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U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED July 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-13009
MEDICAL RESOURCES MANAGEMENT, INC.
(Exact name of registrant as specified in its charter)
NEVADA 95-4607643
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
932 GRAND CENTRAL AVENUE GLENDALE, CALIFORNIA 91201
(Address of principal executive offices) (Zip Code)
(818) 240-8250
(Registrant's telephone number, including area code)
Check whether the Registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
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
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State the number of shares outstanding of each of the Registrant's classes of
common equity, as of the latest practicable date: As of September 10, 1997
there were 7,345,927 shares outstanding of the Registrant's common stock,
$0.001 par value.
Transitional Small Business Disclosure Format:
YES X NO
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TABLE OF CONTENTS
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ITEM PAGE NO.
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PART I. FINANCIAL INFORMATION
Item 1. Consolidated Balance Sheets -- July 31, 1997 (unaudited) and October 31, 1996.............. 3
Consolidated Statements of Income -- Three and Nine Months Ended July 31, 1997 and 1996
(unaudited).............................................................................. 4
Consolidated Statements of Cash Flows -- Nine Months Ended July 31, 1997 and 1996
(unaudited).............................................................................. 5
Notes to Consolidated Financial Statements (unaudited)..................................... 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations...... 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.......................................................................... 11
Item 2. Changes in Securities...................................................................... 11
Item 3. Defaults upon Senior Securities............................................................ 13
Item 4. Submission of Matters to a Vote of Security Holders........................................ 14
Item 5. Other Information.......................................................................... 14
Item 6. Exhibits and Reports on Form 8-K........................................................... 14
Signatures................................................................................. 15
</TABLE>
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MEDICAL RESOURCES MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JULY 31, OCTOBER 31,
1997 1996
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(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................................. $ 159,552 $ 12,482
Accounts receivable, less allowance of $165,000 at July 31, 1997 and
$85,000 at October 31, 1996............................................. 1,727,195 1,090,388
Inventories............................................................... 464,093 118,490
Prepaid expenses.......................................................... 156,621 54,488
Income tax receivable..................................................... 31,282 36,254
Deferred tax assets....................................................... 37,817
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Total current assets........................................................ 2,538,743 1,349,919
Property and equipment:
Rental equipment.......................................................... 14,004,969 9,386,958
Transportation equipment.................................................. 826,484 690,244
Office furniture and equipment............................................ 300,525 140,176
Leasehold improvements.................................................... 76,833 8,456
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15,208,811 10,225,834
Less accumulated depreciation............................................. 6,412,984 5,773,222
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Net property and equipment.................................................. 8,795,827 4,452,612
Customer list and other intangibles, net.................................... 324,782 --
Deposits.................................................................... 140,266 13,472
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Total assets................................................................ $ 11,799,618 $ 5,816,003
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses..................................... $ 1,057,428 $ 561,645
Current portion of long-term debt......................................... 812,293 512,293
Current portion of obligations under capital leases....................... 1,025,338 415,338
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Total current liabilities................................................... 2,895,059 1,489,276
Long-term debt, net of current portion...................................... 1,842,696 1,196,267
Obligations under capital leases, net of current portion.................... 3,293,520 694,480
Deferred income taxes....................................................... 613,540 599,904
Notes payable--shareholders................................................. 253,720
Shareholders' equity:
Common stock, $.001 par value:
Authorized shares -- 100,000,000
Issued and outstanding shares -- 7,345,927 at July 31, 1997 and
6,100,720 at October 31, 1996......................................... 7,346 6,101
Additional paid-in capital................................................ 1,643,907 233,573
Retained earnings......................................................... 1,503,550 1,342,682
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Total shareholders' equity.................................................. 3,154,803 1,582,356
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Total liabilities and shareholders' equity.................................. $ 11,799,618 $ 5,816,003
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</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
3
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MEDICAL RESOURCES MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JULY 31, NINE MONTHS ENDED JULY 31,
1997 1996 1997 1996
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<S> <C> <C> <C> <C>
Revenue.............................. $ 2,154,622 $ 1,628,568 $ 5,586,783 $ 4,987,066
Cost of revenue...................... 987,836 716,973 2,411,689 2,247,626
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Gross profit......................... 1,166,786 911,595 3,175,094 2,739,440
Depreciation expense................. 191,832 212,998 666,935 614,164
Selling expenses..................... 353,773 262,570 881,612 715,511
General and administrative
expenses........................... 386,398 316,674 1,014,126 921,265
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Operating income..................... 234,783 119,353 612,421 488,500
Interest expense..................... 168,178 60,623 342,111 238,389
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Income before income taxes........... 66,605 58,730 270,310 250,111
Provision for income taxes........... 27,993 24,300 109,475 108,300
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Net income........................... $ 38,612 $34,430 $160,835 $ 141,811
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Net income per common share.......... $ 0.01 $ 0.01 $ 0.02 $ 0.03
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Weighted average common shares....... 7,077,615 4,744,632 6,580,330 4,744,632
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</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
4
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MEDICAL RESOURCES MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
JULY 31,
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1997 1996
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OPERATING ACTIVITIES
Net income.................................................................... $ 160,835 $ 141,811
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation................................................................ 666,935 614,164
Deferred income taxes....................................................... 51,453 27,300
Changes in operating assets and liabilities, net of effects from purchase of
Pulse, Laser Medical and Med Surg:
Accounts receivable....................................................... (277,348) (129,305)
Inventories............................................................... (157,962) 17,723
Prepaid expenses.......................................................... (102,133) (19,377)
Income tax receivable..................................................... 4,972 (86,789)
Accounts payable and accrued expenses..................................... (32,645) (146,378)
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Net cash provided by operating activities..................................... 314,107 419,149
INVESTING ACTIVITIES
Purchases of property and equipment........................................... (8,676) (914,136)
Purchase of Pulse, Laser Medical and Med Surg, net of cash acquired........... (910,624)
Increase in deposits.......................................................... (122,033) (8,034)
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Net cash used for investing activities........................................ (1,041,333) (922,170)
FINANCING ACTIVITIES
Issuance of common stock-net proceeds......................................... 355,225
Borrowings on long-term debt.................................................. 1,205,571 1,229,852
Principal payments on long-term debt.......................................... (355,946) (334,090)
Payments on notes payable-bank................................................ (40,612)
Payments on notes payable-shareholders........................................ (19,399)
Principal payments on capital lease obligations............................... (330,554) (335,612)
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Net cash provided by financing activities..................................... 874,296 500,139
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Net increase (decrease) in cash............................................... 147,070 (2,882)
Cash and cash equivalents at beginning of period.............................. 12,482 26,218
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Cash and cash equivalents at end of period.................................... $ 159,552 $ 23,336
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Supplemental information:
Cash paid during the period for:
Interest.................................................................... $ 331,048 $ 75,248
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Taxes....................................................................... $ -- $ 43,000
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Capital lease obligations entered into for equipment.......................... $ 1,336,171 $ 972,023
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</TABLE>
See accompanying notes to consolidated financial statements.
5
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MEDICAL RESOURCES MANAGEMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
July 31, 1997
1. BASIS OF PREPARATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for
the three months and nine months ended July 31, 1997 are not necessarily
indicative of the results that may be expected for the year ending October
31, 1997. For further information, refer to the financial statements and
footnotes thereto included in the Company's Annual Report on Form 10-SB for
the year ended October 31, 1996.
The Company acquired Pulse Medical Products, Inc. (Pulse) on March 31, 1997.
The acquisition was completed through the exchange of approximately 325,000
shares of common stock for all of the issued and outstanding common stock of
Pulse, and this transaction has been accounted for as a purchase.
Accordingly, the accompanying unaudited consolidated financial statements
include the results of operations of Pulse commencing April 1, 1997.
The Company acquired Laser Medical, Inc. (Laser Med) on June 30, 1997. This
acquisition was completed through the exchange of 190,000 shares of common
stock for all of the issued and outstanding common stock of Laser Med. This
transaction has been accounted for as a purchase. Accordingly, the
accompanying unaudited consolidated financial statements include the results
of operations of Laser Med commencing July 1, 1997.
The Company also acquired Med Surg Specialties, Inc. (Med Surg) on June 30,
1997. This acquisition was completed through the exchange of 214,667 shares
of common stock for all of the issued and outstanding common stock of Med
Surg, and has been accounted for as a purchase. Accordingly, the accompanying
unaudited consolidated financial statements include the results of operations
for Med Surg commencing July 1, 1997.
2. SHAREHOLDERS' EQUITY
During the nine months ended July 31, 1997, the Company sold 291,600 units
(each unit consisting of one share of common stock, one Class A warrant
entitling the holder to purchase one share of common stock for a three year
period at a price of $2.50 per share, and one Class B warrant entitling the
holder to purchase one share of common stock for a three year period at a
price of $4.00 per share) at a price of $1.25 per unit. Net proceeds
therefrom were approximately $334,000.
The Company also issued 21,100 units, at the same price of $1.25 per unit, in
exchange for certain accounts payable due to vendors. In addition, the
Company issued 202,840 units in exchange for the retirement of $253,550 of
subordinated indebtedness due to shareholders, also at a price of $1.25 per
unit.
Qualified stock options for the purchase of 529,000 shares of common stock at
prices ranging from $1.50 to $2.13 per share were granted during the nine
months ended July 31, 1997, none of which have been exercised. In addition,
non-qualified stock options for the purchase of 325,000 shares of common
stock at a price of $1.50 were issued to certain officers and board members
during the nine months ended July 31, 1997, none of which have been exercised.
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
Certain statements contained in Management's Discussion and Analysis,
particularly in the final paragraph of "Liquidity and Capital Resources," and
elsewhere in this Report on Form 10-QSB are forward-looking statements. These
statements discuss, among other things, expected growth, future revenues and
future performance. The forward-looking statements are subject to risks and
uncertainties, including the following: (a) changes in levels of competition
from current competitors and potential new competition; (b) loss of a
significant customer; and (c) changes in availability or terms of working
capital financing from vendors and lending institutions. The foregoing should
not be construed as an exhaustive list of all factors that could cause actual
results to differ materially from those expressed in forward-looking
statements made by the registrant. Actual results may materially differ from
anticipated results described in these statements.
The following discussion and analysis should be read together with the
financial statements and notes thereto included elsewhere herein.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage
of net sales represented by certain items included in the Statements of
Income:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JULY 31, JULY 31,
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<S> <C> <C> <C> <C>
1997 1996 1997 1996
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Net revenues................................................. 100.0% 100.0% 100.0% 100.0%
Cost of revenues............................................. 45.8 44.0 43.2 45.1
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Gross profit................................................. 54.2 56.0 56.8 54.9
Depreciation expense......................................... 8.9 13.1 11.9 12.3
Selling expenses............................................. 16.4 16.1 15.8 14.3
General and administrative expenses.......................... 18.0 19.5 18.1 18.7
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Operating income............................................. 10.9 7.3 11.0 9.6
Interest expense............................................. 7.8 3.7 6.1 4.6
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Income before income taxes................................... 3.1 3.6 4.9 5.0
Provision for income taxes................................... 1.3 1.5 2.0 2.2
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Net income................................................... 1.8% 2.1% 2.9% 2.8%
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</TABLE>
QUARTER ENDED JULY 31, 1997 COMPARED TO QUARTER ENDED JULY 31, 1996
Net revenues for the quarter ended July 31, 1997 increased by $526,000,
or 32.3%, from the comparable period of the prior year. The increase in net
revenues is almost entirely the result of additional revenues in the
approximate amount of $538,000 due to the acquisition of Pulse, Laser Med and
Med Surg.
Cost of revenues for the quarter ended July 31, 1997 was $988,000, or
45.8% of net revenues, compared to $717,000, or 44.0% of net revenues, in the
comparable prior period, an increase of $271,000, or 37.8%. The increase in
cost of revenues is primarily attributable to an increase in cost of revenues
of $270,000 resulting from the acquisition of Pulse, Laser Med and Med Surg.
Gross profit for the quarter ended July 31, 1997 was $1,167,000, or 54.2%
of net revenues, compared to $912,000, or 56.0% of net revenues, in the
quarter ended July 31, 1996, an increase of $255,000, or 28.0%, principally
as a result of an increase in gross profit of $268,000 from the acquisition
of Pulse, Laser Med and Med Surg.
7
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Depreciation expense for the quarter ended July 31, 1997 was $192,000,
down slightly from $213,000 for the third quarter of fiscal 1996. The
decrease in depreciation expense is mainly attributable to some depreciable
assets of Physiologic Reps, Inc. (PRI) reaching the end of their depreciable
lives.
Selling expenses for the quarter ended July 31, 1997 were $354,000,
compared to $263,000 for the comparable period of the prior year, an increase
of $91,000, or 34.6%. As a percentage of net revenues, selling expenses
increased from 16.1% in the quarter ended July 31, 1996 to 16.4% in the
current quarter. The increase in selling expense is primarily attributable to
(a) the addition of sales and marketing personnel in the California market by
PRI, and (b) selling expense in the amount of $42,000 from the acquisition of
Pulse, Laser Med and Med Surg.
General and administrative expenses increased to $386,000 in the quarter
ended July 31, 1997 from $317,000 in the quarter ended July 31, 1997, an
increase of $69,000, or 21.8%. As a percentage of net revenues, such expenses
decreased from 19.5% in the third quarter of the prior fiscal year to 18.0%
in the third quarter of the current fiscal year. This percentage decrease
occurred principally as a result of lower general and administrative expenses
experienced by Pulse, Laser Med and Med Surg.
Interest expense for the quarter ended July 31, 1997 was $168,000,
compared to $61,000 in the third quarter of the prior fiscal year, an
increase of $107,000, or 175.4%. The increase in interest expense is the
result of $85,000 in additional interest expense from the acquisition of
Pulse, Laser Med and Med Surg, as well as an increase in the indebtedness of
PRI.
Income before income taxes increased by $8,000, or 13.6%, to $67,000 in
the quarter ended July 31, 1997 from $59,000 in the quarter ended July 31,
1996. Income before income taxes, as a percentage of revenues, declined to
3.1% in the quarter ended July 31, 1997 from 3.6% in the quarter ended July
31, 1996 as a result of all of the aforementioned factors. Pulse experienced
a loss before taxes of approximately $63,000 in the quarter ended July 31,
1997.
NINE MONTHS ENDED JULY 31, 1997 COMPARED TO NINE MONTHS ENDED JULY 31, 1996
Net revenues for the nine months ended July 31, 1997 were $5.59 million,
compared to $4.99 million for the first nine months of the prior fiscal year,
an increase of $600,000, or 12.0%. The increase in net revenues for the first
nine months of fiscal 1997 over fiscal 1996 is primarily the result of an
increase of $774,000 due to the acquisitions of Pulse Medical Products, Laser
Medical and Med Surg Specialties, offset in part by a decrease in sales of
Physiologic Reps, Inc (PRI) of approximately $174,000, or 3.5%.
Cost of revenues for the nine months ended July 31, 1997 was $2.41
million, or 43.2% of net revenues, compared to $2.25 million, or 45.1% of net
revenues, in the comparable prior period, an increase of $164,000, or 7.3%.
The increase of cost of revenues as a percentage of net revenues is primarily
attributable to an increase of $390,000 from the three newly acquired
companies previously mentioned, offset in part by a decrease in cost of
revenues of $226,000 experienced by PRI.
Gross profit for the nine months ended July 31, 1997 was $3.18 million,
or 56.8% of net revenues, compared to $2.74 million, or 54.9% of net
revenues, in the nine months ended July 31, 1996, an increase of $436,000, or
15.9% as a result of the net increases in revenues and cost of revenues. The
increase in gross profit as a percentage of revenues is principally
attributable to the higher gross profit margins experienced by Pulse in the
medical equipment rental market segment.
Depreciation expense for the nine months ended July 31, 1997 was
$667,000, or 11.9% or revenues, compared to $614,000, or 12.3% of net
revenues, in the nine months ended July 31, 1996, an increase of $53,000, or
8.6%. Pulse's generally has lower depreciation expense as a percentage of its
revenues, since a higher percentage of its revenues are generated from
product sales compared to rental of medical equipment than is the case for
the Company's other subsidiaries.
8
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Selling expenses for the nine months ended July 31, 1997 increased by
$166,000, or 23.2%, from $716,000 during the first nine months of the prior
fiscal year. As a percentage of net revenues, selling expenses increased to
15.8% in the first nine months of the current fiscal year, compared to 13.1%
in the same period of the prior fiscal year. The increase in selling expense
is primarily attributable to (i) an increase of $113,000 in PRI's selling
expenses due to expansion of its sales and marketing staff in California, and
(ii) the addition of $53,000 in selling expenses as a result of the
acquisition of Pulse.
General and administrative expenses increased from $921,000 in the nine
months ended July 31, 1996 to $1,014,000 in the nine months ended July 31,
1997, an increase of $93,000, or 10.1%. As a percentage of net revenues, such
expenses decreased from 18.7% in the first nine months of the prior fiscal
year to 18.1% in the comparable period of the current fiscal year. The
increase in general and administrative expenses is principally attributable
to $85,000 in general and administrative expenses resulting from the
acquisition of Pulse.
Operating income was $612,000 in the nine months ended July 31, 1997, or
11.0% of revenues, compared to $489,000 in the first nine months of the prior
fiscal year, or 9.6% of revenues. This increase in operating income of
$123,000 between these two nine-month periods is attributable to the factors
previously cited above.
Interest expense for the first nine months of the current fiscal year was
$342,000, compared to $238,000 in the comparable period of the prior fiscal
year, an increase of $104,000, or 43.7%. The increase in interest expense is
the result of increased levels of indebtedness, principally for (i) the
acquisition of new laser equipment for PRI, (ii) an increase in the
borrowings of the Company under its credit facilities and (iii) indebtedness
assumed as a part of the acquisitions of Pulse, Laser Med and Med Surg,
offset in part by lower borrowing rates experienced in connection with the
term loans incurred by the Company.
Income before income taxes increased by $20,000, or 8.0%, to $270,000 in
the nine months ended July 31, 1997 from $250,000 in the nine months ended
July 31, 1996. Income before income taxes, as a percentage of revenues,
decreased slightly to 4.9% in the first nine months of the current year from
5.0% in the nine months ended July 31, 1996 as a result of the aforementioned
factors.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity requirements arise from the funding of its
working capital needs, principally accounts receivable, as well as its
capital expenditure needs. The Company's primary sources for working capital
are cash flow from operations and borrowings under debt facilities.
During the nine months ended July 31, 1997, net cash provided by
operating activities was $314,000, which resulted primarily from (i) net
income of $161,000, (ii) depreciation expense of $667,000 and (iii) an
increase in long-term deferred income tax liabilities of $51,000. These
sources of cash were offset in part by a net increase of approximately
$565,000 in working capital items.
Net cash used for investing activities during the nine months ended July
31, 1997 was $1,014,000, which was attributable primarily to the acquisitions
of Pulse, Laser Med and Med Surg.
During the nine months ended July 31, 1997, the Company's cash provided
by financing activities totaled $874,000, consisting primarily of $1,206,000
in borrowings under term debt facilities, as well as $355,000 in net proceeds
from the Company's private offering of Common Stock and warrants. Such cash
provided by financing activities was offset in part by (i) principal payments
on long-term debt of $356,000 and (ii) principal payments on capital lease
obligations of $331,000.
9
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On April 24, 1997, the Company entered into an Equipment Note Loan and
Security Agreement (Agreement) with LINC Capital, Inc., a division of LINC
Capital Partners. The Agreement provides for (i) a $300,000 working capital
facility for Pulse, (ii) a $1,200,000 capital lease facility for used
equipment, and (iii) a $1,000,000 capital lease facility for new equipment.
This Agreement was entered into primarily to refinance the existing
indebtedness of Pulse, as well as to provide funds for the acquisition of new
equipment by either Pulse or PRI. As of July 31, 1997, the entire working
capital facility of $300,000 had been used, as well as approximately
$1,185,000 of the capital lease facility for used equipment. In addition,
approximately $260,000 of the capital lease facility for new equipment had
been utilized as of July 31, 1997.
On July 10, 1997, the Company entered into a Term WCMA Loan and Security
Agreement (the Term Loan Agreement) with Merrill Lynch Business Financial
Services, Inc. (Merrill Lynch). This Term Loan Agreement provides for a $2
million term loan, with interest payable monthly and principal payable in
equal annual installments of $400,000 at the end of each of the five years
commencing on or about September 1, 1998. Proceeds from this term loan will
be used to provide additional working capital for the Company, as well as to
retire the existing credit facilities with Merrill Lynch, which totaled
approximately $1.55 million as of July 31, 1997. Advances under this term
loan during the quarter ended July 31, 1997 totaled $425,000.
COMMITMENTS
The Company had no material commitments for capital expenditures at July
31, 1997. However, although it has no present commitments or agreements to
make such capital expenditures, during the next 12 months the Company expects
to make substantial capital expenditures, in accordance with its historical
practice. The mobile laser/surgical services and medical equipment rental
businesses are capital intensive. The Company believes that funds generated
from operations, together with funds available from credit facilities and
capital lease facilities that the Company expects to obtain during the coming
12-month period, will be sufficient to finance its working capital and
capital expenditure requirements for the next 12 months.
10
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGES IN SECURITIES.
COMMON STOCK
As of July 31, 1997, the Company had 7,345,927 shares of common stock
issued and outstanding. The holders of shares of common stock are entitled to
dividends when and as declared by the Board of Directors from funds legally
available therefore, and, upon liquidation are entitled to share, pro rata,
in any distribution to holders of common stock. There are no pre-emptive,
conversion or redemption privileges, nor sinking fund provisions with respect
to the common stock. All of the outstanding shares of common stock are duly
authorized, validly issued, fully paid and non-assessable.
The Company has borrowed money from two principal shareholders -- Allen
and Susan Bonnifield. The notes payable -- shareholders bear interest at
rates ranging from 10% to 12% and are subordinated to the notes payable to a
finance company. On March 31, 1997, Allen Bonnifield cancelled indebtedness
of the Company owed to him in the amount of $108,000 in exchange for 86,400
Units consisting of common stock and warrants in the private placement. On
April 24, 1997, Susan Bonnifield cancelled indebtedness of the Company owed
to her in the amount of $145,550 in exchange for 116,440 Units consisting of
common stock and warrants in the private placement.
Warrants
As of July 31, 1997, as a result of a private placement of its common
stock and warrants, the Company had Class A and Class B warrants outstanding
to purchase 531,540 shares and 531,540 shares of common stock, respectively.
Each Class A warrant entitles the holder thereof to purchase one share of
common stock at a price, initially, of $2.50, and each Class B warrant
entitles the holder thereof to purchase one share of common stock at a price,
initially, of $4.00, through and including November 1, 1999.
The Class A and Class B warrants are redeemable by the Company commencing
on May 1, 1997 upon 30 days' notice, at a price of $.05 per warrant, provided
that the closing bid price of the common stock on all of the 20 trading days
ending on the third day prior to the day on which the Company gives notice
has been at least 120% (currently $3.00, subject to adjustment, for the Class
A warrants and $4.80, subject to adjustment, for the Class B warrants) of the
then effective exercise price of the warrants called for redemption. The
holders of the Class A and Class B warrants called for redemption have
exercise rights until the close of business on the date fixed for redemption.
The exercise price and number of shares of common stock or other
securities issuable on exercise of the Class A and Class B warrants are
subject to adjustment in certain circumstances, including in the event of a
stock dividend, recapitalization, reorganization, merger or consolidation of
the Company. However, no Class A or Class B warrant is subject to adjustment
for issuances of common stock at a price below the exercise price of that
warrant, including the issuance of shares of common stock pursuant to the
Company's 1996 Stock Incentive Plan. The Class A and Class B warrants may be
exercised upon surrender of the warrant certificate on or prior to the
expiration date at the offices of the Company, with the exercise form
attached to the certificate completed and executed as indicated, accompanied
by full payment of the exercise price (by certified check payable to the
Company) to the Company for the number of warrants being exercised.
Warrantholders do not have the rights or privilege of holders of common stock.
11
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No fractional shares will be issued upon exercise of warrants. However,
if a warrantholder exercises all warrants of a particular class then owned of
record by him, the Company will pay to such warrantholder, in lieu of the
issuance of any fractional share which is otherwise issuable, an amount in
cash based on the market value of the common stock on the last trading day
prior to the exercise date.
On April 24, 1997, in connection with a certain Equipment Note Loan and
Security Agreement (Equipment Loan Agreement) entered into by the Company,
warrants were granted to the noteholder to purchase 100,000 shares of common
stock at a price of $2.00 per share, exercisable at any time during the six
years following the date of the Equipment Loan Agreement. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations
- --Liquidity and Capital Resources."
STOCK OPTIONS
STOCK INCENTIVE PLAN
In September 1996, the Company adopted the 1996 Stock Incentive Plan
(Plan) to allow officers and employees and certain non-employees to receive
options to purchase common stock and to receive grants of common stock
subject to certain restrictions. Under the Plan, regular salaried employees,
including directors, who are full time employees, may be granted options
exercisable at not less than 100 percent of the fair market value at the date
of grant. The exercise price of any option granted to an optionee who owns
stock possessing more than ten percent of the voting power of all classes of
stock of the Company must be 110 percent of the fair market value of the
common stock on the date of grant, and the duration may not exceed five years.
Options generally become exercisable at a rate of 33 percent of the
shares subject to option one year after grant. The remaining shares generally
become exercisable ratably over an additional 24 months. The duration of
options may not exceed ten years. A maximum number of 1,500,000 shares of
common stock may be issued pursuant to the Plan.
The following table summarizes stock option activity under the Plan since
its adoption:
EXERCISE
PRICE PER
SHARES SHARE
-------------- --------------
Granted.................................. 872,000 $ 1.50--$2.13
Cancelled................................ (34,000) $ 1.50--$2.13
-------------- --------------
Balance at July 31, 1997................... 838,000 $ 1.50--$2.13
-------------- --------------
-------------- --------------
OTHER STOCK OPTIONS
In conjunction with the August 19, 1996 reorganization between Medical
Resources Management, Inc. (MRM) and Physiologic Reps, Inc. (PRI), in
exchange for options previously granted to purchase shares of PRI, certain
employees received 81,804 non-qualified options to purchase MRM common stock
at an exercise price of $.50 per share. Additionally, on June 30, 1997, the
Company granted to certain officers and board members a total of 325,000
non-qualified options to purchase MRM common stock at an exercise price of
$1.50 per share. These non-qualified options generally have the same
restrictions and vesting provisions as options granted under the 1996 Stock
Incentive Plan.
In addition, under the terms of its acquisition agreement with the
shareholders of Pulse Medical Products, Inc. (Pulse), the Company has agreed
to issue up to 300,000 options to purchase common stock at an exercise price
of $1.50 per share to the former shareholders and employees of Pulse based
upon Pulse's operating results during the year ending October 31, 1997. These
options will generally have the same restrictions and vesting provisions as
options granted under the 1996 Stock Incentive Plan.
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All information set forth below has been adjusted to reflect the
reorganization of the Company and PRI on August 19, 1996.
1. On July 31, 1996, PRI entered into a Plan and Agreement of
Reorganization (Plan of Reorganization) with Kendall Management
Corporation (Kendall) whereby Kendall acquired all of PRI's issued and
outstanding common stock in exchange for Kendall common stock. Upon the
close of the Plan of Reorganization on August 19, 1996, PRI's
shareholders owned approximately 83.6% of the outstanding common stock
of Kendall. In addition, Kendall issued options exercisable into 81,804
shares of Kendall common stock in exchange for PRI options. As a
result, PRI became a subsidiary of Kendall.
Subsequent to the reorganization, Kendall changed its name to Medical
Resources Management, Inc.
Pursuant to the Plan of Reorganization, Kendall completed the
acquisition of PRI's issued and outstanding common stock in exchange
for 5,100,720 shares of its own common stock. The tax-free exchange was
pursuant to the provisions of Sections 351 and 368(a)(1)(B) of the
Internal Revenue Code. For financial statement purposes, the
transaction has been accounted for as a reverse acquisition as if PRI
issued its common stock for the net assets of Kendall. Kendall was not
an operating company.
2. Between November 1, 1996 and April 30, 1997, the Company sold 291,600
Units consisting of 291,600 shares of common stock and 291,600 Class A
warrants and 291,600 Class B warrants to purchase, in the aggregate,
583,200 shares of common stock. The Units were sold at $1.25 per Unit,
for gross proceeds of $364,500. The private placement was limited to
investors qualifying under Section 25102(n) of the California
Corporations Code of 1977, as amended, and Regulation D and Section CE
of the Securities Act of 1933, as amended. Officers and directors of
the registrant sold the Units.
3. Between November 1996 and July 1997, the Company issued incentive stock
options under the registrant's 1996 Stock Incentive Plan to employees
to purchase an aggregate of 529,000 shares of common stock at exercise
prices between $1.50 and $2.13 per share, which price was at fair
market value at time of grant.
4. On March 31, 1997, the Company issued 325,000 shares of common stock to
the four former shareholders of Pulse Medical Products, Inc. (Pulse) in
exchange for all of the common stock of Pulse.
5. On June 30, 1997, the Company issued 214,667 shares of common stock to
the former shareholder of Med Surg Specialties, Inc. (Med Surg) in
exchange for all of the common stock of Med Surg.
6. On June 30, 1997, the Company issued 190,000 shares of common stock to
the two former shareholders of Laser Medical, Inc. (Laser Medical) in
exchange for all of the common stock of Laser Medical.
In each sale of securities described in the preceding paragraphs of this
Item 2, each purchaser agreed that the securities acquired will be held for
investment purposes, that the representative certificates may bear restrictive
legends indicating that the securities may not be freely transferred and that
the records of the Company may contain appropriate stop transfer orders. The
Company had reasonable grounds to believe that each purchaser was capable of
evaluating the merits and risks of his investment, was able to bear the economic
risks of his investment and acquired the securities for investment purposes
only. Accordingly, the Company believes that the foregoing transactions were
exempt from the registration provisions of the Securities Act of 1933 pursuant
to the exemption under Section 4(2) of that Act, and the Rules and Regulations
promulgated thereunder and under Section 3(b) of that Act, by reason of such
transactions being by an issuer and not involving a public offering.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
13
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Exhibit
Number Exhibit Description
6.12 Term WCMCA Note and Security Agreement dated July 10, 1997
between the Company and Merrill Lynch Business Financial Services
(b) Reports on Form 8-K
None.
14
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
MEDICAL RESOURCES MANAGEMENT, INC.
Date September 15, 1997
By /s/ Allen H. Bonnifield
--------------------------------------
Allen H. Bonnifield, President and CEO
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[LOGO] No. 9707340401
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TERM WCMA-Registered Trademark- LOAN AND SECURITY AGREEMENT
TERM WCMA LOAN AND SECURITY AGREEMENT ("Loan Agreement") dated as of July 10,
1997, between MEDICAL RESOURCES MANAGEMENT, INC. D/B/A MRM, INC., a corporation
organized and existing under the laws of the State of California having its
principal office at 932 Grand Central, Glendale, CA 91201 ("Customer"), and
MERRILL LYNCH BUSINESS FINANCIAL SERVICES INC., a corporation organized and
existing under the laws of the State of Delaware having its principal office at
33 West Monroe Street, Chicago, IL 60603 ("MLBFS").
In accordance with that certain WORKING CAPITAL MANAGEMENT-Registered Trademark-
ACCOUNT AGREEMENT NO. 24X-07498 ("WCMA Agreement") between Customer and MLBFS'
affiliate, MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED ("MLPF&S"),
Customer has subscribed to the WCMA Program described in the WCMA Agreement. The
WCMA Agreement is by this reference incorporated as a part hereof. In
conjunction therewith, Customer has requested that MLBFS make the Term WCMA Loan
hereinafter described (the "Loan"); and, subject to the terms and conditions
herein set forth, MLBFS has agreed to make the Loan to Customer.
The Loan combines the equivalent of five successive one-year term loans, each
equal to that portion of the Loan which will be fully amortized in the ensuing
year, with a line of credit under the WCMA Program ("WCMA Line of Credit") equal
to that portion of the Loan which will not be amortized in the ensuing year.
Subject to the terms hereof, each year after the initial funding there will be
an additional funding on account of the term portion of the Loan, with the
proceeds deposited into Customer's WCMA Account concurrently with a
corresponding reduction in the Maximum WCMA Line of Credit.
This structure provides Customer with substantially the same initial funding
and loan amortization as a conventional term loan. However, unlike most
conventional term loans, it permits both a prepayment in whole or in part at
any time without penalty, and, subject to the terms and conditions herein set
forth, a re-borrowing on a revolving basis of any such amounts prepaid on
account of the WCMA Line of Credit portion of the Loan. The structure of the
Loan therefore enables Customer at its option to use any free cash balances
that it may have from time to time to reduce interest expense on the line of
credit portion of the Loan without impairing its working capital.
Accordingly, and in consideration of the premises and of the mutual covenants of
the parties hereto, Customer and MLBFS hereby agree as follows:
ARTICLE I. DEFINITIONS
1.1 SPECIFIC TERMS. In addition to terms defined elsewhere in this Loan
Agreement, when used herein the following terms shall have the following
meanings:
(a) "Account Debtor" shall mean any party who is or may become obligated with
respect to an Account or Chattel Paper.
(b) "Additional Agreements" shall mean all agreements, instruments, documents
and opinions other than this Loan Agreement, whether with or from Customer or
any other party, which are contemplated hereby or otherwise reasonably required
by MLBFS in connection herewith, or which evidence the creation, guaranty or
collateralization of any of the Obligations or the granting or perfection of
liens or security interests upon the Collateral or any other collateral for the
Obligations, and shall include, without limitation, the Term WCMA Note.
<PAGE>
(c) "Bankruptcy Event" shall mean any of the following: (i) a proceeding under
any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt or
receivership law or statute shall be filed or consented to by Customer or any
Guarantor; or (ii) any such proceeding shall be filed against Customer or any
Guarantor and shall not be dismissed or withdrawn within sixty (60) days after
filing; or (iii) Customer or any Guarantor shall make a general assignment for
the benefit of creditors; or (iv) Customer or any Guarantor shall become
insolvent or generally fail to pay or admit in writing its inability to pay its
debts as they become due; or (v) Customer or any Guarantor shall be adjudicated
a bankrupt or insolvent.
(d) "Business Day" shall mean any day other than a Saturday, Sunday, federal
holiday or other day on which the New York Stock Exchange is regularly closed.
(e) "Closing Date" shall mean the date upon which all conditions precedent to
MLBFS' obligation to make the first advance on account of the Loan shall have
been met to the satisfaction of MLBFS.
(f) "Collateral" shall mean all Accounts, Chattel Paper, Contract Rights,
Inventory, Equipment, Fixtures, General Intangibles, Deposit Accounts, Documents
and Instruments of Customer, howsoever arising, whether now owned or existing
or hereafter acquired or arising, and wherever located; together with all books
and records (including computer records) directly related thereto, all proceeds
thereof (including, without limitation, proceeds in the form of Accounts and
insurance proceeds), and the additional collateral described in Section 4.6 (b)
hereof.
(g) "Commitment Expiration Date" shall mean August 11, 1997.
(h) "Commitment Fee" shall mean a fee of $10,000.00 due to MLBFS in connection
with this Loan Agreement.
(i) "Conversion Date" shall mean the first to occur of the date of funding the
final advance on account of the Loan permitted under the terms hereof, or
September 30, 1997.
(j) "General Funding Conditions" shall mean each of the following conditions to
any loan or advance by MLBFS hereunder: (i) no Event of Default, or event which
with the giving of notice, passage of time, or both, would constitute an Event
of Default, shall have occurred and be continuing or would result from the
making of such loan or advance hereunder by MLBFS; (ii) there shall not have
occurred and be continuing any material adverse change in the business or
financial condition of Customer or any Guarantor; (iii) all representations and
warranties of Customer or any Guarantor herein or in any Additional Agreements
shall then be true and correct in all material respects; (iv) MLBFS shall have
received this Loan Agreement and all Additional Agreements, duly executed and
filed or recorded where applicable, all of which shall be in form and substance
reasonably satisfactory to MLBFS; (v) the Commitment Fee shall have been paid in
full; (vi) MLBFS shall have received, as and to the extent applicable, copies of
invoices, bills of sale, loan payoff letters and/or other evidence reasonably
satisfactory to it that the proceeds of the Loan will satisfy the Loan Purpose;
(vii) MLBFS shall have received evidence reasonably satisfactory to it as to the
ownership of the Collateral and the perfection and priority of MLBFS' liens and
security interests thereon, as well as the ownership of and the perfection and
priority of MLBFS' liens and security interests on any other collateral for the
Obligations furnished pursuant to any of the Additional Agreements; (viii) MLBFS
shall have received evidence reasonably satisfactory to it of the insurance
required hereby or by any of the Additional Agreements; and (ix) any additional
conditions specified in the "Term WCMA Approval" letter executed by MLBFS with
respect to the transactions contemplated hereby shall have been met to the
reasonable satisfaction of MLBFS.
(k) "Guarantor" shall mean a person or entity who has either guaranteed or
provided collateral for any or all of the Obligations; and "Business Guarantor"
shall mean any such Guarantor that is a corporation, partnership,
proprietorship, limited liability company or other entity regularly engaged in a
business activity.
(l) "Interest Rate" shall have the meaning set forth in the Term WCMA Note.
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<PAGE>
(m) "Loan Amount" shall mean an amount equal to the lesser of (i) the amount
required to purchase new equipment as evidence by invoices, plus the amount
necessary to refinance Customer's Term Loan And Security Agreement Nos.
9503551501 and 9606550201 and WCMA Note, Loan And Security Agreement No.
208-07K26, (ii) the principal balance of the Loan outstanding on the
Conversion Date, or (iii) $2,000,000.00.
(n) "Loan Purpose" shall mean the purpose for which the proceeds of the Loan
will be used; to wit: to refinance Customer's Term Loan And Security Agreement
Nos. 9503551501 and 9606550201 and WCMA Note, Loan And Security Agreement No.
208-07K26, to finance new equipment and to provide Customer with additional
working capital.
(o) "Location of Tangible Collateral" shall mean the address of Customer set
forth at the beginning of this Loan Agreement, together with any other address
or addresses set forth on an exhibit hereto as being a Location of Tangible
Collateral.
(p) "Maximum WCMA Line of Credit" shall mean the maximum aggregate line of
credit which MLBFS will extend to Customer subject to the terms and conditions
hereof, as the same shall be reduced from time to time in accordance with the
terms hereof.
(q) "Obligations" shall mean all liabilities, indebtedness and other
obligations of Customer to MLBFS, howsoever created, arising or evidenced,
whether now existing or hereafter arising, whether direct or indirect, absolute
or contingent, due or to become due, primary or secondary or joint or several,
and, without limiting the foregoing, shall include interest accruing after the
filing of any petition in bankruptcy, and all present and future liabilities,
indebtedness and obligations of Customer under this Loan Agreement and the Term
WCMA Note.
(r) "Permitted Liens" shall mean with respect to the Collateral: (i) liens for
current taxes not delinquent, other non-consensual liens arising in the ordinary
course of business for sums not due, and, if MLBFS' rights to and interest in
the Collateral are not materially and adversely affected thereby, any such liens
for taxes or other non-consensual liens arising in the ordinary course of
business being contested in good faith by appropriate proceedings; (ii) liens in
favor of MLBFS; (iii) liens which will be discharged with the proceeds of the
Loan; (iv) existing liens upon and leases of Equipment and Fixtures, if any,
together with any future purchase money liens upon and leases of Equipment and
Fixtures; and (v) any other liens expressly permitted in writing by MLBFS.
(s) "Term WCMA Note" shall mean and refer to the Term WCMA Note executed by
Customer and dated as of the date hereof which incorporates both a WCMA Note
evidencing amounts owing on account of the WCMA Line of Credit portion of the
Loan, and a Term Note evidencing amounts owing on account of the term portion of
the Loan.
(t) "WCMA Account" shall mean and refer to the Working Capital Management
Account of Customer with MLPF&S identified as WCMA Account No. 24X-07498.
(u) "WCMA Loan" shall mean each advance made by MLBFS pursuant to the WCMA Line
of Credit.
(v) "WCMA Loan Balance" shall mean an amount equal to the aggregate unpaid
principal balance of all WCMA Loans.
1.2 OTHER TERMS. Except as otherwise defined herein: (i) all terms used in this
Loan Agreement which are defined in the Uniform Commercial Code of Illinois
("UCC") shall have the meanings set forth in the UCC, and (ii) capitalized terms
used herein which are defined in the WCMA Agreement shall have the meanings set
forth in the WCMA Agreement.
ARTICLE II. THE LOAN
-3-
<PAGE>
2.1 COMMITMENT. Subject to the terms and conditions hereof, MLBFS hereby agrees
to make the Loan to Customer, and Customer hereby agrees to borrow the Loan from
MLBFS. The Loan will be funded in up to three separate advances as requested by
Customer prior to the Conversion Date; provided, however, that Customer shall
not request funding of, and MLBFS shall not be obligated to fund, any advances
on account of the Loan in an amount less than $100,000.00. Unless otherwise
hereafter agreed by MLBFS, each such advance will be disbursed either directly
to the applicable third party or parties on account of the Loan Purpose or to
reimburse Customer for amounts directly expended by it; all as directed by
Customer in an Advance Certificate to be executed and delivered to MLBFS prior
to the date of funding.
2.2 OPERATION OF LOAN.
(a) TERM WCMA NOTE. The Loan will be evidenced by and shall be repayable in
accordance with the terms of the Term WCMA Note and this Loan Agreement. The
Term WCMA Note combines two promissory notes, one evidencing the term portion of
the Loan (the "Term Note") and the other evidencing the WCMA Line of Credit
portion of the Loan (the "WCMA Note"). The balance owing by Customer on account
of the Loan at any time shall be an amount equal to the sum of the then
outstanding balances under the WCMA Note and the Term Note included in the Term
WCMA Note. The Term WCMA Note is hereby incorporated as a part hereof.
(b) TERM NOTE PRINCIPAL. The principal balance owing under the Term Note at any
time shall be an amount equal to the unpaid portion of the amount funded from
time to time on account of the Term Note, as hereinafter provided. So long as
there shall be any moneys owing by Customer to MLBFS hereunder or there shall be
a WCMA Line of Credit, no reduction in the unpaid principal balance of the Term
Note to zero shall be deemed a payment of the Term Note in full or an
extinguishment of any of the obligations of Customer thereunder or hereunder.
(c) TERM NOTE FUNDING. All advances on account of the Loan funded prior to the
Conversion Date will be funded out of and evidenced by the Term Note. On or
about the Conversion Date, an amount equal to four-fifths of the Loan Amount
will be paid to MLBFS out of the WCMA Line of Credit and applied on account of
the outstanding principal balance of the Term Note; leaving a principal balance
of the Term Note equal to one-fifth of the Loan Amount. Subject to the terms
hereof, the Term Note will be funded again by MLBFS in four subsequent annual
installments, each equal to one-fifth of the Loan Amount. Such installments will
be funded on a date chosen by MLBFS in its sole discretion which will be on or
within two weeks BEFORE OR AFTER each subsequent anniversary of the Conversion
Date (each, a "Subsequent Funding Date"). Each Term Note funding after the first
shall be deposited into Customer's WCMA Account.
(d) ACTIVATION OF WCMA LINE. On the Conversion Date, MLBFS will activate and
make available as an integral part of the Loan a WCMA Line of Credit equal to
four-fifths of the Loan Amount, all of which will be immediately disbursed to
MLBFS on account of the then Term Note principal balance, as aforesaid.
(e) SUBSEQUENT FUNDINGS. On the first Subsequent Funding Date, concurrently with
MLBFS' funding of an additional installment of the debt evidenced by the Term
Note into the WCMA Account, the Maximum WCMA Line of Credit will be reduced to
an amount equal to three-fifths of the Loan Amount. On the second Subsequent
Funding Date, the Maximum WCMA Line of Credit will be reduced to an amount equal
to two-fifths of the Loan Amount; and on the third Subsequent Funding Date the
Maximum WCMA Line of Credit will be reduced to an amount equal to one-fifth of
the Loan Amount.
(f) WCMA MATURITY DATE. On the fourth Subsequent Funding Date (the "WCMA
Maturity Date"), the WCMA Line of Credit will be terminated and the WCMA
Account, at the option of Customer, will either be converted to a WCMA Cash
Account (subject to any requirements of MLPF&S) or terminated.
2.3 CONDITIONS OF MLBFS' OBLIGATION. The Closing Date and MLBFS' obligation to
make each advance on account of the Loan prior to the Conversion Date are
subject to the prior fulfillment of each of the following conditions: (a) MLBFS
shall have received a written request from Customer that an advance on account
of the Loan be funded in accordance with the terms hereof, together with a
written direction from Customer as
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<PAGE>
to the method of payment and payee(s) of the proceeds of the Loan, which
request and direction shall have been received by MLBFS not less than two
Business Days prior to any requested funding date; (b) the Conversion Date
shall not then have occurred; and (c) each of the General Funding Conditions
shall have been met or satisfied to the reasonable satisfaction of MLBFS.
2.4 CONDITIONS OF SUBSEQUENT FUNDINGS. The obligation of MLBFS to fund
installments of the term portion of the Loan on any Subsequent Funding Date
shall be subject to each of the conditions specified in Section 2.3(c) hereof
being met at such date, and the further condition that all payments due under
the Term Note on or prior to any Subsequent Funding Date shall have been paid in
full; provided, however, that notwithstanding the failure of any such conditions
to have been met, MLBFS may in its sole discretion fund such installment and/or
any other installments, and no such funding shall constitute a waiver by MLBFS
of any of its rights hereunder or under any of the Additional Agreements.
Without limiting the foregoing, it is understood that no funding by MLBFS of any
sum hereunder while an Event of Default shall have occurred and is continuing
shall under any circumstances be deemed a waiver by MLBFS of such Event of
Default, or a waiver of any of MLBFS' rights hereunder.
2.5 COMMITMENT FEE. In consideration of the agreement by MLBFS to extend the
Loan to Customer in accordance with and subject to the terms hereof, Customer
has paid or shall, on or before the Closing Date pay, the Commitment Fee to
MLBFS. Customer acknowledges and agrees that the Commitment Fee has been fully
earned by MLBFS, and that it will not under any circumstances be refundable.
2.6 ACKNOWLEDGMENTS OF CUSTOMER. Customer acknowledges, covenants and agrees
that:
(a) PAYMENT OF WCMA INTEREST; ADDITIONAL DEPOSITS. Under the terms of this Loan
Agreement, interest accrued on amounts outstanding on the WCMA Line of Credit
each month will, subject to the terms hereof, ordinarily be paid from the
proceeds of a borrowing of an additional sum under the WCMA Line of Credit.
Because all or substantially all of the Maximum WCMA Line of Credit will
ordinarily be drawn on the Conversion Date, CUSTOMER AGREES THAT IT WILL,
WITHOUT DEMAND, INVOICING OR THE REQUEST OF MLBFS, FROM TIME TO TIME MAKE
SUFFICIENT DEPOSITS INTO THE WCMA ACCOUNT IN ORDER TO ASSURE THAT THE MAXIMUM
WCMA LINE OF CREDIT IS NOT EXCEEDED. Installments of principal and interest
under the Term Note shall be paid directly to MLBFS in accordance with the terms
of the Term Note.
(b) ADDITIONAL INTEREST CHARGES. SUBJECT TO THE TERMS HEREOF, ON EACH SUBSEQUENT
FUNDING DATE MLBFS WILL DEPOSIT THE AMOUNT FUNDED INTO THE WCMA ACCOUNT. DUE TO
POSSIBLE DELAYS IN POSTING AS WELL AS CERTAIN DELAYS IN RECOGNITION OF DEPOSITS
INHERENT IN THE WCMA PROGRAM, CUSTOMER WILL NOT RECEIVE CREDIT FOR THE AMOUNT
DEPOSITED FOR UP TO SEVERAL DAYS THEREAFTER, RESULTING IN AN INTEREST CHARGE FOR
THAT PERIOD OF TIME ACCRUING AND CHARGED IN THE WCMA ACCOUNT. ON THE OTHER HAND,
BECAUSE MLBFS BORROWS ALL OR SUBSTANTIALLY ALL OF THE FUNDS THAT IT LENDS ON THE
DATE OF FUNDING, IT MUST CHARGE INTEREST ON THE AMOUNT FUNDED ON EACH SUBSEQUENT
FUNDING DATE FROM THE DATE OF ITS DEPOSIT INTO THE WCMA ACCOUNT, WHETHER OR NOT
SUCH DEPOSIT IS IMMEDIATELY RECOGNIZED. THE TIMING DIFFERENCES BETWEEN THE DATE
OF DEPOSIT AND DATE OF RECOGNITION OF THE DEPOSIT IN THE WCMA ACCOUNT WILL
THEREFORE RESULT IN EXTRA INTEREST CHARGES TO CUSTOMER, WHICH CUSTOMER
ACKNOWLEDGES ARE AN ADDITIONAL COST OF THE LOAN AND HEREBY UNCONDITIONALLY
AGREES TO PAY.
ARTICLE III. THE WCMA LINE OF CREDIT
3.1 WCMA NOTE.
All amounts owing under the WCMA Line of Credit shall be deemed owing under and
evidenced by the WCMA Note included in the Term WCMA Note.
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<PAGE>
3.2 WCMA LOANS.
(a) LOAN COMMITMENT AND REQUESTS. Subject to the terms and conditions hereof:
(i) on the Conversion Date, MLBFS will make a WCMA Loan to Customer in an amount
equal to the Maximum WCMA Line of Credit, the entire proceeds of which will be
disbursed to MLBFS on account of the Term Note, as aforesaid; and (ii) during
the period from and after the Conversion Date to the WCMA Maturity Date: (x)
Customer may repay said WCMA Loan and any other WCMA Loans in whole or in part
at any time without premium or penalty, and request a re-borrowing of amounts
repaid on a revolving basis, and (y) MLBFS will make such additional WCMA Loans
as Customer may from time to time request in accordance with the terms hereof.
Customer may request WCMA Loans by use of WCMA Checks, FTS, Visa-Registered
Trademark- charges, wire transfers, or such other means of access to the WCMA
Line of Credit as may be permitted by MLBFS from time to time; it being
understood that so long as the WCMA Line of Credit shall be in effect, any
charge or debit to the WCMA Account which but for the WCMA Line of Credit would
under the terms of the WCMA Agreement result in an overdraft, shall be deemed a
request by Customer for a WCMA Loan.
(b) CONDITIONS OF WCMA LOANS. Notwithstanding the foregoing, MLBFS shall not be
obligated to make any WCMA Loan, and may without notice refuse to honor any such
request by Customer, if at the time of receipt by MLBFS of Customer's request:
(i) the making of such WCMA Loan would cause the Maximum WCMA Line of Credit to
be exceeded; or (ii) the Maturity Date shall have occurred, or the WCMA Line of
Credit shall have otherwise been terminated in accordance with the terms hereof;
or (iii) an event shall have occurred and is continuing which shall have caused
any of the General Funding Conditions to not then be met or satisfied to the
reasonable satisfaction of MLBFS. The making by MLBFS of any WCMA Loan at a time
when any one or more of said conditions shall not have been met shall not in any
event be construed as a waiver of said condition or conditions or of any Event
of Default, and shall not prevent MLBFS at any time thereafter while any
condition shall not have been met from refusing to honor any request by Customer
for a WCMA Loan.
(c) FORCE MAJEURE. MLBFS shall not be responsible, and shall have no liability
to Customer or any other party, for any delay or failure of MLBFS to honor any
request of Customer for a WCMA Loan or any other act or omission of MLBFS,
MLPF&S or any of their affiliates due to or resulting from any system failure,
error or delay in posting or other clerical error, loss of power, fire, Act of
God or other cause beyond the reasonable control of MLBFS, MLPF&S or any of
their affiliates unless directly arising out of the willful wrongful act or
active gross negligence of MLBFS. In no event shall MLBFS be liable to Customer
or any other party for any incidental or consequential damages arising from any
act or omission by MLBFS, MLPF&S or any of their affiliates in connection with
the WCMA Line of Credit or this Loan Agreement.
(d) INTEREST. The WCMA Loan Balance shall bear interest at the Interest Rate.
Interest shall be computed for the actual number of days elapsed on the basis of
a year consisting of 360 days. Except as otherwise provided herein, accrued and
unpaid interest on the WCMA Loan Balance shall be payable monthly on the last
Business Day of each calendar month, commencing with the last Business Day of
the calendar month in which the Conversion Date shall occur. Customer hereby
irrevocably authorizes and directs MLPF&S to pay MLBFS such accrued interest
from any available free credit balances in the WCMA Account, and if such
available free credit balances are insufficient to satisfy any interest payment
due, to liquidate any investments in the Money Accounts (other than any
investments constituting any Minimum Money Accounts Balance under the WCMA
Directed Reserve program) in an amount up to the balance of such accrued
interest, and pay to MLBFS the available proceeds on account thereof. If
available free credit balances in the WCMA Account and available proceeds of the
Money Accounts are insufficient to pay the entire balance of accrued interest,
and Customer otherwise fails to make such payment when due, MLBFS may, in its
sole discretion, make a WCMA Loan in an amount equal to the balance of such
accrued interest and pay the proceeds of such WCMA Loan to itself on account of
such interest. The amount of any such WCMA Loan will be added to the WCMA Loan
Balance. If MLBFS declines to extend a WCMA Loan to Customer under these
circumstances, Customer hereby authorizes and directs MLPF&S to make all such
interest payments to MLBFS from any Minimum Money Accounts Balance. If there is
no Minimum Money Accounts Balance, or it is insufficient to pay all such
interest, MLBFS will invoice Customer for payment of the balance of the accrued
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interest, and Customer shall pay such interest as directed by MLBFS within 5
Business Days of receipt of such invoice.
(e) PAYMENTS. All payments required or permitted to be made pursuant to this
Loan Agreement shall be made in lawful money of the United States. Unless
otherwise directed by MLBFS, payments on account of the WCMA Loan Balance may be
made by the delivery of checks (other than WCMA Checks), or by means of FTS or
wire transfer of funds (other than funds from the WCMA Line of Credit) to MLPF&S
for credit to Customer's WCMA Account. Notwithstanding anything in the WCMA
Agreement to the contrary, Customer hereby irrevocably authorizes and directs
MLPF&S to apply available free credit balances in the WCMA Account to the
repayment of the WCMA Loan Balance prior to application for any other purpose.
Payments to MLBFS from funds in the WCMA Account shall be deemed to be made by
Customer upon the same basis and schedule as funds are made available for
investment in the Money Accounts in accordance with the terms of the WCMA
Agreement. The acceptance by or on behalf of MLBFS of a check or other payment
for a lesser amount than shall be due from Customer, regardless of any
endorsement or statement thereon or transmitted therewith, shall not be deemed
an accord and satisfaction or anything other than a payment on account, and
MLBFS or anyone acting on behalf of MLBFS may accept such check or other payment
without prejudice to the rights of MLBFS to recover the balance actually due or
to pursue any other remedy under this Loan Agreement or applicable law for such
balance. All checks accepted by or on behalf of MLBFS in connection with the
Loan and WCMA Line of Credit are subject to final collection.
(f) EXCEEDING THE MAXIMUM WCMA LINE OF CREDIT. In the event that the WCMA Loan
Balance shall at any time exceed the Maximum WCMA Line of Credit, Customer shall
within 1 Business Day of the first to occur of (i) any request or demand of
MLBFS, or (ii) receipt by Customer of a statement from MLPF&S showing a WCMA
Loan Balance in excess of the Maximum WCMA Line of Credit, deposit sufficient
funds into the WCMA Account to reduce the WCMA Loan Balance below the Maximum
WCMA Line of Credit.
(g) STATEMENTS. MLPF&S will include in each monthly statement it issues under
the WCMA Program information with respect to WCMA Loans and the WCMA Loan
Balance. Any questions that Customer may have with respect to such information
should be directed to MLBFS; and any questions with respect to any other matter
in such statements or about or affecting the WCMA Program should be directed to
MLPF&S.
ARTICLE IV. GENERAL PROVISIONS
4.1 REPRESENTATIONS AND WARRANTIES.
Customer represents and warrants to MLBFS that:
(a) ORGANIZATION AND EXISTENCE. Customer is a corporation, duly organized and
validly existing in good standing under the laws of the State of California and
is qualified to do business and in good standing in each other state where the
nature of its business or the property owned by it make such qualification
necessary; and, where applicable, each Business Guarantor is duly organized,
validly existing and in good standing under the laws of the state of its
formation and is qualified to do business and in good standing in each other
state where the nature of its business or the property owned by it make such
qualification necessary.
(b) EXECUTION, DELIVERY AND PERFORMANCE. The execution, delivery and
performance by Customer of this Loan Agreement and by Customer and each
Guarantor of such of the Additional Agreements to which it is a party: (i) have
been duly authorized by all requisite action, (ii) do not and will not violate
or conflict with any law or other governmental requirement, or any of the
agreements, instruments or documents which formed or govern Customer or any such
Guarantor, and (iii) do not and will not breach or violate any of the provisions
of, and will not result in a default by Customer or any such Guarantor under,
any other agreement, instrument or document to which it is a party or by which
it or its properties are bound.
(c) NOTICES AND APPROVALS. Except as may have been given or obtained, no notice
to or consent or approval of any governmental body or authority or other third
party whatsoever (including, without limitation, any other creditor) is required
in connection with the execution, delivery or performance by Customer or any
Guarantor
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of such of this Loan Agreement, the Term WCMA Note and the other Additional
Agreements to which it is a party.
(d) ENFORCEABILITY. This Loan Agreement, the Term WCMA Note and such of the
other Additional Agreements to which Customer or any Guarantor is a party are
the respective legal, valid and binding obligations of Customer and such
Guarantor, enforceable against it or them, as the case may be, in accordance
with their respective terms, except as enforceability may be limited by
bankruptcy and other similar laws affecting the rights of creditors generally or
by general principles of equity.
(e) COLLATERAL. Except for any Permitted Liens: (i) Customer has good and
marketable title to the Collateral, (ii) none of the Collateral is subject to
any lien, encumbrance or security interest, and (iii) upon the filing of all
Uniform Commercial Code financing statements executed by Customer with respect
to the Collateral in the appropriate jurisdiction(s) and/or the completion of
any other action required by applicable law to perfect its liens and security
interests, MLBFS will have valid and perfected first liens and security
interests upon all of the Collateral.
(f) FINANCIAL STATEMENTS. Except as expressly set forth in Customer's or any
Business Guarantor's financial statements, all financial statements of Customer
and each Business Guarantor furnished to MLBFS have been prepared in conformity
with generally accepted accounting principles, consistently applied, are true
and correct, and fairly present the financial condition of it as at such dates
and the results of its operations for the periods then ended; and since the most
recent date covered by such financial statements, there has been no material
adverse change in any such financial condition or operation. All financial
statements furnished to MLBFS of any Guarantor other than a Business Guarantor
are true and correct and fairly represent such Guarantor's financial condition
as of the date of such financial statements, and since the most recent date of
such financial statements, there has been no material adverse change in such
financial condition.
(g) LITIGATION. No litigation, arbitration, administrative or governmental
proceedings are pending or, to the knowledge of Customer, threatened against
Customer or any Guarantor, which would, if adversely determined, materially and
adversely affect the liens and security interests of MLBFS hereunder or under
any of the Additional Agreements, the financial condition of Customer or any
such Guarantor or the continued operations of Customer or any Business
Guarantor.
(h) TAX RETURNS. All federal, state and local tax returns, reports and
statements required to be filed by Customer and each Guarantor have been filed
with the appropriate governmental agencies and all taxes due and payable by
Customer and each Guarantor have been timely paid (except to the extent that any
such failure to file or pay will not materially and adversely affect either the
liens and security interests of MLBFS hereunder or under any of the Additional
Agreements, the financial condition of Customer or any Guarantor, or the
continued operations of Customer or any Business Guarantor).
(i) COLLATERAL LOCATION. All of the tangible Collateral is located at a
Location of Tangible Collateral.
Each of the foregoing representations and warranties: (i) has been and will be
relied upon as an inducement to MLBFS to make the Loan, and (ii) is continuing
and shall be deemed remade by Customer on the Closing Date, on the date of
funding of each additional advance on account of the Loan, on the Conversion
Date, on each Subsequent Funding Date and concurrently with each request for a
WCMA Loan.
4.2 FINANCIAL AND OTHER INFORMATION.
Customer shall furnish or cause to be furnished to MLBFS during the term of this
Loan Agreement all of the following:
(a) ANNUAL FINANCIAL STATEMENTS. Within 120 days after the close of each fiscal
year of Customer, Customer shall furnish or cause to be furnished to MLBFS: (i)
a copy of the annual consolidated audited financial statements of Customer with
schedules showing consolidating financial statements of each entity, consisting
of at least a balance sheet as at the close of such fiscal year and related
statements of income,
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retained earnings and cash flows, certified by its current independent
certified public accountants or other independent certified public
accountants reasonably acceptable to MLBFS, and (ii) the balance sheet of
each individual Guarantor as of said fiscal year-end, certified by such
Guarantor.
(b) INTERIM FINANCIAL STATEMENTS. Within 45 days after the close of each fiscal
quarter of Customer, Customer shall furnish or cause to be furnished to MLBFS:
(i) a statement of profit and loss for the fiscal quarter then ended, and (ii) a
balance sheet as at the close of such fiscal quarter; all in reasonable detail
and certified by its chief financial officer.
(c) AGING OF ACCOUNTS. Within 45 days after the close of each fiscal quarter of
Customer, Customer shall furnish or cause to be furnished to MLBFS an aging of
its Accounts and any Chattel Paper, certified by its chief financial officer.
(d) OTHER INFORMATION. Customer shall furnish or cause to be furnished to MLBFS
such other information as MLBFS may from time to time reasonably request
relating to Customer, any Guarantor or the Collateral.
4.3 OTHER COVENANTS. Customer further covenants and agrees during the term of
this Loan Agreement that:
(a) FINANCIAL RECORDS; INSPECTION. Customer and each Business Guarantor will:
(i) maintain at its principal place of business complete and accurate books and
records, and maintain all of its financial records in a manner consistent with
the financial statements heretofore furnished to MLBFS, or prepared on such
other basis as may be approved in writing by MLBFS; and (ii) permit MLBFS or its
duly authorized representatives, upon reasonable notice and at reasonable times,
to inspect its properties (both real and personal), operations, books and
records.
(b) TAXES. Customer and each Guarantor will pay when due all taxes, assessments
and other governmental charges, howsoever designated, and all other liabilities
and obligations, except to the extent that any such failure to pay will not
materially and adversely affect either the liens and security interests of MLBFS
hereunder or under any of the Additional Agreements, the financial condition of
Customer or any Guarantor or the continued operations of Customer or any
Business Guarantor.
(c) COMPLIANCE WITH LAWS AND AGREEMENTS. Neither Customer nor any Guarantor will
violate any law, regulation or other governmental requirement, any judgment or
order of any court or governmental agency or authority, or any agreement,
instrument or document to which it is a party or by which it is bound, if any
such violation will materially and adversely affect either the liens and
security interests of MLBFS hereunder or under any of the Additional Agreements,
the financial condition of Customer or any Guarantor, or the continued
operations of Customer or any Business Guarantor.
(d) USE OF LOAN PROCEEDS; SECURITIES TRANSACTIONS. The proceeds of the Loan
(including the initial WCMA Loan) shall be used by Customer solely for the Loan
Purpose, or, with the prior written consent of MLBFS, for other lawful business
purposes of Customer not prohibited hereby. The proceeds of each WCMA Loan
other than the initial WCMA Loan shall be used by Customer solely for working
capital in the ordinary course of Customer's business, or, with the prior
written consent of MLBFS, for other lawful business purposes of Customer not
prohibited hereby. CUSTOMER AGREES THAT UNDER NO CIRCUMSTANCES WILL THE LOAN OR
FUNDS BORROWED FROM MLBFS THROUGH THE TERM WCMA LINE OF CREDIT BE USED: (I) FOR
PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OF ANY PERSON WHATSOEVER, OR (II) TO
PURCHASE, CARRY OR TRADE IN SECURITIES, OR REPAY DEBT INCURRED TO PURCHASE,
CARRY OR TRADE IN SECURITIES, WHETHER IN OR IN CONNECTION WITH THE WCMA ACCOUNT,
ANOTHER ACCOUNT OF CUSTOMER WITH MLPF&S OR AN ACCOUNT OF CUSTOMER AT ANY OTHER
BROKER OR DEALER IN SECURITIES.
(e) NOTIFICATION BY CUSTOMER. Customer shall provide MLBFS with prompt written
notification of: (i) any Event of Default, or event which with the giving of
notice, passage of time, or both, would constitute an Event of Default; (ii) any
materially adverse change in the business, financial condition or operations of
Customer or any Business Guarantor; and (iii) any information which indicates
that any financial statements of Customer or any Guarantor fail in any material
respect to present fairly the financial condition and results of operations
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purported to be presented in such statements. Each notification by Customer
pursuant hereto shall specify the event or information causing such
notification, and, to the extent applicable, shall specify the steps being taken
to rectify or remedy such event or information.
(f) NOTICE OF CHANGE. Customer shall give MLBFS not less than 30 days prior
written notice of any change in the name (including any fictitious name) or
principal place of business or residence of Customer or any Guarantor.
(g) CONTINUITY. Except upon the prior written consent of MLBFS, which consent
will not be unreasonably withheld: (i) neither Customer nor any Business
Guarantor shall be a party to any merger or consolidation with, or purchase or
otherwise acquire all or substantially all of the assets of, or any material
stock, partnership, joint venture or other equity interest in, any person or
entity, or sell, transfer or lease all or any substantial part of its assets, if
any such action would result in either: (A) a material change in the principal
business, ownership or control of Customer or such Business Guarantor, or (B) a
material adverse change in the financial condition or operations of Customer or
such Business Guarantor; (ii) Customer and each Business Guarantor shall
preserve their respective existence and good standing in the jurisdictions of
establishment and operation, and shall not operate in any material business
substantially different from their respective business in effect as of the date
of application by Customer for credit from MLBFS; and (iii) neither Customer nor
any Business Guarantor shall cause or permit any material change in its
controlling ownership.
(h) LOANS AND TRANSFERS. Customer shall not without the prior written consent
of MLBFS directly or indirectly lend any moneys to, or transfer any assets or
property to Ladd's Stockton Marina, Inc. or any other affiliated person or
entity, other than in an arms length transaction for fair consideration in the
ordinary course of business.
(i) MINIMUM NET WORTH AND SUBORDINATED DEBT. The sum of (x) Customer's aggregate
subordinated debt and (y) Customer's "tangible net worth" shall at all times
exceed $2,200,000.00. For the purposes hereof, the term "tangible net worth"
shall mean Customer's net worth as shown on Customer's regular financial
statements prepared in a manner consistent with the terms hereof, but excluding
an amount equal to (i) any assets which are ordinarily classified as
"intangible" in accordance with generally accepted accounting principles, and
(ii) any amounts now or hereafter directly or indirectly owing to Customer by
officers, shareholders or affiliates of Customer (including any subordinated
debt).
(j) DEBT TO WORTH. The ratio of Customer's total debt to Customer's tangible net
worth plus subordinated debt, determined as aforesaid, shall not at any time
exceed 3.25 to 1.
4.4 COLLATERAL
(a) PLEDGE OF COLLATERAL. To secure payment and performance of the Obligations,
Customer hereby pledges, assigns, transfers and sets over to MLBFS, and grants
to MLBFS first liens and security interests in and upon all of the Collateral,
subject only to Permitted Liens.
(b) LIENS. Except upon the prior written consent of MLBFS, Customer shall not
create or permit to exist any lien, encumbrance or security interest upon or
with respect to any Collateral now owned or hereafter acquired other than
Permitted Liens.
(c) PERFORMANCE OF OBLIGATIONS. Customer shall perform all of its obligations
owing on account of or with respect to the Collateral; it being understood that
nothing herein, and no action or inaction by MLBFS, under this Loan Agreement or
otherwise, shall be deemed an assumption by MLBFS of any of Customer's said
obligations.
(d) SALES AND COLLECTIONS. So long as no Event of Default shall have occurred
and is continuing, Customer may in the ordinary course of its business: (i)
sell any Inventory normally held by Customer for sale, (ii) use or consume any
materials and supplies normally held by Customer for use or consumption, and
(iii) collect all
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of its Accounts. Customer shall take such action with respect to protection
of its Inventory and the other Collateral and the collection of its Accounts
as MLBFS may from time to time reasonably request.
(e) ACCOUNT SCHEDULES. Upon the request of MLBFS, made now or at any reasonable
time or times hereafter, Customer shall deliver to MLBFS, in addition to the
other information required hereunder, a schedule identifying, for each Account
and all Chattel Paper subject to MLBFS' security interests hereunder, each
Account Debtor by name and address and amount, invoice or contract number and
date of each invoice or contract. Customer shall furnish to MLBFS such
additional information with respect to the Collateral, and amounts received by
Customer as proceeds of any of the Collateral, as MLBFS may from time to time
reasonably request.
(f) ALTERATIONS AND MAINTENANCE. Except upon the prior written consent of
MLBFS, Customer shall not make or permit any material alterations to any
tangible Collateral which might materially reduce or impair its market value or
utility. Customer shall at all times keep the tangible Collateral in good
condition and repair and shall pay or cause to be paid all obligations arising
from the repair and maintenance of such Collateral, as well as all obligations
with respect to each Location of Tangible Collateral, except for any such
obligations being contested by Customer in good faith by appropriate
proceedings.
(g) LOCATION. Except for movements required in the ordinary course of
Customer's business, Customer shall give MLBFS 30 days' prior written notice of
the placing at or movement of any tangible Collateral to any location other than
a Location of Tangible Collateral. In no event shall Customer cause or permit
any material tangible Collateral to be removed from the United States without
the express prior written consent of MLBFS.
(h) INSURANCE. Customer shall insure all of the tangible Collateral under a
policy or policies of physical damage insurance providing that losses will be
payable to MLBFS as its interests may appear pursuant to a Lender's Loss Payable
Endorsement and containing such other provisions as may be reasonably required
by MLBFS. Customer shall further provide and maintain a policy or policies of
comprehensive public liability insurance naming MLBFS as an additional party
insured. Customer and each Business Guarantor shall maintain such other
insurance as may be required by law or is customarily maintained by companies in
a similar business or otherwise reasonably required by MLBFS. All such insurance
shall provide that MLBFS will receive not less than 10 days prior written notice
of any cancellation, and shall otherwise be in form and amount and with an
insurer or insurers reasonably acceptable to MLBFS. Customer shall furnish MLBFS
with a copy or certificate of each such policy or policies and, prior to any
expiration or cancellation, each renewal or replacement thereof.
(i) EVENT OF LOSS. Customer shall at its expense promptly repair all repairable
damage to any tangible Collateral. In the event that any tangible Collateral is
damaged beyond repair, lost, totally destroyed or confiscated (an "Event of
Loss") and such Collateral had a value prior to such Event of Loss of $25,000.00
or more, then, on or before the first to occur of (i) 90 days after the
occurrence of such Event of Loss, or (ii) 10 Business Days after the date on
which either Customer or MLBFS shall receive any proceeds of insurance on
account of such Event of Loss, or any underwriter of insurance on such
Collateral shall advise either Customer or MLBFS that it disclaims liability in
respect of such Event of Loss, Customer shall, at Customer's option, either
replace the Collateral subject to such Event of Loss with comparable Collateral
free of all liens other than Permitted Liens (in which event Customer shall be
entitled to utilize the proceeds of insurance on account of such Event of Loss
for such purpose, and may retain any excess proceeds of such insurance), or
prepay the Loan by an amount equal to the actual cash value of such Collateral
as determined by either the insurance company's payment (plus any applicable
deductible) or, in absence of insurance company payment, as reasonably
determined by MLBFS. Notwithstanding the foregoing, if at the time of occurrence
of such Event of Loss or any time thereafter prior to replacement or prepayment,
as aforesaid, an Event of Default shall occur hereunder, then MLBFS may at its
sole option, exercisable at any time while such Event of Default shall be
continuing, require Customer to either replace such Collateral or prepay the
Loan, as aforesaid. Any prepayment of the Loan pursuant to this Section shall be
applied first to installments on account of the then "Term Note Balance" (as
defined in the Term WCMA Note) in inverse order of maturity; with any prepayment
in excess of the then Term Note Balance applied on account of the WCMA Note
concurrently with: (i) a like permanent reduction in the Maximum WCMA Line of
Credit, and (ii) a like
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reduction in the obligation of MLBFS to fund future installments on account
of the Term Note in inverse order of funding. No amount prepaid pursuant to
this Section may be re-borrowed by Customer.
(j) NOTICE OF CERTAIN EVENTS. Customer shall give MLBFS immediate notice of any
attachment, lien, judicial process, encumbrance or claim affecting or involving
$25,000.00 or more of the Collateral.
(k) INDEMNIFICATION. Customer shall indemnify, defend and save MLBFS harmless
from and against any and all claims, liabilities, losses, costs and expenses
(including, without limitation, reasonable attorneys' fees and expenses) of any
nature whatsoever which may be asserted against or incurred by MLBFS arising out
of or in any manner occasioned by (i) the ownership, collection, possession, use
or operation of any Collateral, or (ii) any failure by Customer to perform any
of its obligations hereunder; excluding, however, from said indemnity any such
claims, liabilities, etc. arising directly out of the willful wrongful act or
active gross negligence of MLBFS. This indemnity shall survive the expiration or
termination of this Loan Agreement as to all matters arising or accruing prior
to such expiration or termination.
4.5 EVENTS OF DEFAULT.
The occurrence of any of the following events shall constitute an "Event of
Default" under this Loan Agreement:
(a) FAILURE TO PAY. Customer shall fail to pay to MLBFS or deposit into the WCMA
Account when due any amount owing or required to be paid or deposited by
Customer under this Loan Agreement or the Term WCMA Note, or shall fail to pay
when due any other Obligations, and any such failure shall continue for more
than five (5) Business Days after written notice thereof shall have been given
by MLBFS to Customer.
(b) FAILURE TO PERFORM. Customer or any Guarantor shall default in the
performance or observance of any covenant or agreement on its part to be
performed or observed under this Loan Agreement, the Term WCMA Note or any of
the other Additional Agreements (not constituting an Event of Default under any
other clause of this Section), and such default shall continue unremedied for
ten (10) Business Days after written notice thereof shall have been given by
MLBFS to Customer.
(c) BREACH OF WARRANTY. Any representation or warranty made by Customer or any
Guarantor contained in this Loan Agreement, the Term WCMA Note or any of the
other Additional Agreements shall at any time prove to have been incorrect in
any material respect when made.
(d) DEFAULT UNDER OTHER AGREEMENT. A default or Event of Default by Customer or
any Guarantor shall occur under the terms of any other agreement, instrument or
document with or intended for the benefit of MLBFS, MLPF&S or any of their
affiliates, and any required notice shall have been given and required passage
of time shall have elapsed.
(e) BANKRUPTCY EVENT. Any Bankruptcy Event shall occur.
(f) MATERIAL IMPAIRMENT. Any event shall occur which shall reasonably cause
MLBFS to in good faith believe that the prospect of full payment or performance
by Customer or any Guarantor of any of their respective liabilities or
obligations under this Loan Agreement, the Term WCMA Note or any of the other
Additional Agreements to which Customer or such Guarantor is a party has been
materially impaired.
(g) ACCELERATION OF DEBT TO OTHER CREDITORS. Any event shall occur which results
in the acceleration of the maturity of any indebtedness of $100,000.00 or more
of Customer or any Guarantor to another creditor under any indenture, agreement,
undertaking, or otherwise.
(h) SEIZURE OR ABUSE OF COLLATERAL. The Collateral, or any material part
thereof, shall be or become subject to any material abuse or misuse, or any
levy, attachment, seizure or confiscation which is not released within ten (10)
Business Days.
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4.6 REMEDIES.
(a) REMEDIES UPON DEFAULT. Upon the occurrence and during the continuance of any
Event of Default, MLBFS may at its sole option do any one or more or all of the
following, at such time and in such order as MLBFS may in its sole discretion
choose:
(i) TERMINATION. MLBFS may without notice terminate its obligation to make any
further advances on account of the Loan (if any portion of the Loan has not then
been funded),), or fund any further amount on account of the Term WCMA Note, or
make or continue to make the WCMA Line of Credit available to Customer, or
otherwise extend any credit to or for the benefit of Customer (it being
understood, however, that upon the occurrence of any Bankruptcy Event the WCMA
Line of Credit and all such obligations shall automatically terminate without
any action on the part of MLBFS); and upon any such termination MLBFS shall be
relieved of all such obligations.
(ii) ACCELERATION. MLBFS may declare the principal of and interest on the Term
Note and WCMA Note included in the Term WCMA Note, and all other Obligations to
be forthwith due and payable, whereupon all such amounts shall be immediately
due and payable, without presentment, demand for payment, protest and notice of
protest, notice of dishonor, notice of acceleration, notice of intent to
accelerate or other notice or formality of any kind, all of which are hereby
expressly waived; provided, however, that upon the occurrence of any Bankruptcy
Event all such principal, interest and other Obligations shall automatically
become due and payable without any action on the part of MLBFS.
(iii) EXERCISE RIGHTS OF SECURED PARTY. MLBFS may exercise any or all of the
remedies of a secured party under applicable law, including, but not limited to,
the UCC, and any or all of its other rights and remedies under this Loan
Agreement and the Additional Agreements.
(iv) POSSESSION. MLBFS may require Customer to make the Collateral and the
records pertaining to the Collateral available to MLBFS at a place designated by
MLBFS which is reasonably convenient to Customer, or may take possession of the
Collateral and the records pertaining to the Collateral without the use of any
judicial process and without any prior notice to Customer.
(v) SALE. MLBFS may sell any or all of the Collateral at public or private sale
upon such terms and conditions as MLBFS may reasonably deem proper. MLBFS may
purchase any Collateral at any such public sale. The net proceeds of any such
public or private sale and all other amounts actually collected or received by
MLBFS pursuant hereto, after deducting all costs and expenses incurred at any
time in the collection of the Obligations and in the protection, collection and
sale of the Collateral, will be applied to the payment of the Obligations, with
any remaining proceeds paid to Customer or whoever else may be entitled thereto,
and with Customer and each Guarantor remaining jointly and severally liable for
any amount remaining unpaid after such application.
(vi) DELIVERY OF CASH, CHECKS, ETC. MLBFS may require Customer to forthwith upon
receipt, transmit and deliver to MLBFS in the form received, all cash, checks,
drafts and other instruments for the payment of money (properly endorsed, where
required, so that such items may be collected by MLBFS) which may be received by
Customer at any time in full or partial payment of any Collateral, and require
that Customer not commingle any such items which may be so received by Customer
with any other of its funds or property but instead hold them separate and apart
and in trust for MLBFS until delivery is made to MLBFS.
(vii) NOTIFICATION OF ACCOUNT DEBTORS. MLBFS may notify any Account Debtor that
its Account or Chattel Paper has been assigned to MLBFS and direct such Account
Debtor to make payment directly to MLBFS of all amounts due or becoming due with
respect to such Account or Chattel Paper; and MLBFS may enforce payment and
collect, by legal proceedings or otherwise, such Account or Chattel Paper.
(viii) CONTROL OF COLLATERAL. MLBFS may otherwise take control in any lawful
manner of any cash or non-cash items of payment or proceeds of Collateral and of
any rejected, returned, stopped in transit or repossessed
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goods included in the Collateral and endorse Customer's name on any item of
payment on or proceeds of the Collateral.
(b) SET-OFF. MLBFS shall have the further right upon the occurrence and during
the continuance of an Event of Default to set-off, appropriate and apply toward
payment of any of the Obligations, in such order of application as MLBFS may
from time to time and at any time elect, any cash, credit, deposits, accounts,
securities and any other property of Customer which is in transit to or in the
possession, custody or control of MLBFS, MLPF&S or any agent, bailee, or
affiliate of MLBFS or MLPF&S, including, without limitation, all securities
accounts with MLPF&S and all cash and securities and other financial assets
therein or controlled thereby, and all proceeds thereof. Customer hereby
collaterally assigns and grants to MLBFS a continuing security interest in all
such property as additional Collateral.
(c) POWER OF ATTORNEY. Effective upon the occurrence and during the continuance
of an Event of Default, Customer hereby irrevocably appoints MLBFS as its
attorney-in-fact, with full power of substitution, in its place and stead and in
its name or in the name of MLBFS, to from time to time in MLBFS' sole discretion
take any action and to execute any instrument which MLBFS may deem necessary or
advisable to accomplish the purposes of this Loan Agreement, including, but not
limited to, to receive, endorse and collect all checks, drafts and other
instruments for the payment of money made payable to Customer included in the
Collateral.
(d) REMEDIES ARE SEVERABLE AND CUMULATIVE. All rights and remedies of MLBFS
herein are severable and cumulative and in addition to all other rights and
remedies available in the Term WCMA Note, the other Additional Agreements, at
law or in equity, and any one or more of such rights and remedies may be
exercised simultaneously or successively.
(e) NOTICES. To the fullest extent permitted by applicable law, Customer hereby
irrevocably waives and releases MLBFS of and from any and all liabilities and
penalties for failure of MLBFS to comply with any statutory or other requirement
imposed upon MLBFS relating to notices of sale, holding of sale or reporting of
any sale, and Customer waives all rights of redemption or reinstatement from any
such sale. Any notices required under applicable law shall be reasonably and
properly given to Customer if given by any of the methods provided herein at
least 5 Business Days prior to taking action. MLBFS shall have the right to
postpone or adjourn any sale or other disposition of Collateral at any time
without giving notice of any such postponed or adjourned date. In the event
MLBFS seeks to take possession of any or all of the Collateral by court process,
Customer further irrevocably waives to the fullest extent permitted by law any
bonds and any surety or security relating thereto required by any statute, court
rule or otherwise as an incident to such possession, and any demand for
possession prior to the commencement of any suit or action.
4.7 MISCELLANEOUS.
(a) NON-WAIVER. No failure or delay on the part of MLBFS in exercising any
right, power or remedy pursuant to this Loan Agreement, the Term WCMA Note or
any of the other Additional Agreements shall operate as a waiver thereof, and no
single or partial exercise of any such right, power or remedy shall preclude any
other or further exercise thereof, or the exercise of any other right, power or
remedy. Neither any waiver of any provision of this Loan Agreement, the Term
WCMA Note or any of the other Additional Agreements, nor any consent to any
departure by Customer therefrom, shall be effective unless the same shall be in
writing and signed by MLBFS. Any waiver of any provision of this Loan Agreement,
the Term WCMA Note or any of the other Additional Agreements and any consent to
any departure by Customer from the terms thereof shall be effective only in the
specific instance and for the specific purpose for which given. Except as
otherwise expressly provided herein, no notice to or demand on Customer shall in
any case entitle Customer to any other or further notice or demand in similar or
other circumstances.
(b) DISCLOSURE. Customer hereby irrevocably authorizes MLBFS and each of its
affiliates, including without limitation MLPF&S, to at any time (whether or not
an Event of Default shall have occurred) obtain from and disclose to each other
any and all financial and other information about Customer.
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<PAGE>
(c) COMMUNICATIONS. All notices and other communications required or
permitted hereunder or in connection with any of the Additional Agreements
shall be in writing, and shall be either delivered personally, mailed by
postage prepaid certified mail or sent by express overnight courier or by
facsimile. Such notices and communications shall be deemed to be given on the
date of personal delivery, facsimile transmission or actual delivery of
certified mail, or one Business Day after delivery to an express overnight
courier. Unless otherwise specified in a notice sent or delivered in
accordance with the terms hereof, notices and other communications in writing
shall be given to the parties hereto at their respective addresses set forth
at the beginning of this Loan Agreement, or, in the case of facsimile
transmission, to the parties at their respective regular facsimile telephone
number.
(d) COSTS, EXPENSES AND TAXES. Customer shall upon demand pay or reimburse
MLBFS for: (i) all Uniform Commercial Code and other filing and search fees
and expenses incurred by MLBFS in connection with the verification,
perfection or preservation of MLBFS' rights hereunder or in the Collateral or
any other collateral for the Obligations; (ii) any and all stamp, transfer
and other taxes and fees payable or determined to be payable in connection
with the execution, delivery and/or recording of this Loan Agreement or any
of the Additional Agreements; and (iii) all reasonable fees and out-of-pocket
expenses (including, but not limited to, reasonable fees and expenses of
outside counsel) incurred by MLBFS in connection with the preparation of this
Loan Agreement and any of the Additional Agreements and closing of the
transactions contemplated hereby or thereby, the collection of any sum
payable hereunder or under any of the Additional Agreements not paid when
due, the enforcement of this Loan Agreement or any of the Additional
Agreements and the protection of MLBFS' rights hereunder or thereunder,
excluding, however, salaries and normal overhead attributable to MLBFS'
employees. The obligations of Customer under this paragraph shall survive the
expiration or termination of this Loan Agreement and the discharge of the
other Obligations.
(e) RIGHT TO PERFORM OBLIGATIONS. If Customer shall fail to do any act or
thing which it has covenanted to do under this Loan Agreement or any
representation or warranty on the part of Customer contained in this Loan
Agreement shall be breached, MLBFS may, in its sole discretion, after 5
Business Days written notice is sent to Customer (or such lesser notice,
including no notice, as is reasonable under the circumstances), do the same
or cause it to be done or remedy any such breach, and may expend its funds
for such purpose. Any and all reasonable amounts so expended by MLBFS shall
be repayable to MLBFS by Customer upon demand, with interest at the Interest
Rate during the period from and including the date funds are so expended by
MLBFS to the date of repayment, and all such amounts shall be additional
Obligations. The payment or performance by MLBFS of any of Customer's
obligations hereunder shall not relieve Customer of said obligations or of
the consequences of having failed to pay or perform the same, and shall not
waive or be deemed a cure of any Event of Default.
(f) LATE CHARGE. Any payment required to be made by Customer pursuant to this
Loan Agreement or any of the Additional Agreements not paid within ten (10)
days of the applicable due date shall be subject to a late charge in an
amount equal to the lesser of: (i) 5% of the overdue amount, or (ii) the
maximum amount permitted by applicable law. Such late charge shall be
payable on demand, or, without demand, may in the sole discretion of MLBFS be
paid by a WCMA Loan and added to the WCMA Loan Balance in the same manner as
provided herein for accrued interest with respect to the WCMA Line of Credit.
(g) FURTHER ASSURANCES. Customer agrees to do such further acts and things
and to execute and deliver to MLBFS such additional agreements, instruments
and documents as MLBFS may reasonably require or deem advisable to effectuate
the purposes of this Loan Agreement, the Term WCMA Note or any of the other
Additional Agreements, or to establish, perfect and maintain MLBFS' security
interests and liens upon the Collateral, including, but not limited to: (i)
executing financing statements or amendments thereto when and as reasonably
requested by MLBFS; and (ii) if in the reasonable judgment of MLBFS it is
required by local law, causing the owners and/or mortgagees of the real
property on which any Collateral may be located to execute and deliver to
MLBFS waivers or subordinations reasonably satisfactory to MLBFS with respect
to any rights in such Collateral.
(h) BINDING EFFECT. This Loan Agreement, the Term WCMA Note and the other
Additional Agreements shall be binding upon, and shall inure to the benefit
of MLBFS, Customer and their respective successors and
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<PAGE>
assigns. Customer shall not assign any of its rights or delegate any of
its obligations under this Loan Agreement, the Term WCMA Note or any of the
other Additional Agreements without the prior written consent of MLBFS.
Unless otherwise expressly agreed to in a writing signed by MLBFS, no such
consent shall in any event relieve Customer of any of its obligations under
this Loan Agreement, the Term WCMA Note or any of the other Additional
Agreements.
(i) HEADINGS. Captions and section and paragraph headings in this Loan
Agreement are inserted only as a matter of convenience, and shall not affect
the interpretation hereof.
(j) GOVERNING LAW. This Loan Agreement, the Term WCMA Note and, unless
otherwise expressly provided therein, each of the other Additional
Agreements, shall be governed in all respects by the laws of the State of
Illinois.
(k) SEVERABILITY OF PROVISIONS. Whenever possible, each provision of this
Loan Agreement, the Term WCMA Note and the other Additional Agreements shall
be interpreted in such manner as to be effective and valid under applicable
law. Any provision of this Loan Agreement, the Term WCMA Note or any of the
other Additional Agreements which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective only to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions of this Loan Agreement, the Term WCMA Note and the other
Additional Agreements or affecting the validity or enforceability of such
provision in any other jurisdiction.
(l) TERM. This Loan Agreement shall become effective on the date accepted by
MLBFS at its office in Chicago, Illinois, and, subject to the terms hereof,
shall continue in effect so long thereafter as either MLBFS shall be
obligated to make the Loan, or, after the Closing Date, there shall be any
moneys outstanding under the Term Note or WCMA Note included in the Term WCMA
Note or under this Loan Agreement, or there shall be any other Obligations
outstanding.
(m) COUNTERPARTS. This Loan Agreement may be executed in one or more
counterparts which, when taken together, constitute one and the same
agreement.
(n) JURISDICTION; WAIVER. CUSTOMER ACKNOWLEDGES THAT THIS LOAN AGREEMENT IS
BEING ACCEPTED BY MLBFS IN PARTIAL CONSIDERATION OF MLBFS' RIGHT AND OPTION,
IN ITS SOLE DISCRETION, TO ENFORCE THIS LOAN AGREEMENT, THE TERM WCMA NOTE
AND THE OTHER ADDITIONAL AGREEMENTS IN EITHER THE STATE OF ILLINOIS OR IN ANY
OTHER JURISDICTION WHERE CUSTOMER OR ANY COLLATERAL FOR THE OBLIGATIONS MAY
BE LOCATED. CUSTOMER CONSENTS TO JURISDICTION IN THE STATE OF ILLINOIS AND
VENUE IN ANY STATE OR FEDERAL COURT IN THE COUNTY OF COOK FOR SUCH PURPOSES,
AND CUSTOMER WAIVES ANY AND ALL RIGHTS TO CONTEST SAID JURISDICTION AND
VENUE. CUSTOMER FURTHER WAIVES ANY RIGHTS TO COMMENCE ANY ACTION AGAINST
MLBFS IN ANY JURISDICTION EXCEPT IN THE COUNTY OF COOK AND STATE OF ILLINOIS.
MLBFS AND CUSTOMER HEREBY EACH EXPRESSLY WAIVE ANY AND ALL RIGHTS TO A TRIAL
BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THE
PARTIES AGAINST THE OTHER PARTY WITH RESPECT TO ANY MATTER RELATING TO,
ARISING OUT OF OR IN ANY WAY CONNECTED WITH THE LOAN, THIS LOAN AGREEMENT,
THE TERM WCMA NOTE, ANY OTHER ADDITIONAL AGREEMENTS AND/OR ANY OF THE
TRANSACTIONS WHICH ARE THE SUBJECT MATTER OF THIS LOAN AGREEMENT.
(o) INTEGRATION. THIS LOAN AGREEMENT, TOGETHER WITH THE TERM WCMA NOTE AND
THE OTHER ADDITIONAL AGREEMENTS, CONSTITUTES THE ENTIRE UNDERSTANDING AND
REPRESENTS THE FULL AND FINAL AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO
THE SUBJECT MATTER HEREOF, AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR
WRITTEN AGREEMENTS OR PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF
THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS OF THE PARTIES. WITHOUT
LIMITING THE FOREGOING, CUSTOMER ACKNOWLEDGES THAT: (I) NO PROMISE OR
COMMITMENT HAS BEEN MADE TO IT BY MLBFS, MLPF&S OR ANY OF THEIR RESPECTIVE
EMPLOYEES, AGENTS OR
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<PAGE>
REPRESENTATIVES TO MAKE THE LOAN ON ANY TERMS OTHER THAN AS EXPRESSLY SET
FORTH HEREIN AND IN THE TERM WCMA NOTE, OR TO MAKE ANY OTHER LOAN OR
OTHERWISE EXTEND ANY OTHER CREDIT TO CUSTOMER OR ANY OTHER PARTY; AND (II)
EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, THIS LOAN AGREEMENT SUPERSEDES
AND REPLACES ANY AND ALL PROPOSALS, LETTERS OF INTENT AND APPROVAL AND
COMMITMENT LETTERS FROM MLBFS TO CUSTOMER, NONE OF WHICH SHALL BE CONSIDERED
AN ADDITIONAL AGREEMENT. NO AMENDMENT OR MODIFICATION OF THIS AGREEMENT OR
ANY OF THE ADDITIONAL AGREEMENTS TO WHICH CUSTOMER IS A PARTY SHALL BE
EFFECTIVE UNLESS IN A WRITING SIGNED BY BOTH MLBFS AND CUSTOMER.
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<PAGE>
IN WITNESS WHEREOF, this Loan Agreement has been executed as of the day and year
first above written.
MEDICAL RESOURCES MANAGEMENT, INC. D/B/A MRM, INC.
By:
------------------------------------------------------
Signature (1) Signature (2)
- ---------------------------------------------------------
Printed Name Printed Name
- ---------------------------------------------------------
Title Title
Accepted at Chicago, Illinois:
MERRILL LYNCH BUSINESS FINANCIAL
SERVICES INC.
By:
-----------------------------------------------
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<PAGE>
EXHIBIT A
ATTACHED TO AND HEREBY MADE A PART OF TERM WCMA LOAN AND SECURITY AGREEMENT
NO. 9707340401 BETWEEN MERRILL LYNCH BUSINESS FINANCIAL SERVICES INC. AND
MEDICAL RESOURCES MANAGEMENT, INC. D/B/A MRM, INC.
- --------------------------------------------------------------------------------
LOCATIONS OF TANGIBLE COLLATERAL:
<PAGE>
[LOGO] No. 9707340401
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$2,000,000.00 July 10, 1997
TERM WCMA-Registered Trademark- NOTE
FOR VALUE RECEIVED, MEDICAL RESOURCES MANAGEMENT, INC. D/B/A MRM, INC., a
corporation organized and existing under the laws of the State of California
("Customer"), hereby promises to pay to the order of MERRILL LYNCH BUSINESS
FINANCIAL SERVICES INC., a corporation organized and existing under the laws
of the State of Delaware ("MLBFS"), in lawful money of the United States, the
principal sum of $2,000,000.00, or, if more or less, an amount equal to the
sum of the principal balances from time to time outstanding under the "Term
Note" and "WCMA Note" included herein, plus accrued and unpaid interest
thereon and any other charges hereinafter set forth or payable in accordance
with the terms of the Loan Agreement, as follows:
DEFINITIONS
In addition to terms defined elsewhere in this Note, as used herein, the
following terms shall have the following meanings:
(i) "Closing Date" shall mean the date of the first advancement of funds
hereunder.
(ii) "Conversion Date" shall mean the first to occur of: (i) the date of
funding the final advance permitted under the terms of the Loan Agreement, or
(ii) September 30, 1997.
(iii) "Excess Interest" shall mean any amount of interest in excess of the
maximum amount of interest permitted to be charged by law.
(iv) "Initial Loan Amount" shall mean an amount equal to the sum of: (a)
the amount advanced on the Closing Date on account of the Term Note, and (b)
the Maximum WCMA Line of Credit immediately after activation of the WCMA Line
of Credit on the Closing Date.
(v) "Interest Rate" shall mean a variable per annum rate equal to the
sum of (i) 2.70% per annum, and (ii) the interest rate from time to time
published in the "Money Rates" section of THE WALL STREET JOURNAL for 30-day
high-grade unsecured notes sold through dealers by major corporations (the
"30-Day Commercial Paper Rate"). The Interest Rate will change as of the date
of publication in THE WALL STREET JOURNAL of a 30-Day Commercial Paper Rate
that is different from that published on the preceding Business Day. In the
event that THE WALL STREET JOURNAL shall, for any reason, fail or cease to
publish the 30-Day Commercial Paper Rate, MLBFS will choose a reasonably
comparable index or source to use as the basis for the Interest Rate.
(vi) "Loan Agreement" shall mean that certain TERM WCMA LOAN AND SECURITY
AGREEMENT NO. 9707340401 between Customer and MLBFS, as the same may have been
or may hereafter be amended or supplemented.
(vii) "Note" shall mean this TERM WCMA NOTE.
Capitalized terms used herein and not defined herein shall have the meaning
set forth in the Loan Agreement. Without limiting the foregoing, the terms
"Additional Agreements", "Bankruptcy Event", "Event of Default" and "WCMA
Loan Balance" shall have the respective meanings set forth in the Loan
Agreement.
<PAGE>
TERM NOTE
FOR VALUE RECEIVED, Customer hereby promises to pay to the order of MLBFS, in
lawful money of the United States, an amount equal to the outstanding
principal balance of the term portion of the Term WCMA Loan, as increased
from time to time by additional fundings pursuant to the provisions of
Section 2.2 (c) of the Loan Agreement (the "Term Note Balance"); together
with interest on the Term Note Balance, from the date of advancement of funds
hereunder until payment, at the Interest Rate.
Said indebtedness shall be payable in consecutive monthly installments
commencing on the first day of the second calendar month following the
Closing Date, and continuing on the first day of each calendar month
thereafter until this Note shall be paid in full. Each installment payable
prior to the first day of the second calendar month following the Conversion
Date shall be in an amount equal to accrued and unpaid interest at the
Interest Rate. Commencing on the first day of the second calendar month
immediately following the Conversion Date, Customer shall pay 60 consecutive
monthly installments, each in an amount equal to the sum of (i) accrued and
unpaid interest at the Interest Rate, and (ii) 1/60th of the Initial Loan
Amount. Each payment received hereunder shall be applied FIRST to any fees
and expenses of MLBFS payable by Customer under the terms of the Loan
Agreement, NEXT to any late charges payable hereunder, NEXT to accrued and
unpaid interest at the Interest Rate, WITH THE BALANCE applied on account of
the unpaid principal hereof. All sums payable hereunder shall be payable at
the office of MLBFS at 33 West Monroe Street, Chicago, Illinois 60603, or at
such other place or places as the holder hereof may from time to time appoint
in writing.
Customer may prepay this Term Note at any time in whole or in part without
premium or penalty. Any partial prepayment shall be applied to installments
of the Initial Loan Amount in the chronological order such installments
become due. Customer shall not have the right to re-borrow amounts prepaid on
account of this Term Note.
WCMA NOTE
FOR VALUE RECEIVED, Customer hereby promises to pay to the order of MLBFS, at
the times and in the manner set forth in the Loan Agreement, or in such other
manner and at such place as MLBFS may hereafter designate in writing, the
following: (a) on the WCMA Maturity Date, the then WCMA Loan Balance; and (b)
interest at the Interest Rate on the outstanding WCMA Loan Balance, from and
including the date on which the initial WCMA Loan is made until the date of
payment of all WCMA Loans in full. Interest shall be payable in the manner
and on the dates specified in, or determined in accordance with, the Loan
Agreement.
PROVISIONS APPLICABLE TO BOTH TERM NOTE AND WCMA NOTE
Any part of the principal hereof or interest hereon or other sums payable
hereunder or under the Loan Agreement not paid within ten (10) days of the
applicable due date shall be subject to a late charge equal to the lesser of
(i) 5% of the overdue amount, or (ii) the maximum amount permitted by law.
All interest shall be computed on the basis of actual days elapsed over a
360-day year.
This Term WCMA Note constitutes and includes both the "Term Note" and the
"WCMA Note" referred to in, and is entitled to all of the benefits of the
Loan Agreement. The Loan Agreement is by this reference hereby incorporated
as a part hereof.
If Customer shall fail to pay when due any installment or other sum due
hereunder, and any such failure shall continue for more than five (5)
Business Days after written notice thereof from the holder hereof to
Customer, or if any other Event of Default shall occur and be continuing,
then at the option of the holder hereof (or, upon the occurrence of any
Bankruptcy Event, automatically, without any action on the part of the holder
hereof), and in addition to all other rights and remedies available to such
holder under the Loan Agreement and otherwise, an amount equal to the sum of
the WCMA Loan Balance and the Term Note Balance at such time remaining
unpaid, together with all accrued and unpaid interest thereon and all other
sums then owing by
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<PAGE>
Customer under the Loan Agreement, may be declared to be and thereby become
immediately due and payable.
It is expressly understood, however, that nothing contained in the Loan
Agreement, any other agreement, instrument or document executed by Customer,
or otherwise, shall affect or impair the right, which is unconditional and
absolute, of the holder hereof to enforce payment of all sums due under this
Term WCMA Note at or after maturity, whether by acceleration or otherwise, or
shall affect the obligation of Customer, which is also unconditional and
absolute, to pay the sums payable under this Term WCMA Note in accordance
with its terms. Except as otherwise expressly set forth herein or in the Loan
Agreement, Customer hereby waives presentment, demand for payment, protest
and notice of protest, notice of dishonor, notice of acceleration, notice of
intent to accelerate and all other notices and formalities in connection
with this Term WCMA Note.
Wherever possible each provision of this Term WCMA Note shall be interpreted
in such manner as to be effective and valid under applicable law, but if any
provision of this Term WCMA Note shall be prohibited by or invalid under such
law, such provision shall be ineffective to the extent of such prohibition or
invalidity without invalidating the remainder of such provision or the
remaining provisions of this Term WCMA Note. Notwithstanding any provision to
the contrary in this Term WCMA Note, the Loan Agreement or any of the
Additional Agreements, no provision of this Term WCMA Note, the Loan
Agreement or any of the Additional Agreements shall require the payment or
permit the collection of any Excess Interest. If any Excess Interest is
provided for, or is adjudicated as being provided for, in this Term WCMA
Note, the Loan Agreement or any of the Additional Agreements, then: (a)
Customer shall not be obligated to pay any Excess Interest; and (b) any
Excess Interest that MLBFS may have received under this Term WCMA Note, the
Loan Agreement or any of the Additional Agreements shall, at the option of
MLBFS, be: (i) applied as a credit against the then unpaid principal balance
of this Term WCMA Note, or accrued and unpaid interest hereon not to exceed
the maximum amount permitted by law, or both, (ii) refunded to the payor
thereof, or (iii) any combination of the foregoing.
This Term WCMA Note shall be construed in accordance with the laws of the
State of Illinois and may be enforced by the holder hereof in any
jurisdiction in which the Loan Agreement may be enforced.
IN WITNESS WHEREOF, this Term WCMA Note has been executed by Customer as of
the day and year first above written.
MEDICAL RESOURCES MANAGEMENT, INC. D/B/A MRM, INC.
By:
------------------------------------------------
Signature (1) Signature (2)
- ---------------------------------------------------
Printed Name Printed Name
- ---------------------------------------------------
Title Title
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<PAGE>
[LOGO] No. 9707340401
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- --------------------------------------------------------------------------------
ADVANCE CERTIFICATE
The undersigned, MEDICAL RESOURCES MANAGEMENT, INC. D/B/A MRM, INC., a
corporation organized and existing under the laws of the State of California
("Customer"), as a primary inducement to MERRILL LYNCH BUSINESS FINANCIAL
SERVICES INC. ("MLBFS") to make an advance to or for the benefit of Customer
on account of the loan to Customer (the "Advance") pursuant to that certain
TERM WCMA LOAN AND SECURITY AGREEMENT NO. 9707340401 between Customer and
MLBFS dated as of July 10, 1997 (the "Loan Agreement") DOES HEREBY REPRESENT,
WARRANT AND AGREE AS FOLLOWS:
1. All of Customer's representations and warranties in the Loan Agreement are
true and correct and remade as of the date hereof, and, without limiting the
foregoing: (i) subject only to "Permitted Liens" (as defined in the Loan
Agreement), MLBFS has a first lien and security interest upon all of the
"Collateral" under the Loan Agreement (including any Collateral financed or
refinanced with the proceeds of the Advance), and (ii) the Advance is being
applied on account of and will satisfy the "Loan Purpose" under the Loan
Agreement.
2. There has not occurred any event which constitutes an "Event of Default"
under the Loan Agreement, or any event which with the giving of notice,
passage of time, or both would constitute such an Event of Default.
3. There has not occurred any material adverse change in the business or
financial condition of Customer or any Guarantor of Customer's obligations to
MLBFS since the date of the last financial statements submitted to MLBFS.
4. MLBFS is hereby authorized and directed to disburse the proceeds of the
Advance, as follows:
TO PAYOFF TERM LOAN NOS. 9503551501 AND 9606550201 AND WCMA ACCOUNT NO. 24X-
07475 AND DEPOSIT REMAINING PROCEEDS INTO WCMA ACCOUNT NO. 24X-07498
Dated this ____ day of ____________, 199_
MEDICAL RESOURCES MANAGEMENT, INC. D/B/A MRM, INC.
By:
----------------------------------------------
Signature (1) Signature (2)
- -------------------------------------------------
Printed Name Printed Name
- -------------------------------------------------
Title Title
<PAGE>
[LOGO]
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CERTIFICATE OF SECRETARY
THE UNDERSIGNED HEREBY CERTIFIES TO MERRILL LYNCH BUSINESS FINANCIAL SERVICES
INC. that the undersigned is the duly appointed and acting Secretary (or
Assistant Secretary) of MEDICAL RESOURCES MANAGEMENT, INC. D/B/A MRM, INC., a
corporation duly organized, validly existing and in good standing under the
laws of the State of California; and that the following is a true, accurate
and compared transcript of resolutions duly, validly and lawfully adopted on
the _______ day of ____________________, 1997 by the Board of Directors of
said Corporation acting in accordance with the laws of the state of
incorporation and the charter and by-laws of said Corporation:
"RESOLVED, that this Corporation is authorized and empowered, now and from
time to time hereafter, to borrow and/or obtain credit from, and/or enter
into other financial arrangements with, MERRILL LYNCH BUSINESS FINANCIAL
SERVICES INC. ("MLBFS"), and in connection therewith to grant to MLBFS liens
and security interests on any or all property belonging to this Corporation;
all such transactions to be on such terms and conditions as may be mutually
agreed from time to time between this Corporation and MLBFS; and
"FURTHER RESOLVED, that the President, any Vice President, Treasurer,
Secretary or other officer of this Corporation, or any one or more of them,
be and each of them hereby is authorized and empowered to: (a) execute and
deliver to MLBFS on behalf of this Corporation any and all loan agreements,
promissory notes, security agreements, pledge agreements, financing
statements, mortgages, deeds of trust, leases and/or all other agreements,
instruments and documents required by MLBFS in connection therewith, and any
present or future extensions, amendments, supplements, modifications and
restatements thereof; all in such form as any such officer shall approve, as
conclusively evidenced by his or her signature thereon, and (b) do and
perform all such acts and things deemed by any such officer to be necessary
or advisable to carry out and perform the undertakings and agreements of this
Corporation in connection therewith; and any and all prior acts of each of
said officers in these premises are hereby ratified and confirmed in all
respects; and
"FURTHER RESOLVED, that MLBFS is authorized to rely upon the foregoing
resolutions until it receives written notice of any change or revocation from
an authorized officer of this Corporation, which change or revocation shall
not in any event affect the obligations of this Corporation with respect to
any transaction conditionally agreed or committed to by MLBFS or having its
inception prior to the receipt of such notice by MLBFS."
THE UNDERSIGNED FURTHER CERTIFIES that: (a) the foregoing resolutions have
not been rescinded, modified or repealed in any manner, are not in conflict
with any agreement of said Corporation and are in full force and effect as of
the date of this Certificate, and (b) the following individuals are now the
duly elected and acting officers of said Corporation and the signatures set
forth below are the true signatures of said officers:
President:
---------------------------------------
Vice President:
----------------------------------
Treasurer:
---------------------------------------
Secretary:
---------------------------------------
-----------------: ------------------------------
Additional Title
IN WITNESS WHEREOF, the undersigned has executed this Certificate and has
affixed the seal of said Corporation hereto, pursuant to due authorization,
all as of this ________ day of _________________, 1997.
---------------------------------
(CORPORATE SEAL) Secretary
Printed Name:
---------------------------------
<PAGE>
[LOGO] Ref. No. 9707340401
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UNCONDITIONAL GUARANTY
FOR VALUE RECEIVED, and in order to induce MERRILL LYNCH BUSINESS FINANCIAL
SERVICES INC. ("MLBFS") to advance moneys or extend or continue to extend
credit to or for the benefit of MEDICAL RESOURCES MANAGEMENT, INC. D/B/A MRM,
INC., a corporation organized and existing under the laws of the State of
California (with any successor-in interest, including, without limitation,
any successor by merger or by operation of law, herein collectively referred
to as "Customer") under: (a) that certain TERM WCMA LOAN AND SECURITY
AGREEMENT NO. 9707340401 between MLBFS and Customer (the "Loan Agreement"),
(b) any "Additional Agreements", as that term is defined in the Loan
Agreement (including, without limitation, the TERM WCMA NOTE incorporated by
reference into the Loan Agreement), and (c) all present and future
amendments, restatements, supplements and other evidences of any extensions,
increases, renewals, modifications and other changes of or to the Loan
Agreement or Additional Agreements (collectively, the "Guaranteed
Documents"), THE UNDERSIGNED (INDIVIDUALLY, "GUARANTOR", AND COLLECTIVELY
"GUARANTORS") HEREBY JOINTLY AND SEVERALLY UNCONDITIONALLY GUARANTEE TO
MLBFS: (i) the prompt and full payment when due, by acceleration or
otherwise, of all sums now or any time hereafter due from Customer to MLBFS
under the Guaranteed Documents, (ii) the prompt, full and faithful
performance and discharge by Customer of each and every other covenant and
warranty of Customer set forth in the Guaranteed Documents, and (iii) the
prompt and full payment and performance of all other indebtedness,
liabilities and obligations of Customer to MLBFS, howsoever created or
evidenced, and whether now existing or hereafter arising (collectively, the
"Obligations"). Guarantors further agree to pay all reasonable costs and
expenses (including, but not limited to, court costs and reasonable
attorneys' fees) paid or incurred by MLBFS in endeavoring to collect or
enforce performance of any of the Obligations, or in enforcing this Guaranty.
Guarantors acknowledges that MLBFS is relying on the execution and delivery
of this Guaranty in advancing moneys to or extending or continuing to extend
credit to or for the benefit of Customer.
This Guaranty is absolute, unconditional and continuing and shall remain in
effect until all of the Obligations shall have been fully and indefeasibly
paid, performed and discharged. Upon the occurrence and during the
continuance of any Event of Default under the Guaranteed Documents, any or
all of the indebtedness hereby guaranteed then existing shall, at the option
of MLBFS, become immediately due and payable from Guarantors (it being
understood, however, that upon the occurrence of any "Bankruptcy Event", as
defined in the Guaranteed Documents, all such indebtedness shall
automatically become due and payable without action on the part of MLBFS).
Notwithstanding the occurrence of any such event, this Guaranty shall
continue and remain in full force and effect. To the extent MLBFS receives
payment with respect to the Obligations, and all or any part of such payment
is subsequently invalidated, declared to be fraudulent or preferential, set
aside, required to be repaid by MLBFS or is repaid by MLBFS pursuant to a
settlement agreement, to a trustee, receiver or any other person or entity,
whether under any Bankruptcy law or otherwise (a "Returned Payment"), this
Guaranty shall continue to be effective or shall be reinstated, as the case
may be, to the extent of such payment or repayment by MLBFS, and the
indebtedness or part thereof intended to be satisfied by such Returned
Payment shall be revived and continued in full force and effect as if said
Returned Payment had not been made.
The liability of Guarantors hereunder shall in no event be affected or
impaired by any of the following, any of which may be done or omitted by
MLBFS from time to time, without notice to or the consent of any Guarantor:
(a) any renewals, amendments, modifications or supplements of or to any of
the Guaranteed Documents, or any extensions, forbearances, compromises or
releases of any of the Obligations or any of MLBFS' rights under any of the
Guaranteed Documents; (b) any acceptance by MLBFS of any collateral or
security for, or other guarantees of, any of the Obligations; (c) any
failure, neglect or omission on the part of MLBFS to realize upon or protect
any of the Obligations, or any collateral or security therefor, or to
exercise any lien upon or right of appropriation of any moneys, credits or
property of Customer or any other guarantor,
<PAGE>
possessed by or under the control of MLBFS or any of its affiliates, toward
the liquidation or reduction of the Obligations; (d) any invalidity,
irregularity or unenforceability of all or any part of the Obligations, of
any collateral security for the Obligations, or the Guaranteed Documents; (e)
any application of payments or credits by MLBFS; (f) the granting of credit
from time to time by MLBFS to Customer in excess of the amount set forth in
the Guaranteed Documents; or (g) any other act of commission or omission of
any kind or at any time upon the part of MLBFS or any of its affiliates or
any of their respective employees or agents with respect to any matter
whatsoever. MLBFS shall not be required at any time, as a condition of
Guarantors' obligations hereunder, to resort to payment from Customer or
other persons or entities whatsoever, or any of their properties or estates,
or resort to any collateral or pursue or exhaust any other rights or remedies
whatsoever.
No release or discharge in whole or in part of any one or more of the
Guarantors or any other guarantor of the Obligations shall release or
discharge any of the other Guarantors or any other guarantor, unless and
until all of the Obligations shall have been indefeasibly fully paid and
discharged. Guarantors expressly waive presentment, protest, demand, notice
of dishonor or default, notice of acceptance of this Guaranty, notice of
advancement of funds under the Guaranteed Documents and all other notices and
formalities to which Customer or Guarantors might be entitled, by statute or
otherwise, and, so long as there are any Obligations or MLBFS is committed to
extend credit to Customer, Guarantors waive any right to revoke or terminate
this Guaranty without the express written consent of MLBFS.
So long as there are any Obligations, Guarantors shall not have any claim,
remedy or right of subrogation, reimbursement, exoneration, contribution,
indemnification, or participation in any claim, right, or remedy of MLBFS
against Customer or any security which MLBFS now has or hereafter acquires,
whether or not such claim, right or remedy arises in equity, under contract,
by statute, under common law, or otherwise.
MLBFS is hereby irrevocably authorized by Guarantors at any time during the
continuance of an Event of Default under the Loan Agreement or any other of
the Guaranteed Documents or in respect of any of the Obligations, in its sole
discretion and without demand or notice of any kind, to appropriate, hold,
set off and apply toward the payment of any amount due hereunder, in such
order of application as MLBFS may elect, all cash, credits, deposits,
accounts, securities and any other property of any Guarantor which is in
transit to or in the possession, custody or control of MLBFS or Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"), or any of their
respective agents, bailees or affiliates, including, without limitation, all
securities accounts with MLPF&S and all cash, securities and other financial
assets therein or controlled thereby, and all proceeds thereof. Guarantors
hereby collaterally assign and grant to MLBFS a continuing security interest
in all such property as additional security for the Obligations. Upon the
occurrence and during the continuance of an Event of Default, MLBFS shall
have all rights in such property available to collateral assignees and
secured parties under all applicable laws, including, without limitation, the
Uniform Commercial Code.
Each Guarantor agrees to furnish to MLBFS such financial information
concerning such Guarantor as may be required by any of the Guaranteed
Documents or as MLBFS may otherwise from time to time reasonably request.
Guarantors further hereby irrevocably authorize MLBFS and each of its
affiliates, including without limitation MLPF&S, to at any time (whether or
not an Event of Default shall have occurred) obtain from and disclose to each
other any and all financial and other information about any Guarantors.
Each Guarantor severally warrants and agrees that: (a) unless clearly stated
or noted, no material assets shown on any financial statements of such
Guarantor heretofore or hereafter furnished to MLBFS are or will be held in
an irrevocable trust, pension trust, retirement trust, IRA or other trust or
form of ownership exempt from execution by creditors of such Guarantor; and,
(b) except upon the prior written consent of MLBFS, which consent will not be
unreasonably withheld, such Guarantor will not hereafter transfer any
material assets of such Guarantor to any trust or third party if the effect
thereof will be to cause such assets to be exempt from execution by creditors
of such Guarantor (excluding, however, normal and reasonable contributions to
pension plans, retirement plans, etc., and IRA rollovers).
<PAGE>
No delay on the part of MLBFS in the exercise of any right or remedy under
the Guaranteed Documents, this Guaranty or any other agreement shall operate
as a waiver thereof, and, without limiting the foregoing, no delay in the
enforcement of any security interest, and no single or partial exercise by
MLBFS of any right or remedy shall preclude any other or further exercise
thereof or the exercise of any other right or remedy. This Guaranty may be
executed in any number of counterparts, each of which counterparts, once they
are executed and delivered, shall be deemed to be an original and all of
which counterparts, taken together, shall constitute but one and the same
Guaranty. This Guaranty shall be binding upon Guarantors and their respective
heirs and personal representatives, and shall inure to the benefit of MLBFS
and its successors and assigns. All obligations of the Guarantors hereunder
are joint and several.
This Guaranty shall be governed by the laws of the State of Illinois. WITHOUT
LIMITING THE RIGHT OF MLBFS TO ENFORCE THIS GUARANTY IN ANY JURISDICTION AND
VENUE PERMITTED BY APPLICABLE LAW, GUARANTORS EACH AGREE THAT THIS GUARANTY
MAY AT THE OPTION OF MLBFS BE ENFORCED BY MLBFS IN ANY JURISDICTION AND VENUE
IN WHICH ANY OF THE GUARANTEED DOCUMENTS MAY BE ENFORCED. GUARANTORS AND
MLBFS HEREBY EACH EXPRESSLY WAIVE ANY AND ALL RIGHTS TO A TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES
AGAINST THE OTHER PARTY IN ANY WAY RELATED TO OR ARISING OUT OF THIS GUARANTY
OR THE OBLIGATIONS. Wherever possible each provision of this Guaranty shall
be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Guaranty shall be prohibited by or invalid
under such law, such provision shall be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Guaranty. No modification or
waiver of any of the provisions of this Guaranty shall be effective unless in
writing and signed by Guarantors and an officer of MLBFS.
Dated as of July 10, 1997.
GUARANTORS: ADDRESS:
4911 W. March Lane
Stockton, CA 95219
- -----------------------------------
ALLEN BONNIFIELD
4911 W. March Lane
Stockton, CA 95219
- -----------------------------------
SUSAN BONNIFIELD
WITNESS:
-------------------------
PRINTED NAME:
--------------------
<PAGE>
[LOGO] Ref. No. 9707340401
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNCONDITIONAL GUARANTY
FOR VALUE RECEIVED, and in order to induce MERRILL LYNCH BUSINESS FINANCIAL
SERVICES INC. ("MLBFS") to advance moneys or extend or continue to extend
credit to or for the benefit of MEDICAL RESOURCES MANAGEMENT, INC. D/B/A MRM,
INC., a corporation organized and existing under the laws of the State of
California (with any successor-in interest, including, without limitation,
any successor by merger or by operation of law, herein collectively referred
to as "Customer") under: (a) that certain TERM WCMA LOAN AND SECURITY
AGREEMENT NO. 9707340401 between MLBFS and Customer (the "Loan Agreement"),
(b) any "Additional Agreements", as that term is defined in the Loan
Agreement (including, without limitation, the TERM WCMA NOTE incorporated by
reference into the Loan Agreement), and (c) all present and future
amendments, restatements, supplements and other evidences of any extensions,
increases, renewals, modifications and other changes of or to the Loan
Agreement or Additional Agreements (collectively, the "Guaranteed
Documents"), the undersigned, PHYSIOLOGIC REPS D/B/A P.R.I., a corporation
duly organized and validly existing under the laws of the State of California
("Guarantor"), HEREBY UNCONDITIONALLY GUARANTEES TO MLBFS: (i) the prompt and
full payment when due, by acceleration or otherwise, of all sums now or any
time hereafter due from Customer to MLBFS under the Guaranteed Documents,
(ii) the prompt, full and faithful performance and discharge by Customer of
each and every other covenant and warranty of Customer set forth in the
Guaranteed Documents, and (iii) the prompt and full payment and performance
of all other indebtedness, liabilities and obligations of Customer to MLBFS,
howsoever created or evidenced, and whether now existing or hereafter arising
(collectively, the "Obligations"). Guarantor further agrees to pay all
reasonable costs and expenses (including, but not limited to, court costs and
reasonable attorneys' fees) paid or incurred by MLBFS in endeavoring to
collect or enforce performance of any of the Obligations, or in enforcing
this Guaranty. Guarantor acknowledges that MLBFS is relying on the execution
and delivery of this Guaranty in advancing moneys to or extending or
continuing to extend credit to or for the benefit of Customer.
This Guaranty is absolute, unconditional and continuing and shall remain in
effect until all of the Obligations shall have been fully and indefeasibly
paid, performed and discharged. Upon the occurrence and during the
continuance of any default or Event of Default under the Guaranteed
Documents, any or all of the indebtedness hereby guaranteed then existing
shall, at the option of MLBFS, become immediately due and payable from
Guarantor (it being understood, however, that upon the occurrence of any
"Bankruptcy Event", as defined in the Guaranteed Documents, all such
indebtedness shall automatically become due and payable without action on the
part of MLBFS). Notwithstanding the occurrence of any such event, this
Guaranty shall continue and remain in full force and effect. To the extent
MLBFS receives payment with respect to the Obligations, and all or any part
of such payment is subsequently invalidated, declared to be fraudulent or
preferential, set aside, required to be repaid by MLBFS or is repaid by MLBFS
pursuant to a settlement agreement, to a trustee, receiver or any other
person or entity, whether under any Bankruptcy law or otherwise (a "Returned
Payment"), this Guaranty shall continue to be effective or shall be
reinstated, as the case may be, to the extent of such payment or repayment by
MLBFS, and the indebtedness or part thereof intended to be satisfied by such
Returned Payment shall be revived and continued in full force and effect as
if said Returned Payment had not been made.
The liability of Guarantor hereunder shall in no event be affected or
impaired by any of the following, any of which may be done or omitted by
MLBFS from time to time, without notice to or the consent of Guarantor: (a)
any renewals, amendments, modifications or supplements of or to any of the
Guaranteed Documents, or any extensions, forbearances, compromises or
releases of any of the Obligations or any of MLBFS' rights under any of the
Guaranteed Documents; (b) any acceptance by MLBFS of any collateral or
security for, or other guarantees of, any of the Obligations; (c) any
failure, neglect or omission on the part of MLBFS to realize upon or protect
any of the Obligations, or any collateral or security therefor, or to
exercise any lien upon or
-1-
<PAGE>
right of appropriation of any moneys, credits or property of Customer or any
other guarantor, possessed by or under the control of MLBFS or any of its
affiliates, toward the liquidation or reduction of the Obligations; (d) any
invalidity, irregularity or unenforceability of all or any part of the
Obligations, of any collateral security for the Obligations, or the
Guaranteed Documents; (e) any application of payments or credits by MLBFS;
(f) the granting of credit from time to time by MLBFS to Customer in excess
of the amount set forth in the Guaranteed Documents; or (g) any other act of
commission or omission of any kind or at any time upon the part of MLBFS or
any of its affiliates or any of their respective employees or agents with
respect to any matter whatsoever. MLBFS shall not be required at any time, as
a condition of Guarantor's obligations hereunder, to resort to payment from
Customer or other persons or entities whatsoever, or any of their properties
or estates, or resort to any collateral or pursue or exhaust any other rights
or remedies whatsoever.
No release or discharge in whole or in part of any other guarantor of the
Obligations shall release or discharge Guarantor unless and until all of the
Obligations shall have been indefeasibly fully paid and discharged. Guarantor
expressly waives presentment, protest, demand, notice of dishonor or default,
notice of acceptance of this Guaranty, notice of advancement of funds under
the Guaranteed Documents and all other notices and formalities to which
Customer or Guarantor might be entitled, by statute or otherwise, and, so
long as there are any Obligations or MLBFS is committed to extend credit to
Customer, waives any right to revoke or terminate this Guaranty without the
express written consent of MLBFS.
So long as there are any Obligations, Guarantor shall not have any claim,
remedy or right of subrogation, reimbursement, exoneration, contribution,
indemnification, or participation in any claim, right, or remedy of MLBFS
against Customer or any security which MLBFS now has or hereafter acquires,
whether or not such claim, right or remedy arises in equity, under contract,
by statute, under common law, or otherwise.
MLBFS is hereby irrevocably authorized by Guarantor at any time during the
continuance of an Event of Default under the Loan Agreement or any other of
the Guaranteed Documents or in respect of any of the Obligations, in its sole
discretion and without demand or notice of any kind, to appropriate, hold,
set off and apply toward the payment of any amount due hereunder, in such
order of application as MLBFS may elect, all cash, credits, deposits,
accounts, securities and any other property of Guarantor which is in transit
to or in the possession, custody or control of MLBFS or Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("MLPF&S"), or any of their respective
agents, bailees or affiliates, including, without limitation, all securities
accounts with MLPF&S and all cash, securities and other financial assets
therein or controlled thereby, and all proceeds thereof. Guarantor hereby
collaterally assigns and grants to MLBFS a continuing security interest in
all such property as additional security for the Obligations. Upon the
occurrence and during the continuance of an Event of Default, MLBFS shall
have all rights in such property available to collateral assignees and
secured parties under all applicable laws, including, without limitation, the
UCC.
Guarantor agrees to furnish to MLBFS such financial information concerning
Guarantor as may be required by any of the Guaranteed Documents or as MLBFS
may otherwise from time to time reasonably request. Guarantor further hereby
irrevocably authorizes MLBFS and each of its affiliates, including without
limitation MLPF&S, to at any time (whether or not an Event of Default shall
have occurred) obtain from and disclose to each other any and all financial
and other information about Guarantor.
No delay on the part of MLBFS in the exercise of any right or remedy under
the Guaranteed Documents, this Guaranty or any other agreement shall operate
as a waiver thereof, and, without limiting the foregoing, no delay in the
enforcement of any security interest, and no single or partial exercise by
MLBFS of any right or remedy shall preclude any other or further exercise
thereof or the exercise of any other right or remedy. This Guaranty may be
executed in any number of counterparts, each of which counterparts, once they
are executed and delivered, shall be deemed to be an original and all of
which counterparts, taken together, shall constitute but one and the same
Guaranty. This Guaranty shall be binding upon Guarantor and its successors
and assigns, and shall inure to the benefit of MLBFS and its successors and
assigns. If there is more than one guarantor of the Obligations, all of the
obligations and agreements of Guarantor are joint and several with such other
guarantors.
-2-
<PAGE>
This Guaranty shall be governed by the laws of the State of Illinois. WITHOUT
LIMITING THE RIGHT OF MLBFS TO ENFORCE THIS GUARANTY IN ANY JURISDICTION AND
VENUE PERMITTED BY APPLICABLE LAW, GUARANTOR AGREES THAT THIS GUARANTY MAY AT
THE OPTION OF MLBFS BE ENFORCED BY MLBFS IN ANY JURISDICTION AND VENUE IN
WHICH ANY OF THE GUARANTEED DOCUMENTS MAY BE ENFORCED. GUARANTOR AND MLBFS
HEREBY EACH EXPRESSLY WAIVE ANY AND ALL RIGHTS TO A TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES AGAINST
THE OTHER PARTY IN ANY WAY RELATED TO OR ARISING OUT OF THIS GUARANTY OR THE
OBLIGATIONS. Wherever possible each provision of this Guaranty shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Guaranty shall be prohibited by or invalid under
such law, such provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Guaranty. No modification or
waiver of any of the provisions of this Guaranty shall be effective unless in
writing and signed by both Guarantor and an officer of MLBFS.
Each signatory on behalf of Guarantor warrants that he has authority to sign
on behalf of Guarantor, and by so signing, to bind Guarantor hereunder.
Dated as of July 10, 1997.
PHYSIOLOGIC REPS D/B/A P.R.I.
BY:
------------------------------------------------------
Signature (1) Signature (2)
------------------------------------------------------
Printed Name Printed Name
------------------------------------------------------
Title Title
ADDRESS OF GUARANTOR:
932 Grand Central
Glendale, CA 91201
-3-
<PAGE>
[LOGO]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CERTIFICATE OF SECRETARY
(GUARANTY)
THE UNDERSIGNED HEREBY CERTIFIES that the undersigned is the duly appointed
and acting Secretary (or Assistant Secretary) of PHYSIOLOGIC REPS D/B/A
P.R.I., a corporation duly organized, validly existing and in good standing
under the laws of the State of California; that the following is a true,
accurate and compared transcript of resolutions duly, validly and lawfully
adopted on the _______ day of ____________________, 1997 by the Board of
Directors of said Corporation acting in accordance with the laws of the state
of incorporation and the charter and by-laws of said Corporation:
"RESOLVED, that it is advisable and in the best interests and to the benefit
of this Corporation to guaranty the obligations of MEDICAL RESOURCES
MANAGEMENT, INC. D/B/A MRM, INC. ("Customer") to MERRILL LYNCH BUSINESS
FINANCIAL SERVICES INC. ("MLBFS"); and
"FURTHER RESOLVED, that the President, any Vice President, Treasurer,
Secretary or other officer of this Corporation, or any one or more of them,
be and each of them hereby is authorized and empowered for and on behalf of
this Corporation to: (a) execute and deliver to MLBFS: (i) an Unconditional
Guaranty of the obligations of Customer, (ii) any other agreements,
instruments and documents required by MLBFS, including, without limitation,
any agreements, instruments and documents evidencing liens or security
interests on any of the property of this Corporation as collateral for said
Unconditional Guaranty and/or the obligations of Customer to MLBFS, and (iii)
any present or future amendments to any of the foregoing; all in such form as
such officer shall approve, as evidenced by his signature thereon; and (b) to
do and perform all such acts and things deemed by any such officer to be
necessary or advisable to carry out and perform the undertakings and
agreements of this Corporation set forth therein; and all prior acts of said
officers in these premises are hereby ratified and confirmed; and
"FURTHER RESOLVED, that MLBFS is authorized to rely upon the foregoing
resolutions until it receives written notice of any change or revocation from
an authorized officer of this Corporation, which change or revocation shall
not in any event affect the obligations of this Corporation with respect to
any transaction conditionally agreed or committed to by MLBFS or having its
inception prior to the receipt of such notice by MLBFS."
THE UNDERSIGNED FURTHER CERTIFIES that: (a) the foregoing resolutions have
not been rescinded, modified or repealed in any manner, are not in conflict
with any agreement of said Corporation and are in full force and effect as of
the date of this Certificate, and (b) the following individuals are now the
duly elected and acting officers of said Corporation and the signatures set
forth below are the true signatures of said officers:
President:
-----------------------------------------------
Vice President:
------------------------------------------
Treasurer:
-----------------------------------------------
Secretary:
-----------------------------------------------
-----------------: --------------------------------------
Additional Title
IN WITNESS WHEREOF, the undersigned has executed this Certificate and has
affixed the seal of said Corporation hereto, pursuant to due authorization,
all as of this ________ day of _________________, 1997.
(Corporate Seal) -----------------------------------
Secretary
Printed Name:
-----------------------------------
<PAGE>
[LOGO] Ref. No. 9707340401
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNCONDITIONAL GUARANTY
FOR VALUE RECEIVED, and in order to induce MERRILL LYNCH BUSINESS FINANCIAL
SERVICES INC. ("MLBFS") to advance moneys or extend or continue to extend
credit to or for the benefit of MEDICAL RESOURCES MANAGEMENT, INC. D/B/A MRM,
INC., a corporation organized and existing under the laws of the State of
California (with any successor-in interest, including, without limitation,
any successor by merger or by operation of law, herein collectively referred
to as "Customer") under: (a) that certain TERM WCMA LOAN AND SECURITY
AGREEMENT NO. 9707340401 between MLBFS and Customer (the "Loan Agreement"),
(b) any "Additional Agreements", as that term is defined in the Loan
Agreement (including, without limitation, the TERM WCMA NOTE incorporated by
reference into the Loan Agreement), and (c) all present and future
amendments, restatements, supplements and other evidences of any extensions,
increases, renewals, modifications and other changes of or to the Loan
Agreement or Additional Agreements (collectively, the "Guaranteed
Documents"), the undersigned, PULSE MEDICAL PRODUCTS, INC., a corporation
duly organized and validly existing under the laws of the State of Idaho
("Guarantor"), hereby unconditionally guarantees to MLBFS: (i) the prompt and
full payment when due, by acceleration or otherwise, of all sums now or any
time hereafter due from Customer to MLBFS under the Guaranteed Documents,
(ii) the prompt, full and faithful performance and discharge by Customer of
each and every other covenant and warranty of Customer set forth in the
Guaranteed Documents, and (iii) the prompt and full payment and performance
of all other indebtedness, liabilities and obligations of Customer to MLBFS,
howsoever created or evidenced, and whether now existing or hereafter arising
(collectively, the "Obligations"). Guarantor further agrees to pay all
reasonable costs and expenses (including, but not limited to, court costs and
reasonable attorneys' fees) paid or incurred by MLBFS in endeavoring to
collect or enforce performance of any of the Obligations, or in enforcing
this Guaranty. Guarantor acknowledges that MLBFS is relying on the execution
and delivery of this Guaranty in advancing moneys to or extending or
continuing to extend credit to or for the benefit of Customer.
This Guaranty is absolute, unconditional and continuing and shall remain in
effect until all of the Obligations shall have been fully and indefeasibly
paid, performed and discharged. Upon the occurrence and during the
continuance of any default or Event of Default under the Guaranteed
Documents, any or all of the indebtedness hereby guaranteed then existing
shall, at the option of MLBFS, become immediately due and payable from
Guarantor (it being understood, however, that upon the occurrence of any
"Bankruptcy Event", as defined in the Guaranteed Documents, all such
indebtedness shall automatically become due and payable without action on the
part of MLBFS). Notwithstanding the occurrence of any such event, this
Guaranty shall continue and remain in full force and effect. To the extent
MLBFS receives payment with respect to the Obligations, and all or any part
of such payment is subsequently invalidated, declared to be fraudulent or
preferential, set aside, required to be repaid by MLBFS or is repaid by MLBFS
pursuant to a settlement agreement, to a trustee, receiver or any other
person or entity, whether under any Bankruptcy law or otherwise (a "Returned
Payment"), this Guaranty shall continue to be effective or shall be
reinstated, as the case may be, to the extent of such payment or repayment by
MLBFS, and the indebtedness or part thereof intended to be satisfied by such
Returned Payment shall be revived and continued in full force and effect as
if said Returned Payment had not been made.
The liability of Guarantor hereunder shall in no event be affected or
impaired by any of the following, any of which may be done or omitted by
MLBFS from time to time, without notice to or the consent of Guarantor: (a)
any renewals, amendments, modifications or supplements of or to any of the
Guaranteed Documents, or any extensions, forbearances, compromises or
releases of any of the Obligations or any of MLBFS' rights under any of the
Guaranteed Documents; (b) any acceptance by MLBFS of any collateral or
security for, or other guarantees of, any of the Obligations; (c) any
failure, neglect or omission on the part of MLBFS to realize upon or protect
any of the Obligations, or any collateral or security therefor, or to
exercise any lien upon or right of appropriation of any moneys, credits or
property of Customer or any other guarantor, possessed by or
<PAGE>
under the control of MLBFS or any of its affiliates, toward the liquidation
or reduction of the Obligations; (d) any invalidity, irregularity or
unenforceability of all or any part of the Obligations, of any collateral
security for the Obligations, or the Guaranteed Documents; (e) any
application of payments or credits by MLBFS; (f) the granting of credit from
time to time by MLBFS to Customer in excess of the amount set forth in the
Guaranteed Documents; or (g) any other act of commission or omission of any
kind or at any time upon the part of MLBFS or any of its affiliates or any of
their respective employees or agents with respect to any matter whatsoever.
MLBFS shall not be required at any time, as a condition of Guarantor's
obligations hereunder, to resort to payment from Customer or other persons or
entities whatsoever, or any of their properties or estates, or resort to any
collateral or pursue or exhaust any other rights or remedies whatsoever.
No release or discharge in whole or in part of any other guarantor of the
Obligations shall release or discharge Guarantor unless and until all of the
Obligations shall have been indefeasibly fully paid and discharged. Guarantor
expressly waives presentment, protest, demand, notice of dishonor or default,
notice of acceptance of this Guaranty, notice of advancement of funds under
the Guaranteed Documents and all other notices and formalities to which
Customer or Guarantor might be entitled, by statute or otherwise, and, so
long as there are any Obligations or MLBFS is committed to extend credit to
Customer, waives any right to revoke or terminate this Guaranty without the
express written consent of MLBFS.
So long as there are any Obligations, Guarantor shall not have any claim,
remedy or right of subrogation, reimbursement, exoneration, contribution,
indemnification, or participation in any claim, right, or remedy of MLBFS
against Customer or any security which MLBFS now has or hereafter acquires,
whether or not such claim, right or remedy arises in equity, under contract,
by statute, under common law, or otherwise.
MLBFS is hereby irrevocably authorized by Guarantor at any time during the
continuance of an Event of Default under the Loan Agreement or any other of
the Guaranteed Documents or in respect of any of the Obligations, in its sole
discretion and without demand or notice of any kind, to appropriate, hold,
set off and apply toward the payment of any amount due hereunder, in such
order of application as MLBFS may elect, all cash, credits, deposits,
accounts, securities and any other property of Guarantor which is in transit
to or in the possession, custody or control of MLBFS or Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("MLPF&S"), or any of their respective
agents, bailees or affiliates, including, without limitation, all securities
accounts with MLPF&S and all cash, securities and other financial assets
therein or controlled thereby, and all proceeds thereof. Guarantor hereby
collaterally assigns and grants to MLBFS a continuing security interest in
all such property as additional security for the Obligations. Upon the
occurrence and during the continuance of an Event of Default, MLBFS shall
have all rights in such property available to collateral assignees and
secured parties under all applicable laws, including, without limitation, the
UCC.
Guarantor agrees to furnish to MLBFS such financial information concerning
Guarantor as may be required by any of the Guaranteed Documents or as MLBFS
may otherwise from time to time reasonably request. Guarantor further hereby
irrevocably authorizes MLBFS and each of its affiliates, including without
limitation MLPF&S, to at any time (whether or not an Event of Default shall
have occurred) obtain from and disclose to each other any and all financial
and other information about Guarantor.
No delay on the part of MLBFS in the exercise of any right or remedy under
the Guaranteed Documents, this Guaranty or any other agreement shall operate
as a waiver thereof, and, without limiting the foregoing, no delay in the
enforcement of any security interest, and no single or partial exercise by
MLBFS of any right or remedy shall preclude any other or further exercise
thereof or the exercise of any other right or remedy. This Guaranty may be
executed in any number of counterparts, each of which counterparts, once they
are executed and delivered, shall be deemed to be an original and all of
which counterparts, taken together, shall constitute but one and the same
Guaranty. This Guaranty shall be binding upon Guarantor and its successors
and assigns, and shall inure to the benefit of MLBFS and its successors and
assigns. If there are more than one guarantor of the Obligations, all of the
obligations and agreements of Guarantor are joint and several with such other
guarantors.
This Guaranty shall be governed by the laws of the State of Illinois. WITHOUT
LIMITING THE RIGHT OF MLBFS TO ENFORCE THIS GUARANTY IN ANY JURISDICTION AND
VENUE PERMITTED BY
-2-
<PAGE>
APPLICABLE LAW, GUARANTOR AGREES THAT THIS GUARANTY MAY AT THE OPTION OF
MLBFS BE ENFORCED BY MLBFS IN ANY JURISDICTION AND VENUE IN WHICH ANY OF THE
GUARANTEED DOCUMENTS MAY BE ENFORCED. GUARANTOR AND MLBFS HEREBY EACH
EXPRESSLY WAIVE ANY AND ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES AGAINST THE OTHER
PARTY IN ANY WAY RELATED TO OR ARISING OUT OF THIS GUARANTY OR THE
OBLIGATIONS. Wherever possible each provision of this Guaranty shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Guaranty shall be prohibited by or invalid under
such law, such provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Guaranty. No modification or
waiver of any of the provisions of this Guaranty shall be effective unless in
writing and signed by both Guarantor and an officer of MLBFS.
Each signatory on behalf of Guarantor warrants that he has authority to sign
on behalf of Guarantor, and by so signing, to bind Guarantor hereunder.
Dated as of July 10, 1997.
PULSE MEDICAL PRODUCTS, INC.
BY:
--------------------------------------
Signature (1) Signature (2)
- -------------------------------------------
Printed Name Printed Name
- -------------------------------------------
Title Title
ADDRESS OF GUARANTOR:
5449 Kendall Street
Boise, ID 83706
-3-
<PAGE>
[LOGO]
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CERTIFICATE OF SECRETARY
(GUARANTY)
THE UNDERSIGNED HEREBY CERTIFIES that the undersigned is the duly appointed
and acting Secretary (or Assistant Secretary) of PULSE MEDICAL PRODUCTS,
INC., a corporation duly organized, validly existing and in good standing
under the laws of the State of Idaho; that the following is a true, accurate
and compared transcript of resolutions duly, validly and lawfully adopted on
the _______ day of ____________________, 1997 by the Board of Directors of
said Corporation acting in accordance with the laws of the state of
incorporation and the charter and by-laws of said Corporation:
"RESOLVED, that it is advisable and in the best interests and to the benefit
of this Corporation to guaranty the obligations of MEDICAL RESOURCES
MANAGEMENT, INC. D/B/A MRM, INC. ("Customer") to MERRILL LYNCH BUSINESS
FINANCIAL SERVICES INC. ("MLBFS"); and
"FURTHER RESOLVED, that the President, any Vice President, Treasurer,
Secretary or other officer of this Corporation, or any one or more of them,
be and each of them hereby is authorized and empowered for and on behalf of
this Corporation to: (a) execute and deliver to MLBFS: (i) an Unconditional
Guaranty of the obligations of Customer, (ii) any other agreements,
instruments and documents required by MLBFS, including, without limitation,
any agreements, instruments and documents evidencing liens or security
interests on any of the property of this Corporation as collateral for said
Unconditional Guaranty and/or the obligations of Customer to MLBFS, and (iii)
any present or future amendments to any of the foregoing; all in such form as
such officer shall approve, as evidenced by his signature thereon; and (b) to
do and perform all such acts and things deemed by any such officer to be
necessary or advisable to carry out and perform the undertakings and
agreements of this Corporation set forth therein; and all prior acts of said
officers in these premises are hereby ratified and confirmed; and
"FURTHER RESOLVED, that MLBFS is authorized to rely upon the foregoing
resolutions until it receives written notice of any change or revocation from
an authorized officer of this Corporation, which change or revocation shall
not in any event affect the obligations of this Corporation with respect to
any transaction conditionally agreed or committed to by MLBFS or having its
inception prior to the receipt of such notice by MLBFS."
THE UNDERSIGNED FURTHER CERTIFIES that: (a) the foregoing resolutions have
not been rescinded, modified or repealed in any manner, are not in conflict
with any agreement of said Corporation and are in full force and effect as of
the date of this Certificate, and (b) the following individuals are now the
duly elected and acting officers of said Corporation and the signatures set
forth below are the true signatures of said officers:
President:
---------------------------------------------------
Vice President:
----------------------------------------------
Treasurer:
---------------------------------------------------
Secretary:
---------------------------------------------------
-----------------: ------------------------------------------
Additional Title
IN WITNESS WHEREOF, the undersigned has executed this Certificate and has
affixed the seal of said Corporation hereto, pursuant to due authorization,
all as of this ________ day of _________________, 1997.
(Corporate Seal) -------------------------------
Secretary
Printed Name:
-------------------------------
<PAGE>
[LOGO]
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LANDLORD'S SUBORDINATION AGREEMENT
The undersigned LANDLORD is the record owner and lessor to MEDICAL RESOURCES
MANAGEMENT, INC. D/B/A MRM, INC. ("Tenant") of the real property commonly
known as 932 Grand Central, Glendale, CA 91201 (the "Premises");
Landlord has been advised that MERRILL LYNCH BUSINESS FINANCIAL SERVICES INC.
("MLBFS") has or is about to lend moneys to, extend or continue to extend
credit to or for the benefit of, or enter into another financial
accommodation with, Tenant, or for the benefit of a third party based upon
the credit and/or collateral of Tenant, and in connection therewith that
Tenant has granted or is about to grant to MLBFS a security interest in,
among other collateral, the following property of Tenant; to wit: all
equipment, inventory, removable trade fixtures and other tangible and
intangible personal property now or hereafter owned by Tenant ("MLBFS'
Collateral") Among other conditions thereof, MLBFS has required that Landlord
execute and deliver this Agreement.
Accordingly, and for valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, Landlord hereby agrees as follows:
1. Landlord hereby subordinates for the benefit of MLBFS, and with respect to
all present and future obligations of or secured by Tenant to MLBFS, any
right or interest in MLBFS' Collateral which, but for this Agreement, would
or might be prior to the rights and/or security interests of MLBFS, as
aforesaid; and Landlord agrees so long as Tenant shall be obligated to MLBFS,
it will not, without the prior consent of MLBFS, exercise any right under
local law to levy or distrain upon any of MLBFS' Collateral.
2. Landlord further agrees that in the event that MLBFS shall at any time
seek to take possession of or remove all or any part of MLBFS' Collateral
from the Premises, Landlord will not hinder the same or interfere or object
thereto, and Landlord hereby consents to MLBFS' entry upon the Premises for
such purposes; provided, however, that: (i) any such removal shall be made
during reasonable business hours; (ii) MLBFS shall not, without the prior
written consent of Landlord, conduct any public or auction sale on the
Premises; and (iii) MLBFS shall promptly at its expense repair any damage to
the Premises directly caused by any such removal by MLBFS or its agents of
MLBFS' Collateral from the Premises.
This Agreement shall be binding upon and shall inure to the benefit of
Landlord and it successors, assigns, heirs and/or personal representatives,
as applicable, and MLBFS and its successors and assigns.
Dated as of July 10, 1997.
Landlord:
---------------------------------------
By:
--------------------------------------------
(Signature 1 (Signature 2)
- -------------------------------------------------
(Printed Name) (Printed Name)
- -------------------------------------------------
(Title) (Title)
<PAGE>
Private Client Group
MERRILL LYNCH BUSINESS
FINANCIAL SERVICES INC.
33 West Monroe Street
22nd Floor
Chicago, Illinois 60603
312/845-1020
[LOGO] FAX 312/845-9093
July 10, 1997
Mr. Allen Bonnifield, Jr.
Medical Resources Management, Inc. d/b/a MRM, Inc.
932 Grand Central
Glendale, CA 91201
RE: TERM WCMA LOAN APPROVAL
Dear Mr. Bonnifield, Jr.,
As I believe you know, we have approved the request of Medical Resources
Management, Inc. d/b/a MRM, Inc. ("Customer") for a Term Loan upon the terms
and conditions set forth in the enclosed documents ("Loan Documents").
For your information, the following are some of the principal terms of the
approval:
LOAN PURPOSE: The purpose of the Loan is to refinance Customer's Term Loan
And Security Agreement Nos. 9503551501 and 9606550201 and WCMA Note, Loan And
Security Agreement No. 208-07K26, to finance new equipment as evidenced by
invoices and to provide Customer with additional working capital.
MAXIMUM LOAN AMOUNT: An aggregate amount equal to the lesser of (i) 100% of
the amount necessary to satisfy the Loan Purpose, or (ii) $2,000,000.00.
MAXIMUM NUMBER OF ADVANCES ON ACCOUNT OF THE LOAN: 3.
MINIMUM AMOUNT OF EACH ADVANCE: $100,000.00.
ADVANCE PERIOD: Until the first to occur of the date of funding the final
permitted advance, or September 30, 1997 (the "Conversion Date").
TERM: 5-years from the first day of the calendar month immediately following
the Conversion Date.
INTEREST RATE: Variable at a per annum rate equal to the sum of 2.70% and the
"30-Day Commercial Paper Rate" (as published in THE WALL STREET JOURNAL),
based upon actual days elapsed over a 360-day year.
COMMITMENT FEE: $10,000.00.
Please refer to the Loan Documents for a complete description and statement
of the terms of the Term WCMA Loan.
In addition to conditions set forth in the Loan Documents, our approval is
subject to:
(a) The valid subscription and continued maintenance by Customer of a Working
Capital Management Account with Merrill Lynch, Pierce, Fenner and Smith
Incorporated for use in connection with the WCMA Line of Credit, which
subscription and maintenance shall be evidenced on Merrill Lynch's computer
system.
<PAGE>
(b) Our receipt of all of the Loan Documents together with any additional
documents contemplated thereby or otherwise reasonably required by us, all of
which shall be duly executed and, if applicable, recorded, and all of which
shall be in form and substance satisfactory to us.
(c) Acceptance by us in writing of the executed Loan Documents at our office
in Chicago after review and a final determination by us of the consistency of
the Loan Documents with our original internal credit approval. (Without
limiting the foregoing, it should be understood that prior to such acceptance
we are not bound by any clerical or other errors in or omissions from the
Loan Documents.)
(d) Our continuing satisfaction with the financial condition of Customer and
each guarantor of Customer's obligations to us.
(e) There not occurring any event which under the terms of the Loan Documents
would constitute an Event of Default.
(f) Evidence satisfactory to us of the perfection and priority of any liens
required by us in the Loan Documents.
(g) Our receipt of a Certificate of Insurance satisfactory to us evidencing a
policy or policies of physical damage insurance on the tangible collateral
described in the Loan Documents, and providing that losses shall be payable
to us as our interests may appear pursuant to a Lender's Loss Payable
Endorsement, and that we shall receive not less than 10 days prior notice of
any cancellation or material amendment.
IN ADDITION TO THE FOREGOING, OUR APPROVAL IS SUBJECT TO OUR RECEIPT (WHERE
APPLICABLE) AND SATISFACTION WITH THE FOLLOWING:
1) A COPY OF THE WRITTEN AGREEMENT OF PAYMENT TERMS BETWEEN THE IRS AND PULSE
MEDICAL PRODUCTS, INC.; AND
2) EVIDENCE OF CUSTOMER'S CORPORATE STATUS IN THE STATE OF CALIFORNIA.
Our approval will remain open subject to said conditions until August 11,
1997, after which time it shall be void.
NOTE THAT AS SET FORTH ABOVE THE LOAN DOCUMENTS REQUIRE A LOAN COMMITMENT FEE OF
$10,000.00. IF THIS FEE HAS NOT YET BEEN PAID, PLEASE INCLUDE YOUR CHECK FOR
$10,000.00 AT THE TIME YOU RETURN THE EXECUTED LOAN DOCUMENTS. NOTE FURTHER THAT
UNDER THE TERMS OF THE LOAN DOCUMENTS CUSTOMER IS RESPONSIBLE FOR UCC FILING AND
SEARCH FEES AND EXPENSES.
To assist you in completing the Loan Documents, we have affixed a "Sign Here"
RED ARROW to each page requiring a signature, and have penciled an "x" in
front of each signature line.
In order to minimize signature requirements, we normally seek only one copy
of each of the Loan Documents. After the Loan has been funded, we will return
a fully executed duplicate copy for your records.
If you have any questions about our approval or the structure or terms of the
facility, please call Lisa Kroll at (312) 269-4448. If you have any questions
about the Loan Documents, please call me at (312) 269-4432.
<PAGE>
Very truly yours,
MERRILL LYNCH BUSINESS
FINANCIAL SERVICES INC.
By:
----------------------------------------
Wendy L. Merkle
Division Documentation Administrator
cc: Nick Zappia
Lisa Kroll
