<PAGE>
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
--------------------------------
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: June 13, 1997
(Date of earliest event reported)
--------------------------------
CARDIAC CONTROL SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
--------------------------------
Delaware 0-14653 74-2119162
(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification No.)
incorporation or
organization)
3 Commerce Boulevard, Palm Coast, Florida 32164
(Address of principal executive offices, zip code)
(904) 445-5450
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
<PAGE>
Item 5. Other Events.
On June 13, 1997 (the "Closing"), the Company closed on a maximum $3.5
million credit facility with Coast Business Credit, a division of Southern
Pacific Thrift & Loan Association ("Coast"), pursuant to that certain Loan and
Security Agreement between the Company and Coast and the Schedule attached
thereto(the "Loan and Security Agreement"). Under the Loan and Security
Agreement, the Company may borrow for the purpose of, among others, working
capital up to the lesser of $3.5 million or the sum of (i) receivable loans of
up to 80% of certain eligible accounts receivable ("Receivable Loans"), (ii)
inventory loans not to exceed the lesser of $500,000 or 40% of eligible raw
material and 50% of eligible finished goods of eligible inventory ("Inventory
Loans"), (iii) a maximum aggregate of $500,000 for the purchase of new or used
equipment ("CAPEX Subline"), and (iv) a $300,000 term loan ("Term Loan")
(collectively, the "Loan"). The interest rate equals the Prime Rate plus 2% per
annum, other than the Term Loan and CAPEX Subline which will accrue interest at
the rate of 2.25% over the prime rate (as defined therein), per annum. Minimum
monthly interest will be calculated on a minimum loan balance of $1,000,000.
The Company is obligated to pay a $35,000 commitment fee on each anniversary of
the date of the initial closing of the Loan, a quarterly facility fee of $3,500,
and a renewal fee equal to $17,500 upon the renewal of the Loan and Security
Agreement. The maturity date for payment of any outstanding principal balance
is June 30, 2000, subject to automatic renewal for successive one year terms.
The Loan is subject to an early termination fee of $105,000 if the Loan is
terminated on or prior to the first anniversary of the Loan closing date,
$70,000 if terminated prior to the second anniversary, and $35,000 if terminated
after the second anniversary.
The Loan is secured by (i) a first priority lien in (A) all of the personal
property of the Company located at its principal executive offices at 3 Commerce
Boulevard, Palm Coast, Florida (the "Mortgaged Property"), including, among
other things, all fixtures, building materials, inventory, goods, equipment and
machinery, (B) the Company's operating bank account and (ii) all of the
Company's intellectual property, including copyrights, patents, trademarks,
goodwill, etc., and by (iii) a mortgage on the Mortgaged Property, of which
Coast receives a first priority lien up to $500,000 and a second priority lien
on the remainder of the Company's indebtedness to it.
In order to obtain its first priority liens on the Company's property as
described above, Coast entered into an Intercreditor and Subordination Agreement
(the "Subordination Agreement") with Sirrom Capital Corporation, an existing
secured creditor of the
<PAGE>
the Company ("Sirrom") which holds a $1,500,000 promissory note of the Company.
Sirrom agreed to subordinate its security interests, and take a second priority
lien, with respect to (i) the Mortgaged Property only up to a maximum of
$500,000 of the Company's indebtedness to Coast, and (ii) all other assets of
the Company in which it has a security interest up to the full amount of the
indebtedness of the Company to Coast. As consideration for such subordination,
Sirrom received a warrant (the "Sirrom Warrant")to purchase 50,000 shares of the
Company's common stock (the "Sirrom Warrant Shares") at an exercise price of $5
per share at any time during the period beginning June 6, 1997 and ending on
June 6, 2002.
In connection with the Loan, Coast received a warrant (the "Coast
Warrant")to purchase 37,500 shares of the Company's common stock (the "Coast
Warrant Shares") exercisable at $4.00 per share until June 30, 2002. Neither
the Sirrom Warrant Shares nor the Coast Warrant Shares are registered under the
Securities Act of 1933, as amended, or the laws of any state, although the terms
of each creditor's Warrant does provide such creditor with certain piggyback
registration rights.
<TABLE>
<CAPTION>
Item 7. Exhibits.
<S> <C>
4.1 Warrant to Purchase 37,500 Shares of Common Stock of the Company
granted to Coast Business Credit, a division of Southern Pacific
Thrift & Loan Association ("Coast").
4.2 Warrant to Purchase 50,000 Shares of Common Stock of the Company
granted to Sirrom Capital Corporation ("Sirrom").
10.1 Loan and Security Agreement between the Company and Coast, and
attached Schedule thereto.
10.2 $300,000 Secured Promissory Note of the Company to Coast.
10.3 $500,000 Capex Promissory Note of the Company to Coast.
10.4 Intercreditor and Subordination Agreement between Coast and Sirrom.
10.5 Mortgage and Security Agreement between the Company and Coast.
</TABLE>
<PAGE>
10.6 Security Agreement (Intellectual Property) between
the Company and Coast.
10.7 Grant of Security Interest - Patents in favor of Coast.
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CARDIAC CONTROL SYSTEMS, INC.
(Registrant)
Date: June 23, 1997 By: /s/ Alan J. Rabin
-------------------------------------
Alan J. Rabin
President and Chief Executive Officer
<PAGE>
EXHIBIT INDEX
<TABLE>
<C> <S>
Exhibit 4.1 Warrant to Purchase 37,500 Shares of Common Stock of Cardiac
Control Systems, Inc. (the "Company") granted to Coast Business
Credit, a division of Southern Pacific Thrift & Loan Association
("Coast").
Exhibit 4.2 Warrant to Purchase 50,000 Shares of Common Stock of the Company
granted to Sirrom Capital Corporation ("Sirrom").
Exhibit 10.1 Loan and Security Agreement dated June 13, 1997 between the
Company and Coast, and attached Schedule thereto.
Exhibit 10.2 $300,000 Secured Promissory Note of the Company to Coast.
Exhibit 10.3 $500,000 Capex Promissory Note of the Company to Coast.
Exhibit 10.4 Intercreditor and Subordination Agreement between Coast and
Sirrom.
Exhibit 10.5 Mortgage and Security Agreement between the Company and Coast.
Exhibit 10.6 Security Agreement (Intellectual Property) between the Company and
Coast.
Exhibit 10.7 Grant of Security Interest - Patents in favor of Coast.
</TABLE>
<PAGE>
EXHIBIT 4.1
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE LAWS OF ANY STATE. THE TRANSFER OF THIS WARRANT IS SUBJECT
TO THE RESTRICTIONS SET FORTH IN SECTION 3 HEREOF, AND NO TRANSFER OF THIS
WARRANT SHALL BE VALID OR EFFECTIVE UNLESS AND UNTIL THE TERMS AND
CONDITIONS OF SECTION 3 HEREOF HAVE BEEN COMPLIED WITH.
Warrant No. 1
WARRANT
To Purchase Common Stock of
CARDIAC CONTROL SYSTEMS, INC.
Expiring June 30, 2002
This is to certify that, for value received, COAST BUSINESS CREDIT, a
division of Southern Pacific Thrift & Association ("Coast"), or registered
assigns, is entitled to purchase from Cardiac Control Systems, Inc., a Delaware
corporation (the "Company"), at any time or from time to time prior to 5 P.M.
local time at the place where the Warrant Office hereinafter referred to is
located on or before June 30, 2002, 37,500 duly authorized, validly issued,
fully paid and nonassessable shares of Common Stock of the Company (the "Common
Stock"), at the Current Warrant Price (as hereinafter defined) in lawful money
of the United States of America. The purchase price hereunder at any time of a
single share of Common Stock is referred to herein as the "Current Warrant
Price". Initially, and until adjustment in the manner hereinafter provided, the
Current Warrant Price shall be $4.00 per share. The number of shares of Common
Stock purchasable hereunder and the Current Warrant Price are subject to
adjustment from time to time in the manner provided in Section 4 hereof.
This Warrant is issued in connection with a Loan and Security Agreement,
dated as of June 13, 1997, by and between the Company and Coast (the "Credit
Agreement"). Certain terms used in this Warrant are defined in Section 5
hereof. Capitalized terms used herein and not otherwise defined herein shall
have the meaning assigned thereto in the Credit Agreement.
SECTION 1. EXERCISE OF WARRANTS.
(S)1.1. Method of Exercise. Subject to the provisions of Section 3 of
------------------
this Warrant, to exercise this Warrant in whole or in part, the holder hereof
shall deliver to the Company at the Warrant Office designated pursuant to
(S)2.1: (i) a written notice, in substantially the form of the Subscription
Notice appearing at the end of this Warrant, of such holder's election
<PAGE>
to exercise this Warrant, which notice shall specify the number of shares of
Common Stock to be purchased and the nature of payment, whether by check or by
Warrants (pursuant to (S)1.4) or by a combination thereof, (ii) a certified or
official bank check or corporate check payable to the order of the Company
and/or a cancellation of a number of Warrants (pursuant to (S)1.4) and/or any
other form of consideration which the Company and the holder hereof may have
agreed to accept in payment of the Current Warrant Price in the aggregate equal
to the aggregate Current Warrant Price of the number of shares of Common Stock
being purchased and (iii) this Warrant. The Company shall as promptly as
practicable, and in any event within 7 days after receipt by the Company of such
notice, execute and deliver or cause to be executed and delivered, in accordance
with said notice, a certificate or certificates representing the aggregate
number of shares of Common Stock specified in said notice. The stock
certificate or certificates so delivered shall be in the denomination as may be
specified in said notice and shall be issued in the name of such holder or such
other name as shall be designated in said notice. Such certificate or
certificates shall be deemed to have been issued and such holder or any other
person so designated to be named therein shall be deemed for all purposes to
have become a holder of record of such shares as of the date said notice is
received by the Company as aforesaid. If this Warrant shall have been exercised
only in part, the Company shall, at the time of delivery of said certificate or
certificates, deliver to such holder a new Warrant evidencing the rights of such
holder to purchase the remaining shares of Common Stock called for by this
Warrant, which new Warrant shall in all other respects be identical with this
Warrant, or, at the request of such holder, appropriate notation may be made on
this Warrant and the same returned to such holder. The Company shall pay all
expenses, taxes and other charges payable in connection with the preparation,
issuance and delivery of such stock certificates and new Warrants, except that,
in case such stock certificates or new Warrants shall be registered in a name or
names other than the name of the holder of this Warrant, funds sufficient to pay
all stock transfer taxes which shall be payable upon the issuance of such stock
certificate or certificates or new Warrants shall be paid by the holder hereof
at the time of delivering the notice of exercise mentioned above or promptly
upon receipt of a written request of the Company for payment of the same.
(S)1.2. Warrant Shares to be Fully Paid and Nonassessable. All shares of
-------------------------------------------------
Common Stock issued upon the exercise of this Warrant shall be validly issued,
fully paid and nonassessable and, if the Common Stock is then listed on a
securities exchange, shall be duly listed thereon.
(S)1.3. No Fractional Shares to be Issued. The Company shall not be
---------------------------------
required upon any exercise of this Warrant to issue a certificate representing
any fraction of a share of Common Stock,
2
<PAGE>
but, in lieu thereof, shall pay to the holder of this Warrant cash in an amount
equal to a corresponding fraction (calculated to the nearest 1/100 of a share)
of the Current Market Price of one share of Common Stock as of the date of
receipt by the Company of notice of exercise of this Warrant.
(S)1.4. Payment of Current Warrant Price with Warrants. Upon any exercise
----------------------------------------------
of this Warrant as provided in (S)1.1, the holder hereof may, in lieu of payment
of the Current Warrant Price in cash, surrender any Warrant (valued for such
purpose at the Current Market Price of the underlying Common Stock for which
such Warrant is exercisable on the date of such exercise less the Current
Warrant Price then in effect) and apply all or a portion of the amount so
determined to the payment of the Current Warrant Price for the number of shares
of Common Stock being purchased.
(S)1.5. Legend on Warrant Shares. Each certificate for Warrant Shares
------------------------
initially issued upon exercise of this Warrant, unless at the time of exercise
such Warrant Shares are registered under the Act, shall bear the following
legend (and any additional legend required by any securities exchange upon which
such Warrant Shares may, at the time of such exercise, be listed) on the face
thereof:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or the laws of any
state."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of (i) a public distribution pursuant to a registration statement or (ii) an
exempt sale pursuant to Rule 144 or Rule 144A under the Act of the securities
represented thereby) shall also bear such legend unless, in the opinion of
Orrick, Herrington & Sutcliffe or such other counsel for the holder thereof as
shall be reasonably acceptable to the Company, the securities represented
thereby need no longer be subject to the restrictions contained in said Section
3. The provisions of said Section 3 shall be binding upon all subsequent
holders of this Warrant.
(S)1.6. Acknowledgment of Continuing Obligation. The Company will, at the
---------------------------------------
time of any exercise of this Warrant in whole or in part, upon request of the
holder hereof, acknowledge in writing its then continuing obligation to such
holder in respect of any rights pursuant to this Warrant (including, without
limitation, any right to registration, if any, of the shares of Common Stock
issued upon such exercise) to which such holder shall continue to be entitled
after such exercise in accordance with this Warrant; provided, however, that the
-------- -------
failure of such holder to make any such request shall not affect the continuing
obligation of the Company to such holder in respect of such rights.
3
<PAGE>
SECTION 2. WARRANT OFFICE; TRANSFER, DIVISION OR COMBINATION
OF WARRANTS.
(S)2.1. Warrant Office. The Company shall maintain an office for certain
--------------
purposes specified herein (the "Warrant Office"), which office shall initially
be the Company's office at Three Commerce Boulevard, Palm Court, Florida 32164,
and may subsequently be such other office of the Company or of any transfer
agent of the Common Stock in the continental United States as to which written
notice has previously been given to all of the Warrantholders.
(S)2.2. Ownership of Warrant. The Company may deem and treat the person
--------------------
in whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any notice
to the contrary, until presentation of this Warrant for registration of transfer
as provided in this Section 2.
(S)2.3. Transfer of Warrants. The Company agrees to maintain at the
--------------------
Warrant Office books for the registration and registration of transfer of the
Warrants, and, subject to the provisions of Section 3 hereof, this Warrant and
all rights hereunder are transferable, in whole or in part, on said books at
said office, upon surrender of this Warrant at said office, together with a
written assignment of this Warrant duly executed by the holder hereof or his
duly authorized agent or attorney and funds sufficient to pay any transfer taxes
payable upon the making of such transfer. Upon such surrender and payment the
Company shall execute and deliver a new Warrant or Warrants in the name of the
assignee or assignees and in the denominations specified in such instrument of
assignment, and this Warrant shall promptly be cancelled. A Warrant may be
exercised by a new holder for the purchase of shares of Common Stock without
having a new Warrant issued.
(S)2.4. Division or Combination of Warrants. This Warrant may be divided
-----------------------------------
or combined with other Warrants upon presentation hereof and of any Warrant or
Warrants with which this Warrant is to be combined at the Warrant Office,
together with a written notice specifying the names and denominations in which
new Warrants are to be issued, signed by the holders hereof and thereof or their
respective duly authorized agents or attorneys. Subject to compliance with
(S)2.3 hereof as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or Warrants in
exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice; provided, that no holder of this Warrant may divide the
--------
Warrant into a Warrant exercisable into less than 1,000 shares of Common Stock.
4
<PAGE>
(S)2.5. Expenses of Delivery of Warrants. The Company shall pay all
--------------------------------
expenses, taxes (other than transfer taxes) and other charges payable in
connection with the preparation, issuance and delivery of any Warrant hereunder.
SECTION 3. RESTRICTIONS ON EXERCISE AND TRANSFER;
REGISTRATION RIGHTS.
(S)3.1. Restrictions on Exercise and Transfer. The holder of this
-------------------------------------
Warrant, as of the date of issuance hereof, represents to the Company that is
acquiring the Warrants for its own account for investment purposes and not with
a view to the distribution thereof. Notwithstanding any provisions contained in
this Warrant to the contrary, this Warrant and the related Warrant Shares shall
not be transferable except pursuant to the proviso contained in the following
sentence or upon the conditions specified in this Section 3, which conditions
are intended, among other things, to insure compliance with the provisions of
the Act and applicable state law in respect of the transfer of this Warrant or
such Warrant Shares. The holder of this Warrant, by its acceptance hereof,
agrees that it will not transfer this Warrant or the related Warrant Shares
prior to delivery to the Company of an opinion of such holder's counsel (as such
opinion and such counsel are described in (S)3.2 hereof) or until registration
of such Warrant Shares under the Act has become effective or after a sale of
such Warrant or Warrant Shares has been consummated pursuant to Rule 144 or Rule
144A under the Act; provided, however, that such holder may freely transfer this
-------- -------
Warrant or such Warrant Shares (without delivery to the Company or opinion of
Counsel) (w) to one of its nominees, Affiliates or a nominee thereof, (x) to a
pension or profit-sharing fund established and maintained for its employees or
for the employees of any such Affiliate, (y) from a nominee to any of the
aforementioned persons as beneficial owner of this Warrant or such Warrant
Shares, or (z) to a Qualified Institutional Buyer so long as such transfer is
effected in compliance with Rule 144A under the Act.
(S)3.2. Notice of Intention to Transfer; Opinion of Counsel. The holder
---------------------------------------------------
of this Warrant, by its acceptance hereof, agrees that prior to any transfer of
this Warrant or of the related Warrant Shares (other than as permitted by (S)3.1
hereof or pursuant to a registration under the Act), such holder will give
written notice to the Company of its intention to effect such transfer, together
with an opinion of Orrick, Herrington & Sutcliffe, or such other counsel for
such holder as shall be reasonably acceptable to the Company, to the effect that
the proposed transfer of this Warrant and/or such Warrant Shares may be effected
without registration under the Act of this Warrant and/or such Warrant Shares.
Upon delivery of such notice and opinion to the Company, the holder of this
Warrant or such Warrant Shares shall be entitled to transfer
5
<PAGE>
this Warrant and/or such Warrant Shares in accordance with the intended method
of disposition specified in the notice delivered by such holder to the Company;
provided, however, that if such method of disposition would, in the opinion of
- -------- -------
such counsel, require that the Company take any action and/or execute and file
with the Commission and/or any state securities authority with jurisdiction
and/or deliver to the Warrantholder or any other person any form or document
(other than a registration statement under the Act or under any state securities
laws) in order to establish the entitlement of the Warrantholder to take
advantage of such method of disposition, the Company agrees promptly, at its
expense, to take any such action and/or execute and file and/or deliver any such
form or document; and, provided, further, that the Company will reimburse such
-------- -------
holder in full for the reasonable fees and disbursements of such counsel
incurred by such holder or on its behalf in connection with such transfer of
this Warrant and/or such Warrant Shares and/or the obtaining of an opinion
pursuant to this (S)3.2.
(S)3.3. [Reserved].
(S)3.4. "Piggyback Registrations".
-------------------------
(a) If the Company at any time prior to June 30, 2007, proposes to
register any of its equity securities (as defined in the Act), other than
securities which are convertible into shares of Common Stock, under the Act on
Forms S-1, S-2 or S-3 (but not Form S-4 or S-8) or on any other form upon which
may be registered securities similar to the Warrants or the Warrant Shares, it
will at each such time give written notice at least 30 days prior to the filing
of the registration statement to all Warrantholders of its intention so to do.
Such notice shall specify the proposed date of the filing of the registration
statement and advise each Warrantholder of its right to participate therein.
Upon the written request of any Warrantholder given prior to the proposed date
of filing set forth in such notice, the Company will cause each Warrant Share
which the Company has been requested to register by such Warrantholder to be
registered under the Act, all to the extent requisite to permit the sale or
other disposition by such Warrantholder of the Warrant Shares so registered.
(b) If, in the written opinion of the underwriter or underwriters managing
the public offering which is the subject of a registration pursuant to clause
(a) of this (S)3.4 (or in the event that such distribution shall not be
underwritten, in the written opinion of an investment banking firm of recognized
standing satisfactory to the Warrantholders), the total amount of the securities
to be so registered, when added to the total amount of Warrant Shares which the
Warrantholders have requested to be registered pursuant to said clause (a), will
exceed the maximum amount of securities of the Company which can be marketed
6
<PAGE>
(i) at a price reasonably related to their then current market value, or (ii)
without otherwise materially and adversely affecting the entire offering, then
the Company shall have the right to exclude from such registration such number
of Warrant Shares which it would otherwise be required to register pursuant to
said clause (a) as is necessary to reduce the total amount of securities to be
so registered to the maximum amount of securities which can be so marketed;
provided, however, that if the securities (other than the Warrant Shares) to be
- -------- -------
so registered for sale are to be offered for the account of the Company and
others, the Company may only exclude Warrant Shares pro rata with the securities
held by such other persons (it being agreed that in the case where such
registration is to be effected as a result of the exercise by a holder of the
Company's securities of such holder's right to cause such securities to be so
registered, such pro rata exclusion shall include the Company).
(S)3.5. Company's Obligations in Registration. The obligation of the
-------------------------------------
Company to register any Warrant Shares pursuant to (S)3.4 hereof includes the
obligation to register under the same registration statement the related
Warrants if such registration is necessary to effect the offer and sale of
Warrant Shares to the public. If and whenever the Company is obligated by the
provisions of this Section 3 to effect the registration of any Warrant Shares
under the Act, as expeditiously as possible the Company will:
(a) expeditiously prepare and file with the Commission a registration
statement with respect to such Warrant Shares and use its best efforts to
cause such registration statement to become and remain effective during the
period required for the distribution of the securities covered by the
registration statement; provided, however, that in the event that the
-------- -------
Warrant Shares covered by such registration statement are not to be sold to
or through underwriters acting for the Company, the Company shall not be
required to keep such registration statement in effect, or to prepare and
file any amendments or supplements thereto, after the expiration of six
months following the date on which such registration statement becomes
effective under the Act or such longer period during which the Commission
requires that such registration statement be kept effective with respect to
any of the Warrant Shares so registered;
(b) as expeditiously as possible, prepare and file with the Commission
such amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep such
registration statement effective and to comply with the provisions of the
Act with respect to the disposition of all Warrant Shares covered by such
registration statement, whenever the
7
<PAGE>
Warrantholders for whom such Warrant Shares are registered or are to be
registered shall desire to dispose of the same, subject, however, to the
proviso contained in the immediately preceding clause (a); provided,
--------
however, that in any event the Company's obligations under this (S)3.5(b)
-------
shall terminate 90 days after the effective date of any such registration
statement if none of the Warrant Shares registered thereunder shall have
been sold;
(c) as expeditiously as possible, furnish to the Warrantholders for
whom such Warrant Shares are registered or are to be registered and to any
underwriter or underwriters such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of
the Act, and such other documents as such Warrantholders may reasonably
request in order to facilitate the disposition of such Warrant Shares;
(d) use its reasonable efforts to register or qualify the Warrant
Shares covered by such registration statement under such other securities
or blue sky laws of such jurisdictions as the Warrantholders for whom such
Warrant Shares are registered or are to be registered shall reasonably
request, and do any and all other reasonable acts and things to so register
or qualify which may be necessary or advisable to enable such
Warrantholders to consummate the disposition in such jurisdictions of such
Warrant Shares;
(e) furnish to the Warrantholders for whom such Warrant Shares are
registered or are to be registered at the time of the disposition of
Warrant Shares by such Warrantholders an opinion of counsel for the Company
acceptable to such Warrantholders to the effect that (i) a registration
statement covering such Warrant Shares has been filed with the Commission
under the Act and has been made effective by order of the Commission, (ii)
such registration statement and the prospectus contained therein appear on
their face to be appropriately responsive in all material respects to the
requirements of the Act, and nothing has come to said counsel's attention
which would cause it to believe that either such registration statement or
such prospectus contains any untrue statement of a material fact or omits
to state a material fact required to be stated therein or necessary to make
the statements therein not misleading, (iii) a prospectus meeting the
requirements of the Act is available for delivery, (iv) no stop order has
been issued by the Commission suspending the effectiveness of such
registration statement and, to the best of such counsel's knowledge, no
proceedings for the issuance of such a stop order are threatened or
contemplated, (v) the applicable provisions of the securities or blue sky
laws of each state in which the Company shall be required, pursuant
8
<PAGE>
to (S)3.5(d), to register or qualify such Warrant Shares, have been
complied with, and (vi) such other matters as such Warrantholders may
reasonably request.
(S)3.6. Payment of Registration Expenses. The costs and expenses of all
--------------------------------
registrations under the Act and of all other actions which the Company is
required to take or effect pursuant to this Section 3 shall be paid by the
Company (including, without limitation, all registration, qualification and
filing fees, printing expenses, expenses of distributing prospectuses and other
documents, fees and disbursements of counsel and accountants for the Company,
and expenses of any special audits incident to or required in connection with
any such registration hereof, but excluding the fees and disbursements of
special counsel for the Warrantholders, any consultants retained by the
Warrantholders and underwriters' or brokers' discounts or commissions applicable
to the Warrant Shares).
(S)3.7. Information from Warrantholders. Notices and requests delivered
-------------------------------
by Warrantholders to the Company pursuant to this Section 3 shall contain such
information regarding the Warrant Shares and the intended method of disposition
thereof as shall reasonably be required in connection with the action to be
taken.
(S)3.8. Company's Indemnification. In the event of any registration under
-------------------------
the Act of any Warrant Shares pursuant to this Section 3, the Company hereby
agrees to indemnify and hold harmless each Warrantholder disposing of such
Warrant Shares and each other person, if any, who controls such Warrantholder
within the meaning of Section 15 of the Act and each other person (including
underwriters) who participates in the offering of such Warrant Shares against
any losses, claims, damages or liabilities, joint or several, to which such
Warrantholder or controlling person or participating person may become subject
under the Act or otherwise, in so far as such losses, claims, damages or
liabilities (or proceedings in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact contained,
on the effective date thereof, in any registration statement under which such
Warrant Shares were registered under the Act, in any preliminary prospectus or
final prospectus contained therein, or in any amendment or supplement thereto,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse such Warrantholder and
each such controlling person or participating person for any legal or any other
expenses incurred by such Warrantholder or such controlling person or
participating person in connection with investigating or defending any such
loss, claim, damage, liability or proceeding; provided, however, that the
-------- -------
Company will not be liable in any such case to the extent
9
<PAGE>
that any such loss, claim, damage or liability arises out of or is based upon
(a) an untrue statement or alleged untrue statement or omission or alleged
omission made in such registration statement, said preliminary or final
prospectus or said amendment or supplement in reliance upon and in conformity
with written information furnished to the Company by an instrument duly
executed by such Warrantholder or such controlling or participating person, as
the case may be, specifically for use in the preparation thereof or (b) an
untrue statement or alleged untrue statement, omission or alleged omission in a
prospectus if such untrue statement or alleged untrue statement, omission or
alleged omission is corrected in an amendment or supplement to the prospectus
which amendment or supplement is delivered to such Warrantholder and such
Warrantholder thereafter fails to deliver such prospectus as so amended or
supplemented prior to or concurrently with the sale of Warrant Shares to the
person asserting such loss, claim, damage, liability or expense.
(S)3.9. Warrantholder's Indemnification. It shall be a condition of the
-------------------------------
Company's obligation under this Section 3 to effect any registration under the
Act that there shall have been delivered to the Company an agreement or
agreements duly executed by each Warrantholder for whom Warrant Shares are to be
so registered, whereby such Warrantholder agrees to indemnify and hold harmless
the Company, each other person referred to in subparts (1), (2) and (3) of
Section 11(a) of Section 15 of the Act in respect of such registration statement
and each other person, if any, which controls the Company within the meaning of
the Act against any losses, claims, damages or liabilities, joint or several, to
which the Company or such other person or such person controlling the Company
may become subject under the Act or otherwise, but only to the extent that such
losses, claims, damages or liabilities (or proceeding in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of any
material fact contained, on the effective date thereof, in any registration
statement under which such Warrant Shares were registered under the Act, in any
preliminary prospectus or final prospectus contained therein or in any amendment
or supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, which, in each such
case, has been made in or omitted from such registration statement, said
preliminary or final prospectus or said amendment or supplement in reliance
upon, and in conformity with, written information furnished to the Company by an
instrument duly executed by such Warrantholder specifically for use in the
preparation thereof. The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in the distribution, to the same extent as provided
above, with respect to information with respect to such persons so furnished in
10
<PAGE>
writing by such persons specifically for inclusion in any prospectus or
registration statement.
(S)3.10. Conduct of Indemnification Proceedings. Any person entitled to
--------------------------------------
indemnification hereunder will (a) give prompt written notice to the
indemnifying party of any claim with respect to which it seeks indemnification
and (b) unless, in such indemnified party's reasonable judgment, a conflict of
interest may exist between such indemnified and indemnifying parties with
respect to such claim, permit such indemnifying party to assume the defense of
such claim with counsel reasonably satisfactory to the indemnified party;
provided, however, that the failure of an indemnified party to give notice as
- -------- -------
provided herein shall not relieve the indemnifying party of its obligations
under this (S)3.10 with respect to such indemnified party, except to the extent
that the indemnifying party is actually prejudiced by such failure. Whether or
not such defense is assumed by the indemnifying party, the indemnifying party
will not be subject to any liability for any settlement made without its consent
(but such consent will not be unreasonably withheld). No indemnifying party
will consent to the entry of any judgment or enter into any settlement which
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
of such claim or litigation. An indemnifying party who is not entitled to, or
elects not to, assume the defense of the claim against the indemnified party,
will not be obligated to pay the fees and expenses of more than one counsel for
all parties indemnified by such indemnifying party with respect to such claim,
unless in the reasonable judgment of any indemnified party a conflict of
interest may exist between such indemnified party and any other such indemnified
parties with respect to such claim, in which event the indemnifying party shall
be obligated to pay the fees and expenses of such additional counsel or
counsels.
If for any reason the indemnification provided for in the preceding
(S)(S)3.8 and 3.9 hereof is unavailable to an indemnified party as contemplated
thereby, the indemnifying party shall contribute to the amount paid or payable
by the indemnified party as a result of such loss, claim, damage or liability in
such proportion as is appropriate to reflect not only the relative benefits
received by the indemnified party and the indemnifying party, but also the
relative fault of the indemnified party and the indemnifying party, as well as
any other relevant equitable considerations. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of fraudulent
misrepresentation.
(S)3.11. Underwriting Agreement Indemnification Provisions.
-------------------------------------------------
Notwithstanding the provisions of (S)(S)3.8, 3.9 and 3.10 hereof, if
11
<PAGE>
an underwriting agreement executed by the Company pursuant to (S)3.6(f) hereof
shall contain indemnification, contribution and related procedural provisions in
a form customary to the underwriter which are substantially to the same effect
as the provisions provided for in (S)(S)3.8, 3.9 and 3.10 hereof, such customary
indemnification provisions shall be incorporated in such underwriting agreement
in lieu of those provided for in (S)(S)3.8, 3.9 and 3.10 hereof.
(S)3.12. Public Information. The Company covenants and agrees that if and
------------------
so long as the Common Stock shall be registered under Section 12 of the Exchange
Act, at any time when any Warrantholder so entitled desires to make sales of any
Warrant Shares in reliance on Rule 144 or Rule 144A under the Act either (i)
there will be available adequate current public information with respect to the
Company as required by said Rules, or (ii) if such information is not available
the Company will use its best efforts to make such information available without
delay. Without limiting the foregoing, after the time of any such registration
the Company will timely file with the Commission all reports required to be
filed under Sections 13 and 15(d) of the Exchange Act and will promptly furnish
to any Warrantholder so requesting a written statement that the Company has
complied with all such reporting requirements.
(S)3.13. No Conflicting Registration Rights. The Company covenants and
----------------------------------
agrees that if and so long as any Warrants or any Warrant Shares shall remain
outstanding and the holders thereof shall have any rights under this Section 3,
it will not enter into any agreement with any person creating any rights with
respect to any shares of Common Stock or any other security in conflict with or
inconsistent with any rights retained by any holder of Warrants or Warrant
Shares pursuant to this Section 3.
SECTION 4. ANTI-DILUTION PROVISIONS.
(S)4.1. Adjustment of Current Warrant Price and Number of Shares
--------------------------------------------------------
Purchasable. The Current Warrant Price and the number of shares of Common Stock
- -----------
purchasable upon the exercise of each Warrant shall be subject to adjustment
from time to time as hereinafter provided in this Section 4. Upon each
adjustment of the Current Warrant Price, the holder of this Warrant shall
thereafter be entitled to purchase at the Current Warrant Price resulting from
such adjustment, the number of shares (calculated to the nearest whole share) of
Common Stock calculated by multiplying the Current Warrant Price in effect
immediately prior to such adjustment by the number of shares purchasable
pursuant hereto immediately prior to such adjustment and dividing the product
thereof by the Current Warrant Price resulting from such adjustment.
12
<PAGE>
(S)4.2. Calculation of Adjustments. (a) In case on any date on or after
--------------------------
the Closing Date any shares of Common Stock other than Warrant Shares shall be
issued by the Company for a consideration per share or (in the case of any
transaction of a type described in (S)4.2(b)(iii) or (S)4.2(b)(iv) hereof) shall
be deemed to be issued for a Presumed Consideration per share less than the
Current Market Price on such date (any such issuance or deemed issuance of
shares being hereinafter referred to as an "Adjustment Event"), the Current
Warrant Price shall be reduced to the price (calculated to the nearest one-
hundredth of a cent (0.001)) determined by multiplying (i) the Current Warrant
Price in effect immediately prior to such Adjustment Event by (ii) a fraction,
(x) the numerator of which shall be the sum of (1) the number of shares of
Common Stock outstanding (excluding as a result of the Warrants) and deemed to
be outstanding immediately prior to such Adjustment Event multiplied by the
Current Market Price immediately prior to such Adjustment Event and (2) the
consideration, if any, received and/or any Presumed Consideration deemed
received by the Company upon such Adjustment Event, and (y) the denominator of
which shall be the number of shares of Common Stock outstanding (excluding as a
result of the Warrants) and deemed to be outstanding (including any shares of
capital stock, warrants or options issuable after giving effect to any anti-
dilution provisions of the Company's other securities as a result of such
Adjustment Event) after giving effect to such Adjustment Event multiplied by the
Current Market Price immediately prior to such Adjustment Event.
(b) For the purpose of this (S)4.2, the following provisions shall be
applicable with respect to the issuance of additional shares of Common Stock and
the computation provided for in (S)4.2(a) hereof:
(i) Treasury Shares. The sale or other disposition of any shares of
---------------
Common Stock at the time held in the Company's treasury shall be treated
hereunder as an issuance of shares.
(ii) Dividends. In case any shares of Common Stock shall be issued as
---------
a dividend on Common Stock, the Current Warrant Price shall be adjusted as
provided in (S)4.3 hereof. In case any shares of Common Stock shall be
issued as a dividend on any security other than Common Stock, or in case
any security convertible into or exchangeable for shares of Common Stock
(such convertible or exchangeable security being hereinafter called
"Convertible Securities") shall be issued as a dividend on any security,
such shares or Convertible Securities shall be considered to have been
issued without consideration at the commencement of the day next succeeding
the record date for the determination of stockholders entitled to such
dividend.
13
<PAGE>
(iii) Rights, Warrants or Options. In case the Company shall grant any
---------------------------
rights, warrants or options (other than the Warrants and warrants to
purchase up to 100,000 shares of Common Stock issued in connection with any
final settlement of ongoing litigation of the Company which has been
disclosed to the holder hereof as of June 2, 1997) to subscribe for or to
purchase shares of Common Stock or Convertible Securities, the maximum
number of shares of Common Stock issuable pursuant to such rights, warrants
or options or necessary to effect the conversion or exchange of all such
Convertible Securities (computed without regard to the possible future
effect of anti-dilution provisions) shall be deemed to have been issued as
of the date of the granting of such rights, warrants or options, and the
Company shall be deemed to have received the Presumed Consideration
therefor. No further adjustment (except as provided in (S)4.2(b)(v)
hereof) shall be made in respect of the actual issuance of Common Stock or
Convertible Securities upon the exercise of rights or options, warrants or
the conversion of Convertible Securities referred to in this
(S)4.2(b)(iii).
(iv) Convertible Securities. In case the Company shall issue any
----------------------
Convertible Securities (other than pursuant to the exercise of rights,
warrants or options referred to in (S)4.2(b)(iii) hereof), then the maximum
number of shares of Common Stock necessary to effect the conversion or
exchange of all such Convertible Securities (computed without regard to the
possible future effect of anti-dilution provisions) shall be deemed to have
been issued as of the date of issuance of such Convertible Securities, and
the Company shall be deemed to have received the Presumed Consideration
therefor. No further adjustment (except as provided in (S)4.2(b)(v)
hereof) shall be made in respect of the actual issuance of Common Stock
upon the conversion of Convertible Securities referred to in this
(S)4.2(b)(iv).
(v) Superseding Adjustments. If, at any time after any adjustment of
-----------------------
the Current Warrant Price shall have been made by reason of the provisions
of (S)4.2(b)(iii) or (S)4.2(b)(iv) hereof on the basis of the granting of
certain rights, warrants or options or the issuance of certain Convertible
Securities, or after any new adjustment of the Current Warrant Price shall
have been made with respect to such rights, warrants or options or
Convertible Securities by reason of the provisions of this (S)4.2(b)(v),
such rights, warrants or options or the right of conversion or exchange in
any such Convertible Securities shall expire, and all or a portion of such
rights, warrants or options, or the right of conversion or exchange in
respect of all or a portion of such Convertible Securities, as the case may
be, shall not have been exercised, then such previous adjustment shall be
14
<PAGE>
rescinded and annulled, and the shares of Common Stock which were deemed to
have been issued by virtue of the computation made in connection with the
adjustment so rescinded and annulled shall no longer be deemed to have been
issued by virtue of such computation. Thereupon, a recomputation shall be
made of the effect of issuance of such rights, warrants or options or such
Convertible Securities on the basis of
(A) treating the number of shares of Common Stock, if any,
theretofore actually issued pursuant to the exercise of such expired
rights, warrants or options, or such expired right of conversion or
exchange, as having been issued as of the date of the granting of such
rights, warrants or options or the date of issuance of such
Convertible Securities for the consideration actually received
therefor (computed as provided in (S)4.2(b)(vii) hereof), and
(B) deeming the maximum number of shares of Common Stock, if any,
thereafter issuable pursuant to the conversion or exchange of any
Convertible Securities actually issued or issuable pursuant to the
exercise of such rights or options (computed without regard to the
possible future effect of anti-dilution provisions) as having been
issued as of the date of the granting of such rights or options and
for the Presumed Consideration deemed to have been received as of such
date;
and on such basis, such new adjustment, if any, of the Current Warrant
Price shall be made as may be required by (S)4.2(a) hereof, which new
adjustment shall take into account a recomputation of all adjustments made
pursuant to this Section 4 subsequent to the date of the granting of such
rights, warrants or options or the date of issuance of such Convertible
Securities, and which new adjustment shall supersede the previous
adjustment so rescinded and annulled and all such subsequent adjustments
for all subsequent exercises of Warrants.
(vi) Effect of "Split-up" on "Deemed Issued" Shares. Upon any
----------------------------------------------
subdivision of the Common Stock of the character described in (S)4.3
hereof, including the issuance of a stock dividend which is treated as such
a subdivision under (S)4.2(b)(ii) hereof, the number of the shares of
Common Stock which are at the time deemed to have been issued by virtue of
(S)4.2(b)(iii), (S)4.2(b)(iv) or (S)4.2(b)(v) hereof, but have not actually
been issued, shall be deemed to be increased proportionately.
15
<PAGE>
(vii) Computation of Consideration and Presumed Consideration. For the
-------------------------------------------------------
purposes of this (S)4.2(b):
(A) The consideration received by the Company upon the actual
issuance of shares of Common Stock shall be the sum of the amount of
cash and the fair value of property (as determined by resolution of
the Board of Directors of the Company as at the time of issuance or
"deemed issuance" in the case of (S)4.2(b)(vii)(B)) received by the
Company as the consideration or part of the consideration (1) for the
issuance of any rights, warrants or options upon the exercise of which
such Common Stock was issued, (2) for the issuance of any rights,
warrants or options to purchase Convertible Securities upon the
conversion of which such Common Stock was issued, (3) for the issuance
of the Convertible Securities upon conversion of which such Common
Stock was issued, and (4) at the time of the actual exercise of such
rights, warrants, options or conversion privileges upon the exercise
of which such Common Stock was issued, in each case without deduction
for commissions and expenses incurred by the Company for any
underwriting of, or otherwise in connection with the issue or sale of,
such rights, warrants, options, Convertible Securities or Common
Stock, but after deduction of any sums paid by the Company in cash
upon the exercise of, and pursuant to, such rights, warrants, options
or conversion privileges in respect of fractional shares of Common
Stock;
(B) The consideration deemed to have been received by the
Company for shares of Common Stock deemed to be issued pursuant to
rights, warrants, options, and/or conversion privileges by reason of
transactions of the character described in (S)4.2(b)(iii),
(S)4.2(b)(iv), or (S)4.2(b)(v)(B) hereof (herein called the "Presumed
Consideration" therefor) shall be the consideration (determined as
provided in (S)4.2(b)(vii)(A) hereof) which would have been received
by the Company at or prior to the actual issuance of such shares of
Common Stock so deemed to be issued, if all rights, warrants, options
and/or conversion privileges necessary to effect the actual issuance
of the number of shares deemed to have been issued had been exercised
(successively exercised in the case of rights, warrants or options to
purchase Convertible Securities) and the minimum consideration
received or receivable by the Company upon such exercise had been
received (all computed without regard to the possible future effect of
anti-dilution provisions in such rights, warrants, options and/or
conversion privileges).
16
<PAGE>
(S)4.3. Effect of "Split-ups" and Stock Dividends. In case at any time or
-----------------------------------------
from time to time the Company shall subdivide or combine as a whole, by
reclassification, by the issuance of a stock dividend on the Common Stock
payable in Common Stock, or otherwise, the number of shares of Common Stock then
outstanding into a greater or lessor number of shares of Common Stock, with or
without par value, the Current Warrant Price shall be reduced or increased (as
applicable) proportionately. The issuance of such a stock dividend shall be
treated as a subdivision of the whole number of shares of Common Stock
outstanding immediately prior to such dividend into a number of shares equal to
such whole number of shares so outstanding plus the number of shares issued as a
stock dividend. Upon any such adjustment, the number of shares shall be rounded
upward to the nearest whole share.
(S)4.4. Effect of Merger or Consolidation. In case the Company shall,
---------------------------------
while this Warrant remains outstanding, enter into any consolidation with or
merger into any other corporation wherein the Company is not the surviving
corporation, or wherein securities of a corporation other than the Company are
distributable to holders of Common Stock, or sell or convey its property as an
entirety or substantially as an entirety followed by distribution of any or all
of the proceeds thereof to shareholders, and in connection with such
consolidation, merger, sale or conveyance, shares of stock or other securities
or property shall be issuable or deliverable in exchange for the Common Stock,
then, as a condition of such consolidation, merger, sale or conveyance, lawful
and adequate provision shall be made whereby the holder of this Warrant shall
thereafter be entitled to purchase pursuant to this Warrant (in lieu of the
number of shares of Common Stock which such holder would have been entitled to
purchase immediately prior to such consolidation, merger, sale or conveyance)
the shares of stock or other securities or property to which such number of
shares of Common Stock would have been entitled at the time of such
consolidation, merger, sale or conveyance, at an aggregate purchase price equal
to that which would have been payable if such number of shares of Common Stock
had been purchased by exercise of this Warrant immediately prior thereto;
provided, however, that such per share purchase price shall not be less than the
- -------- -------
higher of the Current Market Price. In case of any such consolidation, merger,
sale or conveyance, appropriate provision shall be made with respect to the
rights and interests thereafter of the holders of Warrants, to the end that all
the provisions of the Warrants (including the provisions of this Section 4)
shall thereafter be applicable, as nearly as practicable, to such stock or other
securities or property thereafter deliverable upon the exercise of the Warrants.
The Company shall not effect any such consolidation, merger, sale or conveyance
unless prior to or simultaneously with the consummation thereof the successor
corporation (if other than the Company) resulting from such consolidation or
merger or purchasing such assets shall assume by written instrument,
17
<PAGE>
executed and mailed or delivered to each holder of Warrants, the obligation to
deliver to such holder such shares of stock or other securities or property as,
in accordance with the foregoing provisions, such Warrantholder may be entitled
to receive, which instrument shall contain the express assumption by such
successor corporation of the due and punctual performance and observance of
every provision of this Warrant to be performed and observed by the Company and
of all liabilities and obligations of the Company hereunder.
(S)4.5. Effect of Certain Dividends. Except as provided in (S)4.4, in
---------------------------
case on any date the Company makes a distribution to holders of its Common Stock
(including any such distribution made in connection with a consolidation or
merger in which the Company is the continuing corporation) of evidences of its
indebtedness or assets of the Company (excluding rights, warrants or options to
purchase shares of Common Stock or Convertible Securities which are exercisable
only for 45 days after such date), the Company shall pay the distribution that
would be payable to holders of the Warrants if the Warrant Shares had been
outstanding as of the record date (the "Distribution") to an escrow holder who
shall be a national banking institution with at least $200 million of net worth
to hold in escrow (together with proceeds from the distribution). Any
Distribution or proceeds which is cash will be invested by the escrow holder in
commercial paper rated in one of the two highest rating categories by both
Moody's Investor Services and Standard & Poor's Corporation and the interest
will accrue to the benefit of the holder of the Warrants. Upon any exercise of
the Warrants, the escrow holder will distribute any amounts held in escrow
relating to the exercised Warrants together with the proceeds therefrom
(including interest) to the holder of the Warrant. If one or more Warrants
terminates, the escrow holder will distribute to the Company any amounts held in
escrow relating to the terminated Warrants together with the proceeds therefrom
(including interest). Payments of amounts held in escrow to the holders of the
Warrants shall not be subject to restriction by agreement or operation of law
except as provided in this (S)4.5.
(S)4.6. Reorganization or Reclassification. In case of any capital
----------------------------------
reorganization or any reclassification of the capital stock of the Company
(except as provided in (S)4.3 hereof) while this Warrant remains outstanding,
then, as a condition of such reorganization or reclassification, lawful and
adequate provision shall be made whereby the holder of this Warrant shall
thereafter be entitled to purchase pursuant to this Warrant (in lieu of the
number of shares of Common Stock which such holder would have been entitled to
purchase immediately prior to such reorganization or reclassification) the
shares of stock of any class or classes or other securities or property to which
such number of shares of Common Stock would have been entitled at the time of
such reorganization or reclassification, at an aggregate
18
<PAGE>
purchase price equal to that which would have been payable if such number of
shares of Common Stock had been purchased immediately prior to such
reorganization or reclassification. In case of any such capital reorganization
or reclassification, appropriate provision shall be made with respect to the
rights and interests thereafter of the holders of Warrants, to the end that all
the provisions of the Warrants (including the provisions of this Section 4)
shall thereafter be applicable, as nearly as practicable, to such stock or other
securities or property thereafter deliverable upon the exercise of the Warrants.
(S)4.7. Statement of Adjustment. Upon each adjustment of the Current
-----------------------
Warrant Price and the number of shares of Common Stock purchasable hereunder,
and in the event of any change in the rights of the holder of this Warrant by
reason of other events herein set forth, then and in each such case the Company
will promptly prepare a schedule setting forth the adjusted Current Warrant
Price and the adjusted number of shares purchasable hereunder, or specifying the
other shares of stock, other securities or property and the amount thereof
receivable as a result of such change in rights, and setting forth in reasonable
detail the method of calculation and the facts upon which such calculation is
base. The Company will promptly mail a copy of such schedule to the registered
holder of this Warrant.
(S)4.8. Determinations by the Board of Directors. All determinations by
----------------------------------------
the Board of Directors of the Company under this Warrant shall be made in good
faith with due regard to the interests of the holder of this Warrant and the
other holders of securities of the Company and in accordance with good financial
practice, and all valuations made by the Board of Directors of the Company under
the terms of this Warrant must be made with due regard to any market quotations
of securities involved in, or related to, the subject of such valuation.
(S)4.9. Notifications by the Company. In case at any time the Company
----------------------------
proposes:
(a) to pay any dividend payable in stock (of any class or classes) or
in Convertible Securities upon Common Stock or make any distribution to the
holders of the Common Stock; or
(b) to make an offer for subscription pro rata to the holders of
Common Stock of any additional shares of stock of any class or other rights
or to grant to the holders of Common Stock generally any rights, warrants
or options; or
(c) to effect any capital reorganization or reclassification of the
capital stock of the Company, or consolidation or merger of the Company
with, or sale of all
19
<PAGE>
or substantially all of its assets to, another corporation; or
(d) to effect a voluntary or involuntary dissolution, liquidation or
winding-up of the Company;
then, in any one or more such cases, the Company shall give written notice to
the registered holder of this Warrant of the date on which (i) the transfer
books of the Company shall close or a record date shall be taken for such
dividend, distribution, subscription rights or grant, or (ii) a record date
shall be taken to determine stockholders entitled to notice of and to vote at
any meeting of stockholders at which any such proposed reorganization,
reclassification, consolidation, merger, sale of assets, dissolution,
liquidation or winding-up is to be considered, or (iii) such reorganization,
reclassification, consolidation, merger, sale of assets, dissolution,
liquidation or winding-up shall take place, as the case may be. Such notice
shall also specify the date as of which the holders of Common Stock of record
shall participate in such dividend, distribution, subscription rights or grant,
or shall be entitled to vote on or exchange their Common Stock for securities or
other property deliverable upon such reorganization, reclassification,
consolidation, merger, sale of assets, dissolution, liquidation or winding-up,
as the case may be. Such written notice shall be given not less than 30 days
and not more than 60 days prior to such date on which the transfer books of the
Company shall close or a record date shall be taken or any event shall occur,
as the case may be, and such notice may state that any such action will be taken
only if certain events specified in such notice (such as the clearing of proxy
material by the Commission or an affirmative vote of stockholders) occur prior
thereto.
SECTION 5. CERTAIN DEFINITIONS.
For all purposes of this Warrant, unless the context otherwise requires,
the following terms shall have the following respective meanings:
"Act": the Securities Act of 1933, as amended from time to time, or any
---
successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Adjustment Event": see (S)4.2(a) hereof.
----------------
"Affiliate" of an entity: any person controlling, controlled by or under
---------
common control with such entity or who participates in a group within the
meaning of Section 13(d) of the Exchange Act which owns, including, but not
limited to (i) any director or officer of such entity or any of its subsidiaries
20
<PAGE>
and (ii) any person who owns beneficially or of record 5% or more of the shares
of the capital stock of such entity or any of its subsidiaries or of which such
entity, directly or indirectly, owns beneficially or of record 5% or more of the
shares of capital stock.
"Closing Date": June __, 1997.
------------
"Commission": the Securities and Exchange Commission, or any other federal
----------
agency then administering the Act.
"Common Stock": the Company's authorized Common Stock, as such class
------------
existed on the Closing Date, including stock of the Company of any class
thereafter authorized which ranks, or is generally entitled to a participation,
as to assets or dividends substantially on a parity with Common Stock and
generally enjoys voting rights on a parity with Common Stock.
"Company": Cardiac Control Systems, Inc., and any other corporation
-------
assuming the Warrants pursuant to (S)4.4 hereof.
"Convertible Securities": see (S)4.2(b)(ii) hereof.
----------------------
"Current Market Price" (per share of Common Stock at any date): the per
--------------------
share fair market value of the Common Stock (i) determined by the average of the
daily "market prices" over a period of 20 consecutive business days before such
date or (ii) if and so long as there is no exchange or over-the-counter market
for the Common Stock of the Company, the price per share which the Company could
obtain from a willing buyer for the shares sold by the Company from authorized
but unissued shares, as such price shall be determined in good faith by the
Board of Directors of the Company and the holder of the Warrant, provided if the
Company and the holder can not agree on a value, the Company and the holder(s)
of the majority of the Warrants shall retain an independent investment banking
firm, at the Company's expense, to determine the per share fair market value of
the Common Stock. The market price referred to in clause (i) above for each such
business day shall be the last sale price on such day on the principal
securities exchange on which the Common Stock is then listed or admitted to
trading, or, if no sale takes place on such day on any such exchange, the
average of the closing bid and asked prices on such day as officially quoted on
any such exchange, or if the Common Stock is not then listed or admitted on any
stock exchange, the market price for each such business day shall be the last
sale price on such day, or, if no sale takes place on such day, the average of
the closing bid and asked prices on such day in the over-the-counter market, in
either case as reported through NASDAQ, or, if such prices are not at the time
so reported, as furnished by any member of the National Association of
Securities Dealers, Inc. selected by the Company.
21
<PAGE>
"Credit Agreement": see the second paragraph of this Warrant.
----------------
"Current Warrant Price" (per share of Common Stock at any date): the price
---------------------
at which one share of Common Stock may be purchased hereunder at any time;
initially $0.01 and thereafter such price as may be determined from time to
time pursuant to Section 4 hereof.
"Exchange Act": the Securities Exchange Act of 1934, as amended from time
------------
to time, or any successor federal statute, and the rules and regulations of the
Commission thereunder.
"Outstanding": when used with reference to Common Stock at any date, all
-----------
issued shares of Common Stock (including, but without duplication, shares deemed
issued pursuant to Section 4 hereof) at such date, except shares then held in
the treasury of the Company.
"person": an individual, corporation, partnership, joint venture, trust
------
estate, unincorporated organization or government or an agency or political
subdivision thereof.
"Presumed Consideration": see (S)4.2(b)(vii)(B) hereof.
----------------------
"Total Warrants": the sum of the aggregate number of shares of (i) Common
--------------
Stock purchasable by the holder(s) upon exercise of all Warrants then
outstanding and (ii) Warrant Shares which had been issued pursuant to the
exercise of Warrants.
"Warrant Office": see (S)2.1 hereof.
--------------
"Warrant Shares": the shares of Common Stock purchasable or purchased by
--------------
the Warrantholders upon the exercise of the Warrants. Unless otherwise
expressly stated herein, Warrant Shares shall not include shares of Common Stock
purchased upon exercise of a Warrant which have been sold by a Warrantholder
pursuant to a registration statement under the Act.
"Warrantholder": the registered holder of a Warrant or Warrants or any
-------------
related Warrant Shares.
"Warrants": the warrants (of which this Warrant is one) originally issued
--------
by the Company pursuant to the Credit Agreement evidencing the right initially
to purchase an aggregate of 37,500 shares of Common Stock and all warrants
issued in substitution, combination or subdivision of any thereof.
22
<PAGE>
SECTION 6. CERTAIN COVENANTS OF THE COMPANY
The Company covenants and agrees that
(a) it will reserve and set apart and have at all times, free from
preemptive rights, a number of shares of authorized but unissued Common
Stock or other securities or property deliverable upon the exercise of the
Warrants sufficient to enable it at any time to fulfill all its obligations
thereunder;
(b) before taking any action which would cause an adjustment reducing
the Current Warrant Price below the then par value of the shares of Common
Stock issuable upon exercise of the Warrants, it will take any corporate
action which may be necessary in order that the Company may validly and
legally issue fully paid and nonassessable shares of such Common Stock at
such adjusted Current Warrant Price;
(c) if any shares of Common Stock required to be reserved for the
purposes of the exercise of this Warrant require registration with or
approval of any governmental authority under any federal law (other than
the Act) or under any state law before such shares may be issued upon
exercise of this Warrant, the Company will, at its expense, as
expeditiously as possible, cause such shares to be duly registered or
approved, as the case may be;
(d) if and so long as the Common Stock is listed on any national
securities exchange (as defined in the Exchange Act), it will, at its
expense, obtain and maintain the approval for listing upon official notice
of issuance of all shares of Common Stock issuable upon the exercise of the
Warrants at the time outstanding and maintain the listing of such shares
after their issuance; and the Company will so list on such national
securities exchange, will register under the Exchange Act (or any similar
statute then in effect) and will maintain such listing of any other
securities that at any time are issuable upon exercise of the Warrants if,
and at the time that, any securities of the same class shall be listed on
such national securities exchange by the Company;
(e) it will review its stock ledgers, stock transfer books and other
corporate records periodically (and not less often than once in each
calendar quarter) in order to determine whether any Warrantholder is or
shall have become, directly or indirectly, the beneficial owner of more
than such percentage of any class of its equity securities (as defined in
the Exchange Act) as shall cause such Warrantholder to be required to make
any filings or declarations to the Company, the Commission or any national
23
<PAGE>
securities exchange pursuant to the provisions of the Exchange Act or any
comparable federal statute, and the Company will give prompt notice to such
Warrantholder whenever it shall have determined, upon the basis of the
information disclosed by any such review, that such Warrantholder is or has
become such a holder, which notice shall also specify the information upon
which the Company bases such determination; provided, however, that the
-------- -------
Company shall give such notice only once in each fiscal year to any
Warrantholder whose percentage of beneficial ownership of the Company's
equity securities has not changed since the date of the giving of the
immediately preceding notice;
(f) so long as any of the Warrants or Warrant Shares are outstanding
and owned by Coast, the Company will permit one representative of Coast, to
attend all meetings of the Board of Directors of the Company and shall
provide to Coast at least 10 days' notice of and all information given to
the directors of the Company with respect to each regular meeting of the
Board of Directors and such notice as is reasonable under the circumstances
to allow such representatives to attend each special or emergency meeting
of the Board of Directors; the Company shall also provide to Coast a copy
of any written action by the Board of Directors of the Company in lieu of a
meeting thereof; and within 30 days of each meeting of the Board of
Directors, copies of the minutes of such meeting; and
(g) this Warrant shall be binding upon any corporation succeeding to
the Company by merger, consolidation or acquisition of all or substantially
all of the Company's assets.
SECTION 7. NOTICE.
Any notice or other document required to be given or delivered to the
Warrantholders shall be delivered at, or sent by certified or registered mail
to, each such holder at the last address shown on the books of the Company
maintained at the Warrant Office for the registration and registration of
transfer of the Warrants or at any more recent address of which any
Warrantholder shall have notified the Company in writing. Any notice or other
document required or permitted to be given or delivered to holders of record of
outstanding Warrant Shares shall be delivered at, or sent by certified or
registered mail to, each such holder at such holder's address as the same
appears on the stock records of the Company. Any notice or other document
required or permitted to be given or delivered to the Company, other than such
notice or documents required to be delivered to the Warrant Office, shall be
delivered at, or sent
24
<PAGE>
by certified or registered mail to, the office of the Company at Three Commerce
Boulevard, Palm Court, Florida 32164, or such other address within the United
States of America as shall have been furnished by the Company to the
Warrantholders and the holders of record of Warrant Shares. Any notice or other
document sent by certified or registered mail, return receipt requested, shall
be deemed to have been delivered and received when sent if the receipt is
appropriately completed and returned. Notices or documents delivered in any
other manner shall be deemed to have been delivered only when and if received.
SECTION 8. LIMITATIONS OF LIABILITY; NOT STOCKHOLDERS.
No provision of this Warrant shall be construed as conferring upon the
holder hereof the right to vote, consent, receive dividends or receive notice
other than as herein expressly provided in respect of meetings of stockholders
for the election of directors of the Company or any other matter whatsoever as a
stockholder of the Company. No provision hereof, in the absence of affirmative
action by the holder hereof to purchase shares of Common Stock, and no mere
enumeration herein of the rights or privileges of the holder hereof, shall give
rise to any liability of such holder for the purchase price of any Warrant
Shares or as a stockholder of the Company, whether such liability is asserted by
the Company or by creditors of the Company.
SECTION 9. LOSS, DESTRUCTION, ETC. OF WARRANTS.
Upon receipt of evidence satisfactory to the Company of the loss, theft,
mutilation or destruction of any Warrant, and in the case of any such loss,
theft or destruction upon delivery of a bond of indemnity in such form and
amount as shall be reasonably satisfactory to the Company, or in the event of
such mutilation upon surrender and cancellation of the Warrant, the Company will
make and deliver a new Warrant, of like tenor, in lieu of such lost, stolen,
destroyed or mutilated Warrant; provided, however, that neither the original
-------- -------
recipient of this Warrant pursuant to the Credit Agreement nor any other
financial institution having combined net capital, capital surplus and undivided
profits in excess of $50,000,000 which shall become a Warrantholder shall be
required to provide any such bond of indemnity. Any Warrant issued under the
provisions of this Section 9 in lieu of any Warrant alleged to be lost,
destroyed or stolen, or in lieu of any mutilated Warrant, shall constitute an
original contractual obligation on the part of the Company.
25
<PAGE>
SECTION 10. LAW GOVERNING.
This Warrant shall be governed by, and construed and enforced in accordance
with, the law of the State of New York.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in its
name by its Chairman of the Board, President or a Vice President and its
corporate seal to be impressed hereon and attested by its Secretary or an
Assistant Secretary.
Dated: June __, 1997
CARDIAC CONTROL SYSTEMS, INC.
By: /s/ Alan J. Rabin
-----------------------------
Title: President CEO
[CORPORATE SEAL APPEARS HERE]
Attest:
/s/ [SIGNATURE APPEARS HERE]
- -----------------------------
Assistant Secretary
26
<PAGE>
SUBSCRIPTION NOTICE
Cardiac Control Systems, Inc..
The undersigned, the holder of the foregoing Warrant, hereby elects to
exercise purchase rights represented by said Warrant for, and to purchase
thereunder, _______ shares of the Common Stock covered by said Warrant and
herewith (a) makes payment in full therefor of $__________ by certified or
official bank check payable to the order of the Company; and (b) requests (1)
that certificates for such shares (and any securities or other property issuable
upon such exercise) be issued in the name of and delivered to
___________________, whose address is ___________________ and (2) if such shares
shall not include all of the shares issuable as provided in said Warrant, that a
new Warrant of like tenor and date for the balance of the shares issuable
thereunder be delivered to the undersigned.
--------------------------------
Signature Guaranteed:
Dated:
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ____________________ the rights represented by the foregoing Warrant of
Cardiac Control Systems, Inc. and appoints ______________________________
attorney to transfer said rights on the books of said corporation, with full
power of substitution in the premises.
--------------------------------
Signature Guaranteed:
Dated:
27
<PAGE>
EXHIBIT 4.2
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE HEREUNDER HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
APPLICABLE STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED UNTIL (i) A
REGISTRATION STATEMENT UNDER THE ACT OR SUCH APPLICABLE STATE SECURITIES LAWS
SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (ii) IN THE OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY REGISTRATION UNDER SUCH SECURITIES ACTS OR
SUCH APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH
PROPOSED TRANSFER.
WARRANT NO. C-2
STOCK PURCHASE WARRANT
THIS WARRANT is issued this 6th day of June, 1997, by Cardiac Control
Systems, Inc., a Delaware corporation (the "Company"), to SIRROM CAPITAL
CORPORATION, a Tennessee corporation ("Sirrom")(Sirrom and any subsequent
assignee or transferee, are hereinafter referred to collectively as "Holder" or
"Holders").
1. Issuance of Warrant. For and in consideration of Sirrom granting its
--------------------
consent under Section 4.5 of that certain Loan and Security Agreement and the
related Secured Promissory Note, each dated as of March 31, 1995, pursuant to
which the Company borrowed $1,500,000 from Sirrom (respectively, the "Note" and
the "Loan Agreement"), to the Company incurring indebtedness of up to $3,500,000
from Coast Business Credit (R) ("Coast"), pursuant to a Loan and Security
Agreement of even date herewith (the "Coast Loan"), and in that connection
agreeing to subordinate its security interest in certain collateral under the
Loan Agreement in order that the Company might grant to Coast a first priority
security interest in certain assets of the Company as set forth in the Consent
of Sirrom dated June 6, 1997, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company hereby
grants to Holder the right to purchase Fifty Thousand (50,000) shares of the
Company's common stock, $.10 par value (the "Common Stock").
2. Term. The shares of Common Stock issuable upon exercise of this
-----
Warrant are hereinafter referred to as the "Shares." This Warrant shall be
exercisable at any time and from time to time from the date hereof until June 6,
2002 (the "Expiration Date").
3. Price. The exercise price per share for which all or any of the Shares
-----
may be purchased pursuant to the terms of this Warrant shall be Five Dollars and
no cents ($5.00), in further consideration of Sirrom granting its consent to the
incurrence of additional indebtedness pursuant to the Coast Loan and
subordinating its security interest in certain of its collateral under the Loan
Agreement, as described in Section 1 above, and such other good and valuable
consideration as has been received by the Company.
4. Exercise. This Warrant may be exercised by the Holder hereof (but only
--------
on the conditions hereinafter set forth) as to all or any increment or
increments of the Shares then subject to exercise under Section 1 above upon
delivery of written notice of intent to exercise in substantially the form of
the "Notice of Exercise" attached hereto as Annex A, to the Company at the
following address: 3 Commerce Boulevard, Palm Coast, Florida 32137, or at such
other address as the Company shall designate in a written notice to the Holder
hereof, together with this Warrant and either (i) a certified or cashier's check
payable to the Company for the aggregate purchase price of the Shares so
purchased or (ii) the surrender, as noted on the Notice of Exercise, of Shares
having a value on the date of exercise equal to the aggregate purchase price
1
<PAGE>
of the Shares so purchased. Upon exercise of this Warrant as aforesaid, the
Company shall, as promptly as practicable, and in any event within fifteen (15)
business days thereafter, execute and deliver to the Holder of this Warrant a
certificate or certificates for the total number of whole Shares for which this
Warrant is being exercised in such names and denominations as are requested by
such Holder. If this Warrant shall be exercised with respect to less than all of
the Shares, the Holder shall be entitled to receive a new Warrant covering the
number of Shares in respect of which this Warrant shall not have been exercised,
which new Warrant shall in all other respects be identical to this Warrant. The
Company covenants and agrees that it will pay when due any and all state and
federal issue taxes which may be payable in respect of the issuance of this
Warrant or the issuance of any Shares upon exercise of this Warrant; provided,
however, that the Company shall have no liability for any state or federal
income taxes which may be payable by Holder upon income recognized by Holder as
a result of the exercise of this Warrant.
5. Covenants and Conditions. The above provisions are subject to the
------------------------
following:
(a) Neither this Warrant nor the Shares have been registered under the
Securities Act of 1933 (the "Securities Act") or any state securities laws
("Blue Sky Laws"). This Warrant has been acquired for investment purposes
and not with a view to distribution or resale and may not be pledged,
hypothecated, sold, made subject to a security interest, or otherwise
transferred without (i) an effective registration statement for such
Warrant under the Securities Act and such applicable Blue Sky Laws, or (ii)
an opinion of counsel reasonably satisfactory to the Company that
registration is not required under the Securities Act or under any
applicable Blue Sky Laws. Transfer of the Shares issued upon the exercise
of this Warrant shall be restricted in the same manner and to the same
extent as the Warrant and, if required by applicable securities laws, the
certificates representing such Shares shall bear substantially the
following legend:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY APPLICABLE STATE SECURITIES LAW AND MAY NOT BE
TRANSFERRED UNTIL (i) A REGISTRATION STATEMENT UNDER THE ACT OR SUCH
APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH
REGARD THERETO, OR (ii) IN THE OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY REGISTRATION UNDER THE ACT OR SUCH APPLICABLE STATE SECURITIES
LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER.
(b) The Company covenants and agrees that all Shares which may be
issued upon exercise of this Warrant will, upon issuance and payment
therefor, be legally and validly issued and outstanding, fully paid and
nonassessable. The Company shall at all times reserve and keep available
for issuance upon the exercise of this Warrant such number of authorized
but unissued shares of Common Stock as will be sufficient to permit the
exercise in full of this Warrant.
6. Transfer of Warrant. Subject to the provisions of Section 5, this
--------------------
Warrant may be transferred, in whole or in part, to any person or business
entity, by presentation of the Warrant to the Company with written instructions
for such transfer and by the execution by such transferee of an investment
letter in a form reasonably satisfactory to the Company. Upon such
2
<PAGE>
presentation for transfer and receipt of such investment letter, the Company
shall promptly execute and deliver a new Warrant or Warrants in the form hereof
in the name of the assignee or assignees and in the denominations specified in
such instructions. The Company shall pay all expenses in connection with the
preparation, issuance and delivery of Warrants under this Section 6; provided,
however, that the Holder shall reimburse the Company for any out-of-pocket
expenses incurred by the Company in connection with such issuance.
7. Warrant Holder Not Shareholder; Rights Offering. This Warrant does not
-----------------------------------------------
confer upon the Holder hereof, as such, any right whatsoever as a shareholder of
the Company. Notwithstanding the foregoing, in the event the Company should
offer to all of the Company's shareholders the right to purchase any securities
of the company, then all shares of Common Stock that are subject to this Warrant
shall be deemed to be outstanding and owned by the Holder as of the subscription
date and the Holder shall be entitled to participate in such rights offering as
if it were a shareholder.
8. Adjustment Upon Changes in Company Common Stock. The number of shares
-----------------------------------------------
of Common Stock subject to this Warrant and the price per share of such shares
shall be adjusted by the Company proportionately to reflect changes in the
capitalization of the Company as a result of any recapitalization,
reclassification, stock dividend, stock split, combination of shares, exchange
of shares or any other similar change in the Company's capital structure which
affects holders of Common Stock generally. All adjustments described herein
shall be reflected on the Company's stock warrant ledger and the Holder shall
receive written notice thereof.
9. Change of Control. In the event of a merger, consolidation,
-----------------
recapitalization, combination or exchange of shares occurring after the date
hereof pursuant to which the Company is not the surviving entity, the Company
covenants that it will use its best efforts to obtain from the acquiring entity,
as a condition to the closing of such transaction or event, the right for the
Holder to exchange this Warrant, at its sole option and in lieu of exercise
hereof, for a warrant to purchase shares of the acquiring entity. The period of
exercise of such new warrant shall be equal to the remaining duration of the
exercise period of this Warrant and shall permit the Holder to purchase that
number of shares or other consideration of the acquiring entity which the Holder
would be entitled to receive as a result of such merger, consolidation,
recapitalization, combination or exchange of shares if this Warrant had been
exercised immediately prior to such merger, consolidation, recapitalization,
combination or exchange of shares (or the record date, if any, for such
transaction or event) for the same aggregate exercise price as provided for in
this Warrant.
10. Registration.
------------
(a) The Company agrees that, in the event that on the date of exercise
of this Warrant the Company has on file with the Securities and Exchange
Commission (the "Commission") on effective registration statement providing
for the sale of any of the Company's equity securities on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act (an "Equity
Shelf"), the Company shall promptly amend the Equity Shelf so as to permit
the offer for sale by the Holder(s) of the Shares, from time to time
pursuant to Rule 415 under the Securities Act. The Company shall keep the
Equity Shelf effective for the Selling Period (as defined below) until the
earlier of: (i) the date that all of the Shares are sold; or (ii) the date
that the Holder(s) of the Shares holds, together with all other shares of
the Company's Common Stock beneficially owned by such Holder(s) (as defined
in Rule 13d-3 under the Securities Act of 1934, as amended) no more than
one-quarter of one percent (0.25%) of the total number of shares of Common
Stock then outstanding, (the "Selling Period"). The Company shall maintain
the effectiveness of the Debentures' Shelf during the Selling Period, and
shall amend and supplement such
3
<PAGE>
registration statement to the extent necessary to permit offers for resale
thereunder of all or any of the Shares without further registration under
the Securities Act. The Company shall bear the entire expense of the
registration, provided, however, that the Holder(s) of the Shares shall be
responsible for the fees of any counsel or other professionals retained by
the Holder, and any transfer taxes or underwriting discounts or commissions
applicable to the sale of the Shares.
(b) Notwithstanding the foregoing, the Company and the holders of the
Shares agree that if at any time after the date hereof the Company shall
propose to file a registration statement with respect to any of its Common
Stock on a form suitable for a secondary offering, it will give notice in
writing to such effect to the registered holders of the Warrant and the
Shares at least 30 days prior to such filing, and, at the written request
of any such registered holder, made within 10 days after the receipt of
such notice, will include therein at the Company's cost and expense (except
for the fees and expenses of counsel to such holders and underwriting
discounts, commissions, and filing fees, attributable to the Shares
included therein) such of the Shares as such holders shall request;
provided, however, that if the offering being registered by the Company is
underwritten and if no other outstanding Common Stock is offered thereby by
a person or entity other than the Company and if the representative of the
underwriters certifies in writing that the inclusion therein of the Shares
would materially and adversely affect the sale of the securities to be sold
by the Company thereunder, the Shares shall not be included in such
registration statement or such registration statement shall include only so
many shares as will not have such an effect.
The Company, at its own expense, will cause the prospectus included in
such registration statement to meet the requirements of the Securities Act
for a period of at least nine months after the effective date of such
registration statement.
(c) At the time any registration statement filed in accordance with
the provisions of Section 10(b) above becomes effective, and at the
effective date of any post effective amendment thereto, the Company will,
at its own expense, furnish to the holders of the shares included in such
registration statement pursuant to this Section 10, an opinion of the
Company's counsel to the effect that the registration statement and the
prospectus contained therein, and each amendment or supplement thereto, as
of their respective effective or issue dates, comply as to form in all
material respects with the requirements of the Securities Act and the rules
and regulations promulgated thereunder.
Such counsel shall also state that no facts have come to the attention
of such counsel which cause them to believe that such registration
statement, the prospectus contained therein, or any amendment or supplement
thereto, as of their respective effective or issue dates, contains any
untrue statement of any material fact or omits to state any material fact
necessary to make the statements therein not misleading (except that no
statement need be made with respect to any financial statements, notes
thereto or other financial data or other expertized material contained
therein, or any information provided for inclusion therein by the holder of
the Shares).
If for any reason the Company's counsel is unable to make such a
statement and unless the representative of the underwriters directs
otherwise, the Company shall so notify the holders of the Shares and shall
use its best efforts to remove expeditiously all impediments to the
rendering of such opinion.
(d) The Company shall promptly notify the participating holders of
Shares of the occurrence of any event as a result of which any current
prospectus included in a
4
<PAGE>
registration statement filed pursuant to this Section 10 includes any
misstatement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing.
(e) The Company's obligations under Section 10(b) with respect to each
holder of Shares are expressly conditioned upon such holder's furnishing to
the Company in writing such information concerning such holder and the
terms of such holder's proposed offering as the Company or the
representative of the underwriters shall reasonably request for inclusion
in the registration statement. If any registration statement including any
of the Shares is filed, the Company shall indemnify each holder thereof
(and each underwriter for such holder and each person, if any, who controls
such underwriter within the meaning of the Securities Act) from any loss,
claim, damage or liability arising out of or based upon any untrue
statement of a material fact contained in such registration statement or
any omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, except for any
such statement or omission based on information furnished in writing by
such holder of the shares expressly for use in connection with such
registration statement; and such holder shall indemnify the Company (and
each of its officers and directors who has signed such registration
statement, each director, each person, if any, who controls the Company
within the meaning of the Securities Act, each underwriter for the Company
and each person, if any, who controls such underwriter within the meaning
of the Securities Act) and each other such holder against any loss, claim,
damage or liability arising from any such statement or omission which was
made in reliance upon information furnished in writing to the Company by
such holder of the shares expressly for use in connection with such
registration statement.
(f) The rights of the holder of this Warrant or the Shares pursuant to
this Section 10 shall terminate on the date the Holder holds, together with
all other shares of the Company's Common Stock beneficially owned by such
Holder(s) (as defined in Rule 13d-3 under the Securities Act of 1934, as
amended) no more than one-quarter of one percent (0.25%) of the total
number of shares of Common Stock then outstanding, (the "Selling Period").
11. Certain Notices. In case at any time the Company shall propose to (i)
---------------
declare any cash dividend upon its Common Stock; (ii) declare any dividend upon
its Common Stock payable in stock or make any special dividend or other
distribution to the holders of its Common Stock; (iii) offer for subscription to
the holders of any shares of its Common Stock or otherwise issue, or enter into
an agreement providing for the issuance of, any additional shares of stock of
any class or other rights (other than with respect to options to purchase Common
Stock granted pursuant to stock option plans approved by stockholders of the
Company); (iv) reorganize, or reclassify the capital stock of the Company, or
consolidate, merge or otherwise combine with, or sell all or substantially all
of its assets to, another corporation; or (v) voluntarily or involuntarily
dissolve, liquidate or wind up of the affairs of the Company; then, in each such
case, the Company shall give, by certified or registered mail: (a) at least 20
days' prior written notice of the date on which the books of the Company shall
close or a record shall be taken for such dividend distribution or subscription
rights or for determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, and (b) in the case of such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, at least 20
days' prior written notice of the date when the same shall take place. Any
notice required by clause (a) shall also specify, in the case of any such
dividend, distribution or subscription rights, the date on which the holders of
Common Stock shall be entitled thereto, and any notice required by clause (b)
shall specify the date on which the holders of Common Stock shall be entitled to
exchange their Common Stock for
5
<PAGE>
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, as the case may be.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its duly authorized officer as of the date first above written.
CARDIAC CONTROL SYSTEMS, INC.
By: /s/Alan J. Rabin
---------------------
Alan J. Rabin
President
6
<PAGE>
EXHIBIT 10.1
Coast
Loan and Security Agreement
Borrower: Cardiac Control Systems, Inc.
Address: Three Commerce Boulevard
Palm Coast, Florida 32164
Date: June 13, 1997
THIS LOAN AND SECURITY AGREEMENT is entered into on the above date between COAST
BUSINESS CREDIT(R), a division of Southern Pacific Thrift & Loan Association
("Coast"), a California corporation, with offices at 12121 Wilshire Boulevard,
Suite 1111, Los Angeles, California 90025, and the borrower(s) named above
(jointly and severally, the "Borrower"), whose chief executive office is located
at the above address ("Borrower's Address"). The Schedule to this Agreement
(the "Schedule") shall for all purposes be deemed to be a part of this
Agreement, and the same is an integral part of this Agreement. (Definitions of
certain terms used in this Agreement are set forth in Section 8 below.)
1. LOANS.
1.1 Loans. Coast will make loans to Borrower (the "Loans"), in amounts
determined by Coast in its sole discretion, up to the amounts (the "Credit
Limit") shown on the Schedule, provided no Default or Event of Default has
occurred and is continuing.
1.2 Interest. All Loans and all other monetary Obligations shall bear interest
at the rate shown on the Schedule, except where expressly set forth to the
contrary in this Agreement. Interest shall be payable monthly, on the last day
of the month. Interest may, in Coast's discretion, be charged to Borrower's
loan account, and the same shall thereafter bear interest at the same rate as
the other Loans. Regardless of the amount of Obligations that may be
outstanding from time to time, Borrower shall pay Coast minimum monthly interest
during the term of this Agreement with respect to all of the Loans based on the
minimum daily loan balance set forth on the Schedule (the "Minimum Monthly
Interest").
1.3 Fees. Borrower shall pay Coast the fee(s) shown on the Schedule, which are
in addition to all interest and other sums payable to Coast and are not
refundable.
2. SECURITY INTEREST.
2.1 Security Interest. To secure the payment and performance of all of the
Obligations when due, Borrower hereby grants to Coast a security interest in all
of Borrower's interest in the following, whether now owned or hereafter
acquired, and wherever located: All Receivables, Inventory, Equipment,
investment property and General Intangibles, including, without limitation, all
of Borrower's Deposit Accounts, and all money, and all property now or at any
time in the future in Coast's possession (including claims and credit balances),
and all proceeds of any of the foregoing (including proceeds of any insurance
policies, proceeds of proceeds, and claims against third parties), all products
of any of the foregoing, and all books and records related to any of the
foregoing (all of the foregoing, together with all other property in which Coast
may now or in the future be granted a lien or security interest, is referred to
herein, collectively, as the "Collateral").
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER.
In order to induce Coast to enter into this Agreement and to make Loans,
Borrower represents and warrants to Coast as follows, and Borrower covenants
that the following representations will continue to be true, and that Borrower
will at all times comply with all of the following covenants:
3.1 Corporate Existence and Authority. Borrower, if a corporation, is and will
continue to be, duly organized, validly existing and in good standing under the
laws of the jurisdiction of its
<PAGE>
incorporation. Borrower is and will continue to be qualified and licensed to do
business in all jurisdictions in which any failure to do so would have a
material adverse effect on Borrower. The execution, delivery and performance by
Borrower of this Agreement, and all other documents contemplated hereby (i) have
been duly and validly authorized, (ii) are enforceable against Borrower in
accordance with their terms (except as enforcement may be limited by equitable
principles and by bankruptcy, insolvency, reorganization, moratorium or similar
laws relating to creditors' rights generally), and (iii) do not violate
Borrower's articles or certificate of incorporation, or Borrower's by-laws, or
any law or any material agreement or instrument which is binding upon Borrower
or its property, and (iv) do not constitute grounds for acceleration of any
material indebtedness or obligation under any material agreement or instrument
which is binding upon Borrower or its property.
3.2 Name; Trade Names and Styles. The name of Borrower set forth in the
heading to this Agreement is its correct name. Listed on the Schedule are all
prior names of Borrower and all of Borrower's present and prior trade names.
Borrower shall give Coast 30 days' prior written notice before changing its name
or doing business under any other name. Borrower has complied, and will in the
future comply, with all laws relating to the conduct of business under a
fictitious business name.
3.3 Place of Business; Location of Collateral. The address set forth in the
heading to this Agreement is Borrower's chief executive office. In addition,
Borrower has places of business and Collateral is located only at the locations
set forth on the Schedule. Borrower will give Coast at least 30 days prior
written notice before opening any additional place of business, changing its
chief executive office, or moving any of the Collateral to a location other than
Borrower's Address or one of the locations set forth on the Schedule.
3.4 Title to Collateral; Permitted Liens. Borrower is now, and will at all
times in the future be, the sole owner of all the Collateral, except for items
of Equipment which are leased by Borrower. The Collateral now is and will
remain free and clear of any and all liens, charges, security interests,
encumbrances and adverse claims, except for Permitted Liens. Coast now has, and
will continue to have, a first-priority perfected and enforceable security
interest in all of the Collateral, subject only to the Permitted Liens, and
Borrower will at all times defend Coast and the Collateral against all claims of
others. None of the Collateral now is or will be affixed to any real property
in such a manner, or with such intent, as to become a fixture. Borrower is not
and will not become a lessee under any real property lease pursuant to which the
lessor may obtain any rights in any of the Collateral and no such lease now
prohibits, restrains, impairs or will prohibit, restrain or impair Borrower's
right to remove any Collateral from the leased premises. Whenever any
Collateral is located upon premises in which any third party has an interest
(whether as owner, mortgagee, beneficiary under a deed of trust, lien or
otherwise), Borrower shall, whenever requested by Coast, use its best efforts to
cause such third party to execute and deliver to Coast, in form acceptable to
Coast, such waivers and subordinations as Coast shall specify, so as to ensure
that Coast's rights in the Collateral are, and will continue to be, superior to
the rights of any such third party. Borrower will keep in full force and
effect, and will comply with all the terms of, any lease of real property where
any of the Collateral now or in the future may be located.
3.5 Maintenance of Collateral. Borrower will maintain the Collateral in good
working condition, and Borrower will not use the Collateral for any unlawful
purpose. Borrower will immediately advise Coast in writing of any material loss
or damage to the Collateral.
3.6 Books and Records. Borrower has maintained and will maintain at Borrower's
Address complete and accurate books and records, comprising an accounting system
in accordance with generally accepted accounting principles.
3.7 Financial Condition, Statements and Reports. All financial statements now
or in the future delivered to Coast have been, and will be, prepared in
conformity with generally accepted accounting principles (except, in the case of
unaudited financial statements, for the absence of footnotes and subject to
normal year-end adjustments) and now and in the future will fairly reflect the
financial condition of Borrower, at the times and for the periods therein
stated. Between the last date covered by any such statement provided to
2
<PAGE>
Coast and the date hereof, there has been no material adverse change in the
financial condition or business of Borrower. Borrower is now and will continue
to be solvent.
3.8 Tax Returns and Payments; Pension Contributions. Borrower has timely
filed, and will timely file, all tax returns and reports required by foreign,
federal, state and local law, and Borrower has timely paid, and will timely pay,
all foreign, federal, state and local taxes, assessments, deposits and
contributions now or in the future owed by Borrower. Borrower may, however,
defer payment of any contested taxes, provided that Borrower (i) in good faith
contests Borrower's obligation to pay the taxes by appropriate proceedings
promptly and diligently instituted and conducted, (ii) notifies Coast in writing
of the commencement of, and any material development in, the proceedings, and
(iii) posts bonds or takes any other steps required to keep the contested taxes
from becoming a lien upon any of the Collateral. As of the date hereof,
Borrower is unaware of any claims or adjustments proposed for any of Borrower's
prior tax years which could result in additional taxes becoming due and payable
by Borrower. Borrower has paid, and shall continue to pay all amounts necessary
to fund all present and future pension, profit sharing and deferred compensation
plans in accordance with their terms, and Borrower has not and will not withdraw
from participation in, permit partial or complete termination of, or permit the
occurrence of any other event with respect to, any such plan which could result
in any liability of Borrower, including any liability to the Pension Benefit
Guaranty Corporation or its successors or any other governmental agency.
Borrower shall, at all times, utilize the services of an outside payroll service
providing for the automatic deposit of all payroll taxes payable by Borrower.
3.9 Compliance with Law. Borrower has complied, and will comply, in all
material respects, with all provisions of all material foreign, federal, state
and local laws and regulations relating to Borrower, including, but not limited
to, those relating to Borrower's ownership of real or personal property, the
conduct and licensing of Borrower's business, and environmental matters.
3.10 Litigation. Except as disclosed in the Schedule, there is no claim, suit,
litigation, proceeding or investigation pending or (to best of Borrower's
knowledge) threatened by or against or affecting Borrower in any court or before
any governmental agency (or any basis therefor known to Borrower) which may
result, either separately or in the aggregate, in any material adverse change in
the financial condition or business of Borrower, or in any material impairment
in the ability of Borrower to carry on its business in substantially the same
manner as it is now being conducted. Borrower will promptly inform Coast in
writing of any claim, proceeding, litigation or investigation in the future
threatened or instituted by or against Borrower involving any single claim of
$50,000 or more, or involving $100,000 or more in the aggregate.
3.11 Use of Proceeds. All proceeds of all Loans shall be used solely for lawful
business purposes. Borrower is not purchasing or carrying any "margin stock"
(as defined in Regulation G of the Board of Governors of the Federal Reserve
System) and no part of the proceeds of any Loan will be used to purchase or
carry any "margin stock" or to extend credit to others for the purpose of
purchasing or carrying any "margin stock."
4. RECEIVABLES.
4.1 Representations Relating to Receivables. Borrower represents and warrants
to Coast as follows: Each Receivable with respect to which Loans are requested
by Borrower shall, on the date each Loan is requested and made, represent an
undisputed bona fide existing unconditional obligation of the Account Debtor
created by the sale, delivery, and acceptance of goods or the rendition of
services in the ordinary course of Borrower's business.
4.2 Representations Relating to Documents and Legal Compliance. Borrower
represents and warrants to Coast as follows: All statements made and all unpaid
balances appearing in all invoices, instruments and other documents evidencing
the Receivables are and shall be true and correct and all such invoices,
instruments and other documents and all of Borrower's books and records are and
shall be genuine and in all respects what they purport to be. All sales and
other transactions underlying or giving rise to each Receivable shall fully
comply with all applicable laws and governmental rules and regulations. All
signatures and indorsements on all documents, instruments, and agreements
relating to
3
<PAGE>
all Receivables are and shall be genuine, and all such documents, instruments
and agreements are and shall be legally enforceable in accordance with their
terms.
4.3 Schedules and Documents relating to Receivables. Borrower shall deliver to
Coast transaction reports and loan requests, schedules of Receivables, and
schedules of collections, all on Coast's standard forms; provided, however, that
Borrower's failure to execute and deliver the same shall not affect or limit
Coast's security interest and other rights in all of Borrower's Receivables, nor
shall Coast's failure to advance or lend against a specific Receivable affect or
limit Coast's security interest and other rights therein. Loan requests
received after 10:30 AM Pacific Time will not be considered by Coast until the
next Business Day. Together with each such schedule, or later if requested by
Coast, Borrower shall furnish Coast with copies (or, at Coast's request,
originals) of all contracts, orders, invoices, and other similar documents, and
all original shipping instructions, delivery receipts, bills of lading, and
other evidence of delivery, for any goods the sale or disposition of which gave
rise to such Receivables, and Borrower warrants the genuineness of all of the
foregoing. Borrower shall also furnish to Coast an aged accounts receivable
trial balance in such form and at such intervals as Coast shall request. In
addition, Borrower shall deliver to Coast the originals of all instruments,
chattel paper, security agreements, guarantees and other documents and property
evidencing or securing any Receivables, upon receipt thereof and in the same
form as received, with all necessary indorsements, all of which shall be with
recourse. Borrower shall also provide Coast with copies of all credit memos as
and when requested by Coast.
4.4 Collection of Receivables. Borrower shall have the right to collect all
Receivables, unless and until an Event of Default has occurred. Borrower shall
hold all payments on, and proceeds of, Receivables in trust for Coast, and
Borrower shall deliver all such payments and proceeds to Coast within one
Business Day after receipt by Borrower, in their original form, duly endorsed to
Coast, to be applied to the Obligations in such order as Coast shall determine.
Coast may, in its discretion, require that all proceeds of Collateral be
deposited by Borrower into a lockbox account, or such other "blocked account" as
Coast may specify, pursuant to a blocked account agreement in such form as Coast
may specify. Coast or its designee may, at any time, notify Account Debtors
that Coast has been granted a security interest in the Receivables.
4.5 Remittance of Proceeds. All proceeds arising from the disposition of any
Collateral shall be delivered to Coast within one Business Day after receipt by
Borrower, in their original form, duly endorsed to Coast, to be applied to the
Obligations in such order as Coast shall determine. Borrower agrees that it
will not commingle proceeds of Collateral with any of Borrower's other funds or
property, but will hold such proceeds separate and apart from such other funds
and property and in an express trust for Coast. Nothing in this Section limits
the restrictions on disposition of Collateral set forth elsewhere in this
Agreement.
4.6 Disputes. Borrower shall notify Coast promptly of all disputes or claims
relating to Receivables. Borrower shall not forgive (completely or partially),
compromise or settle any Receivable for less than payment in full, or agree to
do any of the foregoing, except that Borrower may do so, provided that: (i)
Borrower does so in good faith, in a commercially reasonable manner, in the
ordinary course of business, and in arm's length transactions, which are
reported to Coast on the regular reports provided to Coast; (ii) no Default or
Event of Default has occurred and is continuing; and (iii) taking into account
all such discounts settlements and forgiveness, the total outstanding Loans will
not exceed the Credit Limit. Coast may, at any time after the occurrence of an
Event of Default, settle or adjust disputes or claims directly with Account
Debtors for amounts and upon terms which Coast considers advisable in its
reasonable credit judgment and, in all cases, Coast shall credit Borrower's Loan
account with only the net amounts received by Coast in payment of any
Receivables.
4.7 Returns. Provided no Event of Default has occurred and is continuing, if
any Account Debtor returns any Inventory to Borrower in the ordinary course of
its business, Borrower shall promptly determine the reason for such return and
promptly issue a credit memorandum to the Account Debtor in the appropriate
amount. In the event any attempted return occurs after the occurrence of any
Event of Default, Borrower shall (i) hold the returned
4
<PAGE>
Inventory in trust for Coast, (ii) segregate all returned Inventory from all of
Borrower's other property, (iii) conspicuously label the returned Inventory as
subject to Coast's security interest, and (iv) immediately notify Coast of the
return of any Inventory, specifying the reason for such return, the location and
condition of the returned Inventory, and on Coast's request deliver such
returned Inventory to Coast.
4.8 Verification. Coast may, from time to time, verify directly with the
respective Account Debtors the validity, amount and other matters relating to
the Receivables, by means of mail, telephone or otherwise, either in the name of
Borrower or Coast or such other name as Coast may choose.
4.9 No Liability. Coast shall not under any circumstances be responsible or
liable for any shortage or discrepancy in, damage to, or loss or destruction of,
any goods, the sale or other disposition of which gives rise to a Receivable, or
for any error, act, omission, or delay of any kind occurring in the settlement,
failure to settle, collection or failure to collect any Receivable, or for
settling any Receivable in good faith for less than the full amount thereof, nor
shall Coast be deemed to be responsible for any of Borrower's obligations under
any contract or agreement giving rise to a Receivable. Nothing herein shall,
however, relieve Coast from liability for its own gross negligence or willful
misconduct.
5. ADDITIONAL DUTIES OF THE BORROWER.
5.1 Financial and Other Covenants. Borrower shall at all times comply with the
financial and other covenants set forth in the Schedule.
5.2 Insurance. Borrower shall, at all times insure all of the tangible
personal property Collateral and carry such other business insurance, with
insurers reasonably acceptable to Coast, in such form and amounts as Coast may
reasonably require, and Borrower shall provide evidence of such insurance to
Coast, so that Coast is satisfied that such insurance is, at all times, in full
force and effect. All liability insurance policies of Borrower shall name Coast
as an additional insured, and all property casualty and related insurance
policies of Borrower shall name Coast as a loss payee thereon and Borrower shall
cause a lenders loss payee endorsement in form reasonably acceptable to Coast.
Upon receipt of the proceeds of any such insurance, Coast shall apply such
proceeds in reduction of the Obligations as Coast shall determine in its sole
discretion, except that, provided no Default or Event of Default has occurred
and is continuing, Coast shall release to Borrower insurance proceeds with
respect to Equipment totaling less than $25,000, which shall be utilized by
Borrower for the replacement of the Equipment with respect to which the
insurance proceeds were paid. Coast may require reasonable assurance that the
insurance proceeds so released will be so used. If Borrower fails to provide or
pay for any insurance, Coast may, but is not obligated to, obtain the same at
Borrower's expense. Borrower shall promptly deliver to Coast copies of all
reports made to insurance companies.
5.3 Reports. Borrower, at its expense, shall provide Coast with the written
reports set forth in the Schedule, and such other written reports with respect
to Borrower (including budgets, sales projections, operating plans and other
financial documentation), as Coast shall from time to time reasonably specify.
5.4 Access to Collateral, Books and Records. At reasonable times, and on one
Business Day's notice, Coast, or its agents, shall have the right to inspect,
audit and copy Borrower's books and records and the Collateral (the "Audits").
Coast shall take reasonable steps to keep confidential all confidential
information obtained in any Audit, but Coast shall have the right to disclose
any such information to its auditors, regulatory agencies, and attorneys, and
pursuant to any subpoena or other legal process. The Audits shall be at
Borrower's expense and the charge for the Audits shall be $750 per person per
day (or such higher amount as shall represent Coast's then current standard
charge for the same), plus reasonable out of pocket expenses. Borrower will not
enter into any agreement with any accounting firm, service bureau or third party
to store Borrower's books or records at any location other than Borrower's
Address, without first notifying Coast of the same and obtaining the written
agreement from such accounting firm, service bureau or other third party to give
Coast the same rights with respect to access to books and records and related
rights as Coast has under this Loan Agreement.
5
<PAGE>
5.5 Negative Covenants. Borrower shall not, without Coast's prior written
consent, do any of the following: (i) merge or consolidate with another
corporation or entity, except in a transaction in which (A) the shareholders of
the Borrower hold at least 50% of the common stock and all other capital stock
of the surviving corporation immediately after such merger or consolidation, and
(B) the Borrower is the surviving corporation; (ii) acquire any assets, except
(A) in the ordinary course of business, or (B) in a transaction or a series of
transactions not involving the payment of an aggregate amount in excess of
$100,000; (iii) enter into any other transaction outside the ordinary course of
business; (iv) sell or transfer any Collateral, except for the sale of finished
Inventory in the ordinary course of Borrower's business, and except for the sale
of obsolete or unneeded Equipment in the ordinary course of business; (v) store
any Inventory or other Collateral with any warehouseman or other third party;
(vi) make any loans of any money or other assets, except (A) advances to
customers or suppliers in the ordinary course of business, (B) travel advances,
employee relocation loans and other employee loans and advances in the ordinary
course of business, and (C) loans to employees, officers and directors for the
purpose of purchasing equity securities of the Borrower; (vii) incur any debts,
outside the ordinary course of business, which would have a material, adverse
effect on Borrower or on the prospect of repayment of the Obligations; (viii)
guarantee or otherwise become liable with respect to the obligations of another
party or entity; (ix) pay or declare any dividends on Borrower's stock (except
for dividends payable solely in stock of Borrower); (x) redeem, retire, purchase
or otherwise acquire, directly or indirectly, any of Borrower's stock, except
that Borrower may repurchase stock owned by employees, directors and consultants
of Borrower pursuant to terms of employment, consulting or other stock
restriction agreements at such time as any such employee, director or consultant
terminates his or her affiliation with the Borrower, for an aggregate purchase
price not to exceed $100,000 in any fiscal year; (xi) make any change in
Borrower's capital structure which would have a material adverse effect on
Borrower or on the prospect of repayment of the Obligations; or (xii) dissolve
or elect to dissolve. Transactions permitted by the foregoing provisions of
this Section are only permitted if no Default or Event of Default would occur as
a result of such transaction.
5.6 Litigation Cooperation. Should any third-party suit or proceeding be
instituted by or against Coast with respect to any Collateral or relating to
Borrower, Borrower shall, without expense to Coast, make available Borrower and
its officers, employees and agents and Borrower's books and records, to the
extent that Coast may deem them reasonably necessary in order to prosecute or
defend any such suit or proceeding.
5.7 Indemnity. Borrower hereby agrees to indemnify Coast and hold Coast
harmless from and against any and all claims, debts, liabilities, demands,
obligations, actions, causes of action, penalties, reasonable costs and expenses
(including reasonable attorneys' fees), of every nature, character and
description, which Coast may sustain or incur based upon or arising out of any
of the Obligations, any actual or alleged failure to collect and pay over any
withholding or other tax relating to Borrower or its employees, any relationship
or agreement between Coast and Borrower, any actual or alleged failure of Coast
to comply with any writ of attachment or other legal process relating to
Borrower or any of its property, or any other matter, cause or thing whatsoever
occurred, done, omitted or suffered to be done by Coast relating to Borrower or
the Obligations (except any such amounts sustained or incurred as the result of
the gross negligence or willful misconduct of Coast). Notwithstanding any
provision in this Agreement to the contrary, the indemnity agreement set forth
in this Section shall survive any termination of this Agreement and shall for
all purposes continue in full force and effect.
5.8 Further Assurances. Borrower agrees, at its expense, on request by Coast,
to execute all documents and take all actions, as Coast, may deem reasonably
necessary or useful in order to perfect and maintain Coast's perfected security
interest in the Collateral, and in order to fully consummate the transactions
contemplated by this Agreement.
6. TERM.
6.1 Maturity Date. This Agreement shall continue in effect until the maturity
date set forth on the Schedule (the "Maturity Date"); provided that the Maturity
date shall automatically be extended, and this Agreement shall automatically and
continuously renew, for successive additional terms of one year each, unless one
party gives written notice to the
6
<PAGE>
other, not less than one hundred twenty days prior to the next Maturity Date,
that such party elects to terminate this Agreement effective on the next
Maturity Date.
6.2 Early Termination. This Agreement may be terminated prior to the Maturity
Date as follows: (i) by Borrower, effective three Business Days after written
notice of termination is given to Coast; or (ii) by Coast at any time after the
occurrence of an Event of Default, without notice, effective immediately. If
this Agreement is terminated by Borrower or by Coast under this Section 6.2,
Borrower shall pay to Coast a termination fee (the "Early Termination Fee") in
the amount shown on the Schedule. The Early Termination Fee shall be due and
payable on the effective date of termination and thereafter shall bear interest
at a rate equal to the rate applicable to the Receivable Loans.
6.3 Payment of Obligations. On the Maturity Date or on any earlier effective
date of termination, Borrower shall pay and perform in full all Obligations,
whether evidenced by installment notes or otherwise, and whether or not all or
any part of such Obligations are otherwise then due and payable. Without
limiting the generality of the foregoing, if on the Maturity Date, or on any
earlier effective date of termination, there are any outstanding Letters of
Credit issued by Coast or issued by another institution based upon an
application, guarantee, indemnity or similar agreement on the part of Coast,
then on such date Borrower shall provide to Coast cash collateral in an amount
equal to the face amount of all such Letters of Credit plus all interest, fees
and cost due or to become due in connection therewith, to secure all of the
Obligations relating to said Letters of Credit, pursuant to Coast's then
standard form cash pledge agreement. Notwithstanding any termination of this
Agreement, all of Coast's security interests in all of the Collateral and all of
the terms and provisions of this Agreement shall continue in full force and
effect until all Obligations have been paid and performed in full; provided
that, without limiting the fact that Loans are subject to the discretion of
Coast, Coast may, in its sole discretion, refuse to make any further Loans after
termination. No termination shall in any way affect or impair any right or
remedy of Coast, nor shall any such termination relieve Borrower of any
Obligation to Coast, until all of the Obligations have been paid and performed
in full. Upon payment and performance in full of all the Obligations and
termination of this Agreement, Coast shall promptly deliver to Borrower
termination statements, requests for reconveyances and such other documents as
may be required to fully terminate Coast's security interests.
7. EVENTS OF DEFAULT AND REMEDIES.
7.1 Events of Default. The occurrence of any of the following events shall
constitute an "Event of Default" under this Agreement, and Borrower shall give
Coast immediate written notice thereof: (a) Any material warranty,
representation, statement, report or certificate made or delivered to Coast by
Borrower or any of Borrower's officers, employees or agents, now or in the
future, shall be untrue or misleading in a material respect; or (b) Borrower
shall fail to pay when due any Loan or any interest thereon or any other
monetary Obligation; or (c) the total Loans and other Obligations outstanding at
any time shall exceed the Credit Limit; or (d) Borrower shall fail to deliver
the proceeds of Collateral to Coast as provided in Section 4.5 above, or shall
fail to give Coast access to its books and records or Collateral as provided in
Section 5.4 above, or shall breach any negative covenant set forth in Section
5.5 above; or (e) Borrower shall fail to comply with the financial covenants (if
any) set forth in the Schedule or shall fail to perform any other non-monetary
Obligation which by its nature cannot be cured; or (f) Borrower shall fail to
perform any other non-monetary Obligation, which failure is not cured within 5
Business Days after the date due; or (g) Any levy, assessment, attachment,
seizure, lien or encumbrance (other than a Permitted Lien) is made on all or any
part of the Collateral which is not cured within 10 days after the occurrence of
the same; or (h) any default or event of default occurs under any obligation
secured by a Permitted Lien, which is not cured within any applicable cure
period or waived in writing by the holder of the Permitted Lien; or (i) Borrower
breaches any material contract or obligation, which has or may reasonably be
expected to have a material adverse effect on Borrower's business or financial
condition; or (j) Dissolution, termination of existence, insolvency or business
failure of Borrower; or appointment of a receiver, trustee or custodian, for all
or any part of the property of, assignment for the benefit of creditors by, or
the commencement of any proceeding by
7
<PAGE>
Borrower under any reorganization, bankruptcy, insolvency, arrangement,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction, now or in the future in effect; or (k) the commencement of any
proceeding against Borrower or any guarantor of any of the Obligations under any
reorganization, bankruptcy, insolvency, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, now or in the
future in effect, which is not cured by the dismissal thereof within 30 days
after the date commenced; or (l) revocation or termination of, or limitation or
denial of liability upon, any guaranty of the Obligations or any attempt to do
any of the foregoing, or commencement of proceedings by any guarantor of any of
the Obligations under any bankruptcy or insolvency law; or (m) revocation or
termination of, or limitation or denial of liability upon, any pledge of any
certificate of deposit, securities or other property or asset of any kind
pledged by any third party to secure any or all of the Obligations, or any
attempt to do any of the foregoing, or commencement of proceedings by or against
any such third party under any bankruptcy or insolvency law; or (n) Borrower
makes any payment on account of any indebtedness or obligation which has been
subordinated to the Obligations, other than as permitted in the applicable
subordination agreement including, without limitation, any Subordination
Agreement with Sirrom Capital, or if any Person who has subordinated such
indebtedness or obligations terminates or in any way limits his subordination
agreement; or (o) there shall be a change in the record or beneficial ownership
of an aggregate of more than 20% of the outstanding shares of stock of Borrower,
in one or more transactions, compared to the ownership of outstanding shares of
stock of Borrower in effect on the date hereof, without the prior written
consent of Coast; or (p) Borrower shall generally not pay its debts as they
become due, or Borrower shall conceal, remove or transfer any part of its
property, with intent to hinder, delay or defraud its creditors, or make or
suffer any transfer of any of its property which may be fraudulent under any
bankruptcy, fraudulent conveyance or similar law; or (q) there shall be a
material adverse change in Borrower's business or financial condition; or (r)
Coast, acting in good faith and in a commercially reasonable manner, deems
itself insecure because of the occurrence of an event prior to the effective
date hereof of which Coast had no knowledge on the effective date or because of
the occurrence of an event on or subsequent to the effective date. Coast may
cease making any Loans hereunder during any of the above cure periods, and
thereafter if an Event of Default has occurred.
7.2 Remedies. Upon the occurrence, and during the continuance, of any Event of
Default, Coast, at its option, and without notice or demand of any kind (all of
which are hereby expressly waived by Borrower), may do any one or more of the
following: (a) Cease making Loans or otherwise extending credit to Borrower
under this Agreement or any other document or agreement; (b) Accelerate and
declare all or any part of the Obligations to be immediately due, payable, and
performable, notwithstanding any deferred or installment payments allowed by any
instrument evidencing or relating to any Obligation; (c) Take possession of any
or all of the Collateral wherever it may be found, and for that purpose Borrower
hereby authorizes Coast without judicial process to enter onto any of Borrower's
premises without interference to search for, take possession of, keep, store, or
remove any of the Collateral, and remain on the premises or cause a custodian to
remain on the premises in exclusive control thereof, without charge for so long
as Coast deems it reasonably necessary in order to complete the enforcement of
its rights under this Agreement or any other agreement; provided, however, that
should Coast seek to take possession of any of the Collateral by Court process,
Borrower hereby irrevocably waives: (i) any bond and any surety or security
relating thereto required by any statute, court rule or otherwise as an incident
to such possession; (ii) any demand for possession prior to the commencement of
any suit or action to recover possession thereof; and (iii) any requirement that
Coast retain possession of, and not dispose of, any such Collateral until after
trial or final judgment; (d) Require Borrower to assemble any or all of the
Collateral and make it available to Coast at places designated by Coast which
are reasonably convenient to Coast and Borrower, and to remove the Collateral to
such locations as Coast may deem advisable; (e) Complete the processing,
manufacturing or repair of any Collateral prior to a disposition thereof and,
for such purpose and for the purpose of removal, Coast shall have the right to
use Borrower's premises, vehicles, hoists, lifts, cranes, equipment and all
other property without charge; (f) Sell, lease or otherwise dispose of any of
the Collateral, in its
8
<PAGE>
condition at the time Coast obtains possession of it or after further
manufacturing, processing or repair, at one or more public and/or private sales,
in lots or in bulk, for cash, exchange or other property, or on credit, and to
adjourn any such sale from time to time without notice other than oral
announcement at the time scheduled for sale. Coast shall have the right to
conduct such disposition on Borrower's premises without charge, for such time or
times as Coast deems reasonable, or on Coast's premises, or elsewhere and the
Collateral need not be located at the place of disposition. Coast may directly
or through any affiliated company purchase or lease any Collateral at any such
public disposition, and if permissible under applicable law, at any private
disposition. Any sale or other disposition of Collateral shall not relieve
Borrower of any liability Borrower may have if any Collateral is defective as to
title or physical condition or otherwise at the time of sale; (g) Demand payment
of, and collect any Receivables and General Intangibles comprising Collateral
and, in connection therewith, Borrower irrevocably authorizes Coast to endorse
or sign Borrower's name on all collections, receipts, instruments and other
documents, to take possession of and open mail addressed to Borrower and remove
therefrom payments made with respect to any item of the Collateral or proceeds
thereof, and, in Coast's sole discretion, to grant extensions of time to pay,
compromise claims and settle Receivables and the like for less than face value;
(h) Offset against any sums in any of Borrower's general, special or other
Deposit Accounts with Coast; and (i) Demand and receive possession of any of
Borrower's federal and state income tax returns and the books and records
utilized in the preparation thereof or referring thereto. All reasonable
attorneys' fees, expenses, costs, liabilities and obligations incurred by Coast
with respect to the foregoing shall be due from the Borrower to Coast on demand.
Coast may charge the same to Borrower's loan account, and the same shall
thereafter bear interest at the same rate as is applicable to the Receivable
Loans. Without limiting any of Coast's rights and remedies, from and after the
occurrence of any Event of Default, the interest rate applicable to the
Obligations shall be increased by an additional three percent per annum.
7.3 Standards for Determining Commercial Reasonableness. Borrower and Coast
agree that a sale or other disposition (collectively, "sale") of any Collateral
which complies with the following standards will conclusively be deemed to be
commercially reasonable: (i) Notice of the sale is given to Borrower at least
five days prior to the sale, and, in the case of a public sale, notice of the
sale is published at least five days before the sale in a newspaper of general
circulation in the county where the sale is to be conducted; (ii) Notice of the
sale describes the collateral in general, non-specific terms; (iii) The sale is
conducted at a place designated by Coast, with or without the Collateral being
present; (iv) The sale commences at any time between 8:00 a.m. and 6:00 p.m; (v)
Payment of the purchase price in cash or by cashier's check or wire transfer is
required; (vi) With respect to any sale of any of the Collateral, Coast may (but
is not obligated to) direct any prospective purchaser to ascertain directly from
Borrower any and all information concerning the same. Coast shall be free to
employ other methods of noticing and selling the Collateral, in its discretion,
if they are commercially reasonable.
7.4 Power of Attorney. Upon the occurrence, and during the continuance, of any
Event of Default, without limiting Coast's other rights and remedies, Borrower
grants to Coast an irrevocable power of attorney coupled with an interest,
authorizing and permitting Coast (acting through any of its employees, attorneys
or agents) at any time, at its option, but without obligation, with or without
notice to Borrower, and at Borrower's expense, to do any or all of the
following, in Borrower's name or otherwise, but Coast agrees to exercise the
following powers in a commercially reasonable manner: (a) Execute on behalf of
Borrower any documents that Coast may, in its sole discretion, deem advisable in
order to perfect and maintain Coast's security interest in the Collateral, or in
order to exercise a right of Borrower or Coast, or in order to fully consummate
all the transactions contemplated under this Agreement, and all other present
and future agreements; (b) Execute on behalf of Borrower any document
exercising, transferring or assigning any option to purchase, sell or otherwise
dispose of or to lease (as lessor or lessee) any real or personal property which
is part of Coast's Collateral or in which Coast has an interest; (c) Execute on
behalf of Borrower, any invoices relating to any Receivable, any draft against
any Account Debtor and any notice to any Account Debtor, any proof of claim in
bankruptcy, any Notice of Lien, claim of mechanic's, materialman's or other
lien, or assignment or satisfaction of mechanic's, materialman's or other
9
<PAGE>
lien; (d) Take control in any manner of any cash or non-cash items of payment or
proceeds of Collateral; endorse the name of Borrower upon any instruments, or
documents, evidence of payment or Collateral that may come into Coast's
possession; (e) Endorse all checks and other forms of remittances received by
Coast; (f) Pay, contest or settle any lien, charge, encumbrance, security
interest and adverse claim in or to any of the Collateral, or any judgment based
thereon, or otherwise take any action to terminate or discharge the same; (g)
Grant extensions of time to pay, compromise claims and settle Receivables and
General Intangibles for less than face value and execute all releases and other
documents in connection therewith; (h) Pay any sums required on account of
Borrower's taxes or to secure the release of any liens therefor, or both; (i)
Settle and adjust, and give releases of, any insurance claim that relates to any
of the Collateral and obtain payment therefor; (j) Instruct any third party
having custody or control of any books or records belonging to, or relating to,
Borrower to give Coast the same rights of access and other rights with respect
thereto as Coast has under this Agreement; and (k) Take any action or pay any
sum required of Borrower pursuant to this Agreement and any other present or
future agreements. Any and all reasonable sums paid and any and all reasonable
costs, expenses, liabilities, obligations and attorneys' fees incurred by Coast
with respect to the foregoing shall be added to and become part of the
Obligations, and shall be payable on demand. Coast may charge the foregoing to
Borrower's loan account and the foregoing shall thereafter bear interest at the
same rate applicable to the Receivable Loans. In no event shall Coast's rights
under the foregoing power of attorney or any of Coast's other rights under this
Agreement be deemed to indicate that Coast is in control of the business,
management or properties of Borrower.
7.5 Application of Proceeds. All proceeds realized as the result of any sale
of the Collateral shall be applied by Coast first to the reasonable costs,
expenses, liabilities, obligations and attorneys' fees incurred by Coast in the
exercise of its rights under this Agreement, second to the interest due upon any
of the Obligations, and third to the principal of the Obligations, in such order
as Coast shall determine in its sole discretion. Any surplus shall be paid to
Borrower or other persons legally entitled thereto; Borrower shall remain liable
to Coast for any deficiency. If, Coast, in its sole discretion, directly or
indirectly enters into a deferred payment or other credit transaction with any
purchaser at any sale of Collateral, Coast shall have the option, exercisable at
any time, in its sole discretion, of either reducing the Obligations by the
principal amount of purchase price or deferring the reduction of the Obligations
until the actual receipt by Coast of the cash therefor.
7.6 Remedies Cumulative. In addition to the rights and remedies set forth in
this Agreement, Coast shall have all the other rights and remedies accorded a
secured party under the California Uniform Commercial Code and under all other
applicable laws, and under any other instrument or agreement now or in the
future entered into between Coast and Borrower, and all of such rights and
remedies are cumulative and none is exclusive. Exercise or partial exercise by
Coast of one or more of its rights or remedies shall not be deemed an election,
nor bar Coast from subsequent exercise or partial exercise of any other rights
or remedies. The failure or delay of Coast to exercise any rights or remedies
shall not operate as a waiver thereof, but all rights and remedies shall
continue in full force and effect until all of the Obligations have been fully
paid and performed.
8. DEFINITIONS. As used in this Agreement, the following terms have the
following meanings:
"Account Debtor" means the obligor on a Receivable.
--------------
"Affiliate" means, with respect to any Person, a relative, partner, shareholder,
---------
director, officer, or employee of such Person, or any parent or subsidiary of
such Person, or any Person controlling, controlled by or under common control
with such Person.
"Business Day" means a day on which Coast is open for business.
------------
"Code" means the Uniform Commercial Code as adopted and in effect in the State
----
of California from time to time.
"Collateral" has the meaning set forth in Section 2.1 above.
----------
10
<PAGE>
"Default" means any event which with notice or passage of time or both, would
-------
constitute an Event of Default.
"Deposit Account" has the meaning set forth in Section 9105 of the Code.
---------------
"Eligible Inventory" means Inventory which Coast, in its sole judgment, deems
------------------
eligible for borrowing, based on such considerations as Coast may from time to
time deem appropriate. Without limiting the fact that the determination of
which Inventory is eligible for borrowing is a matter of Coast's discretion,
Inventory which does not meet the following requirements will not be deemed to
be Eligible Inventory: Inventory which (i) consists of finished goods or raw
material, in good, new and salable condition which is not perishable, not
obsolete or unmerchantable, and is not comprised of work in process, packaging
materials or supplies; (ii) meets all applicable governmental standards; (iii)
has been manufactured in compliance with the Fair Labor Standards Act; (iv)
conforms in all respects to the warranties and representations set forth in this
Agreement; (v) is at all times subject to Coast's duly perfected, first priority
security interest; (vi) is situated at a one of the locations set forth on the
Schedule; and (vii) has not been consigned.
"Eligible Receivables" means Receivables arising in the ordinary course of
--------------------
Borrower's business from the sale of goods, rendition of services or royalty
payments arising from licensing agreements of Borrower to the extent
specifically approved by Coast in writing from time to time, which Coast, in its
good faith business judgment, shall deem eligible for borrowing, based on such
considerations as Coast may from time to time deem appropriate.
"Equipment" means all of Borrower's present and hereafter acquired machinery,
---------
molds, machine tools, motors, furniture, equipment, furnishings, fixtures, trade
fixtures, motor vehicles, tools, parts, dyes, jigs, goods and other tangible
personal property (other than Inventory) of every kind and description used in
Borrower's operations or owned by Borrower and any interest in any of the
foregoing, and all attachments, accessories, accessions, replacements,
substitutions, additions or improvements to any of the foregoing, wherever
located.
"Event of Default" means any of the events set forth in Section 7.1 of this
----------------
Agreement.
"General Intangibles" means all general intangibles of Borrower, whether now
-------------------
owned or hereafter created or acquired by Borrower, including, without
limitation, all choses in action, causes of action, corporate or other business
records, Deposit Accounts, inventions, designs, drawings, blueprints, patents,
patent applications, trademarks and the goodwill of the business symbolized
thereby, names, trade names, trade secrets, goodwill, copyrights, registrations,
licenses, franchises, customer lists, security and other deposits, rights in
all litigation presently or hereafter pending for any cause or claim (whether in
contract, tort or otherwise), and all judgments now or hereafter arising
therefrom, all claims of Borrower against Coast, rights to purchase or sell real
or personal property, rights as a licensor or licensee of any kind, royalties,
telephone numbers, proprietary information, purchase orders, and all insurance
policies and claims (including without limitation life insurance, key man
insurance, credit insurance, liability insurance, property insurance and other
insurance), tax refunds and claims, computer programs, discs, tapes and tape
files, claims under guaranties, security interests or other security held by or
granted to Borrower, all rights to indemnification and all other intangible
property of every kind and nature (other than Receivables).
"Inventory" means all of Borrower's now owned and hereafter acquired goods,
---------
merchandise or other personal property, wherever located, to be furnished under
any contract of service or held for sale or lease (including without limitation
all raw materials, work in process, finished goods and goods in transit, and
including without limitation all farm products), and all materials and supplies
of every kind, nature and description which are or might be used or consumed in
Borrower's business or used in connection with the manufacture, packing,
shipping, advertising, selling or finishing of such goods, merchandise or other
personal property, and all warehouse receipts, documents of title and other
documents representing any of the foregoing.
"Maximum Dollar Amount" has the meaning set forth in Section 1 of the Schedule.
---------------------
"Obligations" means all present and future Loans, advances, debts, liabilities,
-----------
obligations, guaranties,
11
<PAGE>
covenants, duties and indebtedness at any time owing by Borrower to Coast,
whether evidenced by this Agreement or any note or other instrument or document,
whether arising from an extension of credit, opening of a letter of credit,
banker's acceptance, loan, guaranty, indemnification or otherwise, whether
direct or indirect (including, without limitation, those acquired by assignment
and any participation by Coast in Borrower's debts owing to others), absolute or
contingent, due or to become due, including, without limitation, all interest,
charges, expenses, fees, attorney's fees, expert witness fees, audit fees,
letter of credit fees, collateral monitoring fees, closing fees, facility fees,
termination fees, minimum interest charges and any other sums chargeable to
Borrower under this Agreement or under any other present or future instrument or
agreement between Borrower and Coast.
"Permitted Liens" means the following: (i) purchase money security interests in
---------------
specific items of Equipment; (ii) leases of specific items of Equipment; (iii)
liens for taxes not yet payable; (iv) additional security interests and liens
consented to in writing by Coast, which consent shall not be unreasonably
withheld; (v) security interests being terminated substantially concurrently
with this Agreement; (vi) liens of materialmen, mechanics, warehousemen,
carriers, or other similar liens arising in the ordinary course of business and
securing obligations which are not delinquent; (vii) liens incurred in
connection with the extension, renewal or refinancing of the indebtedness
secured by liens of the type described above in clauses (i) or (ii) above,
provided that any extension, renewal or replacement lien is limited to the
property encumbered by the existing lien and the principal amount of the
indebtedness being extended, renewed or refinanced does not increase; (viii)
liens in favor of customs and revenue authorities which secure payment of
customs duties in connection with the importation of goods. Coast will have the
right to require, as a condition to its consent under subparagraph (iv) above,
that the holder of the additional security interest or lien sign an
intercreditor agreement on Coast's then standard form, acknowledge that the
security interest is subordinate to the security interest in favor of Coast, and
agree not to take any action to enforce its subordinate security interest so
long as any Obligations remain outstanding, and that Borrower agree that any
uncured default in any obligation secured by the subordinate security interest
shall also constitute an Event of Default under this Agreement.
"Person" means any individual, sole proprietorship, partnership, joint venture,
------
trust, unincorporated organization, association, corporation, government, or any
agency or political division thereof, or any other entity.
"Receivables" means all of Borrower's now owned and hereafter acquired accounts
-----------
(whether or not earned by performance), royalty payments arising from Borrower's
licensing agreements, letters of credit, contract rights, chattel paper,
instruments, securities, documents and all other forms of obligations at any
time owing to Borrower, all guaranties and other security therefor, all
merchandise returned to or repossessed by Borrower, and all rights of stoppage
in transit and all other rights or remedies of an unpaid vendor, lienor or
secured party.
Other Terms. All accounting terms used in this Agreement, unless otherwise
- -----------
indicated, shall have the meanings given to such terms in accordance with
generally accepted accounting principles, consistently applied. All other terms
contained in this Agreement, unless otherwise indicated, shall have the meanings
provided by the Code, to the extent such terms are defined therein.
9. GENERAL PROVISIONS.
9.1 Interest Computation. In computing interest on the Obligations, all
checks, wire transfers and other items of payment received by Coast (including
proceeds of Receivables and payment of the Obligations in full) shall be deemed
applied by Coast on account of the Obligations three Business Days after receipt
by Coast of immediately available funds, and, for purposes of the foregoing, any
such funds received after 10:30 AM on any day shall be deemed received on the
next Business Day. Coast shall not, however, be required to credit Borrower's
account for the amount of any item of payment which is unsatisfactory to Coast
in its sole discretion, and Coast may charge Borrower's loan account for the
amount of any item of payment which is returned to Coast unpaid.
12
<PAGE>
9.2 Application of Payments. All payments with respect to the Obligations may
be applied, and in Coast's sole discretion reversed and re-applied, to the
Obligations, in such order and manner as Coast shall determine in its sole
discretion.
9.3 Charges to Accounts. Coast may, in its discretion, require that Borrower
pay monetary Obligations in cash to Coast, or charge them to Borrower's Loan
account, in which event they will bear interest at the same rate applicable to
the Loans. Coast may also, in its discretion, charge any monetary Obligations
to Borrower's Deposit Accounts maintained with Coast.
9.4 Monthly Accountings. Coast shall provide Borrower monthly with an account
of advances, charges, expenses and payments made pursuant to this Agreement.
Such account shall be deemed correct, accurate and binding on Borrower and an
account stated (except for reverses and reapplications of payments made and
corrections of errors discovered by Coast), unless Borrower notifies Coast in
writing to the contrary within thirty days after each account is rendered,
describing the nature of any alleged errors or admissions.
9.5 Notices. All notices to be given under this Agreement shall be in writing
and shall be given either personally or by reputable private delivery service or
by regular first-class mail, or certified mail return receipt requested,
addressed to Coast or Borrower at the addresses shown in the heading to this
Agreement, or at any other address designated in writing by one party to the
other party. Notices to Coast shall be directed to the Commercial Finance
Division, to the attention of the Division Manager or the Division Credit
Manager. All notices shall be deemed to have been given upon delivery in the
case of notices personally delivered, or at the expiration of one Business Day
following delivery to the private delivery service, or two Business Days
following the deposit thereof in the United States mail, with postage prepaid.
9.6 Severability. Should any provision of this Agreement be held by any court
of competent jurisdiction to be void or unenforceable, such defect shall not
affect the remainder of this Agreement, which shall continue in full force and
effect.
9.7 Integration. This Agreement and such other written agreements, documents
and instruments as may be executed in connection herewith are the final, entire
and complete agreement between Borrower and Coast and supersede all prior and
contemporaneous negotiations and oral representations and agreements, all of
which are merged and integrated in this Agreement. There are no oral
-----------------
understandings, representations or agreements between the parties which are not
- -------------------------------------------------------------------------------
set forth in this Agreement or in other written agreements signed by the parties
- --------------------------------------------------------------------------------
in connection herewith.
- -----------------------
9.8 Waivers. The failure of Coast at any time or times to require Borrower to
strictly comply with any of the provisions of this Agreement or any other
present or future agreement between Borrower and Coast shall not waive or
diminish any right of Coast later to demand and receive strict compliance
therewith. Any waiver of any default shall not waive or affect any other
default, whether prior or subsequent, and whether or not similar. None of the
provisions of this Agreement or any other agreement now or in the future
executed by Borrower and delivered to Coast shall be deemed to have been waived
by any act or knowledge of Coast or its agents or employees, but only by a
specific written waiver signed by an authorized officer of Coast and delivered
to Borrower. Borrower waives demand, protest, notice of protest and notice of
default or dishonor, notice of payment and nonpayment, release, compromise,
settlement, extension or renewal of any commercial paper, instrument, account,
General Intangible, document or guaranty at any time held by Coast on which
Borrower is or may in any way be liable, and notice of any action taken by
Coast, unless expressly required by this Agreement.
9.9 No Liability for Ordinary Negligence. Neither Coast, nor any of its
directors, officers, employees, agents, attorneys or any other Person affiliated
with or representing Coast shall be liable for any claims, demands, losses or
damages, of any kind whatsoever, made, claimed, incurred or suffered by Borrower
or any other party through the ordinary negligence of Coast, or any of its
directors, officers, employees, agents, attorneys or any other Person affiliated
with or representing Coast, but nothing herein shall relieve Coast from
liability for its own gross negligence or willful misconduct.
13
<PAGE>
9.10 Amendment. The terms and provisions of this Agreement may not be waived or
amended, except in a writing executed by Borrower and a duly authorized officer
of Coast.
9.11 Time of Essence. Time is of the essence in the performance by Borrower of
each and every obligation under this Agreement.
9.12 Attorneys Fees, Costs and Charges. Borrower shall reimburse Coast for all
reasonable attorneys' fees and all filing, recording, search, title insurance,
appraisal, audit, and other reasonable costs incurred by Coast, pursuant to, or
in connection with, or relating to this Agreement (whether or not a lawsuit is
filed), including, but not limited to, any reasonable attorneys' fees and costs
Coast incurs in order to do the following: prepare and negotiate this Agreement
and the documents relating to this Agreement; obtain legal advice in connection
with this Agreement or Borrower; enforce, or seek to enforce, any of its rights;
prosecute actions against, or defend actions by, Account Debtors; commence,
intervene in, or defend any action or proceeding; initiate any complaint to be
relieved of the automatic stay in bankruptcy; file or prosecute any probate
claim, bankruptcy claim, third-party claim, or other claim; examine, audit,
copy, and inspect any of the Collateral or any of Borrower's books and records;
protect, obtain possession of, lease, dispose of, or otherwise enforce Coast's
security interest in, the Collateral; and otherwise represent Coast in any
litigation relating to Borrower. If either Coast or Borrower files any lawsuit
against the other predicated on a breach of this Agreement, the prevailing party
in such action shall be entitled to recover its reasonable costs and attorneys'
fees, including (but not limited to) reasonable attorneys' fees and costs
incurred in the enforcement of, execution upon or defense of any order, decree,
award or judgment. Borrower shall also pay Coast's standard charges for
returned checks and for wire transfers, in effect from time to time. All
attorneys' fees, costs and charges to which Coast may be entitled pursuant to
this Paragraph may be charged by Coast to Borrower's loan account and shall
thereafter bear interest at the same rate as the Receivable Loans.
9.13 Benefit of Agreement. The provisions of this Agreement shall be binding
upon and inure to the benefit of the respective successors, assigns, heirs,
beneficiaries and representatives of Borrower and Coast; provided, however, that
Borrower may not assign or transfer any of its rights under this Agreement
without the prior written consent of Coast, and any prohibited assignment shall
be void. No consent by Coast to any assignment shall release Borrower from its
liability for the Obligations.
9.14 Joint and Several Liability. If Borrower consists of more than one Person,
their liability shall be joint and several, and the compromise of any claim
with, or the release of, any Borrower shall not constitute a compromise with, or
a release of, any other Borrower.
9.15 Limitation of Actions. Any claim or cause of action by Borrower against
Coast, its directors, officers, employees, agents, accountants or attorneys,
based upon, arising from, or relating to this Loan Agreement, or any other
present or future document or agreement, or any other transaction contemplated
hereby or thereby or relating hereto or thereto, or any other matter, cause or
thing whatsoever, occurred, done, omitted or suffered to be done by Coast, its
directors, officers, employees, agents, accountants or attorneys, shall be
barred unless asserted by Borrower by the commencement of an action or
proceeding in a court of competent jurisdiction by the filing of a complaint
within one year after the first act, occurrence or omission upon which such
claim or cause of action, or any part thereof, is based, and the service of a
summons and complaint on an officer of Coast, or on any other person authorized
to accept service on behalf of Coast, within thirty (30) days thereafter.
Borrower agrees that such one-year period is a reasonable and sufficient time
for Borrower to investigate and act upon any such claim or cause of action. The
one-year period provided herein shall not be waived, tolled, or extended except
by the written consent of Coast in its sole discretion. This provision shall
survive any termination of this Loan Agreement or any other present or future
agreement.
9.16 Paragraph Headings; Construction. Paragraph headings are only used in this
Agreement for convenience. Borrower and Coast acknowledge that the headings may
not describe completely the subject matter of the applicable paragraph, and the
headings shall not be used in any manner to construe, limit, define or interpret
any term or provision of this Agreement. The term "including",
14
<PAGE>
whenever used in this Agreement, shall mean "including (but not limited to)".
This Agreement has been fully reviewed and negotiated between the parties and no
uncertainty or ambiguity in any term or provision of this Agreement shall be
construed strictly against Coast or Borrower under any rule of construction or
otherwise.
9.17 Governing Law; Jurisdiction; Venue. This Agreement and all acts and
transactions hereunder and all rights and obligations of Coast and Borrower
shall be governed by the laws of the State of California. As a material part of
the consideration to Coast to enter into this Agreement, Borrower (i) agrees
that all actions and proceedings relating directly or indirectly to this
Agreement shall, at Coast's option, be litigated in courts located within
California, and that the exclusive venue therefor shall be Los Angeles County;
(ii) consents to the jurisdiction and venue of any such court and consents to
service of process in any such action or proceeding by personal delivery or any
other method permitted by law; and (iii) waives any and all rights Borrower may
have to object to the jurisdiction of any such court, or to transfer or change
the venue of any such action or proceeding.
15
<PAGE>
9.18 Mutual Waiver of Jury Trial. BORROWER AND COAST EACH HEREBY WAIVE THE
RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF,
OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE
INSTRUMENT OR AGREEMENT BETWEEN COAST AND BORROWER, OR ANY CONDUCT, ACTS OR
OMISSIONS OF COAST OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH COAST OR BORROWER, IN ALL
OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
Borrower:
Cardiac Control Systems, Inc.
By /s/ Alan J. Rabin
-----------------------------------------
President or Vice President
Coast:
COAST BUSINESS CREDIT, a division of Southern Pacific Thrift & Loan
Association
By /s/ Robert D. Peters
-----------------------------------------
Title: Vice President
-------------------------------------
16
<PAGE>
17
<PAGE>
Coast
Schedule to Loan and Security Agreement
Borrower: Cardiac Control Systems, Inc.
Address: 3 Commerce Boulevard
Palm Coast, Florida 32164
Date: June 13, 1997
This Schedule forms an integral part of the Loan and Security Agreement between
Coast Business Credit, a division of Southern Pacific Thrift & Loan Association,
and the above borrowers of even date.
1. CREDIT LIMIT
(Section 1.1): Loans in an amount not to exceed the lesser of a total
of $3,500,000 at any one time outstanding (the "Maximum
Dollar Amount"), or the sum of (1), (2), (3) and (4)
below:
(1) Loans (the "Receivable Loans") in
an amount up to 80% of the amount of
Borrower's Eligible Receivables (as
defined in Section 8 above), which in no
event are more than 90 days old (120
days old for medical and foreign
Receivables) from invoice date. Without
limiting the foregoing:
a. foreign Receivables may be
considered Eligible Receivables (subject
to all of the other criteria herein) if
(i) the Receivable is due from an
account debtor which has a verifiable
credit history, (ii) the account debtor
is a foreign subsidiary of a large
United States company with a
demonstrated credit history, (iii) the
account debtor has a Dunn & Bradstreet
rating of 3A2 or better, (iv) the
account is backed by a letter of credit
assigned to Coast or (v) the account is
insured by insurance acceptable to and
assigned to Coast, but all such foreign
accounts shall be acceptable in the sole
discretion of Coast, and;
b. Receivables owing from Grupo
Taper, S.A. shall not be Eligible
Receivables.
S-1
<PAGE>
(2) Loans (the "Inventory Loans") in
an amount not to exceed the lesser of:
(a) up to 40% of eligible raw
material and 50% of eligible
finished goods of Borrower's
Eligible Inventory (as
defined in Section 8 above),
calculated at the lower of
cost or market value and
determined on a first-in,
first-out basis, or
(b) $500,000.
(3) $500,000 Capital
Expenditure Subline (CAPEX
Subline). Coast may, at its option,
provide Borrower amounts not to exceed
$500,000 in the aggregate for the
purchase of new or used equipment. No
CAPEX Subline advance by Coast shall be
for less than $100,000 and Coast will
not advance more than 80% of invoice
cost on new equipment less tax and
installation costs or 80% of the
appraised liquidation value on used
equipment, less tax and installation
costs. Appraised liquidation value shall
be determined by Coast in its sole
discretion by an appraiser acceptable to
Coast. The outstanding amounts under the
CAPEX Subline shall be amortized over 48
months plus interest payable monthly,
with the unpaid balance due and payable
on the Maturity Date unless this
Agreement is automatically renewed
pursuant to Section 6.1 hereof. The
CAPEX Subline shall only be available if
no Event of Default has occurred and is
continuing. The CAPEX Subline will be
evidenced by that certain CAPEX
Promissory Note in the form requested by
Coast.
(4) Term Loans. Coast will advance a
term loan ("Term Loan") in the aggregate
amount of $300,000. The Term Loan shall
be repayable based on a 48-month
amortization and shall be evidenced by
Secured Promissory Note in form and
substance acceptable to Coast.
S-2
<PAGE>
2. INTEREST.
Interest Rate
(Section 1.2): A rate equal to the "Prime Rate" plus 2% per annum,
other than the Term Loan and CAPEX Subline which will
accrue interest at the Prime Rate plus 2.25% per annum,
calculated on the basis of a 360-day year for the
actual number of days elapsed. The Interest Rate
applicable to all Loans shall be adjusted monthly as of
the first day of each month, and the interest to be
charged for each month shall be based on the highest
"Prime Rate" in effect during said month, but in no
event shall the rate of interest charged on any Loans
in any month be less than 9% per annum. "Prime Rate"
means the actual "Reference Rate" or the substitute
therefor of the Bank of America NT & SA whether or not
that rate is the lowest interest rate charged by said
bank. If the Prime Rate, as defined, is unavailable,
"Prime Rate" shall mean the highest of the prime rates
published in the Wall Street Journal on the first
business day of the month, as the base rate on
corporate loans at large U.S. money center commercial
banks.
Minimum Monthly
Interest
(Section 1.2): The product of the applicable Interest Rate times a
minimum loan balance of $1,000,000.
3. FEES (Section 1.3):
Commitment Fee: $35,000, payable on the date of Coast's initial
funding, plus 1% of the Maximum Dollar Amount payable
on each anniversary of the date of Coast's initial
funding.
Facility Fee: $3,500, per calendar quarter, payable on the first day
of each calendar quarter, pro rated for such partial
quarter that remains of the current quarter on the date
of Coast's initial funding.
Renewal Fee: A fee equal to 1/2% of 1% of the Maximum Dollar Amount
due and payable upon the automatic renewal of the
Agreement as provided in Section 6.2 above.
All fees shall be deemed earned on the date of Coast's
initial funding.
4. MATURITY DATE
(Section 6.1): June 30, 2000, subject to automatic renewal as provided
in Section 6.1 above, and early termination as provided
in Section 6.2 above.
S-3
<PAGE>
Early Termination Fee
(Section 6.2): A fee of 3% of the Maximum Dollar Amount will be due
for any termination on or prior to the first
anniversary of this Agreement, a fee of 2% after the
first anniversary of this Agreement and prior to the
second anniversary, and a fee of 1% of the Maximum
Dollar Amount after the second anniversary of this
Agreement.
5. REPORTING.
(Section 5.3):
Borrower shall provide Coast with the following:
1. Monthly Receivable agings, aged by invoice
date, within ten days after the end of each
month.
2. Monthly accounts payable agings, aged by
invoice date, and outstanding or held check
registers within ten days after the end of
each month.
3. Monthly perpetual inventory reports for the
Inventory valued on a first-in, first-out
basis at the lower of cost or market (in
accordance with generally accepted accounting
principles) including, without limitation, a
list of consigned inventory by product, dollar
value and identity of the consignee, or such
other inventory reports as are reasonably
requested by Coast, all within ten days after
the end of each month.
4. Monthly internally prepared financial
statements, as soon as available, and in any
event within thirty days after the end of each
month.
5. Quarterly financial statements together with
Borrower's 10Q filed with the Securities and
Exchange Commission, as soon as available, and
in any event within forty five days after the
end of each fiscal quarter.
6. Quarterly customer lists, including customer
name, address, and phone number.
7. Annual audited financial statements, together
with the Borrower's 10K filed with the
Securities & Exchange Commission, as soon as
available, and in any event within 90 days
following the end of Borrower's fiscal year,
certified by independent certified public
accountants acceptable to Coast.
8. Copies of all supply and distribution
contracts and all intellectual property
licensing contracts within 10 days after
Borrower's receipt thereof.
S-4
<PAGE>
6. BORROWER INFORMATION:
Prior Names of
Borrower
(Section 3.2): None
Prior Trade
Names of Borrower
(Section 3.2): None
Existing Trade
Names of Borrower
(Section 3.2): CCS Inc. Japan
Other Locations and
Addresses (Section 3.3): No other domestic locations
Material Adverse
Litigation
(Section 3.10): Lawsuit filed on January 4, 1994 by Strategica
Group, Inc. against Borrower.
7. OTHER CONDITIONS
AND COVENANTS
(Section 5.1): Without limiting any other term or condition herein,
in no event shall Coast have any obligations under
this Agreement unless and until each of the following
conditions have been satisfied as of the closing
date:
a. Borrower shall have a minimum
excess lending availability of at least
$200,000 after accounting for Coast's
initial funding.
b. Borrower shall have no accounts
payable more than 90 days past due from
invoice date or due date, as Coast shall
determine.
c. The Borrower shall have
established a lockbox in favor of Coast for
the collection of all remittances.
d. Coast shall have a first
priority lien on all assets of Borrower.
e. Coast shall have obtained a
first priority mortgage on Borrower's real
property at 3 Commerce Boulevard, Palm
Coast, Florida limited however to $500,000
plus foreclosure costs and expenses. The
S-5
<PAGE>
mortgage shall be supported by title
insurance in form and substance satisfactory
in the discretion of Coast.
f. Coast shall have received a
warrant for 37,500 common shares at an
exercise price of $4 per share and as
otherwise described in the Warrant Agreement
in favor of Coast of even date.
g. All taxes shall be currently
paid.
h. Coast shall have received such
subordinations (including standstills and
collateral waivers) as may be required by
Coast in form and substance acceptable to
Coast in its sole discretion including,
without limitation, a subordination
agreement from Sirrom Capital.
Borrower shall comply with the following additional
covenants:
i. Borrower shall at all times have
a minimum Tangible Net Worth (as determined
by generally accepted accounting principles)
of $1,800,000.
"Tangible Net Worth" shall mean as of any particular
date, consolidated stockholders equity, plus
subordinated debt, if any, less goodwill, patents,
trademarks, copyrights, franchises, formulas,
leaseholds, noncompete agreements, engineering plans,
deferred tax benefits and organization costs.
S-6
<PAGE>
j. Borrower shall notify Coast in
writing of the expiration or termination of
any supply contract, distribution contract
or intellectual property licensing contract,
all within one business day thereof.
Borrower: Coast:
CARDIAC CONTROL SYSTEMS, INC. COAST BUSINESS CREDIT, a division of
Southern Pacific Thrift & Loan Association
By /s/ Alan J. Rabin By /s/ Robert D. Peters
------------------------------ ---------------------------------------
Title: Vice President
-----------------------------------
S-7
<PAGE>
EXHIBIT 10.2
Coast
SECURED PROMISSORY NOTE
$300,000 June 13, 1997
FOR VALUE RECEIVED, the undersigned ("Borrower") promises to pay to the order of
COAST BUSINESS CREDIT ("Coast"), at 12121 Wilshire Boulevard, Suite 1111, Los
Angeles, California, or at such other address as the holder of this Note shall
direct, the principal sum of $300,000, payable $6,250.00 principal per month,
plus interest as hereinafter provided, commencing on July 30, 1997 and
continuing on the last day of each succeeding month. The entire remaining
unpaid principal balance of this Note, plus any and all accrued and unpaid
interest, shall be due and payable on the earlier of: (i) June 30, 2001, or (ii)
the date that the Loan and Security Agreement between the Borrower and Coast
dated the date hereof (the "Loan Agreement") is terminated by either party for
any reason whatsoever.
This Note shall bear interest on the unpaid principal balance hereof from time
to time outstanding at a rate equal to the "Prime Rate" (as hereinafter defined)
plus 2.25 per annum, but in no event shall the interest rate in any month be
less than 9% per annum. Interest shall be calculated on the basis of a 360-day
year for the actual number of days elapsed. As used herein, the term "Prime
Rate" shall mean the actual "Reference Rate" or the substitute therefor of the
Bank of America NT & SA whether or not that rate is the lowest interest rate
charged by said bank. The interest rate applicable to this Note shall be
adjusted monthly, as of the first day of each month, and the interest rate
charged during each month shall be based on the highest Prime Rate in effect
during said month. If the Prime Rate is unavailable, "Prime Rate" shall mean
the highest of the prime rates published in the Wall Street Journal on the first
business day of the month, as the base rate of corporate loans at large U.S.
money center banks. Accrued interest shall be payable monthly, in addition to
the principal payments provided above, commencing on June 30, 1997, and
continuing on the last day of each succeeding month.
Principal of, and interest on, this Note shall be payable in lawful money of the
United States of America. If a payment hereunder becomes due and payable on a
Saturday, Sunday or legal holiday, the due date thereof shall be extended to the
next succeeding business day, and interest shall be payable thereon during such
extension. This Note may not be prepaid except in accordance with the terms and
subject to the conditions of the Loan Agreement. All prepayments will be
applied in the inverse order of maturity of payments.
In the event any payment of principal or interest on this Note is not paid in
full when due, or if any other default or event of default occurs under the Loan
Agreement or any other present or future instrument, document, or agreement
between Borrower and Coast, Coast may, at its option, at any time thereafter,
declare the entire unpaid principal balance of this Note plus all accrued
interest to be immediately due and payable, without notice or demand. Without
limiting the foregoing, and without limiting Coast's other rights and remedies,
in the event any installment of principal or interest is not paid in full on or
before the date due, Borrower agrees that it would be impracticable or extremely
difficult to fix the actual damages resulting therefrom to Coast, and therefore
the Borrower agrees immediately to pay to Coast an amount equal to 5% of the
installment (or portion thereof) not paid, as liquidated damages, to compensate
Coast for the internal administrative expenses in administering the default.
Without limiting the foregoing, and without limiting Coast's other rights and
remedies, in the event any installment of interest is not paid on or before the
date due, it shall thereafter bear like interest as the principal of this Note.
The acceptance of any installment of principal or interest by
<PAGE>
Coast after the time when it becomes due, as herein specified, shall not be held
to establish a custom, or to waive any rights of Coast to enforce payment when
due of any further installments or any other rights, nor shall any failure or
delay to exercise any rights be held to waive the same.
All payments hereunder are to be applied first to costs and fees referred to
hereunder, second to the payment of accrued interest and the remaining balance
to the payment of principal. Any principal prepayment hereunder shall be
applied against principal payments in the inverse order of maturity. Coast
shall have the continuing and exclusive right to apply or reverse and reapply
any and all payments hereunder in its sole discretion.
Borrower agrees to pay all costs and expenses (including without limitation
attorney's fees) incurred by Coast in connection with or related to this Note,
or its enforcement, whether or not suit be brought. Borrower hereby further
waives presentment, demand for payment, notice of dishonor, notice of
nonpayment, protest, notice of protest, and any and all other notices and
demands in connection with the delivery, acceptance, performance, default, or
enforcement of this Note, and Borrower hereby waives the benefits of any statute
of limitations with respect to any action to enforce, or otherwise related to
this Note.
This Note is secured by the Loan Agreement and all other present and future
security agreements between Borrower and Coast. Nothing herein shall be deemed
to limit any of the terms or provisions of the Loan Agreement or any other
present or future document, instrument or agreement, between Borrower and Coast,
and all of Coast's rights and remedies hereunder and thereunder are cumulative.
In the event any one or more of the provisions of this Note shall for any reason
be held to be invalid, illegal or unenforceable, the same shall not affect any
other provision of this Note and the remaining provisions of this Note shall
remain in full force and effect.
No waiver or modification of any of the terms or provisions of this Note shall
be valid or binding unless set forth in a writing signed by a duly authorized
officer of Coast, and then only to the extent therein specifically set forth.
If more than one person executes this Note, their obligations hereunder shall be
joint and several.
COAST AND BORROWER EACH HEREBY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO: (i) THIS NOTE;
OR (ii) ANY OTHER PRESENT OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN COAST AND
BORROWER; OR (iii) ANY CONDUCT, ACTS OR OMISSIONS OF COAST OR BORROWER OR ANY OF
THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS
AFFILIATED WITH COAST OR BORROWER.
This Note is payable in, and shall be governed by the internal laws of, the
State of California.
CARDIAC CONTROL SYSTEMS, INC.
By /s/ Alan J. Rabin
------------------------------
President
2
<PAGE>
EXHIBIT 10.3
CAPEX PROMISSORY NOTE
---------------------
$500,000 As of June 13, 1997
FOR VALUE RECEIVED, the undersigned, Cardiac Control Systems, Inc.,
hereby promises to pay to Coast Business Credit, a division of Southern Pacific
Thrift & Loan Association, ("Lender"), or order, at 12121 Wilshire Blvd., Suite
1111, Los Angeles, California, or at such other address as the holder may
specify in writing, the principal sum of Five Hundred Thousand Dollars
($500,000.00) or so much as shall have been drawn by the undersigned pursuant to
the terms of the Agreement (as defined below), plus interest in the manner and
upon the terms and conditions set forth below. This CAPEX Promissory Note
("Note") is made pursuant to that certain Loan and Security Agreement of even
date between the undersigned and Lender (collectively the "Agreement"), the
provisions of which are incorporated herein by this reference. Capitalized
terms herein, unless otherwise noted, shall have the meaning set forth in the
Agreement.
1.0 Rate and Payment of Interest
----------------------------
This Note shall bear interest on the unpaid principal balance hereof
from time to time out-standing at a rate equal to the "Prime Rate" (as
hereinafter defined) plus 2.25% per annum. Interest shall be calculated on the
basis of a 360-day year for the actual number of days elapsed. As used herein,
the term "Prime Rate" shall mean the actual "Reference Rate" or the substitute
therefor of Bank of America NT & SA whether or not that rate is the lowest
interest rate charged by said bank. The interest rate applicable to this Note
shall be adjusted monthly, as of the first day of each month, and the interest
rate charged during each month shall be based on the highest Prime Rate in
effect during said month. If the Prime Rate is unavailable, "Prime Rate" shall
mean the highest of the prime rates published in the Wall Street Journal on the
first business day of the month, as the base rate of corporate loans at large
U.S. money center banks. Accrued interest shall be payable monthly, commencing
on June 30, 1997, and continuing on the last day of each succeeding month.
Principal of, and interest on, this Note shall be payable in lawful
money of the United States of America. If a payment hereunder becomes due and
payable on a Saturday, Sunday or legal holiday, the due date thereof shall be
extended to the next succeeding business day, and interest shall be payable
thereon during such extension.
2.0 Schedule of Principal Payments
------------------------------
Subject to the provisions of Section 4.0 below, principal under this
Note shall be due and payable in accordance with the following schedule:
<PAGE>
a. Subject to Section 2.0(b) below, equal successive monthly
installments of principal based on a forty-eight month amortization beginning on
July 31, 1997 and continuing on the last day of each month thereafter; and
b. A final installment of all unpaid principal plus accrued and
unpaid interest and charges on the earlier of (i) June 30, 2001, or (ii) the
date the Agreement is terminated by either party for any reason whatsoever.
3.0 Prepayment
----------
Prepayment may be made under this Note in whole or in part subject to
the prepayment charge, as set forth in the Agreement. All prepayments shall be
applied in the inverse order of maturity of payments.
4.0 Holder's Right of Acceleration
------------------------------
If the Agreement is terminated for any reason whatsoever, the entire
remaining principal balance and all accrued and unpaid interest and other fees
and charges with respect to this Note shall, at Coast's option, become due and
payable on the effective date of termination.
5.0 Holder's Rights upon Default
----------------------------
In the event any payment of principal or interest on this Note is not
paid in full when due, or if any other default or event of default occurs under
the Loan Agreement or any other present or future instrument, document, or
agreement between Borrower and Coast, Coast may, at its option, at any time
thereafter, declare the entire unpaid principal balance of this Note plus all
accrued interest to be immediately due and payable, without notice or demand.
Without limiting the foregoing, and without limiting Coast's other rights and
remedies, in the event any installment of principal or interest is not paid in
full on or before the date due, Borrower agrees that it would be impracticable
or extremely difficult to fix the actual damages resulting therefrom to Coast,
and therefore the Borrower agrees immediately to pay to Coast an amount equal to
5% of the installment (or portion thereof) not paid, as liquidated damages, to
compensate Coast for the internal administrative expenses in administering the
default. Without limiting the foregoing, and without limiting Coast's other
rights and remedies, in the event any installment of interest is not paid on or
before the date due, it shall thereafter bear like interest as the principal of
this Note. The acceptance of any installment of principal or interest by Coast
after the time when it becomes due, as herein specified, shall not be held to
establish a custom, or to waive any rights of Coast to enforce payment when due
of any further installments or any other rights, nor shall any failure or delay
to exercise any rights be held to waive the same.
All payments hereunder are to be applied first to costs and fees
referred to hereunder, second to the payment of accrued interest and the
remaining balance to the payment of principal. Any principal prepayment
hereunder, to the extent permitted under the Agreement, shall be applied against
principal payments in the inverse order of maturity. Coast shall have the
continuing and exclusive right to apply or reverse and reapply any and all
payments hereunder in its sole discretion.
<PAGE>
6.0 Additional Rights of Holder
---------------------------
If any installment of principal or interest hereunder is not paid when
due, the holder shall have, in addition to the rights set forth herein, in the
Agreement and under law, the right to compound interest by adding the unpaid
interest to principal, with such amount thereafter bearing interest at the rate
provided in this Note.
7.0 General Provisions
------------------
7.1 If this Note is not paid when due or upon the occurrence of
an Event of Default, the undersigned further promises to pay all costs of
collection, foreclosure fees, and reasonable attorneys' fees incurred by the
holder, whether or not suit is filed hereon, and the fees, costs and expenses as
provided in the Agreement.
7.2 The undersigned hereby consents to any and all renewals,
replacements and/or extensions of time for payment of this Note before, at or
after maturity.
7.3 The undersigned hereby consents to the acceptance, release
or substitution of security for this Note.
7.4 Presentment for payment, notice of dishonor, protest and
notice of protest are hereby expressly waived.
7.5 In no event whatsoever shall the interest rate and other
charges charged hereunder exceed the highest rate permissible under any law
which a court of competent jurisdiction shall, in a final determination, deem
applicable hereto. In the event that a court determines that the payee hereunder
has received interest in excess of the highest rate applicable hereto, the payee
shall promptly refund such excess amount to the undersigned and the provisions
hereof shall be deemed amended to provide for such permissible rate.
7.6 No delay or omission on the part of the holder of this Note
in exercising any right shall operate as a waiver thereof or of any other right.
7.7 A waiver by the holder of this Note upon any one occasion
shall not be construed as a bar or waiver of any right or remedy on any future
occasion.
7.8 Should any one or more of the provisions of this Note be
determined illegal or unenforceable, all other provisions shall nevertheless
remain effective.
7.9 This Note cannot be changed, modified, amended or
terminated orally.
7.10 This Note shall be governed by the laws of the State of
California, without reference to the principles of conflicts of laws thereof.
8.0 Security for the Note
---------------------
<PAGE>
This Note is secured by the Collateral described in the Agreement and
in that certain Mortgage of even date and is subject to all of the terms and
conditions thereof, including, but not limited to, the remedies specified
therein.
IN WITNESS WHEREOF, this Note has been executed and delivered as of
the date first set forth above.
CARDIAC CONTROL SYSTEMS, INC.
By: /s/ Alan J. Rabin
--------------------------------
Its: President CEO
-------------------------------
<PAGE>
EXHIBIT 10.4
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
Coast Business Credit(R)
12121 Wilshire Boulevard, Suite 1111
Los Angeles, California 90025
- -------------------------------------------------------------------------------
[Space above this line for Recorder's use only]
INTERCREDITOR AND SUBORDINATION AGREEMENT
NOTICE: THIS INTERCREDITOR AND SUBORDINATION AGREEMENT RESULTS IN YOUR SECURITY
- ------
INTEREST IN THE PROPERTY BECOMING SUBJECT TO AND OF LOWER PRIORITY THAN THE LIEN
OF SOME OTHER OR LATER SECURITY INSTRUMENT.
This Intercreditor and Subordination Agreement (this "Agreement"),
dated as of June 13, 1997, is entered into by and between Sirrom Capital
Corporation ("Sirrom") and Coast Business Credit(R), a division of Southern
Pacific Thrift & Loan Association ("Coast"), to determine the parties'
respective rights, remedies and interests with respect to Cardiac Control
Systems, Inc., a Delaware corporation ("Borrower"). This Agreement is made with
respect to the following facts:
A. Borrower is the owner of certain improved real property
located at Three Commerce Boulevard, Palm Coast, Flagler County,
Florida, and more particularly described in Exhibit A attached hereto
---------
(the "Property").
B. Sirrom is a creditor of Borrower, as evidenced by that
certain Secured Promissory Note dated March 31, 1995, in the original
principal amount of $1,500,000 (the "Subordinated Instrument"), and
such indebtedness is secured by the lien of that certain Mortgage,
Assignment of Rents and Leases and Security Agreement dated as of
March 31, 1995, executed by Borrower, as mortgagor, for the benefit of
Sirrom, as beneficiary, recorded on April 18, 1995, as Instrument No.
95004828 of the Official Records of Flagler County, Florida, which
constitutes a first priority lien on the Property (the "Sirrom
------
Mortgage") and a security interest in some or all of the personal
--------
property of Borrower.
C. Coast is proposing to extend various secured financial
accommodations to Borrower for the purpose of, among others, providing
working capital; and Coast proposes to secure such financial
accommodations with a perfected lien on substantially all of
Borrower's tangible and intangible assets, including, without
limitation, a perfected lien on the Property (the "Coast Mortgage").
<PAGE>
However, Coast is unwilling to provide such financial accommodations
unless Sirrom subordinates its claims in the manner set forth below.
Sirrom hereby acknowledges and affirms that Coast's financial
accommodations to Borrower constitute valuable consideration to
Sirrom.
NOW, THEREFORE, for good and valuable consideration, receipt of which
is hereby acknowledged by the parties hereto, and to induce Coast to extend such
financial accommodations to Borrower as it may determine, and to better secure
Coast with respect to the foregoing, the parties hereby agree as follows:
1. Subordination and Standby.
-------------------------
a. Indebtedness. Except as set forth in Sections 2 and 3 of this
------------
Agreement, unless and until all Senior Indebtedness (as herein defined) has been
fully paid and satisfied in cash, Sirrom shall not accept or receive, by setoff
or in any other manner, from Borrower the whole or any part of any sums which
may now or hereafter be owing to Sirrom by Borrower, or any of its predecessors,
successors or assigns, including, without limitation, a receiver, trustee or
debtor in possession (the term "Borrower" shall hereinafter include any such
predecessors, successors or assigns) under or in connection with the
Subordinated Indebtedness (as herein defined);
b. Liens and Security Interests. Except as set forth in Section 2
----------------------------
of this Agreement, any and all of Sirrom's liens and security interests against
any assets of Borrower and any other assets securing the Subordinated
Indebtedness, whether now existing or hereafter granted or arising, shall in
each case be subordinate to the rights, liens and interests held by Coast with
respect to the Senior Indebtedness. Accordingly, except as set forth in Section
2 of this Agreement, unless and until all of the Senior Indebtedness has been
fully paid and satisfied in cash:
(1) During the continuance of a Payment Blockage (as defined
below), Sirrom shall not commence, prosecute or participate in any other
action, whether private, judicial, equitable, administrative or otherwise,
including, without limitation, any bankruptcy case against Borrower or any
of its assets, provided that, as more fully set forth in Section 8 hereof,
Sirrom may file a proof of claim in a bankruptcy or insolvency proceeding
involving Borrower, which proof of claim shall indicate Sirrom's
subordination hereunder;
(2) During the continuance of a Payment Blockage, Sirrom shall
have no right either to possess any such assets, enforce any security
interests in, foreclose, levy or execute upon, or collect or attach any
such assets, whether by private or judicial action or otherwise; and
(3) the right, title, interest and claims of Sirrom in and to
the proceeds of any policy of insurance covering or relating to any assets
of Borrower (including, without limitation, the Property) or any awards or
other compensation paid in connection with any permanent or temporary
taking in eminent domain of all or any part of or interest in the Property,
are irrevocably subject and subordinate to the right, title, interest and
claims of Coast in and to such proceeds and awards. Subject to the terms of
Sections 2 and 3 hereof, Sirrom shall promptly remit to Coast all such
proceeds and awards that may be received by Sirrom so long as any part of
the Senior Indebtedness remains outstanding.
2
<PAGE>
c. "Senior Indebtedness". The term "Senior Indebtedness" shall
-------------------
mean, collectively all indebtedness and other obligations of Borrower now or
hereafter existing under that certain Loan and Security Agreement of even date
herewith between Borrower and Coast and the Schedule thereto (the "Loan and
Security Agreement"), any promissory notes and all other documents, instruments
and agreements executed by Borrower with or in favor of Coast in connection
therewith, as they may be amended, supplemented, extended, renewed, modified or
restated from time to time, up to a maximum principal amount of $3,500,000 plus
interest, fees, expenses, indemnities or otherwise (in each case whether
incurred or accruing after the initiation of any bankruptcy case, whether or not
allowed).
d. "Subordinated Indebtedness". The term "Subordinated
-------------------------
Indebtedness" shall mean, collectively, all indebtedness and other obligations
of Borrower to Sirrom under the Subordinated Instrument and any other document,
instrument or agreement, whether the sums represent principal, interest,
dividends, costs, attorneys' fees, charges, or other obligations due or not due,
whether incurred directly or indirectly and whether absolute or contingent.
2. Limited Subordination of Lien on Property. Notwithstanding
-----------------------------------------
anything to the contrary herein, the lien of the Coast Mortgage on the Property
shall be senior to the lien of the Sirrom Mortgage on the Property only to the
extent of $500,000, plus Coast's costs and expenses of collection and
enforcement (including reasonable attorneys' fees) of the Coast Mortgage.
3. Permitted Payments. Subject to the conditions set forth herein,
------------------
Borrower may pay to Sirrom, and Sirrom may accept or receive and shall not be
required to hold in trust, regularly scheduled payments of principal and
interest on the Subordinated Instrument ("Permitted Payments"); provided, that
--------
no payment on any of the Subordinated Indebtedness may be made during any
Payment Blockage instituted pursuant to Section 4 of this Agreement. Sirrom
agrees that prepayments of the Subordinated Indebtedness or payments resulting
from either the breach of any covenant or warranty contained in the Subordinated
Instrument or the acceleration of any amounts due thereunder shall not be
Permitted Payments for the purpose of this Agreement.
4. Payment Blockages.
-----------------
a. Payment Blockage Notices. Upon the occurrence and at any time
------------------------
during the continuation of any Default (as herein defined) under the Loan and
Security Agreement, Coast may deliver written notice thereof to Sirrom in the
manner set forth herein (each a "Payment Blockage Notice"), specifying the
Default or Defaults upon which Coast has elected to prohibit payments from
Borrower to Sirrom ("Payment Blockage"). A Payment Blockage shall be in effect
for the purposes hereof for a period of 120 days from the date of delivery or
deemed delivery of any Payment Blockage Notice unless, prior to the expiration
of such 120 day period, the Defaults are cured, if curable, or waived in writing
or the benefits of such Payment Blockage are waived in writing by Coast.
b. "Defaults". For the purposes of this Agreement, "Default"
--------
shall mean any Event of Default under and as defined in the Loan and Security
Agreement, any default under the Coast Mortgage, any promissory note or any
other document, instrument or agreement evidencing all or any part of the Senior
Indebtedness, or any other failure to pay any portion of the principal of,
premium, if any, or interest on any Senior Indebtedness as and when due and
payable (as a result of maturity, acceleration or otherwise).
3
<PAGE>
5. Modifications of Indebtedness.
-----------------------------
a. Senior Indebtedness. Coast shall have the right, without
-------------------
notice to Sirrom, to amend, supplement or modify the Senior Indebtedness, in any
manner whatsoever, including, without limitation, any extensions or shortening
of time of payments (even if such shortening causes any Senior Indebtedness to
be due on demand or otherwise), any revision of any amortization schedule with
respect thereto, and Sirrom consents and agrees to any such amendment,
supplement or modification.
b. Subordinated Indebtedness. Sirrom understands and agrees that
-------------------------
neither the Subordinated Instrument nor any other document, instrument or
agreement evidencing all or any part of the Subordinated Indebtedness may be
modified or amended without Coast's prior written consent.
6. Subordinated Indebtedness Owed Only to Sirrom. Sirrom warrants
---------------------------------------------
and represents that it is the holder of the Subordinated Indebtedness and has
the authority to enter into this Agreement without the consent of any third
party including any financial institution, government agency, Sirrom
Investments, Inc. or otherwise.
Sirrom covenants and agrees that the entire Subordinated Indebtedness
shall continue to be owing only to it.
Sirrom further warrants and represents that the only indebtedness
owing by Borrower to it is the Subordinated Indebtedness; that to the best of
its knowledge as of the date hereof, there is no default or breach with respect
to any of such indebtedness; and, specifically, that nothing herein contained
constitutes a default or breach with respect to any of such indebtedness.
7. Payments Received by Sirrom. Except as provided in Section 2 or 3
---------------------------
hereof, if any payment, distribution or any collateral proceeds thereof is
received by Sirrom from Borrower, or from any enforcement of Sirrom's security
interest or liens, with respect to the Subordinated Indebtedness prior to the
satisfaction in full of all the Senior Indebtedness in cash, Sirrom shall
receive and hold the same in trust as trustee for the benefit of Coast and shall
forthwith deliver such assets to Coast in precisely the form received (except
for the endorsement or assignment by Sirrom where necessary), for application on
any of the Senior Indebtedness, due or not due. In the event of the failure of
Sirrom to make any such endorsement or assignment to Coast, Coast and any of its
officers or agents are hereby irrevocably authorized to make such endorsement or
assignment.
8. Claims in Bankruptcy. In the event of any bankruptcy, assignment
--------------------
for the benefit of creditors or similar proceedings against Borrower, Sirrom
shall file all claims it may have against Borrower, and shall direct the debtor
in possession or trustee in bankruptcy, as appropriate, to pay over to Coast all
amounts due to Sirrom on account of the Subordinated Indebtedness until the
Senior Indebtedness has been paid in full in cash. If Sirrom fails to file such
claims as requested by Coast, Coast may file such claims on Sirrom's own behalf.
9. Postpetition Financing; Liens. In the event of any bankruptcy
-----------------------------
case against Borrower or any of the assets of Borrower, Sirrom hereby expressly
consents to the granting by Borrower to Coast of senior liens and priorities in
connection with any post-petition financing of Borrower by Coast; provided that
---------
any senior lien with respect to the Property shall be limited as herein provided
and the aggregate obligations of Borrower pre petition and post petition to
Coast shall not exceed the Senior Indebtedness.
4
<PAGE>
10. Sale of Assets. In the event of a sale of some or all of the
--------------
assets of Borrower, Sirrom agrees to release its security interest in such
assets (other than the Property), or any of them, upon the request of Coast;
provided that such assets are sold in a commercially reasonable manner with the
- --------
net proceeds being applied to the Senior Indebtedness, whether or not Sirrom
will receive any proceeds from such sale.
11. Instrument Legends. The faces of the Subordinated Instrument and
------------------
any other instrument evidencing the Subordinated Indebtedness or any portion
thereof will be forthwith inscribed with a legend conspicuously indicating that
payment thereon is subordinated to the claims of Coast pursuant to the terms of
this Agreement, and copies thereof will forthwith be delivered to Coast. Any
instrument evidencing any of the Subordinated Indebtedness or any portion
thereof which is hereafter executed will, on the date thereof, be inscribed with
the aforesaid legend, and copies thereof will be delivered to Coast on the date
of its execution or within 20 business days thereafter.
12. Additional Remedies. If Sirrom violates any of the terms of this
-------------------
Agreement, in addition to any remedies in law, equity or otherwise, Coast may
restrain such violation in any court of law and may interpose this Agreement as
a defense in any action by Sirrom.
13. Sirrom's Waivers. All of the Senior Indebtedness shall be deemed
----------------
to have been made or incurred in reliance upon this Agreement. Sirrom expressly
waives all notice of the acceptance by Coast of the subordination and other
provisions of this Agreement and agrees that Coast has made no warranties or
representations with respect to the legality, validity, enforceability,
collectability or perfection of the Senior Indebtedness or any liens or security
interests held in connection therewith.
Sirrom agrees that Coast shall be entitled to manage and supervise its
loans in accordance with applicable law and its usual practices, modified from
time to time as it deems appropriate under the circumstances, without regard to
the existence of any rights that Sirrom may now or hereafter have in or to any
assets. Coast shall have no liability to Sirrom as a result of any and all
lawful actions which Coast takes or omits to take (including, without
limitation, actions with respect to the creation, perfection or continuation of
its liens or security interest, actions with respect to the occurrence of a
Default, actions with respect to the foreclosure upon, sale, release or failure
to realize upon, any of its collateral, and actions with respect to the
collection of any claim for all or any part of the Senior Indebtedness from any
account debtor or any other party), regardless of whether any such actions or
omissions may affect Coast's rights to deficiency or Sirrom's rights of
subrogation or reimbursement.
Coast may, from time to time, enter into agreements and settlements
with Borrower as it may determine, including, without limitation, any
substitution of collateral, any release of any lien or security interest and any
release of Borrower. Sirrom waives any and all rights it may have to require
Coast to marshal assets.
14. Waivers. No waiver shall be deemed to be made by Coast or Sirrom
-------
of any of their respective rights hereunder unless it is in writing signed by
the waiving party. Each such waiver shall be a waiver only with respect to the
specific instance involved and shall in no way impair the rights of the waiving
party or the obligations of the other party to the waiving party in any other
respect at any other time.
15. Information Concerning Financial Condition. Sirrom hereby
------------------------------------------
assumes responsibility for keeping itself informed of the financial condition of
Borrower and of all other
5
<PAGE>
circumstances bearing upon the risk of nonpayment of the Senior Indebtedness,
and agrees that Coast shall have no duty to advise it of information known to
Coast regarding such condition or any such circumstances. In the event Coast, in
its sole discretion, undertakes, at any time or from time to time, to provide
any such information to Sirrom, Coast shall be under no obligation (i) to
provide any such information to Sirrom on any subsequent occasion, (ii) to
undertake any investigation not a part of its regular business routine, or (iii)
to disclose any information which, pursuant to its commercial finance practices,
Coast wishes to maintain confidential.
16. Third Party Beneficiaries. This Agreement is solely for the
-------------------------
benefit of Coast, Sirrom and their respective successors and assigns, and
neither Borrower nor any other persons or entities are intended to be third
party beneficiaries hereunder or to have any right, benefit, priority or
interest under, or because of the existence of, or to have any right to enforce,
this Agreement. Coast and Sirrom shall have the right to modify or terminate
this Agreement at any time without notice to or approval of Borrower or any
other person or persons.
Notwithstanding any of the foregoing, if any third party satisfies the
Senior Indebtedness owing to Coast, Coast may assign its rights and remedies
hereunder to such third party, and such third party shall assume Coast's
position for all purposes of this Agreement. If a determination is made in
favor of any third party, including, without limitation, a trustee in
bankruptcy, that Coast's liens or security interests are invalid, avoidable or
unperfected, the subordination set forth in Section 1 hereinabove shall be
deemed null and void, but only to the extent of such invalidity, avoidability
and imperfection.
17. Notices. For the purposes of this Agreement, written notices
-------
shall be sent by U.S. first class mail, postage prepaid; or by U.S. certified
mail, return receipt requested, postage prepaid; or by personal delivery; or by
facsimile confirmed by the recipient; and addressed to the notified party at its
address set forth below its signature line, or such other address specified by
the party with like notice. Notices shall be deemed received three (3) business
days after deposit in the U.S. mail, if sent by first class mail; upon the date
set forth in the return receipt, if by certified mail; on the day of
confirmation of delivery by the recipient, if by facsimile; or on the day of
transmittal by personal delivery.
18. Costs and Attorneys' Fees. If there is any claim or controversy
-------------------------
litigated in any lawsuit between any of the parties hereto in connection with
this Agreement, the prevailing parties in the lawsuit shall be entitled to
recover from the other parties their reasonable costs and attorneys' fees.
19. Consent to Jurisdiction; Additional Waivers. Sirrom and Coast
-------------------------------------------
each consents to the jurisdiction of any state or federal court located within
Los Angeles County, California. Sirrom waives personal service of any and all
process upon it, and consents that all service of process be made in the manner
set forth in Section 17 of this Agreement. Sirrom and Coast each waives, to the
fullest extent each may effectively do so, any defense or objection based upon
forum non conveniens and any defense or objection to venue of any action
- ----- --- ----------
instituted within Los Angeles County, California. EACH OF THE PARTIES HERETO
WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION TO ENFORCE OR DEFEND ANY
MATTER ARISING FROM OR RELATED TO THIS AGREEMENT.
6
<PAGE>
20. Governing Law. This Agreement has been delivered and accepted at
-------------
and shall be deemed to have been made in the State of California, and shall be
interpreted, and the rights and liabilities of the parties hereto determined, in
accordance with the internal laws (as opposed to conflicts of laws provisions)
of the State of California.
21. Successors and Assigns. This Agreement shall be binding upon and
----------------------
shall inure to the benefit of the parties' respective successors and assigns,
subject to the provisions hereof.
22. Integrated Agreement. This Agreement sets forth the entire
--------------------
understanding of the parties with respect to the within matters and may not be
modified or amended except upon a writing signed by all parties.
23. Authority. Each of the signatories hereto certifies that such
---------
party has all necessary authority to execute this Agreement.
24. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each one of which when so executed shall be deemed to be an
original, and all of which taken together shall constitute one and the same
agreement.
"Sirrom"
SIRROM CAPITAL CORPORATION
By:
------------------------------
Title:
Address for notices:
-------------------
511 Union Street, Suite 2310
Nashville, Tennessee 37219
Fax: (615) 726-1208
"Coast"
COAST BUSINESS CREDIT
By: /s/ Robert D. Peters
-------------------------------
Title: Vice President
Address for notices:
-------------------
12121 Wilshire Boulevard
Suite 1111
Los Angeles, California 90025
Attn.: Manager
Fax: (310) 979-5827
7
<PAGE>
24. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each one of which when so executed shall be deemed to be an
original, and all of which taken together shall constitute one and the same
agreement.
"Sirrom"
SIRROM CAPITAL CORPORATION
By: /s/ John C. Harrison
------------------------------
Title: VP
Address for notices:
-------------------
500 Church Street, Suite 200
Nashville, Tennessee 37219
Fax: (615) 726-1208
"Coast"
COAST BUSINESS CREDIT
By:
------------------------------
Title:
Address for notices:
-------------------
12121 Wilshire Boulevard
Suite 1111
Los Angeles, California 90025
Attn.: Manager
Fax: (310) 979-5827
All of the foregoing is consented and agreed to as of
the date set forth above:
"Borrower"
CARDIAC CONTROL SYSTEMS, INC.
By: /s/ Alan J. Rabin
-------------------------
Title: President and CEO
8
<PAGE>
CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT
- --------------------------------------------------------------------------------
State of California
County of Los Angeles
---------------------
On June 11, 1997 before me, Stephanie T. Prause personally
---------------------- ----------------------------
Date Name, Title of Officer - i.e.
"Jane Doe, Notary Public"
appeared Robert D. Peters
-----------------------------------------------------------------------
Name(s) of Signer(s)
[_] personally known to me OR [_] proved to me on the basis of satisfactory
evidence to be the person(s) whose name(s) is/are subscribed to the within
instrument and acknowledged to me that he/she/they executed the same in
his/her/their authorized capacity(ies), and that his/her/their signature(s) on
the instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
WITNESS my hand and official seal. [SEAL OF NOTARY PUBLIC APPEARS HERE]
Signature
/s/ Stephanie T. Prause
- ---------------------------
- --------------------------------------------------------------------------------
(ATTENTION NOTARY: Although the information requested below is OPTIONAL, it
could prevent fraudulent attachment of this certificate to another document.)
CAPACITY CLAIMED [_] INDIVIDUAL
BY SIGNER:
[_] CORPORATE OFFICER:
-------------------------------
Title(s)
[_] PARTNERS: [_] Limited
[_] General
[_] ATTORNEY-IN-FACT
[_] TRUSTEE(S)
[_] GUARDIAN/CONSERVATOR
[_] OTHER:
--------------------------------------------
SIGNER IS REPRESENTING:
--------------------------------------------------------
Name of Person(s), Entity(ies)
- --------------------------------------------------------------------------------
THIS CERTIFICATE MUST BE ATTACHED TO THE DOCUMENT DESCRIBED BELOW:
- --------------------------------------------------------------------------------
Title of the Document: Intercredit & Subordination Agreement
---------------------------------------------------------
Date of Document: 6/11/97 Signer(s) Other Than Name Above:
------------ -----------------
Number of Pages: 8 plus 1 all purpose acknowledgment
--------------------------------------- -----------------
- --------------------------------------------------------------------------------
<PAGE>
CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT
- --------------------------------------------------------------------------------
STATE OF TENNESSEE )
) ss.
COUNTY OF DAVIDSON )
On June 11 , 1997, before me, Sheryl Berdux
------------ - -----------------------------------------------
(Name and Title of Officer)
personally appeared John Harrison
------------------------------------------------------------
[X] personally known to me
-or-
[_] proved to me on the basis of satisfactory evidence to be the
person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
WITNESS my hand and official seal.
/s/ Sheryl Berdux My Commission expires SEPT. 23, 2000
-------------------------------------
Signature of Notary
- --------------------------------------------------------------------------------
OPTIONAL
Though the data below is not required by law, it may prove valuable to persons
relying on the document and could prevent fraudulent reattachment of this form.
CAPACITY CLAIMED BY SIGNER DESCRIPTION OF ATTACHED DOCUMENT
[_] Individual
[_] Corporate Officer
------------------------------------- -------------------------------------
Title or Type of Document
[_] Partner(s) [_] Limited
[_] General -------------------------------------
[_] Attorney-In-Fact Number of Pages
[_] Trustee(s)
[_] Guardian/Conservator
[_] Other:
------------------------------- -------------------------------------
Date of Document
Signer is representing:
Name of Person(s) or Entity(ies)
- ----------------------------------------- -------------------------------------
Signer(s) Other Than Named Above
- -----------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT 10.5
MORTGAGE AND SECURITY AGREEMENT
CARDIAC CONTROL SYSTEMS, INC.,
MORTGAGOR
AND
COAST BUSINESS CREDIT(R), A DIVISION OF
SOUTHERN PACIFIC THRIFT & LOAN ASSOCIATION,
MORTGAGEE
DATED: AS OF JUNE 13, 1997
THIS INSTRUMENT WAS PREPARED BY: GARY D. SAMSON, ESQ., ORRICK, HERRINGTON &
SUTCLIFFE LLP, 777 SOUTH FIGUEROA STREET, SUITE 3200, LOS ANGELES, CALIFORNIA
90017.
Record and Return to:
---------------------
Coast Business Credit
12121 Wilshire Boulevard, Suite 1111
Los Angeles, California 90025
Attention: Manager
THIS MORTGAGE AND SECURITY AGREEMENT (this "Mortgage") is made as of
the 13 day of June, 1997, by CARDIAC CONTROL SYSTEMS, INC., a Delaware
corporation ("Mortgagor"), whose address is Three Commerce Boulevard, Palm
Coast, Florida 32164, in favor of COAST BUSINESS CREDIT, a division of Southern
Pacific Thrift & Loan Association ("Mortgagee"), whose address is 12121 Wilshire
Boulevard, Suite 1111, Los Angeles, California 90025.
<PAGE>
W I T N E S S E T H:
--------------------
THAT FOR AND IN CONSIDERATION OF THE SUM OF TEN AND NO/100 DOLLARS
($10.00), AND OTHER VALUABLE CONSIDERATION, THE RECEIPT AND SUFFICIENCY OF WHICH
IS HEREBY ACKNOWLEDGED, MORTGAGOR HEREBY IRREVOCABLY MORTGAGES, GRANTS,
BARGAINS, SELLS, CONVEYS, TRANSFERS, PLEDGES, SETS OVER AND ASSIGNS, AND GRANTS
A SECURITY INTEREST, TO MORTGAGEE, ITS SUCCESSORS AND ASSIGNS, with power of
sale, in all of Mortgagor's estate, right, title and interest in, to and under
any and all of the following described property, whether now owned or hereafter
acquired (collectively, the "Property"):
A. All that certain real property situated at Three Commerce
Boulevard, Palm Coast, County of Flagler, State of Florida, more particularly
described on Exhibit A attached hereto and incorporated herein by this reference
---------
(the "Real Estate"), together with all of the easements, rights, privileges,
franchises, tenements, hereditaments and appurtenances now or hereafter
thereunto belonging or in any way appertaining and all of the estate, right,
title, interest, claim and demand whatsoever of Mortgagor therein or thereto,
either at law or in equity, in possession or in expectancy, now or hereafter
acquired;
B. All structures, buildings and improvements of every kind and
description now or at any time hereafter located or placed on the Real Estate
(the "Improvements");
C. All furniture, furnishings, fixtures, goods, equipment, inventory
or personal property owned by Mortgagor and now or hereafter located on,
attached to or used in and about the Improvements, including, but not limited
to, all machines, engines, boilers, dynamos, elevators, stokers, tanks,
cabinets, awnings, screens, shades, blinds, carpets, draperies, lawn mowers, and
all appliances, plumbing, heating, air conditioning, lighting, ventilating,
refrigerating, disposals and incinerating equipment, and all fixtures and
appurtenances thereto, and such other goods and chattels and personal property
owned by Mortgagor as are now or hereafter used or furnished in operating the
Improvements, or the activities conducted therein, and all building materials
and equipment hereafter situated on or about the Real Estate or Improvements,
and all warranties and guaranties relating thereto, and all additions thereto
and substitutions and replacements therefor (exclusive of any of the foregoing
owned or leased by tenants of space in the Improvements);
D. All easements, rights-of-way, strips and gores of land, vaults,
streets, ways, alleys, passages, sewer rights, and other emblements now or
hereafter located on the Real Estate or under or above the same or any part or
parcel thereof, and all estates, rights, titles, interests, tenements,
hereditaments and appurtenances, reversions and remainders whatsoever, in any
way belonging, relating or appertaining to the Real Estate and/or Improvements
or any part thereof, or which hereafter shall in any way belong, relate or be
appurtenant thereto, whether now owned or hereafter acquired by Mortgagor;
2
<PAGE>
E. All water, ditches, wells, reservoirs and drains and all water,
ditch, well, reservoir and drainage rights which are appurtenant to, located on,
under or above or used in connection with the Real Estate or the Improvements,
or any part thereof, whether now existing or hereafter created or acquired;
F. All minerals, crops, timber, trees, shrubs, flowers and
landscaping features now or hereafter located on, under or above the Real
Estate;
G. All cash funds, deposit accounts and other rights and evidence of
rights to cash, now or hereafter created or held by Mortgagee pursuant to this
Mortgage or any other of the Loan Documents (as hereinafter defined);
H. All leases, licenses, concessions and occupancy agreements of the
Real Estate or the Improvements now or hereafter entered into and all rents,
royalties, issues, profits, revenue, income and other benefits (collectively,
the "Rents and Profits") of the Real Estate or the Improvements, now or
hereafter arising from the use or enjoyment of all or any portion thereof or
from any present or future lease, license, concession, occupancy agreement or
other agreement pertaining thereto or arising from any of the Contracts (as
hereinafter defined) or any of the General Intangibles (as hereinafter defined)
and all cash or securities deposited to secure performance by the tenants,
lessees or licensees, as applicable, of their obligations under any such leases,
licenses, concessions or occupancy agreements, whether said cash or securities
are to be held until the expiration of the terms of said leases, licenses,
concessions or occupancy agreements or applied to one or more of the
installments of rent coming due prior to the expiration of said terms, subject
to, however, the provisions contained in Section 1.11 hereinbelow;
I. All contracts and agreements now or hereafter entered into
covering any part of the Real Estate or the Improvements (collectively, the
"Contracts") and all revenue, income and other benefits thereof, including,
without limitation, management agreements, service contracts, maintenance
contracts, equipment leases, personal property leases and any contracts or
documents relating to construction on any part of the Real Estate or the
Improvements (including plans, drawings, surveys, tests, reports, bonds and
governmental approvals) or to the management or operation of any part of the
Real Estate or the Improvements;
J. All present and future monetary deposits given to any public or
private utility with respect to utility services furnished to any part to the
Real Estate or the Improvements;
K. All present and future funds, accounts, instruments, accounts
receivable, documents, causes of action, claims, general intangibles (including
without limitation, trademarks, trade names, servicemarks and symbols now or
hereafter used in connection with any part of the Real Estate or the
Improvements, all names by which the Real Estate or the Improvements may be
operated or known, all rights to carry on business under such names, and all
rights, interest and privileges which Mortgagor has or may have as developer or
declarant under any covenants, restrictions or declarations now or hereafter
relating to the Real Estate or the Improvements) and all notes or chattel paper
now or hereafter arising from or by virtue of any transactions related to the
Real Estate or the Improvements (collectively, the "General Intangibles");
3
<PAGE>
L. All water taps, sewer taps, certificates of occupancy, permits,
licenses, franchises, certificates, consents, approvals and other rights and
privileges now or hereafter obtained in connection with the Real Estate or the
Improvements and all present and future warranties and guaranties relating to
the Improvements or to any equipment, fixtures, furniture, furnishings, personal
property or components of any of the foregoing now or hereafter located or
installed on the Real Estate or the Improvements;
M. All building materials, supplies and equipment now or hereafter
placed on the Real Estate or in the Improvements and all architectural
renderings, models, drawings, plans, specifications, studies and data now or
hereafter relating to the Real Estate or the Improvements;
N. All right, title and interest of Mortgagor in any insurance
policies or binders now or hereafter relating to the Property including any
unearned premiums thereon;
O. All proceeds, products, substitutions and accessions (including
claims and demands therefor) of the conversion, voluntary or involuntary, of any
of the foregoing into cash or liquidated claims, including, without limitation,
proceeds of insurance and condemnation awards; and
P. All other or greater rights and interests of every nature in the
Real Estate or the Improvements and in the possession or use thereof and income
therefrom, whether now owned or hereafter acquired by Mortgagor.
FOR THE PURPOSES OF SECURING ALL OF THE FOLLOWING NOT TO EXCEED A
TOTAL LIABILITY OF $500,000 PLUS FEES AND COSTS OF MORTGAGEE INCURRED IN THE
ENFORCEMENT OF THIS MORTGAGE.
(1) All indebtedness and other obligations evidenced by that certain
Loan and Security Agreement dated on or about the date hereof, between Mortgagor
and Mortgagee, the Schedule thereto and all promissory notes executed from time
to time in connection therewith (as the same may be amended, modified, renewed
or extended from time to time, collectively, the "Loan Agreement");
(2) The full and prompt payment and performance of all of the
provisions, agreements, covenants and obligations herein contained and contained
in any other agreements, documents or instruments now or hereafter evidencing,
securing or otherwise relating to the indebtedness evidenced by the Loan
Agreement (the Loan Agreement, this Mortgage, and such other agreements,
documents and instruments, together with any and all renewals, amendments,
extensions and modifications thereof, are hereinafter collectively referred to
as the "Loan Documents") and the payment of all other sums therein covenanted to
be paid;
(3) Any and all additional advances made by Mortgagee to protect or
preserve the Property or the lien or security interest created hereby on the
Property, or for taxes, assessments or insurance premiums as hereinafter
provided or for performance of any of Mortgagor's obligations hereunder or under
the other Loan Documents or for any other purpose
4
<PAGE>
provided herein or in the other Loan Documents (whether or not the original
Mortgagor remains the owner of the Property at the time of such advances); and
(4) Any and all other indebtedness now owing or which may hereafter be
owing by Mortgagor to Mortgagee, however and whenever incurred or evidenced,
whether express or implied, direct or indirect, absolute or contingent, or due
or to become due, and all renewals, modifications, consolidations, replacements
and extensions thereof.
(All of the sums referred to in Paragraphs (1) through (4) above are
herein sometimes referred to as the "secured indebtedness" or the "indebtedness
secured hereby").
TO HAVE AND TO HOLD the Property unto Mortgagee, its successors and
assigns forever, for the purposes and uses herein set forth.
PROVIDED, HOWEVER, that if the principal and interest and all other
sums due or to become due under the Loan Agreement, including, without
limitation, any prepayment fees required pursuant to the terms of the Loan
Agreement, shall have been paid at the time and in the manner stipulated therein
and all other sums payable hereunder and all other indebtedness secured hereby
shall have been paid and all other covenants contained in the Loan Documents
shall have been performed, and Mortgagee shall have no further commitments under
the Loan Agreement, then, in such case, this Mortgage shall be satisfied and the
estate, right, title and interest of Mortgagee in the Property shall cease, and
upon payment to Mortgagee of all costs and expenses incurred for the preparation
of the release hereinafter referenced and all recording costs if allowed by law,
Mortgagee shall release this Mortgage and the lien hereof by proper instrument.
Article I
COVENANTS OF MORTGAGOR
----------------------
For the purpose of further securing the indebtedness secured hereby
and for the protection of the security of this Mortgage, for so long as the
indebtedness secured hereby or any part thereof remains unpaid, Mortgagor
covenants and agrees as follows:
1.1 Warranties of Mortgagor. Mortgagor, for itself and its successors and
-----------------------
assigns, does hereby represent, warrant and covenant to and with Mortgagee, its
successors and assigns, that:
(a) Mortgagor has good and marketable fee simple title to the
Property, subject only to those matters expressly set forth on Exhibit B
---------
attached hereto and by this reference incorporated herein (the "Permitted
Exceptions"), and has full power and lawful authority to grant, bargain, sell,
convey, assign, transfer and mortgage its interest in the Property in the manner
and form hereby done or intended. Mortgagor will preserve its interest in and
title to the Property and will forever warrant and defend the same to Mortgagee
against any and all claims whatsoever and will forever warrant and defend the
validity and priority of the lien and security interest created herein against
the claims of all persons and parties whomsoever, subject to the Permitted
5
<PAGE>
Exceptions. The foregoing warranty of title shall survive the foreclosure of
this Mortgage and shall inure to the benefit of and be enforceable by Mortgagee
in the event Mortgagee acquires title to the Property pursuant to any
foreclosure;
(b) No bankruptcy or insolvency proceedings are pending or
contemplated by Mortgagor or, to the best knowledge of Mortgagor, against
Mortgagor or by or against any party directly or contingently liable for the
obligations secured hereby;
(c) All reports, certificates, affidavits, statements and other data
furnished by Mortgagor to Mortgagee in connection with the loan evidenced by the
Loan Agreement are true and correct in all material respects and do not omit to
state any fact or circumstance necessary to make the statements contained
therein not misleading;
(d) The execution, delivery and performance of this Mortgage, the Loan
Agreement and all of the other Loan Documents have been duly authorized by all
necessary action to be, and are, binding and enforceable against Mortgagor in
accordance with the respective terms thereof and do not contravene, result in a
breach of or constitute (upon the giving of notice or the passage of time or
both) a default under the articles of incorporation or other organizational
documents of Mortgagor or any contract or agreement of any nature to which
Mortgagor is a party or by which Mortgagor or any of its property may be bound
and do not violate or contravene any law, order, decree, rule or regulation to
which Mortgagor is subject;
(e) The Real Estate and the Improvements, and the intended use thereof
by Mortgagor comply with all applicable restrictive covenants, zoning
ordinances, subdivision and building codes, flood disaster laws, applicable
health and environmental laws and regulations and all other ordinances, orders
or requirements issued by any state, federal or municipal authorities having or
claiming jurisdiction over the Property. The Real Estate and Improvements
constitute a separate tax parcel for purposes of ad valorem taxation. The Real
Estate and Improvements do not require any rights over, or restrictions against,
other property in order to comply with any of the aforesaid governmental
ordinances, orders or requirements.
(f) All utility services necessary and sufficient for the full use,
occupancy, operation and disposition of the Real Estate and the Improvements for
their intended purposes are available to the Property, including water, storm
sewer, sanitary sewer, gas, electric, cable and telephone facilities, through
public rights-of-way or perpetual private easements approved by Mortgagee;
(g) All streets, roads, highways, bridges and waterways necessary for
access to and full use, occupancy, operation and disposition of the Real Estate
and the Improvements have been completed, have been dedicated to and accepted by
the appropriate municipal authority and are open and available to the Real
Estate and the Improvements without further condition or cost to Mortgagor;
6
<PAGE>
(h) All curb cuts, driveways and traffic signals shown on the survey
delivered to Mortgagee prior to the execution and delivery of this Mortgage are
existing and have been fully approved by the appropriate governmental authority;
(i) There are no judicial, administrative, mediation or arbitration
actions, suits or proceedings pending or threatened against or affecting
Mortgagor or the Property which, if adversely determined, would materially
impair either the Property or Mortgagor's ability to perform the covenants or
obligations required to be performed under the Loan Documents;
(j) The Property is free from delinquent water charges, sewer rents,
taxes and assessments;
(k) As of the date of this Mortgage, the Property is free from
unrepaired damage caused by fire, flood, accident or other casualty;
(l) As of the date of this Mortgage, no part of the Real Estate or the
Improvements has been taken in condemnation, eminent domain or like proceeding
nor is any such proceeding pending or to Mortgagor's knowledge and belief,
threatened or contemplated;
(m) Mortgagor possesses all franchises, patents, copyrights,
trademarks, tradenames, licenses and permits adequate for the conduct of its
business substantially as now conducted;
(n) The Improvements are structurally sound, in good repair and free
of defects in materials and workmanship and have been constructed and installed
in substantial compliance with the plans and specifications relating thereto.
All major building systems located within the Improvements, including, without
limitation, the heating and air conditioning systems and the electrical and
plumbing systems, are in good working order and condition;
(o) To the extent requested by Mortgagee, Mortgagor has delivered to
Mortgagee true, correct and complete copies of all Contracts and all amendments
thereto or modifications thereof;
(p) Mortgagor and the Property are free from any past due
obligations for sales and payroll taxes; and
(q) There are no security agreements or financing statements affecting
any of the Property other than (i) as disclosed in writing by Mortgagor to
Mortgagee prior to the date hereof and (ii) the security agreements and
financing statements created in favor of Mortgagee.
1.2 Defense of Title. If, while this Mortgage is in force, the title to
----------------
the Property or the interest of Mortgagee therein shall be the subject, directly
or indirectly, of any action at law or in equity, or be attached directly or
indirectly, or endangered, clouded or adversely affected in any manner,
Mortgagor, at Mortgagor's expense, shall take all necessary and proper steps for
the defense of said title or interest, including the employment of counsel
approved by Mortgagee, the prosecution or defense of litigation, and the
compromise or discharge of claims made against said
7
<PAGE>
title or interest. Notwithstanding the foregoing, in the event that Mortgagee
determines that Mortgagor is not adequately performing its obligations under
this Section, Mortgagee may, without limiting or waiving any other rights or
remedies of Mortgagee hereunder, take such steps, with respect thereto as
Mortgagee shall deem necessary or proper and any and all costs and expenses
incurred by Mortgagee in connection therewith, together with interest thereon at
the default interest rate provided in the Loan Agreement ("Default Interest
Rate") from the date incurred by Mortgagee until actually paid by Mortgagor,
shall be immediately paid by Mortgagor on demand and shall be secured by this
Mortgage and by all of the other Loan Documents securing all or any part of the
indebtedness evidenced by the Loan Agreement.
1.3 Performance of Obligations. Mortgagor shall pay when due the
--------------------------
principal of and the interest on the indebtedness evidenced by the Loan
Agreement. Mortgagor shall also pay all charges, fees and other sums required
to be paid by Mortgagor as provided in the Loan Documents, and shall observe,
perform and discharge all obligations, covenants and agreements to be observed,
performed or discharged by Mortgagor set forth in the Loan Documents in
accordance with their terms. Further, Mortgagor shall promptly and strictly
perform and comply with all covenants, conditions, obligations and prohibitions
required of Mortgagor in connection with any other document or instrument
affecting title to the Property, or any part thereof, regardless of whether such
document or instrument is superior or subordinate to this Mortgage.
1.4 Insurance. Mortgagor shall, at Mortgagor's expense, maintain in force
---------
and effect on the Property at all times while this Mortgage continues in effect
the following insurance:
(a) Insurance against loss or damage to the Property by fire,
windstorm, tornado and hail and against loss and damage by such other, further
and additional risks as may be now or hereafter embraced by an "all-risk" form
of insurance policy. The amount of such insurance shall be not less than one
hundred percent (100%) of the full replacement (insurable) cost of the
Improvements, furniture, furnishings, fixtures, equipment and other items
(whether personalty or fixtures) included in the Property and owned by Mortgagor
from time to time, without reduction for depreciation. The determination of the
replacement cost amount shall be adjusted annually to comply with the
requirements of the insurer issuing such coverage or, at Mortgagee's election,
by reference to such indices, appraisals or information as Mortgagee determines
in its reasonable discretion. Full replacement cost, as used herein, means,
with respect to the Improvements, the cost of replacing the Improvements without
regard to deduction for depreciation, exclusive of the cost of excavations,
foundations and footings below the lowest basement floor, and means, with
respect to such furniture, furnishings, fixtures, equipment and other items, the
cost of replacing the same, in each case, with inflation guard coverage to
reflect the effect of inflation, or annual valuation. Each policy or policies
shall contain a replacement cost endorsement and either an agreed amount
endorsement (to avoid the operation of any co-insurance provisions) or a waiver
of any co-insurance provisions, all subject to Mortgagee's approval.
(b) Comprehensive Commercial General Liability Insurance for personal
injury, bodily injury, death and property damage liability in amounts not less
than $3,000,000.00 per occurrence and $4,000,000.00 in the aggregate (both
inclusive of umbrella coverage). During any construction on the Property,
Mortgagor's general contractor for such construction shall also
8
<PAGE>
provide the insurance required in this Subsection (b). Mortgagee hereby retains
----------
the right to periodically review the amount of said liability insurance being
maintained by Mortgagor and to require an increase in the amount of said
liability insurance should Mortgagee deem an increase to be reasonably prudent
under then existing circumstances.
(c) General boiler and machinery insurance coverage is required if
steam boilers or other pressure-fired vessels are in operation at the Property.
Minimum liability amount per accident must equal the greater of the replacement
(insurable) value of the Improvements housing such boiler or pressure-fired
machinery or $2,000,000.00.
(d) If the Property or any part thereof is identified by the Secretary
of Housing and Urban Development as being situated in an area now or
subsequently designated as having special flood hazards (including, without
limitation, those areas designated as Zone A or Zone V), flood insurance in an
amount equal to the lesser of: (i) the minimum amount required, under the terms
of coverage, to compensate for any damage or loss on a replacement basis (or the
unpaid balance of the indebtedness secured hereby if replacement cost coverage
is not available for the type of building insured); or (ii) the maximum
insurance available under the appropriate National Flood Insurance
Administration program.
(e) During the period of any construction on the Property or
renovation or alteration of the Improvements, a so-called "Builder's All-Risk
Completed Value" or "Course of Construction" insurance policy in non-reporting
form for any Improvements under construction, renovation or alteration in an
amount approved by Mortgagee and Worker's Compensation Insurance covering all
persons engaged in such construction, renovation or alteration.
(f) Loss of rents or loss of business income insurance in amounts
sufficient to compensate Mortgagor for all Rents and Profits during a period of
not less than one year in which the Property may be damaged or destroyed.
(g) Such other insurance on the Property or on any replacements or
substitutions thereof or additions thereto as may from time to time be required
by Mortgagee against other insurable hazards or casualties which at the time are
commonly insured against in the case of property similarly situated, due regard
being given to the height and type of buildings, their construction, location,
use and occupancy.
All such insurance shall (i) be with insurers authorized to do
business in the state within which the Property is located and who have and
maintain a rating of at least (A) A from Standard & Poors or (B) "A: V" from
A.M. Best, (ii) contain the complete address of the Property (or a complete
legal description), (iii) be for terms of at least one year, (iv) contain
deductibles which do not exceed $10,000.00 or, with respect to the policy
described in clause (d) above $3,000, and (v) be subject to the approval of
Mortgagee as to insurance companies, amounts, content, forms of policies, method
by which premiums are paid and expiration dates.
Mortgagor shall as of the date hereof deliver to Mortgagee
evidence that said insurance policies have been paid current as of the date
hereof and certified copies of such
9
<PAGE>
insurance policies and original certificates of insurance signed by an
authorized agent of the applicable insurance companies evidencing such insurance
satisfactory to Mortgagee. Mortgagor shall renew all such insurance and deliver
to Mortgagee certificates evidencing such renewals at least thirty (30) days
before any such insurance shall expire. Without limiting the required
endorsements to the insurance policies, Mortgagor further agrees that all such
policies shall include a standard, non-contributory, mortgagee clause naming:
Coast Business Credit
12121 Wilshire Boulevard
Suite 1111
Los Angeles, California 90025
(a) as an additional insured under all liability insurance policies, (b) as the
first mortgagee on all property insurance policies and (c) as the lender's loss
payee on all loss of rents or loss of business income insurance policies.
Mortgagor further agrees that all such insurance policies: (a) shall provide for
at least thirty (30) days' prior written notice to Mortgagee prior to any
cancellation or termination thereof and prior to any modification thereof which
affects the interest of Mortgagee; (b) shall contain an endorsement or agreement
by the insurer that any loss shall be payable to Mortgagee in accordance with
the terms of such policy notwithstanding any act or negligence of Mortgagor
which might otherwise result in forfeiture of such insurance; (c) shall waive
all rights of subrogation against Mortgagee; (d) in the event that the Property
constitutes a legal non-conforming use, shall include an ordinance or law
coverage endorsement which will contain "Demolition Cost", "Loss Due to
Operation of Law" and "Increased Cost of Construction" coverages; (e) in the
event that any lease requires that any insurance policies affecting the Property
contain a waiver of subrogation provision, shall, either by their terms or by
endorsement, provide such a waiver; and (f) may be in the form of blanket
policies provided that either such policies contain an endorsement, or Mortgagee
receives other evidence satisfactory to Mortgagee, to the effect that the
coverage provided thereby will not be affected by the failure to pay any portion
of the premium therefore which is not allocable to the Property or by any other
action not relating to the Property which would otherwise permit the issuer
thereof to cancel the coverage thereof. The delivery to Mortgagee of the
insurance policies or the certificates of insurance as provided above shall
constitute an assignment of all proceeds payable under such insurance policies
relating to the Property by Mortgagor to Mortgagee as further security for the
indebtedness secured hereby. In the event of foreclosure of this Mortgage, or
other transfer of title to the Property in extinguishment in whole or in part of
the secured indebtedness, all right, title and interest of Mortgagor in and to
all proceeds payable under such policies then in force concerning the Property
shall thereupon vest in the purchaser at such foreclosure, or in Mortgagee or
other transferee in the event of such other transfer of title. Approval of any
insurance by Mortgagee shall not be a representation of the solvency of any
insurer or the sufficiency of any amount of insurance. In the event Mortgagor
fails to provide, maintain, keep in force or deliver and furnish to Mortgagee
the policies of insurance required by this Mortgage or evidence of their renewal
as required herein, Mortgagee may, but shall not be obligated to, procure such
insurance and Mortgagor shall pay all amounts advanced by Mortgagee therefor,
together with interest thereon at the Default Interest Rate from and after the
date advanced by Mortgagee until actually repaid by Mortgagor, promptly upon
demand by Mortgagee. Any amounts so advanced by Mortgagee, together with
interest
10
<PAGE>
thereon, shall be secured by this Mortgage and by all of the other Loan
Documents securing all or any part of the indebtedness secured hereby. Mortgagee
shall not be responsible for nor incur any liability for the insolvency of the
insurer or other failure of the insurer to perform, even though Mortgagee has
caused the insurance to be placed with the insurer after failure of Mortgagor to
furnish such insurance.
1.5 Payment of Taxes. Mortgagor shall pay or cause to be paid all taxes
----------------
and assessments which are or may become a lien on the Property or which are
assessed against or imposed upon the Property. Mortgagor shall furnish
Mortgagee with receipts (or if receipts are not immediately available, with
copies of canceled checks evidencing payment with receipts to follow promptly
after they become available) showing payment of such taxes and assessments at
least fifteen (15) days prior to the applicable delinquency date therefor.
Notwithstanding the foregoing, Mortgagor may in good faith, by appropriate
proceedings and upon notice to Mortgagee, contest the validity, applicability or
amount of any asserted tax or assessment so long as (a) such contest is
diligently pursued, and (b) Mortgagee determines, in its subjective opinion,
that such contest suspends the obligation to pay the tax and that nonpayment of
such tax or assessment will not result in the sale, loss, forfeiture or
diminution of the Property or any part thereof or any interest of Mortgagee
therein; provided, however, that Mortgagor shall promptly cause to be paid any
-------- -------
amount adjudged by a court of competent jurisdiction to be due, with all
interest, costs and penalties thereon, promptly after such judgment becomes
final; and provided, further, that in any event each such contest shall be
-------- ------- ----
concluded, the taxes, assessments, interest, costs and penalties shall be paid
prior to the date any writ or order is issued under which the Property may be
sold, lost or forfeited. Mortgagee may establish reserves under the Loan
Agreement for amounts so contested by Mortgagor.
1.6 Intentionally Omitted.
---------------------
1.7 Intentionally Omitted.
---------------------
1.8 Intentionally Omitted.
---------------------
1.9 Casualty and Condemnation. Mortgagor shall give Mortgagee prompt
-------------------------
written notice of the occurrence of any casualty affecting, or the institution
of any proceedings for eminent domain or for the condemnation of, the Property
or any portion thereof. All insurance proceeds on the Property, and all causes
of action, claims, compensation, awards and recoveries for any damage,
condemnation or taking of all or any part of the Property or for any damage or
injury to it for any loss or diminution in value of the Property, are hereby
assigned to and shall be paid to Mortgagee not to exceed $500,000 plus fees and
costs as set forth on page 4 hereof. Mortgagee may participate in any suits or
proceedings relating to any such proceeds, causes of action, claims,
compensation, awards or recoveries and Mortgagee is hereby authorized, in its
own name or in Mortgagor's name, to adjust any loss covered by insurance or any
condemnation claim or cause of action, and to settle or compromise any claim or
cause of action in connection therewith, and Mortgagor shall from time to time
deliver to Mortgagee any instruments required to permit such participation;
provided, however, that Mortgagee shall not have the right to participate in
- -------- -------- ----
the adjustment of any loss which is not in excess of the lesser of (i) ten
percent (10%) of the then
11
<PAGE>
outstanding principal balance of the secured obligations and (ii) $50,000.00.
Mortgagee shall apply any sums received by it under this Section first to the
payment of all of its costs and expenses (including, but not limited to, legal
fees and disbursements) incurred in obtaining those sums, and then, as follows:
(a) In the event that less than sixty percent (60%) of the Improvements
located on the Real Estate have been taken or destroyed, then if:
(1) no default is then continuing hereunder or under any of the other
Loan Documents and no event has occurred which, with the giving of notice of the
passage of time or both, would constitute a default hereunder or under any of
the other Loan Documents, and
(2) the Property can, in Mortgagee's judgment, with diligent
restoration or repair, be returned to a condition at least equal to the
condition thereof that existed prior to the casualty or partial taking causing
the loss or damage within the earlier to occur of (i) six (6) months after the
receipt of insurance proceeds or condemnation awards by either Mortgagor of
Mortgagee and (ii) the stated maturity date of the secured obligations, and
(3) all necessary governmental approvals can be obtained to allow the
rebuilding and reoccupancy of the Property as described in Section 1.9(a)(2)
above, and
(4) there are sufficient sums available (through insurance proceeds or
condemnation awards and contributions by Mortgagor, the full amount of which
shall at Mortgagee's option have been deposited with Mortgagee) for such
restoration or repair (including, without limitation, for any costs and expenses
of Mortgagee to be incurred in administering said restoration or repair) and for
payment of principal and interest to become due on the secured obligations
during such restoration or repair, and
(5) the economic feasibility of the Improvements after such
restoration or repair will be such that income from their operation is
reasonably anticipated to be sufficient to pay operating expenses of the
Property and debt service on the indebtedness secured hereby in full with the
same coverage ratio considered by Mortgagee in its determination to make the
loan secured hereby, and
(6) Mortgagor shall have delivered to Mortgagee, at Mortgagor's sole
cost and expense, an appraisal report in form and substance satisfactory to
Mortgagee appraising the value of the Property as so restored or repaired to be
not less than the appraised value of the Property considered by Mortgagee in its
determination to make the loan secured hereby, and
(7) Mortgagor so elects by written notice delivered to Mortgagee
within five (5) days after settlement of the aforesaid insurance or condemnation
claim,
then, Mortgagee shall, solely for the purposes of such restoration or repair,
advance so much of the remainder of such sums as may be required for such
restoration or repair, and any funds deposited by Mortgagor therefor, to
Mortgagor in the manner and upon such terms and conditions as would be required
by a prudent interim construction lender, including, but not limited to, the
prior
12
<PAGE>
approval by Mortgagee of plans and specifications, contractors and form of
construction contracts and the furnishing to Mortgagee of permits, bonds, lien
waivers, invoices, receipts and affidavits from contractors and subcontractors
in form and substance satisfactory to Mortgagee in its discretion, with any
remainder being applied by Mortgagee for payment of the indebtedness secured
hereby in whatever order Mortgagee directs in its absolute discretion.
(b) In all other cases, namely, in the event that sixty percent (60%)
or more of the Improvements located on the Real Estate have been taken or
destroyed or Mortgagor does not elect to restore or repair the Property pursuant
to clause (a) above, or otherwise fails to meet the requirements of clause (a)
above, then in any of such events, Mortgagee shall elect, in Mortgagee's
absolute discretion and without regard to the adequacy of Mortgagee's security,
to do either of the following: (1) accelerate the maturity date of the Loan
Agreement and declare any and all indebtedness secured hereby to be immediately
due and payable and apply the remainder of such sums received pursuant to this
Section to the payment of the indebtedness secured hereby in whatever order
Mortgagee directs in its absolute discretion, with any remainder being paid to
Mortgagor, or (2) notwithstanding that Mortgagor may have elected not to restore
or repair the Property pursuant to the provisions of Section 1.9(a)(7) above,
require Mortgagor to restore or repair the Property in the manner and upon such
terms and conditions as would be required by a prudent interim construction
lender, including, but not limited to the deposit by Mortgagor with Mortgagee,
within thirty (30) days after demand therefor, of any deficiency necessary in
order to assure the availability of sufficient funds to pay for such restoration
or repair, including Mortgagee's costs and expenses to be incurred in connection
therewith, the prior approval by Mortgagee of plans and specifications,
contractors and form of construction contracts and the furnishing to Mortgagee
of permits, bonds, lien waivers, invoices, receipt and affidavits from
contractors and subcontractors in form and substance satisfactory to Mortgagee
in its discretion, and apply the remainder of such sums toward such restoration
and repair, with any balance thereafter remaining being applied by Mortgagee for
payment of the indebtedness secured hereby in whatever order Mortgagee directs
in its absolute discretion.
Any reduction in the indebtedness secured hereby resulting from Mortgagee's
application of any sums received by it hereunder shall take effect only when
Mortgagee actually receives such sums and elects to apply such sums to the
indebtedness secured hereby and, in any event, the unpaid portion of the
indebtedness secured hereby shall remain in full force and effect and Mortgagor
shall not be excused in the payment thereof. Partial payments received by
Mortgagee, as described in the preceding sentence, shall be applied to the
secured obligations in such order as Mortgagee shall determine in its reasonable
judgment. If Mortgagor elects or Mortgagee directs Mortgagor to restore or
repair the Property after the occurrence of a casualty or partial taking of the
Property as provided above, Mortgagor shall promptly and diligently, at
Mortgagor's sole cost and expense and regardless of whether the insurance
proceeds or condemnation award, as appropriate, shall be sufficient for the
purpose, restore, repair, replace and rebuild the Property as nearly as possible
to its value, condition and character immediately prior to such casualty or
partial taking in accordance with the foregoing provisions and Mortgagor shall
pay to Mortgagee all costs and expenses of Mortgagee incurred in administering
said rebuilding, restorations or repair, provided the Mortgagee makes such
proceeds or award available for such purpose. Mortgagor agrees to execute and
deliver from time to time such further instruments as may be requested by
Mortgagee to confirm
13
<PAGE>
the foregoing assignment to Mortgagee of any award, damage, insurance proceeds,
payment or other compensation. Mortgagee is hereby irrevocably constituted and
appointed the attorney-in-fact of Mortgagor (which power of attorney shall be
irrevocable so long as any indebtedness secured hereby is outstanding, shall be
deemed coupled with an interest, shall survive the voluntary or involuntary
dissolution of Mortgagor and shall not be affected by any disability or
incapacity suffered by Mortgagor subsequent to the date hereof), with full power
of substitution, subject to the terms of this section, to settle for, collect
and receive any such awards, damages, insurance proceeds, payments or other
compensation from the parties or authorities making the same, to appear in and
prosecute any proceedings therefor and to give receipts and acquittances
therefor.
1.10 Mechanics' Liens. Mortgagor shall pay when due all claims and
----------------
demands of mechanics, materialmen, laborers and others for any work performed or
materials delivered for the Real Estate or Improvements; provided, however,
-------- -------
that, Mortgagor shall have the right to contest in good faith any such claim or
demand, so long as it does so diligently, by appropriate proceedings and without
prejudice to Mortgagee and provided that neither the Property nor any interest
therein would be in any danger of sale, loss or forfeiture as a result of such
proceeding or contest. In the event Mortgagor shall contest any such claim or
demand, Mortgagor shall promptly notify Mortgagee of such contest and thereafter
shall, upon Mortgagee's request, promptly provide a bond, cash deposit or other
security satisfactory to Mortgagee to protect Mortgagee's interest and security
should the contest be unsuccessful. If Mortgagor shall fail to immediately
discharge or provide security against any such claim or demand as aforesaid,
Mortgagee may do so and any and all expenses incurred by Mortgagee, together
with interest thereon at the Default Interest Rate from the date incurred by
Mortgagee until actually paid by Mortgagor, shall be immediately paid by
Mortgagor on demand and shall be secured by this Mortgage and by all of the
other Loan Documents securing all or any part of the indebtedness evidenced by
the Loan Agreement.
1.11 Rents and Profits. As additional and collateral security for the
-----------------
payment of the indebtedness secured hereby and cumulative of any and all rights
and remedies herein provided for, Mortgagor hereby absolutely and presently
assigns to Mortgagee all existing and future Rents and Profits. Mortgagor
hereby grants to Mortgagee the sole, exclusive and immediate right, without
taking possession of the Property, to demand, collect (by suit or otherwise),
receive and give valid and sufficient receipts for any and all of said Rents and
Profits, for which purpose Mortgagor does hereby irrevocably make, constitute
and appoint Mortgagee its attorney-in-fact with full power to appoint
substitutes or a trustee to accomplish such purpose (which power of attorney
shall be irrevocable so long as any indebtedness secured hereby is outstanding,
shall be deemed to be coupled with an interest, shall survive the voluntary or
involuntary dissolution of Mortgagor and shall not be affected by any disability
or incapacity suffered by Mortgagor subsequent to the date hereof). Mortgagee
shall be without liability for any loss which may arise from a failure or
inability to collect Rents and Profits, proceeds or other payments. However,
until the occurrence of a default under this Mortgage which has not been cured
within any applicable grace or cure period, Mortgagor shall have a license to
collect and receive the Rents and Profits when due and prepayments thereof for
not more than one month prior to due date thereof. Upon the occurrence of a
default hereunder which has not been cured within any applicable grace or cure
period, Mortgagor's license shall automatically terminate without notice to
Mortgagor and Mortgagee may
14
<PAGE>
thereafter, without taking possession of the Property, collect the Rents and
Profits itself or by an agent or receiver. From and after the termination of
such license, Mortgagor shall be the agent of Mortgagee in collection of the
Rents and Profits and all of the Rents and Profits so collected by Mortgagor
shall be held in trust by Mortgagor for the sole and exclusive benefit of
Mortgagee and Mortgagor shall, within one (1) business day after receipt of any
Rents and Profits, pay the same to Mortgagee to be applied by Mortgagee as
hereinafter set forth. Neither the demand for or collection of Rents and Profits
by Mortgagee shall constitute any assumption by Mortgagee of any obligations
under any agreement relating thereto. Mortgagee is obligated to account only for
such Rents and Profits as are actually collected or received by Mortgagee.
Mortgagor irrevocably agrees and consents that the respective payors of the
Rents and Profits shall, upon demand and notice from Mortgagee of a default
hereunder, pay said Rents and Profits to Mortgagee without liability to
determine the actual existence of any default claimed by Mortgagee. Mortgagor
hereby waives any right, claim or demand which Mortgagor may now or hereafter
have against any such payor by reason of such payment of Rents and Profits to
Mortgagee, and any such payment shall discharge such payor's obligation to make
such payment to Mortgagor. All Rents and Profits collected or received by
Mortgagee shall be applied against all expenses of collection, including,
without limitation, attorneys' fees, against costs of operation and management
of the Property and against the indebtedness secured hereby, in whatever order
or priority as to any of the items so mentioned as Mortgagee directs in its sole
subjective discretion and without regard to the adequacy of its security.
Neither the exercise by Mortgagee of any rights under this Section nor the
application of any Rents and Profits to the secured indebtedness shall cure or
be deemed a waiver of any default hereunder. The assignment of Rents and Profits
hereinabove granted shall continue in full force and effect during any period of
foreclosure or redemption with respect to the Property. Mortgagor has executed
an Assignment of Leases and Rents dated of even date herewith (the "Assignment")
in favor of Mortgagee covering all of the right, title and interest of
Mortgagor, as landlord, lessor or licensor, in and to any leases, licenses and
occupancy agreements relating to all or portions of the Property. All rights and
remedies granted to Mortgagee under the Assignment shall be in addition to and
cumulative of all rights and remedies granted to Mortgagee hereunder.
1.12 Leases and Licenses.
-------------------
(a) Prior to execution of any leases of space in the Improvements
after the date hereof, Mortgagor shall submit to Mortgagee, for Mortgagee's
prior approval, which approval shall not be unreasonably withheld, a copy of the
form lease Mortgagor plans to use in leasing space in the Improvements. All
leases of space in the Improvements shall be on terms consistent with the terms
for similar leases in the market area of the Real Estate, shall provide for free
rent only if the same is consistent with prevailing market conditions and shall
provide for market rents then prevailing in the market area of the Real Estate.
Such leases shall also provide for security deposits in reasonable amounts.
Mortgagor shall also submit to Mortgagee for Mortgagee's approval, which
approval shall not be unreasonably withheld, prior to the execution thereof, any
proposed lease, license or occupancy agreement of the Improvements or any
portion thereof that differs materially and adversely from the aforementioned
form lease. Mortgagor shall not execute any lease, license or occupancy
agreement for all or a substantial portion of the Property, except for an actual
occupancy by the tenant, lessee or licensee thereunder, and shall at all times
promptly and faithfully perform, or cause to be performed, all of the covenants,
conditions and agreements contained in all
15
<PAGE>
leases, licenses and occupancy agreements with respect to the Property, now or
hereafter existing, on the part of the landlord, lessor or licensor thereunder
to be kept and performed. Mortgagor shall furnish to Mortgagee, within ten (10)
days after a request by Mortgagee to do so, a current rent roll certified by
Mortgagor as being true and correct containing the names of all tenants, lessees
and licensees with respect to the Property, the terms of their respective
leases, licenses or occupancy agreements, the spaces occupied and the rentals or
fees payable thereunder and the amount of each tenant's security deposit. Upon
the request of Mortgagee, Mortgagor shall deliver to Mortgagee a copy of each
such lease, license and occupancy agreement. Mortgagor shall not do or suffer to
be done any act that might result in a default by the landlord, lessor or
licensor under any such lease, license or occupancy agreement or allow the
tenant, lessee or licensee thereunder to withhold payment or rent and, except as
otherwise expressly permitted by the terms of Section 1.12 hereof, shall not
further assign any such lease, license or occupancy agreement or any such rents.
Mortgagor, at no cost or expense to Mortgagee, shall enforce, short of
termination, the performance and observance of each and every condition and
covenant of each of the parties under such leases. Mortgagor shall not, without
the prior written consent of Mortgagee, modify any of the leases, terminate or
accept the surrender of any leases, waive or release any other party from the
performance or observance of any obligation or condition under such leases
except in the normal course of business in a manner which is consistent with
sound and customary leasing and management practices for similar properties in
the community in which the Property is located. Mortgagor shall not permit the
prepayment of any rents under any of the leases for more than one (1) month
prior to the due date thereof.
(b) Each lease, license and occupancy agreement executed after the
date hereof affecting any of the Real Estate or the Improvements must provide,
in a manner approved by Mortgagee, that the tenant, lessee or licensee, as
appropriate, will recognize as its landlord, lessor or licensor and attorn to
any person succeeding to the interest of Mortgagor upon any foreclosure of this
Mortgage or deed in lieu of foreclosure. Each such lease, license and occupancy
agreement shall also provide that, upon request of said successor-in-interest,
the tenant, lessee or licensee shall execute and deliver an instrument or
instruments confirming its attornment as provided for in this Section; provided,
however, that neither Mortgagee nor any successor-in-interest shall be bound by
any payment of rental for more than one (1) month in advance, or any amendment
or modification of said lease or rental agreement made without the express
written consent of Mortgagee or said successor-in-interest.
(c) Upon the occurrence of a default under this Mortgage which is not
cured within any applicable grace period, whether before or after the whole
principal sum secured hereby is declared to be immediately due or whether before
or after the institution of legal proceedings to foreclose this Mortgage,
forthwith, upon demand of Mortgagee, Mortgagor shall surrender to Mortgagee and
Mortgagee shall be entitled to take actual possession of the Property or any
part thereof personally, or by its agent or attorneys. In such event, Mortgagee
shall have, and Mortgagor hereby gives and grants to Mortgagee, the right, power
and authority to make and enter into leases, licenses and occupancy agreements
with respect to the Property or portions thereof for such rents and for such
periods of occupancy and upon conditions and provisions as Mortgagee may deem
desirable in its sole discretion, and Mortgagor expressly acknowledges and
agrees that the term of such lease, license or occupancy agreement may extend
beyond the date of any
16
<PAGE>
foreclosure sale at the Property; it being the intention of Mortgagor that in
such event Mortgagee shall be deemed to be and shall be the attorney-in-fact of
Mortgagor for the purpose of making and entering into leases, licenses or
occupancy agreements of parts or portions of the Property for the rents and upon
the terms, conditions and provisions deemed desirable to Mortgagee in its sole
discretion and with like effect as if such leases, licenses or occupancy
agreements had been made by Mortgagor as the owner in fee simple of the Property
free and clear of any conditions or limitations established by this Mortgage.
The power and authority hereby given and granted by Mortgagor to Mortgagee shall
be deemed to be coupled with an interest, shall not be revocable by Mortgagor so
long as any indebtedness secured hereby is outstanding, shall survive the
voluntary or involuntary dissolution of Mortgagor and shall not be affected by
any disability or incapacity suffered by Mortgagor subsequent to the date
hereof. In connection with any action taken by Mortgagee pursuant to this
Section, Mortgagee shall not be liable for any loss sustained by Mortgagor
resulting from any failure to let the Property, or any part thereof, or from any
other act or omission of Mortgagee in managing the Property, nor shall Mortgagee
be obligated to perform or discharge any obligation, duty or liability under any
lease, license or occupancy agreement covering the Property or any part thereof
or under or by reason of this instrument or the exercise of rights or remedies
hereunder. Mortgagor shall, and does hereby, indemnify Mortgagee for, and hold
Mortgagee harmless from, any and all claims, actions, demands, liabilities, loss
or damage which may or might be incurred by Mortgagee under any such lease,
license or occupancy agreement or under this Mortgage or by the exercise of
rights or remedies hereunder and from any and all claims and demands whatsoever
which may be asserted against Mortgagee by reason of any alleged obligations or
undertakings on its part to perform or discharge any of the terms, covenants or
agreements contained in any such lease, license or occupancy agreement other
than those finally determined to have resulted solely from the gross negligence
or willful misconduct of Mortgagee. Should Mortgagee incur any such liability,
the amount thereof, including, without limitation, costs, expenses and
attorneys' fees, together with interest thereon at the Default Interest Rate
from the date incurred by Mortgagee until actually paid by Mortgagor, shall be
immediately due and payable to Mortgagee by Mortgagor on demand and shall be
secured hereby and by all of the other Loan Documents securing all or any part
of the indebtedness evidenced by the Loan Agreement. Nothing in this Section
shall impose on Mortgagee any duty, obligation or responsibility for the
control, care, management or repair of the Property, or for the carrying out of
any of the terms and conditions of any such lease, license or occupancy
agreement, nor shall it operate to make Mortgagee responsible or liable for any
waste committed on the Property by the tenants or by any other parties or for
any dangerous or defective condition of the Property, or for any negligence in
the management, upkeep, repair or control of the Property. Mortgagor hereby
assents to, ratifies and confirms any and all actions of Mortgagee with respect
to the Property taken under this Section.
1.13 Alienation and Further Encumbrances. Mortgagor acknowledges that
-----------------------------------
Mortgagee has relied upon the principals of Mortgagor and their experience in
owning and operating properties similar to the Property in connection with the
closing of the loan evidenced by the Loan Agreement. Accordingly, except as
specifically allowed hereinbelow in this Section and notwithstanding anything to
the contrary contained in Section 4.6 hereof, in the event that the Property or
any part thereof or interest therein shall be sold, conveyed, disposed of,
alienated,
17
<PAGE>
hypothecated, leased (except to tenants of space in the Improvements in
accordance with the provisions of Section 1.12 hereof), assigned, pledged,
mortgaged, further encumbered or otherwise transferred or Mortgagor shall be
divested of its title to the Property or any interest therein, in any manner or
way, whether voluntarily or involuntarily, without the prior written consent of
Mortgagee being first obtained, which consent may be withheld in Mortgagee's
sole discretion, then, the same shall constitute a default hereunder and
Mortgagee shall have the right, at its option, to declare any or all of the
indebtedness secured hereby, irrespective of the maturity date specified in the
Loan Agreement, immediately due and payable and to otherwise exercise any of its
other rights and remedies contained in Article III hereof. If such acceleration
is during any period when a prepayment fee is payable pursuant to the provisions
set forth in the Loan Agreement, then, in addition to all of the foregoing, such
prepayment fee shall also then be immediately due and payable to the same end as
though Mortgagor were prepaying the entire indebtedness secured hereby on the
date of such acceleration. Notwithstanding the foregoing, however, any
involuntary transfer caused by the death of Mortgagor or any shareholder, joint
venturer, or beneficial owner of a trust shall not be a default under this
Mortgage so long as Mortgagor is reconstituted, if required, following such
death and so long as those persons responsible for the management of the
Property remain unchanged as a result of such death or any replacement
management is approved by Mortgagee.
1.14 Payment of Utilities, Assessments, Charges, Etc. Mortgagor shall pay
-----------------------------------------------
when due all utility charges which are incurred by Mortgagor or which may become
a charge or lien against any portion of the Property for gas, electricity, water
and sewer services furnished to the Real Estate and/or the Improvements and all
other assessments or charges of a similar nature, or assessments payable
pursuant to any restrictive covenants, whether public or private, affecting the
Real Estate and/or the Improvements or any portion thereof, whether or not such
assessments or charges are or may become liens thereon.
1.15 Access Privileges and Inspections. Mortgagee and the agents,
---------------------------------
representatives and employees of Mortgagee shall, subject to the rights of
tenants, have full and free access to the Real Estate and the Improvements and
any other location where books and records concerning the Property are kept at
all reasonable times for the purposes of inspecting the Property and of
examining, copying and making extracts from the books and records of Mortgagor
relating to the Property. Mortgagor shall lend assistance to all such agents,
representatives and employees of Mortgagee.
1.16 Waste; Alteration of Improvements. Mortgagor shall not commit,
---------------------------------
suffer or permit any waste on the Property nor take any actions that might
invalidate any insurance carried on the Property. Mortgagor shall maintain the
Property in good condition and repair. No part of the Improvements may be
removed, demolished or materially altered, without the prior written consent of
Mortgagee. Without the prior written consent of Mortgagee, Mortgagor shall not
commence construction of any improvements on the Real Estate other than
improvements required for the maintenance or repair of the Property.
1.17 Zoning. Without the prior written consent of Mortgagee, Mortgagor
------
shall not seek, make, suffer, consent to or acquiesce in any change in the
zoning or conditions of use of the Real
18
<PAGE>
Estate or the Improvements. Mortgagor shall comply with and make all payments
required under the provisions of any covenants, conditions or restrictions
affecting the Real Estate or the Improvements. Mortgagor shall comply with all
existing and future requirements of all governmental authorities having
jurisdiction over the Property. Mortgagor shall keep all licenses, permits,
franchises and other approvals necessary for the operation of the Property in
full force and effect. If, under applicable zoning provisions, the use of all or
any part of the Real Estate or the Improvements is or becomes a nonconforming
use, Mortgagor shall not cause or permit such use to be discontinued or
abandoned without the prior written consent of Mortgagee. Further, without
Mortgagee's prior written consent, Mortgagor shall not file or subject any part
of the Real Estate or the Improvements to any declaration of condominium or co-
operative or convert any part of the Real Estate or the Improvements to a
condominium, co-operative or other form of multiple ownership and governance.
1.18 Financial Statements and Books and Records. Mortgagor shall keep
------------------------------------------
accurate books and records of account of the Property and its own financial
affairs sufficient to permit the preparation of financial statements therefrom
in accordance with generally accepted accounting principles. Mortgagee and its
duly authorized representatives shall have the right to examine, copy and audit
Mortgagor's records and books of account at all reasonable times.
1.19 Further Documentation. Mortgagor shall, on the request of Mortgagee
---------------------
and at the expense of Mortgagor: (a) promptly correct any defect, error or
omission which may be discovered in the contents of this Mortgage or in the
contents of any of the other Loan Documents; (b) promptly execute, acknowledge,
deliver and record or file such further instruments (including, without
limitation, further mortgages, deeds of trust, security deeds, security
agreements, financing statements, continuation statements and assignments of
rents or leases) and promptly do such further acts as may be necessary,
desirable or proper to carry out more effectively the purposes of this Mortgage
and the other Loan Documents and to subject to the liens and security interests
hereof and thereof any property intended by the terms hereof and thereof to be
covered hereby and thereby, including specifically, but without limitation, any
renewals, additions, substitutions, replacements or appurtenances to the
Property; (c) promptly execute, acknowledge, deliver, procure and record or file
any document or instrument (including specifically any financing statement)
deemed advisable by Mortgagee to protect, continue or perfect the liens or the
security interests hereunder against the rights or interests of third persons;
and (d) promptly furnish to Mortgagee, upon Mortgagee's request, a duly
acknowledged written statement and estoppel certificate addressed to such party
or parties as directed by Mortgagee and in form and substance supplied by
Mortgagee, setting forth all amounts due under the Loan Agreement, stating
whether any event has occurred which, with the passage of time or the giving of
notice or both, would constitute an event of default hereunder, stating whether
any offsets or defenses exist against the indebtedness secured hereby and
containing such other matters as Mortgagee may reasonably require.
1.20 Payment of Costs; Reimbursement to Mortgagee. Mortgagor shall pay
--------------------------------------------
all costs and expenses of every character incurred in connection with the
closing of the loan evidenced by the Loan Agreement and secured hereby or
otherwise attributable or chargeable to Mortgagor as the owner of the Property,
including, without limitation, appraisal fees, recording fees,
19
<PAGE>
documentary, stamp, mortgage or intangible taxes, title policy premiums and
title search fees, uniform commercial code/tax lien/litigation search fees,
escrow fees and attorneys' fees. If Mortgagor defaults in any such payment,
which default is not cured within any applicable grace or cure period, Mortgagee
may pay the same and Mortgagor shall reimburse Mortgagee on demand for all such
costs and expenses incurred or paid by Mortgagee, together with such interest
thereon at the Default Interest Rate from and after the date of Mortgagee's
making such payment until reimbursement thereof by Mortgagor. Any such sums
disbursed by Mortgagee, together with such interest thereon, shall be additional
indebtedness of Mortgagor secured by this Mortgage and by all of the other Loan
Documents securing all or any part of the indebtedness evidenced by the Loan
Agreement. Further, Mortgagor shall promptly notify Mortgagee in writing of any
litigation or threatened litigation affecting the Property, or any other demand
or claim which, if enforced, could impair or threaten to impair Mortgagee's
security hereunder. Without limiting or waiving any other rights and remedies of
Mortgagee hereunder, if Mortgagor fails to perform any of its covenants or
agreements contained in this Mortgage or in any of the other Loan Documents and
such failure is not cured within any applicable grace or cure period, or if any
action or proceeding of any kind (including, but not limited to, any bankruptcy,
insolvency, arrangement, reorganization or other debtor relief proceeding) is
commenced which might affect Mortgagee's interest in the Property or Mortgagee's
right to enforce its security, then Mortgagee may, at its option, with or
without notice to Mortgagor, make any appearances, disburse any sums and take
any actions as may be necessary or desirable to protect or enforce the security
of this Mortgage or to remedy the failure of Mortgagor to perform its covenants
and agreements (without, however, waiving any default of Mortgagor). Mortgagor
agrees to pay on demand all expenses of Mortgagee incurred with respect to the
foregoing (including, but not limited to, fees and disbursements of counsel),
together with interest thereon at the Default Interest Rate from and after the
date on which Mortgagee incurs such expenses until reimbursement thereof by
Mortgagor. Any such expenses so incurred by Mortgagee, together with interest
thereon as provided above, shall be additional indebtedness of Mortgagor secured
by this Mortgage and by all of the other Loan Documents securing all or any part
of the indebtedness evidenced by the Loan Agreement. The necessity for any such
actions and of the amounts to be paid shall be determined by Mortgagee in its
discretion. Mortgagee is hereby empowered to enter and to authorize others to
enter upon the Property or any part thereof for the purpose of performing or
observing any such defaulted term, covenant or condition without thereby
becoming liable to Mortgagor or any person in possession holding under
Mortgagor. Mortgagor hereby acknowledges and agrees that the remedies set forth
in this Section 1.20 shall be exercisable by Mortgagee, and any and all payments
made or costs or expenses incurred by Mortgagee in connection therewith shall be
secured hereby and shall be, without demand, immediately repaid by Mortgagor
with interest thereon at the Default Interest Rate, notwithstanding the fact
that such remedies were exercised and such payments made and costs incurred by
Mortgagee after the filing by Mortgagor of a voluntary case or the filing
against Mortgagor of an involuntary case pursuant to or within the meaning of
the Bankruptcy Reform Act of 1978, as amended, Title 11 U.S.C., or after any
similar action pursuant to any other debtor relief law (whether statutory,
common law, case law or otherwise) of any jurisdiction whatsoever, now or
hereafter, in effect, which may be or become applicable to Mortgagor, Mortgagee,
any guarantor or indemnitor, the secured indebtedness or any of the Loan
Documents. Mortgagor hereby indemnifies and holds Mortgagee harmless from and
against all loss, cost and expenses with respect to any default hereof, any
liens (i.e., judgments,
20
<PAGE>
mechanics' and materialmen's liens, or otherwise), charges and encumbrances
filed against the Property, and from any claims and demands for damages or
injury, including claims for property damage, personal injury or wrongful death,
arising out of or in connection with any accident or fire or other casualty on
the Real Estate or the Improvements or any nuisance made or suffered thereon,
including, in any case, attorneys' fees, costs and expenses as aforesaid,
whether at pretrial, trial or appellate level, and such indemnity shall survive
payment in full of the indebtedness secured hereby. This Section shall not be
construed to require Mortgagee to incur any expenses, make any appearances or
take any actions.
1.21 Security Interest. This Mortgage is also intended to encumber and
-----------------
create a security interest in, and Mortgagor hereby grants to Mortgagee a
security interest in all fixtures, chattels, accounts, equipment, inventory,
contract rights, general intangibles and other personal property included within
the Property, all renewals, replacements of any of the aforementioned items, or
articles in substitution therefor or in addition thereto or the proceeds thereof
(said property is hereinafter referred to collectively as the "Collateral"),
whether or not the same shall be attached to the Real Estate or the Improvements
in any manner. It is hereby agreed that to the extent permitted by law, all of
the foregoing property is to be deemed and held to be a part of and affixed to
the Real Estate and the Improvements. The foregoing security interest shall
also cover Mortgagor's leasehold interest in any of the foregoing property which
is leased by Mortgagor. Notwithstanding the foregoing, all of the foregoing
property shall be owned by Mortgagor and no leasing or installment sales or
other financing or title retention agreement in connection therewith shall be
permitted without the prior written approval of Mortgagee. Mortgagor shall,
from time to time upon the request of Mortgagee, supply Mortgagee with a current
inventory of all of the property in which Mortgagee is granted a security
interest hereunder, in such detail as Mortgagee may require. Mortgagor shall
promptly replace all of the Collateral subject to the lien or security interest
of this Mortgage when worn or obsolete with Collateral comparable to the worn
out or obsolete Collateral when new and will not, without the prior written
consent of Mortgagee, remove from the Real Estate or the Improvements any of the
Collateral subject to the lien or security interest of this Mortgage except such
as is replaced by an article of equal suitability and value as above provided,
owned by Mortgagor free and clear of any lien or security interest except that
created by this Mortgage and the other Loan Documents and except as otherwise
expressly permitted by the terms of Section 1.13 of this Mortgage. All of the
Collateral shall be kept at the location of the Real Estate except as otherwise
required by the terms of the Loan Documents. Mortgagor shall not use any of
the Collateral in violation of any applicable statute, ordinance or insurance
policy.
1.22 Security Agreement. This Mortgage constitutes a security agreement
------------------
between Mortgagor and Mortgagee with respect to the Collateral in which
Mortgagee is granted a security interest hereunder, and, cumulative of all other
rights and remedies of Mortgagee hereunder, Mortgagee shall have all of the
rights and remedies of a secured party under any applicable Uniform Commercial
Code. Mortgagor hereby agrees to execute and deliver on demand and hereby
irrevocably constitutes and appoints Mortgagee the attorney-in-fact of Mortgagor
to execute and deliver and, if appropriate, to file with the appropriate filing
officer or office such security agreements, financing statements, continuation
statements or other instruments as Mortgagee may request or require in order to
impose, perfect or continue the perfection of the lien or security
21
<PAGE>
interest created hereby. Except with respect to Rents and Profits to the extent
specifically provided herein to the contrary, Mortgagee shall have the right of
possession of all cash, securities, instruments, negotiable instruments,
documents, certificates and any other evidences of cash or other property or
evidences of rights to cash rather than property, which are now or hereafter a
part of the Property and Mortgagor shall promptly deliver the same to Mortgagee,
endorsed to Mortgagee, without further notice from Mortgagee. Mortgagor agrees
to furnish Mortgagee with notice of any change in the name, identity, corporate
structure, residence, or principal place of business or mailing address of
Mortgagor within ten (10) days of the effective date of any such change. Upon
the occurrence of any default hereunder not cured within any applicable grace or
cure period, Mortgagee shall have the rights and remedies as prescribed in the
Mortgage, or as prescribed by general law, or as prescribed by any applicable
Uniform Commercial Code, all at Mortgagee's election. Any disposition of the
Collateral may be conducted by an employee or agent of Mortgagee. Any person,
including both Mortgagor and Mortgagee, shall be eligible to purchase any part
or all of the Collateral at any such disposition. Expenses of retaking, holding,
preparing for sale, selling or the like (including, without limitation,
Mortgagee's attorneys' fees and legal expenses), together with interest thereon
at the Default Interest Rate from the date incurred by Mortgagee until actually
paid by Mortgagor, shall be paid by Mortgagor on demand and shall be secured by
this Mortgage and by all of the other Loan Documents securing all or any part of
the indebtedness evidenced by the Loan Agreement. Mortgagee shall have the right
to enter upon the Real Estate and the Improvements or any real property where
any of the property which is the subject of the security interest granted herein
is located to take possession of, assemble and collect the same or to render it
unusable, or Mortgagor, upon demand of Mortgagee, shall assemble such property
and make it available to Mortgagee at the Real Estate, a place which is hereby
deemed to be reasonably convenient to Mortgagee and Mortgagor. If notice is
required by law, Mortgagee shall give Mortgagor at least ten (10) days' prior
written notice of the time and place of any public sale of such property or of
the time of or after which any private sale or any other intended disposition
thereof is to be made, and if such notice is sent to Mortgagor, as the same is
provided for the mailing of notices herein, it is hereby deemed that such notice
shall be and is reasonable notice to Mortgagor. No such notice is necessary for
any such property which is perishable, threatens to decline speedily in value or
is of a type customarily sold on a recognized market. Any sale made pursuant to
the provisions of this Section shall be deemed to have been a public sale
conducted in a commercially reasonable manner if held contemporaneously with the
foreclosure sale as provided in Section 3.1(e) hereof upon giving the same
notice with respect to the sale of the Property hereunder as is required under
said Section 3.1(e). Furthermore, to the extent permitted by law, in conjunction
with, in addition to or in substitution for the rights and remedies available to
Mortgagee pursuant to any applicable Uniform Commercial Code:
(a) In the event of a foreclosure sale, the Property may, at the
option of Mortgagee, be sold as a whole; and
(b) It shall not be necessary that Mortgagee take possession of the
aforementioned Collateral, or any part thereof, prior to the time that any sale
pursuant to the provisions of this Section is conducted and it shall not be
necessary that said Collateral, or any part thereof, be present at the location
of such sale; and
22
<PAGE>
(c) Mortgagee may appoint or delegate any one or more persons as
agent to perform any act or acts necessary or incident to any sale held by
Mortgagee, including the sending of notices and the conduct of the sale, but in
the name and on behalf of Mortgagee.
The name and address of Mortgagor (as Debtor under any applicable Uniform
Commercial Code) are:
Cardiac Control Systems, Inc.
Three Commerce Boulevard
Palm Coast, Florida 32164
The name and address of Mortgagee (as Secured Party under any applicable Uniform
Commercial Code) are:
Coast Business Credit
12121 Wilshire Boulevard
Suite 1111
Los Angeles, California 90025
1.23 Easements and Rights-of-Way. Mortgagor shall not grant any easement
---------------------------
or right-of-way with respect to all or any portion of the Real Estate or the
Improvements without the prior written consent of Mortgagee. The purchaser at
any foreclosure sale hereunder may, at its discretion, disaffirm any easement or
right-of-way granted in violation of any of the provisions of this Mortgage and
may take immediate possession of the Property free from, and despite the terms
of, such grant of easement or right-of-way. If Mortgagee consents to the grant
of an easement or right-of-way, Mortgagee agrees to grant such consent provided
that Mortgagee is paid a standard review fee together with all other expenses,
including, without limitation, attorneys' fees, incurred by Mortgagee in the
review of Mortgagor's request and in the preparation of documents effecting the
subordination.
1.24 Compliance with Laws. Mortgagor shall at all times comply with all
--------------------
statutes, ordinances, regulations and other governmental or quasi-governmental
requirements and private covenants now or hereafter relating to the ownership,
construction, use or operation of the Property, including, but not limited to,
those concerning employment and compensation of persons engaged in operation and
maintenance of the Property and any environmental or ecological requirements,
even if such compliance shall require structural changes to the Property;
provided, however, that, Mortgagor may, upon providing Mortgagee with security
- -------- ------- ----
satisfactory to Mortgagee, proceed diligently and in good faith to contest the
validity or applicability of any such statute, ordinance, regulation or
requirement so long as during such contest the Property shall not be subject to
any lien, charge, fine or other liability and shall not be in danger of being
forfeited, lost or closed. Mortgagor shall not use or occupy, or allow the use
or occupancy of, the Property in any manner which violates any lease of or any
other agreement applicable to the Property or any applicable law, rule,
regulation or order or which constitutes a public or private nuisance or which
makes void, voidable or cancelable, or increases the premium of, any insurance
then in force with respect thereto.
23
<PAGE>
1.25 Additional Taxes. In the event of the enactment after this date of
----------------
any law of the state where the Property is located or of any other governmental
entity deducting from the value of the Property for the purpose of taxation any
lien or security interest thereon, or imposing upon Mortgagee the payment of the
whole or any part of the taxes or assessments or charges of liens herein
required to be paid by Mortgagor, or changing in any way the laws relating to
the taxation of mortgages or security agreements or debts secured by mortgages
or security agreements or the interest of the Mortgagee or secured party in the
property covered thereby, or the manner of collection of such taxes, so as to
adversely affect this Mortgage or the indebtedness secured hereby or Mortgagee,
then, and in any such event, Mortgagor, upon demand by Mortgagee, shall pay such
taxes, assessments, charges or liens, or reimburse Mortgagee therefor; provided,
--------
however, that if in the opinion of counsel for Mortgagee (a) it might be
- ------- ----
unlawful to require Mortgagor to make such payment, or (b) the making of such
payment might result in the imposition of interest beyond the maximum amount
permitted by law, then and in either such event, Mortgagee may elect, by notice
in writing given to Mortgagor, to declare all of the indebtedness secured hereby
to be and become due and payable in full thirty (30) days from the giving of
such notice.
1.26 Secured Indebtedness; Future Advances. It is understood and agreed
-------------------------------------
that this Mortgage shall secure payment of not only the indebtedness evidenced
by the Loan Agreement but also any and all substitutions, replacements, renewals
and extensions thereof, any and all indebtedness and obligations arising
pursuant to the terms hereof and any and all indebtedness and obligations
arising pursuant to the terms of any of the other Loan Documents, all of which
indebtedness is equally secured with and has the same priority as any amounts
advanced as of the date hereof. This Mortgage is given to secure the
indebtedness of up to $500,000 of the Mortgagor to the Mortgagee evidenced by
the Loan Agreement secured hereby, and any disbursements made by the Mortgagee
for the payment of taxes and the fees and costs of foreclosure, which advances
shall be secured hereby. The total amount of indebtedness secured hereby may
increase or decrease from time to time. The provisions of this Section 1.26
shall not be construed to imply any obligation on Mortgagee to make any future
advances, it being the intention of the parties that any future advances shall
be solely at the discretion and option of the Mortgagee. Any reference to "Loan
Agreement" in this Mortgage shall be construed to reference any future advances
made pursuant to this Section 1.26.
1.27 Mortgagor's Waivers. To the full extent permitted by law, Mortgagor
--------------------
agrees that Mortgagor shall not at any time insist upon, plead, claim or take
the benefit or advantage of any law now or hereafter in force providing for any
appraisement, valuation, stay, moratorium or extension, or any law now or
hereafter in force providing for the reinstatement of the indebtedness secured
hereby prior to any sale of the Property to be made pursuant to any provisions
contained herein or prior to the entering of any decree, judgment or order of
any court of competent jurisdiction, or any right under any statute to redeem
all or any part of the Property so sold. Mortgagor, for Mortgagor and
Mortgagor's successors and assigns, and for any and all persons ever claiming
any interest in the Property, to the full extent permitted by law, hereby
knowingly, intentionally and voluntarily with and upon the advice of competent
counsel: (a) waives, releases, relinquishes and forever forgoes all rights of
valuation, appraisement, stay of execution, reinstatement and notice of election
or intention to mature or declare due the secured indebtedness (except such
notices as are specifically provided for herein); (b) waives, releases,
relinquishes and
24
<PAGE>
forever forgoes all right to a marshalling of the assets of Mortgagor, including
the Property, to a sale in the inverse order of alienation, or to direct the
order in which any of the Property shall be sold in the event of foreclosure of
the liens and security interests hereby created and agrees that any court having
jurisdiction to foreclose such liens and security interests may order the
Property sold as an entirety; and (c) waives, releases, relinquishes and forever
forgoes all rights and periods of redemption provided under applicable law. To
the full extent permitted by law, Mortgagor shall not have or assert any right
under any statute or rule of law pertaining to the exemption of homestead or
other exemption under any federal, state or local law now or hereafter in
effect, the administration of estates of decedents or other matters whatever to
defeat, reduce or affect the right of Mortgagee under the terms of this Mortgage
to a sale of the Property, for the collection of the secured indebtedness
without any prior or different resort for collection, or the right of Mortgagee
under the terms of this Mortgage to the payment of the indebtedness secured
hereby out of the proceeds of sale of the Property in preference to every other
claimant whatever. Further, Mortgagor hereby knowingly, intentionally and
voluntarily, with and upon the advice of competent counsel, waives, releases,
relinquishes and forever forgoes all present and future statutes of limitations
as a defense to any action to enforce the provisions of this Mortgage or to
collect any of the indebtedness secured hereby the fullest extent permitted by
law. Mortgagor covenants and agrees that upon the commencement of a voluntary or
involuntary bankruptcy proceeding by or against Mortgagor, Mortgagor shall not
seek a supplemental stay or otherwise shall not seek pursuant to 11 U.S.C.
(S)105 or any other provision of the Bankruptcy Reform Act of 1978, as amended,
or any other debtor relief law (whether statutory, common law, case law, or
otherwise) of any jurisdiction whatsoever, now or hereafter in effect, which may
be or become applicable, to stay, interdict, condition, reduce or inhibit the
ability of Mortgagee to enforce any rights of Mortgagee against any guarantor or
indemnitor of the secured obligations or any other party liable with respect
thereto by virtue of any indemnity, guaranty or otherwise.
1.28 Intentionally Omitted.
---------------------
1.29 Contractual Statute of Limitations. Mortgagor hereby agrees that any
----------------------------------
claim or cause of action by Mortgagor against Mortgagee, or any of Mortgagee's
directors, officers, employees, agents, accountants or attorneys, based upon,
arising from or relating to the indebtedness secured hereby, or any other
matter, cause or thing whatsoever, whether or not relating thereto, occurred,
done, omitted or suffered to be done by Mortgagee or by Mortgagee's directors,
officers, employees, agents, accountants or attorneys, whether sounding in
contract or in tort or otherwise, shall be barred unless asserted by Mortgagor
by the commencement of an action or proceeding in a court of competent
jurisdiction by the filing of a complaint within one (1) year after Mortgagor
first acquires or reasonably should have acquired knowledge of the first act,
occurrence or omission upon which such claim or cause of action, or any part
thereof, is based and service of a summons and complaint on an officer of
Mortgagee or any other person authorized to accept service of process on behalf
of Mortgagee, within thirty (30) days thereafter. Mortgagor agrees that such
one (1) year period of time is reasonable and sufficient time for a borrower to
investigate and act upon any such claim or cause of action. The one (1) year
period provided herein shall not be waived, tolled or extended except by the
specific written agreement of Mortgagee. This provision shall survive any
termination of this Mortgage or any of the other Loan Documents.
25
<PAGE>
1.30 Intentionally Omitted.
---------------------
1.31 Hazardous Waste and Other Substances.
------------------------------------
(a) Mortgagor hereby represents and warrants to Mortgagee that, as of
the date hereof: (i) to the best of Mortgagor's knowledge, information and
belief, the Property is not in direct or indirect violation of any local, state
or federal law, rule or regulation pertaining to environmental regulation,
contamination or clean-up (collectively, "Environmental Laws"), including,
without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (42 U.S.C. (S)9601 et seq. and 40 CFR (S)302.1 et seq.),
-- --- -- ---
the Resource Conservation and Recovery Act of 1976 (42 U.S.C. (S)6901 et seq.),
-- ---
the Federal Water Pollution Control Act (33 U.S.C. (S)1251 et seq. and 40 CFR
-- ---
(S)116.1 et seq.), those relating to lead based paint, and the Hazardous
-- ---
Materials Transportation Act (49 U.S.C. (S)1801 et seq.), and the regulations
-- ---
promulgated pursuant to said laws, all as amended; (ii) no hazardous, toxic or
harmful substances, wastes, materials, pollutants or contaminants (including,
without limitation, asbestos, lead based paint, polychlorinated biphenyls,
petroleum products, flammable explosives, radioactive materials, infectious
substances or raw materials which include hazardous constituents) or any other
substances or materials which are included under or regulated by Environmental
Laws (collectively, "Hazardous Substances") are located on or have been handled,
generated, stored, processed or disposed of on or released or discharged from
the Property (including underground contamination) except for those substances
used by Mortgagor in the ordinary course of its business and in compliance with
all Environmental Laws; (iii) the Property is not subject to any private or
governmental lien or judicial or administrative notice or action relating to
Hazardous Substances; (iv) there are no existing or closed underground storage
tanks or other underground storage receptacles for Hazardous Substances on the
Property; (v) Mortgagor has received no notice of, and to the best of
Mortgagor's knowledge and belief, there exists no investigation, action,
proceeding or claim by any agency, authority or unit of government or by any
third party which could result in any liability, penalty, sanction or judgment
under any Environmental Laws with respect to any condition, use or operation of
the Property nor does Mortgagor know of any basis for such a claim; and (vi)
Mortgagor has received no notice of and, to the best of Mortgagor's knowledge
and belief, there has been no claim by any party that any use, operation or
condition of the Property has caused any nuisance or any other liability or
adverse condition on any other property nor does Mortgagor know of any basis for
such a claim.
(b) Mortgagor shall keep or cause the Property to be kept free from
Hazardous Substances (except those substances used by Mortgagor in the ordinary
course of its business and in compliance with all Environmental Laws) and in
compliance with all Environmental Laws, shall not install or use any underground
storage tanks, shall expressly prohibit the use, generation, handling, storage,
production, processing and disposal of Hazardous Substances by all tenants of
space in the Improvements, and, without limiting the generality of the
foregoing, during the term of this Mortgage, shall not install in the
Improvements or permit to be installed in the Improvements asbestos or any
substance containing asbestos.
(c) Mortgagor shall promptly notify Mortgagee if Mortgagor shall
become aware of the possible existence of any Hazardous Substances on the
Property or if Mortgagor shall
26
<PAGE>
become aware that the Property is or may be in direct or indirect violation of
any Environmental Laws. Further, immediately upon receipt of the same, Mortgagor
shall deliver to Mortgagee copies of any and all orders, notices, permits,
applications, reports, and other communications, documents and instruments
pertaining to the actual, alleged or potential presence or existence of any
Hazardous Substances at, on, about, under, within, near or in connection with
the Property. Mortgagor shall, promptly and when and as required by Mortgagee,
at Mortgagor's sole cost and expense, take all actions as shall be necessary or
advisable for the clean-up of any and all portions of the Property or other
affected property, including, without limitation, all investigative, monitoring,
removal, containment and remedial actions in accordance with all applicable
Environmental Laws (and in all events in a manner satisfactory to Mortgagee),
and shall further pay or cause to be paid, at no expense to Mortgagee, all
clean-up, administrative and enforcement costs of applicable governmental
agencies which may be asserted against the Property. In the event Mortgagor
fails to do so, Mortgagee may, but shall not be obligated to, cause the Property
or other affected property to be freed from any Hazardous Substances or
otherwise brought into conformance with Environmental Laws and any and all costs
and expenses incurred by Mortgagee in connection therewith, together with
interest thereon at the Default Interest Rate from the date incurred by
Mortgagee until actually paid by Mortgagor, shall be immediately paid by
Mortgagor on demand and shall be secured by this Mortgage and by all of the
other Loan Documents securing all or any part of the indebtedness evidenced by
the Loan Agreement. Mortgagor hereby grants to Mortgagee and its agents and
employees access to the Property and a license to remove any items deemed by
Mortgagee to be Hazardous Substances and to do all things Mortgagee shall deem
necessary to bring the Property in conformance with Environmental Laws.
Mortgagor covenants and agrees, at Mortgagor's sole cost and expense, to
indemnify, defend (at trial and appellate levels, and with attorneys,
consultants and experts acceptable to Mortgagee), and hold Mortgagee harmless
from and against any and all liens, damages, losses, liabilities, obligations,
settlement payments, penalties, assessments, citations, directives, claims,
litigation, demands, defenses, judgments, suits, proceedings, costs,
disbursements or expenses of any kind or of any nature whatsoever (including,
without limitation, reasonable attorneys', consultants' and experts' fees and
disbursements actually incurred in investigating, defending, settling or
prosecuting any claim, litigation or proceeding) which may at any time be
imposed upon, incurred by or asserted or awarded against Mortgagee or the
Property, and arising directly or indirectly from or out of: (i) the presence,
release or threat of release of any Hazardous Substances on, in, under or
affecting all or any portion of the Property or any surrounding areas,
regardless of whether or not caused by or within the control of Mortgagor; (ii)
the violation of any Environmental Laws relating to or affecting the Property,
whether or not caused by or within the control of Mortgagor; (iii) the failure
by Mortgagor to comply fully with the terms and conditions of this Section 1.31;
(iv) the breach of any representation or warranty contained in this Section
1.31; or (v) the enforcement of this Section 1.31, including, without
limitation, the cost of assessment, containment and/or removal of any and all
Hazardous Substances from all or any portion of the Property or any surrounding
areas, the cost of any actions taken in response to the presence, release or
threat of release of any Hazardous Substances on, in, under or affecting any
portion of the Property or any surrounding areas to prevent or minimize such
release or threat of release so that it does not migrate or otherwise cause or
threaten danger to present or future public health, safety, welfare or the
environment, and costs incurred to comply with the Environmental Laws in
connection with all or
27
<PAGE>
any portion of the Property or any surrounding areas. The indemnity set forth in
this Section 1.31(c) shall also include any diminution in the value of the
security afforded by the Property or any future reduction in the sales price of
the Property by reason of any matter set forth in this Section 1.31(c).
Mortgagee's rights under this Section shall survive payment in full of the
indebtedness secured hereby and shall be in addition to all other rights of
Mortgagee under this Mortgage, the Loan Agreement and the other Loan Documents.
(d) Upon Mortgagee's request, at any time after the occurrence of a
default hereunder or at such other time as Mortgagee has reasonable grounds to
believe that Hazardous Substances are or have been released, stored or disposed
of on or around the Property or that the Property may be in violation of the
Environmental Laws, Mortgagor shall provide, at Mortgagor's sole cost and
expense, an inspection or audit of the Property prepared by a hydrogeologist or
environmental engineer or other appropriate consultant approved by Mortgagee
indicating the presence or absence of Hazardous Substances on the Property or an
inspection or audit of the Improvements prepared by an engineering or consulting
firm approved by Mortgagee indicating the presence or absence of friable
asbestos or substances containing asbestos on the Property. If Mortgagor fails
to provide such inspection or audit within thirty (30) days after such request,
Mortgagee may order the same, and Mortgagor hereby grants to Mortgagee and its
employees and agents access to the Property and a license to undertake such
inspection or audit. The cost of such inspection or audit, together with
interest thereon at the Default Interest Rate from the date incurred by
Mortgagee until actually paid by Mortgagor, shall be immediately due and payable
to Mortgagee by Mortgagor on demand and shall be secured hereby and by all of
the other Loan Documents securing all or any part of the indebtedness evidenced
by the Loan Agreement.
1.32 Indemnification; Subrogation.
----------------------------
(a) Mortgagor shall indemnify, defend and hold Mortgagee harmless
against: (i) any and all claims for brokerage, leasing, finders or similar fees
which may be made relating to the Property or the secured indebtedness, and (ii)
any and all liability, obligations, losses, damages, penalties, claims, actions,
suits, costs and expenses (including Mortgagee's reasonable attorneys' fees,
together with reasonable appellate counsel fees, if any) of whatever kind or
nature which may be asserted against, imposed on or incurred by Mortgagee in
connection with the secured indebtedness, this Mortgage, the Property, or any
part thereof, or the exercise by Mortgagee of any rights or remedies granted to
it under this Mortgage; provided, however, that nothing herein shall be
construed to obligate Mortgagor to indemnify, defend and hold harmless Mortgagee
from and against any and all liabilities, obligations, losses, damages,
penalties, claims, actions, suits, costs and expenses enacted against, imposed
on or incurred by Mortgagee by reason of Mortgagee's willful misconduct or gross
negligence.
(b) If Mortgagee is made a party defendant to any litigation or any
claim is threatened or brought against Mortgagee concerning the secured
indebtedness, this Mortgage, the Property, or any part thereof, or any interest
therein, or the construction, maintenance, operation or occupancy or use
thereof, then Mortgagor shall indemnify, defend and hold Mortgagee harmless from
and against all liability by reason of said litigation or claims, including
reasonable attorneys' fees (together with reasonable appellate counsel fees, if
any) and expenses incurred by Mortgagee
28
<PAGE>
in any such litigation or claim, whether or not any such litigation or claim is
prosecuted to judgment. If Mortgagee commences an action against Mortgagor to
enforce any of the terms hereof or to prosecute any breach by Mortgagor of any
of the terms hereof or to recover any sum secured hereby, Mortgagor shall pay to
Mortgagee its reasonable attorneys' fees (together with reasonable appellate
counsel fees, if any) and expenses. The right to such attorneys' fees (together
with reasonable appellate counsel fees, if any) and expenses shall be deemed to
have accrued on the commencement of such action, and shall be enforceable
whether or not such action is prosecuted to judgment. If Mortgagor breaches any
term of this Mortgage, Mortgagee may engage the services of an attorney or
attorneys to protect its rights hereunder, and in the event of such engagement
following any breach by Mortgagor, Mortgagor shall pay Mortgagee reasonable
attorneys' fees (together with reasonable appellate counsel fees, if any) and
expenses incurred by Mortgagee, whether or not an action is actually commenced
against Mortgagor by reason of such breach. All references to "attorneys" in
this Subsection and elsewhere in this Mortgage shall include without limitation
any attorney or law firm engaged by Mortgagee and Mortgagee's in-house counsel,
and all references to "fees and expenses" in this Subsection and elsewhere in
this Mortgage shall include without limitation any fees of such attorney or law
firm and any allocation charges and allocation costs of Mortgagee's in-house
counsel.
(c) A waiver of subrogation shall be obtained by Mortgagor from its
insurance carrier and, consequently, Mortgagor waives any and all right to claim
or recover against Mortgagee, its officers, employees, agents and
representatives, for loss of or damage to Mortgagor, the Property, Mortgagor's
property or the property of others under Mortgagor's control from any cause
insured against or required to be insured against by the provisions of this
Mortgage.
(d) Mortgagor hereby indemnifies and holds harmless the law firm of
Orrick, Herrington & Sutcliffe LLP and all of their attorneys from any and all
loss, cost, expense, damage or claim, whether or not valid, including, without
limitation, attorneys' fees and disbursements, arising under or in any way
connected with Section 697.10 of Florida Statutes or any similar law. Mortgagor
hereby verifies and confirms, to the best of its knowledge, all factual
information in this Mortgage, including the accuracy and correctness of the
legal description set forth herein. In the event any factual errors are found
in this Mortgage or in the legal description, Mortgagor and the Mortgagee shall,
at Mortgagor's sole cost and expense, promptly correct or cause to be corrected
subsequent to the date hereof any and all such errors. Mortgagor shall promptly
pay or cause to be paid all damages, claims or any other costs whatsoever
arising under or in any way connected with any claim, whether or not valid,
arising under or in any way connected with Section 697.10 of the Florida
Statutes, or any similar law due to or caused by any inaccuracy or incorrectness
of factual information or inaccuracy or incorrectness of the legal description
set forth herein. Notwithstanding the foregoing, all rights of Mortgagor and
Mortgagee are preserved against Mortgagor's and Mortgagee's title insurers, the
surveyor, the engineer, if any, and the appraiser, if any, and, after payment is
made by Mortgagor, Mortgagor shall be subrogated to such rights.
1.33 Negative Covenants with Respect to Indebtedness, Operations and
---------------------------------------------------------------
Fundamental Changes of Mortgagor. Mortgagor hereby represents, warrants and
- --------------------------------
covenants, as of the date hereof and until such time as the indebtedness secured
hereby is paid in full and the Loan Agreement has terminated in accordance with
its terms, that Mortgagor:
29
<PAGE>
(a) will comply with all covenants applicable to it in the Loan
Documents;
(b) will not possess or assign the Property or incidental personal
property necessary for the operation of the Property for other than a business
or company purpose;
(c) will not sell, encumber or otherwise dispose of all or
substantially all of the Property or incidental personal property necessary for
the operation of the Property;
(d) will not hold title to Mortgagor's assets other than in
Mortgagor's name; and
(e) will not institute proceedings to be adjudicated bankrupt or
insolvent; or consent to the institution of bankruptcy or insolvency proceedings
against it; or file a petition seeking, or consent to, reorganization or relief
under any applicable federal or state law relating to bankruptcy; or consent to
the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or
other similar official) of the Mortgagor or a substantial part of Mortgagor's
property; or make any assignment for the benefit of creditors; or admit in
writing its inability to pay its debts generally as they become due; or take any
action in furtherance of any such action.
1.34 Intentionally Omitted.
---------------------
Article II
EVENTS OF DEFAULT
-----------------
2.1 Events of Default. The occurrence of any of the following events
-----------------
shall be a default hereunder:
(a) Mortgagor fails to punctually perform any covenant, agreement,
obligation, term or condition hereof which requires payment of any money to
Mortgagee, subject to applicable grace periods, if any.
(b) Mortgagor fails to provide insurance as required by Section 1.4
hereof or fails to perform any covenant, agreement, obligation, term or
condition set forth in Section 1.16 or 1.31 hereof.
(c) Mortgagor fails to perform any other covenant, agreement,
obligation, term or condition set forth herein other than those otherwise
described in this Section 2.1 and, to the extent such failure or default is
susceptible of being cured, the continuance of such failure or default for
thirty (30) days after written notice thereof from Mortgagee to Mortgagor;
provided, however, that if such default is susceptible of cure but such cure
- -----------------
cannot be accomplished with reasonable diligence within said period of time, and
if Mortgagor commences to cure such default promptly after receipt of notice
thereof from Mortgagee, and thereafter prosecutes the curing of such default
with reasonable diligence, such period of time shall be extended for such period
of time as may be necessary to cure such default with reasonable diligence, but
not to exceed an additional sixty (60) days.
30
<PAGE>
(d) Any representation or warranty made herein, in or in connection
with any application or commitment relating to the loan evidenced by the Loan
Agreement, or in any of the other Loan Documents to Mortgagee by Mortgagor, by
any principal in Mortgagor or by any indemnitor or guarantor under any indemnity
or guaranty executed in connection with the loan secured hereby is determined by
Mortgagee to have been false or misleading in any material respect at the time
made.
(e) There shall be a sale, conveyance, disposition, alienation,
hypothecation, leasing, assignment, pledge, mortgage, granting of a security
interest in or other transfer or further encumbrancing of the Property,
Mortgagor, or any portion thereof or any interest therein, in violation of
Section 1.13 hereof.
(f) A default occurs under any of the other Loan Documents which has
not been cured within any applicable grace or cure period therein provided.
(g) Mortgagor, any principal in Mortgagor or any indemnitor or
guarantor under any indemnity or guaranty executed in connection with the loan
secured hereby becomes insolvent, or shall make a transfer in fraud of
creditors, or shall make an assignment for the benefit of creditors, shall file
a petition in bankruptcy, shall voluntarily be adjudicated insolvent or bankrupt
or shall admit in writing the inability to pay debts as they mature, shall
petition or apply to any tribunal for or shall consent to or shall not contest
the appointment of a receiver, trustee, custodian or similar officer for
Mortgagor, for any such principal of Mortgagor or for any such indemnitor or
guarantor or for a substantial part of the assets of Mortgagor, of any such
principal of Mortgagor or of any such indemnitor or guarantor, or shall commence
any case, proceeding or other action under any bankruptcy, reorganization,
arrangement, readjustment or debt, dissolution or liquidation law or statute of
any jurisdiction, whether now or hereafter in effect.
(h) A petition is filed or any case, proceeding or other action is
commenced against Mortgagor, against any principal of Mortgagor or against any
indemnitor or guarantor under any indemnity or guaranty executed in connection
with the loan secured hereby seeking to have an order for relief entered against
it as debtor or seeking reorganization, arrangement, adjustment, liquidation,
dissolution or composition of it or its debts or other relief under any law
relating to bankruptcy, insolvency, arrangement, reorganization, receivership or
other debtor relief under any law or statute of any jurisdiction whether now or
hereafter in effect or a court of competent jurisdiction enters an order for
relief against Mortgagor, against any principal of Mortgagor or against any
indemnitor or guarantor under any indemnity or guaranty executed in connection
with the loan secured hereby, as debtor, or an order, judgment or decree is
entered appointing, with or without the consent of Mortgagor, of any such
principal of Mortgagor or of any such indemnitor or guarantor, a receiver,
trustee, custodian or similar officer for Mortgagor, for any such principal of
Mortgagor or for any such indemnitor or guarantor, or for any substantial part
of any of the properties of Mortgagor, of any such principal of Mortgagor or of
any such indemnitor or guarantor, and if any such event shall occur, such
petition, case, proceeding, action, order, judgment or decree shall not be
dismissed within sixty (60) days after being commenced.
31
<PAGE>
(i) The Property or any part thereof shall be taken on execution or
other process of law in any action against Mortgagor.
(j) Mortgagor abandons all or a portion of the Property.
(k) The holder of any lien or security interest on the Property
(without implying the consent of Mortgagee to the existence or creation of any
such lien or security interest), whether superior or subordinate to this
Mortgage or any of the other Loan Documents, declares a default and such default
is not cured within any applicable grace or cure period set forth in the
applicable document or such holder institutes foreclosure or other proceedings
for the enforcement of its remedies thereunder.
(l) The Property, or any part thereof, is subjected to actual or
threatened waste or to removal, demolition or material alteration so that the
value of the Property is materially diminished thereby and Mortgagee determines
(in its subjective determination) that it is not adequately protected from any
loss, damage or risk associated therewith.
(m) Any dissolution, termination, partial or complete liquidation,
merger or consolidation of Mortgagor.
Article III
REMEDIES
--------
3.1 Remedies Available. If there shall occur a default under this
------------------
Mortgage, and such default has not been cured within any applicable grace or
cure period, then this Mortgage is subject to foreclosure as provided by law and
Mortgagee may, at its option and by or through a trustee, nominee, assignee or
otherwise, to the fullest extent permitted by law, exercise any or all of the
following rights, remedies and recourses, either successively or concurrently:
(a) Acceleration. Accelerate the maturity date of the Loan Agreement
------------
and declare any or all of the indebtedness secured hereby to be immediately due
and payable without any presentment, demand, protest, notice, or action of any
kind whatever (each of which is hereby expressly waived by Mortgagor), whereupon
the same shall become immediately due and payable. Upon any such acceleration,
payment of such accelerated amount shall constitute a prepayment of the
principal balance due under the Loan Agreement and any applicable prepayment fee
provided for therein shall then be immediately due and payable.
(b) Entry on the Property. Either in person or by agent, with or
---------------------
without bringing any action or proceeding, or by a receiver appointed by a court
and without regard to the adequacy of its security, enter upon and take
possession of the Property, or any part thereof, without force or with such
force as is permitted by law and without notice or process or with such notice
or process as is required by law unless such notice and process is waivable, in
which case Mortgagor hereby waives such notice and process, and do any and all
acts and perform any and all work which may be desirable or necessary in
Mortgagee's judgment to complete any unfinished
32
<PAGE>
construction on the Real Estate, to preserve the value, marketability or
rentability of the Property, to increase the income therefrom, to manage and
operate the Property or to protect the security hereof and all sums expended by
Mortgagee therefor, together with interest thereon at the Default Interest Rate,
shall be immediately due and payable to Mortgagee by Mortgagor on demand and
shall be secured hereby and by all of the other Loan Documents securing all or
any part of the indebtedness evidenced by the Loan Agreement.
(c) Collect Rents and Profits. With or without taking possession of
-------------------------
the Property, sue or otherwise collect the Rents and Profits, including those
past due and unpaid.
(d) Appointment of Receiver. Upon, or at any time prior or after,
-----------------------
initiating the exercise of any power of sale, instituting any judicial
foreclosure or instituting any other foreclosure of the liens and security
interests provided for herein or any other legal proceedings hereunder, make
application to a court of competent jurisdiction for appointment of a receiver
for all or any part of the Property, as a matter of strict right and without
notice to Mortgagor and without regard to the adequacy of the Property for the
repayment of the indebtedness secured hereby or the solvency of Mortgagor or any
person or persons liable for the payment of the indebtedness secured hereby, and
Mortgagor does hereby irrevocably consent to such appointment, waives any and
all notices of and defenses to such appointment and agrees not to oppose any
application therefor by Mortgagee, but nothing herein is to be construed to
deprive Mortgagee of any other right, remedy or privilege Mortgagee may now have
under the law to have a receiver appointed, provided, however, that, the
-------- -------
appointment of such receiver, trustee or other appointee by virtue of any court
order, statute or regulation shall not impair or in any manner prejudice the
rights of Mortgagee to receive payment of the Rents and Profits pursuant to
other terms and provisions hereof. Any such receiver shall have all of the
usual powers and duties of receivers in similar cases, including, without
limitation, the full power to hold, develop, rent, lease, manage, maintain,
operate and otherwise use or permit the use of the Property upon such terms and
conditions as said receiver may deem to be prudent and reasonable under the
circumstances as more fully set forth in Section 3.3 below. Such receivership
shall, at the option of Mortgagee, continue until full payment of all of the
indebtedness secured hereby or until title to the Property shall have passed by
foreclosure sale under this Mortgage or deed in lieu of foreclosure.
(e) Foreclosure. Immediately commence an action to foreclose this
-----------
Mortgage or to specifically enforce its provisions or any of the indebtedness
secured hereby pursuant to the statutes in such case made and provided and sell
the Property or cause the Property to be sold in accordance with the
requirements and procedures provided by said statutes in a single parcel or in
several parcels at the option of Mortgagee.
(1) In the event foreclosure proceedings are filed by Mortgagee,
all expenses incident to such proceeding, including, but not limited to,
attorneys' fees and costs, shall be paid by Mortgagor and secured by this
Mortgage and by all of the other Loan Documents securing all or any part of the
indebtedness evidenced by the Loan Agreement. The secured indebtedness and all
other obligations secured by this Mortgage, including, without limitation,
interest at the Default Interest Rate, any prepayment charge, fee or premium
required to be paid under the Loan Agreement in order to prepay principal (to
the extent permitted by applicable law),
33
<PAGE>
attorneys' fees and any other amounts due and unpaid to Mortgagee under the Loan
Documents, may be bid by Mortgagee in the event of a foreclosure sale hereunder.
In the event of a judicial sale pursuant to a foreclosure decree, it is
understood and agreed that Mortgagee or its assigns may become the purchaser of
the Property or any part thereof.
(2) Mortgagee may, by following the procedures and satisfying the
requirements prescribed by applicable law, foreclose on only a portion of the
Property and, in such event, said foreclosure shall not affect the lien of this
Mortgage on the remaining portion of the Property foreclosed.
(f) Other. Exercise any other right or remedy available hereunder,
-----
under any of the other Loan Documents or at law or in equity.
3.2 Application of Proceeds. To the fullest extent permitted by law, the
-----------------------
proceeds of any sale under this Mortgage shall be applied to the extent funds
are so available to the following items in such order as Mortgagee in its
discretion may determine:
(a) To payment of the costs, expenses and fees of taking possession
of the Property, and of holding, operating, maintaining, using, leasing,
repairing, improving, marketing and selling the same and of otherwise enforcing
Mortgagee's right and remedies hereunder and under the other Loan Documents,
including, but not limited to, receivers' fees, court costs, attorneys',
accountants', appraisers', managers' and other professional fees, title charges
and transfer taxes.
(b) To payment of all sums expended by Mortgagee under the terms of
any of the Loan Documents and not yet repaid, together with interest on such
sums at the Default Interest Rate.
(c) To payment of the secured indebtedness and all other obligations
secured by this Mortgage, including, without limitation, interest at the Default
Interest Rate and, to the extent permitted by applicable law, any prepayment
fee, charge or premium required to be paid under the Loan Agreement in order to
prepay principal, in any order that Mortgagee chooses in its sole discretion.
The remainder, if any, of such funds shall be disbursed to Mortgagor or to the
person or persons legally entitled thereto.
3.3 Right and Authority of Receiver or Mortgagee in the Event of Default;
---------------------------------------------------------------------
Power of Attorney. Upon the occurrence of a default hereunder, which default is
- -----------------
not cured within any applicable grace or cure period, and entry upon the
Property pursuant to Section 3.1(b) hereof or appointment of a receiver pursuant
to Section 3.1(b) hereof, and under such terms and conditions as may be prudent
and reasonable under the circumstances in Mortgagee's or the receiver's sole
discretion, all at Mortgagor's expense, Mortgagee or said receiver, or such
other persons or entities as they shall hire, direct or engage, as the case may
be, may do or permit one or more of the following, successively or concurrently:
(a) enter upon and take possession and control of any and
34
<PAGE>
all of the Property; (b) take and maintain possession of all documents, books,
records, papers and accounts relating to the Property; (c) exclude Mortgagor and
its agents, servants and employees wholly from the Property; (d) manage and
operate the Property; (e) preserve and maintain the Property; (f) make repairs
and alterations to the Property; (g) complete any construction or repair of the
Improvements, with such changes, additions or modifications of the plans and
specifications or intended disposition and use of the Improvements as Mortgagee
may in its sole discretion deem appropriate or desirable to place the Property
in such condition as will, in Mortgagee's sole discretion, make it or any part
thereof readily marketable or rentable; (h) conduct a marketing or leasing
program with respect to the Property, or employ a marketing or leasing agent or
agents to do so, directed to the leasing or sale of the Property under such
terms and conditions as Mortgagee may in its sole discretion deem appropriate or
desirable; (i) employ such contractors, subcontractors, materialmen, architects,
engineers, consultants, managers, brokers, marketing agents, or other employees,
agents, independent contractors or professionals, as Mortgagee may in its sole
discretion deem appropriate or desirable to implement and effectuate the rights
and powers herein granted; (j) execute and deliver, in the name of Mortgagee as
attorney-in-fact and agent of Mortgagor or in its own name as Mortgagee, such
documents and instruments as are necessary or appropriate to consummate
authorized transactions; (k) enter into such leases, whether of real or personal
property, or tenancy agreements, under such terms and conditions as Mortgagee
may in its sole discretion deem appropriate or desirable; (l) collect and
receive the Rents and Profits from the Property; (m) eject tenants or repossess
personal property, as provided by law, for breaches of the conditions of their
leases or other agreements; (n) sue for unpaid Rents and Profits, payments,
income or proceeds in the name of Mortgagor or Mortgagee; (o) maintain actions
in forcible entry and detainer, ejectment for possession and actions in distress
for rent; (p) compromise or give acquittance for Rents and Profits, payments,
income or proceeds that may become due; (q) delegate or assign any and all
rights and powers given to Mortgagee by this Mortgage; and (r) do any acts which
Mortgagee in its sole discretion deems appropriate or desirable to protect the
security hereof and use such measures, legal or equitable, as Mortgagee may in
its sole discretion deem appropriate or desirable to implement and effectuate
the provisions of this Mortgage. This Mortgage shall constitute a direction to
and full authority to any lessee, or other third party who has heretofore dealt
or contracted or may hereafter deal or contract with Mortgagor or Mortgagee, at
the request of Mortgagee, to pay all amounts owing under any lease, contract,
concession, license or other agreement to Mortgagee without proof of the default
relied upon. Any such lessee or third party is hereby irrevocably authorized to
rely upon and comply with (and shall be fully protected by Mortgagor in so
doing) any request, notice or demand by Mortgagee for the payment to Mortgagee
of any Rents and Profits or other sums which may be or thereafter become due
under its lease, contract, concession, license or other agreement, or for the
performance of any undertakings under any such lease, contract, concession,
license or other agreement, and shall have no right or duty to inquire whether
any default under this Mortgage or under any of the other Loan Documents has
actually occurred or is then existing. Mortgagor hereby constitutes and appoints
Mortgagee, its assignees, successors, transferees and nominees, as Mortgagor's
true and lawful attorney-in-fact and agent, with full power of substitution in
the Property, in Mortgagor's name, place and stead, to do or permit any one or
more of the foregoing described rights, remedies, powers and authorities,
successively or concurrently, and said power of attorney shall be deemed a power
coupled with an interest and irrevocable so long as any indebtedness secured
hereby is outstanding. Any money
35
<PAGE>
advanced by Mortgagee in connection with any action taken under this Section
3.3, together with interest thereon at the Default Interest Rate from the date
of making such advancement by Mortgagee until actually paid by Mortgagor, shall
be a demand obligation owing by Mortgagor to Mortgagee and shall be secured by
this Mortgage and by every other instrument securing the secured indebtedness.
3.4 Occupancy After Foreclosure. In the event there is a foreclosure sale
---------------------------
hereunder and at the time of such sale, Mortgagor or Mortgagor's
representatives, successors or assigns, or any other persons claiming any
interest in the Property by, through or under Mortgagor (except tenants of space
in the Improvements subject to leases entered into prior to the date hereof),
are occupying or using the Property, or any part thereof, then, to the extent
not prohibited by applicable law, each and all shall, at the option of Mortgagee
or the purchaser at such sale, as the case may be, immediately become the tenant
of the purchaser at such sale, which tenancy shall be a tenancy from day-to-day,
terminable at the will of either landlord or tenant, at a reasonable rental per
day based upon the value of the Property occupied or used, such rental to be due
daily to the purchaser. Further, to the extent permitted by applicable law, in
the event the tenant fails to surrender possession of the Property upon the
termination of such tenancy, the purchaser shall be entitled to institute and
maintain an action for unlawful detainer of the Property in the appropriate
court of the county in which the Real Estate is located.
3.5 Notice to Account Debtors. Mortgagee may, at any time after a default
-------------------------
suit hereunder, which default is not cured within any applicable grace or cure
period, notify the account debtors and obligors of any accounts, chattel paper,
negotiable instruments or other evidences of indebtedness, to Mortgagor included
in the Property to pay Mortgagee directly. Mortgagor shall at any time or from
time to time upon the request of Mortgagee provide to Mortgagee a current list
of all such account debtors and obligors and their addresses.
3.6 Cumulative Remedies. All remedies contained in this Mortgage are
-------------------
cumulative and Mortgagee shall also have all other remedies provided at law and
in equity or in any other Loan Documents. Such remedies may be pursued
separately, successively or concurrently at the sole subjective direction of
Mortgagee and may be exercised in any order and as often as occasion therefor
shall arise. No act of Mortgagee shall be construed as an election to proceed
under any particular provisions of this Mortgage to the exclusion of any other
provision of this Mortgage or as an election of remedies to the exclusion of any
other remedy which may then or thereafter be available to Mortgagee. No delay
or failure by Mortgagee to exercise any right or remedy under this Mortgage
shall be construed to be a waiver of that right or remedy or of any default
hereunder. Mortgagee may exercise any one or more of its rights and remedies at
its option without regard to the adequacy of its security.
3.7 Payment of Expenses. Mortgagor shall pay on demand all of Mortgagee's
-------------------
expenses incurred in any efforts to enforce any terms of this Mortgage, whether
or not any lawsuit is filed and whether or not foreclosure is commenced but not
completed, including, but not limited to, legal fees and disbursements,
foreclosure costs and title charges, together with interest thereon from and
after the date incurred by Mortgagee until actually paid by Mortgagor at the
Default
36
<PAGE>
Interest Rate, and the same shall be secured by this Mortgage and by all
of the other Loan Documents securing all or any part of the indebtedness
evidenced by the Loan Agreement.
Article IV
MISCELLANEOUS TERMS AND CONDITIONS
----------------------------------
4.1 Time of Essence. Time is of the essence with respect to all
---------------
provisions of this Mortgage.
4.2 Release of Mortgage. If all of the secured indebtedness be paid and
-------------------
Mortgagee has no further commitments under the Loan Agreement, then and in that
event only, all rights under this Mortgage shall terminate except for those
provisions hereof which by their terms survive, and the Property shall become
wholly clear of the liens, security interests, conveyances and assignments
evidenced hereby, which shall be released by Mortgagee in due form at
Mortgagor's cost. No release of this Mortgage or the lien hereof shall be valid
unless executed by Mortgagee.
4.3 Certain Rights of Mortgagee. Without affecting Mortgagor's liability
---------------------------
for the payment of any of the indebtedness secured hereby, Mortgagee may from
time to time and without notice to Mortgagor: (a) release any person liable for
the payment of the indebtedness secured hereby; (b) extend or modify the terms
of payment of the indebtedness secured hereby; (c) accept additional real or
personal property of any kind as security or alter, substitute or release any
property securing the indebtedness secured hereby; (d) recover any part of the
Property; (e) consent in writing to the making of any subdivision map or plat
thereof; (f) join in granting any easement therein; or (g) join in any extension
agreement of the Mortgage or any agreement subordinating the lien hereof.
4.4 Waiver of Certain Defenses. No action for the enforcement of the lien
--------------------------
hereof or of any provision hereof shall be subject to any defense which would
not be good and available to the party interposing the same in an action at law
upon the Loan Agreement or any of the other Loan Documents.
4.5 Notices. All notices, demands, requests or other communications to be
-------
sent by one party to the other hereunder or required by law shall be in writing
and shall be deemed to have been validly given or served by delivery of the same
in person to the intended addressee, or by depositing the same with Federal
Express or another reputable private courier service for next business day
delivery, or by depositing the same in the United States mail, postage prepaid,
registered or certified mail, return receipt requested, in any event addressed
to the intended addressee at its address set forth on the first page of this
Mortgage or at such other address as may be designated by such party as herein
provided. All notices, demands and requests to be sent to Mortgagee shall be
addressed to the attention of the Manager. All notices, demands and requests
shall be effective upon such personal delivery, or one (1) business day after
being deposited with the private courier service, or two (2) business days after
being deposited in the United States mail as required above. Rejection or other
refusal to accept or the inability to deliver because of changed address of
which no notice was given as herein required shall be deemed to be receipt of
the notice, demand or
37
<PAGE>
request sent. By giving to the other party hereto at least fifteen (15) days'
prior written notice thereof in accordance with the provisions hereof, the
parties hereto shall have the right from time to time to change their respective
addresses and each shall have the right to specify as its address any other
address within the United States of America.
4.6 Successors and Assigns. The terms, provisions, indemnities, covenants
----------------------
and conditions hereof shall be binding upon Mortgagor and the successors and
assigns of Mortgagor, including all successors in interest of Mortgagor in and
to all or any part of the Property, and shall inure to the benefit of Mortgagee,
its directors, officers, shareholders, employees and agents and their respective
successors and assigns and shall constitute covenants running with the land.
All references in this Mortgage to Mortgagor or Mortgagee shall be deemed to
include all such parties' successors and assigns, and the term "Mortgagee" as
used herein shall also mean and refer to any lawful holder or owner, including
pledgees and participants, of any of the indebtedness secured hereby. If
Mortgagor consists of more than one person or entity, each will be jointly and
severally liable to perform the obligations of Mortgagor.
4.7 Severability. A determination that any provision of this Mortgage is
------------
unenforceable or invalid shall not affect the enforceability or validity of any
other provision, and any determination that the application of any provision of
this Mortgage to any person or circumstance is illegal or unenforceable shall
not affect the enforceability or validity of such provision as it may apply to
any other persons or circumstances.
4.8 Gender. Within this Mortgage, words of any gender shall be held and
------
construed to include any other gender, and words in the singular shall be held
and construed to include the plural, and vice versa, unless the context
otherwise requires.
4.9 Waiver: Discontinuance of Proceedings. Mortgagee may waive any single
-------------------------------------
default by Mortgagor hereunder without waiving any other prior or subsequent
default. Mortgagee may remedy any default by Mortgagor hereunder without
waiving the default remedied. Neither the failure by Mortgagee to exercise, nor
the delay by Mortgagee in exercising, any right, power or remedy upon any
default by Mortgagor hereunder shall be construed as a waiver of such default or
as a waiver of the right to exercise any such right, power or remedy at a later
date. No single or partial exercise by Mortgagee of any right, power or remedy
hereunder shall exhaust the same or shall preclude any other or further exercise
thereof, and every such right, power or remedy hereunder may be exercised at any
time and from time to time. No modification or waiver of any provision hereof
nor consent to any departure by Mortgagor therefrom shall in any event be
effective unless the same shall be in writing and signed by Mortgagee, and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose given. No notice to nor demand on Mortgagor in any case
shall of itself entitle Mortgagor to any other or further notice or demand in
similar or other circumstances. Acceptance by Mortgagee of any payment in an
amount less than the amount then due on any of the secured indebtedness shall be
deemed an acceptance on account only and shall not in any way affect the
existence of a default hereunder. In case Mortgagee shall have proceeded to
invoke any right, remedy or recourse permitted hereunder or under the other Loan
Documents and shall thereafter elect to discontinue or abandon the same for any
reason, Mortgagee shall have the unqualified right to do so and, in such an
event,
38
<PAGE>
Mortgagor and Mortgagee shall be restored to their former positions with respect
to the indebtedness secured hereby, the Loan Documents, the Property and
otherwise, and the rights, remedies, recourses and powers of Mortgagee shall
continue as if the same had never been invoked.
4.10 Section Headings. The headings of the sections and paragraphs of
----------------
this Mortgage are for convenience of reference only, are not to be considered a
part hereof and shall not limit or otherwise affect any of the terms hereof.
4.11 Governing Law. This Mortgage will be governed by and construed in
-------------
accordance with the laws of the State of Florida.
4.12 Counting of Days. The term "days" when used herein shall mean
----------------
calendar days. If any time period ends on a Saturday, Sunday or holiday
officially recognized by the state within which the Real Estate is located, the
period shall be deemed to end on the next succeeding business day. The term
"business day" when used herein shall mean a weekday, Monday through Friday,
except a legal holiday or a day on which banking institutions in Florida are
authorized by law to be closed.
4.13 Relationship of the Parties. The relationship between Mortgagor and
---------------------------
Mortgagee is that of a borrower and a lender only and neither of those parties
is, nor shall it hold itself out to be, the agent, employee, joint venturer or
partner of the other party.
4.14 Application of the Proceeds of the Loan. To the extent that proceeds
---------------------------------------
of the loans evidenced by the Loan Agreement are used to pay indebtedness
secured by any outstanding lien, security interest, charge or prior encumbrance
against the Property, such proceeds have been advanced by Mortgagee at
Mortgagor's request and Mortgagee shall be subrogated to any and all rights,
security interests and liens owned by any owner or holder of such outstanding
liens, security interests, charges or encumbrances, irrespective of whether said
liens, security interests, charges or encumbrances are released.
4.15 Unsecured Portion of Indebtedness. If any part of the secured
---------------------------------
indebtedness cannot be lawfully secured by this Mortgage or if any part of the
Property cannot be lawfully subject to the lien and security interest hereof to
the full extent of such indebtedness, then all payments made shall be applied on
said indebtedness first in discharge of that portion thereof which is unsecured
by this Mortgage.
4.16 Cross Default. A default hereunder which has not been cured within
-------------
any applicable grace or cure period shall be a default under each of the other
Loan Documents.
4.17 Interest After Sale. In the event the Property or any part thereof
-------------------
shall be sold upon foreclosure as provided hereunder, to the extent permitted by
law, the sum for which the same shall have been sold shall, for purposes of
redemption (pursuant to the laws of the state in which the Property is located),
bear interest at the Default Interest Rate.
39
<PAGE>
4.18 Inconsistency with Other Loan Documents. In the event of any
---------------------------------------
inconsistency between the provisions hereof and the provisions in any of the
other Loan Documents, it is intended that the provisions selected by Mortgagee
in its sole subjective discretion shall be controlling.
4.19 Construction of this Document. This document may be construed as a
-----------------------------
mortgage, security deed, deed of trust, chattel mortgage, conveyance,
assignment, security agreement, pledge, financing statement, hypothecation or
contract, or any one or more of the foregoing, in order to fully effectuate the
liens and security interests created hereby and the purposes and agreements
herein set forth.
4.20 No Merger. It is the desire and intention of the parties hereto that
---------
this Mortgage and the lien hereof do not merge in fee simple title to the
Property. It is hereby understood and agreed that should Mortgagee acquire any
additional or other interests in or to the Property or the ownership thereof,
then, unless a contrary intent is manifested by Mortgagee as evidenced by an
appropriate document duly recorded, this Mortgage and the lien hereof shall not
merge in such other or additional interests in or to the Property, toward the
end that this Mortgage may be foreclosed as if owned by a stranger to said other
or additional interests.
4.21 Rights With Respect to Junior Encumbrances. Any person or entity
------------------------------------------
purporting to have or to take a junior mortgage or other lien upon the Property
or any interest therein shall be subject to the rights of Mortgagee to amend,
modify, increase, vary, alter or supplement this Mortgage, the Loan Agreement or
any of the other Loan Documents and to extend the maturity date of the
indebtedness secured hereby and to increase the amount of the indebtedness
secured hereby and to waive or forebear the exercise of any of its rights and
remedies hereunder or under any of the other Loan Documents and to release any
collateral or security for the indebtedness secured hereby, in each and every
case without obtaining the consent of the holder of such junior lien and without
the lien or security interest of this Mortgage losing its priority over the
rights of any such junior lien.
4.22 Mortgagee May File Proofs of Claim. In the case of any receivership,
----------------------------------
insolvency, bankruptcy, reorganization, arrangement, adjustment, composition or
other proceedings affecting Mortgagor or the principals in Mortgagor, or their
respective creditors or property, Mortgagee, to the extent permitted by law,
shall be entitled to file such proofs of claim and other documents as may be
necessary or advisable in order to have the claims of Mortgagee allowed in such
proceedings for the entire secured indebtedness at the date of the institution
of such proceedings and for any additional amount which may become due and
payable by Mortgagor hereunder after such date.
4.23 Fixture Filing. This Mortgage shall be effective from the date of
--------------
its recording as a financing statement filed as a fixture filing with respect to
all goods constituting part of the Property which are or are to become fixtures.
4.24 After-Acquired Property. All property acquired by Mortgagor after
-----------------------
the date of this Mortgage which by the terms of this Mortgage shall be subject
to the lien and the security interest created hereby, shall immediately upon the
acquisition thereof by Mortgagor and without
40
<PAGE>
further mortgage, conveyance or assignment become subject to the lien and
security interest created by this Mortgage. Nevertheless, Mortgagor shall
execute, acknowledge, deliver and record or file, as appropriate, all and every
such further mortgages, security agreements, financing statements, assignments
and assurances, as Mortgagee shall require for accomplishing the purposes of
this Mortgage.
4.25 No Representation. By accepting delivery of any item required to be
-----------------
observed, performed or fulfilled or to be given to Mortgagee pursuant to the
Loan Documents, including, but not limited to, any officer's certificates
balance sheet, statement of profit and loss or other financial statement,
survey, appraisal or insurance policy, Mortgagee shall not be deemed to have
warranted, consented to, or affirmed the sufficiency, legality, effectiveness or
legal effect of the same, or of any term, provision or condition thereof, and
such acceptance of delivery thereof shall not be or constitute any warranty,
consent or affirmation with respect thereto by Mortgagee.
4.26 Counterparts. This Mortgage may be executed in any number of
------------
counterparts, each of which shall be effective only upon delivery and thereafter
shall be deemed an original, and all of which shall be taken to be one and the
same instrument, for the same effect as if all parties hereto had signed the
same signature page. Any signature page of this Mortgage may be detached from
any counterpart of this Mortgage without impairing the legal effect of any
signatures thereon and may be attached to another counterpart of this Mortgage
identical in form hereto but having attached to it one or more additional
signature pages.
4.27 Intentionally Omitted.
---------------------
4.28 Recording and Filing. Mortgagor will cause the Loan Documents and all
--------------------
amendments and supplements thereto and substitutions therefor to be recorded,
filed, re-recorded and re-filed in such manner and in such places as Mortgagee
shall reasonably request, and will pay on demand all such recording, filing, re-
recording and re-filing taxes, fees and other charges. Mortgagor shall reimburse
Mortgagee, or its servicing agent, for the costs incurred in obtaining a tax
service company to verify the status of payment of taxes and assessments on the
Property.
4.29 Entire Agreement and Modification. This Mortgage and the other Loan
---------------------------------
Documents contain the entire agreements between the parties relating to the
subject matter hereof and thereof and all prior agreements relative hereto and
thereto which are not contained herein or therein are terminated. This Mortgage
and the other Loan Documents may not be amended, revised, waived, discharged,
released or terminated orally but only by a written instrument or instruments
executed by the party against which enforcement of the amendment, revision,
waiver, discharge, release or termination is asserted. Any alleged amendment,
revision, waiver, discharge, release or termination which is not so documented
shall not be effective as to any party.
4.30 Maximum Interest. The provisions of this Mortgage and of all
----------------
agreements between Mortgagor and Mortgagee, whether now existing or hereafter
arising and whether written or oral, are hereby expressly limited so that in no
contingency or event whatsoever, whether by reason of demand or acceleration of
the maturity of the Loan Agreement or otherwise, shall the amount paid, or
agreed to be paid ("Interest"), to Mortgagee for the use, forbearance or
retention
41
<PAGE>
of the money loaned under the Loan Agreement exceed the maximum amount
permissible under applicable law. If, from any circumstance whatsoever,
performance or fulfillment of any provision hereof or of any agreement between
Mortgagor and Mortgagee shall, at the time performance or fulfillment of such
provision shall be due, exceed the limit for Interest prescribed by law or
otherwise transcend the limit of validity prescribed by applicable law, then
ipso facto the obligation to be performed or fulfilled shall be reduced to such
limit and if, from any circumstance whatsoever, Mortgagee shall ever receive
anything of value deemed Interest by applicable law in excess of the maximum
lawful amount, an amount equal to any excessive Interest shall be applied to the
reduction of the principal balance owing under the Loan Agreement in the inverse
order of its maturity (whether or not then due) or at the option of Mortgagee be
paid over to Mortgagor, and not to the payment of Interest. All Interest
(including any amounts or payments deemed to be Interest) paid or agreed to be
paid to Mortgagee shall, to the extent permitted by applicable law, be
amortized, prorated, allocated and spread throughout the full period until
payment in full of all principal amounts owing under the Loan Agreement so that
the Interest thereon for such full period will not exceed the maximum amount
permitted by applicable law. This paragraph will control all agreements between
Mortgagor and Mortgagee.
4.31 Intentionally Omitted.
----------------------
4.32 Intentionally Omitted.
---------------------
4.33 SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.
------------------------------------------------
(a) MORTGAGOR, TO THE FULL EXTENT PERMITTED BY LAW, HEREBY KNOWINGLY,
INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT COUNSEL,
(i) SUBMITS TO PERSONAL JURISDICTION IN THE STATE OF FLORIDA OVER ANY SUIT,
ACTION OR PROCEEDING BY ANY PERSON ARISING FROM OR RELATING TO THE NOTE, THIS
MORTGAGE OR ANY OTHER OF THE LOAN DOCUMENTS, (ii) AGREES THAT ANY SUCH ACTION,
SUIT OR PROCEEDING MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION SITTING IN FLAGLER COUNTY, FLORIDA, (iii) SUBMITS TO THE
JURISDICTION OF SUCH COURTS, AND, (iv) TO THE FULLEST EXTENT PERMITTED BY LAW,
AGREES THAT IT WILL NOT BRING ANY ACTION, SUIT OR PROCEEDING IN ANY OTHER FORUM
(BUT NOTHING HEREIN SHALL AFFECT THE RIGHT OF MORTGAGEE TO BRING ANY ACTION,
SUIT OR PROCEEDING IN ANY OTHER FORUM). MORTGAGOR FURTHER CONSENTS AND AGREES
TO SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER LEGAL PROCESS IN ANY SUCH SUIT,
ACTION OR PROCEEDING BY REGISTERED OR CERTIFIED U.S. MAIL, POSTAGE PREPAID, TO
THE MORTGAGOR AT THE ADDRESS FOR NOTICES DESCRIBED IN SECTION 4.5 HEREOF, AND
CONSENTS AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE IN EVERY RESPECT VALID
AND EFFECTIVE SERVICE (BUT NOTHING HEREIN SHALL AFFECT THE VALIDITY OR
EFFECTIVENESS OF PROCESS SERVED IN ANY OTHER MANNER PERMITTED BY LAW).
42
<PAGE>
(b) MORTGAGEE AND MORTGAGOR, TO THE FULL EXTENT PERMITTED BY LAW,
HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF
COMPETENT COUNSEL, WAIVE, RELINQUISH AND FOREVER FORGO THE RIGHT TO A TRIAL BY
JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY
RELATING TO THE INDEBTEDNESS SECURED HEREBY OR ANY CONDUCT, ACT OR OMISSION OF
MORTGAGEE OR MORTGAGOR, OR ANY OF THEIR DIRECTORS, OFFICERS, PARTNERS, MEMBERS,
EMPLOYEES, AGENTS OR ATTORNEYS, OR ANY OTHER PERSONS AFFILIATED WITH MORTGAGEE
OR MORTGAGOR, IN EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT, TORT
OR OTHERWISE.
43
<PAGE>
IN WITNESS WHEREOF, Mortgagor has executed this Mortgage as of the day
and year first above written.
WITNESS: MORTGAGOR:
CARDIAC CONTROL SYSTEMS, INC.
/s/ Randolph H. Fields a Delaware corporation
- -------------------------
Signature
By: /s/ Alan J. Rabin
-------------------------------
RANDOLPH H. FIELDS Name: Alan J. Rabin
- ------------------------- ----------------------------
Print Title: President & CEO
----------------------------
44
<PAGE>
STATE OF Florida )
)ss.
COUNTY OF Orange )
The foregoing instrument was acknowledged before me this June 5, 1997
by Alan J. Rabin, President of Cardiac Control Systems, a Delaware Corporation
on behalf of the corporation. He is [X]personally known to me or has [_]
produced _____________________ as identification and (did/did not take oath).
/s/ Marion M. Bakor
----------------------------------------
Notary Public, State of Florida
[SEAL OF MARION M. BAKOR APPEARS HERE]
----------------------------------------
(print name)
My commission expires:
45
<PAGE>
EXHIBIT 10.6
SECURITY AGREEMENT
(INTELLECTUAL PROPERTY)
THIS SECURITY AGREEMENT (INTELLECTUAL PROPERTY) ("Security
--------
Agreement"), dated as of June 13, 1997, is executed by Cardiac Control Systems,
Inc., a Delaware corporation ("Borrower"), in favor of Coast Business Credit(R),
--------
a division of Southern Pacific Thrift & Loan Association ("Lender").
------
RECITALS
A. Pursuant to a Loan and Security Agreement dated as of the date
hereof ("Loan Agreement") between Borrower and Lender, Lender has agreed to
--------------
extend certain credit facilities to Borrower upon the terms and subject to the
conditions set forth therein.
B. Lender's obligation to extend the credit facilities to Borrower
under the Loan Agreement is subject, among other conditions, to receipt by
Lender of this Security Agreement duly executed by Borrower.
AGREEMENT
NOW, THEREFORE, in consideration of the above recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Borrower hereby agrees with Lender as follows:
1. Definitions and Interpretation. When used in this Security
------------------------------
Agreement, the following terms shall have the following respective meanings:
"Collateral" shall have the meaning given to that term in
----------
Paragraph 2 hereof.
-----------
"Copyright Office" shall mean the United States Copyright Office
----------------
or any successor office or agency thereto.
"Copyrights" shall have the meaning given to that term in
----------
Attachment I hereto.
------------
"Mask Works" shall have the meaning given to that term in
----------
Attachment I hereto.
------------
"Obligations" shall mean and include all loans, advances, debts,
-----------
liabilities and obligations, howsoever arising, owed by Borrower to Lender
of every kind and description (whether or not evidenced by any note or
instrument and whether or not for the payment of money), direct or
indirect, absolute or contingent, due or to become due,
<PAGE>
now existing or hereafter arising pursuant to the terms of the Loan
Agreement or any of the other Loan Documents, including all interest, fees,
charges, expenses, attorneys' fees and accountants' fees chargeable to and
payable by Borrower hereunder and thereunder.
"Patent and Trademark Office" shall mean the United States Patent
---------------------------
and Trademark Office or any successor office or agency thereto.
"Patent Applications" means and refers to all applications made
-------------------
by, or on behalf of, Borrower to the Patent and Trademark Office or to any
similar office or agency of any foreign country or political subdivision
thereof for the registration of Patents.
"Patent Registrations" means and refers to all Patents registered
--------------------
with the Patent and Trademark Office or with any similar office or agency
of any foreign country or political subdivision thereof and all Patent
Applications.
"Patents" shall have the meaning given to that term in Attachment
------- ----------
I hereto.
-
"Trade Secrets" shall have the meaning given to that term in
-------------
Attachment I hereto.
------------
"Trademarks" shall have the meaning given to that term in
----------
Attachment I hereto.
------------
"UCC" shall mean the Uniform Commercial Code as in effect in the
---
State of California from time to time.
Unless otherwise defined herein, all other capitalized terms used
herein and defined in the Loan Agreement shall have the respective meanings
given to those terms in the Loan Agreement, and all terms defined in the UCC
shall have the respective meanings given to those terms in the UCC.
2. Grant of Security Interest; Conditional Assignment.
(a) As security for the Obligations, Borrower hereby pledges and
grants to Lender a security interest in all right, title and interest of
Borrower in and to the property described in Attachment I annexed hereto
------------
(collectively and severally, the "Collateral"), which Attachment I is
---------- ------------
incorporated herein by this reference.
(b) Any assignment, transfer and conveyance of any Trademark to
Lender shall be deemed to have occurred with a contemporaneous assignment,
transfer and conveyance to Lender of the goodwill, business and/or means of
production, associated with the goods produced or sold or the services
rendered in connection with such Trademark.
2
<PAGE>
3. Representations and Warranties. Borrower represents and warrants to Lender
------------------------------
that:
(a) Borrower is the owner of the Collateral (or, in the case of
after-acquired Collateral, at the time Borrower acquires rights in the
Collateral, will be the owner thereof) and that no other Person has (or, in
the case of after-acquired Collateral, at the time Borrower acquires rights
therein, will have) any right, title, claim or interest (by way of Lien or
otherwise) in, against or to the Collateral;
(b) Lender has (or in the case of after-acquired Collateral, at
the time Borrower acquires rights therein, will have) a first priority
perfected security interest in the Collateral;
(c) Borrower has full corporate power and authority to make the
conditional assignment and to grant the security interest herein granted;
(d) Borrower does not own any Patents, Trademarks, Copyrights or
Mask Works registered in, or the subject of pending applications in, the
Patent and Trademark Office or the Copyright Office or any similar offices
or agencies in any other country or any political subdivision thereof,
other than those described in Schedules A - F to Attachment I hereto;
-------------------------------
(e) Borrower has:
(i) the sole, full and unencumbered right, title and
interest in and to the Trademarks shown on Schedule A to Attachment I
--------------------------
for the goods and services covered by the registrations thereof and
such registrations are valid and enforceable and in full force and
effect;
(ii) the sole, full and unencumbered right, title and
interest in and to each of the Patents shown on Schedule B to
-------------
Attachment I, and the registrations thereof are valid and enforceable
------------
and in full force and effect;
(iii) the sole, full and unencumbered right, title and
interest in and to each of the Copyrights shown on Schedule E to
-------------
Attachment I, and according to the records of the Copyright Office,
------------
each of said copyrights is valid and enforceable and in full force and
effect;
(iv) the sole, full and encumbered right, title and
interest in and to the Mask Works shown on Schedule F to Attachment I,
--------------------------
and according to the records of the Copyright Office, each of said
Mask Works is valid and enforceable and in full force and effect;
(f) There is no claim by any third party that any Patents,
Trademarks, Copyrights or Mask Works are invalid or unenforceable or do or
may violate the rights of any Person;
3
<PAGE>
(g) All licenses of Patents, Trademarks, Copyrights, Mask Works
and Trade Secrets which Borrower has granted to any Person are set forth in
Schedule G to Attachment I hereto;
--------------------------
(h) All licenses of Patents, Trademarks, Copyrights, Mask Works
and Trade Secrets which any Person has granted to Borrower are set forth in
Schedule H to Attachment I hereto;
--------------------------
(i) Borrower has obtained from each employee who may be
considered the inventor of patentable inventions (invented within the scope
of such employee's employment) an assignment to Borrower of all rights to
such inventions, including Patents; and
(j) Borrower has taken all steps necessary to protect the
secrecy and the validity under applicable law of all material Trade
Secrets.
4. Covenants of Borrower. Borrower hereby agrees:
---------------------
(a) Borrower will perform all acts and execute all documents,
including notices of security interest for each relevant type of
intellectual property in forms suitable for filing with the Patent and
Trademark Office or the Copyright Office, as applicable, substantially in
the form of Attachment II (appropriately revised) annexed hereto, that may
-------------
be necessary or desirable to record, maintain, preserve, protect and
perfect Lender's interest in the Collateral, the Lien granted to Lender in
the Collateral and the first priority of such Lien;
(b) Except to the extent that Lender shall give its prior
written consent,
(i) Borrower (either itself or through licensees) will
continue to use the Trademarks in connection with each and every
trademark class of goods or services applicable to its current line of
products or services as reflected in its current catalogs, brochures,
price lists or similar materials in order to maintain the Trademarks
in full force and effect free from any claim of abandonment for
nonuse, and Borrower will not (and will not permit any licensee
thereof to) do any act or knowingly omit to do any act whereby any
Trademark may become invalidated;
(ii) Borrower will not do any act or omit to do any act
whereby the Patent Registrations may become abandoned or dedicated or
the remedies available against potential infringers weakened and shall
notify Lender immediately if it knows of any reason or has reason to
know that any Patent Registration may become abandoned or dedicated;
(iii) Borrower will not do any act or omit to do any act
whereby the Copyrights or Mask Works may become abandoned or dedicated
or the
4
<PAGE>
remedies available against potential infringers weakened and shall
notify Lender immediately if it knows of any reason or has reason to
know that any Copyright or Mask Work may become abandoned or
dedicated; and
(iv) Borrower will not assign, sell, mortgage, lease,
transfer, pledge, hypothecate, grant a security interest in or Lien
upon, encumber, grant an exclusive or non-exclusive license, or
otherwise dispose of any of the Collateral, and nothing in this
Security Agreement shall be deemed a consent by Lender to any such
action except as expressly permitted herein;
(c) Except as may be expressly limited by the Loan Agreement,
Borrower will promptly pay Lender for any and all sums, costs, and expenses
which Lender may pay or incur pursuant to the provisions of this Security
Agreement or in enforcing the Obligations, the Collateral or the security
interest and assignments granted hereunder, including all filing or
recording fees, court costs, collection charges, travel, and reasonable
attorneys' fees and expenses, all of which together with interest at the
highest rate then payable on the Obligations shall be part of the
Obligations and be payable on demand;
(d) Borrower will promptly notify Lender upon the filing, either
by Borrower or through any agent, employee, licensee or designee, of (i) an
application for the registration of any Patent, Trademark, Copyright or
Mask Work with the Patent and Trademark Office or the Copyright Office or
any similar office or agency in any other country or any political
subdivision thereof, (ii) any assignment of any Patent or Trademark, which
Borrower may acquire from a third party, with the Patent and Trademark
Office or any similar office or agency in any other country or any
political subdivision thereof, or (iii) any assignment of any Copyright or
Mask Work, which Borrower may acquire from a third party, with the
Copyright Office or any similar office or agency in any other country or
any political subdivision thereof. Upon the request of Lender, Borrower
shall execute and deliver any and all assignments, agreements, instruments,
documents and papers as Lender may request to evidence Lender's interest in
such Patent, Trademark (and the goodwill and general intangibles of
Borrower relating thereto or represented thereby), Copyright or Mask Work,
and Borrower authorizes Lender to amend an original counterpart of the
applicable notice of security interest executed pursuant to Subparagraph
------------
4(a) of this Security Agreement without first obtaining Borrower's approval
----
of or signature to such amendment and to record such assignment with the
Patent and Trademark Office or Copyright Office, as applicable;
(e) Borrower will keep the Collateral free of all Liens, except
in favor of Lender;
(f) Borrower will take all necessary steps in any proceeding
before the Patent and Trademark Office, the Copyright Office or any similar
office or agency in any other country or any political subdivision thereof,
to diligently prosecute or maintain, as
5
<PAGE>
applicable, each application and registration of the Patents, Trademarks,
Copyrights and Mask Works, including filing of renewals, affidavits of use,
affidavits of incontestability and opposition, interference and
cancellation proceedings (except to the extent that dedication, abandonment
or invalidation is permitted hereunder);
(g) During the term of the Loan Agreement, Borrower shall (i)
make application to the Patent and Trademark Office (and assign such
application to Lender as security) to register any material unpatented but
patentable inventions developed by Borrower or its employees (within the
scope of their employment), unless Borrower, in the exercise of its prudent
business judgment, deems any such Patent not to have any significant
commercial value or determines that its rights thereunder are better
preserved as a Trade Secret; (ii) make application to the Patent and
Trademark Office to register any registerable but unregistered material
Trademarks used by Borrower in connection with its products or services;
and (iii) make application to the Copyright Office to register any material
unregistered Copyright or Mask Work to which Borrower has rights;
(h) Borrower shall (i) use proper statutory notice in connection
with its use of the Patents, Trademarks, Copyrights and Mask Works, (ii)
maintain consistent standards of quality in its manufacture of products
sold under the Trademarks or provision of services in connection with the
Trademarks, and (iii) take all steps necessary to protect the secrecy and
the validity under applicable law of all material Trade Secrets;
(i) Borrower agrees that if it or any Affiliate, learns of any
use by any Person of any term or design likely to cause confusion with any
Trademark, Borrower shall promptly notify Lender of such use and of all
steps taken and to be taken to remedy any infringement of any Trademark;
(j) Borrower shall maintain with each employee who may have
access to the Trade Secrets of Borrower an agreement by which such employee
agrees not to disclose such Trade Secrets and with each employee who may be
the inventor of patentable inventions (invented within the scope of such
employee's employment) an invention assignment agreement requiring such
employee to assign all rights to such inventions, including patents and
patent applications, to Borrower and further requiring such employee to
cooperate fully with Borrower, its successors in interest, including
Lender, and their counsel, in the prosecution of any patent application or
in any litigation involving the invention, whether such cooperation is
required during such employee's employment with Borrower or after the
termination of such employment;
(k) Borrower shall at all times keep at least one complete set
of its records concerning the Collateral at its chief executive office and
shall make such records available for inspection by Lender in accordance
with the terms of the Loan Agreement.
6
<PAGE>
5. Authorized Action by Lender.
---------------------------
(a) Lender may, in its sole discretion, pay any amount or do any
act required of Borrower hereunder or requested by Lender to preserve,
defend, protect, maintain, record or enforce Borrower's obligations
contained herein, the Obligations, the Collateral, or the right, title and
interest granted Lender by this Security Agreement, and which Borrower
fails to do or pay, and any such payment shall be deemed an advance by
Lender to Borrower and shall be payable on demand together with interest at
the highest rate then payable on the Obligations.
(b) Borrower agrees to execute and deliver to Lender three
originals of a Special Power of Attorney in substantially the form of
Attachment III to this Agreement for the implementation of the recording,
--------------
giving of notice, preservation, assignment, sale or other disposal of the
Collateral pursuant to Subparagraphs 2(a), 2(b), 5(a) and 7(a).
---------------------------------------
(c) Borrower hereby grants to Lender and its employees and
agents the right to visit Borrower's business facilities at which Borrower
manufactures products or provides services, which products or services are
sold under or provided in connection with any of the Trademarks, and to
inspect such products and the quality control records relating thereto or
observe the provision of such services.
6. Litigation and Other Proceedings
--------------------------------
(a) Borrower shall have the right and obligation to commence and
diligently prosecute such suits, proceedings or other actions for
infringement or other damage, or reexamination or reissue proceedings, or
opposition or cancellation proceedings as are reasonable to protect any of
the Patents, Trademarks, Copyrights, Mask Works or Trade Secrets. No such
suit, proceeding or other actions shall be settled or voluntarily
dismissed, nor shall any party be released or excused of any claims of or
liability for infringement, without the prior written consent of Lender,
which consent shall not be unreasonably withheld.
(b) Upon the occurrence and during the continuation of an Event
of Default, Lender shall have the right but not the obligation to bring
suit or institute proceedings in the name of Borrower or Lender to enforce
any rights in the Collateral, including any license thereunder, in which
event Borrower shall at the request of Lender do any and all lawful acts
and execute any and all documents required by Lender in aid of such
enforcement. If Lender elects not to bring suit to enforce any right under
the Collateral, including any license thereunder, Borrower agrees to use
all reasonable measures, whether by suit, proceeding or other action, to
prevent the infringement of any right under the Collateral by any Person
and for that purpose agrees to diligently maintain any action, suit or
proceeding against any Person so infringing necessary to prevent such
infringement.
7
<PAGE>
7. Default and Remedies.
--------------------
(a) Borrower shall be deemed in default under this Security
Agreement upon the occurrence of an Event of Default, as that term is
defined in the Loan Agreement. Upon the occurrence and during the
continuation of any such Event of Default, Lender may, at its option, and
(except if otherwise specified below) without notice to or demand on
Borrower, and in addition to all rights and remedies available to Lender
under the Loan Agreement or the other Loan Documents, do any one or more of
the following:
(i) upon ten (10) days' prior notice to Borrower, direct
Borrower not to make any further use of the Patents, the Trademarks
(or any mark similar thereto), the Copyrights (or any work deriving
therefrom), or the Mask Works for any purpose;
(ii) at any time and from time to time, upon ten (10)
days' prior notice to Borrower, license, whether general, special or
otherwise, and whether on an exclusive or nonexclusive basis, any of
the Patents, Trademarks, Copyrights or Mask Works, throughout the
world for such term or terms, on such conditions, and in such manner,
as Lender shall in its sole discretion determine;
(iii) at any time and from time to time, enforce (and upon
notice to Borrower have the exclusive right to enforce) against any
licensee or sublicensee all rights and remedies of Borrower in, to and
under any one or more license agreements with respect to the
Collateral (without assuming any obligations or liability thereunder),
and take or refrain from taking any action under any thereof;
(iv) at any time and from time to time, upon ten (10)
days' prior notice to Borrower, assign, sell, or otherwise dispose of,
the Collateral or any of it, either with or without special or other
conditions or stipulations, with power to buy the Collateral or any
part of it, and with power also to execute assurances, and do all
other acts and things for completing the assignment, sale or
disposition which Lender shall, in its sole discretion, deem
appropriate or proper; and
(v) in addition to the foregoing, in order to implement
the assignment, sale or other disposal of any of the Collateral
pursuant to clause (a)(iv) hereof, Lender may, at any time, pursuant
--------------
to the authority granted in the Power of Attorney executed pursuant to
Subparagraph 5(b) hereof, execute and deliver on behalf of Borrower,
-----------------
one or more instruments of assignment of the Patents, Trademarks,
Copyrights or Mask Works (or any application or registration thereof),
in form suitable for filing, recording or registration in any country.
8
<PAGE>
(b) Borrower agrees to pay when due all reasonable costs
incurred in any such transfer of the Patents, Trademarks, Copyrights or
Mask Works, including any taxes, fees and reasonable attorneys' fees and
expenses, and all such costs shall be added to the Obligations. Lender may
apply the proceeds actually received from any such license, assignment,
sale or other disposition to the reasonable costs and expenses thereof,
including reasonable attorneys' fees and all legal, travel and other
expenses which may be incurred by Lender, and then to the Obligations, in
such order as to principal or interest as Lender may desire; and Borrower
shall remain liable and will pay Lender on demand any deficiency remaining,
together with interest thereon at a rate equal to the highest rate then
payable on the Obligations and the balance of any expenses unpaid. Nothing
herein contained shall be construed as requiring Lender to take any such
action at any time. In the event of any such license, assignment, sale or
other disposition of the Collateral, or any of it, after the occurrence or
continuation as hereinabove provided of an Event of Default, Borrower shall
supply its know-how and expertise relating to the manufacture and sale of
the products bearing or in connection with which the Trademarks, Patents,
Copyrights or Mask Works are used, and its customer lists and other records
relating to the Trademarks, Patents, Copyrights or Mask Works and to the
distribution of products or the provisions of services, to Lender or its
designee.
8. Indemnification and Release.
---------------------------
(a) Borrower assumes all responsibility and liability arising
from the use of the Patents, Trademarks, Copyrights and Mask Works, and
Borrower hereby indemnifies and holds Lender and its respective directors,
officers, employees, agents and any of their respective Affiliates
("Indemnitees") harmless from and against any claim, suit, loss, damage or
-------------
expense (including reasonable attorneys' fees and expenses) arising out of
or in connection with any alleged infringement of any patent, trademark,
service mark, trade name, trade secret, copyright or mask work of a third
party or alleged defect in any product manufactured, promoted or sold by
Borrower (or any Affiliate of Borrower) in connection with any Patent,
Trademark, Copyright or Mask Work or out of the manufacture, promotion,
labeling, sale or advertisement of any product or service by Borrower (or
any Affiliate of Borrower). Borrower agrees that Lender does not assume,
nor shall Lender have any responsibility for, the payment of any sums due
or to become due under any agreement or contract included in the Collateral
or the performance of any obligations to be performed under or with respect
to any such agreement or contract by Borrower, and Borrower hereby agrees
to indemnify and hold each Indemnitee harmless with respect to any and all
claims by any Person relating thereto.
(b) Borrower agrees to indemnify and hold each Indemnitee
harmless and against any claim, suit, loss, damage or expense (including
reasonable attorneys' fees and expenses) arising out of or in connection
with (i) any claim, suit or proceeding instituted by or against Borrower,
(ii) any action taken or omitted to be taken by Lender pursuant to
Subparagraph 6(b), or (iii) any action taken or omitted to be taken by
-----------------
Lender pursuant to clause 7(a)(iii) hereof with respect to any license
----------------
agreement of Borrower;
9
<PAGE>
provided, however, that Borrower shall not be required to indemnify any
-------- -------
Indemnitee to the extent such liability arises from the willful misconduct
or gross negligence of such Indemnitee.
(c) Borrower hereby releases each Indemnitee from any claims,
causes of action and demands at any time arising out of or with respect to
any actions taken or omitted to be taken by the Indemnitees, or any of
them, under the powers of attorney granted under the Special Power of
Attorney executed pursuant to Subparagraph 5(b) herein, other than actions
-----------------
taken or omitted to be taken through the gross negligence or willful
misconduct of such Indemnitees.
(d) Borrower agrees to cause Lender to be named as an additional
insured with respect to any policy of insurance held by Borrower from time
to time covering product liability or intellectual property infringement
risk.
9. Miscellaneous.
-------------
(a) Notices. Except as otherwise provided herein, all notices,
-------
requests, demands, consents, instructions or other communications to or
upon Borrower or Lender under this Security Agreement shall be made and
deemed received in accordance with the Loan Agreement.
(b) Nonwaiver. No failure or delay on Lender's part in
---------
exercising any right hereunder shall operate as a waiver thereof or of any
other right nor shall any single or partial exercise of any such right
preclude any other further exercise thereof or of any other right.
(c) Amendments and Waivers. Except with respect to action by
----------------------
the Lender pursuant to Subparagraph 4(d), this Security Agreement may not
-----------------
be amended or modified, nor may any of its terms be waived, except by
written instruments signed by Borrower and Lender as required by the Loan
Agreement. Each waiver or consent under any provision hereof shall be
effective only in the specific instances and for the purpose for which
given.
(d) Assignments. This Security Agreement shall be binding upon
-----------
and inure to the benefit of Lender and Borrower and their respective
successors and assigns; provided, however, that Borrower and Lender may
-------- -------
sell, assign and delegate their respective rights and obligations hereunder
only as permitted by the Loan Agreement.
(e) Cumulative Rights, etc. The rights, powers and remedies of
----------------------
Lender under this Security Agreement shall be in addition to all rights,
powers and remedies given to Lender by virtue of any applicable law, rule
or regulation of any Governmental Authority, the Loan Agreement, any other
Credit Document or any other agreement, all of which rights, powers, and
remedies shall be cumulative and may be exercised successively
10
<PAGE>
or concurrently without impairing Lender's rights hereunder. Borrower
waives any right to require Lender to proceed against any Person or to
exhaust any Collateral or to pursue any remedy in Lender's power.
(f) Payments Free of Taxes, Etc. All payments made by Borrower
----------------------------
under this Security Agreement shall be made by Borrower free and clear of
and without deduction for any and all present and future taxes, levies,
charges, deductions and withholdings. In addition, Borrower shall pay upon
demand any stamp or other taxes, levies or charges of any jurisdiction with
respect to the execution, delivery, registration, performance and
enforcement of this Security Agreement. Upon request by Lender, Borrower
shall furnish evidence satisfactory to Lender that all requisite
authorizations and approvals by, and notices to and filings with,
governmental authorities and regulatory bodies have been obtained and made
and that all requisite taxes, levies and charges have been paid.
(g) Partial Invalidity. If any time any provision of this
------------------
Security Agreement is or becomes illegal, invalid or unenforceable in any
respect under the law of any jurisdiction, neither the legality, validity
or enforceability of the remaining provisions of this Security Agreement
nor the legality, validity or enforceability of such provision under the
law of any other jurisdiction shall in any way be affected or impaired
thereby.
(h) Governing Law. This Security Agreement shall be governed by
-------------
and construed in accordance with the laws of the State of California
without reference to conflicts of law rules.
(i) Submission to Jurisdiction. Borrower hereby irrevocably and
--------------------------
unconditionally:
(i) Submits for itself and its property in any legal
action or proceeding relating to this Security Agreement, or for
recognition and enforcement of any judgment in respect thereof, to the
non-exclusive jurisdiction of the courts of the State of California
and the courts of the United States of America for the County of Los
Angeles, and consents and agrees to suit being brought in such courts
as Lender may elect;
(ii) Waives any objection that it may now or hereafter
have to the venue of any such action or proceeding in any such court
or that such proceeding was brought in an inconvenient court and
agrees not to plead or claim the same; and
(iii) Waives personal service of the summons, complaint and
other process issued in any such action or suit and agrees that
service of such summons, complaint and other process may be made by
registered or certified mail addressed to Borrower at the address set
forth in the Loan Agreement and that
11
<PAGE>
service so made shall be deemed completed upon the earlier of
Borrower's actual receipt thereof or 3 business days after deposit in
the U.S. Mails, proper postage prepaid. Nothing in this Security
Agreement shall be deemed or operate to affect the right of Lender to
serve legal process in any other manner permitted by law, or to
preclude the enforcement by Lender of any judgment or order obtained
in such forum or the taking of any action under this Security
Agreement to enforce same in any other appropriate forum or
jurisdiction.
(j) Jury Trial. EACH OF BORROWER AND LENDER, AND TO THE FULLEST
----------
EXTENT PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ALL RIGHT TO
TRIAL BY JURY AS TO ANY ISSUE RELATING HERETO IN ANY ACTION, PROCEEDING, OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT.
12
<PAGE>
IN WITNESS WHEREOF, Borrower has caused this Security Agreement to be
executed as of the day and year first above written.
CARDIAC CONTROL SYSTEMS, INC.
By /s/ Alan J. Rabin
-------------------------------------
Name: Alan J. Rabin
--------------------------------
Title: President & CEO
-------------------------------
COAST BUSINESS CREDIT, a division of Southern
Pacific Thrift & Loan Association
By /s/ Robert D. Peters
-------------------------------------
Name: Robert D. Peters
--------------------------------
Title: Vice President
-------------------------------
13
<PAGE>
CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT
- --------------------------------------------------------------------------------
STATE OF CALIFORNIA )
) ss.
COUNTY OF_____________)
On ____________, 199___ , before me,__________________________________________
(Name and Title of Officer)
personally appeared ____________________________________________________________
[_] personally known to me
-or-
[_] proved to me on the basis of satisfactory evidence to be the
person(s) whose name(s) is/are subscribed to the within
instrument and acknowledged to me that he/she/they executed
the same in his/her/their authorized capacity(ies), and that
by his/her/their signature(s) on the instrument the
person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
WITNESS my hand and official seal.
-----------------------------------------
Signature Of Notary
- --------------------------------------------------------------------------------
OPTIONAL
Though the data below is not required by law, it may prove valuable to persons
relying on the document and could prevent fraudulent reattachment of this form.
CAPACITY CLAIMED BY SIGNER DESCRIPTION OF ATTACHED DOCUMENT
[_] Individual
[_] Corporate Officer
------------------------------------ ------------------------------------
Title(s) Title Or Type Of Document
[_] Partner(s) [_] Limited
[_] General
------------------------------------
Number
[_] Attorney-In-Fact Of Pages
[_] Trustee(s)
[_] Guardian/Conservator
[_] Other:
------------------------------ ------------------------------------
Date Of Document
Signer is representing:
Name Of Person(s) Or Entity(ies)
------------------------------------
Signer(s) Other Than Named Above
-----------------------------------------
-----------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ATTACHMENT I
TO SECURITY AGREEMENT
(a) All copyrights including (i) all original works of authorship
fixed in any tangible medium of expression, all right, title and interest
therein and thereto, and all registrations and recordings thereof,
including all applications, registrations and recordings in the Copyright
Office or in any similar office or agency of the United States, any state
thereof, or any foreign country or any political subdivision thereof, all
whether now owned or hereafter acquired by Borrower, including those
described on Schedule E to this Attachment I annexed hereto, which
-------------------------------
Schedule E is incorporated herein by this reference, and (ii) all
----------
extensions or renewals thereof and all licenses thereof (collectively, the
"Copyrights");
----------
(b) All patentable inventions, patent rights, shop rights,
letters patent of the United States or any other country, all right, title
and interest therein and thereto, and all registrations and recordings
thereof, including (i) all Patent Registrations and recordings in the
Patent and Trademark Office or in any similar office or agency of the
United States, any state thereof or any foreign country or political
subdivision thereof, all whether now owned or hereafter acquired by
Borrower, including those described in Schedules B and D to this Attachment
------------------------------------
I annexed hereto, which Schedules B and D are incorporated herein by this
- -----------------
reference, and (ii) all reissues, continuations, continuations-in-part or
extensions thereof and all licenses thereof (collectively, the "Patents");
-------
(c) All trademarks, trade names, trade styles and service marks,
and all prints and labels on which said trademarks, trade names, trade
styles and service marks have appeared or appear, and all designs and
general intangibles of like nature, now existing or hereafter adopted or
acquired, all right, title and interest therein and thereto, all
registrations and recordings thereof, including (i) all applications,
registrations and recordings in the Patent and Trademark Office or in any
similar office or agency of the United States, any state thereof, or any
foreign country or any political subdivision thereof, all whether now owned
or hereafter acquired by Borrower, including those described in Schedules A
-----------
and C to this Attachment I, which Schedules A and C are incorporated herein
-------------------------- -----------------
by this reference, and (ii) all reissues, extensions or renewals thereof
and all licenses thereof (collectively, the "Trademarks");
----------
(d) All goodwill of Borrower's business symbolized by the
Trademarks and all customer lists and other records of Borrower relating to
the distribution of products or provision of services bearing or covered by
the Trademarks;
(e) All mask works including all series of related images,
however fixed or encoded, in final or intermediate form, having or
representing the predetermined, three
I-1
<PAGE>
dimensional pattern of metallic, insulating, or semiconductor material
present or removed from the layers of a semiconductor chip product, in
which series the relation of the images to one another is that each image
has the pattern of the surface of one form of the semiconductor chip
product, and all right, title and interest therein and thereto, and all
registrations and recordings thereof, including all applications,
registrations and recordings in the Copyright Office or in any similar
office or agency of the United States, any state thereof, or any foreign
country or any political subdivision thereof, all whether now owned or
hereafter acquired by the Borrower, including those described on Schedule F
----------
to this Attachment I annexed hereto, which Schedule F is incorporated
-------------------- ----------
herein by this reference, and (ii) all extensions or renewals thereof and
all licenses thereof (collectively, the "Mask Works").
----------
(f) All information, including formulas, patterns, compilations,
programs, devices, methods, techniques or processes, that derives
independent economic value, actual or potential, from not being generally
known to, and not being readily ascertainable by proper means by other
Persons who can obtain economic value from its disclosure or use, all
whether now owned or hereafter acquired by the Borrower (collectively, the
"Trade Secrets").
-------------
(g) All claims by Borrower against any Person for past, present
or future infringement of the Patents, Trademarks, Copyrights, Mask Works
or Trade Secrets;
(h) All proceeds of the foregoing (including whatever is
receivable or received when Collateral or proceeds is (are) sold,
collected, exchanged, licensed or otherwise disposed of, whether such
disposition is voluntary or involuntary, including rights to payment and
return premiums and insurance proceeds under insurance with respect to any
Collateral, and all rights to payment with respect to any cause of action
affecting or relating to the Collateral).
I-2
<PAGE>
SCHEDULE A TO ATTACHMENT I
TO SECURITY AGREEMENT
TRADEMARKS
<TABLE>
<CAPTION>
Trademark Jurisdiction Reg. Date Reg. No.
--------- ------------ --------- --------
<S> <C> <C> <C>
None.
</TABLE>
A-I-1
<PAGE>
SCHEDULE B TO ATTACHMENT I
TO SECURITY AGREEMENT
PATENTS
<TABLE>
<CAPTION>
Title Date Issued Patent No.
----- ----------- ----------
<S> <C> <C>
Pacemaker Catheter Utilizing Bipolar 5,127,403
Electrodes Spaced in Accordance to the
Length of a Heart Depolarization Signal
Self-Sealing Connector for Electrical 4,907,592
Leads for Use in Wet Environments
Cardiac Pacer with Switching Circuit 4,726,379
for Isolation
Pacemaker Catheter 4,962,767
Process for Polymer Coating Electrical 4,497,849
Conductors
</TABLE>
B-I-1
<PAGE>
SCHEDULE C TO ATTACHMENT I
TO SECURITY AGREEMENT
APPLICATIONS FOR TRADEMARKS
<TABLE>
<CAPTION>
Trademark Jurisdiction Date Filed Registration No.
--------- ------------ ---------- ----------------
<S> <C> <C> <C>
None.
</TABLE>
C-I-1
<PAGE>
SCHEDULE D TO ATTACHMENT I
TO SECURITY AGREEMENT
PATENT APPLICATIONS
<TABLE>
<CAPTION>
Title Jurisdiction Application Date Application No.
----- ------------ ---------------- ---------------
<S> <C> <C> <C>
Lead Fixation Device or Suture
Sleeve
Atrial "J" Lead
Improved Cardiac Pacing and
Sensing Using Extra-Cardiac
Indifferent Electrode
Configurations
Suppression of Far-Field
Interference Signals for
Implantable Device Data
Transmission Systems
Performed (Shaped) Single
Lead Pacemaker Systems
Performed (Shaped) Single
Lead Pacemaker Systems
Active Fixation of a Lead
</TABLE>
D-I-1
<PAGE>
SCHEDULE E TO ATTACHMENT I
TO SECURITY AGREEMENT
COPYRIGHTS
<TABLE>
<CAPTION>
Registration No. Jurisdiction Date
---------------- ------------ ----
<S> <C> <C>
None.
</TABLE>
E-I-1
<PAGE>
SCHEDULE F TO ATTACHMENT I
TO SECURITY AGREEMENT
MASK WORKS
<TABLE>
<CAPTION>
Registration No. Jurisdiction Date
---------------- ------------ ----
<S> <C> <C>
None.
</TABLE>
F-I-1
<PAGE>
SCHEDULE G TO ATTACHMENT I
TO SECURITY AGREEMENT
LICENSES GRANTED BY BORROWER TO THIRD PARTIES
None.
G-I-1
<PAGE>
SCHEDULE H TO ATTACHMENT I
TO SECURITY AGREEMENT
LICENSES GRANTED BY THIRD PARTIES TO BORROWER
None.
H-I-1
<PAGE>
ATTACHMENT II TO SECURITY AGREEMENT
[SEPARATE INSTRUMENT FOR
EACH FORM OF COLLATERAL]
GRANT OF SECURITY INTEREST
[PATENTS][TRADEMARKS][COPYRIGHTS][MASK WORKS]
THIS GRANT OF SECURITY INTEREST, dated as of June ____, 1997, is
executed by Cardiac Control Systems, Inc., a Delaware corporation ("Borrower"),
--------
in favor of Coast Business Credit(R), a division of Southern Pacific Thrift &
Loan Association ("Lender").
------
A. Pursuant to a Loan and Security Agreement dated as of the date
hereof ("Loan Agreement") between Borrower and Lender, Lender have agreed to
--------------
extend certain credit facilities to Borrower upon the terms and subject to the
conditions set forth therein.
[B. Borrower owns the letters patent, and/or applications for letters
patent, of the United States, more particularly described on Schedules 1-A and
-----------------
1-B annexed hereto as part hereof (collectively, the "Patents");]
- --- -------
[B. Borrower has adopted, used and is using the trademarks, more
particularly described on Schedules 1-A and 1-B annexed hereto as part hereof,
---------------------
which trademarks are registered or subject to an application for registration in
the United States Patent and Trademark Office (collectively, the "Trademarks");]
----------
[B. Borrower owns the copyrights registered in the United States
Copyright Office, more particularly described on Schedule 1-A annexed hereto as
------------
part hereof (collectively, the "Copyrights");]
----------
[B. Borrower owns the mask works registered in the United States
Copyright Office, more particularly described on Schedule 1-A annexed hereto as
------------
part hereof (collectively, the "Mask Works");]
----------
C. Borrower has entered into a Security Agreement (Intellectual
Property) dated the date hereof (the "Security Agreement") in favor of Lender;
------------------
and
[D. Pursuant to the Security Agreement, Borrower has granted to
Lender a security interest in all right, title and interest of Borrower in and
to the Patents, together with any reissue, continuation, continuation-in-part or
extension thereof, and all proceeds thereof, including any and all causes of
action which may exist by reason of infringement thereof for the full term of
II-1
<PAGE>
the Patents (the "Collateral"), to secure the prompt payment, performance and
----------
observance of the Obligations, as defined in the Security Agreement;
[D. Pursuant to the Security Agreement, Borrower has granted to
Lender a security interest in all right, title and interest of Borrower in and
to the Trademarks, together with the goodwill of the business symbolized by the
Trademarks and the customer lists and records related to the Trademarks and the
applications and registrations thereof, and all proceeds thereof, including any
and all causes of action which may exist by reason of infringement thereof (the
"Collateral"), to secure the payment, performance and observance of the
----------
Obligations, as defined in the Security Agreement;]
[D. Pursuant to the Security Agreement, Borrower has granted to
Lender a security interest in all right, title and interest of Borrower in and
to the Copyrights and the registrations thereof, together with any renewals or
extensions thereof, and all proceeds thereof, including any and all causes of
action which may exist by reason of infringement thereof for the full term of
the Copyrights (the "Collateral"), to secure the prompt payment, performance and
----------
observance of the Obligations, as defined in the Security Agreement;]
[D. Pursuant to the Security Agreement, Borrower has granted to
Lender a security interest in all right, title and interest of Borrower in and
to the Mask Works and the registrations thereof, together with any renewals or
extensions thereof, and all proceeds thereof, including any and all causes of
action which may exist by reason of infringement thereof for the full term of
the Mask Works (the "Collateral"), to secure the prompt payment, performance and
----------
observance of the Obligations, as defined in the Security Agreement;]
NOW, THEREFORE, for good and valuable consideration, receipt of which
is hereby acknowledged, Borrower does hereby further grant to Lender a security
interest in the Collateral to secure the prompt payment, performance and
observance of the Obligations.
Borrower does hereby further acknowledge and affirm that the rights
and remedies of Lender with respect to the security interest in the Collateral
granted hereby are more fully set forth in the Security Agreement, the terms and
provisions of which are hereby incorporated herein by reference as if fully set
forth herein.
II-2
<PAGE>
Lender's address is:
Coast Business Credit,
a division of Southern Pacific Thrift & Loan Association
12121 Wilshire Boulevard, Suite 1111
Los Angeles, California 90025
Attn: Manager
Telephone No.: (310) 820-6681
Telecopier No.: (310) 826-2884
IN WITNESS WHEREOF, Borrower has caused this Assignment to be executed
as of the day and year first above written.
CARDIAC CONTROL SYSTEMS, INC.
By:
---------------------------------
Name:
-----------------------------
Title:
----------------------------
II-3
<PAGE>
CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT
- --------------------------------------------------------------------------------
STATE OF CALIFORNIA )
) ss.
COUNTY OF_____________)
On ____________, 199___ , before me,__________________________________________
(Name and Title of Officer)
personally appeared ____________________________________________________________
[_] personally known to me
-or-
[_] proved to me on the basis of satisfactory evidence to be the
person(s) whose name(s) is/are subscribed to the within
instrument and acknowledged to me that he/she/they executed
the same in his/her/their authorized capacity(ies), and that
by his/her/their signature(s) on the instrument the
person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
WITNESS my hand and official seal.
-----------------------------------------
Signature Of Notary
- --------------------------------------------------------------------------------
OPTIONAL
Though the data below is not required by law, it may prove valuable to persons
relying on the document and could prevent fraudulent reattachment of this form.
CAPACITY CLAIMED BY SIGNER DESCRIPTION OF ATTACHED DOCUMENT
[_] Individual
[_] Corporate Officer
------------------------------------ ------------------------------------
Title(s) Title Or Type Of Document
[_] Partner(s) [_] Limited
[_] General
------------------------------------
Number
[_] Attorney-In-Fact Of Pages
[_] Trustee(s)
[_] Guardian/Conservator
[_] Other:
------------------------------ ------------------------------------
Date Of Document
Signer is representing:
Name Of Person(s) Or Entity(ies)
------------------------------------
Signer(s) Other Than Named Above
-----------------------------------------
-----------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE 1-A TO GRANT OF SECURITY INTEREST
PATENTS
<TABLE>
<CAPTION>
Title Date Issued Patent No.
----- ----------- ----------
<S> <C> <C>
Pacemaker Catheter Utilizing 5,127,403
Bipolar Electrodes Spaced in
Accordance to the Length of a
Heart Depolarization Signal
Self-Sealing Connector for 4,907,592
Electrical Leads for Use in
Wet Environments
Cardiac Pacer with Switching 4,726,379
Circuit for Isolation
Pacemaker Catheter 4,962,767
Process for Polymer Coating 4,497,849
Electrical Conductors
</TABLE>
I-A-1
<PAGE>
SCHEDULE 1-B TO GRANT OF SECURITY INTEREST
PATENT APPLICATIONS
<TABLE>
<CAPTION>
Title Jurisdiction Application Date Application No.
----- ------------ ---------------- ---------------
<S> <C> <C> <C>
Lead Fixation Device
or Suture Sleeve
Atrial "J" Lead
Improved Cardiac
Pacing and Sensing
Using Extra-Cardiac
Indifferent Electrode
Configurations
Suppression of Far-
Field Interference
Signals for
Implantable Device
Data Transmission
Systems
Performed (Shaped)
Single Lead
Pacemaker Systems
Performed (Shaped)
Single Lead
Pacemaker Systems
Active Fixation of a
Lead
</TABLE>
I-B-1
<PAGE>
SCHEDULE 1-A TO GRANT OF SECURITY INTEREST
TRADEMARKS
Trademark Jurisdiction Reg. Date Reg. No.
--------- ------------ --------- --------
None.
I-A-1
<PAGE>
SCHEDULE 1-B TO GRANT OF SECURITY INTEREST
TRADEMARK APPLICATIONS
Mark Application Date Application No.
---- ---------------- ---------------
None.
I-B-1
<PAGE>
SCHEDULE 1-A TO GRANT OF SECURITY INTEREST
COPYRIGHTS
Description Registration Date Registration No.
- ----------- ----------------- ----------------
None.
I-A-1
<PAGE>
SCHEDULE 1-A TO GRANT OF SECURITY INTEREST
MASK WORKS
Description Registration Date Registration No.
----------- ----------------- ----------------
None.
I-A-1
<PAGE>
ATTACHMENT III TO SECURITY AGREEMENT
SPECIAL POWER OF ATTORNEY
STATE OF _____________)
) ss.:
COUNTY OF_____________)
KNOW ALL PERSONS BY THESE PRESENTS, THAT Cardiac Control Systems,
Inc., a Delaware corporation ("Borrower"), pursuant to a Security Agreement
--------
(Intellectual Property), dated the date hereof (the "Security Agreement"),
------------------
between Borrower and Lender (as hereinafter defined) hereby appoints and
constitutes Coast Business Credit(R), a division of Southern Pacific Thrift &
Loan Association ("Lender") its true and lawful attorney, with full power of
------
substitution, and with full power and authority to perform the following acts on
behalf of Borrower:
1. For the purpose of assigning, selling, licensing or otherwise
disposing of all right, title and interest of Borrower in and to any letters
patent of the United States or any other country or political subdivision
thereof, and all registrations, recordings, reissues, continuations,
continuations-in-part and extensions thereof, and all pending applications
therefor, and for the purpose of the recording, registering and filing of, or
accomplishing any other formality with respect to, the foregoing, to execute and
deliver any and all agreements, documents, instruments of assignment or other
papers necessary or advisable to effect such purpose;
2. For the purpose of assigning, selling, licensing or otherwise
disposing of all right, title and interest of Borrower in and to any trademarks,
trade names, trade styles and service marks, and all registrations, recordings,
reissues, extensions and renewals thereof, and all pending applications
therefor, and for the purpose of the recording, registering and filing of, or
accomplishing any other formality with respect to, the foregoing, to execute and
deliver any and all agreements, documents, instruments of assignment or other
papers necessary or advisable to effect such purpose;
3. For the purpose of assigning, selling, licensing or otherwise
disposing of all right, title and interest of Borrower in and to any copyrights,
and all registrations, recordings, reissues, extensions and renewals thereof,
and all pending applications therefor, and for the purpose of the recording,
registering and filing of, or accomplishing any other formality with respect to,
the foregoing, to execute and deliver any and all agreements, documents,
instruments of assignment or other papers necessary or advisable to effect such
purpose.
4. For the purpose of assigning, selling, licensing or otherwise
disposing of all right, title and interest of Borrower in and to any mask works,
and all registrations, recordings, reissues, extensions and renewals thereof,
and all pending applications therefor, and for the
III-1
<PAGE>
purpose of the recording, registering and filing of, or accomplishing any other
formality with respect to, the foregoing, to execute and deliver any and all
agreements, documents, instruments of assignment or other papers necessary or
advisable to effect such purpose;
5. For the purpose of evidencing and perfecting the Lender's interest
in any patent, trademark, copyright or mask work not previously assigned to
Lender as security, or in any patent, trademark, copyright or mask work, which
Borrower may acquire from a third party, and for the purpose of the recording,
registering and filing of, or accomplishing any other formality with respect to,
the foregoing, to execute and deliver any and all agreements, documents,
instruments of assignment or other papers necessary or advisable to effect such
purpose.
6. To execute any and all documents, statements, certificates or
other papers necessary or advisable in order to obtain the purposes described
above as Lender may in its sole discretion determine.
This power of attorney is made pursuant to the Security Agreement and
takes effect solely for the purposes of Subparagraphs 2(a), 2(b), 5(a) and 7(a)
---------------------------------------
thereof and is subject to the conditions thereof and may not be revoked until
the payment in full of all "Obligations" as defined in the Security Agreement.
Dated: June ____, 1997
CARDIAC CONTROL SYSTEMS, INC.
By:
----------------------------------
Name:
-------------------------------
Title:
------------------------------
III-2
<PAGE>
CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT
- -------------------------------------------------------------------------------
STATE OF CALIFORNIA )
) ss.
COUNTY OF______________)
On________, 199___ , before me,
--------------------------------------
(Name And Title Of Officer)
personally appeared
-------------------------------------------------------------
[_] personally known to me
-or-
[_] proved to me on the basis of satisfactory evidence to be the
person(s) whose name(s) is/are subscribed to the within instrument
and acknowledged to me that he/she/they executed the same in
his/her/their authorized capacity(ies), and that by his/her/their
signature(s) on the instrument the person(s), or the entity upon
behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
--------------------------------------
Signature Of Notary
- --------------------------------------------------------------------------------
OPTIONAL
Though the data below is not required by law, it may prove valuable to persons
relying on the document and could prevent fraudulent reattachment of this form.
CAPACITY CLAIMED BY SIGNER DESCRIPTION OF ATTACHED DOCUMENT
[_] Individual
[_] Corporate Officer
-------------------------------- ---------------------------------------
Title(s) Title Or Type Of Document
[_] Partner(s) [_] Limited
[_] General
---------------------------------------
Number Of Pages
[_] Attorney-In-Fact
[_] Trustee(s)
[_] Guardian/Conservator
[_] Other:
-------------------------- --------------------------------------
Date Of Document
Signer is representing:
Name Of Person(s) Or Entity(ies)
---------------------------------------
Signer(s) Other Than Named Above
- -------------------------------------
- -------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
-2-
<PAGE>
EXHIBIT 10.7
GRANT OF SECURITY INTEREST
PATENTS
THIS GRANT OF SECURITY INTEREST, dated as of June 5, 1997, is
executed by Cardiac Control Systems, Inc., a Delaware corporation ("Borrower"),
--------
in favor of Coast Business Credit(R), a division of Southern Pacific Thrift &
Loan Association ("Lender").
------
A. Pursuant to a Loan and Security Agreement dated as of the date
hereof ("Loan Agreement") between Borrower and Lender, Lender have agreed to
--------------
extend certain credit facilities to Borrower upon the terms and subject to the
conditions set forth therein.
B. Borrower owns the letters patent, and/or applications for letters
patent, of the United States, more particularly described on Schedules 1-A and
-----------------
1-B annexed hereto as part hereof (collectively, the "Patents");
- --- -------
C. Borrower has entered into a Security Agreement (Intellectual
Property) dated the date hereof (the "Security Agreement") in favor of Lender;
------------------
and
D. Pursuant to the Security Agreement, Borrower has granted to Lender
a security interest in all right, title and interest of Borrower in and to the
Patents, together with any reissue, continuation, continuation-in-part or
extension thereof, and all proceeds thereof, including any and all causes of
action which may exist by reason of infringement thereof for the full term of
the Patents (the "Collateral"), to secure the prompt payment, performance and
----------
observance of the Obligations, as defined in the Security Agreement;
NOW, THEREFORE, for good and valuable consideration, receipt of which
is hereby acknowledged, Borrower does hereby further grant to Lender a security
interest in the Collateral to secure the prompt payment, performance and
observance of the Obligations.
Borrower does hereby further acknowledge and affirm that the rights
and remedies of Lender with respect to the security interest in the Collateral
granted hereby are more fully set forth in the Security Agreement, the terms and
provisions of which are hereby incorporated herein by reference as if fully set
forth herein.
<PAGE>
Lender's address is:
Coast Business Credit,
a division of Southern Pacific Thrift & Loan Association
12121 Wilshire Boulevard, Suite 1111
Los Angeles, California 90025
Attn: Manager
Telephone No.: (310) 820-6681
Telecopier No.: (310) 826-2884
IN WITNESS WHEREOF, Borrower has caused this Assignment to be executed
as of the day and year first above written.
CARDIAC CONTROL SYSTEMS, INC.
By: /s/ Alan J. Rabin
-------------------------------
Name: Alan J. Rabin
Title: President
<PAGE>
CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT
- --------------------------------------------------------------------------------
STATE OF Florida )
) ss.
COUNTY OF Orange )
On June 5, 1997, before me, Alan J. Rabin, President
----------------------------------------------
(Name and Title of Officer)
personally appeared who executed the foregoing document and is
[X] personally known to me
-or-
[_] proved to me on the basis of satisfactory evidence to be
the person(s) whose name(s) is/are subscribed to the
within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized
capacity(ies), and that by his/her/their signature(s) on
the instrument the person(s), or the entity upon behalf of
which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
/s/ Marion M. Baker [SEAL OF NOTARY PUBLIC APPEARS HERE]
------------------------------- Marion M. Baker
Signature Of Notary My Commission CC589074
EXPIRES OCT. 07, 2000
- --------------------------------------------------------------------------------
OPTIONAL
Though the data below is not required by law, it may prove valuable to persons
relying on the document and could prevent fraudulent reattachment of this form.
CAPACITY CLAIMED BY SIGNER DESCRIPTION OF ATTACHED DOCUMENT
[_] Individual
[_] Corporate Officer
- ---------------------------------- --------------------------------------
Title(s) Title Or Type Of Document
[_] Partner(s) [_] Limited
[_] General --------------------------------------
Number
[_] Attorney-In-Fact Of Pages
[_] Trustee(s)
[_] Guardian/Conservator
[_] Other:
----------------------- --------------------------------------
Date Of Document
Signer is representing:
Name Of Person(s) Or Entity(ies) --------------------------------------
Signer(s) Other Than Named Above
--------------------------------
--------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE 1-A TO GRANT OF SECURITY INTEREST
PATENTS
<TABLE>
<CAPTION>
Title Date Issued Patent No.
----- ----------- ----------
<S> <C> <C>
Pacemaker Catheter Utilizing 5,127,403
Bipolar Electrodes Spaced in
Accordance to the Length of a
Heart Depolarization Signal
Self-Sealing Connector for 4,907,592
Electrical Leads for Use in
Wet Environments
Cardiac Pacer with Switching 4,726,379
Circuit for Isolation
Pacemaker Catheter 4,962,767
Process for Polymer Coating 4,497,849
Electrical Conductors
</TABLE>
1-A-1
<PAGE>
SCHEDULE 1-B TO GRANT OF SECURITY INTEREST
PATENT APPLICATIONS
<TABLE>
<CAPTION>
Title Jurisdiction Application Date Application No.
----- ------------ ---------------- ---------------
<S> <C> <C> <C>
Lead Fixation Device
or Suture Sleeve
Atrial "J" Lead
Improved Cardiac
Pacing and Sensing
Using Extra-Cardiac
Indifferent Electrode
Configurations
Suppression of Far-
Field Interference
Signals for
Implantable Device
Data Transmission
Systems
Performed (Shaped)
Single Lead
Pacemaker Systems
Performed (Shaped)
Single Lead
Pacemaker Systems
Active Fixation of a
Lead
</TABLE>
1-B-1
