City of Manchester ("Landlord") and Horizon Medical Products, Inc., a Georgia corporation ("Tenant");
WHEREAS, Tenant is presently leasing from Landlord the "Facility" and the "Project Site", as defined in and pursuant to the provisions of that certain Lease Agreement dated July 1, 1996 (the "1996 Lease");
WHEREAS, pursuant to the option granted to Tenant in the 1996 Lease, Tenant has exercised its right to lease from Landlord the remaining 20,000 square feet of space in the Facility, and Tenant and Landlord desire to enter into this Lease for such space;
NOW, THEREFORE, in consideration of the mutual agreements and covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
1. PREMISES. Landlord, for and in consideration of the rents, covenants, agreements, and stipulations herein mentioned, provided for, and contained herein to be paid, kept, and performed by Tenant, demises and leases and rents unto Tenant, and Tenant hereby leases and takes upon the terms and conditions which hereinafter appear, the following described property (the "Premises") to- wit:
The approximate 20,000 square feet of space in the Facility that are presently unoccupied and vacant and that are not part of the Project under the 1996 Lease, which Premises is located on the real property described in Exhibit "A" attached hereto.
Landlord hereby grants to Tenant the right of ingress and egress from the parking lot outside of the Facility to any door on the outside of the Facility that leads into the Premises.
2. TERM AND RENEWAL. Tenant shall have the right and hold the Premises for a term of one hundred fifty-one (151) months, beginning on September 1, 1997 and ending on March 31, 2010, at midnight, unless sooner terminated as hereinafter provided.
If Tenant renews the Agreement Term under Section 8.7 of the 1996 Lease, Tenant shall have the right to review this Lease for one additional five-year term on the same terms and conditions as contained in this Lease.
3. RENTAL. Tenant agrees to pay to Landlord, without demand, deduction, or setoff, an annual rental of Twenty Thousand and No/100 Dollars ($20,000.00) payable in
equal monthly installments of One Thousand Six Hundred Sixty-Six and 66/100 Dollars ($1,666.66) in advance on the first day of each month during the term hereof. Upon execution of this Lease, Tenant shall pay to Landlord the first month's rent due hereunder, if such rental payment has not previously been made. Rental for any period during the term hereof which is for less than one month shall be a prorated portion of the monthly rental due.
4. LEASE ON "AS-IS" BASIS; BUILD-OUT OF PREMISES. The Premises is leased to Tenant by Landlord on an "as is" basis in its current condition. Tenant acknowledges that Tenant has inspected the Premises and accepts the Premises in such condition.
After commencement of the term of the Lease, Tenant will be solely responsible at its expense for building out and constructing all improvements within the Premises, pursuant to plans and drawings prepared for Tenant at its sole expense. Tenant will furnish Landlord with copies of such drawings and plans and will obtain Landlord's approval for such improvements, which approval will not be unreasonably withheld.
5. UTILITY BILLS. Tenant shall pay all utility bills, including but not limited to water, sewer, gas, electricity, fuel, light, and heat bills for the Premises, and Tenant shall pay all charges for garbage collection or other sanitary services.
6. TAXES. Tenant will pay, or cause to be paid, as the same become lawfully due and payable:
(a) All taxes and governmental charges of any kind upon or with respect to Tenant's interest in the Premises;
(b) All taxes and governmental charges of any kind upon or with respect to Tenant's machinery, equipment, or related property installed or brought by the Tenant in or on the Premises; and
(c) All assessments and charges made by any governmental body for public improvements that may be secured by a lien or charge on the Premises; provided, (i) that there will be no ad valorem tax liability with respect to Tenant's interest in and to the Premises (but that personal property owned by Tenant and located in the Premises shall be subject to ad valorem taxes) and provided further (ii) that with respect to such special assessments or other governmental charges that may lawfully be paid in installments over a period of years, Tenant shall be obligated to pay only such installments as they become due and payable.
Tenant may, at its own expense and in its own name and behalf, in good faith contest any such taxes, assessments, and other charges and, in the event of any such contest, may permit the taxes, assessments, and other charges so contested to remain unpaid during the period of such contest and any appeal therefrom.
7. LIENS AND ENCUMBRANCES. Tenant and Landlord represent and warrant that, as of September 1, 1997, there exist no lien, charge, or encumbrance upon the Premises, other than the liens and encumbrances described in Exhibit "B" attached hereto (the "Permitted Encumbrances"). Tenant may bring equipment, machinery, furniture, office equipment, and inventory onto the Premises, which property of Tenant will be subject to a security interest and lien in favor of NationsCredit Commercial Corporation. Landlord agrees to execute the form of Landlord's Consent and Waiver attached hereto as Exhibit "C" and incorporated herein by reference, if requested to execute such form by NationsCredit Commercial Corporation. Additionally, Tenant may from time to time purchase items of machinery, equipment, or other personal property that do not constitute part of the Premises but are placed or installed on the Premises under an installment purchase and security agreement, purchase money mortgage agreement, lease-purchase agreement, or similar contractual obligation in which the seller retains a security interest.
8. INSURANCE. Throughout the term of this Lease, Tenant shall keep, or cause to be kept, the Premises continuously insured against such risks as are commonly insured against by businesses of like size and type (other than business interruption insurance), paying (except as otherwise provided herein) as the same become due, all premiums in respect thereto, including, but not necessarily limited to:
(a) Insurance to the full insurable replacement value of the Premises as determined by the Tenant, without deduction for depreciation, against loss from damage by fire and lightening, with a uniform standard extended coverage endorsement limited only as may be provided in the standard form of extended coverage endorsement at the time and use in the State of Georgia (provided that such insurance may provide for a deductible provision of not in excess of One Hundred Thousand and No/100 Dollars ($100,000.00) with respect to direct damage applicable to each separate instance of loss insured against); and
(b) If the Premises has located thereon a boiler (or boilers) and/or a pressure vessel (or pressure vessels), boiler and pressure vessel (including pressure pipes) explosion insurance in an amount at least equal to the replacement cost of the Premises and its contents as determined by Tenant (with deductible provision not to exceed One Thousand and No/100 Dollars ($1,000.00)) against loss of damage with respect to all boilers and pressure vessels and pressure pipes which may be installed in the Premises; and
(c) General public liability insurance against claims for bodily injury, death, or property damage occurring on the Premises, such insurance to afford protection of not less than Three Million and No/100 Dollars ($3,000,000.00) per occurrence and Four Million and No/100 Dollars ($4,000,000.00) in the aggregate with respect to bodily injury and property damage; and
(d) Throughout the term of the Lease, Tenant shall maintain, or cause to be maintained, in connection with the Premises workers' compensation insurance coverage required by then applicable law.
The insurance described above may be combined with insurance obtained by Tenant pursuant to the 1996 Lease and the Project (as defined therein).
All insurance required above shall be taken out and maintained in generally recognizable responsible insurance companies selected by Tenant and authorized to do business in the State of Georgia. All policies evidencing such insurance shall provide for payment of the losses for coverage required above to Landlord and Tenant, as their respective interests may appear; provided, however, that all claims regardless of amount may be adjusted by Landlord with the insurers, subject to the prior written approval of Tenant, as to settlement of any claim which is an amount which would require payment to Landlord as aforesaid. The insurance hereby required may be contained in blanket policies now or hereafter maintained by Tenant, so long as such blanket policies contain standard mortgage clauses that comply with the provisions of this Section; and provided further that the policies evidencing such insurance also show as loss payees the Landlord.
9. USE OF PREMISES. The Premises shall be used for manufacturing, warehousing, and office administrative purposes and no other. The Premises shall not be used for any illegal purposes, nor in any manner to create any nuisance or trespass, nor in any manner to vitiate the insurance on the premises.
10. ABANDONMENT OF THE PREMISES. Tenant agrees not to abandon or vacate the Premises during the term of the Lease and agrees to use the Premises for the purposes herein leased until the expiration hereof
11. INDEMNITY. Tenant agrees to and does hereby indemnify and hold Landlord and its officers, directors, and employees harmless against all claims for damages to persons or property by reason of Tenant's use or occupancy of the Premises, and all expenses incurred by Landlord as a result thereof, including reasonable attorney's fees and court costs. The provisions of this Section shall not apply to any claims or liability resulting from Landlord's acts of gross negligence, bad faith, fraud, or deceit or for any claim which Tenant was not given an opportunity to contest due to the bad faith, gross negligence, fraud, or deceit of Landlord or its officers, agents, attorneys, or employees.
12. MAINTENANCE OF THE PREMISES. Throughout the Lease term, Tenant shall keep the Premises in as reasonably safe condition as the operation thereof will permit and shall keep the Premises in good repair and in good operating condition, making from time to time all necessary repairs thereto.
So long as no default exists hereunder, Tenant may from time to time, in its sole discretion and at its own expense, make any alterations, modifications, or improvements to the Premises, including installation of additional machinery, equipment, and related property in the Premises, which Tenant may deem desirable for its business purposes; provided that such additions, modifications, and improvements do not adversely affect or impair the structural integrity of the Premises or change the character of the Premises and all such additions, modifications, and improvements are located within the boundary lines of the Project Site (as defined in the 1996 Lease). all such machinery, equipment, and related property installed by Tenant in the Premises shall remain the sole property of Tenant. Tenant shall repair, at its expense, any damage to the Premises caused by the removal of any such machinery, equipment, or property. All such additions, modifications, or improvements to the Premises will be accomplished in a good and workmanlike manner, in conformity with all applicable laws and regulations, free and clear of liens and encumbrances.
13. REMOVAL OF FIXTURES. Tenant may, if not in default hereunder, prior to the expiration of this Lease remove any fixtures and equipment which it has placed in the Premises, provided Tenant repairs all damages to the Premises caused by such removal.
14. DESTRUCTION OF OR DAMAGE TO PREMISES. If the Premises is totally destroyed by storm, fire, lightening, earthquake, or other casualty, Tenant may terminate this Lease as of the date of such destruction and rental shall be accounted for as between Landlord and Tenant as of that date. If this Lease is not terminated by Tenant, Landlord and Tenant will use insurable proceeds payable as a result of such destruction in reconstructing the Premises, and upon completion of such reconstruction and occupancy of the Premises by Tenant, full rental shall recommence.
If the Premises is damaged but is not wholly destroyed by any such casualties, rental shall abate in such proportion as use of the Premises has been destroyed and Tenant may restore the Premises with insurance proceeds payable as a result of such destruction to substantially the same condition as before such damage, whereupon full rental shall recommence.
15. GOVERNMENTAL ORDERS. Tenant agrees, at its own expense, to comply promptly with all requirements of any legally constituted public authority made necessary by reason of Tenant's occupancy of the Premises. It is mutually agreed, however, between Landlord and Tenant, that if in order to comply with such requirements, the cost to Tenant
shall exceed a sum equal to two years' rent, then Tenant may terminate this Lease by giving written notice of termination to Landlord by certified mail, which termination shall become effective sixty (60) days after receipt of such notice and which notice shall eliminate the necessity of compliance with such requirements by giving such notice unless Landlord shall, before termination becomes effective, pay to Tenant all costs of compliance in excess of one year's rent, or secure payment of such sum in a manner satisfactory to Tenant.
16. CONDEMNATION. If the whole of the Premises, or such portion thereof as will make the Premises unusable for the purposes herein leased, are condemned by any legally constituted authority for any public use or purposes, then in either of such events the term hereby granted shall cease from the date when possession thereof is taken by public authorities, and rental shall be accounted for as between Landlord and Tenant as of such date. Such termination, however, shall be without prejudice to the rights of either Landlord or Tenant to recover compensation and damage caused by condemnation from the condemnor. It is further understood and agreed that neither Tenant nor Landlord shall have any rights in any award made to the other by any condemnation authority notwithstanding the termination of this Lease as herein provided.
17. ASSIGNMENT AND SUBLETTING. Tenant shall not, without the prior written consent of Landlord, which shall not be unreasonably withheld, assign this Lease or any interest hereunder, or sublet the Premises or any part thereof. Consent to any assignment or sublease shall not impair this provision and all later assignments or subleases shall be made likewise only on the prior written consent of Landlord. The assignee of Tenant, at the option of Landlord, shall become liable to Landlord for all obligations of Tenant hereunder, but no sublease or assignment by Tenant shall relieve Tenant of any liability hereunder.
18. EVENTS OF DEFAULT. The following shall be "Events of Default" under this Lease, and the term "Event of Default" or "Default" shall mean, whenever it is used in this Lease, any one or more of the following events:
(a) Failure by Tenant to pay or cause to be paid when due rental payments required to be paid under Section 3 hereof for a period of five (5) days after such amount is due.
(b) Failure by Tenant to observe and perform in any material respect any covenant, condition, or agreement in this Lease, and such failure shall continue unremedied for a period of thirty (30) days after written notice, specifying such failure and requesting that it be remedied, given to Tenant unless Tenant shall commence to remedy such failure within thirty (30) days after the occurrence of such failure and shall diligently pursue such remedy until completion thereof.
(c) The commencement by Tenant of a voluntary case under the federal bankruptcy laws, failure by Tenant promptly to institute judicial proceedings to lift any execution, garnishment, or attachment of such consequence as will materially impair Tenant's obligations hereunder, or the entry of an order for relief in a case instituted under the bankruptcy laws with respect to Tenant and dismissal of such case is not obtained within ninety (90) days of the entry of such order, or the making of any general assignment by Tenant for the benefit of its creditors, or the entry by Tenant into an agreement of composition with its creditors.
(d) Dissolution or liquidation of Tenant.
(e) After the twelfth (12th) anniversary date of the commencement of the term of this Lease, Landlord shall be limited to the right to re-enter and take position of the Premises without any liability to Tenant for such entry and possession, as Landlord's sole remedy as result of an Event of Default.
19. Remedies on Default. Except as provided in Section 18(e) above, in the event of a Default, the Landlord may take any one or more of the following remedial steps in addition to any and all other rights or remedies it may have at law or in equity:
(a) Landlord may terminate this Lease by giving notice of termination, in which event this Lease shall expire and terminate on the date specified in such notice of termination, with the same force and effect as though the date so specified were the date originally fixed as the termination date of the term of this Lease, and all rights of Tenant under the Lease and in and to the Premises shall expire and terminate, and Tenant shall remain liable for all obligations under this Lease arising up to the date of such termination and Tenant shall surrender the Premises to Landlord on the date specified in such notice.
(b) Landlord may, from time to time without terminating this Lease, and without releasing Tenant in whole or in part form its obligation to pay monthly rental and perform all of the covenants, conditions, and agreement to be performed by Tenant as provided in this Lease, make such alterations and repairs as may be necessary in order to re-let the Premises, and after making such alterations and repairs, Landlord may, but shall not be obligated to, re-let the Premises or any part thereof for such term or terms at such rental or rentals and upon such other terms and conditions as Landlord in its sole discretion may deem advisable or acceptable; upon each re-letting, all rentals received by Landlord from such re-letting shall be applied first to the payment of any cost and expenses of such re-letting, including brokerage fees and attorney's fees and all costs of such alterations and repairs, and second to the payment of the monthly rental due and unpaid hereunder, and the residue, if any, shall be held by Landlord and paid to Tenant. In no event shall Tenant be entitled to any excess rental received by Landlord over and
above charges that Tenant is obligated to pay hereunder as monthly rental; if such rentals received from such re-letting during any month are less than those to be paid during the month by Tenant hereunder, including monthly rental, Tenant shall pay any such deficiency to Landlord, which deficiency shall be calculated and paid monthly. Tenant shall also pay to Landlord as soon as ascertained and upon demand all costs and expenses incurred by Landlord in connection with such re-letting and making any alterations and repairs which are not covered by the rental received under such re-letting; notwithstanding any such re-letting without termination, landlord may at any time thereafter elect to terminate this Lease for such previous breach.
20. HOLDING OVER. If Tenant remains in possession of the Premises after expiration of the term hereof, with Landlord's acquiescence and without any express agreement of the parties, Tenant shall be a tenant at will at the rental rate which is in effect at the end of this Lease and there shall be no renewal of this Lease by operation of law.
21. ATTORNEY'S FEES. In the event that any action or proceeding is brought to enforce any term, covenant, or condition of this Lease on the part of the Landlord or Tenant, the prevailing party in such litigation shall be entitled to recover reasonable attorney's fees to be fixed by the court in such action or proceeding, in an amount at least equal to fifteen percent (15%) of any damages due from the non-prevailing party.
22. RIGHTS CUMULATIVE. All rights, powers, and privileges conferred hereunder upon the parties hereto shall be cumulative and not restrictive to those given by law.
23. WAIVER OF RIGHTS. No failure of Landlord to exercise any power given Landlord hereunder or to insist upon strict compliance by Tenant of its obligations hereunder and no custom or practice of the parties at variance with the terms hereof shall constitute a waiver of Landlord's right to demand exact compliance with the terms hereof.
24. OPTION TO PURCHASE PROPERTY. Tenant shall have the right at any time during term of this Lease, upon purchase of the Facility and the Project Site under the 1996 Lease, to purchase the Premises for the sum of $10.00. Upon the exercise of its option to purchase the Premises from the Landlord and upon payment of the purchase price set forth herein in cash, Landlord will, by bill of sale and statutory warranty deed or other appropriate instruments, transfer and convey the Premises (in its then condition, whatever that may be) to Tenant, subject only to the Permitted Encumbrances and to any other liens of which Tenant expressly consented and to those liens resulting from the failure of Tenant to perform or observe any of the agreements or covenants on its part herein contained.
25. ENVIRONMENTAL LAWS. Landlord represents to the best of its knowledge and belief that the Premises are in compliance with all applicable environmental laws and there are not expressive levels (as defined by the Environmental Protection Agency) of radon, toxic waste, or hazardous substances on the Premises. Tenant represents and warrants that Tenant shall comply with all applicable environmental laws and that Tenant shall not permit any of its employees, contractors, or subcontractors or any person present on the Premises to generate, manufacture, store, dispose, or lease on or about or under the Premises any toxic waste or hazardous substances which would result in the Premises not complying with any applicable environmental laws.
26. TIME OF ESSENCE. Time is of the essence of this Lease.
27. ENTIRE AGREEMENT. This Lease contains the entire agreement of the parties hereto concerning the subject matter hereof, and no representations, inducements, promises, or agreements, oral or otherwise, between the parties, not embodied herein, shall be of any force or effect. No subsequent alteration, amendment, change, or addition to this Lease shall be binding upon landlord or Tenant unless reduced to writing and signed by the parties hereto.
28. MISCELLANEOUS.
(a) All notices, certificates, or other communications hereunder shall be sufficiently given and shall be deemed given on the third day following the date on which the same shall have been mailed by first class mail, postage prepaid, or on the date given if given by facsimile, confirmed in writing, addressed as follows:
If to Landlord: The Development Authority of the City of
Manchester
ATTN: Chairman
Post Office Box 585
Manchester, Georgia 31816
If to Tenant: Horizon Medical Products, Inc.
ATTN: President
Seven North Parkway Square
4200 Northside Parkway, N.W.
Atlanta, Georgia 30327
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The parties by notice given hereunder may designate any further or different addresses to which subsequent notices, certificates or other communications shall be sent.
(b) This Lease shall inure to the benefit of and shall be binding upon the parties hereto and their respective successors and permitted assigns and shall be governed by and construed in accordance with the laws of the State of Georgia.
(c) In the event any provision of this Lease shall be held invalid or unenforceable by any court of competent jurisdiction, the remainder of this Lease shall be not effected thereby if such remainder would then continue to conform to the requirements of applicable law.
(d) All covenants, stipulations, obligations, and agreements of the Landlord contained in this Lease shall be deemed to be covenants, stipulations, obligations, and agreements of Landlord to the full extent authorized by Georgia law. No covenant, stipulation, obligation, or agreement contained herein shall be deemed to be a covenant, stipulation, obligation, or agreement of any present or future member, agent, or employee of Landlord in his individual capacity, and neither the members of Landlord nor any official executing this Lease shall be subject to any personal liability or accountability by reason of the execution by Landlord or such members thereof.
(e) Any right, interest, or remedy which shall have accrued during the term of this Lease shall not be terminated or extinguished by the expiration or termination of this Lease but may be enforced by the party for whose benefit such right, interest, or remedy shall have accrued and may be enforceable by such party in accordance with the terms of this Lease as if it had not terminated or expired or otherwise in accordance with law.
(f) This Lease may be simultaneously executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.
(g) LANDLORD MAKES NO WARRANTY, EITHER EXPRESS OR IMPLIED, AS TO THE PREMISES OR THE CONDITION THEREOF, OR THAT THE PREMISES WILL BE SUITABLE FOR THE PURPOSES OR NEEDS OF TENANT, EXCEPT AS EXPRESSLY PROVIDED HEREIN. LANDLORD MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, THAT TENANT WILL HAVE QUIET AND PEACEFUL POSSESSION OF THE PREMISES. LANDLORD MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO THE MERCHANTABILITY, CONDITION, OR WORKMANSHIP OF ANY PART OF THE PREMISES OR ITS SUITABILITY FOR THE TENANT'S PURPOSES.
(h) This Lease, or a memorandum of this Lease describing the relevant terms and conditions and the option provided in Section 24 hereof, and every assignment
and modification hereof shall be recorded at the Clerk's Office of the Superior Court of Meriwether County or in such other office as may be at the time provided by laws as the proper place for such recordation.
IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be executed by its duly authorized officers as of the date first above written.
THE DEVELOPMENT AUTHORITY
OF THE CITY OF MANCHESTER
Signed, sworn to and delivered
before this 23rd day October, 1997.
By: /s/ Ben Key
/s/ Carol R. Johnson -----------------------------
--------------------------------- Chairman - BEN KEY
Unofficial Witness
Attest: /s/ Judy T. Foster
------------------------
/s/ Catherine F. Burke Secretary or Assistant
--------------------------------- Secretary -
Notary Public JUDY T. FOSTER
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[SEAL]
Commission Expires: Notary Public, Meriwether County, Georgia My Commission Expires Nov. 8, 1998
HORIZON MEDICAL PRODUCTS, INC.
Signed, sworn to, and delivered
before me this 28th day of October, 1997.
By:/s/
/s/ Susan ---------------------------
------------------------------
Unofficial Witness Title: PRESIDENT
------------------------
/s/ Suzanne Mason Attest: /s/
------------------------------ -----------------------
Notary Public
My Commission Expires: Title: SECRETARY
------------------------
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[NOTARIAL SEAL]
NOTARY PUBLIC COBB COUNTY, GEORGIA
MY COMMISSION EXPIRES MAY 16, 1999
EXHIBIT "A" TO LEASE AGREEMENT
PROJECT SITE
All that tract or parcel of land lying and being in Land Lot 12 of the First Land District of Meriwether County, Georgia, and in the City of Manchester, containing 10.557 acres, and more particularly described as follows: To obtain a point of beginning start at the intersection of the East right of way of State Route 85E with the centerline of Pigeon Creek and proceed in a southerly direction along the East right of way of State Route 85E a distance of 2,280 feet to an iron pin which is the Point of Beginning. FROM SAID POINT OF BEGINNING proceed South 73 degrees 28 minutes 25 seconds East 730 feet to an iron pin; thence South 16 degrees 31 minutes 35 seconds West 325 feet to an iron pin; thence proceed along a curve which has a radius of 2,834.79 feet, an arc of 331.96 feet and a chord of South 19 degrees 52 minutes 52 seconds West 331.77 feet to an iron pin; thence proceed North 69 degrees 01 minutes 25 seconds West 730.18 feet to an iron pin on the East right of way of State Route 85E; thence proceed in a northerly direction along the East right of way of State Route 85E in a curve which has a radius of 5,768.21 feet, an arc of 448.00 feet and a chord of North 18 degrees 45 minutes 05 seconds East 447.89 feet to a right of way monument; thence continue along the East right of way of State Route 85E North 16 degrees 31 minutes 35 seconds East 152 feet to the iron pin which marks the Point of Beginning.
Said property is bounded on the North by Delano Drive; on the East by an unnamed street; on the South by Lot 11 of the Manchester Development Authority Industrial Park; and on the West by State Route 85E.
Said property is more particularly shown as Lot 12 on a plat of survey for the Manchester Development Authority by Edward A. Bruner, registered surveyor, which plat is dated December 12, 1995, and recorded in plat Book 16, Page 223, in the Office of the Clerk of Meriwether Superior Court.
EXHIBIT "B" TO LEASE AGREEMENT
1. Rights or claims or parties in possession now shown by the public records.
2. Easements, or claims of easements, not shown by the public records.
3. Encroachments, overlaps, boundary line disputes, or other matters which
would be disclosed by an accurate survey or inspection of the premises.
4. Any lien, or right to a lien, for services, labor, or material heretofore
or hereafter furnished, imposed by law and now shown by the public records.
5. Any adverse claim to any portion of said land which has been created by
artificial means or has accreted to any such portion so created and
riparian rights, if any.
6. Taxes or special assessments which are not shown as existing liens by
public records.
7. Any prior reservation or conveyance, together with release of damages, of
minerals of every kind and character, including, but not limited to oil,
gas, sand, and gravel in, on, an under subject property.
8. General and special taxes or assessments for 1997 and subsequent years not
yet due and payable.
9. An Easement to Georgia Power Company dated May 22, 1951, and recorded in
Deed Book 50, page 294, in the Office of the Clerk of Meriwether Superior
Court.
10. A Deed to Secure Debt from The Development Authority of the City of
Manchester to F&M Bank and Trust Company dated March 15, 1996, and recorded
March 20, 1996, in Deed Book 358, page 120, in the office of the Clerk of
Meriwether Superior Court.
11. A Deed to Secure Debt, Assignment of Rents and Leases and Security
Agreement dated July 1, 1996 from The Development Authority of the City of
Manchester to Synovus Trust Company, recorded at Deed Book 363, page 158,
in the office of the Clerk of Meriwether Superior Court.
EXHIBIT "C" TO LEASE AGREEMENT
LESSOR WAIVER AND CONSENT
THIS WAIVER AND CONSENT is made as of this _____ day of July, 1997, by the undersigned in favor of NATIONSCREDIT COMMERCIAL CORPORATION, a Delaware corporation having offices at 201 Broad street, One Canterbury Green, Stanford, Connecticut 06901, acting in its capacity as agent (the "Agent") for itself and the other lending institutions which are or are to become lenders (collectively, the "LENDERS") under the Credit Agreement described below.
STATEMENT OF FACTS
The undersigned are the owner and/or lessor of the real property and related improvements and fixtures located at One Horizon Way, Manchester, Georgia 31816, hereinafter collectively called the "REAL PROPERTY". Pursuant to a Credit Agreement among HORIZON MEDICAL PRODUCTS, INC., a Georgia corporation (the "BORROWER"), the Lenders and the Agent (the "CREDIT AGREEMENT"), the Borrower, the lessee of the Real Property, and its subsidiary, HORIZON ACQUISITION CORP., a Georgia corporation d/b/a Neostar Medical Technologies (the "SUBSIDIARY") may now or hereafter enter into security agreements under which the Agent may be granted a security interest in some or all of the Borrower's and the Subsidiary's now owned or hereafter acquired accounts, contracts rights, chattel paper, instruments, documents, general intangibles, inventory or equipment and all proceeds of any or all of the foregoing (including without limitation returned inventory), and all books and records (including without limitation computer and accounting records) of the Borrower and the Subsidiary pertaining to any or all of the foregoing, hereinafter collectively called the "PERSONAL PROPERTY". Some or all of the Personal Property will be placed, stored or otherwise located on the Real Property.
NOW, THEREFORE, for and in consideration of the foregoing premises, $5.00 in hand paid by the Agent to the undersigned, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each of the undersigned does hereby consent and agree in favor of the Agent as follows:
STATEMENT OF TERMS
1. The undersigned consent to and acquiesce in the Borrower's grant of a security interest in the Personal Property in favor of the Agent.
2. The undersigned hereby waive, relinquish and release any right, privilege or power which the undersigned now have, or amy hereafter have, under or by virtue of any law or any agreement, instrument or other document, to claim or assert any right, title or interest in or to the Personal Property, including without limitation any right, privilege or power to (i) levy or distrain upon the Personal Property for rent, in arrears, in advance or both, or (ii) claim or assert any right, title or interest in or to the Personal Property as security or collateral for any debt or obligations secured by the Real Property.
3. The Agent may exercise any rights, privileges, options or powers which it may have with respect to the Personal Property without regard to the undersigneds' rights, titles or interests in and to the Real Property, including, without limitation, any right, privilege or option which the Agent may have to enter upon the Real Property and inspect, or to take possession of and remove, the Personal Property, or any part thereof, pursuant to the terms and conditions of any agreement between the Borrower and the Agent or pursuant to any applicable law; provided, that the Agent shall reimburse the undersigned for the reasonable costs of repairing any actual physical damage to the Real Property caused by the Agent in removing the Personal Property (but the Agent shall not be liable for any other diminution in the value of the Real Property resulting from the removal of any of the Personal Property therefrom).
4. If the Agent elects to take possession of all or any part of the Personal Property pursuant to the terms of any agreement between the Borrower and the Agent or the Lenders or pursuant to any applicable law, the Agent shall have access to the Real Property for the purposes of inspecting, preserving or removing the Personal Property and the Agent may, in its discretion and without liability to the undersigned except as expressly provided below, leave all or any part of the Personal Property on the Real Property for a period of not more than ninety (90) days after the Agent takes such possession; provided, that the Agent shall pay to the undersigned pro-rated rent (based on the base rent rate then payable by the Borrower to the undersigned) for the days that Agent is in actual possession of the Real Property if and to the extent that the Borrower fails to pay the same.
5. The undersigned agree to give the Agent prior written notice (at the
Agent's address set forth above or at such other address as the Agent may
hereafter designate by written notice to the undersigned) of any payment default
by the Borrower under its lease of the Real Property and the Agent shall have
the right (but not the obligation) to cure such payment default within thirty
(30) days after the Agent's receipt of such payment default notice and the
undersigned shall not terminate the Borrower's lease of the Real Property on
account of such payment default until the Agent's cure right expires.
6. The validity and enforceability of this Waiver and Consent shall not be impaired, diminished, annulled or affected in any manner whatsoever by the modification, alteration, extension or renewal of any debt or other obligation of the Borrower to the Agent or the Lenders.
7. This Waiver and Consent shall be binding upon and enforceable against the undersigned and their respective successors and assigns, and shall inure to the benefit of the Agent and the Lenders and their respective successors and assigns.
8. Words importing the singular number hereunder shall include the plural number and vice versa, and any pronoun used herein shall be deemed to include all genders.
IN WITNESS WHEREOF, the undersigned have executed this Waiver and Consent and affixed its seal hereto as of the day and year first written above.
SYNOVUS TRUST COMPANY,
AS TRUSTEE
(SEAL)
Signed, sealed and delivered this ___ day of July, 1997 in the presence of:
[NOTARIAL SEAL]
THE DEVELOPMENT AUTHORITY OF
THE CITY OF MANCHESTER
By:/s/ Ben Key
-----------------------------
Ben Key
Title: CHAIRMAN
------------------------
Attest: /s/ Judy T. Foster
-----------------------------
Title: Secretary
------------------------
Judy T. Foster
(SEAL)
|
Signed, sealed and delivered this 23rd day of October, 1997 in the presence of:
/s/ Carol R. Johnson ----------------------------------- Notary Public My Commission Expires July 22, 1999 [NOTARIAL SEAL] |
CLERK SUPERIOR COURT DATE RECEIPT NUMBER
MERIWETHER COUNTY, GEORGIA 11/03/97 39315
LOUISE TIGNER GARRETT
RECEIVED OF: SLAUGHTER & VIRGIN P C
ATTORNEYS AT LAW
1201 PEACHTREE ST NE
ATLANTA, GA 30361
FOR:
RECORDING FEE 40.00
-------
TOTAL 40.00
/s/
-----------------------
LOUISE TIGNER GARRETT
CLERK SUPERIOR COURT
MERIWETHER COUNTY, GEORGIA
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1 LEASE AGREEMENT MANCHESTER DEV AUTHORITY TO HORIZON MEDICAL
EXHIBIT 10.11
HORIZON MEDICAL PRODUCTS, INC.
1998 STOCK INCENTIVE PLAN
TABLE OF CONTENTS
Page
----
Section 1 PURPOSE............................................................1
Section 2 DEFINITIONS........................................................1
2.1 Board................................................1
2.2 Change in Control....................................1
2.3 Code.................................................2
2.4 Committee............................................2
2.5 Fair Market Value....................................2
2.6 Horizon Medical......................................2
2.7 IPO..................................................2
2.8 ISO..................................................3
2.9 Key Employee.........................................3
2.10 1933 Act.............................................3
2.11 Non-ISO..............................................3
2.12 Option...............................................3
2.13 Option Certificate...................................3
2.14 Option Price.........................................3
2.15 Outside Director.....................................3
2.16 Parent Corporation...................................3
2.17 Plan.................................................3
2.18 Restricted Stock.....................................4
2.19 Restricted Stock Certificate.........................4
2.20 Rule 16b-3...........................................4
2.21 Stock................................................4
2.22 SAR Value............................................4
2.23 Stock Appreciation Right.............................4
2.24 Stock Appreciation Right Certificate.................4
2.25 Subsidiary...........................................4
2.26 Ten Percent Shareholder..............................4
Section 3 SHARES SUBJECT TO OPTIONS, RESTRICTED STOCK GRANTS
OR STOCK APPRECIATION RIGHTS.......................................5
Section 4 EFFECTIVE DATE.....................................................5
Section 5 COMMITTEE..........................................................6
Section 6 ELIGIBILITY........................................................6
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Section 7 GRANT OF OPTIONS TO KEY EMPLOYEES..................................7
7.1 Committee Action.....................................7
7.2 $100,000 Limit.......................................7
7.3 Option Price.........................................8
7.4 Exercise Period......................................8
Section 8 GRANT OF OPTIONS TO OUTSIDE DIRECTORS..............................9
8.1 Grants of Non-ISOs to Outside Directors..............9
8.2 Exercise Period.....................................10
Section 9 RESTRICTED STOCK..................................................11
9.1 Committee Action....................................11
9.2 Conditions..........................................11
(a) Stock Issuance Conditions..................12
(b) Grants Subject to Forfeiture...............12
9.3 Dividends and Voting Rights.........................12
9.4 Satisfaction of All Conditions......................13
Section 10 STOCK APPRECIATION RIGHTS.........................................13
10.1 Committee Action....................................13
10.2 Terms and Conditions................................13
(a) Stock Appreciation Right Certificate.......13
(b) Option Certificate.........................14
10.3 Exercise............................................14
Section 11 NONTRANSFERABILITY................................................15
Section 12 SECURITIES REGISTRATION AND RESTRICTIONS..........................15
Section 13 LIFE OF PLAN......................................................16
Section 14 ADJUSTMENT........................................................17
14.1 Capital Structure...................................17
14.2 Mergers.............................................18
14.3 Fractional Shares...................................18
Section 15 CHANGE IN CONTROL.................................................19
Section 16 AMENDMENT OR TERMINATION..........................................20
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Section 17 MISCELLANEOUS.....................................................20
17.1 No Shareholder Rights...............................20
17.2 No Contract of Employment...........................21
17.3 Withholding.........................................21
17.4 Loans...............................................21
17.5 Rule 16b-3..........................................22
17.6 Construction........................................22
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SECTION 1
PURPOSE
The purpose of this Plan is to promote the interests of Horizon Medical by authorizing the Committee to grant Options to Key Employees and Outside Directors and to grant Restricted Stock and Stock Appreciation Rights to Key Employees in order (1) to attract and retain Key Employees and Outside Directors, (2) to provide an additional incentive to each Key Employee or Outside Director to work to increase the value of Stock and (3) to provide each Key Employee or Outside Director with a stake in the future of Horizon Medical which corresponds to the stake of each of Horizon Medical's shareholders.
SECTION 2
DEFINITIONS
2.1 Board -- means the Board of Directors of Horizon Medical Products, Inc.
2.2 Change in Control -- means (a) the acquisition of the power to direct, or cause the direction, of the management and policies of Horizon Medical by a person (not previously possessing such power), acting alone or in conjunction with others, whether through the ownership of Stock, by contract or otherwise, or (b) the direct or indirect acquisition (other than through a bona fide public offering) of the power to vote 20% or more of the outstanding Stock by a person or persons (other than a person possessing such power on the date this Plan becomes effective or Horizon Medical or an employee benefit plan established and maintained by Horizon Medical), where, for purposes of this definition, (i) the term "person" means a natural person, corporation, partnership, joint
venture, trust, government or instrumentality of a government and (ii) customary agreements with or between underwriters and selling group members with respect to a bona fide public offering of Stock shall be disregarded.
2.3 Code -- means the Internal Revenue Code of 1986, as amended.
2.4 Committee -- means a committee of the Board which shall have at least 2 members, each of whom shall be appointed by and shall serve at the pleasure of the Board.
2.5 Fair Market Value -- means (1) the closing price on any date for a share of Stock as reported by The Wall Street Journal (a) under the New York Stock Exchange Composite Transactions if Stock is traded on the New York Stock Exchange or, if Stock is otherwise publicly traded, (b) under the quotation system under which such closing price is reported or, if The Wall Street Journal no longer reports such closing price, such closing price as reported by a newspaper or trade journal selected by the Committee or, if no such closing price is available on such date, (2) such closing price as so reported in accordance with Section 2.5(1) for the immediately preceding business day, or, if no newspaper or trade journal reports such closing price or if no such price quotation is available or if Stock is not publicly traded, (3) the price which the Committee acting in good faith determines through any reasonable valuation method that a share of Stock might change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of the relevant facts.
2.6 Horizon Medical -- means Horizon Medical Products, Inc. and any successor to such organization.
2.7 IPO -- means the initial public offering of Horizon Medical.
2.8 ISO -- means an option granted under this Plan to purchase Stock which is intended to satisfy the requirements of Section 422 of the Code.
2.9 Key Employee -- means an employee of Horizon Medical or any Subsidiary or Parent who, in the judgment of the Committee acting in its absolute discretion, is a key to the success of Horizon Medical.
2.10 1933 Act -- means the Securities Act of 1933, as amended.
2.11 Non-ISO -- means an option granted under this Plan to purchase Stock which is intended to fail to satisfy the requirements of Section 422 of the Code.
2.12 Option -- means an ISO or a Non-ISO which is granted under Section 7 or Section 8 of this Plan.
2.13 Option Certificate -- means the written agreement or instrument which sets forth the terms and conditions of an Option granted to a Key Employee or Outside Director under this Plan.
2.14 Option Price -- means the price which shall be paid to purchase one share of Stock upon the exercise of an Option granted under this Plan.
2.15 Outside Director -- means a director who is neither an officer, an employee, nor a 10% shareholder of Horizon Medical or a Parent or Subsidiary of Horizon Medical.
2.16 Parent Corporation -- means any corporation which is a parent of Horizon Medical within the meaning of Section 424(e) of the Code.
2.17 Plan -- means this Horizon Medical 1998 Stock Incentive Plan as effective as of the date adopted by the Committee in 1998 and as amended from time to time thereafter.
2.18 Restricted Stock -- means Stock granted to a Key Employee under Section 9 of this Plan.
2.19 Restricted Stock Certificate -- means the written agreement or instrument which sets forth the terms and conditions of a Restricted Stock grant to a Key Employee.
2.20 Rule 16b-3 -- means the exemption under Rule 16b-3 to Section 16b of the Securities Exchange Act of 1934, as amended, or any successor to such rule.
2.21 Stock -- means the Class A Common Stock of Horizon Medical.
2.22 SAR Value -- means the value assigned by the Committee to a share
of Stock in connection with the grant of a Stock Appreciation Right under
Section 10.
2.23 Stock Appreciation Right -- means a right to receive the appreciation in a share of Stock which is granted under Section 10 of this Plan either as part of an Option or independent of any Option.
2.24 Stock Appreciation Right Certificate -- means the written agreement or instrument which sets forth the terms and conditions of a Stock Appreciation Right which is granted to a Key Employee independent of an Option.
2.25 Subsidiary -- means any corporation which is a subsidiary corporation (within the meaning of Section 424(f) of the Code) of Horizon Medical and any other organization which would be treated as under common control with Horizon Medical under Section 414(c) of the Code if "50 percent" was substituted for "80 percent" in the income tax regulations under Section 414(c) of the Code.
2.26 Ten Percent Shareholder -- means a person who owns (after taking into account the attribution rules of Section 424(d) of the Code) more than ten percent (10%) of
the total combined voting power of all classes of stock of either Horizon Medical, a Subsidiary or a Parent Corporation.
SECTION 3
SHARES SUBJECT TO OPTIONS, RESTRICTED STOCK GRANTS
OR STOCK APPRECIATION RIGHTS
There shall be 500,000 shares of Stock reserved for use under this Plan. Such shares of Stock shall be reserved to the extent that Horizon Medical deems appropriate from authorized but unissued shares of Stock and from shares of Stock which have been reacquired by Horizon Medical. Any shares of Stock subject to an Option which remain unissued after the cancellation or expiration of such Option, any shares of Restricted Stock which are forfeited or canceled and any shares of Stock subject to a Stock Appreciation Right with respect to which no exercise has been made under Section 10 before the cancellation or expiration of such Stock Appreciation Right thereafter shall again become available for use under this Plan, but any shares of Stock used to exercise an Option or to satisfy a withholding obligation shall not again be available for use under this Plan.
SECTION 4
EFFECTIVE DATE
The effective date of this Plan shall be the date this Plan is adopted by the Committee in 1998, provided Horizon Medical's shareholders (acting at a duly called meeting of such shareholders) approve this Plan within twelve (12) months after the date
the Committee adopts this Plan. Any Option or Restricted Stock or Stock Appreciation Right granted before such shareholder approval automatically shall be granted subject to such approval.
SECTION 5
COMMITTEE
This Plan shall be administered by the Committee. The Committee acting in its absolute discretion shall exercise such powers and take such action as expressly called for under this Plan and, further, the Committee shall have the power to interpret this Plan and to take such other action in the administration and operation of this Plan as the Committee deems equitable under the circumstances, which action shall be binding on Horizon Medical, on each affected Key Employee and on each other person directly or indirectly affected by such action.
SECTION 6
ELIGIBILITY
Only Key Employees and Outside Directors shall be eligible for the grant of Options under this Plan, and only Key Employees shall be eligible for the grant of Restricted Stock or Stock Appreciation Rights under this Plan.
SECTION 7
GRANT OF OPTIONS TO KEY EMPLOYEES
7.1 Committee Action. The Committee acting in its absolute discretion shall have the right to grant an Option to a Key Employee under this Plan from time to time to purchase shares of Stock and, further, shall have the right to grant a new Option to a Key Employee in exchange for the cancellation of an outstanding Option granted to such Key Employee which has a higher or lower Option Price. Each grant of an Option shall be evidenced by an Option Certificate, and each Option Certificate shall
(a) specify whether the Option is an ISO or Non-ISO, and
(b) incorporate such other terms and conditions as the Committee acting in its absolute discretion deems consistent with the terms of this Plan, including (without limitation) a limitation on the number of shares subject to the Option which first become exercisable on any date or a Stock Appreciation Right which is a part of such Option.
If the Committee grants an ISO and a Non-ISO to a Key Employee on the same date, the right of the Key Employee to exercise the ISO shall not be conditioned on his or her failure to exercise the Non-ISO.
7.2 $100,000 Limit. The aggregate Fair Market Value of the shares of Stock subject to ISOs and other incentive stock options (which satisfy the requirements under Section 422 of the Code) granted to a Key Employee under this Plan and under any other stock option plan adopted by Horizon Medical, a Subsidiary or a Parent Corporation which first become exercisable in any calendar year shall not exceed $100,000. Such Fair
Market Value figure shall be determined by the Committee on the date the ISO or
other incentive stock option is granted. The Committee shall interpret and
administer the limitation set forth in this Section 7.2 in accordance with
Section 422(d) of the Code, and the Committee shall treat this Section 7.2 as in
effect only for those periods for which Section 422(d) of the Code is in effect.
7.3 Option Price. The Option Price for each share of Stock subject to an ISO or Non-ISO granted to a Key Employee shall be no less than the Fair Market Value of a share of Stock on the date the ISO or Non-ISO is granted unless the Option is an ISO and the Option is granted to a Key Employee who is a Ten Percent Shareholder, in which event the Option Price for each share of Stock subject to such ISO shall be no less than 110% of the Fair Market Value of a share of Stock on the date the ISO is granted. The Option Price shall be payable in full upon the exercise of any Option, and an Option Certificate at the discretion of the Committee may provide for the payment of the Option Price either in cash (which may be provided through a loan or other extension of credit) or in Stock which has been held by the Key Employee for at least 6 months or in any combination of cash and such Stock. If an Option Certificate allows the payment of the Option Price in whole or in part in Stock, such payment shall be made in Stock acceptable to the Committee. Any payment made in Stock shall be treated as equal to the Fair Market Value of such Stock on the date the properly endorsed certificate for such Stock is delivered to the Committee.
7.4 Exercise Period. Each Option granted to a Key Employee under this Plan shall be exercisable in whole or in part at such time or times as set forth in the related Option Certificate, but no Option Certificate shall
(a) make an Option exercisable before the end of the six month period which starts on the date such Option is granted, or
(b) make an Option exercisable on or after the earliest of the
(1) the date which is the fifth anniversary of the date the Option is granted, if the Option is an ISO and the Key Employee is a Ten Percent Shareholder on the date the Option is granted, or
(2) the date which is the tenth anniversary of the date such Option is granted, if such Option is granted to a Key Employee who is not a Ten Percent Shareholder on the date the Option is granted or if such Option is a Non-ISO.
An Option Certificate may provide for the exercise of an Option after the employment of a Key Employee has terminated for any reason whatsoever, including death or disability.
SECTION 8
GRANT OF OPTIONS TO OUTSIDE DIRECTORS
8.1 Grants of Non-ISOs to Outside Directors. Each person who is an Outside Director at the time of the IPO automatically will be granted a Non-ISO under this Plan to purchase 10,000 shares of Stock at an Option Price equal to the IPO price of a share of Stock. Thereafter, the Committee acting in its absolute discretion shall have the right to grant to an Outside Director at the time he or she becomes an Outside Director a Non-ISO to purchase shares of Stock under this Plan at an Option Price equal to the Fair Market Value of a share of Stock on the date of such grant.
8.2 Exercise Period. Subject to any special exercise rules set forth in an Option Certificate evidencing the grant of a Non-ISO to an Outside Director under this Plan, an Outside Director's right to exercise a Non-ISO granted to him or her under this Plan shall be conditioned on the Outside Director continuing as an Outside Director of Horizon Medical as follows:
(a) If the Outside Director continues as an Outside Director of Horizon Medical or a Subsidiary until the first anniversary of the date he or she is granted a Non-ISO under this Plan, the Outside Director may exercise the Non-ISO as to 331/3% of the shares of Stock covered by the Non-ISO on such grant date.
(b) If the Outside Director continues as an Outside Director of Horizon Medical or a Subsidiary until the second anniversary of the date he or she is granted a Non-ISO under this Plan, the Outside Director may exercise the Non-ISO as to an additional 331/3% of the shares of Stock covered by the Non-ISO on such grant date.
(c) If the Outside Director continues as an Outside Director of Horizon Medical or a Subsidiary until the third anniversary of the date he or she is granted a Non-ISO under this Plan, the Outside Director may exercise the Non-ISO as to the remaining shares of Stock covered by the Option.
The aggregate number of shares of Stock which the Outside Director can purchase through the exercise of the Non-ISO on any date shall equal the excess number of shares of Stock as to which the Outside Director has the right on such date to purchase over the
number of shares of Stock which Outside Director previously has purchased through the exercise of the Non-ISO. An Option Certificate may provide for the exercise of a Non-ISO after the Outside Director ceases to serve as an Outside Director for any reason whatsoever, including death or disability.
SECTION 9
RESTRICTED STOCK
9.1 Committee Action. The Committee acting in its absolute discretion shall have the right to grant Restricted Stock to a Key Employee under this Plan from time to time and, further, shall have the right to make a new Restricted Stock grant to a Key Employee in exchange for the cancellation of an outstanding Restricted Stock grant to such Key Employee. Each Restricted Stock grant shall be evidenced by a Restricted Stock Certificate, and each Restricted Stock Certificate shall set forth the conditions, if any, under which Stock will be issued in the name of the Key Employee and the conditions, if any, under which the Key Employee's interest in such Stock will become nonforfeitable.
9.2 Conditions.
(a) Stock Issuance Conditions. The Committee acting in its absolute discretion may make the issuance of Restricted Stock in the name of a Key Employee subject to the satisfaction of one, or more than one, condition which the Committee deems appropriate under the circumstances, and the related Restricted Stock Certificate shall set forth each such condition, if any, and the deadline, if any, for satisfying each such condition or the expiration date, if any, for each such condition. Stock shall be issued in the name
of a Key Employee only after each such condition, if any, has been satisfied or has expired in accordance with the terms of the related Restricted Stock Certificate, and upon issuance such Stock shall be held by Horizon Medical (or Horizon Medical's delegate) pending the satisfaction or expiration of the forfeiture conditions, if any, set forth in the related Restricted Stock Certificate.
(b) Grants Subject to Forfeiture. The Committee acting in its absolute discretion may make Restricted Stock issued in the name of a Key Employee subject to forfeiture upon a failure to satisfy one, or more than one, condition which the Committee acting in its absolute discretion deems appropriate under the circumstances, and the related Restricted Stock Certificate shall set forth each such forfeiture condition, if any, and the related deadline, if any, for satisfying each such forfeiture condition or the expiration date, if any, for each such condition. Stock issued in the name of a Key Employee shall be forfeited unless each such forfeiture condition, if any, has been satisfied or has expired in accordance with the terms of the related Restricted Stock Certificate.
9.3 Dividends and Voting Rights. Each Restricted Stock Certificate shall specify what rights, if any, a Key Employee shall have with respect to the Stock issued in the name of a Key Employee, including rights to receive dividends and to vote, pending the forfeiture of such Stock or the satisfaction or expiration of each forfeiture condition, if any, with respect to such Stock. Furthermore, the Committee may grant dividend equivalent rights on Restricted Stock while such Stock remains subject to an issuance condition under Section 9.2(a) under which cash equivalent to a dividend shall be paid to the Key Employee by Horizon Medical when a dividend is paid, and any such dividend equivalent right shall be set forth in the related Restricted Stock Certificate.
9.4 Satisfaction of All Conditions. A share of Stock issued in the name of a Key Employee shall cease to be Restricted Stock at such time as a Key Employee's interest in such Stock becomes nonforfeitable, and the certificate representing such share shall be released by Horizon Medical (or Horizon Medical's delegate) and transferred to the Key Employee as soon as practicable thereafter.
SECTION 10
STOCK APPRECIATION RIGHTS
10.1 Committee Action. The Committee acting in its absolute discretion shall have the right to grant a Stock Appreciation Right to a Key Employee under this Plan from time to time, and each Stock Appreciation Right grant shall be evidenced by a Stock Appreciation Right Certificate or, if such Stock Appreciation Right is granted as part of an Option, shall be evidenced by the Option Certificate for the related Option.
10.2 Terms and Conditions.
(a) Stock Appreciation Right Certificate. If a Stock Appreciation Right is evidenced by a Stock Appreciation Right Certificate, such certificate shall set forth the number of shares of Stock to which the Key Employee has the right to appreciation and the SAR Value of each share of Stock. Such SAR Value shall be no less than the Fair Market Value of a share of Stock on the date that the Stock Appreciation Right is granted. The Stock Appreciation Right Certificate shall set forth such other terms and conditions for the exercise of the Stock Appreciation Right as the Committee deems appropriate under
the circumstances, but no Stock Appreciation Right Certificate shall make a Stock Appreciation Right exercisable on or after the date which is the tenth anniversary of the date such Stock Appreciation Right is granted.
(b) Option Certificate. If a Stock Appreciation Right is evidenced by an Option Certificate, the SAR Value for each share of Stock subject to the Stock Appreciation Right shall be the Option Price for the related Option. Each such Option Certificate shall provide that the exercise of the Stock Appreciation Right with respect to any share of Stock shall cancel the Key Employee's right to exercise his or her Option with respect to such share and, conversely, that the exercise of the Option with respect to any share of Stock shall cancel the Key Employee's right to exercise his or her Stock Appreciation Right with respect to such share. A Stock Appreciation Right which is granted as part of an Option shall be exercisable only while the related Option is exercisable. The Option Certificate shall set forth such other terms and conditions for the exercise of the Stock Appreciation Right as the Committee deems appropriate under the circumstances.
10.3 Exercise. A Stock Appreciation Right shall be exercisable only when the Fair Market Value of a share of Stock subject to such Stock Appreciation Right exceeds the SAR Value for such share, and the payment due on exercise shall be based on such excess with respect to the number of shares of Stock to which the exercise relates. A Key Employee upon the exercise of his or her Stock Appreciation Right shall receive a payment from Horizon Medical in cash or in Stock, or in a combination of cash and Stock, and any payment in Stock shall be based on the Fair Market Value of a share of Stock on the date the Stock Appreciation Right is exercised. The Committee acting in its absolute discretion shall have the right to determine the form and time of any payment under this Section 10.3.
SECTION 11
NONTRANSFERABILITY
No Option, Restricted Stock or Stock Appreciation Right shall be transferable by a Key Employee or an Outside Director other than by will or by the laws of descent and distribution, and any Option or Stock Appreciation Right shall be exercisable during a Key Employee's or Outside Director's lifetime only by the Key Employee or Outside Director. The person or persons to whom an Option or Restricted Stock or Stock Appreciation Right is transferred by will or by the laws of descent and distribution thereafter shall be treated as the Key Employee or Outside Director.
SECTION 12
SECURITIES REGISTRATION AND RESTRICTIONS
Each Option Certificate, Restricted Stock Certificate and Stock Appreciation Right Certificate shall provide that, upon the receipt of shares of Stock as a result of the exercise of an Option or a Stock Appreciation Right or the satisfaction or expiration of the forfeiture conditions, if any, on any Restricted Stock, the Key Employee or Outside Director shall, if so requested by Horizon Medical, agree to hold such shares of Stock for investment and not with a view of resale or distribution to the public and, if so requested by Horizon Medical, shall deliver to Horizon Medical a written statement satisfactory to Horizon Medical to that effect. Each Option Certificate, Restricted Stock Certificate and Stock Appreciation Right Certificate also shall provide that, if so requested by Horizon Medical, the Key Employee or Outside Director shall make a written representation to
Horizon Medical that he or she will not sell or offer for sale any of such Stock unless a registration statement shall be in effect with respect to such Stock under the 1933 Act and any applicable state securities law or he or she shall have furnished to Horizon Medical an opinion in form and substance satisfactory to Horizon Medical of legal counsel satisfactory to Horizon Medical that such registration is not required. Certificates representing the Stock transferred upon the exercise of an Option or Stock Appreciation Right or upon the lapse of the forfeiture conditions, if any, on any Restricted Stock may at the discretion of Horizon Medical bear a legend to the effect that such Stock has not been registered under the 1933 Act or any applicable state securities law and that such Stock cannot be sold or offered for sale in the absence of an effective registration statement as to such Stock under the 1933 Act and any applicable state securities law or an opinion in form and substance satisfactory to Horizon Medical of legal counsel satisfactory to Horizon Medical that such registration is not required.
SECTION 13
LIFE OF PLAN
No Option, Restricted Stock or Stock Appreciation Right shall be granted under this Plan on or after the earlier of
(a) the tenth anniversary of the effective date of this Plan, at which point this Plan shall continue in effect only until all then outstanding Options and Stock Appreciation Rights have been exercised in full or no longer are exercisable and all then outstanding Restricted Stock
grants have been forfeited or the forfeiture conditions, if any, with respect to such grants have been satisfied or expired, or
(b) the date on which all of the Stock reserved under Section 3 of this Plan has (as a result of the exercise of Options or Stock Appreciation Rights or the satisfaction or expiration of the forfeiture conditions, if any, on all Restricted Stock) been issued or no longer is available for use under this Plan, in which event this Plan also shall terminate on such date.
SECTION 14
ADJUSTMENT
14.1 Capital Structure. The number, kind or class of shares of Stock reserved under Section 3 of this Plan and the number, kind or class of shares of Stock subject to Options or Stock Appreciation Rights granted under this Plan and the Option Price of such Options and the SAR Value of such Stock Appreciation Rights as well as the number, kind or class of shares of Restricted Stock granted under this Plan shall be adjusted by the Committee in an equitable manner to reflect any change in the capitalization of Horizon Medical, including, but not limited to, such changes as stock dividends or stock splits.
14.2 Mergers. The Committee as part of any corporate transaction described in Section 424(a) of the Code shall have the right to adjust (in any manner which the Committee in its discretion deems consistent with Section 424(a) of the Code) the number, kind or class (or any combination thereof) of shares of Stock reserved under Section 3 of this Plan. Furthermore, the Committee as part of any corporate transaction described in Section 424(a) of
the Code shall have the right to adjust (in any manner which the Committee in its discretion deems consistent with Section 424(a) of the Code) the number, kind or class (or any combination thereof) of shares of Stock underlying any Restricted Stock grants previously made under this Plan and any related grant conditions and forfeiture conditions, and the number, kind or class (or any combination thereof) of shares subject to Option and Stock Appreciation Right grants previously made under this Plan and the related Option Price and SAR Value for each such Option and Stock Appreciation Right, and, further, shall have the right (in any manner which the Committee in its discretion deems consistent with Section 424(a) of the Code) to make Restricted Stock, Option and Stock Appreciation Right grants to effect the assumption of, or the substitution for, restricted stock, option and stock appreciation right grants previously made by any other corporation to the extent that such corporate transaction calls for such substitution or assumption of such restricted stock, option or appreciation right grants.
14.3 Fractional Shares. If any adjustment under this Section 14 would create a fractional share of Stock or a right to acquire a fractional share of Stock, such fractional share shall be disregarded and the number of shares of Stock reserved under this Plan and the number subject to any Option or Stock Appreciation Right grants and Restricted Stock grants shall be the next lower number of shares of Stock, rounding all fractions downward. An adjustment made under this Section 14 by the Committee shall be conclusive and binding on all affected persons.
SECTION 15
CHANGE IN CONTROL
If the Committee determines that there has been a Change in Control of Horizon Medical or a bona fide tender or exchange offer for Stock (other than a tender offer by Horizon Medical or an employee benefit plan established and maintained by Horizon Medical), the Committee thereafter shall have the right to take such action, if any, with respect to any or all then outstanding Options, Stock Appreciation Rights and Restricted Stock grants under this Plan as the Committee deems appropriate under the circumstances to protect the interest of Horizon Medical in maintaining the integrity of such grants under this Plan, including waiving any conditions to the exercise of such Options and Stock Appreciation Rights and any issuance and forfeiture conditions on any Restricted Stock and thereafter canceling such Options, Stock Appreciation Rights and Restricted Stock grants. The Committee shall have the right to take different action under this Section 15 with respect to different Key Employees or Outside Directors or different groups of Key Employees or Outside Directors, as the Committee deems appropriate under the circumstances.
SECTION 16
AMENDMENT OR TERMINATION
This Plan may be amended by the Committee from time to time to the extent that the Committee deems necessary or appropriate. The Committee also may suspend the granting of Options or Stock Appreciation Rights or Restricted Stock under this Plan
at any time and may terminate this Plan at any time; provided, however, Horizon
Medical shall not have the right unilaterally to modify, amend or cancel any
Option, Stock Appreciation Right or Restricted Stock granted before such
suspension or termination unless (1) the Key Employee or Outside Director
consents in writing to such modification, amendment or cancellation or (2) there
is a dissolution or liquidation of Horizon Medical or a transaction described in
Section 14 or Section 15 of this Plan.
SECTION 17
MISCELLANEOUS
17.1 No Shareholder Rights. No Key Employee or Outside Director shall have any rights as a shareholder of Horizon Medical as a result of the grant of an Option or a Stock Appreciation Right to him or to her under this Plan or his or her exercise of such Option or a Stock Appreciation Right pending the actual delivery of Stock subject to such Option or Stock Appreciation Right to such Key Employee or Outside Director, and no Key Employee shall have any rights as a shareholder with respect to any Restricted Stock except those rights, if any, set forth in the related Restricted Stock Certificate.
17.2 No Contract of Employment. The grant of an Option or a Stock Appreciation Right or Restricted Stock to a Key Employee or Outside Director under this Plan shall not constitute a contract of employment and shall not confer on a Key Employee or Outside Director any rights upon his or her termination of employment in addition to those rights, if any, expressly set forth in the related Option Certificate, Stock Appreciation Right Certificate or Restricted Stock Certificate.
17.3 Withholding. Each Option, Stock Appreciation Right and Restricted Stock grant shall be made subject to the condition that the Key Employee or Outside Director consents to whatever action the Committee directs to satisfy the federal and state tax withholding requirements, if any, which the Committee in its discretion deems applicable to the exercise of such Option or Stock Appreciation Right or the satisfaction or expiration of any forfeiture conditions with respect to Restricted Stock issued in the name of the Key Employee. The Committee also shall have the right to provide in an Option Certificate, Stock Appreciation Right Certificate or a Restricted Stock Certificate that a Key Employee or Outside Director may elect to satisfy federal and state tax withholding requirements through a reduction in the cash or the number of shares of Stock actually transferred to him or to her under this Plan.
17.4 Loans. If approved by the Committee, Horizon Medical may lend money to, or guarantee loans by a third party to, any Key Employee or Outside Director to finance the exercise of any Option granted under this Plan, and the exercise of an Option with the proceeds of any such loan shall be treated as an exercise for cash under this Plan. If approved by the Committee, Horizon Medical also may, in accordance with a Key Employee's or Outside Director's instructions, transfer Stock upon the exercise of an Option directly to a third party in connection with any arrangement made by the Key Employee or Outside Director for financing the exercise of such Option.
17.5 Rule 16b-3. The Committee shall have the right to amend any Option, Restricted Stock or Stock Appreciation Right grant or to withhold or otherwise restrict the transfer of any Stock or cash under this Plan to a Key Employee or Outside Director as the
Committee deems appropriate in order to satisfy any condition or requirement under Rule 16b-3 to the extent Rule 16 of the Securities Exchange Act of 1934, as amended, might be applicable to such grant or transfer.
17.6 Construction. All of the defined terms under this Plan are set forth in Section 2 of this Plan. All references to sections (Section) are to sections (Section) of this Plan unless otherwise indicated. All references to the singular shall include the plural, and all references to the plural shall include the singular. This Plan shall be construed under the laws of the State of Georgia.
IN WITNESS WHEREOF, Horizon Medical has caused its duly authorized officer to execute this Plan this ____ day of _______________, 1998 to evidence its adoption of this Plan.
HORIZON MEDICAL PRODUCTS, INC.
EXHIBIT 10.12
AGREEMENT
THIS AGREEMENT, made and entered into as of January 1, 1995 between CARDIAC MEDICAL, INC., a Georgia corporation ("CMI"), and HORIZON MEDICAL PRODUCTS, INC., a Georgia corporation ("HMP");
W I T N E S S E T H :
WHEREAS, the parties desire that CMI provide certain management, administrative and secretarial services from time to time to HMP on the terms and conditions set forth below;
NOW, THEREFORE, in consideration of the mutual promises made herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
1. During the term of this Agreement, CMI will provide from time to time, when requested by HMP, various management, administrative and secretarial services to the management and other employees of HMP. CMI retains the right to designate from time to time which employees of CMI will provide such management, administrative and secretarial services to HMP.
2. For such services, HMP will pay to CMI a fee of $150,000, payable in advance in January 1995, for all services to be rendered during the term of this Agreement.
3. The term of this Agreement shall be for three years, commencing January 1, 1995 and continuing through December 31, 1998. HMP has the right to terminate such services upon written notice to CMI, but in the event of such termination, no portion of the fee paid hereunder is refundable to HMP. CMI has the right to
terminate this Agreement upon written notice to HMP in the event a majority of the outstanding shares of HMP are sold or in the event all or substantially all of the assets of HMP are sold, but in the event of such termination, no portion of the fee paid hereunder is refundable to HMP.
4. This Agreement may not be assigned by CMI or HMP without the prior written consent of the other party to such assignment. This Agreement constitutes the complete and entire agreement between the parties and all previous agreements or understandings are expressly superceded and revoked by this Agreement. This Agreement may not be modified by any subsequent amendment unless such modification is in writing and is executed by the parties to this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first set forth above.
CARDIAC MEDICAL, INC.
By: /s/
-------------------------------------
Title:
----------------------------------
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HORIZON MEDICAL PRODUCTS, INC.
By: /s/
-------------------------------------
Title:
----------------------------------
|
ACKNOWLEDGMENT OF TERMINATION OF CONTRACT
THIS ACKNOWLEDGMENT OF TERMINATION OF CONTRACT (the "Acknowledgment") is
made this 12th day of February, 1998 by HORIZON MEDICAL PRODUCTS, INC., a
Georgia corporation. ("HMP") and CARDIAC MEDICAL, INC., a Georgia corporation
("CMI").
RECITALS
WHEREAS, pursuant to an Agreement dated January 1, 1995 by and between HMP and CMI (the "Agreement"), CMI agreed to provide certain management, administrative and secretarial services from time to time to HMP during the term of the Agreement;
WHEREAS, HMP agreed to pay to CMI a fee of $150,000 in advance in January 1995 for all services to be rendered by CMI during the term of the Agreement, which fee was paid by HMP to CMI in January 1995 in accordance with the terms of the Agreement;
WHEREAS, Section 3 of the Agreement provides that: "The term of this Agreement shall be for three years, commencing January 1, 1995 and continuing through December 31, 1998";
WHEREAS, an ambiguity existed as to the actual term of the Agreement because the foregoing provision provides for a three-year term but specifies such term with dates spanning a four years;
WHEREAS, the intent of the parties to the Agreement was for the Agreement to provide for a three-year term and the parties treated the Agreement as terminated on December 31, 1997 in accordance with such intention;
WHEREAS, the foregoing ambiguity in the term of the Agreement was discovered on February 4, 1998 and the parties thereto desire to clarify the ambiguity by acknowledging as follows:
ACKNOWLEDGMENT
HMP and CMI hereby acknowledge and agree that the agreement terminated on December 31, 1997 with each party having rendered full performance and without owning any duties to the other party to the Agreement.
IN WITNESS WHEREOF, the parties have executed this Acknowledgment as of the date first set forth above.
CARDIAC MEDICAL, INC. HORIZON MEDICAL PRODUCTS, INC.
By: /s/ Roy C. Mallady, Jr. By: /s/ William E. Peterson, Jr.
--------------------------- ----------------------------
Name: Roy C. Mallady, Jr. Name: William E. Peterson, Jr.
------------------------- --------------------------
Title: Chairman Title: President
------------------------ -------------------------
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EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
1. Horizon Acquisition Corp., a Georgia corporation which is wholly-owned by the registrant.
2. Strato/Infusaid, Inc., a Massachusetts corporation which is wholly-owned by
the registrant.
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 (File No. ) of our report dated January 29, 1998, on our audits of the financial statements and financial statement schedule of Horizon Medical Products, Inc. and to the inclusion of our report dated September 15, 1997, on our audits of the financial statements of Strato/Infusaid Inc. We also consent to the reference to our firm under the caption "Experts" and "Selected Financial Data."
Birmingham, Alabama
February 13, 1998
| ARTICLE 5 |
| THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM HORIZON MEDICAL PRODUCTS CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM S-1. |
| MULTIPLIER: 1 |
| PERIOD TYPE | YEAR |
| FISCAL YEAR END | DEC 31 1997 |
| PERIOD START | JAN 01 1997 |
| PERIOD END | DEC 31 1997 |
| CASH | 2,893,924 |
| SECURITIES | 0 |
| RECEIVABLES | 4,028,270 |
| ALLOWANCES | 308,239 |
| INVENTORY | 5,405,861 |
| CURRENT ASSETS | 12,956,151 |
| PP&E | 2,735,645 |
| DEPRECIATION | 394,137 |
| TOTAL ASSETS | 31,576,905 |
| CURRENT LIABILITIES | 6,113,585 |
| BONDS | 36,434,124 1 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 0 |
| COMMON | 102 |
| OTHER SE | (11,149,857) 2 |
| TOTAL LIABILITY AND EQUITY | 31,576,905 |
| SALES | 15,798,123 |
| TOTAL REVENUES | 15,798,123 |
| CGS | 6,273,418 |
| TOTAL COSTS | 12,384,245 |
| OTHER EXPENSES | (69,727) |
| LOSS PROVISION | 0 |
| INTEREST EXPENSE | 11,970,734 3 |
| INCOME PRETAX | (8,487,129) |
| INCOME TAX | 319,831 |
| INCOME CONTINUING | (8,806,960) |
| DISCONTINUED | 0 |
| EXTRAORDINARY | 0 |
| CHANGES | 0 |
| NET INCOME | (8,806,960) |
| EPS PRIMARY | (79.80) |
| EPS DILUTED | (79.80) |
| 1 | INCLUDES 11,000,000 OF PUT WARRANT OBLIGATION AND 1,463,319 OF NON COMPETE AND CONSULTING LIABILITIES. |
| 2 | INCLUDES 398,525 CONTRA EQUITY RELATED TO SHAREHOLDER NOTES RECEIVABLE |
| 3 | INCLUDES 8,000,000 OF PUT WARRANT VALUE ACCRETION |