Back to GetFilings.com
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended October 31, 1995
[Fee Required]
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required]
For the transition period from _____________ to _____________
Commission File Number: 0-14961
LUXTEC CORPORATION
(Exact name of registrant as specified in its charter)
Massachusetts 04-2741310
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
326 Clark Street, Worcester, Massachusetts 01606
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code:
(508) 856-9454
Securities registered pursuant to Section 12(b) of the Act:
American Stock Exchange
Common Stock, $.01 par value per share
(Title of class)
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by checkmark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No ___
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ X ]
The aggregate market value of the voting Common Stock held by non-affiliates
of the registrant was approximately $5,134,623 based on the closing price of
such stock on December 29, 1995, as reported by the American Stock Exchange
($3.50 per share).
As of December 29, 1995, 2,443,898 shares of Common stock, $.01 par value,
were issued and outstanding.
Documents Incorporated by Reference Form 10-K Reference
Proxy Statement for the next Annual Meeting Part III
Page 1
PART I
The statements contained in this Annual Report on Form 10-K which are not
historical facts may contain forward-looking statements that involve risks
and uncertainties, including, but not limited to, product demand and market
acceptance risks, the effect of economic conditions, the impact of
competitive products and pricing, product development, commercialization and
technological difficulties, capacity and supply constraints or difficulties,
the results of financing efforts and other risks detailed in the Corporation's
Securities and Exchange Commission filings.
ITEM 1. BUSINESS
The Corporation
Luxtec Corporation, a Massachusetts Corporation (the "Corporation" or
"Luxtec"), was organized in November 1981, and is engaged in the design,
manufacture, marketing and distribution of fiber optic headlight and video
camera systems, light sources, cables, retractors, surgical telescopes and
other custom made surgical equipment for the medical and dental industries,
as well as motion tolerant blood pressure monitors. Through its subsidiary,
Fiber Imaging Technologies, Inc., the Corporation also manufactures small
diameter specialty endoscopes for industrial and medical markets.
On October 23, 1995, Luxtec CD Acquisition Co., Inc., a Massachusetts
corporation and the Corporation's wholly-owned subsidiary ("Acquirer"),
acquired all of the assets and liabilities of CardioDyne, Inc.
("CardioDyne"), a Delaware corporation, in exchange for 1,000,000 shares of
common stock, par value $0.01 per share of the Corporation and certain
additional consideration pursuant to a statutory merger of CardioDyne and
Acquirer.
The Corporation has developed a proprietary, totally programmable, fiber
optic drawing system designed to manufacture optical glass to a predetermined
diameter as well as to control the actual size of the fiber bundles. The
fibers are utilized in fiber optic cables which are incorporated with the
Corporation's Surgical Headlight Systems and the Video Camera Systems as well
as in an array of fiber optic transilluminators utilized with the
Corporation's surgical instruments. The Corporation also markets replacement
fiber optic cables and light sources for use with other manufacturers'
products, including various endoscopic systems used in minimally invasive
surgical procedures.
The Corporation's newly acquired subsidiary, CardioDyne Inc., is also engaged
in the design and development of proprietary,
motion tolerant, non-invasive blood pressure ("BP") monitors for use on
moving and exercising patients. The products are designed for use in the
categories of exercise stress testing, emergency transport, obstetrics, and
other applications where frequent, accurate blood pressure data is vital, yet
where existing blood pressure monitors typically fail to work because of
patient motion. The Corporation's two existing products, currently named the
Kinetorr and Kinetorr PC, have been approved for sale in the United States
by the Food and Drug Administration (the "FDA").
The Corporation maintains its principal executive offices and facilities at
326 Clark Street, Worcester, Massachusetts 01606, and its telephone number is
(508) 856-9454.
Background and Technology
Fiber Optics
Fiber optics allow for the transmission, element by element, of a light or
image from one place to another through a flexible conduit. Fiber optic
technology permits the drawing of high quality optical glass rods and tubes
into flexible fibers, each coated with a "jacket" (a film of an organic
silicon), that protects the fibers from abrasion. This provides for an
improved ability to bend and transmit light and images to and from
inaccessible places.
Page 2
The technology used by Luxtec to provide illumination directly to the
surgical site is facilitated by fiber optic cables piping light into an
adjustable headlight composed of a series of lenses and mirrors mounted on a
headband. These lenses then focus the light directly on the surgical site
when worn by the surgeon. This provides a lightweight, low temperature
illumination source to enhance visualization for microsurgical and deep
cavity illumination. State of the art microsurgery often involves working
on anatomical structures smaller than one millimeter in diameter. To work
on such small structure, the surgeon often needs high quality, portable
magnification devices. The new Luxtec telescopes are designed to offer
high quality magnification with coincident illumination.
Blood Pressure Monitoring
An important symptom of patients with life threatening conditions such as
shock, internal bleeding or heart failure, is usually a drop in blood
pressure. Thus, blood pressure is measured often on most patients, and is a
key vital sign in medicine.
The most common method of measuring blood pressure is by placing an inflated
cuff around the arm in order to occlude arterial blood flow. Blood pressure
is determined by slowly deflating the cuff and listening with a stethoscope
for Korotkoff sounds (arterial blood flow vibrations) that begin at systolic
BP and cease at diastolic BP. These measurements can be taken manually, or
by using various automated and semi-automated instruments or systems. Small
vibrations in the cuff pressure, called oscillometric pulses, are measured by
most automatic blood pressure monitors and are used to derive systolic and
diastolic blood pressure measurements.
For resting patients whose blood pressure must be sampled periodically,
automatic intermittent non-invasive blood pressure monitors are widely used.
Current measuring techniques are very sensitive to any motion of the patient
during the time that the actual reading is being taken. Most intermittent,
non-invasive BP monitors work poorly or do not work at all on patients who
are moving or being transported when the measurement is being taken. Motion
interferes with the ability to detect critical sounds and, therefore, it is
very difficult to measure the blood pressure of patients who are shivering,
exercising, or being transported.
For patients whose blood pressure must be known more frequently, direct blood
pressure measurement is routinely used. In direct measurement, a fluid
filled catheter is introduced into an artery and connected to a pressure
transducer. This form of direct, invasive BP monitoring is expensive and
painful to the patient, requires frequent attention by a nurse or physician,
and poses risks of infection and blood clots. Although several continuous
non-invasive blood pressure monitors have been designed and introduced to
the market, none has received wide clinical use to date. The Corporation
believes this stems from questions regarding the accuracy, stability, and
motion tolerance of such monitors.
Products
Headlight Systems The Corporation has designed and manufactured a line of
fiber optic headlight systems that assist surgeons by illuminating the area
of the surgical procedure. Designed to provide maximum performance and
comfort, the Corporation's headlight systems are lightweight and provide the
surgeon with near coaxial view. The Corporation's patented headlight systems
provide a virtually unobstructed view of the area of surgical procedure.
Light Sources A fiber optic light source with solid state electronics
permits the precise regulation of electric current in order to control
illumination levels of Xenon and Halogen lamps and, thereby, eliminates
fluctuations or "flickering" in the light provided. The lamps illuminate the
end surface of the fiber optic cable through which the light is transmitted
in a rigid or flexible mode without heat. The Corporation manufactures a
product line of high quality, solid state Xenon and Halogen fiber optic
light sources. The Corporations's light sources offer a wide range
of light intensities in order to serve the varying requirements in
illuminating surgical and diagnostic procedures. The Corporation's light
sources are designed and manufactured to comply with U.L. 544 medical safety
standards and are listed domestically with ETL Laboratories. Internationally,
the Corporation works to achieve compliance with as many international
standards as necessary to compete effectively on a worldwide basis
(including the CE mark that has been attained on the present product line).
Page 3
The Corporation's model numbers 9175 and 9300 Xenon light sources produce
high intensity light that is the equivalent of daylight in color. The white
light produced by these light sources is used in instances where more intense
illumination is required, e.g., for endoscopic television surgery or for
use with the Corporation's Videolux television camera products.
Fiber Optic Cables The Corporation designs and manufactures a complete range
of fiber optic cables and holds patents on certain fiber optic cable
assemblies. See "Patents and Proprietary Information." The Corporation has
a range of fiber bundle diameters from 1.0 mm to 6.5 mm and also allows a
surgeon to choose from various angulations (180 degree, 90 degree and 45
degree) in order to optimize the use of surgical instruments. The
Corporation employs a proprietary technology that enables the fiber optic
interface to withstand significantly higher temperatures and that permits
the use of higher output light sources.
All of the Corporation's fiber optic cables are adaptable to competitors'
light sources. The Corporation's Component Cable System allows the end-user
to adapt the end fitting of each cable to their own needs. The Component
Cable System is designed to provide the flexibility of universal cables by
incorporating a patented process to permanently attach select end fittings to
the cable and, thereby, customize the cable according to the user's needs,
either at the point of manufacturing or at the customer's site. This allows
the customer to reduce the inventory of replacement cables and facilitates
a rapid turnaround when a cable needs to be replaced in the operating room,
clinic, or surgi - center.
Fiber Optic Headlight and Video Camera Systems The Corporation manufactures
and markets a series of video products that are currently being used in the
United States and approximately 26 countries around the world. The
Corporation's Videolux Headlight Camera Systems are designed to televise most
surgical procedures. The system is a very small, lightweight, solid state
television camera mounted at the front of a headband, manufactured by the
Corporation, and integrated with fiber optic illumination.
The Corporation's Videolux System can transmit the surgeon's eye view of the
procedure live to a television monitor for teaching purposes or to be
recorded for later use. The Videolux Cameras are available in the NTSC
(National Television System Committee) and PAL (Phase Alternation by Line)
formats as well as in all voltages required worldwide.
Surgical Telescopes The Corporation manufactures and markets a proprietary
line of surgical telescopes. The custom fit telescopes provide the surgeon
with increased magnification ranging from 2.5X to 6X. During the fourth
quarter of fiscal year 1993, the Corporation introduced illumination to the
surgical telescope, utilizing fiber optic delivery of light into the line of
sight and thus providing the first surgical telescope with coaxial
illumination. These products are part of the current product offering of the
Corporation.
Blood Pressure Monitors The Corporation is developing a proprietary
electronic signal acquisition and signal processing technology that separates
"motion noise" from systolic and diastolic blood pressure signals. The
Corporation plans to use this technology to develop non-invasive blood
pressure monitoring products that are motion tolerant.
Page 4
Patents and Proprietary Information
The medical device industry traditionally has placed considerable importance
on obtaining and maintaining patents and trade secret protection for
significant new technologies, products and processes. The Corporation
maintains a policy of seeking patent protection in connection with certain
elements of its technology when it believes that such protection will benefit
the Corporation. The Corporation owns the following U.S. Patents (date of
issuance shown in parentheses):
* Patent No. 4516190 for Surgical Headlight (May 7, 1985)
* Patent No. 4534617 for Fiber Optic Cable (August 13, 1985)
* Patent No. 4616257 for Headlight Camera System (October 7, 1986)
* Patent No. 4653848 for 45 degree and 90 degree Fiber Optic Cables
(March 31, 1987)
* Patent No. 4797736 for Videolux Television Fiber Optic Headlight Camera
System (January 10, 1989)
* Patent No. 5003605 for an electronically augmented stethoscope with timing
sound (March 26,1991)
* Patent No. 5042930 for Optical System allowing coincident viewing,
illuminating and photography (August 27, 1991)
* Patent No. 5078469 for Optical System allowing coincident viewing,
illuminating and photography (January 7, 1992)
* Patent No. 5220453 for telescopic spectacles with coaxial illumination
(June 15, 1993)
* Patent No. 5295052 for a light source assembly (March 15 1994)
* Patent No. D345368 for surgical telescopes (March 22, 1994)
* Patent No. 5307432 for crimped light source termination (April 26, 1994)
* Patent No. 5331357 for an illumination assembly (July 19, 1994)
* Patent No. D349123 for spectacles having integral illumination (July 26, 1994)
* Patent No. D350760 for an eyeglass frame temple (September 20, 1994)
* Patent No. 5392781 for blood pressure monitoring in noisy environments
(February 28, 1995)
In addition, the Corporation has entered into an exclusive license agreement
with InterMED Corporation for the rights to Patent No. 5222949 ("In-Vivo
Hardenable Catheter") for developing a line of catheters incorporating fiber
optics to facilitate several potential specialized applications.
The Corporation is the owner of three federal trademark registrations:
(i) LUXTEC, registration number 1453098, registered August 18, 1987;
(ii) LUXTEC (and design), registration number 1476726, registered
February 16, 1988; and (iii) LUXTEC (stylized), registration number 1758176,
registered March 16, 1993.
In general, the Corporation relies on its development and manufacturing
efforts and skills of its personnel rather than patent protection to
establish and maintain its industry position. The Corporation treats its
design and technical data as confidential and relies on nondisclosure
agreements, trade secrets laws and non-competition agreements to protect its
proprietary position. There can be no assurance that these measures will
adequately protect the Corporation's proprietary technologies.
Page 5
Marketing and Sales
Fiber Optics
The Corporation's customers for its fiber optic and illumination products are
acute care hospitals, clinics, surgi - centers, and surgeons. An estimated
33,000 surgeons use the Corporation's products, on a worldwide basis. The
Corporation's products provide illumination and magnification used during the
surgical procedure.
The Corporation distributes its fiber optic and illumination products through
regional specialty surgical distributors, supported by Luxtec field
specialists as well as a customer support team located in the Worcester
facility. Internationally, Luxtec distributes through a network of local
distributors. The Corporation currently has distributors in 27 countries.
The Corporation competes on the basis of price, product quality and
reliability. The Corporation believes that its large base of satisfied users
is also a key marketing advantage and that the combination of satisfied
customers and quality products positions the corporation as one of the
premium vendors in the marketplace. The Corporation believes that it
provides a higher standard of post sales support when compared to the
competition and that the combination of service and a three year warranty
stands as a significant market differentiation.
The Corporation's marketing strategy is to provide training and support for
the distributor channel, to enhance end user awareness and demand by
participating as an exhibitor at major medical meetings, and to insure that
the Corporation provides high quality and performance of its products.
Blood Pressure Monitoring
The Corporation believes that the initial target market segments for its
products will be for use in exercise stress testing, emergency transport,
obstetrics and for post-operative patients.
Exercise Stress Testing
The exercise stress test is a common non-invasive test for evaluating heart
function in known or suspected coronary artery disease. There are an
estimated 5 million exercise stress tests done annually at approximately
20,000 exercise stress test labs in the U.S. Most stress test labs now
measure blood pressure on their patients manually. Blood pressure must be
measured accurately and often (recommended by many experts to be at least
once per minute) during the test. A decline in systolic BP during exercise
may reflect the presence of advanced coronary artery disease, and is a
criterion for immediate termination of the stress test. This important
indicator must be detected immediately to reduce patient risk. Yet
measuring blood pressure, either manually or automatically, is difficult
since the patient is moving and the treadmill creates interfering background
noise.
The Kinetorr incorporates a sensor and companion processing software that
significantly reduces the interference from motion and noise in the blood
pressure signal. The Corporation believes this results in a reliable blood
pressure measurement during an exercise stress test. The Kinetorr has
undergone clinical trials at Beth Israel Hospital, and has been tested by
physicians and clinicians at several other hospitals, including Deaconess
Hospital, and the University of Massachusetts Medical Center.
Emergency Transport
The Corporation estimates that the emergency transport (ambulance) market for
the Kinetorr is potentially large. There are approximately 42,000 emergency
transport vehicles in the U.S., of which the Corporation estimates that
30,000 are potential candidates for products based on the Kinetorr technology.
The Corporation estimates that emergency victims of accidents, heart attacks,
strokes, and other medical emergencies account for almost 10 million
transports in the U.S. The Corporation further estimates that an additional
2 million medical patients are transferred between hospitals annually in
emergency transport vehicles. These patients are often unstable or at risk
of medical hazard, hence their vital signs (blood pressure, heart rate,
respiration, and oxygen saturation) are measured frequently. Currently,
blood pressure is measured manually on most transport patients and the
measurement is difficult to do even by a skilled EMT because of the noise
and vibration in the vehicle. Preliminary tests indicate that the Kinetorr
accurately measures blood pressure during transports, even with a shivering
patient and even in the presence of vibration and noise.
Page 6
Obstetrics
Blood pressure is an important parameter to monitor during labor and delivery
due to the possibility of dangerously high blood pressures, hemorrhage and
shock, as well as other potential complications. Frequent, accurate blood
pressure information is important to manage these patients. However, women
in labor frequently shiver, particularly those receiving epidural anesthesia.
The Corporation believes that shivering causes commonly used oscillometric
blood pressure monitors to become inaccurate or to cease working. To
accurately measure blood pressure on shivering patients, the alternatives
are invasive blood pressure measurement, which is expensive and risky, or
frequent manual monitoring. The Corporation believes that the Kinetorr
potentially provides a better alternative, as it accurately measures and
records blood pressure on moving or shivering labor patients, without the
cost and risk of invasive monitoring or the constant attention of manual
monitoring.
Post-Operative
Many recovery room patients experience post anesthesia tremors. These
patients are monitored for various vital signs, including blood pressure.
The Corporation believes that current commercial models can become inaccurate
or fail to work in this application due to patient tremor and that a motion
tolerant monitor therefore may be well received in this market.
Competition
Fiber Optics
The Corporation competes with national and international companies engaged in
the manufacture of headlight systems, including B.F. Wehmer and Designs for
Vision, and in fiber optic medical instruments with Pilling Weck Company, the
Stryker Company and Richard Wolf & Company as well as other smaller
diversified companies. In the replacement cable market, the Corporation
competes with both original equipment manufacturers as well as others engaged
in activities similar to that of the Corporation. The Corporation is not
aware of any specific seasonal variation factors that directly effect net
sales levels.
The Corporation's management believes that direct competition in the light
source market comes from several established companies having considerably
larger and greater financial and human resources, including Designs for
Vision, Olympus, B.F. Wehmer, Karl Storz Company, and Richard Wolf & Company.
Blood Pressure Monitoring
The Corporation has identified two companies, Suntek and Colin Medical, that
are currently supplying exercise blood pressure monitors in the U.S. The
companies sell directly under their own name, and Colin produces an OEM
version of its monitor that is sold by Quinton. Critical care blood pressure
monitors are sold by numerous companies, including Critikon, Datascope,
Colin, Hewlett Packard, Spacelabs and others. The Corporation believes that
the Kinetorr's performance, features and capabilities will allow it to
compete effectively against these products. Nonetheless, the Corporation
expects that many of its current and future competitors will have financial,
technical, marketing, sales, manufacturing, distribution and other resources
substantially greater than those of the Corporation. There can be no
assurance that the Corporation will be able to compete successfully in its
intended markets.
Government Regulation
The Corporation's products are subject to government regulation in the United
States and other countries. In order to test clinically, produce and market
products for human diagnostic or therapeutic use, the Corporation must comply
with mandatory procedures and safety standards established by the United
States Food and Drug Administration ("FDA") and comparable state and foreign
regulatory agencies. Typically, products must meet regulatory standards as
safe and effective for their intended use prior to being marketed for human
applications. The clearance process is expensive and time consuming, and
no assurance can be given that any agency will grant clearance for the sale
of the Corporation's products or that the length of time the process will
require will not be extensive. The Corporation believes that its facility is
in compliance with the Federal Food and Drug Administration requirements for
Good Manufacturing Practice.
Major Customers
For the year ended October 31, 1995, one customer, Specialty Surgical
Instrumentation, Inc., accounted for 15% of the Corporation's net revenues.
Page 7
Research and Development
The Corporation incurred approximately $615,000 of product development expenses
in fiscal year 1995, $437,000 in fiscal 1994, and $270,000 in fiscal 1993.
The Corporation expects that the increased level of investment in product
development will result in a series of product introductions during fiscal
1996.
Manufacturing and Suppliers
The Corporation purchases components and materials from more than 300
vendors. The Corporation believes it can purchase substantially all of its
product requirements from other competing vendors under similar terms. The
Corporation has no long-term contract with any supplier.
Backlog
At October 31, 1995, the Corporation's backlog was $850,000, compared to
$181,154 at October 31, 1994. The Corporation generally ships products
within three weeks of the receipt of an order from a customer. The
Corporation does not believe that its backlog accurately predicts the amount
of quarterly or annual revenues.
Employees
As of October 31, 1995, the Corporation had 53 full time employees, of whom
five are executives, three are engaged in supervisory capacities, 27 are in
manufacturing and the remainder are involved in engineering, research and
development, marketing and administration. None of the Corporation's
employees is covered by a collective bargaining agreement. The Corporation
believes its employee relations are good.
Executive Officers
For information with respect to the Executive Officers of the Corporation,
see the section entitled "Election of Directors" appearing in the
Corporation's Proxy Statement in connection with its next Annual Meeting of
Shareholders or special meeting in lieu thereof, which section is
incorporated herein by reference.
ITEM 2. PROPERTIES
The Corporation occupies approximately 22,000 square feet at 326 Clark
Street, Worcester, Massachusetts under a lease that expires in September
1996. The Corporation believes that this space is adequate to meet its
current requirements and that alternative space would be available at
comparable prices should the lease not be extended after its expiration.
ITEM 3. LEGAL PROCEEDINGS
The Corporation is the defendant in a suit brought by Republic Lens
Corporation ("Republic") of New Jersey. The suit, filed on September 29,
1995, in United States District Court, District of New Jersey alleges that
the Corporation breached a contract with Republic in which the Corporation
was obliged to use Republic as its sole supplier of products to be used in
the development and sale of a product that would result from a patent
assigned to the Corporation by Republic. Republic seeks damages of
$2,000,000 together with attorneys' fees and rescission of the contract. The
Corporation believes that the suit is without merit as the Corporation has
not used the patent designated in the suit and the contract. The Chief
Executive Officers of the two corporations have verbally agreed to a settlement
of the suit in which the Corporation will return the rights to the patent to
Republic in return for a release from liability from Republic.
Page 8
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The following matters were submitted to a vote of security holders, whether
through solicitation of proxies or otherwise, during the fourth quarter of
the Corporation's fiscal year ended October 31, 1995.
(a) Annual Meeting of Stockholders was held on October 20, 1995.
(b) Two Class II directors of the Corporation were elected:
FOR WITHHELD
James W. Hobbs 1,168,350 10,150
Lynn K. Friedel 1,167,990 10,510
The Board of Directors is composed of Mr. Hobbs and Ms. Friedel as well as
Mr. James Berardo, Mr. Paul Epstein, Mr. Patrick Phillipps,
Dr. Thomas VanderSalm and Mr. Louis Wallace.
(c) Other matters voted upon at the meeting:
A proposal to approve an amendment of the Company's Articles of Organization
to increase the number of shares authorized for issuance by the Company in
connection with the Agreement of Merger and Plan of Reorganization dated as
of June 28, 1995 (the "Merger Agreement") by and among the Company,
CardioDyne, Inc. ("CardioDyne"), and Luxtec CD Acquisition Co. Inc.
("Acquirer"), a newly formed, wholly-owned subsidiary of the Company.
Pursuant to the Merger Agreement, CardioDyne will be merged with and into A
hares of common stock of the Company (with such number subject to reduction
to account for statutory dissenter's rights of appraisal). In addition, the
former CardioDyne Stockholders may be entitled to a payment depending upon
the market price of the Company's common stock and will be entitled to
earn-out payments based upon the future sale of certain products under
development, if such products are developed. Each of the foregoing payments,
if made, shall be payable fifty percent (50%) in cash and fifty percent (50%)
in common stock of the Company.
FOR AGAINST ABSTAIN NO-VOTE
850,707 21,272 3,179 303,342
A proposal to approve the issuance of up to one million (1,000,000) shares
of common stock of the Company (with such number subject to reduction to
account for statutory dissenter's rights of appraisal) in connection with the
Merger Agreement.
FOR AGAINST ABSTAIN NO-VOTE
857,376 8,517 9,265 303,342
A proposal to ratify the amendment of the Company's 1992 Stock Option Plan
to increase the number of shares authorized for issuance under the Plan and
to limit the number of options that may be granted to any one individual
under the Plan in any fiscal year.
FOR AGAINST ABSTAIN NO-VOTE
838,687 24,617 11,854 303,342
A proposal to approve the Company's 1995 Stock Option Plan For Non-Employee
Directors.
FOR AGAINST ABSTAIN NO-VOTE
834,327 39,333 7,814 297,026
A proposal to approve an amendment of the Company's Articles of
Organization with respect to the limitation of liability of directors and
indemnification of directors and officers of the Company.
FOR AGAINST ABSTAIN NO-VOTE
1,144,703 16,827 10,654 6,316
A proposal to ratify the appointment of Arthur Andersen LLP as independent
public accountants of the Company.
FOR AGAINST ABSTAIN NO-VOTE
1,169,376 5,810 3,314 0
Page 9
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Corporation's Common Stock is traded on the American Stock Exchange
(AMEX) under the AMEX symbol "LXU.EC." The Corporation's Common Stock has
been listed on the American Stock Exchange since April 20, 1994. From
September, 1986 until April, 1994 the Corporation's Common Stock was traded
in the over-the-counter market on the National Association of Securities
Dealers, Inc. Automated Quotations System (NASDAQ) under the NASDAQ symbol
"LUXT." The following table sets forth (i) the high and low closing bid
prices for the Corporation's Common Stock as reported by NASDAQ for the
periods indicated below until April 19, 1994, and (ii) the high and low
closing sale prices of the Corporation's Common Stock on the AMEX during the
periods indicated below commencing on April 20, 1994.
Common Stock High Low
Fiscal Year Ended 10/31/94 First Quarter $ 2.25 $1.50
Second Quarter 2.13 1.50
Third Quarter 10.13 2.13
Fourth Quarter 7.75 3.75
Fiscal Year Ended 10/31/95 First Quarter 5.38 3.50
Second Quarter 4.00 2.50
Third Quarter 7.25 2.88
Fourth Quarter 5.75 4.00
On December 29, 1995, the closing sale price of the Corporation's Common
Stock on the American Stock Exchange was $3.50.
As of December 30, 1995, there were approximately 800 holders of record of
the Corporation's Common Stock. The Corporation estimates that there are
approximately 1,632 beneficial holders of the Corporation's Common Stock.
The Corporation has not paid any cash dividends since its inception and the
Board of Directors does not contemplate doing so in the near future. The
Board of Directors currently intends to retain any future earnings for use
in the Corporation's business.
Page 10
ITEM 6. SELECTED FINANCIAL DATA
The selected consolidated operating data presented below
for the years ended October 31, 1991, 1992, 1993, 1994, and 1995 and the
consolidated balance sheet data at October 31, 1991, 1992, 1993, 1994, and
1995 are derived from and qualified by reference to the Corporation's
consolidated financial statements that have been audited by Arthur Andersen
LLP, the Corporation's independent public accountants. The information set
forth below should be read in conjunction with the financial statements
and notes thereto appearing elsewhere herein. This data reflects the
Corporation's one-for-ten Common Stock reverse split effected April 10, 1992
for all periods presented.
Operating Data: (In thousands, except for per share data)
Years Ended October 31,
1991 1992 1993 1994 1995
Sales.......................... $5,474 $6,040 $6,734 $8,139 $7,755
Net Earnings (Loss)............ 368 407 153 164 (6,127)
Net Earnings (Loss) Per Share.. .26 .29 .11 .11 (4.20)
Balance Sheet Data: (In thousands)
Years Ended October 31,
1991 1992 1993 1994 1995
Working Capital................ $ 743 $1,056 $1,210 $1,410 $ (599)
Total Assets................... 2,259 2,763 3,431 4,072 4,122
Long-term debt and capital
lease obligations, less current
portions....................... 28 67 - - -
Stockholders' equity........... 1,397 1,804 1,957 2,163 198
Page 11
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This analysis of the Corporation's financial condition, capital resources
and results of operations should be read in conjunction with the
accompanying financial statements, including notes thereto.
Results of Operations
The following table sets forth certain consolidated financial data as a
percentage of revenue for the fiscal years ended October 31, 1993, 1994
and 1995.
1993 1994 1995
Sales 100% 100% 100%
Cost of Goods Sold 57 55 61
Selling and Marketing 20 22 24
Research and development 4 5 8
General and administrative 16 15 18
Charge for purchased research and development - - (67)
Other income/(expense) - - (1)
Income (loss) before provision for income taxes 3 3 (79)
Provision for income taxes - 1 -
Net income (loss) 3 2 (79)
Fiscal 1995 Compared with Fiscal 1994
Sales: Sales were down 5% to $7,755,377 in fiscal 1995 compared to
$8,138,903 in fiscal 1994. The reasons for the decrease included delays
in the completion of two new product lines. Luxtec was essentially
out of the Halogen light source business during the second half of fiscal
year 1995, as regulatory delays kept the Corporation from shipping orders that
were received during the fourth quarter. The new versions of the illuminated
and standard telescopes also were not completed until the end of the fourth
quarter, resulting in a buildup of unshipped orders. Luxtec ended the year
with a record backlog of over $850,000.
The Corporation expects sales to increase during fiscal 1996 primarily as a
result of the introduction of the CardioDyne product line of blood pressure
monitors and the completion of the new product development introductions
begun during fiscal 1995.
Cost of Goods Sold: Cost of goods sold was $4,732,500 or 61% of net sales
for fiscal 1995 compared with $4,432,219 or 54% of net sales for fiscal 1994.
The Corporation charged to operations the cost of some inventory items
that had become redundant as a result of the changes to new product lines.
The Corporation also increased accruals related to future warranty claims due
to the introduction of new product lines.
Gross Profit: Gross Profit was $3,022,876 or 39% of net sales for fiscal
1995 compared with $3,706,684 or 46% of net sales for fiscal 1994. The
effect of the above mentioned inventory adjustments and accrual increases were
also accompanied by continued price competition and an increase in the sales
mix of lower margin OEM sales. The Corporation does not expect a
continuation of the deterioration in gross profit as a percent of net sales,
since much of the effect for fiscal 1995 was the result of one time events.
Selling and Marketing Expenses: Selling and marketing expenses of $1,825,897
for fiscal 1995 compared to $1,793,137 for fiscal 1994, an increase of $32,760
or 2%. During fiscal 1995, Luxtec essentially maintained employment levels
at their previous year levels, while introducing several new programs in
conjunction with the Corporation's distributors to offset increased
competition. Management expects sales and marketing expenses to increase
during fiscal 1996, primarily to launch the new CardioDyne product line into
the market.
Page 12
Research and Development: Research and development expenses were $614,937
in fiscal 1995 compared to $437,064 in fiscal 1994, an increase of $177,873
or 41%. The increase in expenses in this category were directly related to
the introduction of two major product line upgrades during fiscal 1995. The
next generation of standard and illuminated telescopes as well as a newly
designed line of halogen lightsources were introduced in late fiscal 1995.
Other significant product changes are expected to be introduced during fiscal
1996, including the rollout of the CadioDyne product line of motion tolerant
blood pressure monitors. Management expects that research expenditures will
continue to increase as a result of the Corporation's product development
plans.
General and Administrative: General and administrative expenses were
$1,377,974 in fiscal 1995 compared to $1,261,356 in fiscal 1994, representing
an increase of $116,618 or 9%. During fiscal 1995, Luxtec continued to
upgrade its investor relations programs, as well as working with an
investment banking firm in activities that ultimately resulted in the
Corporation's acquisition of the new technology represented by CardioDyne's
product lines.
Interest: Interest expense was $97,741 for fiscal 1994 compared with
$31,860 in fiscal 1994. Higher credit line balances and increased interest
rates accounted for the increase.
Fiscal 1994 Compared with Fiscal 1993
Sales: Sales increased to $8,138,903 in fiscal 1994 compared to $6,734,477
in fiscal 1993, an increase of 21%. The reasons for the increase in sales
included: (1) the startup of a new subsidiary - Fiber Imaging Technologies
during the second quarter of fiscal 1994, (2) a new product introduction at
the end of fiscal 1993 - Illuminated Surgical Telescopes, (3) continuing
increases of unit sales of the Xenon Headlight Systems, primarily resulting
from increased marketing and selling expenditures, and (4) the expansion
of geographic distributor coverage of Luxtec's products.
Cost of Goods Sold: Cost of goods sold was $4,432,219 or 54% of net sales
for fiscal 1994 compared with $3,832,848 or 57% of net sales for fiscal 1993.
The Luxtec cost reduction program was successful in lowering costs during
fiscal 1994, primarily through the negotiation of better vendor terms, and,
to a lesser extent, the design of lower cost products.
Gross Profit: Gross Profit was $3,706,684 or 46% of net sales for fiscal
1994 compared with $2,901,629 or 43% of net sales for fiscal 1993. During
the year Luxtec experienced price competition in most of its markets,
resulting in lower average selling prices per product than in fiscal 1993.
However, a combination of product cost reduction and favorable product mix
resulted in improved margins as a percentage of net sales.
Selling and Marketing Expenses: Selling and Marketing expenses of $1,793,137
for fiscal 1994 compared to $1,370,479 for fiscal 1993 increased by
$422,658 or 31%. During fiscal 1994, Luxtec added two new regional managers,
including one in the Midwest and one in Europe, to develop distribution in
their respective areas. The Corporation continued to attend trade shows and
improve sales and marketing programs.
Research and Development: Research and development expenses were $437,064 in
fiscal 1994 compared to $270,445 in fiscal 1993, an increasing of $166,619 or
62%. Luxtec's research and development staff has hired new personnel in a
number of important technical areas.
General and Administrative: General and administrative expenses were
$1,261,356 in fiscal 1994 compared to $1,064,634 in fiscal 1993,
representing an increase of $196,722 or 18%. During fiscal 1994, Luxtec
initiated a series of new investor relations programs, as well as contracting
an investment banking firm to assist the corporation in transactions
relating to the acquisition of new technologies.
Interest: Interest expense was $31,860 for fiscal 1994 compared with
$30,722 in fiscal 1993. Higher credit line balances and increased interest
rates accounted for the increase.
Page 13
Liquidity and Capital Resources
At October 31, 1995, the Corporation had negative working capital of
approximately $ 599,000 compared to positive working capital of $1,410,000 at
October 31, 1994. This situation primarily resulted from the completion of
the acquisition of CardioDyne Inc., including substantial closing costs
payable to the investment banker, legal counsel and others, as well as a
decision to charge to operations the cost of certain redundant inventory that
occurred as the Corporation moved from older product lines to the results of
the new product development effort. The Corporation entered into a new
credit facility with the Bank of Boston during October, 1995, that increased
the revolving credit line from $1,500,000 to $2,500,000 and added additional
credit availability of $750,000 to be used to purchase fixed assets during the
next two years. Subsequent to the year end (during December, 1995), the
Corporation received $1,000,000 from a private investment firm in return
for a note payable at 8% per year and the issuance of warrants to
purchase 450,000 shares ofLuxtec common stock at $3.00 per share. Subject to
Board and shareholder approval, the note payable for $1,000,000 will be
converted into preferred stock with an 8% dividend rate.
The principal source of short-term borrowings during the year was an
unsecured $1,500,000 revolving credit agreement that was increased to
$2,500,000 during October, 1995. At October 31, 1995, the credit line
borrowings balance was approximately $1,730,000. Borrowings ranged from a
high of $1,730,000 to a low of $605,557 during the year. The average
borrowing during the year was $1,128,696 and the weighted average interest
rate was 8.6%. The interest rate at the end of the fiscal year was 9.0%.
The Corporation anticipates that its current cash requirements will be
satisfied by cash flow from existing operations and the continuation of the
current credit arrangements with the Bank of Boston.
Page 14
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
LUXTEC CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
Index
Page No.
Report of Independent Public Accountants 16
Consolidated Balance Sheets as of
October 31, 1994 and October 31, 1995 17
Consolidated Statements of Operations
for the Years Ended October 31, 1993, 1994 and 1995 18
Consolidated Statements of Stockholders'
Equity for the Years Ended
October 31, 1993, 1994 and 1995 19
Consolidated Statements of Cash Flows
for the Years Ended October 31, 1993, 1994 and 1995 20
Notes to Consolidated Financial Statements 21
Page 15
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Luxtec Corporation:
We have audited the accompanying consolidated balance sheets of Luxtec
Corporation and subsidiaries as of October 31, 1994 and 1995, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended October 31, 1995.
These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Luxtec
Corporation and subsidiaries as of October 31, 1994 and 1995, and the results
of their operations and their cash flows for each of the three years in the
period ended October 31, 1995, in conformity with generally accepted
accounting principles.
S/Arthur Andersen LLP
Arthur Andersen LLP
Boston, Massachusetts
December 12, 1995 (except with respect
to the matter discussed in Note 13 as to
which the date is December 18, 1995)
Page 16
LUXTEC CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS October 31,
1994 1995
ASSETS
CURRENT ASSETS:
Cash $10,329 $11,721
Accounts receivable,
less reserves of $53,000 in 1994
and $66,000 in 1995 1,668,009 1,534,267
Inventories 1,519,648 1,696,001
Prepaid expenses and other assets 120,571 82,738
TOTAL CURRENT ASSETS 3,318,557 3,324,727
PROPERTY AND EQUIPMENT, AT COST 1,784,928 1,910,189
ACCUMULATED DEPRECIATION AND
AMORTIZATION (1,280,105) (1,409,960)
PROPERTY AND EQUIPMENT - NET 504,823 500,229
OTHER ASSETS, net of accumulated
amortization of $34,000 and $47,000
at October 31, 1994 and 1995,
respectively 248,463 297,087
TOTAL ASSETS $4,071,843 $4,122,043
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Revolving line of credit $607,158 $1,730,308
Accounts payable 929,651 1,553,869
Accrued expenses 371,610 639,969
TOTAL CURRENT LIABILITIES 1,908,419 3,924,146
COMMITMENTS (Note 8)
STOCKHOLDERS' EQUITY:
Common stock - $.01 par value -
Authorized: 10,000,000 shares
Issued and outstanding - 1,421,200
shares in 1994 and 2,436,541 shares
in 1995 14,212 24,365
Additional paid-in capital 2,990,316 7,141,576
Accumulated deficit (841,104) (6,968,044)
TOTAL STOCKHOLDERS' EQUITY 2,163,424 197,897
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $4,071,843 $4,122,043
The accompanying notes are an integral part of these consolidated financial
statements.
Page 17
LUXTEC CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended October 31,
1993 1994 1995
NET REVENUES $6,734,477 $8,138,903 $7,755,376
COST OF GOODS SOLD 3,832,848 4,432,219 4,732,500
GROSS PROFIT 2,901,629 3,706,684 3,022,876
OPERATING EXPENSES:
Selling and marketing 1,370,479 1,793,137 1,825,897
Research and development 270,445 437,064 614,937
General and administrative 1,064,634 1,261,356 1,377,974
Charge for purchased research
and development (Note 3) - - 5,230,950
TOTAL OPERATING EXPENSES 2,705,558 3,491,557 9,049,758
INCOME (LOSS) FROM OPERATIONS 196,071 215,127 (6,026,882)
OTHER INCOME (EXPENSE):
Interest expense (30,722) (31,860) (97,741)
Other income (expense) 2,004 (2,679) (2,317)
TOTAL OTHER INCOME (EXPENSE) (28,718) (34,539) (100,058)
INCOME (LOSS) BEFORE PROVISION FOR
INCOME TAXES 167,353 180,588 (6,126,940)
PROVISION FOR INCOME TAXES 14,555 16,266 -
NET INCOME (LOSS) $ 152,798 $164,322 $(6,126,940)
NET INCOME (LOSS) PER SHARE $0.11 $0.11 $(4.20)
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING 1,401,532 1,487,823 1,457,897
The accompanying notes are an integral part of these consolidated financial
statements.
Page 18
LUXTEC CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Common Stock Additional
$.01 par value Paid-in Accumulated
Shares Amount Capital Deficit Total
Balance,
October 31, 1992 1,401,200 $14,012 $2,948,016 $(1,158,224) $1,803,804
Net Income - - - 152,798 152,798
Balance,
October 31, 1993 1,401,200 14,012 2,948,016 (1,005,426) 1,956,602
Net Income - - - 164,322 164,322
Issuance of common
stock for patent
rights 20,000 200 42,300 - 42,500
Balance,
October 31, 1994 1,421,200 14,212 2,990,316 (841,104) 2,163,424
Net loss - - - (6,126,940) (6,126,940)
Issuance of common
stock in
connection with
merger with
CardioDyne, Inc. 1,000,000 10,000 4,115,000 - 4,125,000
Issuance of common
stock under
employee stock
purchase plan 15,341 153 36,260 - 36,413
Balance,
October 31, 1995 2,436,541 $24,365 $7,141,576 $(6,968,044) $197,897
The accompanying notes are an integral part of these consolidated financial
statements.
Page 19
LUXTEC CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
For the Years Ended October 31,
1993 1994 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME (LOSS) $152,798 $164,322 $(6,126,940)
ADJUSTMENTS TO RECONCILE NET INCOME
(LOSS) TO NET CASH USED FOR
OPERATING ACTIVITIES -
Charge for purchased research
and development - - 5,230,950
Depreciation and amortization 205,173 173,284 176,916
Provision for uncollectible accounts
receivable 10,230 27,500 12,500
Changes in current assets and
liabilities -
Accounts receivable (284,297) (465,406) 121,242
Inventories (605,297) (144,704) (176,353)
Prepaid expenses and other
current assets (1,877) (55,209) 37,833
Accounts payable 361,742 3,200 624,218
Accrued expenses 73,388 93,524 (255,437)
NET CASH USED FOR OPERATING ACTIVITIES (88,140) (203,489) (355,071)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (95,164) (100,455) (125,261)
Increase in other assets (41,378) (36,968) (95,685)
Cash paid in connection with
CardioDyne, Inc. acquisition, net
of cash acquired - - (582,154)
NET CASH USED FOR INVESTING ACTIVITIES (136,542) (137,423) (803,100)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on revolving line
of credit 168,554 401,287 1,123,150
Payments on long-term debt (70,000) (52,500) -
Payments under capital lease
obligations (19,228) (11,213) -
Issuance of common stock under
employee stock purchase plan - - 36,413
NET CASH PROVIDED BY FINANCING
ACTIVITIES 79,326 337,574 1,159,563
NET INCREASE (DECREASE) IN CASH (145,356) (3,338) 1,392
CASH, BEGINNING OF PERIOD 159,023 13,667 10,329
CASH, END OF PERIOD $13,667 $10,329 $11,721
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
In connection with the merger with
CardioDyne, Inc. (Note 3), the
following noncash transactions
occurred -
Fair value of assets acquired - - $5,235,073
Issuance of common stock - - (4,125,000)
Liabilities assumed - - (523,796)
Cash acquired - - (4,123)
Cash paid for acquisition, net of
cash acquired $ - $ - $582,154
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for -
Interest $ 30,727 $ 31,868 $95,205
Income taxes $ 16,014 $ 14,536 $ -
The accompanying notes are an integral part of these consolidated financial
statements.
Page 20
LUXTEC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL SATEMENTS
October 31, 1995
(1) Nature of the Business
Luxtec Corporation (the Company) designs, manufactures and markets fiber-optic
headlights and headlight television camera systems (for audio/video recordings
of surgical procedures), light sources, cables, retractors, loupes, surgical
telescopes, and other custom-made surgical specialty instruments utilizing
fiber-optic technoloy for the mediacal and dental industries.
During 1995, as disclosed in Note 3, the Company acquired the stock of
CardioDyne, Inc., a development-stage enterprise. The Company expects that
the proceeds from a private placement completed in December, 1995, along with
bank financing, will be sufficient to meet its financing needs for
fiscal 1996.
(2) Summary of Significant Accounting Policies
(a) Principles of Consolidation and Foreign Currency Remeasurement
The accompanying consolidated financial statements include the accounts of
the Company and its majority-owned subsidiaries: Luxtec Fiber Optics B.V.,
Fiber Imaging Technologies, Inc., CardioDyne Inc., and Cathec, Inc. All
intercompany accounts and transactions have been eliminated in consolidation.
The accounts and transactions of Luxtec Fiber Optics B.V. are remeasured into
U.S. dollars using applicable historical, current and weighted-average
exchange rates. All exchange gains and losses from remeasurement of assets
and liablities are currently recognized in operations income. The gains and
losses recognized due to foreign currency exchange were insignificant in
1993, 1994 and 1995. Luxtec Fiber Optics B.V. was dissolved during
fiscal 1995.
(b) Inventories
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out (FIFO) method and includes materials, labor
and manufacturing overhead.
(c) Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization are
calculated using the straight line method over the estimated useful lives of
the assets.
Leasehold improvements are amortized using the straight-line method over the
shorter of the lease term or estimated useful life of the asset.
(d) Other Assets
Other assets consist principally of patent costs, which are amortized using
the straight-line method over five years.
(e) Revenue Recognition
Revenue is recognized when goods are shipped, at which time all conditions of
sale have been met.
(f) Research and Development Costs
Research and development costs are charged to operations as incurred.
Page 21
LUXTEC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1995
(Continued)
(2) Summary of Significant Accounting Policies (Continued)
(g) Earnings per Share
Earnings per share of common stock are based on the weighted average number
of common shares outstanding and common equivalent shares from dilutive
stock options outstanding.
(h) Use of Estimates in the Preparation of Financial Statements
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 revenues and expenses during the reporting period.
Actual results could differ from those estimates.
(3) Merger with CardioDyne, Inc.
On October 23, 1995, the Company consummated a merger agreement (the Merger)
with CardioDyne, Inc., a development-stage company engaged in the development
of products that monitor blood pressure. In connection with the Merger, the
Company issued 1,000,000 shares of Luxtec common stock with a fair value of
$4.125 per share. This transaction was accounted for as a purchase, and
accordingly, the operations of CardioDyne, Inc. since October 23, 1995 are
included in the accompanying consolidated financial statements.
In addition to receiving shares of Luxtec common stock, shareholders of
CardioDyne, Inc. at the effective date of the Merger are entitled to certain
earnout payments based on the performance of products and agreements
incorporating technology in development by CardioDyne, Inc., as
defined. For a period of 17 years following the effective date of the
Merger, former CardioDyne, Inc. shareholders are entitled to receive, in
proportion to their former ownership percentages, 5% and 25% of revenues, if
any, from product and license agreements, respectively, which incorporate
technology in development by CardioDyne, Inc., at the time of acquisition.
Such earnout payments shall become payable 90 days after the end of the
Company's fiscal year. Earnout payments shall be paid 50% in cash and 50% in
Luxtec common stock and will be accounted for as additional purchase price
when due.
The aggregate purchase price of $5,235,073 (which consisted of $4,125,000 of
stock, $523,796 of assumed liabilities and $582,154 of direct acquisition
costs) was allocated based on the fair value of the tangible and intangible
assets acquired as follows:
Current assets $ 4,123
Purchased research and development 5,230,950
Total $5,235,073
The portion of the purchase price, totaling $5,230,950, allocated to research
and development projects that were not yet technologically feasible and did
not have future alternative use was charged to operations as of the
acquisition date, net of any tax considerations. To bring these projects
to technological feasibility, high-risk developmental and testing issues need
to be resolved which requires substantial additional development effort, the
success of which is uncertain at the date of acquistion.
Page 22
LUXTEC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1995
(Continued)
(3) Merger With CardioDyne, Inc. (Continued)
The results of operations related to CardioDyne, Inc. have been included
with those of the Company since October 23, 1995. Unaudited pro forma
operating results for the Company, assuming the acquisition had been made
as of November 1, 1994, are as follows:
For the years ended October 31,
1994 1995
Revenue $8,138,903 $7,755,376
Net Loss (142,033) (6,424,783)
Net loss per common share and
common equivalent share (.06) (2.64)
(4) Inventories
Inventories consist of the following at October 31, 1994 and 1995:
1994 1995
Raw material $ 877,410 $ 978,477
Work in process 96,097 203,833
Finished goods 546,141 513,691
$1,519,648 $1,696,001
(5) Property and Equipment
Property and equipment and their respective useful lives are as follows
at October 31, 1994, and 1995:
Estimated
Useful Lives 1994 1995
Machinery and equipment 3-10 years $1,155,078 $1,251,305
Molds and tooling 5 years 144,293 159,893
Furniture and fixtures 10 years 300,316 306,409
Leasehold improvements Life of lease 185,241 192,582
$1,784,928 $1,910,189
(6) Accrued Expenses
Accrued expenses consist of the following at October 31, 1994, and 1995:
1994 1995
Accrued payroll and related expenses $101,100 $ 80,246
Other accrued expenses 270,510 559,723
$371,610 $ 639,969
Page 23
LUXTEC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1995
(Continued)
(7) Revolving Credit Line
The Company has a $2,500,000 revolving line-of-credit agreement with a bank.
Borrowings bear interest at the bank's prime rate (8.75% at October 31, 1995)
plus .25%. Unused portions of the revolving line of credit accrue a fee at
an annual rate of .25%. Borrowings are secured by substantially all assets
of the Company. The agreement contains covenants, including the maintenance
of certain financial ratios, as defined. The line of credit expires on
March 31, 1997.
The Company has a $750,000 equipment facility agreement with a bank.
Borrowings are based on the purchase price of new equipment and conditions
determined by the bank. Borrowings bear interest at the bank's base rate
plus .5%. Borrowings under this facility are secured by substantially all
assets of the Company. As of October 31, 1995, there are no borrowings
outstanding under the equipment facility. The equipment facility agreement
expires on March 31, 1997.
(8) Commitments
The Company has noncancelable operating lease commitments that consist
principally of rentals of facilities and machinery. Its manufacturing
and office facilities are leased under a two-year operating lease expiring
on September 30, 1996.
The future minimum lease payments under operating leases over their
remaining terms are as follows:
Fiscal
Year Amount
1996 180,000
1997 46,000
1998 43,000
1999 17,000
Total minimum lease payments $286,000
Rent expense charged to operations for operating leases was $132,000 in 1993,
$138,000 in 1994 and $162,000 in 1995.
(9) Stock Plans
The Company maintains a stock option plan (the 1992 Stock Plan) that provides
for the grant of incentive stock options, nonqualified stock options, stock
awards and direct sales of stock. Under the Plan, incentive stock options
may be granted at an exercise price not less than the fair market value of
the Company's common stock on the date of the grant. Nonqualified options
may be granted by the Board of Directors at its discretion. The difference,
if any, between the exercise price and the fair value of the underlying
common stock at the measurement date is charged to expense over the vesting
period of such options with a corresponding credit to additional paid-in
capital. The 1992 Stock Plan also provides that the options are exercisable
at varying dates, as determined by the Compensation Committee of the Board
of Directors (the Compensation Committee) and have terms not to exceed
10 years.
The Company's Board of Directors adopted an amendment to the Company's
1992 Stock Plan. The amendment to the 1992 Stock Plan (i) increased
from 100,000 to 300,000 the number of shares authorized for issuance under
the Plan and (ii) limits to 100,000 the maximum number of shares of common
stock with respect to which options may be granted to any employee
in any calendar year.
Page 24
LUXTEC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1995
(Continued)
(9) Stock Plans (Continued)
On December 8, 1994, the Company adopted a stock option plan for nonemployee
directors (the 1995 Director Plan). The 1995 Director Plan provides that an
aggregate of up to 200,000 nonqualified options may be granted to nonemployee
directors, as determined by the Compensation Committee. Under the terms of
the 1995 Director Plan, options are granted at not less than the fair market
value of the Company's common stock on the date of the grant. The 1995
Director Plan also provides that the options are exercisable at varying
dates, as determined by the Compensation Committee, and have terms not to
exceed 10 years.
The following schedule summarizes the stock option activity for the three
years ended October 31, 1995:
Number of Shares Option Price
per Share
Outstanding at October 31, 1992 $ -
Granted 65,000 1.25
Outstanding at October 31, 1993 65,000 1.25
Granted 55,000 1.63
Outstanding at October 31, 1994 120,000 1.25 - 1.63
Granted 196,000 4.13 - 4.75
Canceled 6,000 1.25
Outstanding at October 31, 1995 310,000 $1.25 - $4.75
Exercisable at October 31, 1995 134,000 $1.25 - $4.75
As of October 31, 1995, 500,000 shares of common stock have been reserved
for issuance under the Company's stock option plans.
On April 21, 1994, the Board of Directors approved the 1993 Employee Stock
Purchase Plan (the 1993 Plan) whereby the Company has reserved and may
issue up to an aggregate of 25,000 shares of common stock in semiannual
offerings. Stock is sold at 85% of fair market value, as defined. Shares
subscribed to and issued under the Plan were 15,341 in 1995.
(10) Income Taxes
As of October 31, 1995, the Company had available net operating loss
carryforwards of approximately $2,516,000, research and development credit
carryforwards of approximately $91,000, and general business credit
carryforwards of approximately $25,000 to reduce future federal income taxes,
if any. These carryforwards expire through 2010 and are subject to review
and possible adjustment by the Internal Revenue Service. The Tax Reform Act
of 1986 limits a Corporation's ability to utilize certain net operating loss
carryforwards in the event of a cumulative change in ownership in excess of
50%, as defined.
In February 1992, The Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income
Taxes." The Company has adopted the provisions of SFAS No. 109 by
retroactively restating all periods presented in the accompanying
consolidated financial statements. There was no effect on net loss or
financial position of adopting the provisions of SFAS No. 109 for any
period presented.
Page 25
LUXTEC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1995
(Continued)
(10) Income Taxes (Continued)
The provision for income taxes differs from the amount computed by applying
the statutory federal income tax rate to income before provision for income
taxes due to the following:
For the Years Ended October 31,
1993 1994 1995
Computed at statutory rate 34.0% 34.0% 34.0%
State income tax,
net of federal benefit 6.0 6.0 6.0
Tax benefit from net
operating loss carryforwards (31.3) (31.0) (40.0)
Effective tax rate 8.7% 9.0% - %
The components of the net deferred tax amount recognized in the accompanying
consolidated balance sheets are set forth below:
1993 1994 1995
Deferred tax assets $440,000 $346,000 $1,141,000
Deferred tax liabilities (44,000) (62,000) -
Valuation allowance (396,000) (284,000) (1,141,000)
$ - $ - $ -
The appropriate tax effect of each type of temporary difference and
carryforward before allocation of the valuation allowance is summarized as
follows:
1993 1994 1995
Net operating losses $324,000 $230,000 $1,006,000
Other temporary differences (44,000) (62,000) 19,000
Research and development credits 91,000 91,000 91,000
General business credits 25,000 25,000 25,000
$396,000 $284,000 $1,141,000
Due to the uncertainty surrounding the timing of realizing the benefits of
its favorable tax attributes in future income tax returns, the Company has
placed a valuation allowance against its otherwise recognizable deferred
tax assets. For the years ended October 31, 1993 and1994, the decrease
in the valuation allowance was $53,000 and $112,000, respectively. For
the year ended October 31, 1995, the increase in the valuation allowance was
$857,000.
Page 26
LUXTEC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1995
(Continued)
(11) Business Segment and Export Sales
The Company operates in one business segment -- the manufacture, sale and
distribution of a wide range of medical products using fiber-optics.
The Company operates from one location in the United States. Sales for
this operation totaled the following:
For the Years Ended October 31,
1993 1994 1995
Geographic Area
Domestic 85% 84% 84%
Europe 10 11 10
All others 5 5 6
100% 100% 100%
(12) Significant Customers
One customer, the president of which is a
member of the Company's Board of Directors, accounted for 15% of total net
sales in fiscal 1993, 1994 and 1995.
(13) Subsequent Event
On December 18, 1995, the Company issued Senior Subordinated Notes
(the Notes) to an investor for $1,000,000 in cash. Interest accrues on
the Notes at the rate of 8% per annum and is payable annually in arrears.
Principal on the Notes is due January 1, 2001. In connection with the
financing, the Company issued a detachable stock warrant to an investor.
The warrant entitles the holder to purchase 450,000 shares of common stock
at an exercise price of $3, adjusted for certain dilutive events, as defined.
Page 27
LUXTEC CORPORATION
October 31, 1995
ITEM 9. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
For information with respect to the Directors and Executive Officers of
the Corporation, see the section entitled "Election of Directors" appearing
in the Corporation's Proxy Statement in connection with its next Annual
Meeting of Shareholders or special meeting in lieu thereof, which section is
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
See the section entitled "Executive Compensation" appearing in the
Corporation's Proxy Statement in connection with its next Annual Meeting of
Shareholders or special meeting in lieu thereof, which section is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
See the section entitled "Election of Directors" appearing in the
Corporation's Proxy Statement in connection with its next Annual Meeting of
Shareholders or special meeting in lieu thereof, which section is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Louis C. Wallace is currently, and has been since 1989, a member of the
Board of Directors of the Corporation. Mr. Wallace is the founder and
President of Specialty Surgical Instrumentation, Inc. (SSI), a surgical
distributor in ten (10) southeastern states. SSI is the largest single
customer of the Corporation, representing approximately 15% of net sales
during fiscal 1995. SSI and Luxtec operate at arms length with a contract
substantially the same as the other domestic distributors of the Corporation's
products. The Corporation expects that SSI will represent approximately
the same percentage of net sales during fiscal 1996 as occurred during
fiscal 1995.
Page 28
LUXTEC CORPORATION
October 31, 1995
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
1. Consolidated Financial Statements
Report of Independent Public Accountants
Consolidated Balance Sheets as of
October 31, 1994 and October 31, 1995.
Consolidated Statements of Earnings
for the years ended October 31, 1993,
October 31, 1994 and October 31, 1995.
Consolidated Statements of Stockholders'
Equity for the years ended October 31, 1993,
October 31, 1994 and October 31, 1995.
Consolidated Statements of Cash Flows
for the years ended October 31, 1993,
October 31, 1994 and October 31, 1995.
Notes to Consolidated Financial Statements
2. Financial Statement Schedules
No schedules are submitted because they are not applicable, not required
or because the information is included elsewhere herein.
Page 29
LUXTEC CORPORATION
October 31, 1995
3. Exhibits
Exhibit Description Designation
2A Merger Agreement 2A****
3A Articles of Organization 3A*
3B Amendment dated March 30, 1982 to Articles of Organization 3B*
3C Amendment dated August 9, 1984 to Articles of Organization 3C*
3D Amendment dated April 10, 1992 to Articles of Organization 3D**
3E Amendment dated October 20, 1995 to Articles of Organization 3E****
3F Amendment dated October 20, 1995 to Articles of Organization 3F****
3G By-Laws 3G*
4 Specimen of Stock Certificate 4*
10L Lease for the premises in Worcester, MA 10L*****
10N Employment Agreement with James Hobbs 10N**
10O Luxtec Corporation 1992 Stock Plan 10O**
10P Luxtec Corporation 1995 Stock Option Plan
for Non-Employee Directors 10P****
10Q Bank Agreement 10Q
21 Luxtec Subsidiaries 21
23 Consent of Auditors 23
*Previously filed as exhibits to the Corporation's Registration Statement
on Form S-18 SEC File No. 33-5514B declared effective on July 7, 1986.
**Previously filed as exhibit to the Corporation's Report on Form 10-K
for fiscal year ended October 31, 1993.
***Previously filed as exhibits to the Corporation's Report on Form 10-Q
for quarter ended July 31, 1994.
****Previously filed as exhibits to the Corporation's Proxy Statement
dated October 20, 1995.
*****Previously filed as exhibit to the Corporation's Report on Form 10-K
for fiscal year ended October 31, 1994.
Page 30
LUXTEC CORPORATION
October 31, 1995
3. Exhibits (Continued)
(b) Reports on Form 8-K:
Announcement of definitive Agreement of Merger and Plan of Reorganization
with CardioDyne, Inc. dated June 28, 1995.
Announcement of closing of merger with CardioDyne, Inc. dated
October 23, 1995.
(c) Exhibits.
The Corporation hereby files as exhibits to this Form 10-K those
exhibits listed in Item 14 (a)(3), above, as being filed herewith.
(d) Financial Statement Schedules.
None.
Page 31
LUXTEC CORPORATION
October 31, 1995
SIGNATURES
Pursuant to the requirements of Section 13 or 15(D) of the
Securities Exchange Act of 1934, the Corporation has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Town of Worcester, Commonwealth of Massachusetts,
on the 29th day of January 1996.
LUXTEC CORPORATION
by S/James W. Hobbs
James W. Hobbs, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons in the capacities and on
the dates indicated:
Signature Title Date
S/James W. Hobbs President, Chief January 29, 1996
James W. Hobbs Executive Officer, Director
S/Samuel M. Stein Chief Financial Officer, January 29, 1996
Samuel M. Stein Treasurer, Assistant Clerk
S/James Berardo Director January 29, 1996
James Berardo
S/Paul Epstein Director January 29, 1996
Paul Epstein
S/Lynn K. Friedel Director January 29, 1996
Lynn K. Friedel
S/Patrick G. Phillipps Director January 29, 1996
Patrick G. Phillipps
S/Thomas J. Vander Salm Director January 29, 1996
Thomas J. Vander Salm
S/Louis C. Wallace Director January 29, 1996
Louis C. Wallace
Page 32
Exhibits furnished pursuant to requirements
of FORM 10K
3. Exhibits
Exhibit Description Designation
2A Merger Agreement 2A****
3A Articles of Organization 3A*
3B Amendment dated March 30, 1982 to Articles of Organization 3B*
3C Amendment dated August 9, 1984 to Articles of Organization 3C*
3D Amendment dated April 10, 1992 to Articles of Organization 3D**
3E Amendment dated October 20, 1995 to Articles of Organization 3E****
3F Amendment dated October 20, 1995 to Articles of Organization 3F****
3G By-Laws 3G*
4 Specimen of Stock Certificate 4*
10L Lease for the premises in Worcester, MA 10L*****
10N Employment Agreement with James Hobbs 10N**
10O Luxtec Corporation 1992 Stock Plan 10O**
10P Luxtec Corporation 1995 Stock Option Plan
for Non-Employee Directors 10P****
10Q Bank Agreement 10Q
21 Luxtec Subsidiaries 21
23 Consent of Auditors 23
*Previously filed as exhibits to the Corporation's Registration Statement
on Form S-18 SEC File No. 33-5514B declared effective on July 7, 1986.
**Previously filed as exhibit to the Corporation's Report on Form 10-K
for fiscal year ended October 31, 1993.
***Previously filed as exhibits to the Corporation's Report on Form 10-Q
for quarter ended July 31, 1994.
****Previously filed as exhibits to the Corporation's Proxy Statement dated
October 20, 1995.
*****Previously filed as exhibit to the Corporation's Report on Form 10-K
for fiscal year ended October 31, 1994.
Page 33
EXHIBIT 21
Luxtec Corporation Subsidiaries
1. Cathtec, Inc., a Massachusetts Corporation.
2. Fiber Imaging Technologies, Inc., a Massachusetts Corporation.
3. CardioDyne, Incorporated, a Massachusetts Corporation.
Page 34
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports in this Form 10-K, into the Company's previously filed
Registration Statement on Form S-8 (File No. 33-83510).
S/ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN
Boston, Massachusetts
January 29, 1996
Page 35
UNLIMITED GUARANTY
THIS UNLIMITED GUARANTY, dated as of October 24, 1995 by CARDIODYNE, INC.
f/k/a LUXTEC CD ACQUISITION CO., INC., a Massachusetts corporation, successor
by merger to CARDIODYNE, INC., a Delaware corporation (the "Guarantor"), is
in favor of THE FIRST NATIONAL BANK OF BOSTON, a national banking association
with its head office at 100 Federal Street, Boston, Massachusetts 02110, and
its foreign branches (the "Lender"). In consideration of the Lender's giving
time, credit or banking facilities or accommodations to LUXTEC CORPORATION
and its successors (the "Customer"), the Guarantor agrees as follows:
1. GUARANTY OF PAYMENT AND PERFORMANCE. The Guarantor hereby guarantees to
the Lender the full and punctual payment when due (whether at maturity, by
acceleration or otherwise), and the performance, of all liabilities,
agreements and other obligations of the Customer to the Lender, whether
direct or indirect, absolute or contingent, due or to become due, secured or
unsecured, now existing or hereafter arising or acquired (whether by way of
discount, letter of credit, lease, loan, overdraft or otherwise) (the
"Obligations"). This Guaranty is an absolute, unconditional and continuing
guaranty of the full and punctual payment and performance of the Obligations
and not of their collectibility only and is in no way conditioned upon any
requirement that the Lender first attempt to collect any of the Obligations
from the Customer or resort to any security or other means of obtaining their
payment or upon a default by the Customer in the payment or performance of
any of the Obligations. The obligations of the Guarantor hereunder shall
become immediately due and payable to the Lender, upon demand by the Lender,
without notice of any nature, which is expressly, waived by the Guarantor.
Payments by the Guarantor hereunder may be required by the Lender on any
number of occasions.
2. GUARANTOR'S AGREEMENT TO PAY. The Guarantor further agrees, as the
principal obligor and not as a guarantor only, to pay to the Lender, on
demand, all costs and expenses (including court costs and legal expenses)
incurred or expended by the Lender in connection with the Obligations, this
Guaranty and the enforcement thereof, together with interest on amounts
recoverable under this Guaranty from the time such amounts become due until
payment, at the rate per annum equal to the rate of interest announced by
the Lender from time to time at its head office as its Base Rate, plus 4.00%:
provided that if such interest exceeds the maximum amount permitted to be
paid under apllicable law, them such interest shall b e reduced to such
maximum permitted amount.
3. UNLIMITED GUARANTY. THE LIABILITY OF THE GUARANTOR HEREUNDER SHALL BE
UNLIMITED.
4. WAIVERS BY GUARANTOR; LENDER'S FREEDOM TO ACT. The Guarantor agrees
that the Obligations will be paid and performed strictly in accordance with
their respective terms regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms or the
rights of the Lender with respect thereto. The Guarantor waives presentment,
demand, protest, notice of acceptance, notice of Obligations incurred and all
other notices of any kind, all defenses which may be avail
5. UNENFORCEABILITY OF OBLIGATIONS AGAINST CUSTOMER. If for any reason the
Customer has no legal existence or is under no legal obligation to discharge
any of the Obligations, or if any of the Obligations have become
irrecoverable from the Customer by operation of law or for any other reason,
this Guaranty shall nevertheless be binding on the Guarantor to the same
extent as if the Guarantor at all times had been the principal obligor on all
such Obligations. In the event that acceleration of the time for
6. SUBROGATION; SUBORDINATION. Until the payment and performance in full of
all Obligations and any and all obligations of the Customer to any affiliate
of the Lender, the Guarantor shall not exercise any rights against the
Customer arising as a result of payment by the Guarantor hereunder, by way of
subrogation or otherwise, and will not prove any claim in competition with
the Lender or its affiliates in respect of any payment hereunder in
bankruptcy or insolvency proceedings of any nature; the Guaranto
7. SECURITY; SET-OFF. The Guarantor grants to the Lender, as security for
the full and punctual payment and performance of the Guarantor's obligations
hereunder, a continuing lien on and security interest in all securities or
other property belonging to the Guarantor now or hereafter held by the Lender
and in all deposits (general or special, time or demand, provisional or
final) and other sums credited by or due from the Lender to the Guarantor or
subject to withdrawal by the Guarantor; and regardless of
8. FURTHER ASSURANCES. The Guarantor agrees, upon demand after any change
in the condition or affairs (financial or otherwise) of the Guarantor deemed
by the Lender to be adverse and material, to secure the payment and
performance of its obligations hereunder by delivering, assigning or
transferring to the Lender or granting the Lender a security interest in
additional collateral of a value and character satisfactory to the Lender,
and authorizes the Lender to file any financing statement deemed by the Le
9. TERMINATION; REINSTATEMENT. This Guaranty shall remain in full force and
effect until the Lender is given written notice of the Guarantor's intention
to discontinue this Guaranty, notwithstanding any intermediate or temporary
payment or settlement of the whole or any part of the Obligations. No such
notice shall be effective unless received and acknowledged by an officer of
the Lender at its head office or at the branch of the Lender where this
Guaranty is given. No such notice shall affect any right
of any affiliate hereunder including, without limitation, the rights set
forth in Sections 4 and 6, with respect to Obligations incurred prior to the
receipt of such notice or Obligations incurred pursuant to any contract or
commitment in existence prior to such receipt, and all checks, drafts, notes,
instruments (negotiable or otherwise) and writings made by or for the account
of the Customer and drawn on the Lender or any of its agents purporting to be
dated on or before the date of receipt of such notic
10. SUCCESSORS AND ASSIGNS. This Guaranty shall be binding upon the
Guarantor, its successors and assigns, and shall inure to the benefit of and
be enforceable by the Lender and its successors, transferees and assigns.
Without limiting the generality of the foregoing sentence, the Lender may
assign or otherwise transfer any agreement or any note held by it evidencing,
securing or otherwise executed in connection with the Obligations, or sell
participations in any interest therein, to any other person or
11. AMENDMENTS AND WAIVERS. No amendment or waiver of any provision of this
Guaranty nor consent to any departure by the Guarantor therefrom shall be
effective unless the same shall be in writing and signed by the Lender. No
failure on the part of the Lender to exercise, and no delay in exercising,
any right hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right.
12. NOTICES. All notices and other communications called for hereunder
shall be made in writing and, unless otherwise specifically provided herein,
shall be deemed to have been duly made or given when delivered by hand or
mailed first class mail postage prepaid or, in the case of telegraphic or
telexed notice, when transmitted, answer back received, addressed as follows:
if to the Guarantor, at the address set forth beneath its signature hereto,
and if to the Lender, at 100 Federal Street, Boston, Massac
13. GOVERNING LAW; CONSENT TO JURISDICTION. This Guaranty is intended to
take effect as a sealed instrument and shall be governed by, and construed
in accordance with, the laws of The Commonwealth of Massachusetts. The
Guarantor agrees that any suit for the enforcement of this Guaranty may be
brought in the courts of The Commonwealth of Massachusetts or any Federal
Court sitting therein and consents to the non-exclusive jurisdiction of such
court and to service of process in any such suit being made upon
mail at the address specified in Section 12 hereof. The Guarantor hereby
waives any objection that it may now or hereafter have to the venue of any
such suit or any such court or that such suit was brought in an inconvenient
court.
14. MISCELLANEOUS. This Guaranty constitutes the entire agreement of the
Guarantor with respect to the matters set forth herein. The rights and
remedies herein provided are cumulative and not exclusive of any remedies
provided by law or any other agreement, and this Guaranty shall be in
addition to any other guaranty of the Obligations. The invalidity or
unenforceability of any one or more sections of this Guaranty shall not
affect the validity or enforceability of its remaining provisions. Captions
are for the ease of reference only and shall not affect the meaning of the
relevant provisions. The meanings of all defined terms used in this Guaranty
shall be equally applicable to the singular and plural forms of the terms
defined.
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be executed
and delivered by its duly authorized officer as of the date appearing on page
one.
CARDIODYNE, INC. f/k/a LUXTEC CD
ACQUISITION CO., INC.
________________________ By:_____________________________
Witness Its President
326 Clark Street
Worcester, Massachusetts 01606
CERTIFICATE
The undersigned certifies to The First National Bank of Boston that:
1. He is the Clerk of the Guarantor which executed the foregoing Guaranty
and in that capacity has the authority to make this certificate on behalf of
the Guarantor.
2. The Guarantor is a corporation, validly organized or formed and existing
in good standing and in the full enjoyment of its powers and franchises under
the laws of the Commonwealth of Massachusetts.
3. The foregoing Guaranty has been duly executed and delivered on behalf of
the Guarantor, such actions have been duly authorized by all necessary
corporate or other action, and the execution, delivery and performance of the
Guaranty by the Guarantor will not contravene any existing law, rule or
regulation, or any provision of its certificate of incorporation or bylaws or
other document or documents evidencing its establishment or governing the
conduct of its affairs or any agreement to which it is a party
IN WITNESS WHEREOF, the undersigned has made this certificate on behalf of
the Guarantor this ____ day of October, 1995.
ATTEST: CARDIODYNE, INC. f/k/a LUXTEC CD
ACQUISITION CO., INC.
_____________________________ By:______________________________
Its Clerk
ASSIGNMENT OF LEASE
THIS ASSIGNMENT AGREEMENT made as of this 24th day of October, 1995, is by
and between LUXTEC CORPORATION, a Massachusetts corporation with its
principal place of business at 326 Clark Street, Worcester, Massachusetts
(the "Assignor") and THE FIRST NATIONAL BANK OF BOSTON, a national banking
association with its head office at 100 Federal Street, Boston, Massachusetts
(the "Assignee").
The Assignor and the Assignee agree as follows:
ASSIGNMENT OF LEASE. For value received and the consideration hereinafter
set forth, and as collateral security for the debt hereinafter described,
Assignor grants a security interest in, and also transfers and assigns to
Assignee, Assignor's entire right, title and interest as lessee in a lease of
property located at 326 Clark Street, Worcester, Worcester County,
Massachusetts, described in a lease dated _____________ by and between
UNITRODE CORPORATION, as lessor (the "Lessor") and Assignor as lessee fo
DEBT SECURED. This Assignment is made to secure the following:
the payment of amounts from time to time due pursuant to the terms of (i) a
certain Revolving Credit Note dated of even date herewith made by the
Assignor to the Assignee in the principal amount of Two Million Five Hundred
Thousand and 00/100 Dollars ($2,500,000.00) (the "Note") and (ii) a certain
Equipment Note dated of even date herewith made by the Assignor to the
Assignee in the principal amount of Seven Hundred and Fifty Thousand and
00/100 Dollars ($750,000.00) (together, the "Notes");
the performance of all covenants and agreements contained in the Notes, a
Loan and Security Agreement by and between the Assignor and the Assignee
dated of even date herewith (the "Agreement"), this Assignment, the
Collateral Documents (as defined in the Agreement) and all other agreements,
documents or instruments executed by or between the parties hereto dated of
even date herewith (collectively, the "Loan Documents"); and
all obligations of the Assignor to the Assignee whether now existing or
hereafter arising, direct or indirect, absolute or contingent, due or not due.
All of the foregoing are collectively referred to herein as the
"Obligations".
ASSIGNOR'S WARRANTIES. Assignor warrants that:
it is the lawful lessee of the Lease herein assigned insofar as it applies
to the Premises and of all the leasehold rights which the Lease purports to
create with full right to assign the same;
the Lease is unencumbered, valid and in full force and effect in accordance
with its terms; and
it is not in default under any of the terms, conditions or covenants of the
Lease.
ASSIGNOR'S COVENANTS. Assignor covenants and agrees:
to observe and perform all obligations imposed on lessee under the Lease;
not to do or permit to be done anything to impair the security thereof; and
to indemnify Assignee from the consequences of any failure to do so;
to pay all rent accruing under the Lease, or for the use and occupancy of
the Premises, at the time when they shall become due;
not to execute any other Assignment of lessee's interest in the Lease;
not to alter, extend or modify the terms of the Lease or to request any
consent or exercise any renewal, or option to extend required or permitted by
the terms of the Lease without the prior written consent of Assignee; and
not to terminate, cancel, surrender or assign the Lease or to cause a
termination or changing of the obligations of Assignor without the prior
written consent of Assignee.
TERMS AND CONDITIONS.
Assignee's Option to Take Possession and Operate Premises. In the event of
Assignor's default in performance of the Obligations, without notice or
regard to the adequacy of the security for the Obligations, personally or by
its agents, with or without bringing any action or proceedings, Assignee
shall have the option, all to the extent permitted by the terms of the Lease,
to take possession of the Premises, and to hold the same as lessee under the
Lease; and, with or without taking physical possession of
(b) Indemnification of Assignee. Assignee shall not be liable for any loss
or liability sustained by Assignor resulting from Assignee's operations or
use of the Premises or from any other act or omission in connection therewith
except for gross negligence or willful misconduct of Assignee. At no time
prior to exercise of the options in Section 5(a) hereof shall Assignee be
obligated to perform or discharge any obligation or duty under the Lease, or
under this Assignment, and Assignor agrees to indemnif
(c) Evidence of Unpaid Indebtedness. Upon payment in full of the
Obligations, this Assignment shall become void and of no effect, but the
affidavit or statement of Assignee or any agent, officer or attorney of
Assignee showing any part of the Obligations remaining unpaid shall
constitute conclusive evidence of the effectiveness and continuing force of
this Assignment and any person may, and is hereby authorized to, rely thereon.
(d) Releases by Assignee. Assignee may take or release other security for
payment of the Obligations and may further release any party primarily or
secondarily liable, and may apply any other security held by Assignee to the
satisfaction of the Obligations without prejudice to any rights under this
Assignment.
(e) Remedies of Assignee Not Exclusive. Nothing contained in this
Assignment nor any act done or omitted by Assignee pursuant to the terms of
this Assignment shall be deemed a waiver by Assignee of any of the rights or
remedies under the documents evidencing the Obligations and this Assignment
is executed without prejudice to any rights or remedies possessed by Assignee
under the terms of any other instruments, whether referred to herein or
otherwise. The right of Assignee to collect the Obligations an
6. DEFAULT. Violation of any of the covenants, representations and
provisions contained herein by the Assignor shall be deemed a default under
the terms of any of the documents evidencing the Obligations.
7. EFFECT OF ASSIGNMENT. The terms, provisions, representations and
warranties herein contained shall be binding upon the Assignor and the
respective heirs, administrators, executors, successors and assigns of the
Assignor, as well as any subsequent owner of the Premises, and shall inure to
the Assignee, its successors and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Assignment at
Worcester, Massachusetts, as of the day and year first above written.
LUXTEC CORPORATION
By:____________________________
Its President
By:____________________________
Its Treasurer
THE FIRST NATIONAL BANK OF
BOSTON
By:____________________________
Its Vice President
The undersigned lessor under the Lease of the Premises described in Section
1 hereof hereby assents to the Assignment of Lease by Assignor to Assignee.
UNITRODE CORPORATION
By:_______________________________
Its
COMMONWEALTH OF MASSACHUSETTS
Worcester, ss. October 24, 1995
Then personally appeared the above-named Samuel M. Stein, Treasurer of
Luxtec Corporation, and acknowledged the foregoing instrument to be his free
act and deed and the free act and deed of Luxtec Corporation, before me.
____________________________
Notary Public
My Commission Expires:
COMMONWEALTH OF MASSACHUSETTS
Worcester, ss. October 24, 1995
Then personally appeared the above-named G. Christopher Miller, Vice
President of The First National Bank of Boston, and acknowledged the
foregoing instrument to be his free act and deed and the free act and deed of
The First National Bank of Boston, before me.
__________________________
Notary Public
My Commission Expires
[_____________________________]
__________, ss. October __, 1995
Then personally appeared the above-named _________________, _______________
of Unitrode Corporation, and acknowledged the foregoing instrument to be
his/her free act and deed and the free act and deed of Unitrode Corporation,
before me.
__________________________
Notary Public
My Commission Expires:
ASSIGNMENT OF PATENTS
THIS ASSIGNMENT OF PATENTS (the "Assignment") is made as of the 24th day of
October, 1995 by CARDIODYNE, INC., a Massachusetts corporation, f/k/a LUXTEC
CD ACQUISITION CO., INC., with its principal office at 326 Clark Street,
Worcester, Massachusetts, successor by merger to CARDIODYNE, INC., a Delaware
corporation (the "Assignor") to THE FIRST NATIONAL BANK OF BOSTON, a national
bank with its head office at 100 Federal Street, Boston, Massachusetts (the
"Lender").
BACKGROUND. Assignor has executed and delivered to the Lender a certain
Unlimited Guaranty dated as of October 24, 1995 guarantying all obligations
of LUXTEC CORPORATION to the Lender pursuant to a certain Loan and Security
Agreement dated as of October 24, 1995 by and among the Assignor, the Lender
and certain other parties (as amended from time to time, the "Loan
Agreement"). In order to induce the Lender to execute and deliver the Loan
Agreement, the Assignor has agreed to assign to the Lender certain
NOW, THEREFORE, in consideration of the premises contained herein and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Assignor hereby agrees with the Lender as follows:
1. To secure the complete and timely satisfaction of all Obligations (such
term, as used herein, shall have the same meaning as provided in the Loan
Agreement) of the Assignor to the Lender, the Assignor hereby assigns,
pledges and grants to the Lender a continuing security interest in and to the
Assignor's right, title and interest in and to the patents and patent
applications listed on Exhibit A attached hereto, including without
limitation all proceeds thereof (such as, by way of example, license royal
2. The Assignor covenants and warrants that:
(a) The Patents are subsisting and have not been adjudged invalid or
unenforceable, in whole or in part;
(b) To the best of the Assignor's knowledge, each of the Patents is valid
and enforceable and the Assignor has notified the Lender in writing of all
prior art (including public uses and sales) of which it is aware;
(c) The Assignor is the sole and exclusive owner of the entire and
unencumbered right, title and interest in and to each of the Patents, free
and clear of any liens, charges and encumbrances, including without
limitation licenses, shop rights and covenants by the Assignor not to sue
third persons; and
(d) The Assignor has the unqualified right to enter into this Assignment
and perform its terms.
3. The Assignor agrees that, until all of the Obligations shall have been
satisfied in full, it will not enter into any agreement (for example, a
license agreement) which is inconsistent with the Assignor's obligations
under this Assignment, without the Lender's prior written consent, which
consent shall not be unreasonably withheld.
4. If, before the Obligations shall have been satisfied in full, the
Assignor shall obtain rights to any new patentable inventions, or become
entitled to the benefit of any patent application or patent for any reissue,
division, continuation, renewal, extension or continuation-in-part of any
Patent or any improvement on any Patent, the provisions of paragraph 1 shall
automatically apply thereto and the Assignor shall give to the Lender prompt
notice thereof in writing.
5. The Assignor authorizes the Lender to modify this Assignment by amending
Exhibit A to include any future patents and patent applications which are
Patents under paragraph 1 or paragraph 4 hereof.
6. Unless and until there shall have occurred and be continuing an Event of
Default (as defined in the Loan Agreement), the Lender hereby grants to the
Assignor the exclusive, worldwide non-transferable right and license to make,
have made, use and sell the inventions disclosed and claimed in the Patents
for the Assignor's own benefit and account and for none other. The Assignor
agrees not to sell or assign its interest in, or grant any sublicense under,
the license granted to the Assignor in this paragr
7. If any Event of Default shall have occurred and be continuing, the
Assignor's license under the Patents as set forth in paragraph 6 shall
terminate forthwith, and the Lender shall have, in addition to all other
rights and remedies given it by this Assignment, those allowed by law and the
rights and remedies of a secured party under the Uniform Commercial Code as
enacted in any jurisdiction in which the Patents may be located and, without
limiting the generality of the foregoing, the Lender may immediat
8. At such time as the Assignor shall completely satisfy all of the
Obligations, the Lender shall execute and deliver to the Assignor all deeds,
assignments and other instruments as may be necessary or proper to re-vest in
the Assignor full title to the Patents, subject to any disposition thereof
which may have been made by the Lender pursuant hereto.
9. Any and all fees, costs and expenses, of whatever kind or nature,
including reasonable attorneys' fees and legal expenses, incurred by the
Lender in connection with the preparation of this Assignment and all other
documents relating hereto and the consummation of this transaction, the
filing or recording of any documents (including all taxes in connection
therewith) in public offices, the payment or discharge of any taxes, counsel
fees, maintenance fees, encumbrances or otherwise protecting, maintainin
10. If, in the Assignor's reasonable business judgment, any patent shall
have significant value to the business of the Assignor, the Assignor shall
have the duty, through counsel acceptable to the Lender, to prosecute
diligently any application with respect to the Patents pending as of the date
of this Assignment or thereafter until the Obligations shall have been paid
in full, to make application on unpatented but patentable inventions and to
preserve and maintain all rights in the Patents. Any expenses
11. The Lender shall have the right but shall in no way be obligated to
bring suit in its own name to enforce the Patents or any license thereunder,
in which event the Assignor shall at the request of the Lender do any and all
lawful acts and execute any and all proper documents required by the Lender
in aid of such enforcement and the Assignor shall promptly, upon demand,
reimburse and indemnify the Lender for all costs and expenses incurred by the
Lender in the exercise of its rights under this paragrap
12. No course of dealing between the Assignor and the Lender, nor any
failure to exercise, nor any delay in exercising, on the part of the Lender,
any right, power or privilege hereunder or under the Loan Agreement shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, power or privilege hereunder or thereunder preclude any other or
further exercise thereof or the exercise of any other right, power or
privilege.
13. All of the Lender's rights and remedies with respect to the Patents,
whether established hereby, by the Loan Agreement, by any other agreements or
by law shall be cumulative and may be exercised singularly or concurrently.
14. The provisions of this Assignment are severable, and if any clause or
provision shall be held invalid and unenforceable in whole or in part in any
jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part thereof, in such jurisdiction, and shall
not in any manner affect such clause or provision in any other jurisdiction,
or any other clause or provision of this Assignment in any jurisdiction.
15. This Assignment is subject to modification only by a writing signed by
the parties, except as provided in paragraph 5.
16. The benefits and burdens of this Assignment shall inure to the benefit
of and be binding upon the respective successors and permitted assigns of the
parties.
17. The validity and interpretation of this Assignment and the rights and
obligations of the parties shall be governed by the laws of The Commonwealth
of Massachusetts.
IN WITNESS WHEREOF, the parties hereto have executed this Assignment as an
instrument under seal as of the day and year first above written.
CARDIODYNE, INC.
____________________________ By:___________________________
Witness Its Treasurer
THE FIRST NATIONAL BANK
OF BOSTON
____________________________ By:__________________________
Witness Its Vice President
COMMONWEALTH OF MASSACHUSETTS
Worcester, ss. January __, 1996
Then personally appeared the above-named Samuel M. Stein, Treasurer of
Cardiodyne, Inc., and acknowledged the foregoing instrument to be his free
act and deed and the free act and deed of Cardiodyne, Inc., before me.
__________________________
Notary Public
My Commission Expires:
COMMONWEALTH OF MASSACHUSETTS
Worcester, ss. January __, 1996
Then personally appeared the above-named G. Christopher Miller, Vice
President of The First National Bank of Boston, and acknowledged the
foregoing instrument to be his free act and deed and the free act and deed
of The First National Bank of Boston, before me.
__________________________
Notary Public
My Commission Expires:
ASSIGNMENT OF PATENTS
THIS ASSIGNMENT OF PATENTS (the "Assignment") is made as of the 24th day of
October, 1995 by LUXTEC CORPORATION, a Massachusetts corporation having a
principal business address at 326 Clark Street, Worcester, Massachusetts
(the "Assignor") to THE FIRST NATIONAL BANK OF BOSTON, a national bank with
its head office at 100 Federal Street, Boston, Massachusetts (the "Lender").
BACKGROUND. Assignor has executed and delivered to the Lender (a) a
certain Revolving Credit Note dated of even date herewith in the principal
amount of Two Million Five Hundred Thousand and 00/100 Dollars
($2,500,000.00), and (b) a certain Equipment Note dated of even date
herewith in the principal amount of Seven Hundred Fifty Thousand and 00/100
Dollars ($750,000.00) (collectively, the "Notes") pursuant to a certain Loan
and Security Agreement dated of even date herewith by and among Assignor,
Lender a
NOW, THEREFORE, in consideration of the premises contained herein and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Assignor hereby agrees with the Lender as follows:
1. To secure the complete and timely satisfaction of all Obligations (such
term, as used herein, shall have the same meaning as provided in the Loan
Agreement) of the Assignor to the Lender, the Assignor hereby assigns,
pledges and grants to the Lender a continuing security interest in and to the
Assignor's right, title and interest in and to the patents and patent
applications listed on Exhibit A attached hereto, including without
limitation all proceeds thereof (such as, by way of example, license royal
2. The Assignor covenants and warrants that:
(a) The Patents are subsisting and have not been adjudged invalid or
unenforceable, in whole or in part;
(b) To the best of the Assignor's knowledge, each of the Patents is valid
and enforceable and the Assignor has notified the Lender in writing of all
prior art (including public uses and sales) of which it is aware;
(c) The Assignor is the sole and exclusive owner of the entire and
unencumbered right, title and interest in and to each of the Patents, free
and clear of any liens, charges and encumbrances, including without
limitation licenses, shop rights and covenants by the Assignor not to sue
third persons; and
(d) The Assignor has the unqualified right to enter into this Assignment
and perform its terms.
3. The Assignor agrees that, until all of the Obligations shall have been
satisfied in full, it will not enter into any agreement (for example, a
license agreement) which is inconsistent with the Assignor's obligations
under this Assignment, without the Lender's prior written consent, which
consent shall not be unreasonably withheld.
4. If, before the Obligations shall have been satisfied in full, the
Assignor shall obtain rights to any new patentable inventions, or become
entitled to the benefit of any patent application or patent for any reissue,
division, continuation, renewal, extension or continuation-in-part of any
Patent or any improvement on any Patent, the provisions of paragraph 1 shall
automatically apply thereto and the Assignor shall give to the Lender prompt
notice thereof in writing.
5. The Assignor authorizes the Lender to modify this Assignment by amending
Exhibit A to include any future patents and patent applications which are
Patents under paragraph 1 or paragraph 4 hereof.
6. Unless and until there shall have occurred and be continuing an Event of
Default (as defined in the Loan Agreement), the Lender hereby grants to the
Assignor the exclusive, worldwide non-transferable right and license to make,
have made, use and sell the inventions disclosed and claimed in the Patents
for the Assignor's own benefit and account and for none other. The Assignor
agrees not to sell or assign its interest in, or grant any sublicense under,
the license granted to the Assignor in this paragr
7. If any Event of Default shall have occurred and be continuing, the
Assignor's license under the Patents as set forth in paragraph 6 shall
terminate forthwith, and the Lender shall have, in addition to all other
rights and remedies given it by this Assignment, those allowed by law and
the rights and remedies of a secured party under the Uniform Commercial
Code as enacted in any jurisdiction in which the Patents may be located and,
without limiting the generality of the foregoing, the Lender may immediat
8. At such time as the Assignor shall completely satisfy all of the
Obligations, the Lender shall execute and deliver to the Assignor all deeds,
assignments and other instruments as may be necessary or proper to re-vest
in the Assignor full title to the Patents, subject to any disposition
thereof which may have been made by the Lender pursuant hereto.
9. Any and all fees, costs and expenses, of whatever kind or nature,
including reasonable attorneys' fees and legal expenses, incurred by the
Lender in connection with the preparation of this Assignment and all other
documents relating hereto and the consummation of this transaction, the
filing or recording of any documents (including all taxes in connection
therewith) in public offices, the payment or discharge of any taxes,
counsel fees, maintenance fees, encumbrances or otherwise protecting,
maintainin
10. If, in the Assignor's reasonable business judgment, any patent shall
have significant value to the business of the Assignor, the Assignor shall
have the duty, through counsel acceptable to the Lender, to prosecute
diligently any application with respect to the Patents pending as of the
date of this Assignment or thereafter until the Obligations shall have been
paid in full, to make application on unpatented but patentable inventions
and to preserve and maintain all rights in the Patents. Any expenses
11. The Lender shall have the right but shall in no way be obligated to
bring suit in its own name to enforce the Patents or any license thereunder,
in which event the Assignor shall at the request of the Lender do any and
all lawful acts and execute any and all proper documents required by the
Lender in aid of such enforcement and the Assignor shall promptly, upon
demand, reimburse and indemnify the Lender for all costs and expenses
incurred by the Lender in the exercise of its rights under this paragrap
12. No course of dealing between the Assignor and the Lender, nor any
failure to exercise, nor any delay in exercising, on the part of the Lender,
any right, power or privilege hereunder or under the Loan Agreement shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, power or privilege hereunder or thereunder preclude any other or
further exercise thereof or the exercise of any other right, power or
privilege.
13. All of the Lender's rights and remedies with respect to the Patents,
whether established hereby, by the Loan Agreement, by any other agreements
or by law shall be cumulative and may be exercised singularly or concurrently.
14. The provisions of this Assignment are severable, and if any clause or
provision shall be held invalid and unenforceable in whole or in part in any
jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part thereof, in such jurisdiction, and shall
not in any manner affect such clause or provision in any other jurisdiction,
or any other clause or provision of this Assignment in any jurisdiction.
15. This Assignment is subject to modification only by a writing signed by
the parties, except as provided in paragraph 5.
16. The benefits and burdens of this Assignment shall inure to the benefit
of and be binding upon the respective successors and permitted assigns of
the parties.
17. The validity and interpretation of this Assignment and the rights and
obligations of the parties shall be governed by the laws of The Commonwealth
of Massachusetts.
IN WITNESS WHEREOF, the parties hereto have executed this Assignment as
an instrument under seal as of the day and year first above written.
LUXTEC CORPORATION
____________________________ By:___________________________
Witness Its Treasurer
THE FIRST NATIONAL BANK
OF BOSTON
____________________________ By:__________________________
Witness Its Vice President
COMMONWEALTH OF MASSACHUSETTS
Worcester, ss. January ___, 1996
Then personally appeared the above-named Samuel M. Stein, Treasurer of
Luxtec Corporation, and acknowledged the foregoing instrument to be his free
act and deed and the free act and deed of Luxtec Corporation, before me.
__________________________
Notary Public
My Commission Expires:
COMMONWEALTH OF MASSACHUSETTS
Worcester, ss. January ___, 1996
Then personally appeared the above-named G. Christopher Miller, Vice
President of The First National Bank of Boston, and acknowledged the
foregoing instrument to be his free act and deed and the free act and
deed of The First National Bank of Boston, before me.
__________________________
Notary Public
My Commission Expires:
ASSIGNMENT OF TRADEMARKS
THIS ASSIGNMENT OF TRADEMARKS (the "Assignment") is made as of the 24th
day of October, 1995 by LUXTEC CORPORATION, a Massachusetts corporation
having a principal business address at 326 Clark Street, Worcester,
Massachusetts (the "Assignor") to THE FIRST NATIONAL BANK OF BOSTON, a
national bank with its head office at 100 Federal Street, Boston,
Massachusetts (the "Lender").
BACKGROUND. Assignor has executed and delivered to the Lender
(a) a certain Revolving Credit Note dated of even date herewith in the
principal amount of Two Million Five Hundred Thousand and 00/100 Dollars
($2,500,000.00), and (b) a certain Equipment Note dated of even date
herewith in the principal amount of Seven Hundred Fifty Thousand and 00/100
Dollars ($750,000.00) (collectively, the "Notes") pursuant to a certain
Loan and Security Agreement dated of even date herewith by and among the
Assignor, the
NOW, THEREFORE, in consideration of the premises contained herein and
other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Assignor hereby agrees with the Lender
as follows:
1. To secure the complete and timely satisfaction of all Obligations
(such term, as used herein, shall have the same meaning as provided in the
Loan Agreement) of the Assignor to the Lender, the Assignor hereby assigns,
pledges and grants to the Lender a continuing security interest in and to
the Assignor's right, title and interest in and to the trademarks and
trademark applications listed in Exhibit A hereto, including without
limitation all proceeds thereof (such as, by way of example, license royalti
2. The Assignor covenants and warrants that:
(a) The Trademarks are subsisting and have not been adjudged invalid or
unenforceable, in whole or in part;
(b) To the best of the Assignor's knowledge, each of the Trademarks is
valid and enforceable and the Assignor has notified the Lender in writing
of all prior art (including public uses and sales) of which it is aware;
(c) The Assignor is the sole and exclusive owner of the entire and
unencumbered right, title and interest in and to each of the Trademarks,
free and clear of any liens, charges and encumbrances, including without
limitation licenses, shop rights and covenants by the Assignor not to sue
third persons; and
(d) The Assignor has the unqualified right to enter into this Assignment.
3. The Assignor agrees that, until all of the Obligations shall have been
satisfied in full, it will not enter into any agreement (for example, a
license agreement) which is inconsistent with the Assignor's obligations
under this Assignment, without the Lender's prior written consent, which
consent shall not be unreasonably withheld.
4. If, before the Obligations shall have been satisfied in full, the
Assignor shall obtain rights to any new trademark, or become entitled to
the benefit of any trademark or trademark applications for any reissue,
division, continuation, renewal, extension or continuation-in-part of any
Trademark or any improvement on any Trademark, the provisions of paragraph 1
shall automatically apply thereto and the Assignor shall give to the Lender
prompt notice thereof in writing.
5. The Assignor authorizes the Lender to modify this Assignment by
amending Exhibit A to include any future trademarks and trademark
applications which are Trademarks under paragraph 1 or paragraph 4 hereof.
6. Unless and until there shall have occurred and be continuing an Event
of Default (as defined in the Loan Agreement), the Lender hereby grants to
the Assignor the exclusive, worldwide non-transferable right and license to
make, have made, use and sell the inventions disclosed and claimed in the
Trademarks for the Assignor's own benefit and account and for none other.
The Assignor agrees not to sell or assign its interest in, or grant any
sublicense under, the license granted to the Assignor in this par
7. If any Event of Default shall have occurred and be continuing, the
Assignor's license under the Trademarks as set forth in paragraph 6 shall
terminate forthwith, and the Lender shall have, in addition to all other
rights and remedies given it by this Assignment, those allowed by law and
the rights and remedies of a secured party under the Uniform Commercial Code
as enacted in any jurisdiction in which the Trademarks may be located and,
without limiting the generality of the foregoing, the Lender may im
8. At such time as the Assignor shall completely satisfy all of the
Obligations, the Lender shall execute and deliver to the Assignor all
deeds, assignments and other instruments as may be necessary or proper to
re-vest in the Assignor full title to the Trademarks, subject to any
disposition thereof which may have been made by the Lender pursuant hereto.
9. Any and all fees, costs and expenses, of whatever kind or nature,
including reasonable attorneys' fees and legal expenses, incurred by the
Lender in connection with the preparation of this Assignment and all other
documents relating hereto and the consummation of this transaction, the
filing or recording of any documents (including all taxes in connection
therewith) in public offices, the payment or discharge of any taxes,
counsel fees, maintenance fees, encumbrances or otherwise protecting,
maintainin
arks, or in defending or prosecuting any actions or proceedings arising
out of or related to the Trademarks, shall be borne and paid by the
Assignor on demand by the Lender and until so paid shall be added to the
principal amount of the Obligations and shall bear interest at the rate
prescribed in the Loan Agreement.
10. If, in the Assignor's reasonable business judgment, any Trademark
shall have significant value to the business of the Assignor, the Assignor
shall have the duty, through counsel acceptable to the Lender, to prosecute
diligently any application with respect to the Trademarks pending as of
the date of this Assignment or thereafter until the Obligations shall have
been paid in full, to make application on unpatented but patentable
inventions and to preserve and maintain all rights in the Trademarks. Any
nection with such an application shall be borne by the Assignor. The
Assignor shall not abandon any right to file a patent application, or any
pending patent application or patent without the consent of the Lender,
which consent shall not be unreasonably withheld.
11. The Lender shall have the right but shall in no way be obligated to
bring suit in its own name to enforce the Trademarks or any license
thereunder, in which event the Assignor shall at the request of the Lender
do any and all lawful acts and execute any and all proper documents required
by the Lender in aid of such enforcement and the Assignor shall promptly,
upon demand, reimburse and indemnify the Lender for all costs and expenses
incurred by the Lender in the exercise of its rights under this parag
12. No course of dealing between the Assignor and the Lender, nor any
failure to exercise, nor any delay in exercising, on the part of the Lender,
any right, power or privilege hereunder or under the Loan Agreement shall
operate as a waiver thereof; nor shall any single or partial exercise of
any right, power or privilege hereunder or thereunder preclude any other or
further exercise thereof or the exercise of any other right, power or
privilege.
13. All of the Lender's rights and remedies with respect to the Trademarks,
whether established hereby, by the Loan Agreement, by any other agreements
or by law shall be cumulative and may be exercised singularly or concurrently.
14. The provisions of this Assignment are severable, and if any clause or
provision shall be held invalid and unenforceable in whole or in part in
any jurisdiction, then such invalidity or unenforceability shall affect
only such clause or provision, or part thereof, in such jurisdiction, and
shall not in any manner affect such clause or provision in any other
jurisdiction, or any other clause or provision of this Assignment in any
jurisdiction.
15. This Assignment is subject to modification only by a writing signed
by the parties, except as provided in paragraph 5.
16. The benefits and burdens of this Assignment shall inure to the benefit
of and be binding upon the respective successors and permitted assigns of
the parties.
17. The validity and interpretation of this Assignment and the rights and
obligations of the parties shall be governed by the laws of The Commonwealth
of Massachusetts.
IN WITNESS WHEREOF, the parties hereto have executed this Assignment
as an instrument under seal as of the day and year first above written.
LUXTEC CORPORATION
____________________________ By:___________________________
Witness Its Treasurer
THE FIRST NATIONAL BANK
OF BOSTON
____________________________ By:__________________________
Witness Its Vice President
COMMONWEALTH OF MASSACHUSETTS
Worcester, ss. January ___, 1996
Then personally appeared the above-named Samuel M. Stein, Treasurer of
Luxtec Corporation, and acknowledged the foregoing instrument to be his
free act and deed and the free act and deed of Luxtec Corporation, before me.
__________________________
Notary Public
My Commission Expires:
COMMONWEALTH OF MASSACHUSETTS
Worcester, ss. January ___, 1996
Then personally appeared the above-named G. Christopher Miller,
Vice President of The First National Bank of Boston, and acknowledged
the foregoing instrument to be his free act and deed and the free act
and deed of The First National Bank of Boston, before me.
__________________________
Notary Public
My Commission Expires:
UNLIMITED GUARANTY
THIS UNLIMITED GUARANTY, dated as of October 24, 1995 by FIBER IMAGING
TECHNOLOGIES, INC. (the "Guarantor"), is in favor of THE FIRST NATIONAL BANK
OF BOSTON, a national banking association with its head office at 100
Federal Street, Boston, Massachusetts 02110, and its foreign branches
(the "Lender"). In consideration of the Lender's giving time, credit or
banking facilities or accommodations to LUXTEC CORPORATION and its
successors (the "Customer"), the Guarantor agrees as follows:
1. GUARANTY OF PAYMENT AND PERFORMANCE. The Guarantor hereby guarantees
to the Lender the full and punctual payment when due (whether at maturity,
by acceleration or otherwise), and the performance, of all liabilities,
agreements and other obligations of the Customer to the Lender, whether
direct or indirect, absolute or contingent, due or to become due, secured
or unsecured, now existing or hereafter arising or acquired (whether by way
of discount, letter of credit, lease, loan, overdraft or otherwise) (
ull and punctual payment and performance of the Obligations and not of
their collectibility only and is in no way conditioned upon any requirement
that the Lender first attempt to collect any of the Obligations from the
Customer or resort to any security or other means of obtaining their payment
or upon a default by the Customer in the payment or performance of any of
the Obligations. The obligations of the Guarantor hereunder shall become
immediately due and payable to the Lender, upon demand by the Lender
antor hereunder may be required by the Lender on any number of occasions.
2. GUARANTOR'S AGREEMENT TO PAY. The Guarantor further agrees, as the
principal obligor and not as a guarantor only, to pay to the Lender, on
demand, all costs and expenses (including court costs and legal expenses)
incurred or expended by the Lender in connection with the Obligations, this
Guaranty and the enforcement thereof, together with interest on amounts
recoverable under this Guaranty from the time such amounts become due until
payment, at the rate per annum equal to the rate of interest announced
f such interest exceeds the maximum amount permitted to be paid under
applicable law, then such interest shall be reduced to such maximum
permitted amount.
3. UNLIMITED GUARANTY. THE LIABILITY OF THE GUARANTOR HEREUNDER SHALL
BE UNLIMITED.
4. WAIVERS BY GUARANTOR; LENDER'S FREEDOM TO ACT. The Guarantor agrees
that the Obligations will be paid and performed strictly in accordance with
their respective terms regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms or the
rights of the Lender with respect thereto. The Guarantor waives presentment,
demand, protest, notice of acceptance, notice of Obligations incurred and
all other notices of any kind, all defenses which may be avail
fect, any right to require the marshalling of assets of the Customer, and
all suretyship defenses generally. Without limiting the generality of the
foregoing, the Guarantor agrees to the provisions of any instrument
evidencing, securing or otherwise executed in connection with any Obligation
and agrees that the obligations of the Guarantor hereunder shall not be
released or discharged, in whole or in part, or otherwise affected by
(i) the failure of the Lender to assert any claim or demand or to enforce an
5. UNENFORCEABILITY OF OBLIGATIONS AGAINST CUSTOMER. If for any reason
the Customer has no legal existence or is under no legal obligation to
discharge any of the Obligations, or if any of the Obligations have become
irrecoverable from the Customer by operation of law or for any other reason,
this Guaranty shall nevertheless be binding on the Guarantor to the same
extent as if the Guarantor at all times had been the principal obligor on
all such Obligations. In the event that acceleration of the time for
6. SUBROGATION; SUBORDINATION. Until the payment and performance in full
of all Obligations and any and all obligations of the Customer to any
affiliate of the Lender, the Guarantor shall not exercise any rights against
the Customer arising as a result of payment by the Guarantor hereunder, by
way of subrogation or otherwise, and will not prove any claim in
competition with the Lender or its affiliates in respect of any payment
hereunder in bankruptcy or insolvency proceedings of any nature; the Guaranto
7. SECURITY; SET-OFF. The Guarantor grants to the Lender, as security for
the full and punctual payment and performance of the Guarantor's obligations
hereunder, a continuing lien on and security interest in all securities or
other property belonging to the Guarantor now or hereafter held by the Lender
and in all deposits (general or special, time or demand, provisional or
final) and other sums credited by or due from the Lender to the Guarantor
or subject to withdrawal by the Guarantor; and regardless of
llateral or other means of obtaining repayment of the Obligations, the
Lender is hereby authorized at any time and from time to time, without
notice to the Guarantor (any such notice being expressly waived by the
Guarantor) and to the fullest extent permitted by law, to set off and apply
such deposits and other sums against the obligations of the Guarantor under
this Guaranty, whether or not the Lender shall have made any demand under
this Guaranty and although such obligations may be contingent or unmature
8. FURTHER ASSURANCES. The Guarantor agrees, upon demand after any change
in the condition or affairs (financial or otherwise) of the Guarantor deemed
by the Lender to be adverse and material, to secure the payment and
performance of its obligations hereunder by delivering, assigning or
transferring to the Lender or granting the Lender a security interest in
additional collateral of a value and character satisfactory to the Lender,
and authorizes the Lender to file any financing statement deemed by the Le
9. TERMINATION; REINSTATEMENT. This Guaranty shall remain in full force
and effect until the Lender is given written notice of the Guarantor's
intention to discontinue this Guaranty, notwithstanding any intermediate or
temporary payment or settlement of the whole or any part of the Obligations.
No such notice shall be effective unless received and acknowledged by an
officer of the Lender at its head office or at the branch of the Lender
where this Guaranty is given. No such notice shall affect any right
10. SUCCESSORS AND ASSIGNS. This Guaranty shall be binding upon the
Guarantor, its successors and assigns, and shall inure to the benefit of
and be enforceable by the Lender and its successors, transferees and
assigns. Without limiting the generality of the foregoing sentence, the
Lender may assign or otherwise transfer any agreement or any note held by
it evidencing, securing or otherwise executed in connection with the
Obligations, or sell participations in any interest therein, to any other
person or
11. AMENDMENTS AND WAIVERS. No amendment or waiver of any provision of
this Guaranty nor consent to any departure by the Guarantor therefrom shall
be effective unless the same shall be in writing and signed by the Lender.
No failure on the part of the Lender to exercise, and no delay in exercising,
any right hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right.
12. NOTICES. All notices and other communications called for hereunder
shall be made in writing and, unless otherwise specifically provided herein,
shall be deemed to have been duly made or given when delivered by hand or
mailed first class mail postage prepaid or, in the case of telegraphic or
telexed notice, when transmitted, answer back received, addressed as
follows: if to the Guarantor, at the address set forth beneath its signature
hereto, and if to the Lender, at 100 Federal Street, Boston, Massac
ester Tower, 100 Front Street, Worcester, Massachusetts, 01608-1438,
Attention: Senior Commercial Loan Officer or at such address as either party
may designate in writing.
13. GOVERNING LAW; CONSENT TO JURISDICTION. This Guaranty is intended to
take effect as a sealed instrument and shall be governed by, and construed
in accordance with, the laws of The Commonwealth of Massachusetts. The
Guarantor agrees that any suit for the enforcement of this Guaranty may be
brought in the courts of The Commonwealth of Massachusetts or any Federal
Court sitting therein and consents to the non-exclusive jurisdiction of such
court and to service of process in any such suit being made upon
that it may now or hereafter have to the venue of any such suit or any such
court or that such suit was brought in an inconvenient court.
14. MISCELLANEOUS. This Guaranty constitutes the entire agreement of the
Guarantor with respect to the matters set forth herein. The rights and
remedies herein provided are cumulative and not exclusive of any remedies
provided by law or any other agreement, and this Guaranty shall be in
addition to any other guaranty of the Obligations. The invalidity or
unenforceability of any one or more sections of this Guaranty shall not
affect the validity or enforceability of its remaining provisions. Captions
are
defined terms used in this Guaranty shall be equally applicable to the
singular and plural forms of the terms defined.
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be executed
and delivered by its duly authorized officer as of the date appearing on
page one.
FIBER IMAGING TECHNOLOGIES, INC.
________________________ By:_____________________________
Witness Its President
326 Clark Street
Worcester, Massachusetts 01606
CERTIFICATE
The undersigned certifies to The First National Bank of Boston that:
1. He is the Clerk of the Guarantor which executed the foregoing Guaranty
and in that capacity has the authority to make this certificate on behalf
of the Guarantor.
2. The Guarantor is a corporation, validly organized or formed and existing
in good standing and in the full enjoyment of its powers and franchises under
the laws of the Commonwealth of Massachusetts.
3. The foregoing Guaranty has been duly executed and delivered on behalf of
the Guarantor, such actions have been duly authorized by all necessary
corporate or other action, and the execution, delivery and performance of
the Guaranty by the Guarantor will not contravene any existing law, rule or
regulation, or any provision of its certificate of incorporation or bylaws
or other document or documents evidencing its establishment or governing the
conduct of its affairs or any agreement to which it is a party
bound.
IN WITNESS WHEREOF, the undersigned has made this certificate on behalf
of the Guarantor this ____ day of October, 1995.
ATTEST: FIBER IMAGING TECHNOLOGIES, INC.
_____________________________ By:______________________________
Its Clerk
EXHIBITS
Exhibit 1.01(A) Borrowing Base Certificate
Exhibit 1.01(B) Guarantor
Exhibit 1.01(C) Guaranty
Exhibit 1.01(D) Landlord's Consent and Waiver
Exhibit 1.01(E) Lease Assignment
Exhibit 1.01(F)(1) Assignment of Patents
Exhibit 1.01(F)(2) Assignment of Trademarks
Exhibit 1.01(G) Existing Liens
Exhibit 1.01(H) Subordinated Indebtedness
Exhibit 2.04(A) Equipment Note
Exhibit 2.04(B) Revolving Credit Note
Exhibit 3.01(O) Opinion of Bingham, Dana & Gould
Exhibit 5.01(A) Subsidiaries
Exhibit 5.01(F) Pending Litigation
Exhibit 5.01(N) Existing Indebtedness
Exhibit 5.01(O) Material Leases, Contract & Commitments
Exhibit 6.01(A) Use of Loan Proceeds
LANDLORD'S CONSENT AND WAIVER
UNITRODE CORPORATION, a Maryland corporation with a place of business
located at 7 Continental Boulevard, Merrimack, New Hampshire 03054 (the
"Owner"), being (a) the owner of the premises located at 326 Clark Street,
Worcester, Massachusetts by deed dated ________________________ and recorded
in the Worcester District Registry of Deeds, Book ______, Page ______ (the
"Premises"); and (b) the lessor of the Premises to LUXTEC CORPORATION, a
Massachusetts corporation with its principal place of business at the
BLE CONSIDERATION RECEIVED, HEREBY REPRESENTS TO AND AGREES WITH both Lessee
and THE FIRST NATIONAL BANK OF BOSTON, a national banking association with
its head office at 100 Federal Street, Boston, Massachusetts (the "Lender"),
as follows:
1. The Owner is the owner of the Premises and the lessor of the Premises to
the Lessee;
2. The Lender has loaned, and may loan in the future, certain funds to Lessee,
which loan is presently secured by, and which future loans will be secured
by, all personal property of the Lessee, including, without limitation, any
and all machinery and equipment, furniture and fixtures, all now owned or
hereafter acquired by Lessee (the "Goods");
3. Certain of the Goods may be deemed to have been affixed to the Premises
and in the future additional Goods may be so affixed;
4. The Goods which may be deemed to have been affixed to the Premises shall
remain personal property notwithstanding the manner in which the Goods are or
become affixed; title to the Goods shall at all times remain in the Lessee,
its successors and assigns; and the Owner will claim no rights in nor any
liens of any kind against the Goods, and any and all such rights and liens,
if any (whether by lease or operation of law), are hereby expressly waived;
5. The Owner hereby grants and conveys to Lessee, its successors and
assigns, any right, title and interest which might accrue to the Owner in the
Goods and agrees that Lessee, or its successors and assigns, may remove the
Goods from the Premises upon termination of the Lease, or any time prior
thereto, without the consent of the Owner, and access to the Premises for the
purpose of such removal, or for the purposes of sale on the Premises
(including auction sale), is hereby granted by the Owner to the Lend
6. The signature below of the holder of a mortgage on the Premises indicates
such mortgagee's consent and waiver in accordance with the above, with
respect to any and all interests of said mortgagee in the Goods, all for good
and valuable consideration received and in order to induce the Lender to make
any present or future loan to the Lessee. The absence of such signature
shall constitute a representation by the Owner that there are no mortgages or
any other encumbrances on the Premises.
IN WITNESS WHEREOF, the parties hereto have executed this Landlord's Consent
and Waiver by their duly authorized officers, as an instrument under seal, as
of the 24th day of October, 1995.
[Mortgagee] UNITRODE CORPORATION
By:_____________________________ By:____________________________
Its Its President
By:____________________________
Its Treasurer
Accepted in Reliance
Hereon
THE FIRST NATIONAL BANK LUXTEC CORPORATION
OF BOSTON
By:_____________________________ By:____________________________
Its Vice President Its President
By:____________________________
Its Treasurer
[_____________________________]
__________, ss. October __, 1995
Then personally appeared the above-named _________________, _______________
of Unitrode Corporation, and acknowledged the foregoing instrument to be
his/her free act and deed and the free act and deed of Unitrode Corporation,
before me.
__________________________
Notary Public
My Commission Expires:
COMMONWEALTH OF MASSACHUSETTS
________, ss. October __, 1995
Then personally appeared the above-named _________________, of _____________
_______, and acknowledged the foregoing instrument to be the free act and
deed of _________________________, before me.
____________________________
Notary Public
My Commission Expires:
COMMONWEALTH OF MASSACHUSETTS
Worcester, ss. October __, 1995
Then personally appeared the above-named G. Christopher Miller, Vice
President of The First National Bank of Boston, and acknowledged the
foregoing instrument to be his free act and deed and the free act and deed of
The First National Bank of Boston, before me.
__________________________
Notary Public
My Commission Expires
COMMONWEALTH OF MASSACHUSETTS
Worcester, ss. October __, 1995
Then personally appeared the above-named Samuel M. Stein, Treasurer of
Luxtec Corporation, respectively, and acknowledged the foregoing instrument
to be his free act and deed and the free act and deed of Luxtec Corporation,
before me.
____________________________
Notary Public
My Commission Expires:
REVOLVING CREDIT NOTE
$2,500,000.00 October 24, 1995
Worcester, Massachusetts
FOR VALUE RECEIVED, LUXTEC CORPORATION, a Massachusetts corporation with its
principal place of business at 326 Clark Street, Worcester, Massachusetts
(the "Borrower"), promises to pay to THE FIRST NATIONAL BANK OF BOSTON (the
"Lender"), or order, at the Lender's head office at 100 Federal Street,
Boston, Massachusetts, the principal sum of TWO MILLION FIVE HUNDRED THOUSAND
AND 00/100 DOLLARS ($2,500,000.00) or such lesser amounts as shall from time
to time be outstanding, in lawful money of the United Sta
n the manner hereinafter provided.
The unpaid principal of this Revolving Credit Note from time to time
outstanding shall bear interest, computed on the basis of the actual number
of days elapsed over a year assumed to have 360 days, at a rate per annum
equal to one-quarter of one percent (0.25%) per annum above the Lender's Base
Rate of interest, established from time to time by the Lender (the "Base
Rate"), such interest rate to be adjusted from time to time on the effective
date of any change in the Base Rate announced by the Lender. Th
ON as its Base Rate. Interest shall be payable monthly in arrears beginning
on November 30, 1995 and continuing thereafter on the last day of each
succeeding month; provided, however, that all indebtedness evidenced by this
Revolving Credit Note, if not sooner paid, shall in any event be due and
payable on March 31, 1997 (the "Maturity Date").
The Borrower may borrow, repay (without penalty), and reborrow the principal
hereunder from time to time prior to the occurrence of an Event of Default
(as hereinafter defined) or the Maturity Date, whichever occurs first.
Each payment made hereunder shall be applied first to interest then due on
the unpaid balance of principal and then to principal. Overdue payments of
principal (whether at stated maturity, by acceleration or otherwise) and, to
the extent permitted by law, overdue interest, shall bear interest,
compounded monthly and payable on demand in immediately available funds, at a
rate per annum equal to four percent (4.00%) above the Base Rate, fully
floating; provided that if such interest exceeds the maximum amou
ed amount.
If a payment of principal or interest due hereunder is not made within ten
(10) days of its due date, the Borrower will also pay on demand in addition
thereto a late charge equal to five percent (5.00%) of the amount of such
payment.
This Revolving Credit Note is issued pursuant to the provisions of a certain
Loan and Security Agreement dated of even date herewith by and between the
Borrower and the Lender, all of the terms and conditions of which are
incorporated herein by reference, as the same may from time to time be
amended (the "Agreement"). Neither this reference to the Agreement nor any
provision thereof shall affect or impair the absolute and unconditional
obligations of the Borrower to pay the principal of and interest on th
te an Event of Default hereunder.
The indebtedness evidenced by this Revolving Credit Note is secured as set
forth in the Agreement.
Any deposits or other sums at any time credited by or due from the holder to
the Borrower or any endorser or guarantor hereof and any securities or other
property of the Borrower or any endorser or guarantor hereof at any time in
the possession or custody of the holder may at all times be held and treated
as collateral security for the payment of this Revolving Credit Note and any
and all other liabilities (direct or indirect, absolute or contingent, sole,
joint or several, secured or unsecured, due or to
set-off such deposits or other sums against such liabilities at any time.
The Borrower and each guarantor, endorser or other person now or hereafter
liable for the payment of any of the indebtedness evidenced by this Revolving
Credit Note, severally agree, by making, guaranteeing or endorsing this
Revolving Credit Note or by making any agreement to pay any of the
indebtedness evidenced by this Revolving Credit Note, to waive presentment
for payment, protest and demand, notice of protest, demand and or dishonor
and nonpayment of this Revolving Credit Note, and consents, on one o
llateral securing this Revolving Credit Note or any part thereof at any time,
(b) to the acceptance or release by the holder or holders hereof at any time
of any additional collateral or security for or other guarantors of this
Revolving Credit Note, (c) to the modification or amendment, at any time, and
from time to time, of this Revolving Credit Note, the Agreement, or any
instrument securing this Revolving Credit Note at the request of any person
liable hereon, (d) to the granting by the holder hereof of
ents, covenants and conditions contained in this Revolving Credit Note, the
Agreement, or any other instrument securing this Revolving Credit Note, at
the request of any person liable hereon, and (e) to any and all forbearances
and indulgences whatsoever. Such consent shall not alter or diminish the
liability of any person.
The Borrower agrees to pay all reasonable expenses or costs, including
attorneys' fees and costs of collection, which may be incurred by the holder
hereof in connection with the enforcement of any obligations hereunder or
representation with respect to bankruptcy or insolvency proceedings.
IN WITNESS WHEREOF, the Borrower has executed this Revolving Credit Note by
its duly authorized officer as an instrument under seal as of the day and
year first written above.
LUXTEC CORPORATION
__________________________ By:________________________________
Witness Its President
EQUIPMENT NOTE
$750,000.00 October 24, 1995
Worcester, Massachusetts
FOR VALUE RECEIVED, LUXTEC CORPORATION, a Massachusetts corporation with its
principal place of business at 326 Clark Street, Worcester, Massachusetts
(the "Borrower"), promises to pay to THE FIRST NATIONAL BANK OF BOSTON (the
"Lender"), or order, at the Lender's head office at 100 Federal Street,
Boston, Massachusetts, the principal sum of SEVEN HUNDRED AND FIFTY THOUSAND
AND 00/100 ($750,000.00) DOLLARS or such lesser amounts as are advanced
hereunder, in lawful money of the United States of America, wi
The unpaid principal of this Equipment Note from time to time outstanding
shall bear interest, computed on the basis of the actual number of days
elapsed over a year assumed to have 360 days, at a rate per annum equal to
one-half of one percent (0.50%) above the Lender's Base Rate of interest,
established from time to time by the Lender (the "Base Rate"), such interest
rate to be adjusted from time to time on the effective date of any change in
the Base Rate announced by the Lender. The Base Rate shall b
e.
For the period commencing on the date hereof through and including October
23, 1997, the Borrower may request advances hereunder to be utilized for the
purposes and upon the terms and conditions set forth in a certain Loan and
Security Agreement by and between the Borrower and the Lender dated of even
date herewith (the "Agreement"). Repaid principal hereunder may not be
reborrowed.
Interest shall be payable monthly in arrears beginning one (1) month from
the last day of the month in which the first advance hereunder is made and
continuing thereafter on the last day of each succeeding month that this
Equipment Note shall remain outstanding. At the end of each six (6) month
period during the first two (2) years from the date of this Equipment Note,
the outstanding principal balance as of such date will be amortized in
monthly principal payments of such amounts as shall be determined b
this Equipment Note. Monthly payments of principal and interest shall
continue until the entire indebtedness evidenced by this Equipment Note is
fully paid, provided, however, that all indebtedness evidenced by this
Equipment Note, if not sooner paid, shall in any event be due and payable
five (5) years from the date of this Equipment Note.
Overdue payments of principal (whether at stated maturity, by acceleration
or otherwise), and, to the extent permitted by law, overdue interest, shall
bear interest, compounded monthly and payable on demand in immediately
available funds, at a rate per annum equal to four percent (4.00%) above the
Base Rate, fully floating; provided that if such interest exceed the maximum
amount permitted to be paid under applicable law, then such interest shall be
reduced to such maximum permitted amount.
If a payment of principal or interest due hereunder is not made within ten
(10) days of its due date, the Borrower will also pay on demand in addition
thereto a late charge equal to five percent (5.00%) of the amount of such
payment.
This Equipment Note is issued pursuant to and is intended for the benefit of
and is subject to the provisions of the Agreement, all of the terms and
conditions of which are incorporated hereunder by reference as the same may
from time to time be amended or extended. An Event of Default under the
Agreement shall also constitute an Event of Default hereunder. Neither this
reference to the Agreement nor any provision thereof shall affect or impair
the absolute and unconditional obligation of the Borrower to
The indebtedness evidenced by this Equipment Note is secured as set forth in
the Agreement.
This Equipment Note may be prepaid before maturity in whole or in part
without penalty or premium.
Any deposits or other sums at any time credited by or due from the holder to
the Borrower, any endorser or guarantor hereof and any securities or other
property of the Borrower, any endorser or guarantor at any time in the
possession of the holder may at all times be held and treated as collateral
for the payment of this Equipment Note and any and all other liabilities
(direct or indirect, absolute or contingent, sole, joint or several, secured
or unsecured, due or to become due, now existing or hereafter
ainst such liabilities at any time.
The Borrower and each guarantor, endorser or other person now or hereafter
liable for the payment of any of the indebtedness evidenced by this Equipment
Note, severally agrees, by making, guaranteeing or endorsing this Equipment
Note or by making any agreement to pay any of the indebtedness evidenced by
this Equipment Note to waive presentment for payment, protest and demand,
notice of protest, demand and of dishonor and nonpayment of this Equipment
Note, and consents, on one or more occasions, without not
ent Note or any part thereof at any time, (b) to the acceptance or release by
the holder or holders hereof at any time of any additional collateral or
security for or other guarantors of this Equipment Note, (c) to the
modification or amendment, at any time and from time to time, of this
Equipment Note, the Agreement or any instrument securing this Equipment Note
at the request of any person liable hereon, (d) to the granting by the holder
hereof of any extension of the time of this Equipment Note or for t
t or any other instrument securing this Equipment Note, at the request of any
person liable hereon, and (e) to any and all forbearances and indulgences
whatsoever. Such consent shall not alter nor diminish the liability of any
person.
The Borrower agrees to pay all reasonable expenses or costs, including
attorneys' fees and costs of collection, which may be incurred by the holder
hereof in connection with the enforcement of any obligations hereunder or
representation with respect to bankruptcy or insolvency proceedings.
IN WITNESS WHEREOF, the Borrower has executed this Equipment Note by its
duly authorized officer as an instrument under seal as of the day and year
first written above.
LUXTEC CORPORATION
_________________________ By:______________________________
Witness Its President
TABLE OF CONTENTS
ARTICLE 1.0 DEFINITIONS 1
1.01 Defined Terms 1
ARTICLE 2.0 THE LOANS 11
2.01 Disbursement of the Loans 11
2.02 The Equipment Loan 11
2.03 The Revolving Credit Loan 12
2.04 The Notes 12
2.05 The Facility Fee 12
2.06 Interest Rates and Payments of Interest 12
2.07 Overadvance 13
2.08 Payment to the Lender 14
ARTICLE 3.0 CONDITIONS PRECEDENT 14
3.01 Documents Required for the Closing 14
3.02 Documents Required for Subsequent Disbursements 15
3.03 Certain Events 16
3.04 Legal Matters 16
ARTICLE 4.0 COLLATERAL SECURITY 16
4.01 Composition of the Collateral 16
4.02 Rights in Property Held by the Lender 17
4.03 Rights in Property Held by the Borrower, the
Guarantors or the Lender 17
4.04 Priority of Liens 18
4.05 UCC Financing Statements 18
4.06 Mortgagees', Landlords', and Warehousemen's
Waivers 19
ARTICLE 5.0 REPRESENTATIONS AND WARRANTIES 19
5.01 Original 19
5.02 Survival 23
ARTICLE 6.0 COVENANTS OF THE BORROWER 23
6.01 Affirmative Covenants 23
6.02 Negative Covenants 29
ARTICLE 7.0 DEFAULT 32
7.01 Events of Default 32
7.02 Acceleration 34
ARTICLE 8.0 THE LENDER'S RIGHTS AND REMEDIES 34
8.01 The Lender's Rights Upon Default 34
8.02 Account Debtors 34
8.03 Possession and Foreclosure of Collateral 35
8.04 Use of Intellectual Property 35
8.05 Notification of Default to Third Parties 36
8.06 Assembly of Collateral 36
8.07 Right of Set-Off 36
8.08 Exercise of Other Remedies 36
8.09 Cumulative Rights and Remedies 36
ARTICLE 9.0 ATTORNEY-IN-FACT 37
9.01 Attorney-In-Fact 37
ARTICLE 10.0 MISCELLANEOUS 37
10.01 Construction 37
10.02 Further Assurances 37
10.03 Enforcement and Waiver by the Lender 37
10.04 Expenses of the Lender 38
10.05 Notices 38
10.06 Waiver and Indemnification by the Borrower and the
Guarantors 39
10.07 Participation 39
10.08 Waiver of Jury Trial 39
10.09 Applicable Law 40
10.10 Binding Effect, Assignment, and Entire Agreement 40
10.11 Severability 40
10.12 Counterparts 40
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT dated as of October 24, 1995, is by and
among LUXTEC CORPORATION, a Massachusetts corporation with its principal
office at 326 Clark Street, Worcester, Massachusetts (the "Borrower"), FIBER
IMAGING TECHNOLOGIES, INC., a Massachusetts corporation with its principal
office at 326 Clark Street, Worcester, Massachusetts, CATHTEC INCORPORATED, a
Massachusetts corporation with its principal office at 326 Clark Street,
Worcester, Massachusetts, CARDIODYNE, INC., a Massachusetts co
r, Massachusetts, successor by merger to CARDIODYNE, INC., a Delaware
corporation, and THE FIRST NATIONAL BANK OF BOSTON, a national banking
association with its head office at 100 Federal Street, Boston,
Massachusetts (the "Lender").
W I T N E S S E T H:
BACKGROUND. The Borrower has requested the Lender to make available loans up
to the sum of $2,500,000.00 on a revolving loan basis and the sum of
$750,000.00 for the purchase of equipment, and the Lender is willing to do so
upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises herein contained, and each
intending to be legally bound hereby, the parties agree as follows:
0 DEFINITIONS
Defined Terms.
As used herein, the following terms shall have the following meanings:
"Accounts," "Chattel Paper," "Contracts," "Documents," "Equipment,"
"Fixtures," "General Intangibles," "Goods," "Instruments," and "Inventory"
shall have the same respective meanings as are given to those terms in the
Uniform Commercial Code as presently adopted and in effect in the
Commonwealth of Massachusetts.
"Affiliate" means, as to any Person, each other Person that directly, or
indirectly through one or more intermediaries, controls, or is controlled by,
or under common control with, such Person.
"Agreement" means this Loan and Security Agreement, as the same may from
time to time be amended or supplemented.
"Borrowing Base" means, at any time, the amount computed on the Borrowing
Base Certificate most recently delivered to, and accepted by, the Lender in
accordance with this Agreement and equal to the lesser of:
(A) $2,500,000.00; or
(B) The aggregate of (1) eighty percent (80%) of Eligible Accounts of the
Borrower and the Guarantors; plus (2) thirty percent (30%) of the book value
of Inventory of the Borrower and the Guarantors as determined by the Lender
in its reasonable business judgment; comprised of raw materials; plus (3)
forty percent (40%) of the book value of Inventory of the Borrower and the
Guarantors comprised of work in process and finished goods as determined by
the Lender in its reasonable business judgment; plus (4) du
on value of Equipment of the Borrower and the Guarantors as determined by the
Lender in its reasonable business judgment; plus (5) the amount available
from time to time pursuant to the Overadvance; provided, however, that (x)
the Lender may limit aggregate advances hereunder to a sum not to exceed
$2,250,000.00 unless and until the Equity Injection is completed, and (y) the
Lender may exclude from the Borrowing Base all or a proportionate part of
any particular portion of the Inventory of the Borrower or a
e the Lender otherwise reasonably considers the collateral value thereof to
the Lender to be impaired or its ability to realize such value to be insecure.
"Borrowing Base Certificate" means a fully completed certificate in the form
of Exhibit 1.01(A) to this Agreement, certified by the chief financial
officer of the Borrower to be correct and delivered to, and accepted by, the
Lender pursuant to Section 3.01(Q) or Section 6.01(B)(7).
"Business Day" means a day other than a Saturday, a Sunday, or a day on
which commercial banks in Boston, Massachusetts are authorized to close.
"Closing" has the meaning given to such term in Section 3.01.
"Collateral" has the meaning given to such term in Section 4.01.
"Collateral Documents" means the Lease Assignment(s) specified in Section
3.01(C), the Landlord's Consent(s) and Waiver(s) specified in Section
3.01(D), the Guarantees specified in Section 3.01(E), the Patent and
Trademark Assignments specified in Section 3.01(F), UCC-1 Financing
Statements specified in Section 3.01(G), and the documents, whether
deliverable at or after the Closing, required under Article 4.0.
"Consolidated Current Assets" and "Consolidated Current Liabilities" mean,
at any time, all assets or liabilities, respectively, that should, in
accordance with GAAP, be classified as current assets or current liabilities,
respectively, on a consolidated balance sheet of the Borrower and its
Subsidiaries.
"Consolidated Earnings" means, at any date as of which the amount thereof
shall be determined, consolidated earnings of the Borrower and its
Subsidiaries from continuing operations before income taxes for such period,
excluding any nonrecurring or extraordinary items.
"Consolidated Fixed Assets" means, at any time, all assets (other than
Consolidated Current Assets) that should, in accordance with GAAP, be
classified as assets on a consolidated balance sheet of the Borrower and its
Subsidiaries.
"Consolidated Liabilities" means all Indebtedness that, in accordance with
GAAP, should be classified as liabilities on a consolidated balance sheet of
the Borrower and its Subsidiaries.
"Consolidated Losses" means, at any date as of which the amount thereof
shall be determined, consolidated losses of the Borrower and its Subsidiaries
for such period including, without limitation, income taxes, interest
expense and any and all extraordinary items.
"Consolidated Tangible Net Worth" means, at any time, Stockholders' Equity,
less the sum of:
Any surplus resulting from any write-up of assets subsequent to October 31,
1994;
Goodwill, including any amounts, however designated on a
consolidated balance sheet of the Borrower and its Subsidiaries, representing
the excess of the purchase price paid for assets or stock acquired over the
value assigned thereto on the books of the Borrower;
Patents, trademarks, trade names, copyrights and licenses;
Any amount at which shares of capital stock of the Borrower appear as an
asset on the Borrower's balance sheet;
Loans and advances to stockholders, directors, officers, or employees;
Deferred expenses; and
Any other amount in respect of an intangible that should be classified as an
asset on a consolidated balance sheet of the Borrower and its Subsidiaries
in accordance with GAAP.
"Cumulative Consolidated Losses" means, at any date as of which the amount
thereof shall be determined, consolidated losses of the Borrower and its
Subsidiaries for the immediately preceding two (2) fiscal quarters.
"Debt Coverage Ratio" means that ratio having as its numerator the sum of
(a) Consolidated Earnings before deduction of interest and income taxes, plus
(b) consolidated depreciation and amortization expenses incurred by the
Borrower and its Subsidiaries, less (c) income taxes paid by the Borrower and
its Subsidiaries, less (d) capital expenditures made by the Borrower and its
Subsidiaries, plus (e) payments due on account of operating leases of
equipment; and having as its denominator the sum of (a) intere
ts due on account of operating leases of equipment.
"Domestic Account" means an Account arising from the sale of goods to or
services performed for an account debtor located within the United States of
America or Canada;
"Eligible Account" means, at any time, an Account that conforms and
continues to conform to the following conditions:
(A) The Account arose from a bona fide outright sale of Goods by the
Borrower or from services performed by the Borrower, and such Goods have been
shipped to the appropriate account debtors or their designees (or the sale
has otherwise been consummated), or the services have been performed for the
appropriate account debtors;
(B) The Account is based upon an enforceable order or contract, written or
oral, for Goods shipped or held or for services performed, and the same were
shipped, held, or performed in accordance with such order or contract;
(C) The title of the Borrower to the Account and, except as to the account
debtor, to any Goods is absolute and is not subject to any prior assignment,
claim, lien, or security interest, except Permitted Liens;
(D) The amount shown on the books of the Borrower and on any invoice or
statement delivered to the Lender is owing to the Borrower, less any partial
payment that has been made thereon by anyone;
(E) The Account shall be eligible only to the extent that it is not subject
to any claim of reduction, counterclaim, set-off, contras, recoupment, or any
claim for credits, allowances, or adjustments by the account debtor because
of returned, inferior, or damaged Goods or unsatisfactory services, or for
any other reason, except for customary discounts, not to exceed two percent
(2.0%) allowed for prompt payment;
(F) The account debtor has not returned or refused to retain, or otherwise
notified the Borrower of any dispute concerning, or claimed nonconformity of,
any of the Goods or services from the sale of which the Account arose;
(G) The Account is (1) a Domestic Account and is due and payable not more
than ninety (90) days from the date of the invoice therefor, or (2) a Foreign
Account and is due and payable not more then sixty (60) days from the date
of the invoice therefor;
(H) The Account is not (1) a Domestic Account of an account debtor which has
outstanding, at any time, twenty percent (20%) or more of its accounts on
an aggregate basis for a period of ninety (90) days from the date of the
invoice therefor, or (2) a Foreign Account of an account debtor which has
outstanding, at any time, twenty percent (20%) or more of its accounts on an
aggregate basis for a period of sixty (60) days from the date of the invoice
therefor;
(I) The Borrower has not received any note, trade acceptance, draft, or
other Instrument with respect to, or in payment of, the Account, nor any
Chattel Paper with respect to the Goods giving rise to the Account, unless,
if any such Instrument or Chattel Paper has been received, the Borrower
immediately notifies the Lender and, at the latter's request, endorses or
assigns and delivers the same to the Lender;
(J) The Borrower has not received any notice of the death of the account
debtor or a partner thereof; nor of the dissolution, termination of
existence, insolvency, business failure, appointment of a receiver for any
part of the property of, assignment for the benefit of creditors by, or the
filing of a petition in bankruptcy or the commencement of any proceeding
under any bankruptcy or insolvency laws by or against, the account debtor.
Upon the receipt by the Borrower of any such notice, it will immediate
(K) The account debtor is not a Subsidiary or other Affiliate of the
Borrower; and
(L) The Lender has not deemed such Account ineligible because of uncertainty
about the creditworthiness of the account debtor or because the Lender
otherwise reasonably considers the collateral value thereof to the Lender to
be impaired or its ability to realize such value to be insecure.
In addition to the foregoing, Eligible Account shall mean any amount
receivable by the Borrower under any insurance policy covering Goods which
have, within the preceding forty-five (45) days, been damaged or destroyed by
fire or other direct casualty loss, provided that a claim therefor has been
made in compliance with such insurance policy, to the extent that such claim
has not been in any way denied or contested by the insurer and provided that
such insurer, if such insurer were an account debtor of th
In the event of any dispute, under the foregoing criteria, about whether an
Account is or has ceased to be an Eligible Account, the decision of the
Lender shall control.
"Equipment Loan" has the meaning given to such term in Section 2.02.
"Equipment Note" means the Equipment referred to in Section 2.04 hereof.
"Equity Injection" means the injection of at least $1,000,000.00 as
Stockholders' Equity on terms and subject to conditions acceptable to the
Lender.
"Event of Default" has the meaning provided in Section 7.01.
"Financial Statements" means the consolidated balance sheets of the Borrower
and its Subsidiaries as of October 31, 1993, and 1994, and consolidated
statements of income, stockholders' equity, and changes in cash flow, and
notes thereto, of the Borrower and its Subsidiaries for the years ended on
such dates, certified by Arthur Andersen LLP to present fairly the
consolidated financial position and results of operations of the Borrower and
its Subsidiaries at such dates and for such periods in accordance wi
"Foreign Account" means an Account arising from the sale of goods to or
services performed for an account debtor located outside the United States of
America or Canada and within such foreign countries as are acceptable to the
Lender from time to time in the Lender's sole discretion.
"GAAP" means generally accepted accounting principles applied
consistently as was done in the preparation of the Financial Statements, with
such changes or modifications thereto as may be approved in writing by the
Lender.
"Guarantor" means each and any of the Persons listed on Exhibit 1.01(B).
"Guaranty" means with respect to a Guarantor, a duly authorized and executed
Guaranty in the form of Exhibit 1.01(C), attached hereto and made a part
hereof.
"Indebtedness" means, as to the Borrower or any Guarantor or Subsidiary, all
items of indebtedness, obligation or liability whether matured or unmatured,
liquidated or unliquidated, direct or contingent, joint or several,
including, but without limitation:
(A) All indebtedness guaranteed, directly or indirectly, in any manner, or
endorsed (other than for collection or deposit in the ordinary course of
business) or discounted with recourse;
(B) All indebtedness in effect guaranteed, directly or indirectly, through
agreements, contingent or otherwise: (1) to purchase such indebtedness; or
(2) to purchase, sell, or lease (as lessee or lessor) property, products,
materials, or supplies or to purchase or sell services, primarily for the
purpose of enabling the debtor to make payment of such indebtedness or to
insure the owner of the indebtedness against loss; or (3) to supply funds to,
or in any other manner invest in, the debtor;
(C) All indebtedness secured by (or for which the holder of such
indebtedness has a right, contingent or otherwise, to be secured by)
any mortgage, deed of trust, pledge, lien, security interest, or other
charge or encumbrance upon property owned or acquired subject thereto,
whether or not the liabilities secured thereby have been assumed; and
(D) All indebtedness incurred as the lessee of goods or services under
leases that, in accordance with GAAP, should not be reflected on the lessee's
balance sheet.
"Intellectual Property" means trademarks, service marks, trade names, trade
styles, logos, goodwill, trade secrets, patents, and licenses acquired under
any statutory, common law or registration process in any state or nation at
any time, or under any agreement executed with any person or entity at any
time. The term "license" refers not only to rights granted by agreement from
the owner of patents, trade marks, service marks and the like, but also to
rights granted by a franchisor under a franchise or si
"Landlord's Consent and Waiver" means with respect to each premises on which
property of the Borrower is located, a duly authorized and executed Landlord
Consent and Waiver by and among the proper parties in the form of Exhibit
1.01(D) attached hereto and made a part hereof.
"Laws" means all ordinances, statutes, rules, regulations, orders,
injunctions, writs, or decrees of any government or political subdivision or
agency thereof, or of any court or similar entity established by any thereof.
"Lease" means the Lease by and between the Borrower and Unitrode
Corporation dated July 18, 1991, as extended, with respect to the property
located at 326 Clark Street, Worcester, Massachusetts.
"Lease Assignment" means a duly authorized and executed Assignment of Lease
by and between the Borrower and the Lender with respect to the Lease in the
form of Exhibit 1.01(E) attached hereto and made a part hereof.
"Loan Termination Date" shall have the meaning ascribed to such term in
Section 2.03 of this Agreement.
"Loans" means the Revolving Credit Loan and the Equipment Loan, collectively.
"Notes" means the Revolving Credit Note and the Equipment Note, collectively.
"Obligations" is intended to be used in its most comprehensive sense and
means all the obligations of the Borrower and each Guarantor to the Lender of
every kind and description, whether direct or indirect, absolute or
contingent, primary or secondary, joint or several, due or to be come due,
now existing or hereafter arising or acquired and whether by way of loan,
discount, letter of credit, lease or otherwise, including without limitation,
the following obligations:
(A) To pay the principal of, and interest on, the Notes in accordance with
the terms thereof and to satisfy all other liabilities to the Lender, whether
hereunder or otherwise, whether now existing or hereafter incurred, matured
or unmatured, direct or contingent, joint or several, including any
extensions, modifications, renewals thereof and substitutions therefor.
(B) To repay to the Lender all amounts advanced by the Lender hereunder or
otherwise on behalf of the Borrower or any Guarantor, including, but without
limitation, advances for principal or interest payments to prior secured
parties, mortgagees, or lienors, or for taxes, levies, insurance, rent, or
repairs to, or maintenance or storage of, any of the Collateral;
(C) To perform and observe all covenants, agreements and undertakings of the
Borrower or any Guarantor pursuant to the terms and conditions of this
Agreement, the Collateral Documents or any other agreement or instrument now
or hereafter delivered to the Lender by the Borrower or any Guarantor; and
(D) To reimburse the Lender, on demand, for all of the Lender's expenses and
costs, including without limitation the reasonable fees and expenses of its
counsel, in connection with the preparation, administration, amendment,
modification, or enforcement of this Agreement and the documents required
hereunder, including, without limitation, any proceeding brought, or
threatened, to enforce payment or performance of any of the obligations
referred to in the foregoing Paragraphs (A), (B) and (C).
"Overadvance" means the amount of $300,000.00 which shall be available to
the Borrower for the period from the date hereof until November 20, 1995
subject to and in accordance with the provisions of Section 2.07 hereof;
"Patent and Trademark Assignment" means with respect to each patent or
trademark of the Borrower and each Guarantor a duly executed and authorized
Assignment of Patent and/or a duly executed Assignment of Trademark by the
proper parties in the form of Exhibit 1.01(F)(1) and Exhibit 1.01(F)(2),
respectively, attached hereto.
"Permitted Liens" means:
(A) Liens for taxes, assessments, or similar charges, incurred in the
ordinary course of business, that are not yet due and payable;
(B) Pledges or deposits made in the ordinary course of business to secure
payment of worker's compensation, or to participate in any fund in connection
with worker's compensation, unemployment insurance, old-age pensions, or
other social security programs;
(C) Liens of mechanics, materialmen, warehousemen, carriers, or other like
liens, securing obligations incurred in the ordinary course of business that
are not yet due and payable;
(D) Good faith pledges or deposits made in the ordinary course of business
to secure performance of bids, tenders, contracts (other than for the
repayment of borrowed money) or leases, not in excess of ten percent (10%) of
the aggregate amount due thereunder, or to secure statutory obligations, or
surety, appeal, indemnity, performance, or other similar bonds required in
the ordinary course of business;
(E) Encumbrances consisting of zoning restrictions, easements, or other
restrictions on the use of real property, none of which materially impairs
the use of such property by the Borrower in the operation of its business,
and none of which is violated in any material respect by existing or proposed
structures or land use;
(F) Liens in favor of the Lender;
(G) Existing liens set forth or described on Exhibit 1.01(G), attached
hereto and made a part hereof;
(H) Purchase money security interests granted to secure not more than one
hundred percent (100%) of the purchase price of assets, the purchase of
which does not violate this Agreement or any instrument required hereunder;
and
(I) The following, if the validity or amount thereof is being contested in
good faith by appropriate and lawful proceedings, so long as levy and
execution thereon have been stayed and continued to be stayed and they do
not, in the aggregate, materially detract from the value of the property of
the Borrower or any Subsidiary, or materially impair the use thereof in the
operation of its business:
(1) Claims or liens for taxes, assessments, or charges due and payable and
subject to interest or penalty;
(2) Claims, liens and encumbrances upon, and defects of title to, real or
personal property, including any attachment of personal or real property or
other legal process prior to adjudication of a dispute on the merits;
(3) Claims or liens of mechanics, materialmen, warehousemen, carriers, or
other like liens; and
(4) Adverse judgments on appeal.
"Person" means any individual, corporation, partnership, association,
joint-stock company, trust, unincorporated organization, joint venture,
court, or government or political subdivision or agency thereof.
"Purchase Price" means the purchase price of the item or items of Purchased
Equipment paid by the Borrower, net of any taxes, commissions, freight
charges and other soft costs as determined by the Lender in its sole
discretion.
"Purchased Equipment" means the Equipment to be purchased by the Borrower
with the proceeds of the Equipment Loan.
"Records" means correspondence, memoranda, tapes, discs, papers, books and
other documents, or transcribed information of any type, whether expressed in
ordinary or machine readable language.
"Revolving Credit Loan" has the meaning given to such term in Section 2.03.
"Revolving Credit Note" means the Revolving Credit Note referred to in
Section 2.04 hereof.
"Stockholders' Equity" means, at any time the aggregate of Subordinated
Indebtedness, plus the sum of the following accounts set forth on a
consolidated balance sheet of the Borrower and its Subsidiaries prepared in
accordance with GAAP: (A) the par or stated value of all outstanding capital
stock; (B) capital surplus; and (C) retained earnings.
"Subordination Agreement" means a duly authorized and executed Subordination
Agreement with respect to Subordinated Indebtedness in form and substance
satisfactory to the Lender and the Borrower.
"Subordinated Indebtedness" means all Indebtedness incurred at any time by
the Borrower or any Subsidiary, the repayment of which is subordinated to the
Loan in form and manner satisfactory to the Lender. All existing
Subordinated Indebtedness is so specified in Exhibit 1.01(H).
"Subsidiary" means any Affiliate that is directly, or indirectly through one
or more intermediaries, controlled by the Borrower or not less than 50% of
the voting capital stock of which is owned, directly or through one or more
intermediaries, by the Borrower.
Accounting. Accounting terms used and not otherwise defined in this
Agreement have the meanings determined by, and all calculations with respect
to accounting or financial matters unless otherwise provided herein shall be
computed in accordance with, GAAP.
0 THE LOANS
Disbursement of the Loans.
The Lender will credit the proceeds of the Revolving Credit Loan, as
available pursuant to an initial Borrowing Base Certificate furnished by the
Borrower dated no earlier than September 30, 1995 and periodic Borrowing Base
Certificates furnished by the Borrower thereafter, to the Borrower's deposit
account with the Lender. The Lender will credit the proceeds of the
Equipment Loan as from time to time disbursed in accordance with Section 2.02
hereof.
The Equipment Loan.
Commencing with the date on which the Equity Injection is completed and
continuing thereafter for a period ending two (2) years from the date of
this Agreement, the Lender will make advances from time to time pursuant to
the Equipment Loan of sums in amounts not exceeding $750,000.00 in the
aggregate, such advances to be utilized in order to acquire Purchased
Equipment; provided, however, that the amount of each such advance shall be
limited, at the Borrower's election, to an amount equal to: (a) not more
amount equal to seventy percent (70%) of the appraised auction value of the
Equipment of the Borrower, as determined by the Lender in its sole
discretion, at the time of the proposed advance shall equal or exceed the
aggregate of twenty-five percent (25%) of the outstanding undisbursed amount
of the Equipment Loan plus the amount of the Purchase Price of the Purchased
Equipment to be acquired; or (b) seventy-five (75%) of the Purchase Price of
Purchased Equipment. The Borrower will provide the Lender with
n its sole discretion, whether borrowings under the Equipment Note may be
utilized to acquire Purchased Equipment subject of the requested advance.
The Revolving Credit Loan.
Subject to the terms hereof, the Lender shall lend the Borrower from time to
time until March 31, 1997 (the "Loan Termination Date"), such sums as the
Borrower may request by reasonable notice to the Lender, received by the
Lender, which shall not exceed, in the aggregate principal amount at any one
time outstanding, $2,500,000.00. The Borrower may borrow, repay without
penalty or premium and reborrow hereunder, from the date of this Agreement
until the Loan Termination Date, the full amount then due unde
the Revolving Credit Loan shall at no time exceed the amount of the then
existing Borrowing Base, and if, at any time, an excess shall for any reason
exist, the full amount of such excess, together with accrued and unpaid
interest thereon as herein provided, shall be immediately due and payable in
full.
The Notes.
At the time of the making of the Loans, the Borrower shall execute and
deliver to the Lender the Equipment Note and the Revolving Credit Note in the
forms attached hereto as Exhibit 2.04(A) and Exhibit 2.04(B) respectively.
The Facility Fee.
From and after the date hereof, until the Loan Termination Date, the
Borrower shall pay a facility fee of one-quarter of one percent (0.25%)
per annum on the average daily undisbursed amount of the Revolving Credit
Loan during each quarterly period or portion thereof. This facility fee
shall be payable quarterly in arrears, on the last day of each January,
April, July and October, commencing on January 31, 1996.
Interest Rates and Payments of Interest.
Interest on the principal balances of the Loans from time to time
outstanding shall accrue at the respective rates (a "Note Rate") and in the
manner set forth in the Notes.
It is the intention of the parties hereto to conform strictly to applicable
usury laws as in effect, from time to time, during the term of the Loans.
Accordingly, if any transaction or transactions contemplated hereby would be
usurious under applicable law (including the laws of the United States of
America, or of any other jurisdiction whose laws may be applicable), then,
in that event, notwithstanding anything to the contrary in this Agreement
or any other agreement entered into in connection with this
(ii) the aggregate of all interest under applicable law that is contracted
for, charged, or received under this Agreement or under any of the other
aforesaid agreements or otherwise in connection with this Agreement shall
under no circumstances exceed the maximum amount of interest allowed by
applicable law, and any excess shall be promptly credited to the Borrower by
the Lender (or, if such consideration shall have been paid in full, such
excess shall be promptly refunded to the Borrower by the Lender);
ll be obligated to pay the amount of such interest to the extent that it is
in excess of the maximum interest permitted by the applicable usury laws;
and (iv) the effective rate of interest shall be ipso facto reduced to the
Highest Lawful Rate hereinafter defined. All sums paid, or agreed to be
paid, to the Lender for the use, forbearance, and detention of the
indebtedness of the Borrower to the Lender shall, to the extent permitted
by applicable law, be amortized, pro rated, allocated, and spread through
the Highest Lawful Rate in effect at any particular time during the full
term thereof. The maximum lawful interest rate, if any, referred to in this
Section 2.06(B) that may accrue pursuant to this Agreement is referred to
herein as the "Highest Lawful Rate". If at any time a Note Rate exceeds
the Highest Lawful Rate, the rate of interest to accrue pursuant to this
Agreement shall be limited, notwithstanding anything to the contrary in
this Agreement, to the Highest Lawful Rate, but any subsequent reducti
the Highest Lawful Rate until the total amount of interest accrued pursuant
to this Agreement equals the amount of interest that would have accrued if
a varying rate per annum equal to the Rate had at all times been in effect.
If the total amount of interest paid or accrued pursuant to this Agreement
under the foregoing provisions is less than the total amount of interest
that would have accrued if a varying rate per annum equal to the applicable
Note Rate had at all times been in effect, then the Borrower
the Lender an amount equal to the difference between (a) the lesser of
(i) the amount of interest that would have accrued if the Highest Lawful
Rate had at all times been in effect, or
(ii) the amount of interest that would have accrued if a varying rate per
annum equal to the applicable Note Rate had at all times been in effect,
and (b) the amount of interest accrued in accordance with the other
provisions of this Agreement.
Overadvance.
The Borrower may borrow from the Lender during the period from the date
hereof until November 20, 1995 an amount which shall not exceed, in the
aggregate amount at any one time outstanding, $300,000.00 or such lesser
amount as shall be specified by the Borrower, such sums to be included in
the Borrowing Base.
2.08 Payment to the Lender.
The Lender shall send the Borrower statements of all amounts due with
respect to the Loans, which statements shall be considered correct and
presumptively binding on the Borrower unless the Borrower notifies the Lender
to the contrary within thirty (30) days of its receipt of any statement
that it deems to be incorrect. Alternatively, at its sole discretion, the
Lender may charge against any deposit account of the Borrower all or any
part of any amount due hereunder.
0 CONDITIONS PRECEDENT
The obligation of the Lender to make the Loans is subject to the following
conditions precedent:
Documents Required for the Closing.
The Borrower shall have duly authorized, executed and delivered or caused
to be duly authorized, executed and delivered to the Lender, prior to the
initial disbursement of either of the Loans (the "Closing"), the following:
The Equipment Note in the form attached hereto as Exhibit 2.04(A);
The Revolving Credit Note in the form attached hereto as Exhibit 2.04(B);
The Lease Assignment;
The Landlord's Consent and Waiver;
A duly executed Guaranty of each of the Guarantors;
The Patent and Trademark Assignments;
The UCC financing statements and other instruments required by Article 4.0;
The Financial Statements;
A copy, certified as of the date of the Closing, of resolutions of the
board of directors of the Borrower and each Guarantor, authorizing the
execution, delivery, and performance of this Agreement, the Notes, the
Collateral Documents, and each other document to be delivered pursuant hereto;
A copy, certified as of the date of the Closing, of the bylaws of the
Borrower and each Guarantor;
A certificate, dated the date of the Closing, of the corporate clerk or
assistant clerk of the Borrower and each Guarantor as to the incumbency and
signatures of the officers of the Borrower and each Guarantor, as
applicable, signing this Agreement, the Notes, the Collateral Documents,
and each other document to be delivered pursuant hereto;
A copy, certified as of the most recent date practicable by the Secretary
of the Commonwealth of Massachusetts, of the Articles of Organization of
the Borrower and each Guarantor, and all amendments thereto, together with a
certificate (dated the date of the Closing) of the corporate clerk or
assistant clerk of the Borrower and each Guarantor to the effect that such
Articles of Organization have not been further amended since the date of
the aforesaid certification of the Secretary of the Commonwealth of M
A certificate of good standing dated as of the most recent date
practicable, issued by the Secretary of the Commonwealth of Massachusetts
as to the legal existence, Articles of Organization and good legal standing
of the Borrower and each Guarantor;
Certificates, as of the most recent dates practicable, of the Secretary of
the Commonwealth of Massachusetts and of the secretary of state of each
state in which the Borrower and each Guarantor are qualified as a foreign
corporation and, if applicable, of the department of revenue or taxation
of each of the foregoing states, as to the good standing of the Borrower
and each Guarantor;
A written opinion of the law firm of Bingham, Dana & Gould, legal counsel
for the Borrower and the Guarantors, dated the date of the Closing and
addressed to the Lender, in form satisfactory to the Lender, and attached
hereto as Exhibit 3.01(O);
A duly executed Borrowing Base Certificate as of a date not earlier than
September 30, 1995, acceptable to the Lender and certifying a Borrowing
Base in an amount sufficient to support the initial disbursement of the
Revolving Credit Loan; and
Such other documents and the completion of such other matters as counsel
to the Lender may deem necessary or appropriate.
Documents Required for Subsequent Disbursements.
At the time of, and as a condition to, any disbursement of any part of
the Revolving Credit Loan or the Equipment Loan to be made by the Lender
subsequent to the Closing, the Lender may require the Borrower and the
Guarantors to deliver to the Lender a certificate, dated the date on which
any such disbursement is to be made, signed by the president or a vice
president of the Borrower, and to the effect that:
As of the date thereof, no Event of Default has occurred and is
continuing, and no event has occurred and is continuing that, but for the
giving of notice or passage of time or both, would be an Event of Default;
No material adverse change has occurred in the business prospects,
financial condition, or results of operations of the Borrower or any
Subsidiary since the date of the Financial Statements; and
Each of the representations and warranties contained in Section 5.01 is
true and correct in all respects as if made on and as of the date of such
disbursement.
Certain Events.
At the time of, and as a condition to, the Closing and each disbursement
of any part of the Loans to be made by the Lender at or subsequent to the
Closing:
No Event of Default shall have occurred and be continuing, and no event
shall have occurred and be continuing that, with the giving of notice or
passage of time or both, would be an Event of Default; and
All of the Collateral Documents shall have remained in full force and effect.
Legal Matters.
At the time of the Closing and each subsequent disbursement, all legal
matters incidental thereto shall be satisfactory to Bowditch & Dewey, legal
counsel to the Lender.
0 COLLATERAL SECURITY
Composition of the Collateral.
The property in which a security interest is granted pursuant to the
provisions of Sections 4.02 and 4.03 hereof, the Lease Assignment and the
Patent and Trademark Assignments are herein collectively called the
"Collateral". The Collateral, together with all other property of the
Borrower and each of the Guarantors of any kind held by the Lender, shall
stand as one general, continuing collateral security for all Obligations
and may be retained by the Lender until all Obligations have been satisfied
in ful
Rights in Property Held by the Lender.
As security for the prompt satisfaction of all Obligations, the Borrower
and each Guarantor hereby assign, transfer, and set over to the Lender all
of their respective right, title, and interest in and to, and grant the
Lender a lien on and a security interest in, all amounts that may be owing,
from time to time, by the Lender to the Borrower or any Guarantor in any
capacity, including, but without limitation, any balance or share belonging
to the Borrower or any Guarantor, or any deposit or other account
ff that the Lender has under Section 8.07 or otherwise.
Rights in Property Held by the Borrower, the Guarantors or the Lender.
As further security for the prompt satisfaction of all Obligations, the
Borrower and each Guarantor hereby assign to the Lender all of their
respective right, title and interest in and to, and grants the Lender a
lien upon and a continuing security interest in, all of the following,
wherever located, whether now owned or hereafter acquired, together with
all replacements therefor and proceeds (including, but without limitation,
insurance proceeds) and products thereof:
All Inventory;
All Accounts, Contracts, accounts receivable, contract rights, and Chattel
Paper, regardless of whether or not they constitute proceeds of other
Collateral;
All General Intangibles, regardless of whether or not they constitute
proceeds of other Collateral, including, without limitation, all the rights
of the Borrower or any Guarantor (which the Lender may exercise or not as
it in its sole discretion may determine) to acquire or obtain Goods and/or
services with respect to the manufacture, processing, storage, sale,
shipment, delivery or installation of any of the Inventory of the Borrower
or any Guarantor or other Collateral;
All products of and accessions to any of the Collateral;
All liens, guaranties, securities, rights, remedies and privileges pertaining
to any of the Collateral, including the right of stoppage in transit;
All obligations owing to the Borrower or any Guarantor of every kind and
nature, and all choses in action;
All tax refunds of every kind and nature to which the Borrower or any
Guarantor is now or hereafter may become entitled no matter however
arising, including, without limitation, loss carry back refunds;
All Intellectual Property, goodwill, trade secrets, computer programs,
customer lists, trade names, trademarks and patents;
All Chattel Paper, Documents and Instruments (whether negotiable or
non-negotiable, and regardless of their being attached to Chattel Paper);
All Equipment, including without limitation machinery, furniture, motor
vehicles, Fixtures and all other goods used in the conduct of the business
of the Borrower or any Guarantor;
All proceeds of Collateral of every kind and nature and in whatever form,
including, without limitation, both cash and non-cash proceeds resulting or
arising from the rendering of services by the Borrower or any Guarantor or
the sale or other disposition by the Borrower or any Guarantor of the
Inventory or other Collateral;
All books, records, computer discs, electronic data and other information
relating to the conduct of the business of the Borrower or any Guarantor
including, without in any way limiting the generality of the foregoing,
those relating to its Accounts;
All deposit accounts maintained by the Borrower or any Guarantor with any
bank, trust company, investment firm or fund, or any similar institution or
organization; and
All property of the Borrower or any Guarantor in the possession of the
Lender.
Priority of Liens.
The foregoing liens shall be first and prior liens except for Permitted Liens.
UCC Financing Statements.
The Borrower and each Guarantor will:
Execute such UCC financing statements (including amendments thereto and
continuation statements thereof) in form satisfactory to the Lender as the
Lender, from time to time, may specify;
Pay, or reimburse the Lender for paying, all costs and taxes of filing or
recording the same in such public offices as the Lender may designate; and
Take such other steps as the Lender, from time to time, may direct,
including the noting of the Lender's lien on the Collateral and on any
certificates of title therefor, all to perfect to the satisfaction of the
Lender the Lender's interest in the Collateral.
In addition to the foregoing, and not in limitation thereof:
A carbon, photographic, or other reproduction of this Agreement shall be
sufficient as a UCC financing statement and may be filed in any appropriate
office in lieu thereof; and
To the extent lawful, the Borrower and each Guarantor hereby appoint the
Lender as its attorney-in-fact (without requiring the Lender to act as such)
to execute any UCC financing statement in the name of the Borrower or any
Guarantor, and to perform all other acts that the Lender deems appropriate to
perfect and continue its security interest in, and to protect and preserve,
the Collateral.
Mortgagees', Landlords', and Warehousemen's Waivers.
The Borrower and each Guarantor will, within twenty (20) days after any
request of the Lender, cause any mortgagee of real estate owned by the
Borrower or any Guarantor, any landlord of premises leased by the Borrower
or any Guarantor, and any warehouseman or other bailee on whose premises
any of the Collateral may be located to execute and deliver to the Lender
instruments, in form and substance satisfactory to the Lender, by which
such mortgagee, landlord or warehouseman or other bailee waives its rights
0 REPRESENTATIONS AND WARRANTIES
Original.
To induce the Lender to enter into this Agreement, the Borrower and each
Guarantor individually and collectively represent and warrant to the Lender
as follows:
The Borrower and the Guarantors are corporations duly organized, validly
existing, and in good standing under the Laws of the Commonwealth of
Massachusetts; the Borrower and the Guarantors have no Subsidiaries other
than the Subsidiaries named in Exhibit 5.01(A); each Subsidiary is a
corporation duly organized, validly existing, and in good standing under
the Laws of its state of incorporation, all as set forth in Exhibit 5.01(A);
the Borrower, the Guarantors and the Subsidiaries have the lawful power to o
as a foreign corporation in the jurisdictions wherein the nature of the
business transacted by it or property owned by it makes such qualification
necessary; the states in which the Borrower and each Guarantor and
Subsidiary are qualified to do business are set forth in Exhibit 5.01(A) or
otherwise disclosed to the Lender in writing; the percentage of ownership
of the Borrower and each Guarantor of the outstanding stock of each
Subsidiary is as listed in Exhibit 5.01(A); the addresses of all places of
bus
sed to the Lender in writing; no Borrower, Guarantor or Subsidiary has
changed its name, been the surviving corporation in a merger, acquired any
business, or changed its principal executive office within five (5) years
and one (1) month prior to the date hereof except as set forth in
Exhibit 5.01(A); and all of the authorized, issued, and outstanding shares
of capital stock of each Subsidiary are owned by the Borrower or a Guarantor,
except as set forth in Exhibit 5.01(A);
No Borrower, Guarantor or Subsidiary is directly or indirectly controlled
by, or acting on behalf of, any Person which is an "Investment Company",
within the meaning of the Investment Company Act of 1940, as amended;
No Borrower, Guarantor or Subsidiary is in default with respect to any of
its existing Indebtedness, and the making and performance of this Agreement,
the Notes, and the Collateral Documents will not (immediately or with the
passage of time, the giving of notice, or both):
Violate the Articles of Organization or by-laws of any Borrower, Guarantor
or Subsidiary, or violate any Laws or result in a default under any
contract, agreement, or instrument to which the Borrower or any Subsidiary
is a party or by which Borrower, any Guarantor or Subsidiary or its property
is bound; or
Result in the creation or imposition of any security interest in, or lien
or encumbrance upon, any of the assets of the Borrower, any Guarantor or
Subsidiary except in favor of the Lender;
The Borrower and each Guarantor, to the extent applicable to it, has the
power and authority to enter into and perform this Agreement, the Notes, and
the Collateral Documents, and to incur the obligations herein and therein
provided for, and has taken all actions necessary to authorize the
execution, delivery, and performance of this Agreement, the Notes, and the
Collateral Documents;
This Agreement, the Notes, and the Collateral Documents are, or when
delivered will be, valid, binding, and enforceable in accordance with their
respective terms subject to applicable bankruptcy, insolvency,
reorganization or similar laws affecting the rights and remedies of
creditors and secured parties;
Except as disclosed in Exhibit 5.01(F) hereto, there is no pending order,
notice, claim, litigation, proceeding, or investigation against or
affecting the Borrower, any Guarantor or Subsidiary, whether or not covered
by insurance, that would in the aggregate involve the payment of $25,000.00
or more or would otherwise materially or adversely affect the financial
condition or business prospects of the Borrower, any Guarantor or Subsidiary
if adversely determined;
The Borrower and each Guarantor and Subsidiary have good and marketable
title to all of their assets, none of which is subject to any security
interest, encumbrance or lien, or claim of any third Person except for
Permitted Liens;
The Financial Statements, including any schedules and notes pertaining
thereto, have been prepared in accordance with GAAP, and fully and fairly
present the financial condition of the Borrower and its Subsidiaries at the
dates thereof and the results of operations for the periods covered thereby,
and there have been no material adverse changes in the consolidated financial
condition or business of the Borrower and its Subsidiaries from October 31,
1994, to the date hereof;
As of the date hereof, the Borrower, the Guarantors and the Subsidiaries
have no material Indebtedness of any nature, including, but without
limitation, liabilities for taxes and any interest or penalties relating
thereto except to the extent reflected (in a footnote or otherwise) and
reserved against in the consolidated balance sheet dated October 31, 1994
included in the Financial Statements or as disclosed in, or permitted by,
this Agreement; and neither the Borrower nor any Guarantor knows or has reaso
ion related to such Indebtedness as of the date of the Closing except as
disclosed on Exhibit 5.01(F) or otherwise disclosed to the Lender in writing;
Except as otherwise permitted herein, the Borrower and each Guarantor have
filed all federal, state, and local tax returns and other reports required
by any applicable Laws to have been filed prior to the date hereof, has
paid or caused to be paid all taxes, assessments, and other governmental
charges that are due and payable prior to the date hereof, and has made
adequate provision for the payment of such taxes, assessments, or other
charges accruing but not yet payable; neither the Borrower nor any Guara
with any taxes, assessments, or charges not provided for on their books;
Except to the extent that the failure to comply would not materially
interfere with the conduct of the business of the Borrower, any Guarantor
or Subsidiary, the Borrower and each Guarantor and Subsidiary have each
complied with all applicable Laws with respect to (1) any restrictions,
specifications, or other requirements pertaining to products that it
manufactures or sells or to the services it performs; (2) the conduct of
its business; and (3) the use, maintenance, and operation of the real and
persona
No representation or warranty by or with respect to the Borrower, any
Guarantor or Subsidiary contained herein or in any certificate or other
document furnished by the Borrower, any Guarantor or Subsidiary pursuant
hereto contains any untrue statement of a material fact or omits to state
a material fact necessary to make such representation or warranty not
misleading in light of the circumstances under which it was made;
Each consent, approval or authorization of, or filing, registration or
qualification with, any Person required to be obtained or effected by the
Borrower, any Guarantor or Subsidiary in connection with the execution and
delivery of this Agreement, the Notes, and the Collateral Documents or the
undertaking or performance of any obligation hereunder or thereunder has
been duly obtained or effected;
All existing Indebtedness of the Borrower, any Guarantor or Subsidiary:
(1) for money borrowed, or (2) under any security agreement, mortgage or
agreement covering the lease by the Borrower, any Guarantor or Subsidiary
as lessee of real or personal property is described in Exhibit 5.01(N);
Except as described in Exhibit 5.01(O), attached hereto, or otherwise
disclosed to the Lender in writing, (a) no Borrower, Guarantor or Subsidiary
has any material leases, contracts, or commitments of any kind (including,
without limitation, employment agreements; collective bargaining agreements;
powers of attorney; distribution arrangements; licenses, patents,
trademarks, service marks or license agreements; contracts for future
purchase or delivery of goods or rendering of services; bonuses, pension,
he Borrower and the Guarantors, all parties to all such material leases,
contracts, and other commitments to which the Borrower, any Guarantor or
Subsidiary is a party have complied with the provisions of such leases,
contracts, and other commitments; and (c) to the best of the Borrower's
knowledge, no party is in default under any thereof and no event has
occurred which, but for the giving of notice or the passage of time, or
both, would constitute a default;
Neither the Borrower nor any Guarantor has made any agreement or taken
any action which may cause anyone to become entitled to a commission or
finder's fee as a result of or in connection with the making of the Loans;
The consolidated federal tax returns of the Borrower and the Guarantors
for all years of operation, including the year ended October 31, 1994, have
been filed with the Internal Revenue Service and have not been challenged;
Any Employee Pension Benefit Plans, as defined in the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), of the Borrower and each
Subsidiary meet, as of the date hereof, the minimum funding standards of
29 U.S.C.A. 1082 (Section 302 of ERISA), and no Reportable Event or
Prohibited Transaction, as defined in ERISA, has occurred with respect to
any Employee Benefit Plans, as defined in ERISA, of the Borrower or any
Guarantor or Subsidiary; and
The liens and security interests created pursuant to Sections 4.02 and 4.03
are in all cases first and prior liens except for Permitted Liens.
Survival.
All of the representations and warranties set forth in Section 5.01 shall
survive until all Obligations are satisfied in full and there remain no
outstanding commitments hereunder.
0 COVENANTS OF THE BORROWER
Affirmative Covenants.
The Borrower and each Guarantor do hereby individually and collectively
covenant and agree with the Lender that, so long as any of the Obligations
remain unsatisfied or any commitments hereunder remain outstanding, they
will comply, or if appropriate cause the Subsidiaries to comply, at all
times with the following affirmative covenants:
The Borrower will use the proceeds of the Loans only for the purposes set
forth in Exhibit 6.01(A), and will furnish the Lender such evidence as it
may reasonably require with respect to such use;
The Borrower and the Guarantors will furnish the Lender:
As soon as available, but in any event within forty-five (45) days after
the close of each quarterly accounting period in each fiscal year:
(a) a consolidated statement of Stockholders' Equity and a consolidated
statement of changes in cash flow of the Borrower and its Subsidiaries for
such quarter; (b) consolidated income statements of the Borrower and its
Subsidiaries for such quarter; and (c) consolidated balance sheets of the
Borrower and its Subsidiaries as of the end of such quarter all in reasonabl
ancial officer to have been prepared in accordance with GAAP;
As soon as available, but in any event within one hundred and twenty (120)
days after the close of each fiscal year: (a) a consolidated statement of
Stockholders' Equity and a consolidated statement of changes in cash flow
of the Borrower and its Subsidiaries for such fiscal year; (b) consolidated
and consolidating income statements of the Borrower and its Subsidiaries
for such fiscal year; and (c) consolidated and consolidating balance sheets
of the Borrower and its Subsidiaries as of the end of such fi
s and management letters; the consolidated statements and balance sheets to
be audited by an independent certified public accountant selected by
Borrower and acceptable to the Lender, and certified by such accountants to
have been prepared in accordance with GAAP and to present fairly the
consolidated financial position and results of operations of the Borrower
and its Subsidiaries; in addition, the Borrower will obtain from such
independent certified public accountants and deliver to the Lender, within
one
amination necessary to their certification they have obtained no knowledge
of any Event of Default by the Borrower, or disclosing all Events of Default
of which they have obtained knowledge (it being understood and agreed by
the Lender that in making their examination, such accountants shall not be
required to go beyond the bounds of generally accepted auditing procedures
for the purpose of certifying financial statements); the Lender shall have
the right, from time to time to discuss the affairs of the Bor
the Borrower to be represented at any such discussions;
Contemporaneously with each quarterly and year-end financial report
required by the foregoing paragraphs (1) and (2), a certificate of the
president or principal financial officer of the Borrower stating that he
has individually reviewed the provisions of this Agreement and that a
review of the activities of the Borrower during such year or quarterly
period, as the case may be, has been made by him or under his supervision,
with a view to determining whether the Borrower has fulfilled all its
obligations u
Promptly after the sending or making available or filing of the same,
copies of all reports, proxy statements, and financial statements that the
Borrower sends or makes available to its stockholders and all registration
statements and reports that the Borrower or any Guarantor files with the
Securities and Exchange Commission or any successor Person;
Within fifteen (15) days after the end of each calendar month, in such
form and detail as shall be reasonably satisfactory to the Lender, an
aging, as of the end of such month, of (a) the then Eligible Accounts,
(b) all other Accounts of the Borrower certified by the president or chief
financial officer of the Borrower to be complete and correct;
Within fifteen (15) days after the end of each calendar month, in such
form and detail as shall be satisfactory to the Lender, a designation of
Borrower's Inventory, showing the amount and cost of each item or group
thereof;
Within fifteen (15) days after the end of each calendar month (and at any
additional time in the discretion of the Lender or if any material
deterioration in the Borrowing Base would be disclosed thereby) a Borrowing
Base Certificate as of the end of such month (or as of a date not more than
three (3) days prior to the date of any such additional Borrowing Base
Certificate). Each Borrowing Base Certificate shall be effective only as
accepted by the Lender (and with such revisions, if any, as the Lender ma
l upon a change in the Borrowing Base), such acceptance to be presumed
after receipt of such Borrowing Base Certificate unless the Lender otherwise
notifies the Borrower, whether thereafter, theretofore, or contemporaneously
therewith; and
Upon the Lender's request, from time to time, copies of any or all
agreements, contracts, or commitments referred to in Section 5.01(O) hereof;
The Borrower and each Guarantor will maintain their Inventory, Equipment,
real estate, and other properties in good condition and repair (normal wear
and tear excepted), and will pay and discharge or cause to be paid and
discharged, when due, the cost of repairs to, or maintenance of, the same,
and will pay or cause to be paid in a timely manner all rental or mortgage
payments due on such real estate. The Borrower and each Guarantor hereby
agree that, in the event any of them fails to pay or cause to be p
d on demand be reimbursed therefor by the Borrower or the Guarantors;
The Borrower, the Guarantors and the Subsidiaries will maintain, or cause
to be maintained, public liability insurance (subject to a maximum of
$5,000.00 in deductibles for each entity) and fire and extended coverage
insurance on all assets that are of a character usually insured by
corporations engaged in the same or similar businesses, all in form and
amount sufficient to indemnify the Borrower or Subsidiary for 100% of the
appraised value of any such asset lost or damaged (subject to any deductible
cust
insurance generally carried on comparable assets within the industry and
with such insurers as may be satisfactory to the Lender. The Borrower, the
Guarantors and the Subsidiaries will cause all such insurance policies to
contain a standard loss payee clause and to be payable to the Lender as its
interest may appear, to deliver the policies of insurance to the Lender.
The Borrower will furnish to the Lender such evidence of insurance as the
Lender may require. The Borrower hereby agrees that, in the e
e, the Lender, in its discretion, may do so and be reimbursed by the
Borrower therefor. The Borrower and each Guarantor or Subsidiary hereby
assign to the Lender any returned or unearned premiums that may be due the
Borrower or any Subsidiary upon cancellation by the insurer of any such
policy for any reason whatsoever and direct any such insurer to pay the
Lender any amounts so due; provided, however, that the Lender will pay to
the Borrower or the appropriate Guarantor or Subsidiary any such returned or
vent of Default hereunder. The Lender is hereby appointed the
attorney-in-fact of the Borrower and each Guarantor or Subsidiary (without
requiring the Lender to act as such) to endorse any check which may be
payable to the Borrower or any Guarantor or Subsidiary to collect any
premiums or the proceeds of such insurance (other than proceeds of public
liability insurance), and any amount so collected may be applied by the
Lender toward satisfaction of any of the Obligations if an Event of Default
has occurre
t shall remit such proceeds to the Borrower or such Guarantor or Subsidiary
within ten (10) Business Days after the Lender's receipt of such proceeds,
provided that immediately prior to any such remittance the Lender is
provided with a Borrowing Base Certificate reflecting a current Borrowing
Base not less than the amount of the Revolving Credit Loan then outstanding;
The Borrower, the Guarantors and the Subsidiaries will each pay or cause
to be paid when due, all taxes, assessments, and charges or levies imposed
upon it or on any of its property or which it is required to withhold and
pay except where contested in good faith by appropriate proceedings with
adequate reserves therefor having been set aside on its books; provided,
however, that the Borrower and each Guarantor or Subsidiary shall pay or
cause to be paid all such taxes, assessments, charges or levies forthw
The Borrower and its Subsidiaries will maintain:
Consolidated Tangible Net Worth (a) of at least $750,000.00 at all times
during the period commencing on the date hereof through and including
April 30, 1996; (b) of at least $1,000,000.00 at all times during the period
commencing on May 1, 1996 through and including July 31, 1996; (c) of at
least $1,250,000.00 at all times during the period commencing on August 1,
1996 through and including January 1, 1997; and (d) at all times during each
fiscal quarter ending after April 30, 1997, an amount equal to or
0%) of Consolidated Earnings for the fiscal quarter tested;
A ratio of Consolidated Liabilities to Consolidated Tangible Net Worth as
of the following test dates of not more than:
Test Date Ratio
January 31, 1996 2.0:1.0
April 30, 1996 2.5:1.0
July 31, 1996 3.0:1.0
October 31, 1996 3.0:1.0
January 31, 1997 3.0:1.0
April 30, 1997 3.0:1.0
July 31, 1997 3.0:1.0
October 31, 1997 2.5:1.0
and thereafter
(a) Consolidated Losses as of the end of the following fiscal quarters of
not more than:
Fiscal Consolidated
Quarter Ending Losses
January 31, 1996 $300,000.00
April 30, 1996 $350,000.00
July 31, 1996 $450,000.00
October 31, 1996 $200,000.00
January 31, 1997 $200,000.00
April 30, 1997 $0.00
and thereafter
or (b) Cumulative Consolidated Losses, as of the end of the following fiscal
quarters, of not more than:
Fiscal Consolidated
Quarters Ending Losses
April 30, 1996 $600,000.00
July 31, 1996 $700,000.00
October 31, 1996 $600,000.00
A Debt Service Coverage Ratio of not less than 2.00:1.00 tested as of
October 31, 1997 and the end of each fiscal quarter thereafter based upon
the fiscal quarter tested and the three (3) fiscal quarters immediately
preceding such fiscal quarter on a rolling four quarters basis;
A Borrowing Base such that the amount of the Borrower's outstanding
Revolving Credit Loan will not, at any time, exceed its Borrowing Base; and
The Borrower, the Guarantors and the Subsidiaries will each, when
requested to do so, make available for inspection by duly authorized
representatives of the Lender any of its books and records and will furnish
the Lender any information regarding its business affairs and financial
condition reasonably requested by the Lender within a reasonable time after
written request therefor;
The Borrower, the Guarantors and the Subsidiaries will each take all
necessary steps to preserve its corporate existence and franchises and
comply with all present and future Laws applicable to it in the operation
of its business, and all material agreements to which it is subject;
The Borrower, the Guarantors and the Subsidiaries will each collect its
Accounts and sell its Inventory only in the ordinary course of business;
The Borrower, the Guarantors and the Subsidiaries will each keep accurate
and complete Records of its Accounts, Inventory, and Equipment consistent
with sound business practices;
The Borrower, the Guarantors and the Subsidiaries will each give immediate
notice to the Lender of (1) any litigation or proceeding in which it is a
party if an adverse decision therein would require it to pay more than
$25,000.00, or deliver assets the value of which exceeds such sum (whether
or not the claim is considered to be covered by insurance); and (2) the
institution of any other suit or proceeding involving it that might
materially and adversely affect its operations, financial condition, propert
Within ten (10) days after the filing thereof, the Borrower and the
Guarantors will furnish the Lender upon request with copies of federal
income tax returns filed by the Borrower or any Guarantor;
The Borrower, the Guarantors and the Subsidiaries will each (a) pay
immediately, from the proceeds of the initial disbursement of the Revolving
Credit Loan at the Closing, its outstanding Indebtedness to the Lender and
cause all security therefor or in respect thereof to be assigned to the
Lender, and (b) pay when due (or within applicable grace periods) all of
its other Indebtedness due third Persons except when the amount thereof is
being contested in good faith by appropriate proceedings and with adequa
Subordinated Indebtedness except in strict compliance with all of the
terms of subordination thereof theretofore approved in writing by the
Lender. If default be made by the Borrower or any Guarantor or Subsidiary
in the payment of any principal (or installment thereof) of, or interest
on, any such Indebtedness, the Lender shall have the right, in its
discretion, to pay such interest or principal for the account of the
Borrower or such Guarantor or Subsidiary and be reimbursed by the Borrower
or such Gua
The Borrower, the Guarantors and its Subsidiaries will each notify the
Lender immediately if it becomes aware of the occurrence of any Event of
Default or of any fact, condition, or event that only with the giving of
notice or passage of time or both, could become an Event of Default or if
it becomes aware of any material adverse change in the business prospects,
financial condition (including, without limitation, proceedings in
bankruptcy, insolvency, reorganization, or the appointment of a receiver or
tr
r, any Guarantor or any Subsidiary to observe any of their respective
undertakings hereunder or under the Collateral Documents;
The Borrower, the Guarantors and its Subsidiaries will each notify the
Lender thirty (30) days in advance of any change in the location of any of
its places of business or of the establishment of any new, or the
discontinuance of any existing, place of business;
The Borrower, the Guarantors and the Subsidiaries will each (1) fund any of
its Employee Pension Benefit Plans in accordance with no less than the
minimum funding standards of 29 U.S.C.A. 1082 (Section 302 of ERISA); (2)
furnish the Lender, promptly after the filing of the same, with copies of any
reports or other statements filed with the United States Department of Labor
or the Internal Revenue Service with respect to any such Plan; and (3)
promptly advise the Lender of the occurrence of any Reportabl
The Borrower and the Guarantors shall each maintain their primary operating
accounts, to the extent in existence, with the Lender until such time as the
Loans are paid in full;
The Borrower and the Guarantors shall each permit the Lender and its agents
to conduct periodic audits and account debtor inquiries with respect to
outstanding balances of Accounts and field audits on any premises occupied
by the Borrower or on which any Collateral is located and shall pay to the
Lender its reasonable costs and expenses related to each such audit; and
The Borrower shall cause the Equity Injection to be completed on or before
six (6) months from the date of this Agreement.
Negative Covenants.
The Borrower and the Guarantors do hereby individually and collectively
covenant and agree with the Lender that, so long as any of the Obligations
remain unsatisfied or any commitments hereunder remain outstanding, they will
comply, or if appropriate cause the Subsidiaries to comply, at all times
with the following negative covenants, unless otherwise indicated herein or
the Lender shall otherwise have agreed in writing:
Neither the Borrower nor any Guarantor or Subsidiary will enter into any
merger, consolidation, reorganization or recapitalization, or reclassify its
capital stock nor will the Borrower nor any Guarantor or Subsidiary change
its name without thirty days' prior written notice to the Lender;
Neither the Borrower nor any Guarantor or Subsidiary will sell, transfer,
lease, or otherwise dispose of all or (except in the ordinary course of
business) any material part of its assets;
Neither the Borrower nor any Guarantor or Subsidiary will sell, lease,
transfer, assign, or otherwise dispose of any of the Collateral (excluding
only Collateral which is obsolete and not used in the operation of their
businesses) except in the ordinary course of business;
Neither the Borrower nor any Guarantor or Subsidiary will sell or otherwise
dispose of, or for any reason cease operating, any of its divisions,
franchises, or lines of business;
Neither the Borrower nor any Guarantor or Subsidiary will mortgage, pledge,
grant, or permit to exist a security interest in, or a lien upon, any of its
assets of any kind, now owned or hereafter acquired, except for Permitted
Liens, liens of the Collateral Documents, and existing liens listed on
Exhibit 1.01(G) to the extent shown on such Exhibit 1.01(G) to be permitted
to exist after the Closing;
Neither the Borrower nor any Guarantor or Subsidiary will become liable,
directly or indirectly, as guarantor or otherwise for any obligation of any
other Person, except for (i) the Guaranties, and (ii) the endorsement of
commercial paper for deposit or collection in the ordinary course of business;
Neither the Borrower nor any Guarantor or Subsidiary will incur, create,
assume, or permit to exist any Indebtedness except: (1) the Loans; (2)
existing Indebtedness listed on Exhibit 1.01(G) to the extent shown on such
Exhibit 1.01(G) to be permitted to exist after the Closing; (3) trade
indebtedness incurred in the ordinary course of business (provided, however,
that neither the Borrower nor any Subsidiary may acquire inventory other than
for cash or on open account except as expressly approved in writi
lease obligations permitted by Section 6.02(L); (6) Indebtedness secured by
Permitted Liens; (7) Subordinated Indebtedness; (8) Indebtedness permitted
pursuant to Section 6.01(E); (9) Indebtedness in respect of judgments or
awards that have been in force for less than the applicable period for taking
an appeal so long as execution is not levied thereunder or in respect of
which the Borrower or such Subsidiary shall at the time in good faith be
prosecuting an appeal or proceedings for review and in respect
ss pursuant to warranties of products or services issued in the ordinary
course of business of the Borrower or any Guarantor.
Neither the Borrower nor any Guarantor or Subsidiary (other than a wholly
owned Subsidiary of the Borrower) will declare or pay any dividends, or make
any other payment or distribution on account of its capital stock nor make
any assignment or transfer of Accounts, or, other than in the ordinary course
of business, of Inventory;
Neither the Borrower nor any Guarantor or Subsidiary will form any
subsidiary, make any investment in (including any assignment of Inventory or
other property), or make any loan in the nature of an investment to, any
Person, which shall exceed the aggregate amount of $500,000.00, other than
investments of the Borrower in the Subsidiaries listed on Exhibit 5.01(A);
Neither the Borrower nor any Guarantor or Subsidiary will make any loan or
advance to any officer, shareholder, director, or employee of the Borrower or
any Guarantor or Subsidiary, except for business travel and similar
temporary advances in the ordinary course of business;
Excepting the Indebtedness evidenced by the Equipment Note, neither the
Borrower nor any guarantor or Subsidiary shall have outstanding at any one
time Indebtedness exceeding the aggregate amount of $150,000.00 in connection
with the purchase or lease of Consolidated Fixed Assets; as used in this
paragraph, the term "lease" means a lease that is not capitalized in a
consolidated balance sheet of the Borrower and the Subsidiaries and should
not be so capitalized under GAAP;
Neither the Borrower nor any Guarantor or Subsidiary will purchase or
otherwise invest in or hold securities, nonoperating real estate, or other
nonoperating assets except: (1) direct obligations of the United States of
America, or of a bank with assets of not less than $20,000,000,000.00 or
other investments approved in advance in writing by the Lender; (2) the
present investment in any such assets held as of October 31, 1994 and
reflected in the Financial Statements; and (3) operating assets that herea
Excepting the transactions entered into in connection with the Equity
Injection or the matters disclosed in Exhibit 6.02(M) attached hereto,
neither the Borrower nor any Guarantor or Subsidiary will redeem, purchase,
or retire any of its capital stock or purchase or retire for any
consideration, any warrant, right, or option pertaining thereto or other
security convertible into any of the foregoing, or permit (i) with respect to
the stock of the Borrower, any redemption or retirement of the outstanding
to the stock of any Guarantor or Subsidiary, any transfer, sale, redemption,
retirement other change in the ownership of the outstanding capital stock of
any Guarantor or Subsidiary;
Neither the Borrower nor any Guarantor or Subsidiary will prepay any
Subordinated Indebtedness, Indebtedness for borrowed money except the
Obligations, or Indebtedness secured by any of its assets (except the
Obligations), or enter into or modify any agreement as a result of which the
terms of payment of any of the foregoing Indebtedness are waived or modified;
Neither the Borrower nor any Guarantor or Subsidiary will enter into any
sale-leaseback transaction;
Neither the Borrower nor any Guarantor or Subsidiary will acquire or agree
to acquire any stock in, or all or substantially all of the assets of, any
Person other than the Borrower and subject to the provisions of Section 6.02
(I) hereof;
Neither the Borrower nor any Guarantor or Subsidiary will furnish the Lender
any certificate or other document that will contain any untrue statement of
material fact or that will omit to state a material fact necessary to make it
not misleading in light of the circumstances under which it was furnished;
and
Neither the Borrower nor any Guarantor or Subsidiary will directly or
indirectly apply any part of the proceeds of the Loans to the purchasing or
carrying of any "margin stock" within the meaning of Regulation U of the
Board of Governors of the Federal Reserve System, or any regulations,
interpretations, or rulings thereunder.
0 DEFAULT
Events of Default.
The occurrence of any one or more of the following events shall constitute
an Event of Default hereunder:
The Borrower or any Guarantor shall fail to pay when due any of its
Obligations to pay money to the Lender;
The Borrower or any Guarantor or Subsidiary shall fail to observe or perform
any of its Obligations other than payment of money to be observed or
performed by it hereunder, under any of the Collateral Documents or otherwise,
and such failure shall continue for fifteen (15) days after (1) notice of
such failure from the Lender; or (2) the Lender is notified of such failure
or should have been so notified pursuant to the provisions of Section 6.01(O),
whichever is earlier;
The Borrower or any Guarantor or Subsidiary shall fail to pay any
Indebtedness exceeding the aggregate amount of $50,000.00 due any third
Persons, and such failure shall continue beyond any applicable grace period,
or the Borrower or any Subsidiary shall suffer to exist any other event of
default under any agreement binding upon the Borrower or any Guarantor or
Subsidiary;
Any financial statement, representation, warranty, or certificate made or
furnished by or with respect to the Borrower or any Guarantor or Subsidiary
to the Lender in connection with this Agreement, or in any separate statement
or document to be delivered to the Lender hereunder, shall be materially
false, incorrect, or incomplete when made;
The Borrower or any Guarantor or Subsidiary shall admit its inability to pay
its debts as they mature or shall make an assignment for the benefit of
itself or any of its creditors;
Proceedings in bankruptcy, or for reorganization of the Borrower or any
Guarantor or Subsidiary, or for the readjustment of any of their respective
debts under the Bankruptcy Code, as amended, or any part thereof, or under
any other Laws, whether state or federal, for the relief of debtors, now or
hereafter existing, shall be commenced against or by the Borrower or any
Guarantor or Subsidiary and, except with respect to any such proceedings
instituted by the Borrower, any Guarantor or Subsidiary, shall no
A receiver or trustee shall be appointed for the Borrower or any Guarantor
or Subsidiary or for any substantial part of their respective assets, or any
proceedings shall be instituted for the dissolution or the full or partial
liquidation of the Borrower or any Guarantor or Subsidiary, and except with
respect to any such appointments requested or instituted by the Borrower, any
Guarantor or Subsidiary, such receiver or trustee shall not be discharged
within sixty (60) days of his appointment, and except wi
ings shall not be discharged within sixty (60) days of their commencement, or
the Borrower or any Guarantor or Subsidiary shall discontinue business or
materially change the nature of its business, or the Collateral becomes, in
the reasonable judgment of the Lender, insufficient in value to satisfy the
Obligations, or the Lender otherwise reasonably finds itself insecure as to
the prompt and punctual payment and discharge of the Obligations;
The Borrower or any Guarantor or Subsidiary shall suffer final judgments
for payment of money aggregating in excess of $50,000.00 and shall not
discharge the same within a period of thirty (30) days unless, pending
further proceedings, execution has not been commenced or, if commenced, has
been effectively stayed;
A judgment creditor of the Borrower or any Guarantor or Subsidiary shall
obtain possession of any of the Collateral by any means, including (without
implied limitation) levy, distraint, replevin, or self-help;
Any obligee of Subordinated Indebtedness shall fail to comply with the
subordination provisions of the instruments evidencing such Subordinated
Indebtedness; or
Any Guarantor shall fail to comply fully with the requirements of, or shall
terminate or attempt to terminate, any Guaranty.
Acceleration.
At its option, and at any time upon the occurrence of any Event of Default,
the Lender may, whether immediately or otherwise, declare all Obligations
of the Borrower or any Guarantor to be immediately due and payable without
further action of any kind without notice, demand or presentment.
0 THE LENDER'S RIGHTS AND REMEDIES
The Lender's Rights Upon Default.
Upon the occurrence of an Event of Default and at any time thereafter, the
Lender, without presentment, demand, notice, protest or advertisement of any
kind, will have the following rights:
Account Debtors.
Upon the occurrence of an Event of Default and at any time thereafter, the
Lender may institute a lockbox for the collection of payments and/or notify
account debtors, at the Borrower's expense, that the Collateral has been
assigned to the Lender and that payments shall be made directly to the Lender.
Upon request of the Lender, the Borrower will enter into an agreement
establishing such a lockbox and/or notify such account debtors that their
accounts must be paid to the Lender. Upon the occurrence of an
remittances in trust for the Lender and deliver them in kind to the Lender.
The Lender shall have full power to collect, compromise, endorse, sell or
otherwise deal with the Collateral or proceeds thereof in its own name or in
the name of the Borrower.
Possession and Foreclosure of Collateral.
Upon the occurrence of an Event of Default and at any time thereafter, to
the extent that the Borrower could legally do so, the Lender may enter onto,
occupy and use any premises owned by the Borrower or in which the Borrower
has any interest. The Lender may take possession of all Collateral. In the
Lender's sole discretion, the Lender may operate and use the Borrower's
equipment, complete work in process and sell inventory without being liable
to the Borrower on account of any losses, damage or deprecia
deems advisable. The Lender may sell or lease Collateral alone or in
conjunction with other property, real or personal, and allocate the sale
proceeds or leases among the items of Collateral sold without the necessity
of the Collateral being present at any such sale, or in view of prospective
purchasers thereof. If notice of sale is legally required, the Borrower
agrees that ten (10) days' written notice shall be deemed reasonable. Upon
such sale, the Lender may become the purchaser of the whole or any
e possession and pay for the Collateral so sold. In case of any such failure,
the said Collateral may be resold. Any Collateral remaining unsold after
being offered at public auction may be abandoned or disposed of for no
consideration in such manner as the Lender deems appropriate.
In any event, at any time and from time to time the Lender may abandon the
Collateral or any part thereof. The Borrower agrees immediately upon demand
to take possession of any and all abandoned Collateral and to remove it from
any location in the possession of or under the control of the Lender.
Use of Intellectual Property.
Upon the occurrence of an Event of Default and at any time thereafter, the
Lender may use all or any part of the Borrower's Intellectual Property which
the Borrower now has or may hereafter acquire. The Lender may license such
Intellectual Property to third parties, seek registration of such
Intellectual Property in any state or nation or prosecute pending
applications for patent, trademark, or service marks in the Borrower's name
in any state or nation.
Notification of Default to Third Parties.
Upon the occurrence of an Event of Default and at any time thereafter, the
Lender may notify the Borrower's suppliers, account debtors and other third
parties of the default and of any and all decisions made and actions taken by
the Lender with respect to this Agreement, the Obligations or the Collateral,
without liability of any kind.
Assembly of Collateral.
Upon the occurrence of an Event of Default and at any time thereafter, the
Lender may require the Borrower to assemble the Collateral in a single
location at a place to be designated by the Lender and make the Collateral at
all times secure and available to the Lender.
Right of Set-Off.
The Lender may, and is hereby authorized by the Borrower and the each
Guarantor, at any time and from time to time, to the fullest extent permitted
by applicable Laws, without advance notice to the Borrower or any Guarantor
(any such notice being expressly waived by the Borrower and each Guarantor),
set-off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and any other indebtedness at any time
owing by the Lender to, or for the credit or the account
, now or hereafter existing, whether or not such Obligations have matured and
irrespective of whether the Lender has exercised any other rights that it
has or may have with respect to such Obligations, including without
limitation any acceleration rights. The Lender agrees promptly to notify the
Borrower after any such set-off and application, provided that the failure
to give such notice shall not affect the validity of such set-off and
application. The rights of the Lender under this Section 8.07 are in
the Lender may have.
Exercise of Other Remedies.
Upon the occurrence of any Event of Default and at any time thereafter, the
Lender may exercise the remedies of a Lender afforded by the Uniform
Commercial Code and other applicable law or by the terms of any agreement
between the Borrower, any or all of the Guarantors and the Lender.
Cumulative Rights and Remedies.
All rights and remedies of the Lender, whether provided for herein or in
other agreements, instruments or documents or conferred by law, are
cumulative and may be exercised alone or simultaneously.
0 ATTORNEY-IN-FACT
Attorney-In-Fact.
Upon the occurrence of an Event of Default and at all time thereafter, the
Borrower hereby irrevocably appoints the Lender, or its designee, as the
Borrower's true and lawful attorney-in-fact, with full power as follows: (1)
to endorse the name of the Borrower on any assignments, notes, checks,
drafts, money orders, or other instruments of payment for Collateral; (2) to
sign or endorse the name of the Borrower on any negotiable instrument,
invoice, freight or express bill, bill of lading, storage or wareh
adjust, settle and cancel, in the Borrower's name, insurance policies as
required by Section 6.01(D) and to sign the Borrower's name on settlement
checks or drafts; (4) in the Borrower's name, to do any act which this
Agreement requires Borrower to do, and, (5) to give notice to the United
States Post Office to effect changes of address so that mail addressed to the
Borrower may be delivered directly to the Lender. In exercising this power-
of-attorney, the Lender shall not be liable to the extent that it
0 MISCELLANEOUS
Construction.
The provisions of this Agreement shall be in addition to those of any
guaranty, pledge or security agreement, note, or other evidence of liability
now or hereafter held by the Lender, all of which shall be construed as
complementary to each other. Nothing herein contained shall prevent the
Lender from enforcing any or all other guaranty, pledge or security
agreements, notes, or other evidences of liability in accordance with their
respective terms.
Further Assurances.
From time to time, the Borrower and each Guarantor will execute and deliver
to the Lender such additional documents and will provide such additional
information as the Lender may reasonably require to carry out the terms of
this Agreement and be informed of the status and affairs of the Borrower and
each Guarantor.
Enforcement and Waiver by the Lender.
The Lender shall have the right at all times to enforce the provisions of
this Agreement and the Collateral Documents in strict accordance with the
terms hereof and thereof, notwithstanding any conduct or custom on the part
of the Lender in refraining from so doing at any time or times. The failure
of the Lender at any time or times to enforce its rights under such
provisions, strictly in accordance with the same, shall not be construed as
having created a custom in any way or manner contrary to specific
and remedies of the Lender are cumulative and concurrent and the exercise of
one right or remedy shall not be deemed a waiver or release of any other
right or remedy.
Expenses of the Lender.
The Borrower and each Guarantor will, on demand, reimburse the Lender for
all expenses, including the reasonable fees and expenses of legal counsel for
the Lender, incurred by the Lender in connection with the preparation,
administration, amendment, modification, or enforcement of this Agreement and
the Collateral Documents and the collection or attempted collection of any
of the Obligations.
Notices.
Any notices or consents required or permitted by this Agreement shall be in
writing and shall be deemed delivered if delivered in person or if sent by
certified mail, postage prepaid, return receipt requested, facsimile or
telegraph, as follows, unless such address is changed by written notice
hereunder:
If to the Borrower Luxtec Corporation
or any Guarantor: 326 Clark Street
Worcester, MA 01606
Attention: President
With a copy to: Victor J. Paci, Esquire
Bingham, Dana & Gould
150 Federal Street
Boston, MA 02110
If to the Lender: The First National Bank of Boston
100 Federal Street
Boston, MA 02110
Attention: Senior Commercial Loan Officer
With a copy to: The First National Bank of Boston
100 Front Street
Worcester Tower
Worcester, MA 01608-1438
Attention: Senior Commercial Loan Officer
and to: George W. Tetler, III, Esquire
Bowditch & Dewey
311 Main Street
Worcester, MA 01608
Waiver and Indemnification by the Borrower and the Guarantors.
To the maximum extent permitted by applicable Laws, the Borrower and the
Guarantors:
Waive (1) protest of all commercial paper at any time held by the Lender on
which the Borrower or any Guarantor is in any way liable; (2) except as the
same may herein be specifically granted, notice of acceleration and of
intention to accelerate; and (3) notice and opportunity to be heard, after
acceleration in the manner provided in Section 7.02, before exercise by the
Lender of the remedies of self-help, set-off, or of other summary procedures
permitted by any applicable Laws or by any agreement with th
ther action taken by the Lender; and
Indemnify the Lender and its officers, attorneys, agents, and employees from
all claims for loss or damage related to this Agreement, the Loans, the
Collateral Documents, the transactions contemplated thereby, the Lender's
enforcement of its rights with respect thereto or the relationship by and
among the Lender, the Borrower and each Guarantor caused by any act or
omission on the part of any of them except willful misconduct.
Participation.
Notwithstanding any other provision of this Agreement, the Borrower and each
Guarantor understands that the Lender may at any time enter into
participation agreements with one or more participating banks whereby the
Lender will allocate certain percentages of its commitment to them. The
Borrower and each Guarantor acknowledge that, for the convenience of all
parties, this Agreement is being entered into with the Lender only and that
its obligations under this Agreement are undertaken for the benefit of, a
antor hereby grant to each such participating bank, to the extent of its
participation in the Loans, the right to set off deposit accounts maintained
by the Borrower and the each Guarantor with such bank.
Waiver of Jury Trial.
THE BORROWER, EACH GUARANTOR AND THE LENDER WAIVE THEIR RESPECTIVE RIGHTS TO
A TRIAL BY JURY, WITH RESPECT TO ANY SUIT, ACTION OR PROCEEDING, WHETHER
CLAIM OR COUNTERCLAIM, BROUGHT OR INSTITUTED BY ANY PARTY TO THIS AGREEMENT
OR ANY OF THEIR SUCCESSORS AND ASSIGNS, WHICH RELATES DIRECTLY OR INDIRECTLY
TO THIS AGREEMENT, THE LOANS, THE COLLATERAL DOCUMENTS OR THE RELATIONSHIP
BY AND AMONG THE LENDER, THE BORROWER AND/OR THE ANY OR ALL OF THE GUARANTORS.
Applicable Law.
This Agreement is entered into and performable in the Commonwealth of
Massachusetts and shall be subject to and construed and enforced in
accordance with the laws of the Commonwealth of Massachusetts.
Binding Effect, Assignment, and Entire Agreement.
This Agreement shall inure to the benefit of, and shall be binding upon, the
respective successors and permitted assigns of the parties hereto. Neither
the Borrower nor any Guarantor has any right to assign any of its rights or
obligations hereunder without the prior written consent of the Lender. This
Agreement, including the Exhibits hereto, all of which are hereby
incorporated herein by reference, and the documents executed and delivered
pursuant hereto, constitute the entire agreement between the par
Severability.
If any provision of this Agreement shall be held invalid under any
applicable Laws, such invalidity shall not affect any other provision of this
Agreement that can be given effect without the invalid provision, and, to
this end, the provisions hereof are severable.
Counterparts.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original, but all of which together shall constitute
but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
a sealed instrument as of the day and year first above written.
LUXTEC CORPORATION
ar first above written.
LUXTEC CORPORATION
_______________________ By:_____________________________ Witness
Its President
FIBER IMAGING TECHNOLOGIES, INC.
_______________________ By:_____________________________ Witness
Its President
CATHTEC INCORPORATED
_______________________ By:_____________________________ Witness
Its President
CARDIODYNE, INC., f/k/a LUXTEC CD
ACQUISITION CO., INC.
_______________________ By:_____________________________
Its President
THE FIRST NATIONAL BANK OF BOSTON
________________________ By:_____________________________
Witness Its Vice President
EXHIBIT 1.01(C)
EXHIBIT 1.01(E)
EXHIBIT 1.01(C) (con't.)
EXHIBIT 1.01(C) (con't.)