<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
----------------
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): March 28, 1996
MARQUEST MEDICAL PRODUCTS, INC.
(Exact Name of Registrant as Specified in its Charter)
COLORADO 84-0785259
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11039 EAST LANSING CIRCLE, ENGLEWOOD, CO 80112
(Address and zip code of principal executive offices)
(303) 790-4835
(Registrant's telephone number, including area code)
<PAGE>
ITEM 5. OTHER EVENTS
Marquest Medical Products, Inc. (the"Company") has completed several
transactions effecting its indebtedness and capital.
On March 28, 1996, the Company converted $1,851,600 in debt principal , $486,571
in related interest payable and $376,330 in unpaid management fees, all of which
were owed to Scherer Healthcare, Inc, into 3,877,859 shares of the Company's
restricted common stock, no par value. The conversion price was $0.70 per
share.
On March 29, 1996, Scherer Capital, LLC, a company controlled by the majority
shareholder of Scherer Healthcare, Inc., purchased 2,061,856 shares of the
Company's restricted common stock, no par value, at a price of $0.485 per share,
for $1,000,000.
On March 28, 1996, the Company signed a Loan and Security Agreement with Scherer
Capital, LLC, enabling the Company to borrow a maximum of $1,500,000 at an
interest rate of 1-1/2% over prime, adjusted quarterly. The note is secured by
the Company's inventory, building and equipment and is due April 1, 2001. The
Company can redeem the notes after April l, 1997 at a premium of 104%,
decreasing 1% per year. The notes are convertible at the option of Scherer
Capital, LLC into shares of the Company's common stock, no par value at a
conversion price of $0.70 per share. As of March 30, 1996, the Company has
borrowed $700,000 under this Note Agreement to repay a bridge loan from Scherer
Capital, LLC.
As a result of these transactions, the Company has 14,186,595 shares
outstanding. Scherer Healthcare, Inc. and Scherer Capital, LLC own 50.8% and
14.5%, respectively, of the Company.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
NO. DESCRIPTION PAGE
- --- ----------- ----
4.1 Subscription Agreement for Purchase of Common Stock between 4
Marquest Medical Products, Inc. and Scherer Capital, LLC dated
March 29, 1996
4.2 Conversion Agreement dated March 28, 1996 between Marquest 6
Medical Products, Inc. and Scherer Healthcare, Inc.
4.3 Loan and Security Agreement dated March 28, 1996 between Marquest 9
Medical Products, Inc. and Scherer Capital, LLC.
4.4 Second Priority Deed of Trust, Security Agreement and Assignment 59
of Rents and Leases dated March 28, 1996 from Marquest Medical
Products, Inc. to the Public Trustee of Douglas County, Colorado
for the benefit of Scherer Capital, LLC.
4.5 Convertible Secured Note due April 1, 2001 96
2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized on April 8, 1996.
/s/ Margaret Von der Schmdit
___________________________________
Margaret Von der Schmdt
Vice President - Finance and Chief Financial
Officer
3
<PAGE>
EXHIBIT 4.1
SUBSCRIPTION AGREEMENT FOR
PURCHASE OF COMMON STOCK
Scherer Capital, LLC, a Delaware limited liability Company ("Purchaser"),
does hereby subscribe for and agree to purchase Two Million Sixty One Thousand
Eight Hundred Fifty Six (2,061,856) shares (the "Shares") of the Common Stock,
One Cent ($0.01) par value, of MARQUEST MEDICAL PRODUCTS, INC., a corporation
organized and existing under the laws of the State of Colorado ("Marquest"), and
agrees to pay Forty Eight and One-Half Cents ($0.485) per share for the Shares,
for a total subscription amount of One Million and 20/100 Dollars
($1,000,000.20).
Purchaser acknowledges that the Shares will not be registered under the
Securities Act of 1933, as amended (the "Federal Act"), in reliance upon the
exemption from registration under Section 4(2) of the Federal Act as not
involving any public offering. Purchaser also acknowledges that reliance by
Marquest on the foregoing exemptions from registration is predicated in part
upon its representations, warranties and agreements contained in this
Subscription Agreement.
Purchaser hereby represents, warrants, covenants and agrees as follows:
(1) Purchaser is purchasing the Shares solely for its own account, with
the intention of holding the Shares for investment, with no present intention of
dividing or allowing others to participate in this investment or of reselling or
otherwise participating, directly or indirectly, in a distribution of the
Shares; and it shall not make any sale, transfer or other disposition of the
Shares in violation of state or federal law.
(2) Purchaser understands that Marquest is under no obligation to register
the Shares for public sale or to comply with the conditions of Rule 144
promulgated by the United States Securities and Exchange Commission under the
Federal Act or take any other action necessary in order to make any exemption
for the sale of the Shares without registration available, and that Marquest has
no present intention of registering the Shares for public sale.
(3) Purchaser understands that the Shares will constitute "restricted
securities" under the Federal Act inasmuch as they are being or will be acquired
in a transaction not involving a public offering and that under the Federal Act
and applicable regulations thereunder may be resold without registration under
the Federal Act only in certain limited circumstances.
(4) Purchaser has such knowledge and experience in business and financial
matters that it is capable of evaluating the risks and merits associated with
the acquisition of the Shares and has had the opportunity to review and evaluate
financial and other
<PAGE>
information relating to the Borrower and to obtain copies of such other
information as deemed appropriate prior to executing this Agreement.
(5) Purchaser acknowledges that any certificates representing the shares
subscribed for hereunder will contain a legend indicating that said shares have
not been registered under the Federal Act or any applicable state securities
laws, and prohibiting further transfer, sale or conveyance of such securities
until such securities may, in the opinion of counsel to the issuer, be so
transferred, sold or conveyed without a violation of any state or federal
securities law.
(6) Purchaser understands and agrees that this Subscription Agreement (a)
is binding upon and will inure to the benefit of its successors and assigns; (b)
may not be amended except by an instrument in writing signed by Purchaser and
Marquest; (e) may not be assigned or transferred by Purchaser; and (f) will be
governed by and construed in accordance with the laws of the State of Colorado.
IN WITNESS WHEREOF, Purchaser has executed this Subscription Agreement on
the _____ day of __________________, 1996.
"Purchaser"
SCHERER CAPITAL, LLC
By: /s/ M. Murphy
---------------------------------------
Title: Vice President
------------------------------------
2
<PAGE>
EXHIBIT 4.2
CONVERSION AGREEMENT
This Agreement is made as of March 28, 1996, by and between MARQUEST
MEDICAL PRODUCTS, INC., a Colorado corporation (the "Company") and SCHERER
HEALTHCARE, INC., a Delaware corporation (the "Investor").
RECITALS
As evidenced by a Promissory Note dated June 15, 1993 in the original
principal amount of $4,042,900 (the "Convertible Note") the Company is indebted
to the Investor on the date hereof in the outstanding principal amount of
$1,851,600. The Company is also indebted to the Investor in the amount of
$486,571 representing accrued and unpaid interest on the Convertible Note
through March 5, 1996 and in the amount of $376,330 for management fees owed by
the Company to the Investor through March 5, 1996.
Pursuant to the terms in the Convertible Note, the Investor has the right
to convert the principal balance of the Convertible Note into common stock of
the Company at the conversion rate of $0.75 per share. The Company has
requested that the Investor also convert accrued and unpaid interest on the
Convertible Note and the management fees owed by the Company to the Investor
through march 5, 1996 into common stock of the Company, and to induce the
Investor to do so, has agreed that all of the outstanding principal balance of
the Convertible Note, accrued and unpaid interest thereon and the unpaid
management fees shall be convertible into common stock of the Company at a
conversion price of $0.70 per share.
The Investor has agreed to convert the principal and interest of the
Convertible Note and the unpaid management fees into common stock of the Company
at such conversion price.
NOW THEREFORE, in consideration of the premises and the mutual promises
herein contained, the parties agree as follows:
1. Effective as of the date hereof, the Investor agrees to convert the
unpaid principal balance of the Convertible Note in the amount of $1,851,600,
unpaid interest thereon in the amount of $486,571 and unpaid management fees
owed by the Company in the amount of $376,330 into 3,877,859 shares of common
stock of the Company, par value $0.01 per share (the "Conversion Shares"), which
represents a conversion price of $0.70 per share (rounded up to the nearest
whole number of shares). The Company shall, as soon as practical, issue and
deliver to the Investor a certificate for such shares, but such conversion shall
be deemed to have been made on the date of this Agreement and the Investor shall
be treated for all purposes as the record holder of such shares as of such date.
All shares issued to the Investor pursuant to such conversion shall be duly and
validly issued and fully paid and non-assessable.
2. In connection with the conversion effectuated hereby, the Investor
represents and warrants to the Company as follows:
<PAGE>
a. The Investor is an "accredited investor" within the meaning of
Rule 501 under the Securities Act of 1933 and was not organized for the specific
purpose of acquiring the Conversion Shares.
b. The Investor has sufficient knowledge and experience in investing
in companies similar to the Company so as to be able to evaluate the risks and
merits of the Investor's conversion of indebtedness of the Company into the
Conversion Shares.
c. The Investor has had an opportunity to discuss the Company's
business, management, and financial affairs and prospects with the Company's
management personnel and to conduct such due diligence regarding the Company and
the Investor's investment in the Company as the Investor deems necessary.
d. The stock being acquired by the Investor as a result of the
conversion of indebtedness of the Company into the Conversion Shares is being
acquired by the Investor for the Investor's own account for purposes of
investment and not with a view to or for sale in connection with any
distribution or resale thereof.
e. The Investor understands that the Conversion Shares will not be
registered under the United States Securities Act of 1933, as amended, by reason
of its issuance in transactions exempt from the registration requirements of
such Act pursuant to Section 4(2) of such Act, (ii) the Conversion Shares must
be held indefinitely unless a subsequent disposition thereof is registered under
such act or is exempt from registration, and (iii) the Company will make a
notation on its transfer books to such effect.
f. The Investor understands that the following legend will be placed
on all stock certificates evidencing the Conversion Shares:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR ANY APPLICABLE
STATE SECURITIES LAWS. THE SHARES MAY BE SOLD OR TRANSFERRED ONLY IF THE
SHARES ARE REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR
MARQUEST MEDICAL PRODUCTS, INC. RECEIVES AN OPINION OF COUNSEL SATISFACTORY
TO IT THAT AN EXEMPTION FROM REGISTRATION IS AVAILABLE."
3. The Company represents and warrants as follows:
a. This Agreement and the issuance of the Conversion Shares pursuant
to this Agreement (i) have been duly authorized by all necessary corporate
action, and (ii) does not and will not violate or contravene any provisions of
law or the Articles of Incorporation or Bylaws of the Company or any agreement
by which the Company or any of its assets are bound. The Company is not
required to obtain the consent or approval of any person or entity, including,
without limitation, any governmental authority or its shareholders, to enter
into this Agreement
2
<PAGE>
and to consummate the transactions contemplated by this Agreement, except for
consents which have already been obtained.
b. When issued pursuant to this Agreement, the Conversion Shares
will be duly and validly issued and will be fully paid and non-assessable.
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto as of the date first above written.
SCHERER HEALTHCARE, INC.
By:
---------------------
Its: CHAIRMAN AND CEO
MARQUEST MEDICAL PRODUCTS, INC.
By:
-----------------------
Its: PRESIDENT
3
<PAGE>
EXHIBIT 4.3
LOAN AND SECURITY AGREEMENT
BETWEEN
MARQUEST MEDICAL PRODUCTS, INC.
AND
SCHERER CAPITAL, LLC
MARCH 28, 1996
<PAGE>
INDEX
-----
1. DEFINITIONS, TERMS AND REFERENCES.................................. 1
1.1 Certain Definitions........................................... 1
1.2 Use of DefinedTterms.......................................... 6
1.3 Accounting Terms.............................................. 6
1.4 Terminology................................................... 6
1.5 Exhibits...................................................... 6
2. THE LOANS......................................................... 6
2.1 Loans......................................................... 6
2.2 Indemnity..................................................... 7
2.3 Interest Savings Clause....................................... 7
2.4 Commitment Fee................................................ 8
2.5 Exchange of Marquest Bridge Note.............................. 8
3. SECURITY INTEREST - COLLATERAL..................................... 8
3.1 Security Interest............................................. 8
3.2 Mortgage...................................................... 8
3.3 Perfection of Security Interest............................... 9
3.4 Right to Inspect; Verifications............................... 9
4. THE NOTES.......................................................... 9
4.1 Conversion.................................................... 9
4.2 Redemption.................................................... 9
5. REPRESENTATIONS AND WARRANTIES..................................... 10
5.1 Corporate Existence and Qualification......................... 10
5.2 Chief Executive Office; Collateral Locations.................. 10
5.3 Corporate Authority........................................... 10
5.4 No Consents; Validity and Binding Effect...................... 10
5.5 No Pending Claims............................................. 10
5.6 Corporate Organization........................................ 11
5.7 Solvency...................................................... 11
5.8 Adequacy of Intangible Assets................................. 11
5.9 Taxes......................................................... 11
5.10 ERISA......................................................... 11
5.11 Financial Information......................................... 12
5.12 Title to Assets............................................... 12
5.13 Absence of Liabilities........................................ 12
5.14 Violations of Law............................................. 12
5.15 No Default.................................................... 13
5.16 Trade Relations............................................... 13
5.17 Security Interests............................................ 13
5.18 Equipment..................................................... 13
5.19 Inventory..................................................... 13
- i -
<PAGE>
6. CONDITIONS PRECEDENT............................................... 13
6.1 No Injunction................................................. 14
6.2 No Material Adverse Change.................................... 14
6.3 No Default or Event of Default................................ 14
6.4 Documentation................................................. 14
6.5 Environmental Audit........................................... 15
7. AFFIRMATIVE COVENANTS.............................................. 16
7.1 Collateral.................................................... 16
7.2 Conversion Shares............................................. 16
7.3 Reporting Requirements........................................ 16
7.4 Tax Returns................................................... 17
7.5 Compliance with Laws.......................................... 17
7.6 ERISA......................................................... 18
7.7 Notifications to Lender....................................... 18
7.8 Environmental Laws............................................ 19
7.9 Insurance..................................................... 19
7.10 Preservation of Corporate Existence........................... 19
7.11 Equipment..................................................... 20
8. NEGATIVE COVENANTS................................................. 20
8.1 No Encumbrances............................................... 20
8.2 No Asset Sales................................................ 20
8.3 Senior Debt................................................... 20
8.4 No Dividends.................................................. 20
8.5 Corporate Structure........................................... 20
8.6 Relocations; Use of Name...................................... 21
8.7 ERISA......................................................... 21
8.8 Arms-Length Transactions...................................... 21
8.9 Use of Proceeds............................................... 21
9. EVENTS OF DEFAULT.................................................. 21
9.1 Liabilities................................................... 21
9.2 Misrepresentations............................................ 22
9.3 Covenants..................................................... 22
9.4 Other Debts................................................... 22
9.5 Tax Liens..................................................... 22
9.6 ERISA......................................................... 22
9.7 Voluntary Bankruptcy.......................................... 22
9.8 Involuntary Nankruptcy........................................ 23
9.9 Suspension of Business........................................ 23
9.10 Judgments..................................................... 23
10.1 Default Rate.................................................. 23
10.2 Acceleration of the Liabilities............................... 23
10.3 Set-Off....................................................... 24
10.4 Rights and Remedies of a Secured Party........................ 24
10.5 Take Possession of Collateral................................. 24
10.6 Sale of Collateral............................................ 24
10.7 Notice........................................................ 25
11. REPRESENTATIONS OF LENDER.......................................... 25
- ii -
<PAGE>
12. MISCELLANEOUS...................................................... 26
12.1 Waiver....................................................... 26
12.2 Survival..................................................... 26
12.3 No Assignment by Borrower.................................... 26
12.4 Counterparts................................................. 27
12.5 Expense Reimbursement........................................ 27
12.6 Successors and Assigns....................................... 27
12.7 Severability................................................. 27
12.8 Notices...................................................... 27
12.9 Entire Agreement; Amendment................................. 28
12.10 Time of the Essence...........................................28
12.11 Interpretation............................................... 28
12.12 Lender Not a Joint Venturer.................................. 29
12.13 Cure of Defaults by Lender................................... 29
12.14 Jury Trial Waiver and Consent to Jurisdiction and Venue...... 29
12.15 Indemnity.................................................... 29
12.16 Sole Benefit................................................. 29
Exhibit A Form of Note
Exhibit B Form of Opinion of Counsel to Borrower
Exhibit C Description of the Realty
Schedule 1.1 Permitted Liens
Schedule 5.2 Business and Collateral Locations
Schedule 5.5 Litigation
Schedule 5.10 ERISA
- iii -
<PAGE>
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT ("Agreement") is made and entered the
28th day of March, 1996, by and between MARQUEST MEDICAL PRODUCTS, INC., a
Colorado corporation (hereinafter referred to as "Borrower"), and SCHERER
CAPITAL, LLC, a Delaware limited liability company (hereinafter referred to as
"Lender").
W I T N E S S E T H:
WHEREAS, Borrower desires to obtain from Lender loans in the aggregate
principal amount of up to One Million Five Hundred Thousand Dollars
($1,500,000); and
WHEREAS, Lender is willing to extend such financing to Borrower on the
terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing premises, to induce
Lender to extend the financing provided for herein, and other good and valuable
consideration, Borrower and Lender agree as follows:
1. DEFINITIONS, TERMS AND REFERENCES.
1.1 CERTAIN DEFINITIONS. When used herein, the following terms shall
have the following meanings:
"AFFILIATE means any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with Borrower. For the
purposes of this definition, "control" when used with respect to any specified
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"BANKRUPTCY CODE" shall mean the Bankruptcy Reform Act of 1978, as
amended from time to time.
"BORROWER" shall have the meaning given that term in the preamble to
this Agreement, and such term also shall include Borrower's successors and
assigns.
"BUSINESS DAY" shall mean any day on which banks in the United States
are generally open for business, and shall not include a Saturday, Sunday,
United States legal holiday or day on which banking institutions are authorized
by law to close.
<PAGE>
"CAPITAL LEASE" shall mean any lease or similar arrangement which is
required to be capitalized for financial reporting purposes in accordance with
GAAP.
"COLLATERAL" shall have the meaning set forth in Section 3.1 hereof.
"DEFAULT" shall mean the occurrence of any event which, after
satisfaction of any requirement for the giving of notice or the lapse of time,
or both, would become an Event of Default.
"DEFAULT RATE" shall mean an interest rate per annum equal to eighteen
percent 18% (but in no event higher than the maximum rate of interest
permissible under applicable provisions of law).
"ENVIRONMENTAL LAWS" shall mean all federal, state, local and foreign
laws relating to pollution or protection of the environment, including laws
relating to emissions, discharges, releases or threatened releases of any
Hazardous Substance into the environment (including without limitation ambient
air, surface water, ground water or land), or otherwise relating to the
generation, manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of Hazardous Substances and any and all
regulations, codes, plans, orders, decrees, judgments, injunctions, notices or
demand letters issued, entered, promulgated or approved thereunder.
"EQUIPMENT" shall mean all of the Borrower's right, title and
interest, whether now owned or hereafter acquired, in and to all equipment and
fixtures in all of its forms, wherever located, now or hereafter existing,
including, but not limited to, (i) all furniture, furnishings, fixtures and
trade fixtures, all machinery and appliances, (ii) all production,
manufacturing, distribution, selling, data processing, computer and office
equipment, (iii) all counters, shelves, racks, storage facilities and retailing
equipment, and (iv) all tools, tooling, molds and dyes, and all accessions and
additions thereto, parts and appurtenances thereof, substitutions therefor and
replacements thereof.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and all rules and regulations from time to
time promulgated thereunder.
"ERISA AFFILIATE" shall mean each trade or business (whether or not
incorporated) which, together with Borrower, is treated as a single employer
under Section 414(b), (c), (m) or (o) of the Internal Revenue Code.
"EVENT OF DEFAULT" shall mean any of the events or conditions
described in Article 9 hereof.
<PAGE>
"HAZARDOUS SUBSTANCES" shall mean any and all pollutants,
contaminants, chemicals or industrial, toxic or hazardous substances or wastes
as defined by any of the Environmental Laws.
"INDEBTEDNESS" shall mean as applied to any Person, (a) all
indebtedness, obligations or other liabilities of such Person (i) for borrowed
money or evidenced by debt securities, debentures, acceptances, notes or other
similar instruments, and any accrued interest, fees and charges relating thereto
or (ii) for Capital Lease obligations; (b) all indebtedness, obligations or
other liabilities of such Person secured by a lien on any property of such
Person, whether or not such indebtedness, obligations or other liabilities are
assumed by such Person; (c) all preferred stock subject to mandatory redemption
prior to April 1, 2001, and (d) Indebtedness of others guaranteed by such
Person.
"INVENTORY" shall mean all of Borrower's inventory, whether now
existing or acquired or arising or in which Borrower now has or hereafter
acquires any rights, including, without limitation, any and all goods,
merchandise and other personal property, wheresoever located and whether or not
in transit, which is or may at any time be held for sale or lease, for Borrower
or for others, or furnished under any contract of service or held as raw
materials, work in process, finished goods or materials, and supplies used or
consumed in Borrower's business, including, without limitation, all such
property the sale or other disposition of which for Borrower or for others, has
given rise to an account receivable and which may have been returned to or
repossessed or stopped in transit by Borrower.
"INTERNAL REVENUE CODE" shall mean the Internal Revenue Code of 1986,
as amended, and the rules and regulations promulgated thereunder from time to
time.
"LENDER" shall have the meaning given that term in the preamble to
this Agreement, and such term also shall include Lender's successors and
assigns.
"LIABILITIES" shall mean all indebtedness, liabilities, and
obligations of Borrower of any nature whatsoever which Lender may now or
hereafter have, own or hold, and which are now or hereafter owing to Lender
regardless of however and whenever created, arising or evidenced, whether now,
heretofore or hereafter incurred, whether now, heretofore or hereafter due and
payable, whether alone or together with another or others, whether direct or
indirect, primary or secondary, absolute or contingent, or joint or several, and
whether as principal, maker, endorser, guarantor, surety or otherwise, and also
regardless of whether such Liabilities are from time to time reduced and
thereafter increased or entirely extinguished and thereafter reincurred,
including, without limitation the Notes and any extensions, renewals,
modifications or substitutions thereof or therefor.
- 3 -
<PAGE>
"LOAN DOCUMENTS" means and includes this Agreement, the Notes, the
Mortgage, and any extensions, renewals, modifications or substitutions thereof
or therefor, and all other associated loan and collateral documents including,
without limitation, all guaranties, suretyship agreements, security agreements,
security deeds, subordination agreements, exhibits, schedules, attachments,
financing statements, notices, consents, waivers, opinions, letters, reports,
records, title certificates and applications therefor, assignments, documents,
instruments, information and other writings related thereto, or furnished by
Borrower to Lender in connection therewith or in connection with any of the
Collateral and/or the Realty.
"LOANS" shall mean any and all Loans made by Lender pursuant to
Section 2.1 hereof.
"MARQUEST BRIDGE NOTE" shall mean that certain promissory note issued
by Borrower in favor of Lender on December 15, 1995, in the principal amount of
$1,800,000.
"MORTGAGE" shall mean that certain Deed of Trust and Security
Agreement, dated as of the date hereof, executed by Borrower in favor of the
Public Trustee of the County of Douglas, as trustee, and Lender, as beneficiary,
with respect to the Realty.
"MULTIEMPLOYER PLAN" shall have the meaning set forth in Section
4001(a)(3) of ERISA.
"NOTES" shall mean any and all convertible secured promissory notes,
each substantially in the form of EXHIBIT A attached hereto, to be executed by
the Borrower in favor of Lender to evidence the Loans and all renewals,
extensions, modifications or replacements thereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
under ERISA.
"PERMITTED LIENS" shall mean: (a) those liens existing on the date
hereof and described on SCHEDULE 1.1 attached hereto; (b) liens, security
interests and encumbrances in favor of Lender; (c) liens for (i) property taxes
not delinquent, (ii) taxes not yet subject to penalties, (iii) pledges or
deposits made under Workmen's Compensation, Unemployment Insurance, Social
Security and similar legislation, or in connection with appeal or surety bonds
incident to litigation, or to secure statutory obligations, (iv) mechanics' and
materialmen's liens with respect to liabilities which are not yet due or which
are being contested in good faith; and (d) zoning restrictions, easements, minor
restrictions on the use of the real property, minor irregularities in the title
thereto and other minor encumbrances that do not secure the payment of money or
the performance of any obligation and do not individually
- 4 -
<PAGE>
or in the aggregate, materially detract from the value of such real property or
impair its use in the business of Borrower, and (v) liens upon tangible personal
property acquired after the date hereof by Borrower which liens were created
solely for the purpose of securing indebtedness representing, or incurred to
finance, the cost of such property, provided that no such lien shall extend to
or cover any property of Borrower other than the property so acquired and
provided.
"PERSON" shall mean and include any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
corporation, institution, entity, party or government (whether national,
federal, state, county, city, municipal, or otherwise, including, without
limitation, any instrumentality, division, agency, body or department thereof).
"PLAN" shall mean any employee benefit plan, program, arrangement,
practice or contract, maintained by or on behalf of the Borrower or an ERISA
Affiliate, which provides benefits or compensation to or on behalf of employees
or former employees, whether formal or informal, whether or not written,
including but not limited to the following types of plans:
(i) EXECUTIVE ARRANGEMENTS - any bonus, incentive compensation,
stock option, deferred compensation, commission, severance, "golden
parachute," "rabbi trust," or other executive compensation plan, program,
contract, arrangement or practice;
(ii) ERISA PLANS - any "employee benefit plan" as defined in Section
3(3) of ERISA, including, but not limited to, any defined benefit pension
plan, profit sharing plan, money purchase plan, savings or thrift plan,
stock bonus plan, employee stock ownership plan, Multiemployer Plan, or any
plan, fund, program, arrangement or practice providing for medical
(including post-retirement medical), hospitalization, accident, sickness,
disability, or life insurance benefits;
(iii) OTHER EMPLOYEE FRINGE BENEFITS - any stock purchase, vacation,
scholarship, day care, prepaid legal services, severance pay or other
fringe benefit plan, program, arrangement, contract or practice.
"PRIME RATE" shall mean the interest rate per annum on any particular
day as published on such day in THE WALL STREET JOURNAL (Eastern Edition) as the
current prime corporate lending rate, or in the event such Prime Rate is
discontinued as a standard, a comparable reference rate designated by Lender as
a substitute therefor.
- 5 -
<PAGE>
"REALTY" shall mean that certain real property owned by Borrower,
situated in Douglas County, Colorado, and more particularly described on
EXHIBIT C hereto.
"REPORTABLE EVENT" shall have the meaning set forth in Section 4043 of
ERISA.
"SUBSIDIARY" shall mean any Person, of which more than fifty percent
(50%) of the outstanding shares of capital stock or other ownership interest
having ordinary voting power to elect a majority of the board of directors of
such corporation or similar governing body of such other Person is at the time
directly or indirectly owned or controlled by Borrower or by one or more
Subsidiaries.
1.2 USE OF DEFINED TERMS. All terms defined in this Agreement and
the Exhibits hereto shall have the same defined meanings when used in any other
Loan Document, unless the context shall require otherwise.
1.3 ACCOUNTING TERMS. All accounting terms not specifically
defined herein shall have the meanings assigned to such terms in accordance with
generally accepted accounting principles in effect from time to time.
1.4 TERMINOLOGY. All personal pronouns used in this Agreement,
whether used in the masculine, feminine or neuter gender, shall include all
other genders; the singular shall include the plural, and the plural shall
include the singular. Titles of Articles and Sections in this Agreement are for
convenience only, and neither limit nor amplify the provisions of this
Agreement, and all references in this Agreement to Articles, Sections,
Subsections, paragraphs, clauses, subclauses, Exhibits or Schedule shall refer
to the corresponding Article, Section, Subsection, paragraph, clause, subclause
of, Exhibit or Schedule attached to, this Agreement, unless specific reference
is made to the articles, sections or other subdivisions of, Exhibit or Schedule
to, another document or instrument.
1.5 EXHIBITS. All Exhibits and Schedules attached hereto are by
reference made a part hereof.
2. THE LOANS.
2.1 LOANS.
(a) From the date hereof through and until February 28, 2001 and
subject to the terms of this Agreement, from time to time Lender shall make
loans of up to $1,500,000 in total principal amount to Borrower for the purpose
of financing the Borrower's day to day business operations. Advances made by
Lender under this
- 6 -
<PAGE>
Section 2.1 are hereinafter collectively called the "Loans." Subject to the
overall credit limitation of $1,500,000 in the aggregate (the "Total Loan
Commitment"), each Loan will be in increments of $250,000 or multiple integrals
thereof; provided that the first Loan shall be in the aggregate principal amount
of the Marquest Bridge Note and the last Loan extended hereunder may be in any
amount up to the remaining amount of the Total Loan Commitment. Notwithstanding
any of the foregoing, the repayment or other satisfaction of any Loan shall not
obligate Lender to make any Loans to Borrower which, when added to the principal
amount of all previously issued Loans, whether or not paid, would exceed the
Total Loan Commitment. Lender shall make each Loan available to Borrower at
Lender's principal office no later than 30 days from the date on which Lender
has received a written notice from Borrower requesting a Loan under this
Agreement, which notice must identify the principal amount of such requested
Loan and be accompanied by all certificates and other documents required to be
provided to Lender hereunder.
(b) Each of the Loans shall each be evidenced by a separate Note,
and interest on such Loans will accrue at the Prime Rate plus one and one-half
percent (1.5%) per annum, as determined on the date of issuance of each Note,
and adjusted thereafter on the first day of each calendar quarter; provided that
if the first day of any calendar quarter falls on a day other than a Business
Day, the adjustment to the interest rate shall be determined based upon the
Prime Rate in effect on the Business Day immediately preceding such date.
Principal and interest on such Loan will be payable as provided in such Note.
2.2 INDEMNITY. Borrower agrees to promptly indemnify and hold
harmless the Lender from and against any and all claims, liabilities, losses,
damages, actions and demands by any party against the Lender arising out of the
making, holding or administration of the Loans, allegations of any participation
by the Lender in the affairs of Borrower or allegations that the Lender has any
joint liability with the Borrower for any reason, allegations of violations of
Environmental Laws, environmental contamination or environmental liability, or
any claims against the Lender by any shareholder of the Borrower, unless, with
respect to the above, the Lender is finally and judicially determined to have
acted or failed to act with gross negligence or to have engaged in willful
misconduct.
2.3 INTEREST SAVINGS CLAUSE. Nothing contained in this Agreement
or in the Notes or in any of the other Loan Documents shall be construed to
permit Lender to receive at any time interest, fees or other charges in excess
of the amounts which Lender is legally entitled to charge and receive under any
law to which such interest, fees or charges are subject. In no contingency or
event whatsoever shall the compensation payable to Lender by Borrower, howsoever
characterized or computed, hereunder
- 7 -
<PAGE>
or under the Notes or under any other agreement or instrument evidencing or
relating to the Liabilities, exceed the highest rate permissible under any law
to which such compensation is subject. There is no intention that Lender shall
contract for, charge or receive compensation in excess of the highest lawful
rate, and, in the event it should be determined that any excess has been charged
or received, then, IPSO FACTO, such rate shall be reduced to the highest lawful
rate so that no amounts shall be charged which are in excess thereof; and Lender
shall apply such excess against the Liabilities then outstanding and, to the
extent of any amounts remaining thereafter, refund such excess to Borrower.
2.4 COMMITMENT FEE. From the date hereof through and including
February 28, 2001, Borrower shall pay Lender a commitment fee (the "Commitment
Fee"), calculated in each case on the basis of a 360-day year and actual days
elapsed, equal to one-half of one percent (1/2 of 1%) per annum of the aggregate
average daily unused amount of the Total Loan Commitment, payable on the first
day of each calendar quarter for the preceding quarter or portion thereof
(commencing on the first such date to occur following the date of this
Agreement).
2.5 EXCHANGE OF MARQUEST BRIDGE NOTE. Concurrently with the
execution of this Agreement, Borrower shall execute and deliver to Lender
(a) one Note in the aggregate principal amount of all unpaid principal on the
Marquest Bridge Note (the "Initial Note") and (b) a check payable to the order
of Lender in the amount of all accrued but unpaid interest on the Marquest
Bridge Note (the "Interest Payment"). Concurrently with Lender's receipt of the
Initial Note and Interest Payment, Lender shall mark the Marquest Bridge Note
cancelled. No amounts shall be payable by Lender to Borrower with respect to
the Note issued in exchange for the Marquest Bridge Note.
3. SECURITY INTEREST - COLLATERAL.
3.1 SECURITY INTEREST. As security for the Liabilities, Borrower
hereby grants to Lender a continuing, first priority lien on and security
interest in and to all of Borrower's Inventory and Equipment, whether now owned
or existing or hereafter acquired or arising or in which Borrower now has or
hereafter acquires any rights and wheresoever located, and all accessions to,
substitutions for and all replacements, products and proceeds (except to the
extent proceeds of any Inventory create accounts receivable, which accounts
receivable shall not constitute collateral) of the foregoing (all of the
foregoing sometimes herein referred to as "Collateral").
3.2 MORTGAGE. As additional security for the Liabilities, Borrower
shall execute and deliver the Mortgage to Lender, granting to Lender a lien on,
security title to and
- 8 -
<PAGE>
security interest in the Realty and other property described therein.
3.3 PERFECTION OF SECURITY INTEREST. Until the termination of this
Agreement and the payment and satisfaction in full of all Liabilities, whichever
last occurs, Lender's security interest in the Collateral and the Realty, and
all products and proceeds thereof, shall continue in full force and effect.
Borrower shall perform any and all steps requested by Lender to perfect,
maintain and protect Lender's security interest in the Collateral and the
Realty, including, without limitation, executing and filing financing or
continuation statements, or amendments thereof, in form and substance
satisfactory to Lender; and delivering to Lender all documents or instruments
included in the Collateral and the Realty, the possession of which is necessary
or appropriate to perfect Lender's security interest therein. Lender may file
one or more financing statements disclosing Lender's security interest under
this Agreement without Borrower's signature appearing thereon and Borrower shall
pay the costs of, or incidental to, any recording or filing of any financing
statements concerning the Collateral. Borrower agrees that a carbon,
photographic, photostatic, or other reproduction of this Agreement or of a
financing statement is sufficient as a financing statement.
3.4 RIGHT TO INSPECT; VERIFICATIONS. Lender (or any person or
persons designated by it), in its sole discretion, shall have the right from
time to time to call at any place of business or property location of Borrower
at any reasonable time and, without hindrance or delay, to inspect the
Collateral and to audit, inspect and make copies and extracts from Borrower's
records and other data relating to the Collateral or the Realty, to Borrower's
business or to any other transactions between the parties hereto, including, but
not limited to, invoices and evidence of shipment and such other documents and
proof of delivery as Lender may reasonably require.
4. THE NOTES.
4.1 CONVERSION. Each Note shall be convertible, in whole or in
part, at the option of Lender into shares of capital stock of Borrower in
accordance with the terms and conditions in the Notes. The initial "Conversion
Price" as described in Section 4.2 of each Note shall be Seventy Cents ($0.70)
per share, subject to adjustment as provided in Sections 4.5(a), (b) and (c) of
the Notes.
4.2 REDEMPTION. Each Note shall be redeemable by Borrower or by
Lender, as the case may be, in accordance with the terms and conditions in each
Note.
- 9 -
<PAGE>
5. REPRESENTATIONS AND WARRANTIES. In order to induce Lender to enter
into this Agreement, Borrower hereby represents and warrants to Lender as
follows:
5.1 CORPORATE EXISTENCE AND QUALIFICATION. Borrower is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Colorado, of which the shares evidencing the capital stock have
been validly issued, fully paid and are non-assessable, and is duly qualified as
a foreign corporation in good standing in each other state wherein the conduct
of its business or the ownership of its property requires such qualification.
5.2 CHIEF EXECUTIVE OFFICE; COLLATERAL LOCATIONS. Borrower's
principal place of business, chief executive office and office where it keeps
all of its books and records is located at 11039 East Lansing Circle,
Englewood, Colorado 80112, and neither Borrower nor any of its predecessors
has had any other chief executive office or principal place of business
during the preceding five (5) years. Except as set forth on SCHEDULE 5.2
attached hereto, Borrower has no other places of business and maintains
Collateral at no other locations.
5.3 CORPORATE AUTHORITY. Borrower has the corporate power and
authority to execute, deliver and perform under this Agreement and the Loan
Documents to which it is a party, and to borrow hereunder, and has taken all
necessary and appropriate corporate action to authorize the execution, delivery
and performance of this Agreement and such Loan Documents.
5.4 NO CONSENTS; VALIDITY AND BINDING EFFECT. The execution,
delivery and performance of this Agreement and the Loan Documents are not in
contravention of any provisions of law or any agreement or indenture by which
Borrower is bound or of the Articles of Incorporation or By-laws of Borrower,
and do not require the consent or approval of any governmental body, agency,
authority or other Person which has not been obtained and a copy thereof
furnished to Lender. This Agreement and the Loan Documents to which Borrower is
a party constitute the valid and legally binding obligations of Borrower,
enforceable against Borrower in accordance with their respective terms.
5.5 NO PENDING CLAIMS. Except as described on SCHEDULE 5.5, there
is no claim, action, suit, arbitration, investigation, condemnation or other
proceeding at law or in equity, or by or before any federal, state, local or
other governmental agency, or by or before any other agency or arbitrator, nor
is there any judgment, order, writ, injunction or decree of any court pending,
anticipated or (to Borrower's knowledge) threatened against Borrower or against
any properties or assets which might have a material adverse effect on Borrower
or its properties or assets, or which call into question the validity
- 10 -
<PAGE>
or enforceability of any of the Loan Documents, or which might involve the
alleged violation by Borrower of any federal, state, local or other law, rule or
regulation.
5.6 CORPORATE ORGANIZATION. The Articles of Incorporation and
By-laws of Borrower are in full force and effect under the laws of the State of
Colorado and all amendments to said Articles of Incorporation and By-laws have
been duly and properly made under and in accordance with all applicable laws.
5.7 SOLVENCY. Giving effect to the execution and delivery of the
Loan Documents and the making of the Loans, Borrower (a) is not insolvent as
such term is defined in the Bankruptcy Code and the Uniform Commercial Code,
(b) has capital sufficient to carry on its business and transactions and all
business and transactions in which it is about to engage, (c) is able to pay its
debts as they mature and (d) owns property whose fair saleable value is greater
than the amount required to pay its debts.
5.8 ADEQUACY OF INTANGIBLE ASSETS. Borrower possesses all
trademarks, tradenames, governmental registrations and licenses, including, but
not limited to, those pertaining to the sale and distribution of its products,
necessary to continue to conduct its business as heretofore conducted by it.
5.9 TAXES. Borrower has filed all United States tax returns and
all state, local and foreign tax returns, reports and estimates which are
required to be filed, and all taxes (including penalty and interest, if any)
shown on such returns, reports and estimates or which are otherwise due and
payable have been fully paid. Such tax returns properly reflect Borrower's
income and taxes for the periods covered thereby.
5.10 ERISA. Except as disclosed on SCHEDULE 5.10 attached hereto
and incorporated herein by reference:
(a) COMPLIANCE. Each Plan has at all times been maintained by its
terms and in operation, in accordance with all applicable laws, except such
noncompliance (when taken as a whole) that will not have a materially adverse
effect on Borrower or upon it financial condition, assets, business, operations,
liabilities or prospects;
(b) LIABILITIES. Neither the Borrower nor any ERISA Affiliate is
currently or will become subject to any liability (including withdrawal
liability), tax or penalty whatsoever to any person whomsoever with respect to
any Plan including, but not limited to, any tax, penalty or liability arising
under Title I or Title IV of ERISA or Chapter 43 of the Code, except such
liabilities (when taken as a whole) as will not have a materially
- 11 -
<PAGE>
adverse effect on the Borrower, or upon its financial condition, assets,
business, operations, liabilities or prospects; and
(c) FUNDING. The Borrower and each ERISA Affiliate have made full
and timely payment of all amounts (i) required to be contributed under the terms
of each Plan and applicable law and (ii) required to be paid as expenses of each
Plan. No Plan has any "amount of unfunded benefit liabilities" (as defined in
Section 4001(a)(18) of ERISA).
5.11 FINANCIAL INFORMATION.
(a) All financial information of Borrower submitted to Lender is
true and correct in all material respects and contains no material misstatements
or omissions and fairly presents the assets, liabilities and financial condition
of Borrower, and there are no liabilities of Borrower, fixed or contingent,
which are material but which have not been disclosed to Lender in writing;
(b) Since the date of the last financial statement of Borrower
submitted to Lender, there has been no material adverse change in the assets,
liabilities, financial position or results of operations of Borrower, and
Borrower has not (i) incurred any obligation or liability, fixed or contingent,
which would materially and adversely affect its business, operations or
financial condition, (ii) incurred any Indebtedness, other than the Liabilities
and trade payables arising in the ordinary course of the Borrower's business, or
(iii) guaranteed the obligations of any other Person.
5.12 TITLE TO ASSETS. Except for the Permitted Liens, Borrower has
or will have good, indefeasible and merchantable title to and ownership of the
Collateral and the Realty, free and clear of all liens, claims, security
interests and encumbrances, and Borrower has used all best efforts to
investigate and determine the absence of any real or potential liability
(including, but not limited to, liability under Environmental Laws) relating to
any real or personal property where Collateral may be located.
5.13 ABSENCE OF LIABILITIES. Borrower has used all best efforts to
investigate and determine the absence of any real or potential liability,
including, but not limited to, liability under Environmental Laws (exclusive of
liabilities disclosed in the most recent financial statements or Borrower
provided to Lender or incurred in the ordinary course of Borrower's business),
relating to any real or personal property.
5.14 VIOLATIONS OF LAW. Borrower is not in violation of any
applicable statute, regulation or ordinance of any governmental entity, or of
any agency thereof, in any respect materially and adversely affecting the
Collateral, the Realty,
- 12 -
<PAGE>
business, property, assets, operations or condition, financial or otherwise, of
Borrower.
5.15 NO DEFAULT. Borrower is not in default with respect to (a) any
note, indenture, loan agreement, mortgage, lease, deed or other similar
agreement relating to indebtedness to which Borrower is a party or by which
Borrower is bound or (b) any other instrument, document or agreement to which
Borrower is a party or by which Borrower or any of its property is bound, which
is material to the operations or condition, financial or otherwise, of Borrower.
5.16 TRADE RELATIONS. There exists no actual or threatened
termination, cancellation or limitation of, or any modification or change in,
the business relationship of Borrower with any material supplier or with any
company whose contracts with Borrower individually or in the aggregate are
material to the operations of Borrower; and there exists no condition or state
of facts or circumstances which would materially adversely affect Borrower or
prevent Borrower from conducting its business in essentially the same manner in
which it has heretofore been conducted by Borrower.
5.17 SECURITY INTERESTS. This Agreement creates a valid and
perfected first priority security interest in the Collateral securing payment of
the Liabilities, subject only to the Permitted Liens, and all filings and other
actions necessary or desirable to perfect and protect such security interest
shall be taken.
5.18 EQUIPMENT. Except for Equipment not used in the ordinary
course of Borrower's business or currently under repair, the Equipment is and
shall remain in good condition and is currently usable in the normal course of
Borrower's business.
5.19 INVENTORY. The Inventory is and shall remain in good
condition, substantially meets all standards imposed by any governmental agency,
or department or division thereof having regulatory authority over such goods,
their use and/or sale, is either currently usable or currently saleable in the
normal course of Borrower's business, except for obsolete and unmerchantable
Inventory in an amount reasonable for a manufacturer in Borrower's business, and
is not subject to any output contract or similar agreement between Borrower and
any other person.
6. CONDITIONS PRECEDENT. Notwithstanding any other provision of this
Agreement, it is understood and agreed that all of Lender's obligations under
this Agreement including, without limitation, any obligation to lend or advance
moneys to Borrower are subject to the fulfillment of each of the following
conditions at or before the date hereof, and, except with respect to item
6.4(d), at the time of making each Loan contemplated under this
- 13 -
<PAGE>
Agreement, to the sole and complete satisfaction of Lender and its counsel, and
Borrower shall cause each of the following conditions to be so fulfilled:
6.1 NO INJUNCTION. No action, proceeding, investigation,
regulation or legislation shall have been instituted, threatened or proposed
before any court, governmental agency or legislative body to enjoin, restrain,
or prohibit, or to obtain substantial damages in respect of, or which is related
to or arises out of this Agreement, or the consummation of the transactions
contemplated hereby, or which in Lender's sole discretion, would make it
inadvisable to consummate the transactions contemplated by this Agreement.
6.2 NO MATERIAL ADVERSE CHANGE. There shall not have occurred any
material adverse change in Borrower's business or financial condition, or any
event, condition, or state of facts which would be expected materially and
adversely to affect the prospects of Borrower subsequent to consummation of the
transactions contemplated by this Agreement, as determined by the Lender in its
sole discretion.
6.3 NO DEFAULT OR EVENT OF DEFAULT. There shall exist no Default
or Event of Default or any event or condition which, with the making of the
Loan, would constitute a Default or Event of Default.
6.4 DOCUMENTATION. Lender shall have received the following
documents, each duly executed and delivered to Lender, and each to be
satisfactory in form and substance to Lender and its counsel:
(a) the Note(s);
(b) a certificate signed by the chief operating officer and chief
financial officer of Borrower, stating that the representations and warranties
set forth in Article 5 hereof are true and correct in all material respects on
and as of such date with the same effect as though made on and as of such date,
stating that Borrower is on such date in compliance with all the terms and
conditions set forth in this Agreement on its part to be observed and performed,
and stating that on such date, and after giving effect to the making of the
Loans, no Default or Event of Default has occurred or is continuing;
(c) a certificate of the Secretary of Borrower, certifying (i) that
attached thereto is a true and correct copy of its By-Laws as in effect on the
date of such certification, (ii) that attached thereto is a true and complete
copy of Resolutions adopted by its Board of Directors, authorizing the
execution, delivery and performance of this Agreement and the Loan Documents,
and (iii) as to the incumbency and genuineness of the
- 14 -
<PAGE>
signatures of its officers executing this Agreement or any of the other Loan
Documents;
(d) the written opinion of LeBoeuf, Lamb, Greene and MacRae, LLP,
legal counsel to Borrower, in the form attached hereto as EXHIBIT B hereto, as
to the transactions contemplated by this Agreement;
(e) copies of all filing receipts or acknowledgments issued by any
governmental authority to evidence any filing or recordation necessary to
perfect the security interests of Lender in the Collateral and the Realty and
evidence in a form reasonably acceptable to Lender that, except with respect to
Permitted Liens, such security interests will constitute valid and perfected
first priority security interests;
(f) written instructions from Borrower to Lender as to any sums to
be paid to any Person out of the proceeds of Loans under this Agreement;
(g) a subordination agreement in form acceptable to Lender from any
other creditor of Borrower who has a prior security interest in any of the
Collateral to subordinate such security interest to the security interest of
Lender hereunder;
(h) the Mortgage, duly executed by Borrower, together with such UCC
fixture filings as Lender shall deem appropriate with respect to the fixtures
covered thereby, duly recorded in the appropriate recording offices with all
recording fees and taxes thereon, if any, paid by Borrower;
(i) audited annual financial statements for Borrower for its most
recently completed fiscal year and unaudited financial statements for Borrower
for its most recently completed fiscal quarter, satisfactory to Lender in its
discretion; and
(j) such other documents, instruments and agreements as Lender or
its counsel shall request in Lender's sole discretion.
6.5 ENVIRONMENTAL AUDIT. If Lender in its reasonable discretion
believes that the Realty is in violation of applicable Environmental Laws,
Lender shall have been afforded the opportunity, at its option, to conduct an
environmental assessment at Borrower's expense to ascertain the compliance of
Borrower and/or its predecessors with all Environmental Laws applicable to
Borrower, its assets and its business and to determine whether the Realty and
other assets of Borrower are free of Hazardous Substances and such assessment
shall show that the Realty and other assets of Borrower are in compliance with
applicable Environmental Laws and that the Realty and such other assets are free
of any and all Hazardous Substances.
- 15 -
<PAGE>
7. AFFIRMATIVE COVENANTS. Borrower covenants to Lender that from and
after the date hereof, and until the termination of this Agreement and the
payment and satisfaction in full of the Liabilities, it will, unless Lender
otherwise consents in writing:
7.1 COLLATERAL. Keep the Collateral free from any liens,
encumbrances or security interests whatsoever, other than the Permitted Liens;
promptly pay or discharge all taxes assessed against the Collateral and all
liens which may attach thereto; keep all records of Borrower with respect to the
Collateral at its office set forth in Section 5.2 hereof and not remove such
records from such address without the prior written consent of Lender; from time
to time, on reasonable request of Lender, execute such financing statements,
notices and other documents (and pay the costs, taxes and other expenses in
connection with filing or recording same in all public offices deemed necessary
by Lender) and do such other acts and things, all as Lender may reasonably
request, to establish and maintain a valid security interest in and security
title to the Collateral to secure the payment of the Liabilities, and at all
times keep the Equipment in first class order and repair, excepting any loss,
damage or destruction which is fully covered by insurance (after giving effect
to any applicable deductible);
7.2 CONVERSION SHARES. Borrower shall at all times have
authorized, unissued and reserved for issuance upon the conversion of the Notes
that number of shares of capital stock of Borrower into which all outstanding
Notes are then convertible.
7.3 REPORTING REQUIREMENTS. Furnish or cause to be furnished to
Lender:
(a) As soon as practicable, and in any event within sixty (60) days
after the end of each fiscal quarter of Borrower, commencing with the quarter
ending March 31, 1996, interim unaudited financial statements for Borrower
including a balance sheet, income statement and statement of changes in
financial position, for the quarter and year-to-date period then ended, prepared
in accordance with GAAP, consistent with the past practice of Borrower, and
certified as to truth and accuracy thereof by the chief financial officer of
Borrower;
(b) As soon as available, and in any event within ninety (90) days
after the end of each fiscal year of Borrower, audited annual financial
statements of Borrower, including a balance sheet, income statement and
statement of changes in financial position for the fiscal year then ended,
prepared in accordance with GAAP, in comparative form and accompanied by the
unqualified opinion of the independent certified public accountants regularly
retained by Borrower and acceptable to Lender;
- 16 -
<PAGE>
(c) Together with the annual financial statements referred to in
clause (b) above, a statement from such independent certified public accountants
that, in making their examination of such financial statements, they obtained no
knowledge of any Default or Event of Default or, in lieu thereof, a statement
specifying the nature and period of existence of any such Default or Event of
Default disclosed by their examination;
(d) Together with the annual or interim financial statements
referred to in clauses (a) and (b) above, a certificate of the chief executive
officer and chief financial officer of Borrower certifying that, (i) to the best
of their knowledge, no Default or Event of Default has occurred and is
continuing or, if a Default or Event of Default has occurred and is continuing,
a statement as to the nature thereof and the action which is proposed to be
taken with respect thereto; and (ii) Borrower is in compliance with all
covenants required of it by other lenders or creditors of Borrower.
(e) Together with the annual financial statements referred to in
clause (b) above, Borrower's annual financial projections for the current year;
(f) Such other information respecting the condition or operations,
financial or otherwise, of Borrower as Lender may from time to time reasonably
request.
7.4 TAX RETURNS. File all federal, state and local tax returns and
other reports that Borrower is required by law to file, maintain adequate
reserves for the payment of all taxes, assessments, governmental charges and
levies imposed upon it, its income, or its profits, or upon any property
belonging to it, and pay and discharge all such taxes, assessments, governmental
charges and levies prior to the date on which penalties attach thereto, except
where the same may be contested in good faith by appropriate proceedings and for
which adequate reserves have been established.
7.5 COMPLIANCE WITH LAWS. Comply with all laws, statutes, rules,
regulations and ordinances of any governmental entity, or of any agency thereof,
applicable to Borrower, a violation of which, in any respect, may materially and
adversely affect the Collateral or the Realty or Borrower's business, property,
assets, operations or condition, financial or otherwise, including, without
limitation, all laws governing the sale, purchase and distribution of medical
products, and any such laws, statutes, rules, regulations or ordinances
regarding the collection, payment, and deposit of employees' income,
unemployment, and Social Security taxes and with respect to pension liabilities.
- 17 -
<PAGE>
7.6 ERISA.
(a) At all times make prompt payment of contributions required to
meet the minimum funding standards set forth in Section 302 and 305 of ERISA
with respect to each Plan and otherwise comply with ERISA and all rules and
regulations promulgated thereunder;
(b) Promptly after the occurrence thereof with respect to any Plan,
or any trust established thereunder, notify Lender of (i) a "reportable event"
described in Section 4043 of ERISA and the regulations issued from time to time
thereunder (other than a "reportable event" not subject to the provisions for
30-day notice to the PBGC under such regulations), or (ii) any other event which
could subject the Borrower or any ERISA Affiliate to any tax, penalty or
liability under Title I or Title IV of ERISA or Chapter 43 of the Code;
(c) At the same time and in the same manner as such notice must be
provided to the PBGC, or to a Plan participant, beneficiary or alternative
payee, give Lender any notice required under Section 101(d), 302(f)(4), 303,
307, 4041(b)(1)(A) or 4041(c)(1)(A) of ERISA or under Section 401(a)(29) of 412
of the Code with respect to any Plan;
(d) Furnish to Lender, promptly upon the request of the Lender,
(i) true and complete copies of any and all documents, government reports and
determination or opinion letters for any Plan; (ii) a current statement of
withdrawal liability for each Multiemployer Plan; and
(e) Furnish to Lender, promptly upon Lender's request therefor,
such additional information concerning any Plan or any other such employee
benefit plan as may be reasonably requested.
7.7 NOTIFICATIONS TO LENDER. Notify Lender immediately by
telephone (with each such notice to be confirmed in writing within five (5)
business days): (a) upon Borrower's learning thereof, of any litigation or
claims with respect to or involving any acts or incidents at any location where
Collateral is located (including the nature of the claim, the name of the
claimant, Borrower's defense, and the amount of the claim), or any other
litigation or claim affecting Borrower claiming damages against Borrower,
whether or not any such claim or litigation is covered by insurance, and
establish such reasonable reserves with respect thereto as Lender may request;
(b) upon Borrower's learning thereof, of (i) any claims with respect to alleged
violation of Environmental Laws or contamination of or damage to soil, water,
other property or persons creating potential liability to Borrower in excess of
$50,000 in the aggregate, (ii) spills or accidents, and (iii) any government
environmental compliance audits; (c) upon Borrower's learning thereof, of any
Default or Event of Default hereunder; and (d) upon the occurrence thereof, of
Borrower's
- 18 -
<PAGE>
default under (i) any note, indenture, loan agreement, mortgage, lease, deed or
other similar agreement relating to any indebtedness of Borrower or (ii) any
other instrument, document or agreement to which Borrower is a party or by
which Borrower or any of its property is bound, which is material to the
operations or condition, financial or otherwise, of Borrower.
7.8 ENVIRONMENTAL LAWS. Borrower shall comply in all material
respects with all Environmental Laws and, in the event of any "release" or
"threatened release" of any Hazardous Substance onto the Realty or other
property of Borrower which requires or may require remedial action pursuant to
any Environmental Law, after notifying Lender and all appropriate governmental
agencies thereof, proceed with due diligence and at Borrower's cost and expense
to respond appropriately, in accordance with all requirements of the
Environmental Laws.
7.9 INSURANCE.
(a) At Lender's request, keep all of its property insured by
insurance companies acceptable to Lender and licensed to do business in the
State of Colorado against loss or damage by fire or other risk usually insured
against under extended coverage endorsement and theft, burglary, and pilferage,
together with such other hazards as Lender may from time to time reasonably
request, in amounts reasonably satisfactory to Lender and naming Lender as loss
payee thereon pursuant to a Lender's loss payee clause satisfactory to Lender;
(b) Maintain at all times liability insurance coverage against such
risks and in such amounts as are customarily maintained by others in similar
businesses, such insurance to be carried by insurance companies licensed to do
business in the State of Colorado and in all jurisdictions in which such
Borrower does business; and
(c) Deliver certificates of insurance for such policy or policies
to Lender, containing endorsements, in form satisfactory to Lender, providing
that the insurance shall not be cancelable, except upon thirty (30) days' prior
written notice to Lender.
7.10 PRESERVATION OF CORPORATE EXISTENCE. Preserve and maintain its
corporate existence, rights, franchises and privileges in the jurisdiction of
its incorporation, and qualify and remain qualified as a foreign corporation in
each jurisdiction in which such qualification is necessary or desirable in view
of its business and operations or the ownership of its properties.
- 19 -
<PAGE>
7.11 EQUIPMENT. Keep and maintain the Equipment used in the
ordinary course of Borrower's business in good operating condition, repair and
make all necessary replacements thereof so that the value and operating
efficiency thereof shall at all times be maintained and preserved, not permit
any item of Equipment to become a fixture to real estate (other than the Realty)
or accession to other personal property unless Lender has a first priority lien
on or security interest in such real estate or other personal property; and,
immediately on demand therefor by Lender, deliver to Lender any and all evidence
of ownership of any of the Equipment (including, without limitation,
certificates of title and applications for title, together with any necessary
applications to have Lender's lien noted thereon, in the case of vehicles).
8. NEGATIVE COVENANTS. Borrower covenants with Lender that from and
after the date hereof and until the termination of this Agreement and the
payment and satisfaction in full of the Liabilities, it will not, without the
prior written consent of Lender:
8.1 NO ENCUMBRANCES. Create, assume, or suffer to exist any
mortgage, deed of trust, pledge, assignment, lien, charge, encumbrance on,
security interest or security title of any kind in any of the Collateral or the
Realty.
8.2 NO ASSET SALES. Sell, exchange, transfer, lease or dispose of
any of the material assets of Borrower (or an interest therein) or any of the
Collateral (or any interest therein), other than sales of Inventory in the
ordinary course of business.
8.3 SENIOR DEBT. Create or assume on or after the date hereof any
Indebtedness which would not be specifically and expressly subordinate to the
Indebtedness evidenced by the Loan Documents, including without limitation all
of the Notes.
8.4 NO DIVIDENDS OR REPAYMENTS OF ADVANCES. Declare or pay any
dividends on, or make any distribution with respect to, its shares of any class
of capital stock, redeem or retire any capital stock, or take any action having
an effect equivalent to any of the foregoing, or repay any advances from any
Affiliate.
8.5 CORPORATE STRUCTURE. Dissolve or otherwise terminate its
corporate status; enter into any merger, reorganization or consolidation;
without the consent of Lender, issue to any Person (other than to (a) Lender,
(b) Scherer Healthcare, Inc., or (c) any Person owning on the date hereof any
stock options, warrants or other rights convertible into capital stock of
Borrower) any shares of any class of Borrower's capital stock or any securities
or other instruments for or which are convertible into any shares of any class
of capital stock of Borrower at a per share price that is less than the then-
current
- 20 -
<PAGE>
market price for such shares; or make any substantial change in the basic type
of business conducted by Borrower as of the date hereof.
8.6 RELOCATIONS; USE OF NAME. Relocate its executive offices, open
new places of business or relocate existing places of business, maintain any
Collateral or records with respect to Collateral at any other locations than
those locations presently kept or maintained, as set forth on SCHEDULE 5.2
hereto, as supplemented or amended from time to time, or use any corporate name
(other than its own) or any fictitious name, except upon thirty (30) days prior
written notice to Lender and after the delivery to Lender of financing
statements, if required by Lender, in form satisfactory to Lender.
8.7 ERISA. Take, or fail to take, or permit any ERISA Affiliate to
take, or fail to take, any action with respect to a Plan including, but not
limited to, (i) establishing any Plan, (ii) amending any Plan, (iii) terminating
or withdrawing from any Plan, or (iv) incurring an amount of unfunded benefit
liabilities, as defined in Section 4001(a)(18) of ERISA, where such action or
failure could have a material adverse effect on the Borrower, result in a lien
on the property of the Borrower, or require the Borrower to provide any
security.
8.8 ARMS-LENGTH TRANSACTIONS. Enter into or be a party to any
contract, agreement or transaction with any Person except those entered into in
an arm's-length transaction, for fair value and pursuant to the reasonable
requirements of Borrower's business.
8.9 USE OF PROCEEDS. Use any part of the proceeds of any Loan to
purchase or, to carry or reduce or retire or refinance any credit incurred to
purchase or carry, any margin stock (within the meaning of Regulation G or U of
the Board of Governors of the Federal Reserve System) or, in any event, for any
purpose which would involve a violation of such Regulation G or U or of
Regulation T or X of such Board of Governors, or for any purpose prohibited by
law or by the terms and conditions of this Agreement.
9. EVENTS OF DEFAULT. The occurrence of any of the following events or
conditions shall constitute an Event of Default hereunder:
9.1 LIABILITIES. Borrower shall fail to make any payment of
principal or interest on the Liabilities including, without limitation, each of
the Notes, within five (5) days of when the same is due and payable;
- 21 -
<PAGE>
9.2 MISREPRESENTATIONS. Any representation or warranty by Borrower
in any of the Loan Documents or in any certificate or statement furnished at any
time hereunder or in connection with any of the Loan Documents is false or
misleading in any material respect.
9.3 COVENANTS. Borrower shall fail to observe or perform any
covenant or agreement of Borrower contained in Article 7 or Article 8 herein and
such failure is not remedied within ten (10) days thereafter, or Borrower shall
fail to observe or perform any of its other covenants or agreements contained in
this Agreement or in any of the other Loan Documents.
9.4 OTHER DEBTS. The occurrence of any event of default under any
loan, indebtedness, guaranty or agreement for borrowed money or other material
credit of Borrower or any Affiliate of Borrower with Lender or any creditor
other than Lender.
9.5 TAX LIENS. A notice of lien, levy or assessment, is filed of
record with respect to all or any of any Borrower's assets by the United States,
or any department, agency or instrumentality thereof, or by any state, county,
municipal or other governmental agency, including, without limitation, the PBGC.
9.6 ERISA. The occurrence of any of the following events: (i) the
happening of a Reportable Event with respect to any Plan; (ii) the
disqualification or involuntary termination of a Plan for any reason; (iii) the
voluntary termination of any Plan while such Plan has a funding deficiency (as
determined under Section 412 of the Internal Revenue Code); (iv) the appointment
of a trustee by an appropriate United States district court to administer any
such Plan; (v) the institution of any proceedings by the PBGC to terminate any
such Plan or to appoint a trustee to administer any such Plan; (vi) the failure
of Borrower to notify Lender promptly upon receipt by Borrower of any notice of
the institution of any proceeding or other actions which may result in the
termination of any such Plan.
9.7 VOLUNTARY BANKRUPTCY. Borrower shall: (a) file a voluntary
petition in bankruptcy or a voluntary petition or answer seeking liquidation,
reorganization, arrangement, readjustment of its debts, or any other relief
under the Bankruptcy Code, or under any other act or law pertaining to
insolvency or debtor relief, whether State, Federal, or foreign, now or
hereafter existing; (b) enter into any agreement indicating its consent to,
approval of, or acquiescence in, any such petition or proceeding; (c) apply for
or permit the appointment by consent or acquiescence of a receiver, custodian or
trustee of it or for all or a substantial part of its property; (d) make an
assignment for the benefit of creditors; or
- 22 -
<PAGE>
(e) be unable or shall fail to pay its debts generally as such debts become due,
admit, in writing, its inability or failure to pay its debts generally as such
debts become due, or otherwise become insolvent.
9.8 INVOLUNTARY BANKRUPTCY. There shall have been filed against
Borrower an involuntary petition in bankruptcy or seeking liquidation,
reorganization, arrangement, readjustment of its debts or any other relief under
the Bankruptcy Code, or under any other act or law pertaining to insolvency or
debtor relief, whether State, Federal or foreign, now or hereafter existing;
Borrower shall suffer or permit the involuntary appointment of a receiver,
custodian or trustee of it or for all or a substantial part of its property; or
Borrower shall suffer or permit the issuance of a warrant of attachment,
execution or similar process against all or any substantial part of its
property.
9.9 SUSPENSION OF BUSINESS. The suspension of the transaction of
the usual business of the Borrower or the dissolution of the Borrower.
9.10 JUDGMENTS. Any judgment, decree or order for the payment of
money shall be rendered against Borrower and remain unsatisfied and in effect
for a period of thirty (30) consecutive days without being vacated, discharged,
satisfied or stayed or bonded pending appeal.
10. REMEDIES. Upon the occurrence or existence of any Event of Default,
and during the continuation thereof, without prejudice to the rights of Lender
to enforce its claims against Borrower for damages for failure by Borrower to
fulfill any of the obligations hereunder, Lender shall have the following rights
and remedies, in addition to any other rights and remedies available to Lender
at law, in equity or otherwise:
10.1 DEFAULT RATE. The outstanding principal balance of the
Liabilities shall bear interest at the Default Rate until paid in full.
10.2 ACCELERATION OF THE LIABILITIES. Upon the occurrence of an
Event of Default (i) any commitment of Lender to loan funds to Borrower
hereunder shall automatically terminate, and (ii) all of the Liabilities shall
become immediately due and payable, whereupon the aggregate unpaid principal
balances of any and all interest accrued on the Notes, shall become forthwith
due and payable (or convertible in accordance with the terms of each Note),
without presentment, demand, protest, notice of non-payment or any other notice
required by law relative thereto, all of which are hereby expressly waived by
Borrower, anything contained herein to the contrary notwithstanding.
- 23 -
<PAGE>
10.3 SET-OFF. The right to set-off, without notice to Borrower, any
and all deposits at any time credited by or due from Lender to Borrower, and
whether or not matured or contingent.
10.4 RIGHTS AND REMEDIES OF A SECURED PARTY. All of the rights and
remedies of a secured party under the applicable Uniform Commercial Code or
under other applicable law, all of which rights and remedies shall be
cumulative, and none of which shall be exclusive, to the extent permitted by
law, in addition to any other rights and remedies contained in this Agreement,
and in any of the other Loan Documents.
10.5 TAKE POSSESSION OF COLLATERAL. The right to (a) enter upon the
premises of Borrower, or any other place or places where the Collateral is
located and kept, through self-help and without judicial process, without first
obtaining a final judgment or giving Borrower notice and opportunity for a
hearing on the validity of Lender's claim and without any obligation to pay rent
to Borrower, and remove the Collateral therefrom to the premises of Lender or
any agent of Lender, for such time as Lender may desire, in order to effectively
collect or liquidate the Collateral, and/or (b) require Borrower to assemble the
Collateral and make it available to Lender at a place to be designated by
Lender, in its sole discretion.
10.6 SALE OF COLLATERAL. The right to sell or to otherwise dispose
of all or any of the Collateral, at public or private sale or sales, with such
notice as may be required by law, in lots or in bulk, for cash or on credit, all
as Lender, in its sole discretion, may deem advisable; such sales may be
adjourned from time to time with or without notice. Lender shall have the right
to conduct such sales on Borrower's premises or elsewhere and shall have the
right to use Borrower's premises without charge for such sales for such time or
times as Lender may see fit. Lender is hereby granted a license or other right
to use, without charge, Borrower's labels, patents, copyrights, rights of use of
any name, trade secrets, tradenames, trademarks, service marks and advertising
matter, or any property of a similar nature, as it pertains to the Collateral,
in advertising for sale and selling any Collateral and Borrower's rights under
all licenses and all franchise agreements shall inure to Lender's benefit.
Lender shall have the right to sell, lease or otherwise dispose of the
Collateral, or any part thereof, for cash, credit or any combination thereof,
and Lender may purchase all or any part of the Collateral at public or, if
permitted by law, private sale and, in lieu of actual payment of such purchase
price, may set off the amount of such price against the Liabilities, all free
from any right of redemption which is hereby expressly waived by Borrower. The
proceeds realized from the sale of any Collateral shall be applied first to the
costs, expenses and attorneys' fees and expenses incurred by Lender for
collection and for acquisition, completion, protection, removal, storage, sale
and delivery of the
- 24 -
<PAGE>
Collateral; second to interest due upon any of the Liabilities, all free from
any right of redemption which is hereby expressly waived by Borrower; and third
to the principal of the Liabilities. The Borrower shall be liable to Lender and
shall pay to Lender on demand any deficiency which may remain after such sale,
disposition, collection or liquidation of the Collateral, and Lender in turn
agrees to remit to Borrower (or such other persons as are by law entitled
thereto) any surplus remaining after all Liabilities have been paid in full. If
any of the Collateral shall require repairing, maintenance, preparation, or the
like, or is in process or other unfinished state, Lender shall have the right,
but shall not be obligated, to do such repairing, maintenance, preparation,
processing or completion of manufacturing for the purpose of putting the same in
such saleable form as Lender shall deem appropriate, but Lender shall have the
right to sell or dispose of such Collateral without such preparation, repair,
processing or the like.
10.7 NOTICE. BORROWER HEREBY WAIVES ANY AND ALL RIGHTS IT MAY HAVE
TO NOTICE OR HEARING PRIOR TO SEIZURE BY LENDER OF THE COLLATERAL WHETHER BY
WRIT OF POSSESSION OR OTHERWISE AND ANY REQUIREMENT THAT LENDER POST BOND IN ANY
SUCH PROCEEDING. However, should Lender give notice, any notice given by Lender
of a sale, lease, other disposition of the Collateral or the Realty or any other
intended action by Lender, given to Borrower in the manner set forth in Section
12.8 below, ten (10) days prior to such proposed action, shall constitute
commercially reasonable and fair notice thereof to Borrower.
11. REPRESENTATIONS OF LENDER.
11.1 Lender represents and warrants to Borrower with respect to the
Notes and the shares issuable upon conversion of the Notes (the "Purchased
Securities") as follows:
(a) Lender is acquiring the Purchased Securities solely for its own
account, with the intention of holding the same for investment, with no present
intention of dividing or allowing others to participate in this investment or of
reselling or otherwise participating, directly or indirectly, in a distribution
thereof; and it shall not make any sale, transfer or other disposition of the
Purchased Securities in violation of state or federal law.
(b) Lender understands that Marquest is under no obligation to register
the Purchased Securities for public sale or to comply with the conditions of
Rule 144 promulgated by the United States Securities and Exchange Commission
under the Securities Act of 1933 (the "Federal Act") or take any other action
necessary in order to make any exemption for the sale of the Purchased
Securities without registration available, and that Marquest has no present
intention of registering the Purchased Securities for public sale.
- 25 -
<PAGE>
(c) Lender understands that the Purchased Securities will constitute
"restricted securities" under the Federal Act inasmuch as they are being or will
be acquired in a transaction not involving a public offering and that under the
Federal Act and applicable regulations thereunder may be resold without
registration under the Federal Act only in certain limited circumstances.
(d) Lender has such knowledge and experience in business and financial
matters that it is capable of evaluating the risks and merits associated with
the acquisition of the Purchased Securities and has had the opportunity to
review and evaluate financial and other information relating to the Borrower and
to obtain copies of such other information as deemed appropriate prior to
executing this Agreement.
(e) Lender acknowledges that any certificates representing shares of
common stock issuable upon conversion of any of the Notes will contain a legend
indicating that said shares have not been registered under the Federal Act or
any applicable state securities laws, and prohibiting further transfer, sale or
conveyance of such securities until such securities may, in the opinion of
counsel to the issuer, be so transferred, sold or conveyed without a violation
of any state or federal securities law.
12. MISCELLANEOUS.
12.1 WAIVER. Each and every right granted to Lender under this
Agreement, or any other document delivered hereunder or in connection herewith
or allowed it by law or in equity, shall be cumulative and may be exercised
from time to time. No failure on the part of Lender to exercise, and no delay
in exercising, any right shall operate as a waiver thereof, nor shall any single
or partial exercise by Lender of any right preclude any other or future exercise
thereof or the exercise of any other right. No waiver by Lender of any Default
or Event of Default shall constitute a waiver of any subsequent Default or Event
of Default.
12.2 SURVIVAL. All representations, warranties and covenants made
herein shall survive the execution and delivery of all of the Loan Documents.
The terms and provisions of this Agreement shall continue in full force and
effect until all of the Liabilities have been paid in full and Lender has
terminated this Agreement in writing, whichever last occurs.
12.3 NO ASSIGNMENT BY BORROWER. No assignment hereof shall be made
by Borrower without the prior written consent of Lender. Lender may assign, or
sell participations in, its right, title and interest herein and in the Loan
Documents at any time hereafter without notice to or consent of Borrower.
- 26 -
<PAGE>
12.4 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which when fully executed shall be an original, and all of said
counterparts taken together shall be deemed to constitute one and the same
agreement.
12.5 EXPENSE REIMBURSEMENT. Borrower agrees to reimburse Lender for
all of Lender's reasonable expenses incurred in connection with the development,
preparation, execution, delivery, modification, regular review and
administration of this Agreement, the Notes, and the other Loan Documents,
including audit costs, appraisal costs, the cost of searches, filings and filing
fees, taxes and the fees and disbursements of Lender's attorneys, and any
counsel retained by them, and all costs and expenses incurred by Lender
(including attorney's fees and disbursements) to: (i) commence, defend or
intervene in any court proceeding; (ii) file a petition, complaint, answer,
motion or other pleadings, or to take any other action in or with respect to any
suit or proceeding (bankruptcy or otherwise) relating to the Collateral, the
Realty or this Agreement, the Notes or any of the other Loan Documents; (iii)
protect, collect, lease, sell, take possession of, or liquidate any of the
Collateral or the Realty; (iv) attempt to enforce Lender's security interest in
the Collateral or the Realty or to seek any advice with respect to such
enforcement; and (v) enforce any of Lender's rights to collect any of the
Liabilities. The Borrower also agrees to pay, and to save harmless Lender from
any delay in paying, any intangibles, documentary stamp and other taxes, if any,
which may be payable in connection with the execution and delivery of this
Agreement, the Notes or any of the other Loan Documents, or the recording of any
thereof, or in any modification hereof or thereof.
12.6 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the successors and permitted assigns of the parties
hereto.
12.7 SEVERABILITY. If any provision of this Agreement or any of the
Loan Documents or the application thereof to any party thereto or circumstances
shall be invalid or unenforceable to any extent, the remainder of this Agreement
or such Loan Documents and the application of such provisions to any other party
thereto or circumstance shall not be affected thereby and shall be enforced to
the greatest extent permitted by law.
12.8 NOTICES. All notices, requests and demands to or upon the
respective parties hereto shall be deemed to have been given or made when
personally delivered or delivered to a nationally recognized overnight delivery
service or deposited in
- 27 -
<PAGE>
the mail, registered or certified mail, postage prepaid, addressed as follows or
to such other address as may be designated hereafter in writing by the
respective parties hereto:
If to Borrower:
Marquest Medical Products, Inc.
11039 East Lansing Circle
Englewood, Colorado 80112
Attention: President
With a copy to:
Thomas J. Moore, Esq.
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
633 Seventeenth Street
Suite 2800
Denver, Colorado 80202
If to Lender:
Scherer Capital, LLC
2859 West Paces Ferry Road
Suite 300
Atlanta, Georgia 30339
Attention: President
With a copy to:
J. Dexter Edge, Jr.
Troutman Sanders LLP
600 Peachtree Street
Suite 5200
Atlanta, Georgia 30308
12.9 ENTIRE AGREEMENT; AMENDMENT. This Agreement and the Loan
Documents constitute the entire agreement between the parties hereto with
respect to the subject matter hereof and supersede all prior negotiations,
understandings and agreements between such parties in respect of such subject
matter. Neither this Agreement nor any provision hereof may be changed, waived,
discharged, modified or terminated orally, but only by an instrument in writing
signed by the party against whom enforcement is sought.
12.10 TIME OF THE ESSENCE. Time is of the essence in this Agreement
and the other Loan Documents.
12.11 INTERPRETATION. No provision of this Agreement shall be
construed against or interpreted to the disadvantage of any party hereto by any
court or other governmental or judicial
- 28 -
<PAGE>
authority by reason of such party having or being deemed to have structured or
dictated such provision.
12.12 LENDER NOT A JOINT VENTURER. Neither this Agreement nor any
agreements, instruments, documents or transactions contemplated hereby
(including the Loan Documents) shall in any respect be interpreted, deemed or
construed as making Lender a partner or joint venturer with Borrower or as
creating any similar relationship or entity, and Borrower agrees that it will
not make any assertion, contention, claim or counterclaim to the contrary in any
action, suit or other legal proceeding involving Lender and Borrower.
12.13 CURE OF DEFAULTS BY LENDER. If, hereafter, Borrower defaults
in the performance of any duty or obligation to Lender hereunder, Lender may, at
its option, but without obligation, cure such default and any costs, fees and
expenses incurred by Lender in connection therewith shall be included in the
Liabilities and be secured by the Collateral and the Realty.
12.14 JURY TRIAL WAIVER AND CONSENT TO JURISDICTION AND VENUE. EACH
PARTY TO THIS AGREEMENT HEREBY WAIVES ANY RIGHT SUCH PARTY MAY HAVE UNDER ANY
APPLICABLE LAW TO A TRIAL BY JURY WITH RESPECT TO ANY SUIT OR LEGAL ACTION WHICH
MAY BE COMMENCED BY OR AGAINST SUCH PERSON OR THE OTHER PARTIES CONCERNING THE
INTERPRETATION, CONSTRUCTION, VALIDITY, ENFORCEMENT OR PERFORMANCE OF THIS
AGREEMENT OR ANY OF THE OTHER FINANCING DOCUMENTS. EACH PARTY TO THIS AGREEMENT
FURTHER AGREES AND CONSENTS TO THE JURISDICTION OF ANY FEDERAL COURT SITTING IN
ATLANTA, GEORGIA WITH RESPECT TO ANY SUCH SUIT OR LEGAL ACTION, AND EACH PARTY
TO THIS AGREEMENT FURTHER AGREES AND CONSENTS TO VENUE OF ANY FEDERAL COURT
SITTING IN FULTON COUNTY, GEORGIA WITH REGARD TO ANY SUCH SUIT OR LEGAL ACTION.
12.15 INDEMNITY. In addition to any other indemnity provided for
herein, Borrower agrees to indemnify Lender from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever (including,
without limitation, fees and disbursements of counsel) which may be imposed on,
incurred by, or asserted against Lender in any litigation, proceeding or
investigation instituted or conducted by any governmental agency or
instrumentality or any other Person (other than Borrower) with respect to any
aspect of, or any transaction contemplated by, or referred to in, or any matter
related to, this Agreement, whether or not Lender is a party thereto, except to
the extent that any of the foregoing arises out of the willful misconduct or
gross negligence of Lender.
12.16 SOLE BENEFIT. The rights and benefits set forth in this
Agreement and in all the Loan Documents are for the sole and exclusive benefit
of the parties hereto and thereto and any
- 29 -
<PAGE>
transferee or assignee of any Notes and may be relied upon only by them.
IN WITNESS WHEREOF, Borrower and Lender each have set its hand and seal, as
of the day and year first above written.
"BORROWER"
MARQUEST MEDICAL PRODUCTS, INC.
By: /s/ W. J. Thompson
------------------------------
President
Attest: /s/ Margaret Von der Schmidt
----------------------------
Secretary
[CORPORATE SEAL]
Accepted by Lender in Atlanta, Georgia
"LENDER"
SCHERER CAPITAL, LLC
By:
-----------------------------
Title: Vice President
--------------------------
- 30 -
<PAGE>
EXHIBIT A
FORM OF NOTES
THE SECURITIES EVIDENCED HEREBY WERE ISSUED AND SOLD WITHOUT REGISTRATION UNDER
THE FEDERAL SECURITIES ACT OF 1933, AS AMENDED (THE "FEDERAL ACT"), OR
SECURITIES LAWS OF ANY STATE, INCLUDING THE GEORGIA SECURITIES ACT OF 1973, AS
AMENDED (THE "GEORGIA ACT"), IN RELIANCE UPON CERTAIN EXEMPTIVE PROVISIONS OF
SAID ACTS, INCLUDING SECTION 5-9(13) OF THE GEORGIA ACT. SAID SECURITIES CANNOT
BE SOLD OR TRANSFERRED EXCEPT (1) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE FEDERAL ACT OR PURSUANT TO AN EXEMPTION FROM SUCH
REGISTRATION; AND (2) IN A TRANSACTION WHICH IS EXEMPT UNDER THE GEORGIA ACT OR
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE GEORGIA ACT OR IN A
TRANSACTION WHICH IS OTHERWISE IN COMPLIANCE WITH THE GEORGIA ACT; AND (3) IN A
TRANSACTION WHICH IS EXEMPT FROM THE APPLICABLE SECURITIES LAWS OF ANY STATE OR
IN A TRANSACTION WHICH IS OTHERWISE IN COMPLIANCE WITH THE SAID SECURITIES LAWS.
MARQUEST MEDICAL PRODUCTS, INC.
CONVERTIBLE SECURED NOTE
DUE APRIL 1, 2001
Date: _______________ $__________
1. PROMISE TO PAY. Marquest Medical Products, Inc., a corporation
incorporated under the laws of the State of Colorado (together with its
subsidiaries, if any, hereinafter collectively referred to as the "Company"),
for value received, hereby promises to pay, except as otherwise provided for
herein, to Scherer Capital, LLC (hereinafter called the "Holder"): (a) the
principal amount of _____________________________________ Dollars ($___________)
on April 1, 2001 (the "Maturity Date"); and (b) simple interest on the principal
amount hereof outstanding and unconverted from time to time commencing on the
date hereof, accruing at the "Prime Rate" (as such term is defined below) plus
one and one-half percent (1 1/2%), as determined on the date hereof and on the
first day of each calendar quarter thereafter, provided that if the first day of
a calendar quarter falls on a day other than a business day, such determination
shall be based on the Prime Rate in effect on the immediately preceding business
day. Interest shall be payable quarterly on the 1st day of each April, July,
October and January throughout the term hereof, commencing on the date hereof.
For purposes of this Note, the "Prime Rate" on any particular day is the
interest rate per annum published on such day in THE WALL STREET JOURNAL
(Eastern Edition) as the current prime corporate lending rate, or in the event
such Prime Rate is discontinued as a standard, a comparable
<PAGE>
reference rate designated by Holder as a substitute therefor. The principal
hereof and interest thereon shall be payable at the principal office of the
Holder (or at such other place as the Holder may reasonably designate) in such
coin or currency of the United States of America that at the time of payment
shall be legal tender for the payment of public or private debts in funds
collectible on the date which is prescribed herein for payment.
In the event that payment is not made on the date prescribed for payment
herein, simple interest shall accrue on the aggregate amount due and payable
(including principal, interest or both, as the case may be) but remaining
unpaid, at the rate of eighteen percent (18%) per annum, (but in no event higher
than the maximum rate of interest permissible under applicable provisions of
law) from the date such amount becomes due and payable until the date of
payment. In the event that the Holder is required to engage the services of an
attorney or to institute litigation to effect collection of the sums due
pursuant to this Note, the Company shall pay all reasonable costs of such
collection, including, without limitation reasonable attorneys' fees and court
costs not to exceed 15% of the outstanding principal and amount of, and the
accrued and unpaid interest on, the Note after default.
The indebtedness evidenced hereby is secured by that certain Loan and
Security Agreement dated March 28, 1996, by and between Company and Holder (the
"Loan Agreement").
2. AUTHORIZED ISSUE. This Note is one of the Convertible Secured Notes
limited in the aggregate amount to One Million Five Hundred Thousand Dollars
($1,500,000) and referenced to in the Loan Agreement. In addition to its rights
and remedies as set forth herein, the Holder shall have all of the rights and
remedies of the Lender under the Loan Agreement.
3. EVENTS OF DEFAULT. Upon the occurrence of an "Event of Default" as
such term is defined in the Loan Agreement, then, and in any such event and
without limiting its remedies as provided in the Loan Agreement, the Holder may,
upon delivery of a notice of any such Event of Default given to the Company,
declare the remaining unpaid and unconverted sums due under this Note to be
forthwith due and payable, whereupon the aggregate then unpaid and unconverted
principal amount of this Note, together with all accrued interest thereon, shall
become immediately due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived.
4. CONVERSION. At any time on or before the Maturity Date, the
outstanding principal amount of, and the accrued and unpaid interest on, this
Note shall be convertible into common stock, $0.01 par value, of Company (the
"Common Stock") at the option of
-2-
<PAGE>
the Holder in accordance with the following provisions of this Section 4.
4.1 OPTIONAL CONVERSION. Subject to and upon compliance with the
other provisions of this Note and the provisions of this Section 4, the
Holder shall have the right at the Holder's option to convert all or any
portion of the outstanding principal of, and the accrued interest on, this
Note into fully paid and nonassessable shares of Common Stock, at the
Conversion Price (hereafter defined) in effect on the Conversion Date
(hereafter defined), upon the terms hereinafter set forth.
4.2 CONVERSION PRICE. The outstanding principal amount of, and
accrued interest on, this Note shall be convertible into the number of
shares of Common Stock as is determined by multiplying the amount to be
converted times a fraction, the numerator of which is $1.00 and the
denominator of which is the Conversion Price in effect on the Conversion
Date. The Conversion Price at which shares of Common Stock shall be
issuable upon conversion of this Note shall be Seventy Cents ($0.70)
(subject to adjustment as provided below, hereafter the "Conversion
Price"). The Conversion Price shall be subject to adjustment as set forth
in Section 4.5 below.
4.3 MECHANICS OF CONVERSION. The Holder may exercise the conversion
right specified in Section 4.1 above by written notice stating that the
Holder elects to convert all or a specified portion of the outstanding
principal amount of and interest on this Note. Conversion shall be deemed
to have been effected on the date when both notice of an election to
convert and the original of this Note are delivered; any such date is
referred to herein as the "Conversion Date". As promptly as practicable
thereafter Company shall issue and deliver to the Holder a certificate or
certificates for the number of full shares of Common Stock to which the
Holder is entitled rounded up to the next whole share as provided in
Section 4.4 below in consideration of the delivery of the Note to the
Company at such time. If this Note is to be converted in part only,
Company shall issue and deliver to the Holder contemporaneously therewith
the original of this Note with an appropriate notation of the reduction in
the principal amount so converted or a replacement note identical in all
respects to this Note except as adjusted to reflect the outstanding
principal amount thereof after giving effect to such conversion. The
person in whose name the certificate or certificates of Common Stock is to
be issued shall be deemed to have become a holder of record of such Common
Stock on the applicable Conversion Date. Conversion of all
-3-
<PAGE>
or any portion of the principal of this Note shall not affect Company's
obligation to pay interest accrued through the date of conversion on the
outstanding principal balance of this Note which is converted and on any
remaining outstanding principal balance hereof.
4.4 FRACTIONAL SHARES. No fractional shares of Common Stock or scrip
shall be issued upon conversion of this Note. Instead of any fractional
shares of Common Stock which would otherwise be issuable upon conversion of
this Note, the number of full shares of Common Stock issuable upon
conversion hereof shall be increased to the next highest number of whole
shares.
4.5 CONVERSION PRICE ADJUSTMENTS. The Conversion Price and the
number of shares of Common Stock issuable upon conversion (the "Conversion
Shares") shall be subject to adjustment from time to time as follows:
(a) STOCK DIVIDENDS. If the number of shares of Common Stock
outstanding at any time after March 28, 1996 is increased by a stock
dividend payable in shares of Common Stock or by a subdivision or
split-up of shares of Common Stock, then immediately after the record
date fixed for the determination of holders of Common Stock entitled
to receive such stock dividend or the effective date of such
subdivision or split-up, as the case may be, the Conversion Price
shall be appropriately reduced and the number of Conversion Shares
proportionately increased so that the Holder thereafter shall be
entitled to receive the number of shares of Common Stock of Company
which the Holder would have owned immediately following such action
had this Note been then outstanding and converted immediately prior
thereto.
(b) COMBINATION OF STOCK. If the number of shares of Common
Stock outstanding at any time after March 28, 1996 is decreased by a
combination of the outstanding shares of Common Stock, then,
immediately after the effective date of such combination, the
Conversion Price shall be appropriately increased and the number of
Conversion Shares proportionately decreased so that the Holder shall
be entitled to receive the number of shares of Common Stock which the
Holder would have owned immediately following such action had this
Note been then outstanding and converted immediately prior thereto.
(c) REORGANIZATION. In case of any capital reorganization of
Company, or of any reclassification
-4-
<PAGE>
of the Common Stock, or in case of the consolidation of Company with
or the merger of Company with or into any other corporation,
partnership or other business entity in which Company is not the
survivor, or any share exchange involving the Common Stock or of the
sale, lease or other transfer of all or substantially all of the
assets of Company to any other corporation, partnership or other
business entity, or in the case of any distribution of cash (other
than dividends not exceeding, in the aggregate, net income earned from
December 31, 1995 to the date on which such dividend is declared) or
other assets or of notes or other indebtedness of Company or any other
securities of Company (except Common Stock) to the holders of Common
Stock, this Note shall, after such capital reorganization,
reclassification, consolidation, merger, share exchange, sale, lease
or other transfer or such distribution, be convertible into the number
of shares of stock or other securities or property to which a holder
of the Common Stock issuable (at the time of such capital
reorganization, reclassification, consolidation, merger, share
exchange, sale, lease or other transfer or such distribution) upon
conversion of this Note as the Holder would have been entitled to
receive upon such capital reorganization reclassification,
consolidation, merger, share exchange, sale, lease or other transfer
or such distribution in place of (or in addition to, in the case of
any such event after which Common Stock remains outstanding) the
shares of Common Stock into which this Note would otherwise have been
convertible; and in any such case, if necessary, the provisions set
forth herein with respect to the rights and interests thereafter of
the Holder shall be appropriately adjusted so as to be applicable, as
nearly as may reasonably be, to any share of stock or other securities
or property thereafter deliverable on the conversion of this Note.
The subdivision or combination of shares of Common Stock issuable upon
conversion of this Note into a greater or lesser number of shares of
Common Stock (whether with or without par value) shall not be deemed
to be a reclassification of the Common Stock for the purposes of this
subparagraph (c).
(d) ROUNDING OF CALCULATIONS. All calculations under this
Section 4.5 shall be made to the nearest cent or to the nearest one
hundredth (1/100th) of a share, as the case may be.
-5-
<PAGE>
(e) TIMING OF ISSUANCE OF ADDITIONAL COMMON STOCK UPON CERTAIN
ADJUSTMENTS. In any case in which the provisions of this Section 4.5
require that an adjustment shall become effective immediately after a
record date for an event, Company may defer until the occurrence of
such event issuing to the Holder hereof the additional shares of
Common Stock or other property issuable or deliverable upon exercise
by reason of the adjustment required by such event over and above the
shares of Common Stock or other property issuable or deliverable upon
such conversion before giving effect to such adjustment; PROVIDED,
HOWEVER, that Company upon request shall deliver to the Holder a due
bill or other appropriate instrument evidencing the Holder's right to
receive such additional shares or other property, and such cash, upon
the occurrence of the event requiring such adjustments.
4.6 STATEMENT REGARDING ADJUSTMENTS. Whenever the Conversion Price
shall be adjusted as provided in Section 4.5, Company shall forthwith file,
at the principal office of Company, a statement showing in detail the facts
requiring such adjustment and the Conversion Price that shall be in effect
after such adjustment, and Company shall also cause a copy of such
statement to be sent by mail, first class postage prepaid, to the Holder at
its address appearing on Company's records. Each such statement shall be
signed by Company's chief financial officer. Where appropriate, such copy
may be given in advance and may be included as part of a notice required to
be mailed under the provisions of Section 4.7 below.
4.7 NOTICE TO HOLDER. In the event Company proposes to take any
action of the type described in clause (a), (b) or (c) of paragraph 4.5
above, Company shall give notice to Holder in the manner set forth in
Section 4.6 above, which notice shall specify the record date, if any, with
respect to any such action and the approximate date on which such action is
to take place. Such notice shall also set forth such facts with respect
thereto as shall be reasonably necessary to indicate the effect of such
action (to the extent such effect may be known at the date of such notice)
on the Conversion Price and the number, kind or class of shares or other
securities or property which shall be deliverable or purchasable upon the
occurrence of such action or deliverable upon conversion of this Note. In
the case of any action which would require the fixing of a record date,
such notice shall be given at least 10 days prior to the date so fixed, and
in case of all other action, such notice shall be given at least 15 days
prior to the taking of such proposed action.
-6-
<PAGE>
4.8 COSTS. Company shall pay all documentary, stamp, transfer or
other transactional taxes attributable to the issuance or delivery of
shares of Common Stock or other securities or property upon conversion of
this Note; PROVIDED, HOWEVER, that Company shall not be required to pay any
income taxes incurred by the holder of this Note or any taxes which may be
payable in respect of any transfer involved in the issuance or delivery of
any certificate for such shares or securities in any name other than that
of Holder.
4.9 RESERVATION OF SHARES. Company shall reserve at all times so
long as this Note remains outstanding, free from preemptive rights, out of
its treasury stock or its authorized but unissued shares of Common Stock,
or both, solely for the purpose of effecting the conversion of this Note,
sufficient shares of Common Stock to provide for the conversion of this
Note and set aside and keep available any other property deliverable upon
conversion of this Note.
4.10 APPROVALS. If any shares of Common Stock or other securities to
be reserved for the purpose of conversion of this Note requires
registration with or approval of any governmental authority under any
Federal or state law before such shares or other securities may be validly
issued or delivered upon conversion, then Company will in good faith and as
expeditiously as possible endeavor to secure such registration or approval,
as the case may be.
4.11 VALID ISSUANCE. All shares of Common Stock or other securities
which may be issued upon conversion of this Note will upon issuance by
Company be duly and validly issued, fully paid and nonassessable and free
from all taxes, liens and charges with respect to the issuance thereof and
Company shall take no action which will cause a contrary result.
5. PUT AND CALL.
5.1 PUT. (a) Immediately upon the occurrence of any "Put Event" (as such
term is defined below), Holder may at its option at any time upon giving written
notice to the Company declare the entire then unpaid and unconverted principal
of and accrued and unpaid interest on this Note (the "Remaining Indebtedness")
at such time to be due and payable in accordance herewith. The Company shall
have thirty (30) business days after receipt of the foregoing notice from Holder
in which to tender the full amount of the Remaining Indebtedness to Holder in
full and complete satisfaction hereof;
- 7 -
<PAGE>
(b) For purposes of this Note, a Put Event is defined as any of the
following events:
(i) The acquisition of 40% or more of the voting capital stock
of the Company or of any entity holding, directly or
indirectly, voting capital stock with the power to control
the management of the Company, by any "person" or "group" as
such terms are used for purposes of Sections 13(d) and 14(d)
of the Securities Act of 1934 (the "Exchange Act"), or by
any person or group that is or becomes a "beneficial owner"
as such term is defined in Rule 13d-3 or 13d-5 under the
Exchange Act;
(ii) the merger or consolidation of the Company into or with any
other entity; or
(iii) the liquidation or dissolution of the Company.
Company agrees to notify Holder of any Put Event described in subparagraph (i)
above immediately upon Company's knowledge thereof, and of any Put Event
described in subparagraphs (ii) and (iii) above no less than sixty (60) days
prior to the occurrence of any such event.
5.2 CALL. On or after April 1, 1997, the Company may, in its discretion,
give Holder written notice that ninety (90) days after the date Holder receives
such notice the Company shall redeem this Note for the redemption price
described below, expressed as a percentage of the unpaid principal amount of the
Note (the "Redemption Price") plus all interest accrued and unpaid to the date
of redemption, in full and complete satisfaction hereof.
YEAR OF REDEMPTION REDEMPTION PRICE
1997 104%
1998 104%
1999 103%
2000 102%
2001 101%
During such ninety (90)-day period, Holder has the option to convert the entire
Remaining Indebtedness into shares of Common Stock pursuant to the conversion
formula and procedures set forth in Section 4 hereof. If Holder fails to
exercise his conversion option as set forth herein during such ninety (90)-day
period, the Company's election pursuant to this Section 5.2 shall be binding
upon Holder.
-8-
<PAGE>
6. NOTICES. Any notice or communication given pursuant hereto by any
party hereto shall be in writing and hand delivered or mailed by registered or
certified mail, postage prepaid, as follows:
If to Holder to:
Scherer Capital, LLC
2859 West Paces Ferry Road
Suite 300
Atlanta, Georgia 30339
Attention: President
With a copy to:
J. Dexter Edge, Jr.
Troutman Sanders LLP
600 Peachtree Street
Suite 5200
Atlanta, Georgia 30308
If to the Company, to:
Marquest Medical Products, Inc.
11039 East Lansing Circle
Englewood, Colorado 80112
Attention: President
With a copy to:
Thomas J. Moore, Esq.
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
633 Seventeenth Street
Suite 2800
Denver, Colorado 80202
or at such other address as hereafter shall be furnished in writing by the
addressed party to the other parties.
7. AMENDMENT. This Note, and the terms hereof, may not be amended except
by an agreement in writing signed by Holder and the Company.
8. GOVERNING LAW. This Note, and the legality, validity, performance and
interpretation hereof shall be governed by the laws of the State of Georgia.
9. ASSIGNABILITY. This Note shall be freely assignable by the Holder
hereof, provided that Holder may not, in any way transfer, dispose of, convey or
assign all or any portion or interest in this Note, the Common Stock, or any
interest herein
-9-
<PAGE>
or therein unless in accordance with all applicable federal and state securities
laws.
10. CAPTIONS. The captions and headings in this Note are merely for
reference purposes and shall have no meaning or effect upon the terms hereof.
IN WITNESS WHEREOF, the Company has executed this Note on
, .
- ------------------ -------
MARQUEST MEDICAL PRODUCTS, INC.
By:
----------------------------
President
ATTEST:
- --------------------------
Secretary
-10-
<PAGE>
EXHIBIT B
LEGAL OPINION
<PAGE>
EXHIBIT C
DESCRIPTION OF THE REALTY
Lot 1, Block 1, an amendment to Lots 1 and 3 of an amended plat of Block 1,
Meridian Office Park Filing No. 1, Second Amendment as recorded February 10,
1986 under Reception No. 374931, County of Douglas, State of Colorado.
<PAGE>
SCHEDULE 1.1
PERMITTED LIENS
<PAGE>
SCHEDULE 5.2
BUSINESS AND COLLATERAL LOCATIONS
11039 East Lansing Circle, Englewood, Colorado 80112
<PAGE>
SCHEDULE 5.5
LITIGATION
1. Hartford Specialty Co. and Twin City Fire Insurance Company v. Marquest
Medical Products, Inc., filed February 15, 1994, in District Court,
Arapahoe County, State of Colorado.
<PAGE>
SCHEDULE 5.10
ERISA
<PAGE>
EXHIBIT 4.4
WHEN RECORDED, RETURN TO:
Troutman Sanders
NationsBank Plaza
600 Peachtree Street, N.E.
Suite 5200
Atlanta, Georgia 30308
Attn: Criton Constantinides, Esq.
SECOND PRIORITY DEED OF TRUST, SECURITY AGREEMENT
AND ASSIGNMENT OF LEASES AND RENTS
THIS SECOND PRIORITY DEED OF TRUST, SECURITY AGREEMENT AND ASSIGNMENT OF
LEASES AND RENTS (hereinafter referred to as the "Deed of Trust") is made and
entered into this 28th day of March, 1996, by MARQUEST MEDICAL PRODUCTS, INC., a
Colorado corporation (hereinafter referred to as "Trustor"), whose address for
notice hereunder is 11039 East Lansing Circle, Englewood, Colorado 80112,
Attention: President, to THE PUBLIC TRUSTEE OF DOUGLAS COUNTY, COLORADO
("Trustee") for the benefit of SCHERER CAPITAL, LLC, a Delaware limited
liability company (hereinafter referred to as "Beneficiary").
WITNESSETH:
Article 1
DEFINITIONS
1.1 DEFINITIONS. As used herein the following terms shall have the
following meanings:
(a) BENEFICIARY: Scherer Capital, LLC, whose address for notice is
2859 Paces Ferry Road, Suite 300, Atlanta, Georgia 30339, Attention: President.
(b) EVENT OF DEFAULT: Any happening or occurrence described in
Article 6 hereinbelow.
(c) FIXTURES: All materials, supplies, equipment, apparatus and
other items now owned or hereafter acquired by Trustor and now or hereafter
attached to, installed in or used in connection with any of the Improvements or
the Land, including, but not limited to, any and all partitions, dynamos, window
screens and shades, drapes, rugs and other floor coverings, awnings, motors,
engines, boilers, furnaces, pipes, plumbing, cleaning, call and sprinkler
systems, fire extinguishing apparatus and equipment, water tanks, swimming
pools, heating, ventilating, plumbing, laundry, incinerating, air conditioning
and air cooling equipment and systems, gas and electric
- --------------------------------------------------------------------------------
THIS INSTRUMENT IS TO BE FILED IN THE REAL ESTATE RECORDS AND IS ALSO TO BE
INDEXED IN THE INDEX OF FINANCING STATEMENTS.
THE NAMES OF THE DEBTOR AND THE SECURED PARTY, THE MAILING ADDRESS OF THE
SECURED PARTY FROM WHICH INFORMATION CONCERNING THE SECURITY INTEREST MAY BE
OBTAINED, THE MAILING ADDRESS OF THE DEBTOR AND A STATEMENT INDICATING THE
TYPES, OR DESCRIBING THE ITEMS OF COLLATERAL, ARE AS DESCRIBED IN PARAGRAPH 9.5
HEREOF, IN COMPLIANCE WITH THE REQUIREMENTS OF ARTICLE 9, SECTION 402 OF THE
COLORADO UNIFORM COMMERCIAL CODE (4-9-402 C.R.S. 1973).
THE MAILING ADDRESS OF BENEFICIARY IS: SCHERER CAPITAL, LLC,
2859 PACES FERRY ROAD, SUITE 300, ATLANTA, GEORGIA 30339,
ATTENTION: PRESIDENT.
<PAGE>
machinery, appurtenances and equipment, disposals, dishwashers, refrigerators
and ranges, recreational equipment and facilities of all kinds, elevators, and
water, gas, electrical, storm and sanitary sewer facilities and all other
utilities, whether or not situated in easements, together with all accessions,
replacements, betterments and substitutions for any of the foregoing and the
proceeds thereof.
(d) GOVERNMENTAL AUTHORITY: Any and all courts, boards, agencies,
commissions, offices or authorities of any nature whatsoever for any
governmental unit (federal, state, county, district, municipal, city or
otherwise), whether now or hereafter in existence, having jurisdiction over
Trustor or the Mortgaged Property.
(e) IMPOSITIONS: (i) All real estate and personal property taxes,
charges, assessments, excises and levies and any interest, costs or penalties
with respect thereto, general and special, ordinary and extraordinary, foreseen
and unforeseen, of any kind and nature whatsoever, which at any time prior to or
after the execution hereof may be assessed, levied or imposed upon the Mortgaged
Property or the ownership, use, occupancy or enjoyment thereof, or any portion
thereof, or the sidewalks, streets or alleyways adjacent thereto; (ii) any
charges, fees, license payments or other sums payable for any easement, license
or agreement maintained for the benefit of the Mortgaged Property; and (iii)
water, gas, sewer, electricity, telephone and other utility charges and fees
that are or may become a lien against the Mortgaged Property.
(f) IMPROVEMENTS: Any and all buildings, covered garages, utility
sheds, workrooms, open parking areas, structures and other improvements, and any
and all additions, alterations, betterments or appurtenances thereto, now or at
any time hereafter situated, placed or constructed upon the Land, or any part
thereof.
(g) INDEBTEDNESS: (i) The principal of, interest on and all other
amounts, payments and premiums due under or secured by the Notes, this Deed of
Trust, and any and all other documents now or hereafter executed by Trustor or
any other person or party in connection with the loans evidenced by the Notes;
(ii) such additional sums, with interest thereon, as may hereafter be borrowed
from Beneficiary, its successors or assigns, by Trustor or the then record owner
of the Mortgaged Property, when evidenced by a promissory note which, by its
terms, is secured hereby (it being contemplated that such future indebtedness
may be incurred); and (iii) such additional sums, with interest thereon, as may
hereafter be advanced by Beneficiary, its successors or assigns in accordance
with this Deed of Trust to protect the security hereof.
(h) LAND: The real estate or interest therein described in EXHIBIT
"A" attached hereto and incorporated herein by this reference, all Fixtures or
other improvements situated thereon and all rights, titles and interests
appurtenant thereto.
(i) LEASES: Any and all leases, subleases, licenses, concessions or
other agreements (written or verbal, now or here-after in effect) to which
Trustor is a party and which grant a possessory interest in and to, or the right
to use, all or any part of the Mortgaged Property, together with all security
and other deposits made in connection therewith, save and except any and all
leases, subleases or other agreements pursuant to which Trustor is granted a
possessory interest in the Land.
(j) LEGAL REQUIREMENTS: (i) Any and all present and future judicial
decisions, statutes, rulings, rules, regulations,
-2-
<PAGE>
permits, certificates or ordinances of any Governmental Authority in any way
applicable to Trustor or the Mortgaged Property, including, without limiting the
generality of the foregoing, the ownership, use, occupancy, possession,
operation, maintenance, alteration, repair or reconstruction thereof; (ii) any
and all covenants, conditions and restrictions contained in any deed or other
form of conveyance or in any other instrument of any nature that relate in any
way or are applicable to the Mortgaged Property or the ownership, use or
occupancy thereof; (iii) Trustor's presently or subsequently effective By-laws
and Articles of Incorporation; and (iv) any lease or other contract pursuant to
which Trustor is granted a possessory interest in the Land.
(k) LOAN AGREEMENT: That certain Loan and Security Agreement of even
date herewith between Trustor and Beneficiary, together with any and all
amendments and supplements thereto.
(l) MAJOR AGREEMENT: (i) Each operating, cross-easement, restriction
or similar agreement material to the use and operation of the Mortgaged Property
encumbering or affecting the Mortgaged Property and any adjoining property,
(ii) each management agreement with respect to the Mortgaged Property, and
(iii) all other agreements, such as engineers' contracts, utility contracts,
maintenance agreements and service contracts, material to the use and operation
of the Mortgaged Property.
(m) MORTGAGED PROPERTY: The Land, Improvements, Fixtures,
Personalty, Leases and Rents together with:
(i) all rights, privileges, tenements, hereditaments, royalties,
minerals, oil and gas rights, rights-of-way, easements, appendages, and
appurtenances in any way appertaining thereto, and all right, title and
interest, if any, of Trustor, now existing or hereafter acquired, in and to
any streets, ways, alleys, strips or gores of land adjoining the Land or
any part thereof; and
(ii) all of Trustor's right, title and interest in and to all
betterments, improvements, additions, alterations, appurtenances,
substitutions, replacements and revisions thereof and thereto, and all
reversions and remainders therein; and
(iii) subject to the rights of Trustor under Article 8 hereof,
all of Trustor's right, title and interest in and to any awards,
remunerations, reimbursements, settlements or compensation heretofore made
or hereafter to be made by any Governmental Authority pertaining to the
Land, Improvements, Fixtures or Personalty, including, but not limited to,
those for any vacation of, or change of grade in, any streets affecting the
Land or the Improvements and those for municipal utility district or other
utility costs incurred or deposits made in connection with the Land; and
(iv) subject to the rights of Trustor under Paragraph 4.8
hereof, all of Trustor's right, title and interest in and to any proceeds
of insurance required or maintained pursuant to the terms of Paragraph 4.7
hereof; and
(v) subject to the rights of Trustor under Paragraph 10.2
hereof, all of Trustor's right, title and interest in and to all of the
Major Agreements, Leases and Rents; and
-3-
<PAGE>
(vi) any and all other security and collateral, of any nature
whatsoever, now or hereafter given for the repayment of the Indebtedness or
the performance and discharge of the Obligations.
As used in this Deed of Trust, the term "Mortgaged Property" shall be expressly
defined as meaning all or, where the context permits or requires, any portion of
the above, and all or, where the context permits or requires, any interest of
Trustor therein.
(n) NOTE OR NOTES: Individually or collectively, as the context
permits or requires, the following described promissory notes, together with any
and all renewals, amendments, supplements, rearrangements, reinstatements,
enlargements or extensions of the same, and any other promissory note or notes
executed and delivered pursuant to the Loan Agreement or which by its or their
terms is secured by this Deed of Trust:
Those certain Convertible Secured Notes executed from time to time by
Trustor pursuant to the Loan Agreement and payable to Beneficiary, in the
maximum aggregate principal amount of ONE MILLION FIVE HUNDRED THOUSAND
DOLLARS ($1,500,000.00), with final payment being due on April 1, 2001.
(o) OBLIGATIONS: Any and all of the covenants, conditions,
warranties, representations and other obligations (other than to repay the
Indebtedness) made or undertaken by Trustor or any other party to any Security
Document to Beneficiary, Trustee or others, as set forth in the Loan Agreement,
the Notes, this Deed of Trust, the Major Agreements, the Leases and all other
documents now or hereafter executed by Trustor or any other such party to any
Security Document in connection with the loans evidenced by the Notes and in any
deed, lease, sublease or other form of conveyance or any other agreement
pursuant to which Trustor is granted a possessory interest in the Land.
(p) PERMITTED ENCUMBRANCES: The outstanding deeds of trust, liens,
easements, restrictions, security interests and other matters (if any) as
reflected on EXHIBIT "B" attached hereto and the liens and security interests
created by the Security Documents. The first priority deed of trust reflected
on EXHIBIT "B" is referred to herein as the "Prior Deed of Trust."
(q) PERSONALTY: All of the right, title and interest of Trustor in
and to all furniture, furnishings, equipment, machinery, building supplies and
materials, goods, insurance proceeds, inventory, all refundable, returnable or
reimbursable fees, deposits or other funds or evidence of credit or indebtedness
deposited by or on behalf of Trustor with any governmental agencies, boards,
corporations, providers of utility services, public or private, including
specifically, but without limitation, all refundable, returnable or reimbursable
tap fees, utility deposits, consultant fees and development costs, and all other
personal property (other than the Fixtures) of any kind or character, as defined
in and subject to the provisions of Article 9 of the Colorado Uniform Commercial
Code, which are now or hereafter located, or to be located, upon, within or
about the Land and the Improvements, or which are or may be used in or related
to the planning, development, financing or operation of the Mortgaged Property,
together with all accessories, additions, replacements and substitutions thereto
or therefor and the proceeds thereof (Trustor hereby agreeing with respect to
all
-4-
<PAGE>
additions and replacements to execute and deliver from time to time such further
instruments as may be requested by Beneficiary to confirm the conveyance,
transfer and assignment of any of the foregoing).
(r) RENTS: All of the rents, revenues, income, proceeds, profits,
security and other types of deposits, and other benefits paid or payable by
parties to the Major Agreements or the Leases other than Trustor for using,
leasing, licensing, possessing, operating from, residing in, selling or
otherwise enjoying the Mortgaged Property, or any part thereof.
(s) SECURITY DOCUMENTS: The Loan Agreement, the Notes, this Deed of
Trust, and any and all other documents now or hereafter executed by, Trustor or
any other person or party to evidence or secure the payment of the Indebtedness
or the performance and discharge of the Obligations.
(t) TRUSTEE: The Public Trustee of Douglas County, State of
Colorado.
(u) TRUSTOR: The above-defined Trustor, whether one or more, and any
and all subsequent owners of the Mortgaged Property, or any part thereof
[without hereby implying Beneficiary's consent to any Disposition (as defined in
Paragraph 6.2 hereinbelow)] of the Mortgaged Property.
Article 2
GRANT AND CONVEYANCE
2.1 GRANT AND CONVEYANCE. For the purpose of securing the repayment of
the Indebtedness and the performance of the Obligations, and upon the terms and
conditions contained in this Deed of Trust, Trustor irrevocably grants, conveys
and assigns the Mortgaged Property to Trustee, in trust for the benefit of
Beneficiary, with power of sale and right of entry and possession.
Article 3
WARRANTIES AND REPRESENTATIONS
Trustor hereby unconditionally warrants and represents to Beneficiary as
follows (which warranties and representations have been and will be relied upon
in advancing funds to Trustor under the Security Documents):
3.1 NO DEFAULT. The execution, delivery and performance by Trustor of the
Security Documents will not violate, be in conflict with, result in a breach of
or constitute (with due notice or lapse of time, or both) a default under any
Legal Requirement, Lease or Major Agreement, or result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon any
of Trustor's property or assets. To the best of Trustor's knowledge, no event
has occurred (including specifically Trustor's execution of the Security
Documents and Beneficiary's consummation of the loans represented thereby) which
will violate, be in conflict with, result in the breach of or constitute (with
due notice or lapse of time, or both) a default of a material nature under any
Legal Requirement, Lease or Major Agreement, or result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever on the
Mortgaged Property other than the liens and security interests created by or
expressly permitted under the Security Documents.
-5-
<PAGE>
3.2 TITLE TO MORTGAGED PROPERTY AND PRIORITY OF THIS INSTRUMENT. Trustor
has good, marketable and indefeasible title to the Land (in fee simple) and
Improvements, and good and marketable title to the Fixtures and Personalty, free
and clear of any liens, charges, encumbrances, security interests, claims,
easements, restrictions, options, leases (other than the Leases), covenants and
other rights, titles, interests or estates of any nature whatsoever except the
Permitted Encumbrances. This Deed of Trust constitutes a valid and subsisting
second priority deed to trust, prior in right, on the Land, Improvements and
Fixtures, subject only to the Permitted Encumbrances; a valid, subsisting second
priority security interest in and to the Personalty and to the extent that the
terms Leases and Rents include items covered by Article 9 of the Colorado
Uniform Commercial Code, in the Leases and Rents, subject only to the Permitted
Encumbrances; and a valid, subsisting second priority assignment of the Leases
and Rents not covered by said Article 9, subject only to the Permitted
Encumbrances, all in accordance with the terms hereof.
3.3 HAZARDOUS SUBSTANCES. As used below, "Hazardous Substances" shall
mean and include all hazardous and toxic substances, wastes or materials, any
pollutants or contaminants (including, without limitation, asbestos and raw
materials which include hazardous constituents), or any other similar
substances, or materials which are included under or regulated by any local,
state or federal law, rule or regulation pertaining to environmental regulation,
contamination or clean-up, including, without limitation, "CERCLA", as amended,
or as may be amended from time to time, "RCRA", as amended, or as may be amended
from time to time, or state lien or state superlien or environmental clean-up
statutes (all such laws, rules and regulations being referred to collectively as
"Environmental Laws"). Trustor warrants, represents and agrees as follows:
(a)(i) The Mortgaged Property is not subject to any private or
governmental lien, or to the best of Trustor's knowledge to any judicial or
administrative notice or action, relating to Hazardous Substances or
environmental problems, impairments or liabilities with respect thereto, or
the direct or indirect violation of any Environmental Laws.
(ii) No other personal or real property owned by Trustor is subject to
any private or governmental lien, or to the best of Trustor's knowledge to
any judicial or administrative notice or action, relating to Hazardous
Substances or environmental problems, impairments or liabilities with
respect thereto, or the direct or indirect violation of any Environmental
Laws, which could materially and adversely affect the business, properties,
financial position, results of operations or prospects of Trustor, and
which Beneficiary could determine is likely to result in a future default
under any covenant set forth in Section 7.8 of the Loan Agreement.
(b) Trustor shall not allow any Hazardous Substances to be stored,
located, discharged, possessed, managed, processed or otherwise handled on
the Mortgaged Property other than small quantities which are utilized in
the ordinary course of business of the Mortgaged Property, and which are
used and disposed of in a lawful manner, and Trustor shall comply with all
Environmental Laws affecting the Mortgaged Property.
(c) Trustor shall immediately notify Beneficiary should Trustor
become aware of (i) the existence of any Hazardous Substance in, on or
beneath the Mortgaged Property or any other property owned by Trustor in
-6-
<PAGE>
violation of any Environmental Law with respect to the Mortgaged Property
or any other property owned by Trustor, (ii) any "release" or threatened
"release" (as defined in CERCLA and rules and regulations promulgated
thereunder) of any Hazardous Substances on or from the Mortgaged Property
or any other real property owned by Trustor, or (iii) any lien, action, or
notice of the nature described in subparagraph (b) above. Trustor shall,
at its own cost and expense, take all actions as shall be necessary or
advisable for the clean-up of the Mortgaged Property, including all
removal, containment and remedial actions in accordance with all applicable
Environmental Laws, and shall further pay or cause to be paid at no expense
to Beneficiary all clean-up, administrative, and enforcement costs of
applicable government agencies asserted against the Mortgaged Property or
the owner thereof. All costs, including, without limitation, those costs
set forth above, damages, liabilities, losses, claims, expenses (including
attorneys' fees and disbursements) which are incurred by Beneficiary,
without requirement of waiting for the ultimate outcome of any litigation,
claim or other proceeding, shall be paid by Trustor to Beneficiary as
incurred within ten (10) days after notice from Beneficiary itemizing the
amounts incurred to the date of such notice.
(d) Upon reasonable prior notice to Trustor, Beneficiary, its
employees and agents, may from time to time (whether before or after the
commencement of a nonjudicial or judicial proceeding) enter and inspect the
Mortgaged Property for the purpose of determining the existence, location,
nature and magnitude of any past or present release or threatened release
of any hazardous substance into, onto, beneath or from the Mortgaged
Property. Except in cases of emergency, any such inspection shall be
conducted in a manner which does not unreasonably interfere with the
operation of the Mortgaged Property.
All warranties and representations contained in this Paragraph 3.3 shall be
deemed to be continuing and shall remain true and correct in all material
respects until the Indebtedness has been paid in full and any limitations period
expires. Notwithstanding anything to the contrary contained herein or in any of
the other Security Documents, Trustor's agreements and Trustor's indemnification
of Beneficiary contained in Paragraph 3.3 shall survive the exercise of any
remedy by Beneficiary under any of the Security Documents, including foreclosure
(or deed in lieu thereof), even if, as a part of such foreclosure or deed in
lieu of foreclosure, the Indebtedness is satisfied in full, but only with
respect to liability or costs arising as a result of events occurring prior to
the date upon which Trustor is divested of title to the Mortgaged Property,
whether voluntarily, involuntarily or by operation of law.
Article 4
AFFIRMATIVE COVENANTS
Trustor hereby unconditionally covenants and agrees with Beneficiary as
follows:
4.1 PAYMENT AND PERFORMANCE. Trustor will pay the Indebtedness due from
Trustor, as and when called for in the Security Documents, and on or before the
due dates thereof, and will perform all of the Obligations to be performed by
Trustor in full and on or before the dates same are to be performed.
-7-
<PAGE>
4.2 EXISTENCE. Trustor will preserve and keep in full force and effect
its existence, rights, franchises and trade names.
4.3 COMPLIANCE WITH LEGAL REQUIREMENTS. Trustor will promptly and
faithfully comply with, conform to and obey all present and future Legal
Requirements in all material respects, whether or not same shall necessitate
structural changes in, improvements to, or interfere with the use or enjoyment
of the Mortgaged Property.
4.4 SECOND DEED OF TRUST STATUS. Trustor will protect the second priority
security deed status of this Deed of Trust and the other Security Documents and
will not place, or permit to be placed, or otherwise convey, mortgage,
hypothecate or encumber the Mortgaged Property with, any other lien or security
deed or interest of any nature whatsoever (statutory, constitutional or
contractual), regardless of whether same is allegedly or expressly inferior to
the title created by this Deed of Trust, without the prior written consent of
Beneficiary. If any lien or security interest is asserted against the Mortgaged
Property, Trustor will, at its own cost and expense, (a) promptly pay the
underlying claim in full or take such other action so as to cause same to be
released or bonded to Beneficiary's satisfaction; and (b) within ten (10) days
from the date Trustor first has knowledge of such claim, lien or security
interest, give Beneficiary notice of such claim, lien or security interest.
Such notice shall specify who is asserting such claim, lien or security interest
and shall detail the origin and nature of the underlying claim giving rise to
such asserted claim, lien or security interest.
Trustor will observe and comply with all of the terms and conditions of the
Prior Deed of Trust and any and all documents evidencing or securing the
indebtedness secured thereby (the "Prior Loan Documents"). Trustor will
immediately forward to Beneficiary copies of all notices and other
correspondence received by Trustor under or relating to the Prior Loan
Documents. Without Beneficiary's prior written consent, Trustor will not amend
or modify the Prior Loan Documents, or increase (or permit the increase of) the
indebtedness secured thereby to an amount greater than $ 100.00
4.5 PAYMENT OF IMPOSITIONS. Trustor will duly pay and discharge, or cause
to be paid and discharged, the Impositions not later than the due date thereof,
or the day prior to the day any fine, penalty, interest or cost may be added
thereto or imposed, or the day prior to the day any lien may be filed, for the
nonpayment thereof (if such day is used to determine the due date of the
respective item); provided, however, that Trustor may, if, to the extent and in
the manner permitted by law, (a) pay the Impositions in installments, whether or
not interest shall accrue on the unpaid balance of such Impositions, if such
installment payment would not create or permit the filing of a lien against the
Mortgaged Property, and (b) contest the payment of any Impositions in good faith
and by appropriate proceedings provided that: (i) any such contests shall be
prosecuted diligently and in a manner not prejudicial to the rights, liens and
security interests of Beneficiary, (ii) if an Event of Default is then in
existence, Trustor shall deposit funds with Beneficiary or obtain a bond in form
and substance and with an issuing company reasonably satisfactory to Beneficiary
in an amount sufficient to cover any amounts which may be owing in the event the
contest may be unsuccessful (Trustor agreeing to make such deposit or obtain
such bond, as the case may be, within five (5) days after demand therefor and,
that, if made by payment of funds to Beneficiary, the amount so deposited shall
be disbursed in accordance with the resolution of the contest either to
-8-
<PAGE>
Trustor or the adverse claimant), (iii) no contest may be conducted and no
payment may be delayed beyond the date on which the Mortgaged Property could be
sold for nonpayment, and (iv) Beneficiary may pay over to the taxing authority
entitled thereto any or all of the funds at any time when, in the opinion of
Beneficiary's counsel, the entitlement of such authority to such funds is
established. Subject to Trustor's right to contest as provided for herein,
Trustor shall submit to Beneficiary copies of tax statements and paid tax
receipts evidencing the due and punctual payment of all real estate and personal
property taxes, charges and assessments levied upon or assessed or charged
against the Mortgaged Property on or before thirty (30) days of the delinquent
date of any such taxes.
In the event of the passage of any state, federal, municipal or other
governmental law, order, rule or regulation, subsequent to the date hereof, in
any manner changing or modifying the laws now in force governing the taxation of
deeds to secure debt, or security agreements, or assignments of leases or debts
secured thereby or the manner of collecting such taxes so as to adversely affect
Beneficiary, Trustor will pay any such tax on or before the due date thereof.
If Trustor fails to make such prompt payment or if, in the opinion of
Beneficiary, any such state, federal, municipal, or other governmental law,
order, rule or regulation prohibits Trustor from making such payment or would
penalize Beneficiary if Trustor makes such payment or if, in the opinion of
Beneficiary, the making of such payment might result in the imposition of
interest beyond the maximum amount permitted by applicable law, then the entire
balance of the Indebtedness and all interest accrued thereon shall, at the
option of Beneficiary, become immediately due and payable.
4.6 REPAIR. Trustor will keep the Mortgaged Property in first class order
and condition, and will make all repairs, replacements, renewals, additions,
betterments, improvements and alterations thereof and thereto, interior and
exterior, structural and nonstructural, ordinary and extraordinary, foreseen and
unforeseen, which are necessary or reasonably appropriate to keep same in such
order and condition. Trustor will also use its best efforts to prevent any act
or occurrence which might materially impair the value or usefulness of the
Mortgaged Property for its intended usage, as set forth in the Security
Documents. In instances where repairs, replacements, renewals, additions,
betterments, improvements or alterations are required in and to the Mortgaged
Property on an emergency basis to prevent loss, damage, waste or destruction
thereof, Trustor shall proceed to construct same, or cause same to be
constructed, notwithstanding anything to the contrary contained in Paragraph 5.2
hereinbelow; provided, however, that in instances where such emergency measures
are to be taken, Trustor will notify Beneficiary, in writing, of the
commencement of same and the measures to be taken, and when same are completed,
the completion date and the measures actually taken.
4.7 INSURANCE. (a) Trustor will obtain and maintain, or cause to be
obtained and maintained, insurance upon and relating to the Mortgaged Property,
insuring against personal injury and death, loss by fire and such other hazards,
casualties and contingencies (including business interruption insurance covering
loss of Rents and builder's all risk coverage) as are normally and usually
covered by extended coverage policies in effect where the Land is located and
such other risks as may be reasonably specified by Beneficiary, from time to
time, all in such amounts and with such insurers of recognized responsibility as
are reasonably acceptable to Beneficiary. Each insurance policy issued in
connection therewith shall provide by way of endorsements, riders or otherwise
that (i) except as otherwise provided in Paragraph 4.7(c) below, proceeds will
be payable to
-9-
<PAGE>
Beneficiary as its interest may appear, it being agreed by Trustor and
Beneficiary that such payments, less Beneficiary's expenses in collecting such
insurance proceeds, shall be applied, (A) to the restoration, repair or
replacement of the Mortgaged Property (hereinafter referred to as the "Work") if
all of the following conditions are satisfied within ninety (90) days from the
date of such damage or destruction:
(I) In Beneficiary's reasonable opinion, the insurance proceeds are
sufficient to pay all costs of the Work. To the extent the proceeds are
not sufficient to pay all costs of the Work, Beneficiary will permit
Trustor to deposit such additional funds with Beneficiary or demonstrate to
Beneficiary's reasonable satisfaction Trustor's ability to pay such
additional costs of the Work;
(II) Trustor has delivered to Beneficiary a construction contract for
the Work in form and content reasonably acceptable to Beneficiary with a
contractor reasonably satisfactory to Beneficiary; and
(III) No Event of Default is continuing and no event has occurred and
no facts exists which with notice or lapse of time, or both, would
constitute an Event of Default;
or (B) if any of the conditions above is not satisfied, at Beneficiary's option,
either to the restoration, repair or replacement of the Mortgaged Property or
toward the payment of the Indebtedness; (ii) the coverage of Beneficiary shall
not be terminated, reduced or affected in any manner regardless of any breach or
violation by Trustor of any warranties, declarations or conditions in such
policy; (iii) no such insurance policy shall be cancelled, endorsed, altered or
reissued to effect a material change in coverage for any reason and to any
extent whatsoever unless such insurer shall have first given Beneficiary thirty
(30) days prior written notice thereof; and (iv) Beneficiary may, but shall not
be obligated to, make premium payments to prevent any cancellation, endorsement,
alteration or reissuance, and such payments shall be accepted by the insurer to
prevent same. Beneficiary shall be furnished with a certificate of insurance
with respect to all liability insurance required by the terms of this Paragraph
4.7 and a certified copy (certified by the applicable insurer) of the original
of each other initial policy coincident with the execution of this Deed of Trust
and a certified copy (certified by the applicable insurer) of each renewal
policy not less than fifteen (15) days prior to the expiration of the initial or
each preceding renewal policy, together with receipts or other evidence that the
premiums thereon have been paid. Trustor shall furnish to Beneficiary, on or
before thirty (30) days after the close of each of Trustor's fiscal year, a
statement certified by Trustor or a duly authorized officer of Trustor of the
amounts of insurance maintained in compliance with this Paragraph 4.7, of the
risks covered by such insurance, and of the insurance company or companies which
carry such insurance.
(b) The delivery of any insurance policies hereunder shall constitute an
assignment of all unearned premiums as further security hereunder. In the event
of the foreclosure of this Deed of Trust in extinguishment or partial
extinguishment of the Indebtedness, all right, title and interest of Trustor in
and to all insurance policies then in force shall pass to the purchaser or to
Beneficiary, as the case may be, and Beneficiary is hereby irrevocably appointed
by Trustor as attorney-in-fact for the Trustor to assign any such policy to said
purchaser or to Beneficiary, as the case may be, without accounting to Trustor
for any unearned premiums thereon.
-10-
<PAGE>
(c) Notwithstanding the terms of subparagraph 4.7(a)(i) above, in the
event of a casualty causing less than One Hundred Thousand Dollars ($100,000.00)
of damage to the Mortgaged Property, and so long as no Event of Default is
continuing and no event has occurred or facts or conditions exists which with
the lapse of time or the giving of notice, or both, would in Beneficiary's
judgment constitute an Event of Default, then the insurance proceeds payable
with respect to such casualty may be paid directly to Trustor, to be used by
Trustor for the restoration and repair of the Mortgaged Property.
4.8 APPLICATION OF PROCEEDS.
If the proceeds of the insurance described in Paragraph 4.7 hereinabove are
to be used for the Work, such proceeds shall be paid out by Beneficiary from
time to time to Trustor (or, at the option of Beneficiary, jointly to Trustor
and the persons furnishing labor and/or material incident to the Work or
directly to such persons) as the Work progresses, subject to the following
conditions: (a) if the cost of the Work estimated by Beneficiary shall exceed
$100,000.00, prior to the commencement thereof (other than Work to be performed
on an emergency basis to protect the Mortgaged Property or prevent interference
therewith), (i) an architect or engineer, approved by Beneficiary, shall be
retained by Trustor (at Trustor's expense) and charged with the supervision of
the Work, and (ii) Trustor shall have prepared, submitted to Beneficiary, and
secured Beneficiary's written approval of, the plans and specifications for such
Work; (b) each request for payment by Trustor shall be made on ten (10) days'
prior written notice to Beneficiary and shall be accompanied by a certificate to
be executed by the architect or engineer supervising the Work (if one is
required pursuant to Paragraph 4.8(a) hereinabove), otherwise by Trustor or an
executive officer of Trustor, stating, among such other matters as may be
reasonably required by Beneficiary, that: (i) all of the Work completed has
been done in substantial compliance with the plans and specifications submitted
to Beneficiary; (ii) the sum requested is justly required to reimburse Trustor
for costs and expenses incurred by Beneficiary and for payments by Trustor to,
or is justly due to, the contractor, subcontractors, materialmen, laborers,
engineers, architects or other persons rendering services or materials for the
Work (giving a brief description of such services and materials); (iii) subject
to Paragraph 4.8 (f) hereinbelow, when added to all sums previously paid out by
Trustor, the sum requested does not exceed the value of the Work done to the
date of such certificate; and (iv) the amount of insurance proceeds remaining in
the hands of Beneficiary will be sufficient on completion of the Work to pay for
the same in full (giving, in such reasonable detail as the Beneficiary may
require, an estimate of the cost of such completion); (c) each request shall be
accompanied by waivers of lien and affidavits from Trustor's general contractor,
satisfactory in form and substance to Beneficiary, covering that part of the
Work for which payment or reimbursement was requested with respect to the
immediately preceding request for payment, and by a search prepared by a title
company or licensed abstractor or by other evidence satisfactory to Beneficiary
that there has not been filed with respect to the Mortgaged Property any
unbonded mechanic's lien or other lien, affidavit or instrument asserting any
lien or any lien rights with respect to the Mortgaged Property; (d) there has
not occurred any Event of Default since the hazard, casualty or contingency
giving rise to payment of the insurance proceeds; (e) in the case of the request
for the final disbursement, such request is accompanied by a copy of any
Certificate of Occupancy or other certificate required by any Legal Requirement
to render occupancy of the damaged portion of the Mortgaged Property lawful; and
(f) if, in Beneficiary's judgment, the amount of such insurance proceeds will
not be
-11-
<PAGE>
sufficient to complete the Work (which determination may be made prior to or
during the performance of the Work), then Trustor shall deposit with
Beneficiary, immediately upon request therefor, an amount of money which, when
added to such insurance proceeds, will be sufficient, in Beneficiary's judgment,
to complete the Work. If, upon completion of the Work, any portion of the
insurance proceeds has not been disbursed to Trustor (or one or more of the
other aforesaid persons) incident thereto, Beneficiary may, at Beneficiary's
option, disburse such balance to Trustor or apply such balance toward the
payment of the Indebtedness, whether or not then due. Nothing herein shall be
interpreted to prohibit Beneficiary from (y) withholding from each such
disbursement ten percent (10%) (or such greater amount, if permitted or required
by any Legal Requirement) of the amount otherwise herein provided to be
disbursed, and from continuing to withhold such sum, until the Work has been
completed and Trustor has delivered to Beneficiary final lien waivers and
affidavits from Trustor's general contractor, satisfactory in form and substance
to Beneficiary, at which time the amount withheld shall be disbursed to, or at
the direction of, Trustor, or (z) applying at any time the whole or any part of
such insurance proceeds to the curing of any Event of Default.
4.9 RESTORATION FOLLOWING CASUALTY. If any act or occurrence of any kind
or nature, ordinary or extraordinary, foreseen or unforeseen (including any
casualty for which insurance was not obtained or obtainable), shall result in
damage to or loss or destruction of the Mortgaged Property, Trustor will give
notice thereof to Beneficiary immediately and, if so instructed by Beneficiary,
will promptly, at Trustor's sole cost and expense and regardless of whether the
insurance proceeds (if any) shall be sufficient for the purpose, commence and
continue diligently to completion to restore, repair, replace and rebuild the
Mortgaged Property in accordance with the provisions of Paragraph 4.8 and all
Legal Requirements as nearly as possible to its value, condition and character
immediately prior to such damage, loss or destruction.
4.10 PRIOR DEED OF TRUST. So long as the Prior Deed of Trust remains
outstanding, the disposition of insurance proceeds will be governed by the Prior
Deed of Trust; provided however, that (i) any insurance proceeds which by the
terms of the Prior Deed of Trust are to be disbursed to Trustor shall be
governed by, and disbursed pursuant to, this Deed of Trust, and (ii) if, and to
the extent, this Deed of Trust requires Trustor to maintain types of insurance
not required by the Prior Deed of Trust, or insurance in amounts greater than
required by the Prior Deed of Trust, Trustor shall maintain the types of
insurance, and in the amounts, required hereby.
4.11 INSPECTION. Trustor will permit Trustee and Beneficiary and their
agents, representatives and employees to inspect the Mortgaged Property at all
reasonable times.
4.12 HOLD HARMLESS. Trustor will defend, at its own cost and expense, and
hold Beneficiary and Trustee harmless from any action, proceeding or claim
affecting the Mortgaged Property or the Security Documents, and all costs and
expenses incurred by Beneficiary or Trustee in protecting its interests
hereunder in such an event (including all court costs and attorneys' fees) shall
be borne by Trustor and secured hereby.
4.13 TAX AND INSURANCE ESCROW. At Beneficiary's option, in order to
implement the provisions of Paragraphs 4.5 and 4.7 hereinabove, Trustor shall
pay to Beneficiary monthly, annually, or as otherwise directed by Beneficiary,
an amount (together with interest earned thereon, the "Escrowed Sums") equal to
the sum of (a) the annual Impositions (estimated by Beneficiary, wherever
-12-
<PAGE>
necessary) to become due for the tax year during which such payment is so
directed and (b) the insurance premiums for the same year for those insurance
policies as are required hereunder. If Beneficiary determines that any amounts
theretofore paid by Trustor are insufficient for the payment in full of such
Impositions and insurance premiums, Beneficiary shall notify Trustor of the
increased amounts required to provide a sufficient fund, whereupon Trustor shall
pay to Beneficiary within thirty (30) days thereafter the additional amount as
stated in Beneficiary's notice. The Escrowed Sums shall be held by Beneficiary
in an interest-bearing account (with all interest earned on such account being
credited to such account) and may be commingled with Beneficiary's other funds.
Upon assignment of this Deed of Trust, Beneficiary shall pay over the balance of
the Escrowed Sums then in its possession to its assignee whereupon, provided the
assignee expressly assumes Beneficiary's obligations hereunder with respect such
Escrowed Sums, the Beneficiary shall then become completely released from all
liability with respect thereto. Within ninety-five (95) days following the full
payment of the Indebtedness (other than a full payment of the Indebtedness as a
consequence of a foreclosure or conveyance in lieu of foreclosure of the liens
and security interests securing the Indebtedness) or at such earlier time as
Beneficiary may elect, the balance of the Escrowed Sums in its possession shall
be paid over to Trustor and no other party shall have any right or claim
thereto. If no Event of Default shall have occurred and be continuing
hereunder, the Escrowed Sums shall, at the option of Beneficiary, either (i) be
repaid to Trustor in sufficient time to allow Trustor to satisfy Trustor's
obligations under the Security Documents to pay the Impositions and the required
insurance premiums or (ii) be paid directly to the Governmental Authority and
the insurance company entitled thereto on or before the date such payments are
due. If an Event of Default shall have occurred and be continuing hereunder,
however, Beneficiary shall have the additional option of crediting the full
amount of the Escrowed Sums against the Indebtedness. Notwithstanding anything
to the contrary contained in this Paragraph 4.13 or elsewhere in this Deed of
Trust, Beneficiary hereby reserves the right to waive the payment by Trustor to
Beneficiary of the Escrowed Sums, and, in the event Beneficiary does so waive
such payment, it shall be without prejudice to Beneficiary's rights to insist,
at any subsequent time or times, that such payments be made in accordance
herewith. The provisions of this Paragraph 4.13 are not intended to contravene
any applicable requirements of the laws of the State of Colorado, and from time
to time the provisions of this Paragraph 4.13 shall be deemed modified as
necessary to be in conformance with the laws of the State of Colorado (provided
that the provisions of this Paragraph 4.13 shall be controlling to the extent
any contrary requirements of Colorado law may be waived, and Trustor hereby
waives those requirements of Colorado law to the fullest extent allowed).
Article 5
NEGATIVE COVENANTS
Trustor hereby covenants and agrees that until the entire Indebtedness
shall have been paid in full and all of the Obligations shall have been fully
performed and discharged:
5.1 USE VIOLATIONS. Trustor will not use, maintain, operate or occupy, or
allow the use, maintenance, operation or occupancy of, the Mortgaged Property in
any manner or for any purpose which (a) violates any Legal Requirement, Lease or
Major Agreement, (b) constitutes a public or private nuisance, or (c) makes
void, voidable or cancelable, or increases the premium of, any insurance then in
force with respect thereto.
-13-
<PAGE>
5.2 ALTERATIONS. Trustor will not commit (and will not permit) any waste
of the Mortgaged Property and will not (subject to the provisions of Paragraphs
4.6 and 4.9 hereinabove), without the prior written consent of Beneficiary, make
or permit to be made any alterations or additions to the Mortgaged Property.
5.3 REPLACEMENT OF FIXTURES AND PERSONALTY. Trustor will not, without the
prior written consent of Beneficiary, permit any of the Fixtures or Personalty
to be removed at any time from the Land or Improvements unless the removed item
is removed temporarily for maintenance and repair or, if removed permanently, is
replaced by an article of equal suitability and value, owned by Trustor, free
and clear of any lien or security interest except such lien or security interest
as may be first approved, in writing, by Beneficiary.
5.4 ENCUMBRANCE UPON MORTGAGED PROPERTY. Trustor shall not, without the
prior written consent of Beneficiary, create, place or permit to be created or
placed or through any act or failure to act, acquiesce in the placing of, or
allow to remain, any deed of trust, mortgage, security deed, pledge, lien
(statutory, constitutional or contractual), security interest, encumbrance or
charge on, or conditional sale or other title retention agreement, regardless of
whether same are expressly subordinate to the liens of the Security Documents,
with respect to the Mortgaged Property, other than the Permitted Encumbrances.
Article 6
EVENTS OF DEFAULT
The term "Event of Default", as used in the Security Documents, shall mean
the occurrence or happening, at any time and from time to time, of any one or
more of the following:
6.1 FAILURE IN PAYMENT OF INDEBTEDNESS. If Trustor shall fail, refuse or
neglect to pay, in full, any installment or portion of the Indebtedness due from
Trustor as and when the same shall become due and payable, whether at the due
date thereof stipulated in the Security Documents, or at a date fixed for
prepayment, or by acceleration or otherwise, and such failure, refusal or
neglect continues for a period of five (5) days.
6.2 DISPOSITION OF MORTGAGED PROPERTY. If Trustor sells, leases,
exchanges, assigns, conveys, transfers or otherwise disposes of (herein
collectively called "Disposition") all or any portion of the Mortgaged Property
(or any interest therein), without the prior written consent of Beneficiary. It
is expressly agreed that in connection with determining whether to grant or
withhold such consent, Beneficiary may (but is not obligated to), among other
things, (i) consider the creditworthiness of the party to whom such Disposition
will be made and its management ability with respect to the Mortgaged Property,
(ii) consider whether or not the security for repayment of the Indebtedness and
the performance of the Obligations, or Beneficiary's ability to enforce its
rights, remedies and recourses with respect to such security, will be impaired
in any way by the proposed Disposition, (iii) require that Beneficiary be
reimbursed for all costs and expenses incurred by Beneficiary in investigating
the creditworthiness and management ability of the party to whom such
Disposition will be made and in determining whether Beneficiary's security will
be impaired by the proposed Disposition, (iv) require the payment to Beneficiary
of a transfer fee to cover the cost of documenting the Disposition in its
records, (v) require the payment of its attorney's fees incurred in connection
with such Disposition, (vi) require the express assumption, from and after the
date of such Disposition, of Trustor's obligation to pay the Indebtedness
-14-
<PAGE>
and perform the Obligations by the party to whom such Disposition will be made
(with or without the release of Trustor from liability for such Indebtedness and
Obligations), (vii) require the execution of Assumption Agreements, Modification
Agreements, Supplemental Security Documents and Financing Statements
satisfactory in form and substance to Beneficiary, and (viii) require
endorsements (to the extent available under applicable law) to any existing
mortgagee title insurance policies insuring this Deed of Trust and the security
interests covering the Mortgaged Property.
6.3 ENCUMBRANCE UPON MORTGAGED PROPERTY. If the Trustor shall, without
the prior written consent of Beneficiary, create, place or permit to be created
or placed, or through any act or failure to act, acquiesce in the placing of, or
allow to remain, any mortgage, security deed, pledge, lien (statutory,
constitutional or contractual), security interest, encumbrance or charge on, or
conditional sale or other title retention agreement, regardless of whether same
are expressly subordinate to the liens of the Security Documents, with respect
to the Mortgaged Property, other than the Permitted Encumbrances.
6.4 DEFAULT IN PRIOR LOAN DOCUMENTS. If an event of default shall occur
under the Prior Deed of Trust or any other Prior Loan Document, and not be cured
within the applicable grace or cure period, if any.
6.5 FORECLOSURE OF OTHER LIENS. If the holder of any lien or security
interest or deed on the Mortgaged Property (without hereby implying
Beneficiary's consent to the existence, placing, creating or permitting of any
such lien or security interest or deed) institutes foreclosure or other
proceedings for the enforcement of its remedies thereunder.
6.6 DEFAULT IN LOAN AGREEMENT OR OTHER DOCUMENTS. If an event of default
shall occur under the Loan Agreement or any other Security Document (even though
not listed as an Event of Default hereunder), and the same is not cured within
the applicable cure period, if any.
6.7 NOTICE OF DEFAULT NOT REQUIRED. Except as otherwise expressly
provided herein or in the other Security Documents, no notice of default shall
be required, and without Beneficiary's prior written consent, no right to cure
shall be granted for the Events of Default described hereinabove.
Article 7
BENEFICIARY'S REMEDIES
7.1 REMEDIES. If an Event of Default shall occur, Beneficiary may, at its
sole election, by or through Trustee or otherwise, exercise any or all of the
following rights, remedies and recourses:
(a) ACCELERATION: Declare the Principal Balance (defined hereby as
meaning the then unpaid principal balance on the Notes), the accrued interest
and any other accrued but unpaid portion of the Indebtedness to be immediately
due and payable, without further notice, presentment, protest, demand or action
of any nature whatsoever (each of which hereby is expressly waived by Trustor),
whereupon the same shall become immediately due and payable, time being of the
essence in this Deed of Trust.
(b) TERMINATION OF LICENSE AND/OR ENTRY ON MORTGAGED PROPERTY:
Demand that Trustor shall forthwith surrender to Beneficiary the actual
possession of the Mortgaged Property,
-15-
<PAGE>
and/or terminate the license granted Trustor in Paragraph 10.2 hereof to receive
the Rents and, to the extent permitted by law, enter and take possession of all
of the Mortgaged Property without the appointment of a receiver, or an
application therefor, and exclude Trustor and its agents and employees wholly
therefrom, and have joint access with Trustor to the books, papers and accounts
of Trustor.
If Trustor shall for any reason fail to surrender or deliver the
Mortgaged Property or any part thereof after such demand by Beneficiary,
Beneficiary may obtain a judgment or decree conferring upon Beneficiary the
right to immediate possession or requiring Trustor to deliver immediate
possession of the Mortgaged Property to Beneficiary, and Trustor hereby
specifically covenants and agrees that Trustor will not oppose, contest or
otherwise hinder or delay Beneficiary in any action or proceeding by Beneficiary
to obtain such judgment or decree. Trustor will pay to Beneficiary, upon
demand, all expenses of obtaining such judgment or decree, including reasonable
compensation to Beneficiary, its attorneys and agents, and all such expenses and
compensation shall, until paid, become part of the Indebtedness and shall be
secured by this Deed of Trust.
Upon every such entering upon or taking of possession, Beneficiary may
hold, store, use, operate, manage and control the Mortgaged Property and conduct
the business thereof, and, from time to time, (i) make all necessary and proper
maintenance, repairs, renewals, replacements, additions, betterments and
improvements thereto and thereon and purchase or otherwise acquire additional
fixtures, personalty and other property (ii) insure or keep the Mortgaged
Property insured (iii) manage and operate the Mortgaged Property and exercise
all the rights and powers of Trustor to the same extent as Trustor could in its
own name or otherwise act with respect to the same and (iv) enter into any and
all agreements with respect to the exercise by others of any of the powers
herein granted to Beneficiary, all as Beneficiary from time to time may
determine to be in its best interest. Whether or not Beneficiary has obtained
possession of the Mortgaged Property, upon the termination of Trustor's license
to receive the Rents, Beneficiary may collect, sue for and receive all the Rents
and other issues, profits and revenues from the Mortgaged Property, including
those past due as well as those accruing thereafter. Anything in this Deed of
Trust to the contrary notwithstanding, Beneficiary shall not be obligated to
discharge or perform the duties of the landlord to any tenant or lessee under
any Lease, discharge or perform any obligations under any Major Agreement, or
incur any liability as the result of any exercise by Beneficiary of its rights
under this Deed of Trust, and Beneficiary shall be liable to account only for
the Rents actually received by Beneficiary.
Whether or not Beneficiary takes possession of the Mortgaged Property,
Beneficiary may make, modify, enforce, cancel or accept surrender of any Major
Agreement and Lease, remove and evict any tenant, increase or decrease Rents
under any Lease, appear in and defend any action or proceeding purporting to
affect the Mortgaged Property, and perform and discharge each and every
obligation, covenant and agreement of Trustor contained in any Major Agreement
or any Lease. Neither the entering upon and taking possession of the Mortgaged
Property, nor the collection of any Rents and the application thereof as
aforesaid, shall cure or waive any Event of Default theretofore or thereafter
occurring, or affect any notice of an Event of Default hereunder or invalidate
any act done pursuant to any such notice. Beneficiary shall not be liable to
Trustor, anyone claiming under or through Trustor, or anyone having an interest
in the Mortgaged Property by reason of anything done or left undone by
Beneficiary hereunder. Nothing contained in this Paragraph 7.1(b) shall
-16-
<PAGE>
require Beneficiary to incur any expense or do any act. If the Rents are not
sufficient to meet the costs of taking control of and managing the Mortgaged
Property and/or collecting the Rents, any funds expended by Beneficiary for such
purposes shall become a part of the Indebtedness secured by this Deed of Trust.
Such amounts, together with interest at the Default Rate provided for under the
Loan Agreement and attorneys' fees, if applicable, shall be immediately due and
payable. Notwithstanding Beneficiary's continuance in possession or receipt and
application of Rents, Beneficiary shall be entitled to exercise every right
provided for in this Deed of Trust or by law upon or after the occurrence of an
Event of Default. Any of the actions referred to in this Paragraph 7.1(b) may
be taken by Beneficiary at such time as Beneficiary is so entitled, without
regard to the adequacy of any security for the Indebtedness hereby secured.
In the event that all such interest, deposits and principal
installments and other sums due under any of the terms, covenants, conditions
and agreements of this Deed of Trust shall be paid and all Events of Default
shall be cured, and as a result thereof Beneficiary surrenders possession of the
Mortgaged Property to Trustor, the same right herein given to Beneficiary shall
continue to exist if any subsequent Events of Default shall occur.
(c) FORECLOSURE. Execute a written notice of such Event of Default
and of its election to cause the Mortgaged Property to be sold to satisfy the
Indebtedness and the Obligations. As a condition precedent to any such sale,
Trustee shall give and record such notice of default and election to sell as the
law then requires. When the minimum period of time required by law after such
notice has elapsed, or at any time thereafter, at Beneficiary's sole discretion,
Trustee, without notice to or demand upon Trustor except as required by law,
shall sell the Mortgaged Property at the time and place of sale fixed by it in
the notice of sale, at one or several sales, either as a whole or in separate
parcels and in such manner and order, all as Beneficiary in its sole discretion
may determine, at public auction to the highest bidder for cash, in lawful money
of the United States, payable at time of sale subject, however, to the
provisions of Paragraph 7.10 below. Neither Trustor nor any other person or
entity other than Beneficiary shall have the right to direct the order in which
the Mortgaged Property is sold. Subject to any requirements and limits imposed
by law, Trustee may from time to time postpone sale of all or any portion of the
Mortgaged Property by public announcement at such time and place of sale. Upon
any sale and the expiration of applicable redemption periods, if any, and unless
the Trustor has redeemed, Trustee shall execute and deliver to the holder of the
certificate of purchase or last redemption certificate, as the case may be, a
deed conveying the Mortgaged Property or portion thereof so sold, in the manner
and form required by law, whereupon such purchaser or purchasers shall be let
into immediate possession. In the event of a sale or other disposition of the
Mortgaged Property, or any part thereof, whether made under the power of sale
herein granted or under or by virtue of judicial proceedings or of a judgment or
decree of foreclosure and sale, and the execution of a deed or other conveyance
pursuant thereto, the recitals in the deed of any matters or facts shall be
conclusive proof of the truthfulness thereof. Any person, including Trustee,
Trustor or Beneficiary may purchase at the sale. Nothing in this paragraph
dealing with foreclosure procedures or specifying particular actions to be taken
by Beneficiary or by Trustee or any similar officers shall be deemed to
contradict or add to the requirements and procedures now or hereafter specified
by Colorado law, and any such inconsistency shall be resolved in favor of
Colorado law applicable at the time of foreclosure.
-17-
<PAGE>
Beneficiary, may, in addition to and not in abrogation of the rights
covered under the immediately preceding subparagraph, or elsewhere in this
Article 7, either with or without entry or taking possession as herein provided
or otherwise, proceed by a suit or suits in law or in equity or by any other
appropriate proceeding or remedy (i) to enforce payment of the Notes or the
performance of any term, covenant, condition or agreement of this Deed of Trust
or any other right and (ii) to pursue any other remedy available to it, all as
Beneficiary at its sole discretion shall elect.
(d) RECEIVER: Beneficiary, upon application to a court of competent
jurisdiction, shall be entitled as a matter of strict right, ex parte and
without notice and without regard to the adequacy or value of any security for
the Indebtedness or the solvency of any party bound for its payment, to the
appointment of a receiver to take possession of and to operate the Mortgaged
Property and to collect and apply the incomes, rents, issues, profits and
revenues thereof. The receiver shall have all of the rights and powers
permitted under the laws of the State of Colorado. Trustor will pay to
Beneficiary upon demand all expenses, including receiver's fees, attorneys'
fees, costs and agent's compensation, incurred pursuant to the provisions of
this Paragraph, and any such amounts paid by Beneficiary shall be added to the
Indebtedness and shall be secured by this Deed of Trust.
(e) PERFORMANCE BY BENEFICIARY: Pay, perform or observe any term,
covenant or condition of this Deed of Trust not paid, performed or observed by
Trustor, and all payments made or costs or expenses incurred by Beneficiary in
connection therewith shall be secured hereby and shall be, upon demand,
immediately repaid with interest thereon at the Default Rate provided in the
Loan Agreement. Beneficiary shall be the sole judge of the necessity for any
such actions and of the amounts to be paid. Beneficiary is hereby empowered to
enter and to authorize others to enter upon the Mortgaged Property or any part
thereof for the purpose of performing or observing any such defaulted term,
covenant or condition without thereby becoming liable to Trustor or any person
in possession holding under Trustor.
(f) JUDICIAL FORECLOSURE; SPECIFIC PERFORMANCE: Commence and
maintain an action or actions in any court of competent jurisdiction to
foreclose this Deed of Trust or to obtain specific enforcement of the covenants
of Trustor hereunder, and Trustor agrees that such covenants shall be
specifically enforceable by injunction or any other appropriate equitable remedy
and that for the purposes of any suit brought under this subparagraph, Trustor
waives the defense of laches and any applicable statute of limitations.
(g) OTHER: Exercise any and all other rights, remedies and recourses
granted under the Security Documents (including, without limitation, those set
forth in Articles 9 and 10 hereinbelow) or now or hereafter existing in equity,
at law, by virtue of statute or otherwise.
7.2 SEPARATE SALES. Trustor, for itself and for all parties claiming
through or under Trustor, and for all parties who may acquire a lien on or
interest in the Mortgaged Property, hereby waives all rights to have the
Mortgaged Property and/or any other property which is now or later may be
security for the Indebtedness and Obligations ("Other Property") marshalled upon
any foreclosure of this Deed of Trust or on a foreclosure of any other security
for any of the Indebtedness or Obligations. Trustee, if so directed by
Beneficiary at Beneficiary's election, shall have the right to sell, and any
court in which foreclosure proceedings may be brought shall have the right to
order a sale
-18-
<PAGE>
of, the Mortgaged Property and any or all of the Other Property as a whole or in
separate parcels, in any order that Beneficiary may designate. The Mortgaged
Property may be sold in one or more parcels and in such manner and order as
Beneficiary, in its sole but reasonable discretion, may elect, it being
expressly understood and agreed that the right of sale arising out of any Event
of Default shall not be exhausted by any one or more sales.
7.3 REMEDIES CUMULATIVE, CONCURRENT AND NONEXCLUSIVE. Beneficiary shall
have all rights, remedies and recourses granted in the Security Documents and
available at law or equity (including specifically those granted by the Uniform
Commercial Code in effect in Colorado and applicable to the Mortgaged Property,
the Leases, or any portion thereof); and same (a) shall be cumulative and
concurrent, (b) may be pursued separately, successively or concurrently against
Trustor or others obligated under the Notes, or against the Mortgaged Property,
or against any one or more of them, at the sole discretion of Beneficiary, (c)
may be exercised as often as occasion therefor shall arise, it being agreed by
Trustor that the exercise or failure to exercise any of same shall in no event
be construed as a waiver or release thereof or of any other right, remedy or
recourse, and (d) are intended to be, and shall be, nonexclusive.
7.4 NO CONDITIONS PRECEDENT TO EXERCISE OF REMEDIES. Neither Trustor nor
any other person hereafter obligated for payment of all or any part of the
Indebtedness, or fulfillment of all or any of the Obligations, shall be relieved
of such obligation by reason of (a) the failure of Beneficiary to comply with
any request of Trustor or of any other person so obligated, to foreclose this
Deed of Trust or to enforce any provisions of the other Security Documents, (b)
the release, regardless of consideration, of the Mortgaged Property or the
addition of any other property to the Mortgaged Property, (c) any agreement or
stipulation between any subsequent owner of the Mortgaged Property and
Beneficiary extending, renewing, rearranging or in any other way modifying the
terms of the Security Documents without first having obtained the consent of,
given notice to or paid any consideration to Trustor or such other person, and
in such event, Trustor and all such other persons shall continue to be liable to
make payment according to the terms of any such extension or modification
agreement unless expressly released and discharged, in writing, by Beneficiary,
or (d) by any other act or occurrence, save and except the complete payment of
the Indebtedness and the complete fulfillment of all of the Obligations.
7.5 RELEASE OF AND RESORT TO COLLATERAL. Beneficiary may release,
regardless of consideration, any part of the Mortgaged Property without, as to
the remainder, in any way impairing, affecting, subordinating or releasing the
conveyance, lien, encumbrance or security interests created in or evidenced by
the Security Documents or their stature as a first and prior security deed,
lien, encumbrance or security interest in and to the Mortgaged Property. For
payment of the Indebtedness, Beneficiary may resort to any security therefor
held by Beneficiary in such order and manner as Beneficiary may elect.
7.6 WAIVER OF APPRAISEMENT, VALUATION, ETC. Trustor agrees, to the full
extent permitted by law, that, in case of an Event of Default, neither Trustor
nor anyone claiming through or under Trustor will set up, claim or seek to take
advantage of any moratorium, reinstatement, forbearance, appraisement,
valuation, stay, extension, homestead, exemption or redemption laws now or
hereafter in force in order to prevent or hinder the enforcement or foreclosure
of this Deed of Trust or the absolute sale of the Mortgaged Property, the
delivery of possession thereof immediately after such sale to the purchaser at
such sale, or the
-19-
<PAGE>
exercise of any other remedy hereunder; and Trustor, for itself and all who may
at any time claim through or under it, hereby waives to the full extent that it
may lawfully so do, the benefit of all such laws, and any and all right to have
assets subject to the security interest of this Deed of Trust marshalled upon
any foreclosure or sale under the power herein granted or a sale in inverse
order of alienation.
7.7 DISCONTINUANCE OF PROCEEDINGS. In case Beneficiary shall have
proceeded to enforce any right, power or remedy under this Deed of Trust by
foreclosure, entry or otherwise, or in the event Beneficiary commences
advertising of the intended exercise of the sale under power provided hereunder
and such proceeding or advertisement shall have been withdrawn, discontinued or
abandoned for any reason, or shall have been determined adversely to
Beneficiary, then in every such case (i) the parties hereto shall be restored to
their former positions and rights, (ii) all rights, powers and remedies of
Beneficiary shall continue as if no such proceeding had been taken, (iii) each
and every Event of Default declared or occurring prior or subsequent to such
withdrawal, discontinuance or abandonment shall be and shall be deemed to be a
continuing Event of Default and (iv) neither this Deed of Trust, nor the Notes,
nor the Indebtedness, nor any other Security Document, shall be or shall be
deemed to have been reinstated or otherwise affected by such withdrawal,
discontinuance or abandonment; and Trustor hereby expressly waives the benefit
of any statute or rule of law now provided, or which may hereafter be provided,
which would produce a result contrary to or in conflict with the above.
7.8 APPLICATION OF RENTS AND PROCEEDS. The proceeds of any sale of the
Mortgaged Property, and the Rents and all other sums received by Beneficiary
under the Security Documents, shall be applied by Beneficiary (or the receiver,
if one is appointed) to the extent that funds are so available therefrom to the
following in the order of priority that Beneficiary, in its sole discretion, may
determine:
(a) To the payment of the costs and expenses of taking possession of
the Mortgaged Property and of holding, using, leasing, repairing, improving
and selling the same, including, without limitation, (i) receivers' fees,
(ii) court costs, (iii) attorneys' and accountants' fees, (iv) costs of
advertisement, (v) trustee's fees, and (vi) the payment of any and all
Impositions, liens, security interests or other rights, titles or interests
equal or superior to this Deed of Trust (except those to which the
Mortgaged Property has been sold subject to and without in any way implying
Beneficiary's prior consent to the creation thereof);
(b) To the payment of all amounts, other than the Principal Balance
and accrued but unpaid interest, which may be due under the Security
Documents, together with interest thereon as provided therein;
(c) To the payment of all accrued but unpaid interest due on the
Notes;
(d) To the payment of the Principal Balance and any remaining portion
of the Indebtedness;
(e) To the extent funds are available therefor, and to the extent
known by Beneficiary, and required by law, to the payment of any
indebtedness or obligation secured by a subordinate interest in the
Mortgaged Property; and
(f) Any remaining funds to Trustor.
-20-
<PAGE>
TRUSTOR SHALL BE LIABLE FOR ANY DEFICIENCIES IN THE EVENT THE
PROCEEDS ARE NOT SUFFICIENT TO COVER ITEMS (a) THROUGH (e) ABOVE.
7.9 LEASES. Beneficiary, at its option, is authorized to foreclose this
Deed of Trust subject to the rights of any lessees of the Mortgaged Property
under any Leases, and the failure to make any such lessees parties to any such
foreclosure proceedings and to foreclose their rights will not be, nor be
asserted to be by Trustor, a defense to any proceedings instituted by
Beneficiary to collect the Indebtedness.
7.10 PURCHASE BY BENEFICIARY. Upon any foreclosure sale or sales of all or
any portion of the Mortgaged Property under the power herein granted or pursuant
to judicial proceedings, Beneficiary may bid for and purchase the Mortgaged
Property and shall be entitled to apply all or any part of the Indebtedness as a
credit to the purchase price and, in such case, this Deed of Trust, the Note and
documents evidencing expenditures secured hereby shall be presented to the
person conducting the sale in order that the amount of said indebtedness so used
or applied may be credited thereon as having been paid.
7.11 POWER TO FILE NOTICES AND CURE DEFAULTS. Trustor hereby irrevocably
appoints Beneficiary and its successors and assigns, as its attorney-in-fact,
which agency is coupled with an interest, (a) to execute and/or record any
notices of completion, cessation of labor, or any other notices that Beneficiary
deems appropriate to protect Beneficiary's interest, (b) upon the issuance of a
deed pursuant to the foreclosure of this Deed of Trust or the delivery of a deed
in lieu of foreclosure, to execute all instruments of assignment or further
assurance with respect to the Leases and Rents in favor of the grantee of any
such deed, as may be necessary or desirable for such purpose, (c) to prepare,
execute and file or record financing statements, continuation statements,
applications for registration and like papers necessary to create, perfect or
preserve Beneficiary's security interests and rights in or to any of the
"Collateral" (as defined herein), and (d) upon the occurrence of an event, act
or omission which, with notice or passage of time or both, would constitute an
Event of Default, to perform any obligation of Trustor hereunder; provided,
however, that: (i) Beneficiary as such attorney-in-fact shall only be
accountable for such funds as are actually received by Beneficiary; and (ii)
Beneficiary shall not be liable to Trustor or any other person or entity for any
failure to act under this section.
7.12 SUITS TO PROTECT THE MORTGAGED PROPERTY. Beneficiary shall have the
power to institute and maintain such suits and proceedings as it may deem
necessary or appropriate (i) to prevent any impairment of the Mortgaged Property
by any acts which may be unlawful or constitute an Event of Default under this
Deed of Trust, (ii) to preserve or protect its interest in the Mortgaged
Property and in the Leases and Rents arising therefrom, and (iii) to restrain
the enforcement of or compliance with any legislation or other governmental
enactment, rule or order that may be unconstitutional or otherwise invalid, if
the enforcement of or compliance with such enactment, rule or order would impair
the security hereunder or be prejudicial to the interest of Beneficiary.
7.13 PROOFS OF CLAIM. In the case of any receivership, insolvency,
bankruptcy, reorganization, arrangement, adjustment, composition or other
proceedings affecting Trustor, its creditors or its property, Beneficiary, 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
Beneficiary allowed in such proceedings for the entire
-21-
<PAGE>
amount of the Indebtedness at the date of the institution of such proceedings
and for any additional amount of the Indebtedness after such date.
7.14 NO CURE OR WAIVER. Neither (a) the entry upon or taking possession of
all or any part of the Mortgaged Property, (b) any collection of rents, issues,
profits, insurance proceeds, condemnation awards, other security or proceeds of
other security, or other sums, (c) the application of any collected sum to the
Indebtedness or any Obligation, nor (d) the exercise of any other right or
remedy (including without limitation, the assignment of Rents) by Beneficiary,
Trustee or any receiver shall cure or waive any breach, Event of Default or
notice of default under this Deed of Trust or limit or impair the Indebtedness,
the Obligations or Trustor's liability therefor; nullify the effect of any
notice of default or notice of sale (unless all Indebtedness Obligations then
due have been paid and performed and Trustor has cured all other Events of
Default); impair the status of the security; prejudice Beneficiary or Trustee in
the exercise of any right or remedy; or be construed as an affirmation by
Beneficiary of any tenancy, lease or option or a subordination of the lien of
this Deed of Trust.
Article 8
CONDEMNATION
8.1 GENERAL. Immediately upon its obtaining knowledge of the institution
or the threatened institution of any proceeding for the condemnation of the
Mortgaged Property, or any part thereof, Trustor shall notify Trustee and
Beneficiary of such fact. Trustor shall then, if requested by Beneficiary, file
or defend its claim thereunder and prosecute same with due diligence to its
final disposition and shall cause any awards or settlements to Trustor or any
related party to be paid over to Beneficiary for disposition pursuant to the
terms of this Deed of Trust. Trustor may be the nominal party in such
proceeding, but Beneficiary shall be entitled to participate in and to control
the same and to be represented therein by counsel of its own choice; and Trustor
will deliver, or cause to be delivered, to Beneficiary such instruments as may
be reasonably requested by it from time to time to permit such participation.
If the Mortgaged Property is taken or diminished in value, or if a consent
settlement is entered, by or under threat of such proceeding, the award or
settlement payable to Trustor by virtue of its interest in the Mortgaged
Property shall be, and by these presents is, assigned, transferred and set over
unto Beneficiary to be held by it in trust, subject to the lien and security
interest of this Deed of Trust, and disbursed as follows:
(a) If (i) all of the Mortgaged Property is taken, (ii) so much of
the Mortgaged Property is taken, or the Mortgaged Property is so diminished in
value, that the remainder thereof cannot (in Beneficiary's judgment) continue to
be operated profitably for the purpose for which it was being used immediately
prior to such taking or diminution, (iii) an Event of Default shall have
occurred, or (iv) the Mortgaged Property is partially taken or diminished in
value and (in Beneficiary's judgment) need not be rebuilt, restored or repaired
in any manner, then, in any such event, the entirety of the sums so paid to
Beneficiary shall be applied by it in the order recited in Paragraph 8.2
hereinbelow; or
(b) If (i) only a portion of the Mortgaged Property is taken and the
portion remaining can (in Beneficiary's judgment), with rebuilding, restoration
or repair, be profitably operated for the purpose referred to in Paragraph
8.1(a)(ii) hereinabove, (ii) none of the other facts recited in Paragraph 8.1(a)
hereinabove exists, (iii) Trustor shall deliver to
-22-
<PAGE>
Beneficiary plans and specifications for such rebuilding, restoration or repair
acceptable to Beneficiary, which acceptance shall be evidenced by Beneficiary's
written consent thereto, and (iv) Trustor shall thereafter commence the
rebuilding, restoration or repair and complete same, all in substantial
accordance with the plans and specifications and within a time period acceptable
to Beneficiary, and shall otherwise comply with Paragraph 4.8 hereinabove, then
such sums shall be paid to Trustor to reimburse Trustor for money spent in the
rebuilding, restoration or repair; otherwise, same shall be applied by
Beneficiary in the order recited in Paragraph 8.2 hereinbelow.
8.2 APPLICATION OF PROCEEDS. All proceeds received by Beneficiary with
respect to a taking or a diminution in value of the Mortgaged Property by
condemnation shall be applied:
(a) to reimburse Trustee and Beneficiary for all costs and expenses,
including attorneys' fees, incurred in connection with collection of the said
proceeds;
(b) to the payment of those items recited in Paragraph 7.8(b) through
(f) hereinabove; provided, however, that if such proceeds are required under
Paragraph 8.1(b) hereinabove to be applied to the rebuilding, restoration or
repair of the Mortgaged Property, the provisions of Paragraphs 4.7 and 4.8
hereinabove shall determine the conditions precedent for utilizing such proceeds
for such purpose.
Article 9
SECURITY AGREEMENT
9.1 SECURITY INTEREST. This Deed of Trust (a) shall be construed as a
deed to secure debt on the Mortgaged Property, and (b) shall also constitute and
serve as a "Security Agreement" on personal property within the meaning of, and
shall constitute until this Deed of Trust shall terminate as provided in Article
2 hereinabove, a first and prior security interest under the Uniform Commercial
Code as enacted in the State of Colorado with respect to the Personalty,
Fixtures, Major Agreements and Leases and Rents. To this end, Trustor has
GRANTED, BARGAINED, CONVEYED, ASSIGNED, TRANSFERRED and SET OVER, and by these
presents, does GRANT, BARGAIN, CONVEY, ASSIGN, TRANSFER and SET OVER, unto
Beneficiary a first and prior security interest and all of Trustor's right,
title and interest in, to, under and with respect to the Personalty, Fixtures,
Major Agreements, and Leases and Rents ("Collateral"), subject to the Permitted
Encumbrances, to secure the full and timely payment of the Indebtedness and the
full and timely performance and discharge of the Obligations. It is the intent
of Trustor and Beneficiary that this Deed of Trust encumber all Major
Agreements, Leases and Rents, that all items contained in the definition of
"Major Agreements", "Leases" and "Rents" which are included within Article 9 of
the applicable Uniform Commercial Code be covered by the security interest
granted in this Article 9 and that all items contained in the definition of
"Major Agreements", "Leases" and "Rents" which are excluded from Article 9 of
the applicable Uniform Commercial Code be covered by the provisions of Article 2
and Article 10 hereof.
9.2 FINANCING STATEMENTS. Trustor hereby agrees with Beneficiary to
execute and deliver to Beneficiary, in form and substance satisfactory to
Beneficiary, such Financing Statements and such further assurances as
Beneficiary may, from time to time, reasonably consider necessary to create,
perfect and preserve Beneficiary's security interest herein granted, and
Beneficiary may cause such statements and assurances to be
-23-
<PAGE>
recorded and filed, at such times and places as may be required or permitted by
law, to so create, perfect and preserve such security interest.
Notwithstanding any of the provisions hereof, Beneficiary shall not be
deemed to have accepted any property other than cash in satisfaction of any
obligation of Trustor to Beneficiary unless Beneficiary shall make an express
written election of such remedy under C.R.S. Section 4-9-505, or other
applicable law.
9.3 UNIFORM COMMERCIAL CODE REMEDIES. Beneficiary shall have all the
rights, remedies and recourses with respect to the Personalty, Fixtures, Major
Agreements, and Leases and Rents afforded to a "Secured Party" by the aforesaid
Uniform Commercial Code in addition to, and not in limitation of, the other
rights, remedies and recourses afforded by the Security Documents.
9.4 FIXTURE FILING. This Deed of Trust shall also constitute a "fixture
filing" under C.R.S. Sections 4-9-313 and 4-9-402 of the Colorado Commercial
Code as to any of the Collateral which is or may become a "fixture" under
applicable law.
9.5 WARRANTIES AND FINANCING STATEMENT REQUIREMENTS.
(a) Trustor warrants that (i) Trustor's (that is, "Debtor's") name,
identity or corporate structure and residence or principal place of business are
as set forth in Subparagraph 9.5(b) hereof; (ii) Trustor (that is, "Debtor") has
been using or operating under said name, identity or corporate structure without
change for the time period set forth in Subparagraph 9.5(b) hereof; and (iii)
the location of the Collateral is upon the Land. Trustor covenants and agrees
that Trustor will furnish Beneficiary with notice of any change in the matters
addressed by clauses (i) or (iii) of this Subparagraph 9.5(a) within thirty (30)
days of the effective date of any such change, and Trustor will promptly execute
any financing statements or other instruments reasonably deemed necessary by
Beneficiary to prevent any filed financing statement from becoming misleading or
losing its perfected status.
(b) The information contained in this Subparagraph 9.5(b) is provided
in order that this Deed of Trust shall comply with the requirements of the
Uniform Commercial Code, as enacted in the State of Colorado, for instruments to
be filed as financing statements. The names of the "Debtor" and the "Secured
Party," the identity or corporate structure and residence or principal place of
business of "Debtor," and the time period for which "Debtor" has been using or
operating under said name and identity or corporate structure without change are
as set forth in Schedule 1 of EXHIBIT "C" attached hereto and by this reference
made a part hereof; the mailing address of the "Secured Party" from which
information concerning the security interest may be obtained and the mailing
address of "Debtor" are as set forth in Schedule 2 of said EXHIBIT "C" attached
hereto; and a statement indicating the types, or describing the items, of
Collateral is set forth hereinabove.
9.6 FORECLOSURE OF SECURITY INTEREST. If an Event of Default shall occur,
Beneficiary may elect, in addition to exercising any and all other rights,
remedies and recourses set forth in Article 7 or Article 10 hereof or referred
to in Paragraph 9.3 hereinabove, to collect and receive all Rents and to proceed
in the manner set forth in Article 9 of the applicable Uniform Commercial Code
relating to the procedure to be followed when a Security Agreement covers both
real and personal property.
-24-
<PAGE>
9.7 NO OBLIGATION OF BENEFICIARY. The assignment and security interest
herein granted shall not be deemed or construed to constitute Beneficiary as a
trustee in possession of the Mortgaged Property, to obligate Beneficiary to
lease the Mortgaged Property or attempt to do same, or to take any action, incur
any expense or perform or discharge any obligation, duty or liability whatsoever
under any of the Major Agreements, Leases or otherwise.
9.8 HOLD HARMLESS. Beneficiary shall not be obligated to perform or
discharge, nor does it hereby undertake to perform or discharge, any obligation,
duty or liability under the Major Agreements or the Leases or under or by reason
of this Deed of Trust, and Trustor shall and does hereby agree to indemnify
Beneficiary for and to hold Beneficiary harmless from any and all liability,
loss or damage which it may or might incur under any of the Major Agreements or
the Leases or under or by reason of this Deed of Trust and from any and all
claims and demands whatsoever which may be asserted against it 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 of the Major Agreements or
Leases. Should Beneficiary incur any such liability, loss or damage under any
of the Major Agreements or Leases or under or by reason of this Deed of Trust or
in the defense of any such claims or demands, the amount thereof, including all
costs, expenses and attorneys' fees, shall be secured hereby, and Trustor shall
reimburse Beneficiary therefor promptly upon demand.
Article 10
ASSIGNMENT OF MAJOR AGREEMENTS, LEASES AND RENTS
10.1 ASSIGNMENT. For ten dollars ($10.00) and other good and valuable
consideration, including the indebtedness evidenced by the Note, the receipt and
sufficiency of which are hereby acknowledged, Trustor has GRANTED, BARGAINED,
SOLD and CONVEYED, and by these presents does GRANT, BARGAIN, SELL and CONVEY
absolutely unto Beneficiary the Major Agreements, the Leases and the Rents
subject only to the Permitted Encumbrances applicable thereto and the
hereinafter referenced License. TO HAVE AND TO HOLD the Major Agreements, the
Leases and the Rents unto Beneficiary, forever, and Trustor does hereby bind
itself, its successors and assigns to warrant and forever defend the title to
the Major Agreements, the Leases and the Rents, subject only to the Permitted
Encumbrances applicable thereto, unto Beneficiary against every person
whomsoever lawfully claiming or to claim the same or any part thereof; provided,
however, should the Indebtedness be paid according to the tenor and effect
thereof as and when same shall become due and payable and should the Obligations
be performed and discharged on or before the date same are to be performed and
discharged, then this assignment shall terminate and be of no further force and
effect, and all rights, titles and interests conveyed pursuant to this
assignment shall become revested in Trustor without the necessity of any further
act or requirement by Trustor or Beneficiary.
10.2 LIMITED LICENSE. Beneficiary hereby grants to Trustor a limited
license (the "License"), nonexclusive with the rights of Beneficiary reserved in
Paragraph 10.4 hereof, to exercise and enjoy all incidences of ownership of the
Major Agreements, the Leases and the Rents, including specifically but without
limitation the right to collect (but not more than one month in advance),
demand, sue for, attach, levy, recover and receive the Rents, and to give proper
receipts, releases and acquittances therefor.
-25-
<PAGE>
10.3 ENFORCEMENT OF MAJOR AGREEMENTS AND LEASES. So long as the License is
in effect, Trustor shall (a) submit any and all proposed Major Agreements and
Leases to Beneficiary for approval prior to the execution thereof, (b) duly and
punctually perform and comply with any and all representations, warranties,
covenants and agreements expressed as binding upon Trustor under any Major
Agreement or Lease, (c) maintain each of the Major Agreements and Leases in full
force and effect during the term thereof, (d) appear in and defend any action or
proceeding in any manner connected with any of the Major Agreements and Leases,
(e) deliver to Beneficiary execution counterparts of all Major Agreements and
Leases, (f) act in a commercially reasonable manner in entering into, performing
and enforcing the Major Agreements and the Lease, and (g) deliver to Beneficiary
such further information, and execute and deliver to Beneficiary such further
assurances and assignments, with respect to the Major Agreements and Leases as
Beneficiary may from time to time reasonably request. Without Beneficiary's
prior written consent, Trustor shall not (h) do or knowingly permit to be done
anything to materially impair the value of any of the Leases, (i) except for
deposits not to exceed one month's rent for any one lessee, collect any of the
Rent more than one (1) month in advance of the time when the same becomes due,
(j) discount any future accruing Rent, (k) amend or modify any of the financial
or other economic terms of any Major Agreement or Lease, (l) terminate any Major
Agreement or Lease other than as a result of a material default thereunder, or
(m) assign or grant a security interest in or to the License or any of the Major
Agreements or Leases.
10.4 SUITS; ATTORNMENT. Notwithstanding the License, Beneficiary hereby
reserves, and upon the occurrence and during the continuance of an Event of
Default may exercise, the right and Trustor hereby acknowledges that Beneficiary
has the right (but not the obligation) to collect, demand, sue for, attach,
levy, recover and receive any Rent, to give proper receipts, releases and
acquittances therefor and, after deducting the expenses of collection, to apply
the net proceeds thereof as a credit upon any portion of the Indebtedness
selected by Beneficiary, notwithstanding that such portion selected may not then
be due and payable or that such portion is otherwise adequately secured.
Trustor hereby authorizes and directs any lessee of the Mortgaged Property to
deliver any such payment to, and otherwise to attorn all other obligations under
the Leases direct to Beneficiary. Trustor hereby ratifies and confirms all that
Beneficiary shall do or cause to be done by virtue of this Article 10. No
lessee shall be required to inquire into the authority of Beneficiary to collect
any Rent, and any lessee's obligation to Trustor shall be absolutely discharged
to the extent of its payment to Beneficiary.
10.5 REMEDIES. Upon or at any time after the occurrence of any Event of
Default, Beneficiary, at its option and in addition to the remedies provided in
Article 7 hereof, shall have the complete, continuing and absolute right, power
and authority to terminate the License solely by the giving of written notice of
termination to Trustor. Upon Beneficiary's giving of such notice, the License
shall immediately terminate without any further action being required of
Beneficiary. Thereafter, Beneficiary shall have the exclusive right, power and
authority to take any and all action as described in Paragraph 10.4 hereof,
regardless of whether a foreclosure sale of the remainder of the Mortgaged
Property has occurred under this Deed of Trust, or whether Beneficiary has taken
possession of the remainder of the Mortgaged Property or attempted to do any of
the same. No action referred to in Paragraph 10.4 or this Paragraph 10.5 taken
by Beneficiary shall constitute an election of remedy.
-26-
<PAGE>
10.6 NO OBLIGATION OF BENEFICIARY. Neither the acceptance by Beneficiary
of the assignment granted in this Article 10, nor the granting of any other
right, power, privilege or authority in this Article 10 or elsewhere in this
Deed of Trust, nor the exercise of any of the aforesaid, shall (a) prior to the
actual taking of physical possession and operation control of the Mortgaged
Property by Beneficiary, be deemed to constitute Beneficiary as a "mortgagee in
possession" or (b) at any time thereafter, obligate Beneficiary (i) to appear in
or defend any action or proceeding relating to the Major Agreements, the Leases,
the Rents or the remainder of the Mortgaged Property, (ii) to take any action
hereunder, (iii) to expend any money or incur any expenses or perform or
discharge any obligation, duty or liability with respect to any Major Agreement
or Lease, (iv) to assume any obligation or responsibility for any deposits which
are not physically delivered to Beneficiary or (v) for any injury or damage to
person or property sustained in or about the Mortgaged Property.
10.7 NO MERGER OF ESTATES. Except as permitted by Paragraph 10.2, so long
as any part of the Indebtedness and the Obligations secured hereby remain unpaid
and undischarged, the fee and leasehold estates to the Mortgaged Property shall
not merge but rather shall remain separate and distinct, notwithstanding the
union of such estates either in Trustor, Beneficiary, any lessee or any third
party by purchase or otherwise.
10.8 TRUSTOR'S INDEMNITIES. Trustor shall indemnify and hold Beneficiary
and Trustee harmless from and against any and all liability, loss, cost, damage
or expense which Beneficiary or Trustee may incur under or by reason of this
assignment, or for any action authorized hereby which is taken by Beneficiary or
Trustee pursuant to and in accordance with the provisions hereof, or by reason
of or in defense of any and all claims and demands whatsoever which may be
asserted against Beneficiary or Trustee arising out of the Major Agreements and
the Leases. In the event Beneficiary or Trustee incurs any such liability,
loss, cost, damage or expense, the amount thereof together with all attorneys'
fees and interest thereon at the Default Rate specified in the Loan Agreement
shall be payable by Trustor to Beneficiary or Trustee immediately, without
demand, and shall be secured under Article 2 hereof.
10.9 CONFLICT. It is the intent of the parties that no conflict exist
between the absolute assignment contained in this Article 10 and the collateral
conveyance contained in Article 2 hereof. However, if and to the extent any
such conflict be perceived to exist as to the Major Agreements, the Leases or
the Rents, such conflict shall be resolved in favor of the absolute assignment
contained in this Article 10.
Article 11
MISCELLANEOUS
11.1 PERFORMANCE AT TRUSTOR'S EXPENSE. Trustor shall (a) reimburse
Beneficiary, promptly upon demand, for all amounts expended, advanced or
incurred by Beneficiary to satisfy any obligation of Trustor under the Security
Documents, which amounts shall include all court costs, attorneys' fees
(including, without limitation, for trial, appeal or other proceedings), fees of
auditors and accountants and other investigation expenses reasonably incurred by
Beneficiary in connection with any such matters; and (b) pay any and all other
costs and expenses of performing or complying with any and all of the
Obligations. For all purposes of this Deed of Trust, Beneficiary's costs and
-27-
<PAGE>
expenses shall include, without limitation, fees for trial, appeal or other
proceedings), accounting fees, environmental consultant fees (if any), auditor
fees, and the cost to Beneficiary of any documentary taxes, recording fees,
brokerage fees, title insurance premiums and title surveys. In addition,
Trustor recognizes and agrees that formal written appraisals of the Mortgaged
Property by a licensed independent appraiser may be required by Beneficiary's
internal procedures and/or federal regulatory reporting requirements on an
annual and/or specialized basis. Except to the extent that certain of these
costs and expenses are included within the definition of Indebtedness, the
payment by Trustor of any of these costs and expenses shall not be credited, in
any way or to any extent, against any portion of the Indebtedness.
11.2 SURVIVAL OF OBLIGATIONS. Each and all of the Obligations shall
survive the execution and delivery of the Security Documents, and the
consummation of the loan called for therein, and shall continue in full force
and effect until the Indebtedness shall have been paid in full; provided,
however, that nothing contained in this Paragraph 11.2 shall limit the
obligations of Trustor as set forth in Paragraphs 3.3, 4.12, 9.8 and 10.8
herein.
No merger shall occur as a result of Beneficiary's acquiring any other
estate in, or any other lien on, the Mortgaged Property unless Beneficiary
consents to a merger in writing. Furthermore, the assignment of the Rents and
other liens, security interests, rights and remedies granted hereunder to
Beneficiary, and the covenants, representations, warranties and obligations of
Trustor which are not satisfied or discharged by any foreclosure of the
Mortgaged Property, shall survive such foreclosure and remain in force and
effect thereafter, it being acknowledged and agreed that all obligations of
Trustor and rights and remedies of Beneficiary set forth herein are contractual
in nature, and such obligations, rights and remedies, and all liens,
assignments, security interests and other security provided to Beneficiary
hereunder and under the other Security Documents (but excluding the lien against
the Mortgaged Property or portions thereof that are foreclosed), shall not be
extinguished by the subject foreclosure.
11.3 FURTHER ASSURANCES. Trustor, upon the request of Beneficiary, will
execute, acknowledge, deliver and record and/or file such further instruments
and do such further acts as may be necessary or appropriate to carry out more
effectively the purpose of the Security Documents and to subject to the liens
and security interests thereof any property intended by the terms thereof to be
covered thereby, including specifically, but without limitation, any renewals,
additions, substitutions, replacements, betterments or appurtenances to the then
Mortgaged Property.
11.4 RECORDING AND FILING. Trustor will cause the Security Documents and
all amendments and supplements thereto and substitutions therefor to be
recorded, filed, re-recorded and refiled in such manner and in such places as
Trustee or Beneficiary shall reasonably request, and will pay all such
recording, filing, re-recording and refiling taxes, fees and other charges
related thereto.
11.5 NOTICES. All notices or other communications required or permitted to
be given pursuant to this Deed of Trust shall be in writing and shall be deemed
to have been given or made when mailed by first-class United States mail,
postage prepaid, registered or certified with return receipt requested, if sent
by national overnight courier, or if delivered in person to the intended
addressee. For purposes of notice, the addresses of the parties shall be as set
forth in Paragraph 1.1(a) and the opening recital above; provided, however, that
either party shall have
-28-
<PAGE>
the right to change its address for notice hereunder to any other location
within the continental United States by the giving of notice to the other party
in the manner set forth hereinabove.
11.6 NO WAIVER. Any failure by Trustee or Beneficiary to insist, or any
election by Trustee or Beneficiary not to insist, upon strict performance by
Trustor of any of the terms, provisions or conditions of the Security Documents
shall not be deemed to be a waiver of same or of any other term, provision or
condition thereof, and Trustee and Beneficiary shall have the right at any time
or times thereafter to insist upon strict performance by Trustor of any and all
such terms, provisions and conditions. No delay or omission by Trustee or
Beneficiary, or by any holder of any of the Notes, to exercise any right, power
or remedy accruing upon any breach or Event of Default shall exhaust or impair
any such right, power or remedy or shall be construed to be a waiver of any such
breach or Event of Default, or acquiescence therein, and every right, power and
remedy given by this Deed of Trust to Trustee or Beneficiary may be exercised
from time to time and as often as may be deemed expedient by Trustee or
Beneficiary. No consent or waiver, expressed or implied, by Trustee or
Beneficiary to or of any breach or Event of Default by Trustor in the
performance of the Obligations of Trustor hereunder or to any other Event of
Default shall be deemed or construed to be a consent or waiver to or of any
other breach or Event of Default in the performance of the same or any other
Obligations of Trustor hereunder. Failure on the part of Trustee or Beneficiary
to complain of any act or failure to act or to declare an Event of Default,
irrespective of how long such failure continues, shall not constitute a waiver
by Trustee or Beneficiary of its rights hereunder or impair any rights, powers,
or remedies of Trustee or Beneficiary hereunder.
No act or omission by Trustee or Beneficiary shall release, discharge,
modify, change or otherwise affect the original liability under the Notes, this
Deed of Trust or any other Obligations of Trustor or any subsequent purchaser of
the Mortgaged Property or any part thereof, or any maker, cosigner, endorser,
surety or guarantor, or preclude Trustee or Beneficiary from exercising any
right, power or privilege herein granted or intended to be granted in the event
of any Event of Default then made or by any subsequent Event of Default, or
alter the security title, security interest or lien of this Deed of Trust,
except as expressly provided in an instrument or instruments executed by Trustee
and Beneficiary. Without limiting the generality of the foregoing, Trustee and
Beneficiary may: (i) grant forbearance or an extension of time for the payment
of all or any portion of the Indebtedness; (ii) take other or additional
security for the payment of the Indebtedness; (iii) waive or fail to exercise
any right granted hereunder or in the Notes; (iv) change any of the terms,
covenants, conditions or agreements of the Notes or this Deed of Trust;
(v) consent to the filing of any map, plat or replat affecting the Mortgaged
Property; (vi) consent to the granting of any easement or other right affecting
the Mortgaged Property; (vii) make or consent to any agreement subordinating the
security title, security interest or lien hereof; or (viii) take or omit to take
any action whatsoever with respect to the Notes, this Deed of Trust, the
Mortgaged Property or any document or instrument evidencing, securing or in any
way relating to the Indebtedness; all without releasing, discharging, modifying,
changing or affecting any such liability, or precluding Trustee or Beneficiary
from exercising any such right, power or privilege, or affecting the security
title, security interest or lien of this Deed of Trust. In the event of the
sale or transfer by operation of law or otherwise of all or any part of the
Mortgaged Property, Trustee and Beneficiary, without notice, are hereby
authorized and empowered to deal with any such vendee or transferee with
reference to the Mortgaged Property or the Indebtedness, or with reference to
any of the terms, covenants, conditions or agreements hereof, as fully and to
the
-29-
<PAGE>
same extent as it might deal with the original parties hereto and without in any
way releasing and/or discharging any liabilities, Obligations or undertakings.
11.7 BENEFICIARY'S RIGHT TO PERFORM THE OBLIGATIONS. If Trustor shall
fail, refuse or neglect to make any payment or perform any act required by the
Security Documents within the applicable notice and cure period, if any, then at
any time thereafter, and without notice to or demand upon Trustor and without
waiving or releasing any other right, remedy or recourse Beneficiary may have
because of same, Beneficiary may (but shall not be obligated to) make such
payment or perform such act for the account of and at the expense of Trustor,
and shall have the right to enter the Land and Improvements for such purpose and
to take all such action thereon and with respect to the Mortgaged Property as it
may reasonably deem necessary or appropriate. If Beneficiary shall elect to pay
any Imposition or other sums due with reference to the Mortgaged Property,
Beneficiary may do so in reliance on any bill, statement or assessment procured
from the appropriate Governmental Authority or other issuer thereof without
inquiring into the accuracy or validity thereof. Similarly, in making any
payments to protect the security intended to be created by the Security
Documents, Beneficiary shall not be bound to inquire into the validity of any
apparent or threatened adverse title, lien, encumbrance, claim or charge before
making an advance for the purpose of preventing or removing the same. Trustor
shall indemnify Beneficiary for all losses, expenses, damages, claims and causes
of action, including reasonable attorneys' fees, incurred or accruing by reason
of any acts performed by Beneficiary pursuant to the provisions of this
Paragraph 11.7 or by reason of any other provision in the Security Documents.
All sums paid by Beneficiary pursuant to this Paragraph 11.7, and all other sums
expended by Beneficiary to which it shall be entitled to be indemnified,
together with interest thereon at the Default Rate provided in the Loan
Agreement from the date of such payment or expenditure until paid, shall
constitute additions to the Indebtedness, shall be secured by the liens,
security interests and rights created by the Security Documents and shall be
paid upon demand. Beneficiary shall provide Trustor reasonable notice of any
action taken by Beneficiary under this Paragraph 11.7.
11.8 COVENANTS RUNNING WITH THE LAND. All Obligations contained in this
Deed of Trust are intended to be, and shall be construed as, covenants running
with the Mortgaged Property.
11.9 SUCCESSORS AND ASSIGNS. All of the terms of the Security Documents
shall apply to, be binding upon and inure to the benefit of the parties thereto,
their successors, assigns, heirs and legal representatives, and all other
persons claiming by, through or under them.
11.10 SEVERABILITY. The Security Documents are intended to be performed in
accordance with, and only to the extent permitted by, all applicable Legal
Requirements. If any provision of any of the Security Documents or the
application thereof to any person or circumstance shall, for any reason and to
any extent, be invalid or unenforceable, then neither the remainder of the
instrument in which such provision is contained nor the application of such
provision to other persons or circumstances nor the other instruments referred
to hereinabove shall be affected thereby, but rather, shall be enforced to the
greatest extent permitted by law.
11.11 ENTIRE AGREEMENT AND MODIFICATION. The Security Documents contain
the entire agreements between the parties relating to the subject matter hereof
and thereof, and all prior agreements relative thereto which are not contained
herein or therein are terminated. The Security Documents may not be amended,
revised, waived, discharged, released or terminated
-30-
<PAGE>
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.
11.12 ASSIGNMENT. This Deed of Trust is assignable by Beneficiary and any
such assignment hereof by Beneficiary shall operate to vest in the assignee all
rights and powers herein conferred upon and granted to Beneficiary.
11.13 TIME IS OF THE ESSENCE. Time is of the essence with respect to each
and every covenant, agreement and obligation of Trustor under this Deed of
Trust, the Notes and any and all other Security Documents.
11.14 COUNTERPARTS. This Deed of Trust may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute but one instrument.
11.15 APPLICABLE LAW. This Deed of Trust shall be governed by and
construed according to the laws of the State of Colorado from time to time in
effect, except that the laws of the State of Georgia and applicable United
States Federal law shall determine whether or not the transaction evidenced by
the Security Documents is usurious. It is expressly stipulated and agreed to be
the intent of the parties to comply at all times with applicable Georgia law
governing the maximum rate or amount of interest payable on the Indebtedness (or
applicable United States Federal law to the extent that it permits Beneficiary
to contract for, charge, take, reserve or receive a greater amount of interest
than under Georgia law). If the applicable law is ever revised, repealed or
judicially interpreted so as to render usurious any amount called for under the
Loan Agreement, the Notes or under any of the other Security Documents, or
contracted for, charged, taken, reserved or received with respect to the
Indebtedness, or if Beneficiary's exercise of the option to accelerate the
maturity of the Notes, or if any prepayment results in the payment of interest
in excess of that permitted by applicable law, then it is the parties' express
intent that all excess amounts theretofore collected by Beneficiary be credited
to the principal balance of the Notes or any other principal indebtedness of
Trustor (or, if the Notes and all other indebtedness have been or would thereby
be paid in full, refunded to Trustor), and the provisions of the Loan Agreement,
the Note, this Deed of Trust and the other Security Documents immediately be
deemed reformed and the amounts thereafter collectible hereunder and thereunder
reduced, without the necessity of the execution of any new documents, so as to
comply with the then applicable law, but so as to permit the recovery of the
fullest amount otherwise called for hereunder and thereunder. All sums paid or
agreed to be paid for the use, forbearance or detention of the Indebtedness
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated and spread throughout the full term of the Indebtedness until payment
in full so that the rate or amount of interest on account of the Indebtedness
does not exceed the usury ceiling from time to time in effect and applicable to
the Indebtedness for so long as the Indebtedness is outstanding.
11.16 SUBROGATION. If any or all of the proceeds of the Notes have been
used to extinguish, extend or renew any indebtedness heretofore existing against
the Mortgaged Property, then, to the extent of such funds so used, the
Indebtedness and this Deed of Trust shall be subrogated to all of the rights,
claims, liens, titles and interests heretofore existing against the Mortgaged
Property to secure the indebtedness so extinguished, extended or renewed, and
the former rights, claims, liens, titles and interests, if any, are not waived,
but rather,
-31-
<PAGE>
are continued in full force and effect in favor of Beneficiary and are merged
with the lien and security interest created herein as cumulative security for
the repayment of the Indebtedness and the satisfaction of the Obligations.
11.17 HEADINGS. The Article, Paragraph and Subparagraph entitlements
hereof are inserted for convenience of reference only and shall in no way alter,
modify or define, or be used in construing, the text of such Articles,
Paragraphs or Subparagraphs.
11.18 NO JOINT VENTURE. Notwithstanding anything in any of the Security
Documents or in any other agreement or commitment to the contrary, neither the
Security Documents nor the transactions described in the Security Documents nor
the rights and obligations granted therein shall in any way create or contribute
to the creation of a partnership or joint venture or similar arrangement between
Trustor and Beneficiary.
11.19 JURY TRIAL WAIVER AND CONSENT TO JURISDICTION AND VENUE. EACH PARTY
TO THIS DEED OF TRUST HEREBY WAIVES ANY RIGHT SUCH PARTY MAY HAVE UNDER ANY
APPLICABLE LAW TO A TRIAL BY JURY WITH RESPECT TO ANY SUIT OR LEGAL ACTION WHICH
MAY BE COMMENCED BY OR AGAINST SUCH PERSON OR THE OTHER PARTIES CONCERNING THE
INTERPRETATION, CONSTRUCTION, VALIDITY, ENFORCEMENT OR PERFORMANCE OF THIS DEED
OF TRUST OR ANY OF THE OTHER SECURITY DOCUMENTS. EACH PARTY TO THIS DEED OF
TRUST FURTHER AGREES AND CONSENTS TO THE JURISDICTION OF ANY FEDERAL COURT
SITTING IN ATLANTA, GEORGIA WITH RESPECT TO ANY SUCH SUIT OR LEGAL ACTION, AND
EACH PARTY TO THIS DEED OF TRUST FURTHER AGREES AND CONSENTS TO VENUE OF ANY
FEDERAL COURT SITTING IN FULTON COUNTY, GEORGIA WITH REGARD TO ANY SUCH SUIT OR
LEGAL ACTION.
11.20 ACCEPTANCE OF TRUST; POWERS AND DUTIES OF TRUSTEE. Trustee accepts
this trust when this Deed of Trust is recorded. Except as may be required by
applicable law, Beneficiary may from time to time apply to any court of
competent jurisdiction for aid and direction in the execution of the trust
hereunder and the enforcement of rights and remedies available hereunder, and
may obtain orders or decrees directing, confirming or approving acts in the
execution of said trust and the enforcement of said remedies.
11.21 LOAN AGREEMENT. Reference is hereby made for all purposes to the
Loan Agreement, which is hereby incorporated by reference herein. In the event
of a conflict between the terms and provisions hereof and the Loan Agreement,
the Loan Agreement shall govern.
IN WITNESS WHEREOF, Trustor has executed this Deed of Trust under seal, as
of the day and year first above written.
"Trustor"
MARQUEST MEDICAL PRODUCTS, INC.,
a Colorado corporation
By: /s/ W. J. Thompson
---------------------------------------------
Title: President
--------------------------------------
Attest: /s/ Margaret Von der Schmidt
-----------------------------------------
Title: Secretary
-------------------------------------
(CORPORATE SEAL)
-32-
<PAGE>
STATE OF COLORADO)
SS.
COUNTY OF DOUGLAS)
The foregoing instrument was acknowledged before me this 28th day of March,
1996, by W. J. Thompson and Margaret Von der Schmidt, as President and
Secretary, respectively, of Marquest Medical Products, Inc.
WITNESS my hand and official seal.
My commission expires 04-04-98.
[illegible]
NOTARY PUBLIC
(NOTARIAL SEAL)
-33-
<PAGE>
EXHIBIT "A"
Legal Description
Lot 1, Block 1, an amendment to Lots 1 and 3 of an amended plat of Block 1,
Meridian Office Park Filing No. 1, Second Amendment as recorded February 10,
1986 under Reception No. 374931, County of Douglas, State of Colorado.
<PAGE>
EXHIBIT "B"
Permitted Encumbrances
1. Deed of Trust from Marquest Medical Products, Inc. to the Public
Trustee of Douglas County for the use of Colorado National Bank to
secure the sum of $1,300,000.
2. The rights of tenants as tenants.
3. Order and Decree establishing the Lincoln Park West Metropolitan
District, evidenced by an instrument recorded on October 14, 1976 in
Book 296 at page 563 (subject to an Order of the District Court, County
of Douglas, changing the name of the Lincoln Park West Metropolitan
District to Meridian Metropolitan District, evidenced by an instrument
recorded on March 11, 1985 in Book 564 at page 805).
4. (a) Memorandum of Lease between 901 Corporation as Lessor, and
Lincoln Park West Metropolitan District as Lessee, recorded on October
6, 1981 in Book 423 at page 793.
(b) Second Amendment to Water Lease by and Between TCD North, Inc.
and Lincoln Park West Metropolitan District recorded February 7, 1985
in Book 560 at page 780.
(c) Third Amendment to Water Lease by and Between TCD North, Inc. and
Lincoln Park West Metropolitan District recorded on August 6, 1985 in
Book 588 at page 116.
(d) Subordination Agreement in connection with Water Lease by and
Between TCD North, Inc. and Lincoln Park West Metropolitan District
recorded August 6, 1985 in Book 588 at page 142.
5. Terms, conditions and provisions of Covenant and Agreement between
Meridian 901 Corporation and Lincoln Park West Metropolitan District
recorded April 11, 1983 in Book 471 at page 465.
6. Restrictions and Easements as shown on the Plat and Amended Plat of
Block 1, Meridian Office Park, Filing No. 1, Second Amendment;
Restrictions and Easements as shown on an Amendment to Lots 1 and 3 of
Amended Plat of Block 1, Meridian Office Park, Filing No. 1, Second
Amendment.
7. Terms, conditions and provisions of Landscape Maintenance Agreement
Recorded February 20, 1985 in Book 562 at page 566.
8. (a) Amendment and Restatement of Declaration of Protective Covenants
of Meridian 901 Corporation recorded November 2, 1984 in Book 546 at
page 750.
(b) Application in connection with Amendment and Restatement of
Declaration of Protective Covenants of Meridian 901 Corporation
recorded January 7, 1985 in Book 557 at page 373.
(c) Designation of New Declaration in connection with Amendment and
Restatement of Declaration of Protective Covenants of Meridian 901
Corporation recorded August 6, 1985 in Book 588 at page 235.
9. Terms, conditions and provisions of Assignment, Bill of Sale and
Assumption of Contracts and Other Property Interests by and between
Meridian 901 Corporation and TCD North, Inc., recorded February 7,
1985 in Book 560 at page 767.
10. Restrictions and reservations contained in Deed recorded February 21,
1986 in Book 629 at page 442 (subject to Judgment and Decree for Under
Ground Water Rights and Approval of a Plan for Augmentation of TCD
North, Inc. in the South Platte
<PAGE>
River System and its Tributaries recorded on July 25, 1985 in Book 586
at pages 370 and 375).
11. Declaration of Covenants, Conditions and Restrictions recorded on
February 21, 1986 in Book 625 at page 435.
12. Utility Easement granted to Public Service Company of Colorado in an
instrument recorded on January 9, 1984, in Book 504 at page 82.
13. (a) Easement for Aviation and Related Rights and Hazards granted to
the Arapahoe County Airport Authority by an instrument recorded on
August 8, 1977 in Book 312 at page 511.
(b) Agreement to Amend Easement for Aviation and Related Rights and
Hazards granted to the Arapahoe County Airport Authority recorded on
April 5, 1982 in Book 438 at page 142.
14. Terms and conditions set forth in a letter addressed to the Lincoln
Park West Metropolitan District as to the development of water
resources and related obligations, recorded on May 11, 1977 in Book
307 at page 745 and amended by an instrument recorded on October 6,
1981 in Book 423 at page 802.
15. Resolution by the Board of County Commissioners for zoning Recorded
October 4, 1974 in Book 267 at page 867 and amended in an instrument
recorded on July 29, 1982 in Book 447 at page 602.
16. Utility Easement granted to Public Service Company of Colorado to
construct, operate, maintain, repair and replace utility lines
recorded February 23, 1983 in Book 466 at page 587.
17. Federal Tax Liens perfected April 11, 1995 and January 22, 1996.
<PAGE>
EXHIBIT "C"
SCHEDULE 1
(DESCRIPTION OF "DEBTOR" AND "SECURED PARTY")
A. DEBTOR:
1. Name and Identity or Corporate Structure:
Marquest Medical Products, Inc., a Colorado corporation
2. The residence or principal place of business of Debtor in the State of
Colorado is located at 11039 East Lansing Circle, Englewood, Douglas
County, Colorado.
3. Debtor has been using or operating under said name and identity or
corporate structure without change for the following time period:
since inception.
B. SECURED PARTY: Scherer Capital, LLC
********************************************************************************
SCHEDULE 2
(NOTICE MAILING ADDRESSES OF "DEBTOR" AND "SECURED PARTY")
A. The mailing address of Debtor is:
Marquest Medical Products, Inc.
11039 East Lansing Circle
Englewood, Colorado 80112
Attention: President
B. The mailing address of Secured Party is:
Scherer Capital, LLC
2859 Paces Ferry Road
Suite 300
Atlanta, Georgia 30339
Attention: President
<PAGE>
THE SECURITIES EVIDENCED HEREBY WERE ISSUED AND SOLD WITHOUT REGISTRATION UNDER
THE FEDERAL SECURITIES ACT OF 1933, AS AMENDED (THE "FEDERAL ACT"), OR
SECURITIES LAWS OF ANY STATE, INCLUDING THE GEORGIA SECURITIES ACT OF 1973, AS
AMENDED (THE "GEORGIA ACT"), IN RELIANCE UPON CERTAIN EXEMPTIVE PROVISIONS OF
SAID ACTS, INCLUDING SECTION 5-9(13) OF THE GEORGIA ACT. SAID SECURITIES CANNOT
BE SOLD OR TRANSFERRED EXCEPT (1) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE FEDERAL ACT OR PURSUANT TO AN EXEMPTION FROM SUCH
REGISTRATION; AND (2) IN A TRANSACTION WHICH IS EXEMPT UNDER THE GEORGIA ACT OR
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE GEORGIA ACT OR IN A
TRANSACTION WHICH IS OTHERWISE IN COMPLIANCE WITH THE GEORGIA ACT; AND (3) IN A
TRANSACTION WHICH IS EXEMPT FROM THE APPLICABLE SECURITIES LAWS OF ANY STATE OR
IN A TRANSACTION WHICH IS OTHERWISE IN COMPLIANCE WITH THE SAID SECURITIES LAWS.
MARQUEST MEDICAL PRODUCTS, INC.
CONVERTIBLE SECURED NOTE
DUE APRIL 1, 2001
Date: March 28, 1996 $700,000.00
1. PROMISE TO PAY. Marquest Medical Products, Inc., a corporation
incorporated under the laws of the State of Colorado (together with its
subsidiaries, if any, hereinafter collectively referred to as the "Company"),
for value received, hereby promises to pay, except as otherwise provided for
herein, to Scherer Capital, LLC (hereinafter called the "Holder"): (a) the
principal amount of Seven Hundred Thousand and No/100 Dollars ($700,000.00) on
April 1, 2001 (the "Maturity Date"); and (b) simple interest on the principal
amount hereof outstanding and unconverted from time to time commencing on the
date hereof, accruing at the "Prime Rate" (as such term is defined below) plus
one and one-half percent (1 1/2%), as determined on the date hereof and on the
first day of each calendar quarter thereafter, provided that if the first day of
a calendar quarter falls on a day other than a business day, such determination
shall be based on the Prime Rate in effect on the immediately preceding
business day. Interest shall be payable quarterly on the 1st day of each April,
July, October and January throughout the term hereof, commencing on the date
hereof. For purposes of this Note, the "Prime Rate" on any particular day is
the interest rate per annum published on such day in THE WALL STREET JOURNAL
(Eastern Edition) as the current prime corporate lending rate, or in the event
such Prime Rate is discontinued as a standard, a comparable
<PAGE>
reference rate designated by Holder as a substitute therefor. The principal
hereof and interest thereon shall be payable at the principal office of the
Holder (or at such other place as the Holder may reasonably designate) in such
coin or currency of the United States of America that at the time of payment
shall be legal tender for the payment of public or private debts in funds
collectible on the date which is prescribed herein for payment.
In the event that payment is not made on the date prescribed for payment
herein, simple interest shall accrue on the aggregate amount due and payable
(including principal, interest or both, as the case may be) but remaining
unpaid, at the rate of eighteen percent (18%) per annum, (but in no event higher
than the maximum rate of interest permissible under applicable provisions of
law) from the date such amount becomes due and payable until the date of
payment. In the event that the Holder is required to engage the services of an
attorney or to institute litigation to effect collection of the sums due
pursuant to this Note, the Company shall pay all reasonable costs of such
collection, including, without limitation reasonable attorneys' fees and court
costs not to exceed 15% of the outstanding principal and amount of, and the
accrued and unpaid interest on, the Note after default.
The indebtedness evidenced hereby is secured by that certain Loan and
Security Agreement dated March 28, 1996, by and between Company and Holder (the
"Loan Agreement").
2. AUTHORIZED ISSUE. This Note is one of the Convertible Secured Notes
limited in the aggregate amount to One Million Five Hundred Thousand Dollars
($1,500,000) and referenced to in the Loan Agreement. In addition to its rights
and remedies as set forth herein, the Holder shall have all of the rights and
remedies of the Lender under the Loan Agreement.
3. EVENTS OF DEFAULT. Upon the occurrence of an "Event of Default" as
such term is defined in the Loan Agreement, then, and in any such event and
without limiting its remedies as provided in the Loan Agreement, the Holder may,
upon delivery of a notice of any such Event of Default given to the Company,
declare the remaining unpaid and unconverted sums due under this Note to be
forthwith due and payable, whereupon the aggregate then unpaid and unconverted
principal amount of this Note, together with all accrued interest thereon, shall
become immediately due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived.
4. CONVERSION. At any time on or before the Maturity Date, the
outstanding principal amount of, and the accrued and unpaid interest on, this
Note shall be convertible into common stock, $0.01 par value, of Company (the
"Common Stock") at the
-2-
<PAGE>
option of the Holder in accordance with the following provisions of this Section
4.
4.1 OPTIONAL CONVERSIONS. Subject to and upon compliance with the
other provisions of this Note and the provisions of this Section 4, the
Holder shall have the right at the Holder's option to convert all or any
portion of the outstanding principal of, and the accrued interest on, this
Note into fully paid and nonassessable shares of Common Stock, at the
Conversion Price (hereafter defined) in effect on the Conversion Date
(hereafter defined), upon the terms hereinafter set forth.
4.2 CONVERSION PRICE. The outstanding principal amount of, and
accrued interest on, this Note shall be convertible into the number of
shares of Common Stock as is determined by multiplying the amount to be
converted times a fraction, the numerator of which is $1.00 and the
denominator of which is the Conversion Price in effect on the Conversion
Date. The Conversion Price at which shares of Common Stock shall be
issuable upon conversion of this Note shall be Seventy Cents ($0.70)
(subject to adjustment as provided below, hereafter the "Conversion
Price"). The Conversion Price shall be subject to adjustment as set forth
in Section 4.5 below.
4.3 MECHANICS OF CONVERSION. The Holder may exercise the conversion
right specified in Section 4.1 above by written notice stating that the
Holder elects to convert all or a specified portion of the outstanding
principal amount of and interest on this Note. Conversion shall be deemed
to have been effected on the date when both notice of an election to
convert and the original of this Note are delivered; any such date is
referred to herein as the "Conversion Date". As promptly as practicable
thereafter Company shall issue and deliver to the Holder a certificate or
certificates for the number of full shares of Common Stock to which the
Holder is entitled rounded up to the next whole share as provided in
Section 4.4 below in consideration of the delivery of the Note to the
Company at such time. If this Note is to be converted in part only,
Company shall issue and deliver to the Holder contemporaneously therewith
the original of this Note with an appropriate notation of the reduction in
the principal amount so converted or a replacement note identical in all
respects to this Note except as adjusted to reflect the outstanding
principal amount thereof after giving effect to such conversion. The
person in whose name the certificate or certificates of Common Stock is to
be issued shall be deemed to have become a holder of record of such Common
Stock on the applicable Conversion Date. Conversion of all
-3-
<PAGE>
or any portion of the principal of this Note shall not affect Company's
obligation to pay interest accrued through the date of conversion on the
outstanding principal balance of this Note which is converted and on any
remaining outstanding principal balance hereof.
4.4 FRACTIONAL SHARES. No fractional shares of Common Stock or scrip
shall be issued upon conversion of this Note. Instead of any fractional
shares of Common Stock which would otherwise be issuable upon conversion of
this Note, the number of full shares of Common Stock issuable upon
conversion hereof shall be increased to the next highest number of whole
shares.
4.5 CONVERSION PRICE ADJUSTMENTS. The Conversion Price and the number
of shares of Common Stock issuable upon conversion (the "Conversion
Shares") shall be subject to adjustment from time to time as follows:
(a) STOCK DIVIDENDS. If the number of shares of Common Stock
outstanding at any time after March 28, 1996 is increased by stock
dividend payable in shares of Common Stock or by a subdivision or
split-up of shares of Common Stock, then immediately after the
record date fixed for the determination of holders of Common Stock
entitled to receive such stock dividend or the effective date of such
subdivision or split-up, as the case may be, the Conversion Price
shall be appropriately reduced and the number of Conversion Shares
proportionately increased so that the Holder thereafter shall be
entitled to receive the number of shares of Common Stock of Company
which the Holder would have owned immediately following such action
had this Note been then outstanding and converted immediately prior
thereto.
(b) COMBINATION OF STOCK. If the number of shares of Common
Stock outstanding at any time after March 28, 1996 is decreased by a
combination of the outstanding shares of Common Stock, then,
immediately after the effective date of such combination, the
Conversion Price shall be appropriately increased and the number of
Conversion Shares proportionately decreased so that the Holder shall
be entitled to receive the number of shares of Common Stock which the
Holder would have owned immediately following such action had this
Note been then outstanding and converted immediately prior thereto.
(c) REORGANIZATION. In case of any capital reorganization of
Company, or of any reclassification
-4-
<PAGE>
of the Common Stock, or in case of the consolidation of Company with
or the merger of Company with or into any other corporation,
partnership or other business entity in which Company is not the
survivor, or any share exchange involving the Common Stock or of the
sale, lease or other transfer of all or substantially all of the
assets of Company to any other corporation, partnership or other
business entity, or in the case of any distribution of cash (other
than dividends not exceeding, in the aggregate, net income earned from
December 31, 1995 to the date on which such dividend is declared) or
other assets or of notes or other indebtedness of Company or any other
securities of Company (except Common Stock) to the holders of Common
Stock, this Note shall, after such capital reorganization,
reclassification, consolidation, merger, share exchange, sale, lease
or other transfer or such distribution, be convertible into the number
of shares of stock or other securities or property to which a holder
of the Common Stock issuable (at the time of such capital
reorganization, reclassification, consolidation, merger, share
exchange, sale, lease or other transfer or such distribution)
upon conversion of this Note as the Holder would have been entitled
to receive upon such capital reorganization reclassification,
consolidation, merger, share exchange, sale, lease or other transfer
or such distribution in place of (or in addition to, in the case of
any such event after which Common Stock remains outstanding) the
shares of Common Stock into which this Note would otherwise have been
convertible; and in any such case, if necessary, the provisions set
forth herein with respect to the rights and interests thereafter of
the Holder shall be appropriately adjusted so as to be applicable,
as nearly as may reasonably be, to any share of stock or other
securities or property thereafter deliverable on the conversion of
this Note. The subdivision or combination of shares of Common Stock
issuable upon conversion of this Note into a greater or lesser number
of shares of Common Stock (whether with or without par value) shall
not be deemed to be a reclassification of the Common Stock for the
purposes of this subparagraph (c).
(d) ROUNDING OF CALCULATIONS. All calculations under this
Section 4.5 shall be made to the nearest cent or to the nearest one
hundredth (1/100th) of a share, as the case may be.
-5-
<PAGE>
(e) TIMING OF ISSUANCE OF ADDITIONAL COMMON STOCK UPON CERTAIN
ADJUSTMENTS. In any case in which the provisions of this Section 4.5
require that an adjustment shall become effective immediately after a
record date for an event, Company may defer until the occurrence of
such event issuing to the Holder hereof the additional shares of
Common Stock or other property issuable or deliverable upon exercise
by reason of the adjustment required by such event over and above the
shares of Common Stock or other property issuable or deliverable upon
such conversion before giving effect to such adjustment; PROVIDED,
HOWEVER, that Company upon request shall deliver to the Holder a due
bill or other appropriate instrument evidencing the Holder's right to
receive such additional shares or other property, and such cash, upon
the occurrence of the event requiring such adjustments.
4.6 STATEMENT REGARDING ADJUSTMENTS. Whenever the Conversion Price
shall be adjusted as provided in Section 4.5, Company shall forthwith file,
at the principal office of Company, a statement showing in detail the facts
requiring such adjustment and the Conversion Price that shall be in effect
after such adjustment, and Company shall also cause a copy of such
statement to be sent by mail, first class postage prepaid, to the Holder at
its address appearing on Company's records. Each such statement shall be
signed by Company's chief financial officer. Where appropriate, such copy
may be given in advance and may be included as part of a notice required to
be mailed under the provisions of Section 4.7 below.
4.7 NOTICE TO HOLDER. In the event Company proposes to take any
action of the type described in clause (a), (b) or (c) of paragraph 4.5
above, Company shall give notice to Holder in the manner set forth in
Section 4.6 above, which notice shall specify the record date, if any, with
respect to any such action and the approximate date on which such action is
to take place. Such notice shall also set forth such facts with respect
thereto as shall be reasonably necessary to indicate the effect of such
action (to the extent such effect may be known at the date of such notice)
on the Conversion Price and the number, kind or class of shares or other
securities or property which shall be deliverable or purchasable upon the
occurrence of such action or deliverable upon conversion of this Note. In
the case of any action which would require the fixing of a record date,
such notice shall be given at least 10 days prior to the date so fixed, and
in case of all other action, such notice shall be given at least 15 days
prior to the taking of such proposed action.
-6-
<PAGE>
4.8 COSTS. Company shall pay all documentary, stamp, transfer or
other transactional taxes attributable to the issuance or delivery of
shares of Common Stock or other securities or property upon conversion of
this Note; PROVIDED, HOWEVER, that Company shall not be required to pay any
income taxes incurred by the holder of this Note or any taxes which may be
payable in respect of any transfer involved in the issuance or delivery of
any certificate for such shares or securities in any name other than that
of Holder.
4.9 RESERVATION OF SHARES. Company shall reserve at all times so
long as this Note remains outstanding, free from preemptive rights, out of
its treasury stock or its authorized but unissued shares of Common Stock,
or both, solely for the purpose of effecting the conversion of this Note,
sufficient shares of Common Stock to provide for the conversion of this
Note and set aside and keep available any other property deliverable upon
conversion of this Note.
4.10 APPROVALS. If any shares of Common Stock or other securities
to be reserved for the purpose of conversion of this Note requires
registration with or approval of any governmental authority under any
Federal or state law before such shares or other securities may be validly
issued or delivered upon conversion, then Company will in good faith and
as expeditiously as possible endeavor to secure such registration or
approval, as the case may be.
4.11 VALID ISSUANCE. All shares of Common Stock or other
securities which may be issued upon conversion of this Note will upon
issuance by Company be duly and validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to
the issuance thereof and Company shall take no action which will cause a
contrary result.
5. PUT AND CALL.
5.1 PUT. (a) Immediately upon the occurrence of any "Put Event" (as such
term is defined below), Holder may at its option at any time upon giving written
notice to the Company declare the entire then unpaid and unconverted principal
of and accrued and unpaid interest on this Note (the "Remaining Indebtedness")
at such time to be due and payable in accordance herewith. The Company shall
have thirty (30) business days after receipt of the foregoing notice from Holder
in which to tender the full amount of the Remaining Indebtedness to Holder in
full and complete satisfaction hereof;
-7-
<PAGE>
(b) For purposes of this Note, a Put Event is defined as any of the
following events:
(i) The acquisition of 40% or more of the voting
capital stock of the Company or of any entity
holding, directly or indirectly, voting capital
stock with the power to control the management of
the Company, by any "person" or "group" as such
terms are used for purposes of Section 13(d)
and 14(d) of the Securities Act of 1934 (the
"Exchange Act"), or by any person or group that is
or becomes a "beneficial owner" as such term is
defined in Rule 13d-3 or 13d-5 under the Exchange
Act;
(ii) the merger or consolidation of the Company into or
with any other entity; or
(iii) the liquidation or dissolution of the Company.
Company agrees to notify Holder of any Put Event described in subparagraph (i)
above immediately upon Company's knowledge thereof, and of any Put Event
described in subparagraphs (ii) and (iii) above no less than sixty (60) days
prior to the occurrence of any such event.
5.2 CALL. On or after April 1, 1997, the Company may, in its discretion,
give Holder written notice that ninety (90) days after the date Holder receives
such notice the Company shall redeem this Note for the redemption price
described below, expressed as a percentage of the unpaid principal amount of
the Note (the "Redemption Price") plus all interest accrued and unpaid to the
date of redemption, in full and complete satisfaction hereof.
Year of Redemption Redemption Price
------------------ ----------------
1997 104%
1998 104%
1999 103%
2000 102%
2001 101%
During such ninety (90)-day period, Holder has the option to convert the entire
Remaining Indebtedness into shares of Common Stock pursuant to the conversion
formula and procedures set forth in Section 4 hereof. If Holder fails to
exercise his conversion option as set forth herein during such ninety (90)-day
period, the Company's election pursuant to this Section 5.2 shall be binding
upon Holder.
-8-
<PAGE>
6. NOTICES. Any notice or communication given pursuant hereto by any
party hereto shall be in writing and hand delivered or mailed by registered or
certified mail, postage prepaid, as follows:
If to Holder to:
Scherer Capital, LLC
2859 West Paces Ferry Road
Suite 300
Atlanta, Georgia 30339
Attention: President
With a copy to:
J. Dexter Edge, Jr.
Troutman Sanders LLP
600 Peachtree Street
Suite 5200
Atlanta, Georgia 30308
If to the Company, to:
Marquest Medical Products, Inc.
11039 East Lansing Circle
Englewood, Colorado 80112
Attention: President
With a copy to:
Thomas J. Moore, Esq.
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
633 Seventeenth Street
Suite 2800
Denver, Colorado 80202
or at such other address as hereafter shall be furnished in writing by the
addressed party to the other parties.
7. AMENDMENT. This Note, and the terms hereof, may not be amended except
by an agreement in writing signed by Holder and the Company.
8. GOVERNING LAW. This Note, and the legality, validity, performance and
interpretation hereof shall be governed by the laws of the State of Georgia.
9. ASSIGNABILITY. This Note shall be freely assignable by the Holder
hereof, provided that Holder may not, in any way transfer, dispose of, convey or
assign all or any portion or interest in this Note, the Common Stock, or any
interest herein
-9-
<PAGE>
or therein unless in accordance with all applicable federal and state securities
laws.
10. CAPTIONS. The captions and headings in this Note are merely for
reference purposes and shall have no meaning or effect upon the terms hereof.
IN WITNESS WHEREOF, the Company has executed this Note on March 28, 1996.
MARQUEST MEDICAL PRODUCTS, INC.
By: /s/ W. J. Thompson
------------------------------
President
ATTEST:
/s/ Margaret Von der Schmidt
- --------------------------------
Secretary
-10-
