<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/x/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999.
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____ TO _____.
Commission File Number 0-18592
MERIT MEDICAL SYSTEMS, INC.
- -------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
UTAH 87-0447695
- -------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Identification No.)
incorporation or organization)
1600 West Merit Parkway, South Jordan UT, 84095
- -------------------------------------------------------------------------------
(Address of Principal Executive Offices)
(801) 253-1600
- -------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes __X__ No _____
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
COMMON STOCK 7,572,425
- ---------------- -------------------------------
<S> <C>
TITLE OR CLASS Number of Shares Outstanding at
November 12, 1999
</TABLE>
<PAGE>
MERIT MEDICAL SYSTEMS, INC.
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 1999
and December 31, 1998...................................................... 1
Consolidated Statements of Operations for the three and nine months
ended September 30, 1999 and 1998.......................................... 3
Consolidated Statements of Cash Flows for the nine months
ended September 30, 1999 and 1998.......................................... 4
Notes to Consolidated Financial Statements................................. 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................................. 7
Item 3. Market Risk Disclosure..................................................... 9
PART II. OTHER INFORMATION
Item 4. Exhibits and Reports on Form 8-K........................................... 10
SIGNATURES............................................................................. 10
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1: Financial Statements
MERIT MEDICAL SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
September December 31,
ASSET 1999 1998
- ----- ------------ ------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 731,436 $ 851,910
Trade receivables - net 12,290,665 10,436,485
Employee and related party receivables 467,484 472,994
Irish Development Agency grant receivable 94,945 198,445
Inventories 24,553,726 17,785,743
Prepaid expenses and other assets 625,083 636,124
Deferred income tax assets 739,595 739,595
------------ ------------
Total current assets 39,502,934 31,121,296
------------ ------------
PROPERTY AND EQUIPMENT:
Land 1,365,985 1,065,985
Building 1,500,000
Automobiles 136,436 89,469
Manufacturing equipment 17,105,849 13,669,599
Furniture and fixtures 8,751,644 7,963,835
Leasehold improvements 5,003,745 5,035,288
Construction-in-progress 2,031,670 1,182,669
------------ ------------
Total 35,895,329 29,006,845
Less accumulated depreciation
and amortization (14,110,964) (12,043,130)
------------ ------------
Property and equipment - net 21,784,365 16,963,715
------------ ------------
OTHER ASSETS:
Intangible assets - net 2,322,946 2,333,456
Cost in excess of the fair value of assets acquired - net 4,983,554 150,673
Prepaid royalty - net 21,428
Deposits 44,804 74,218
------------ ------------
Total other assets 7,351,304 2,579,775
------------ ------------
TOTAL $ 68,638,603 $ 50,664,786
============ ============
</TABLE>
CONTINUED ON PAGE 2
See Notes to Consolidated Financial Statements
1
<PAGE>
MERIT MEDICAL SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS (Continued)
SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30, December 31,
1999 1998
------------ -------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Line of credit $ $ 7,634,607
Current portion of long-term debt 1,036,354 1,808,970
Trade payables 5,524,626 3,573,333
Accrued expenses 3,576,249 2,055,849
Advances from employees 97,116 74,090
Income taxes payable 622,712 194,722
------------ -------------
Total current liabilities 10,857,057 15,341,571
DEFERRED INCOME TAX LIABILITIES 1,362,620 1,275,651
LONG-TERM DEBT 24,228,151 3,388,835
DEFERRED CREDITS 997,052 1,023,861
------------ -------------
Total liabilities 37,444,880 21,029,918
------------ -------------
MINORITY INTEREST IN SUBSIDIARY 548,500
------------ -------------
STOCKHOLDERS' EQUITY:
Preferred stock -5,000,000 shares authorized as of September 30,
1999, and December 31, 1998, no shares issued
Common stock - no par value; 20,000,000 and 10,000,000 shares
authorized, respectively, 7,554,371 and 7,508,914 shares issued
at September 30, 1999 and December 31, 1998, respectively 18,084,309 17,793,094
Retained earnings 13,811,503 11,564,928
Foreign currency translation adjustment (702,089) (271,654)
------------ -------------
Total stockholders' equity 31,193,723 29,086,368
------------ -------------
TOTAL $ 68,638,603 $ 50,664,786
============ =============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2
<PAGE>
MERIT MEDICAL SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999 and 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------ ------------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
SALES $19,920,419 $16,703,033 $56,601,881 $51,143,218
COST OF SALES 12,156,979 10,270,250 34,796,574 31,734,533
----------- ----------- ----------- -----------
GROSS MARGIN 7,763,440 6,432,783 21,805,307 19,408,685
----------- ----------- ----------- -----------
OPERATING EXPENSES:
Selling, general and administrative 5,071,648 4,160,108 14,871,567 12,899,025
Research and development 986,010 729,583 2,679,906 2,476,337
----------- ----------- ----------- -----------
TOTAL 6,057,658 4,889,691 17,551,473 15,375,362
----------- ----------- ----------- -----------
INCOME FROM OPERATIONS 1,705,782 1,543,092 4,253,834 4,033,323
OTHER EXPENSE 301,114 236,417 760,614 631,393
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAX EXPENSE 1,404,668 1,306,675 3,493,220 3,401,930
INCOME TAX EXPENSE 463,321 542,743 1,165,567 1,550,163
MINORITY INTEREST IN INCOME
OF SUBSIDIARY 12,579 41,096 81,077 114,717
----------- ----------- ----------- -----------
NET INCOME $ 928,768 $ 722,836 $ 2,246,576 $ 1,737,050
=========== =========== =========== ===========
EARNINGS PER COMMON SHARE -
Basic $ .12 $ .10 $ .30 $ .23
=========== =========== =========== ===========
Diluted $ .12 $ .10 $ .29 $ .23
=========== =========== =========== ===========
WEIGHTED AVERAGE COMMON SHARES -
Basic 7,535,735 7,434,624 7,531,319 7,410,866
=========== =========== =========== ===========
Diluted 7,709,815 7,521,075 7,590,329 7,496,200
=========== =========== =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
3
<PAGE>
MERIT MEDICAL SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED September 30, 1999 and 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
September 30, September 30,
1999 1998
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,246,576 $ 1,737,050
------------ ------------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,575,323 2,121,645
Bad debt expense 110,977 75,689
Losses (gains) on sales and abandonment of
property and equipment 764 43,475
Amortization of deferred credit (106,701) (67,423)
Deferred income taxes 86,969 147,159
Minority interest in income of subsidiary 81,077 114,717
Changes in operating assets and liabilities net of
effects from acquisitions:
Trade receivables (1,965,157) 310,553
Employee and related party receivables 5,510 (224,805)
Irish Development Agency grant receivable 183,392 340,299
Inventories (4,312,626) (2,555,138)
Prepaid expenses 11,041 (63,555)
Deposits and other 29,414 (21,878)
Trade payables 1,951,293 22,422
Accrued expenses 1,520,400 142,536
Advances from employees 23,026 (25,389)
Income taxes 427,990 68,613
------------ ------------
Total adjustments 622,692 428,920
------------ ------------
Net cash provided by operating activities 2,869,268 2,165,970
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures for:
Property and equipment (3,795,562) (3,042,791)
Cash payments in connection with assets
purchased from Mallinckrodt (8,122,777)
Cash payment in connection with purchase of minority
Sentir shareholders' shares (3,477,904)
Intangible assets (188,692) (477,702)
Proceeds from the sale of property and equipment 503 539,202
------------ ------------
Net cash used in investing activities (15,584,432) (2,981,291)
------------ ------------
</TABLE>
CONTINUED ON PAGE 5
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4
<PAGE>
MERIT MEDICAL SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
September 30, September 30,
1999 1998
------------ ------------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from:
Line of credit 1,729,070
Issuance of common stock 291,215 283,443
Issuance of long-term debt 22,058,311
Principal payments on:
Long-term debt (1,689,794) (1,581,681)
Deferred credit
Line of credit (7,634,607) (52,101)
------------ ------------
Net cash provided by financing activities 13,025,125 378,731
------------ ------------
NET INCREASE (DECREASE) IN CASH 309,961 (436,590)
EFFECT OF EXCHANGE RATES ON CASH (430,435) 280,716
CASH AT BEGINNING OF PERIOD 851,910 976,692
------------ ------------
CASH AT END OF PERIOD $ 731,436 $ 820,818
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest (including capitalized interest
of $110,702 and $102,958, respectively) $ 730,539 $ 606,999
============ ============
Income taxes $ 650,608 $ 1,334,391
============ ============
</TABLE>
SUPPLEMENTAL DISCLOSURES OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
During the nine months ended September 30, 1999 and 1998 the Company issued
notes payable totaling $301,817 and $770,848, respectively, for manufacturing
equipment, furniture and fixtures, land and building.
During the nine months ended September 30, 1999, the Company acquired
substantially all of the operating assets of the Mallinckrodt Catheter
Division located in Angleton, Texas for cash. In connection with this
acquisition, the Company recorded the following as of the acquisition date:
<TABLE>
<S> <C>
Assets Acquired $6,098,675
Cost in excess of fair market value 2,024,102
----------
Total purchase price $8,122,777
==========
</TABLE>
During the nine months ended September 30, 1999 the Company purchased all 28%
of the minority shares of Sentir Semiconductor not previously owned by the
Company for $3,477,904. In connection with this acquisition, the Company
recorded $2,848,327 in goodwill.
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5
<PAGE>
MERIT MEDICAL SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. BASIS OF PRESENTATION. In the opinion of management, the accompanying
consolidated financial statements contain all adjustments, consisting only of
normal recurring accruals, necessary for a fair presentation of the financial
position of the Company as of September 30, 1999 and December 31, 1998, and
the results of its operations and cash flows for the three and nine months
ended September 30, 1999 and 1998, and its cash flows for the nine months
September 30, 1999 and 1998. The results of operations for the three and nine
months ended September 30, 1999 and 1998 are not necessarily indicative of
the results for a full year period.
2. INVENTORIES. Inventories at September 30, 1999 and December 31, 1998
consisted of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
-------------- -------------
<S> <C> <C>
Raw materials $10,856,575 $ 8,981,007
Work-in-process 4,203,502 1,954,696
Finished goods 11,198,371 7,458,133
Less reserve for obsolete inventory (1,704,722) (608,093)
-------------- -------------
Total $24,553,726 $ 17,785,743
============== =============
</TABLE>
3. INCOME TAXES. The Company has not fully allocated income tax expense
between current and deferred for the quarters ended September 30, 1999 and
1998. The effective tax rate for the three and nine months ended September
30, 1998 is higher than the federal statutory tax rate largely due to losses
incurred by the Company's Irish subsidiary for which a tax benefit was
recorded at a rate of 10% vs. a 35% federal statutory tax rate. The effective
tax rate improved during the three and nine months ended September 30, 1999,
as the Company's operations in Ireland became profitable and their lower tax
rate improved the Company's overall effective tax rate.
4. REPORTING COMPREHENSIVE INCOME - In June 1997, the Financial Accounting
Standards Board (FASB) issued SFAS No.130, "Reporting Comprehensive Income."
SFAS No. 130 establishes standards for reporting and presentation of
comprehensive income and its components (revenues, expenses, gains and
losses) in a full set of general-purpose financial statements. This statement
requires that an enterprise (a) classify items of other comprehensive income
by their nature in a financial statement and (b) present the accumulated
balance of other comprehensive income separately from retained earnings and
additional paid-in-capital in the equity section of a statement of financial
position.
Effective January 1, 1998, the Company adopted the provisions of SFAS No.
130. Accordingly, the Company determined that the only transaction considered
to be an additional component of comprehensive income is the cumulative
effect of foreign currency translation adjustments. As of September 30, 1999
and December 31, 1998, the cumulative effect of such transactions reduced
stockholders' equity by $702,089 and $271,654, respectively. Comprehensive
income for the three and nine months ended September 30, 1999 and 1998 is
computed as follows:
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
------------- -------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Income $ 928,768 $ 722,836 $2,246,576 $ 1,737,050
Foreign currency translation 187,200 396,545 (430,435) 280,716
----------- ----------- ----------- -----------
Comprehensive income $ 1,115,968 $ 1,119,381 $1,816,141 $ 2,017,766
=========== =========== =========== ===========
</TABLE>
6
<PAGE>
MERIT MEDICAL SYSTEMS, INC.
ITEM 2:
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
OVERVIEW
During the third quarter of 1999, the Company completed a significant
acquisition consistent with its continuing strategy of growth into primary
use, higher-margin products. On August 20, 1999, the Company acquired the
operating assets of the Angleton, Texas division of Mallinckrodt, Inc. for
approximately $8.1 million. The acquisition included a line of diagnostic,
guiding and specialty catheters, as well as diagnostic guide wires, sheaths,
specialty needles and other accessories. All of these products complement
Merit's existing products and are sold to the same customers through the
existing sales force. This acquisition also added important technology and
know-how which the Company believes will accelerate the development of
several new lines of catheter products to be sold into interventional
radiology markets.
The Company also increased its available capital by increasing its existing
bank line of credit to $28 million, up from $10.5 million, on terms that are
deemed favorable to the Company. This new six-year facility with Zions Bank
was instrumental in the financing of the Angleton acquisition. These
transactions, along with new products which have been or will be introduced
in the near future, have positioned the Company for what management believes
will be increased growth and profitability.
OPERATIONS. The Company achieved record levels of sales and earnings for the
three and nine months ended September 30, 1999 compared to the same periods
in 1998. The following table sets forth certain operational data as a
percentage of sales for the three and nine months ended September 30, 1999
and 1998.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales 100.0 % 100.0 % 100.0 % 100.0 %
Gross Margin 39.0 38.5 38.5 37.9
Selling, General and Administrative 25.5 24.9 26.3 25.2
Research & Development 4.9 4.4 4.7 4.8
Income From Operations 8.6 9.2 7.5 7.9
Other Expense 1.5 1.4 1.3 1.2
Net Income 4.7 4.3 4.0 3.4
</TABLE>
SALES. Sales for the third quarter of 1999 ended September 30 were
$19,920,419 compared to $16,703,033 for the same period last year, which
represents a gain of 19 percent. The Company's catheter sales were up 393%,
which included five weeks of sales from the recently required Angleton
catheter line; Sentir's business grew by 140%; inflation device sales
increased by 19 percent, custom kit business grew by 8 percent during the
three-month period compared to the quarter ended September 30, 1998; while
sales of other devices including syringes, manifolds and needles grew by 17
percent. Growth in all segments reflects continued market share gains and
acceptance of the Company's products, as well as hospital procedural growth.
For the nine-month period ended September 30, 1999 total sales were
$56,601,881 compared with $51,143,218 for the same period in 1998, a gain of
11 percent. These gains were led by sales of the Company's catheters which
were up 243%; Sentir's business grew by 45%; inflation devices, which rose 17
percent; tubing, which grew by 16 percent; and custom kits,(other than
inflation and manifold kits) which grew by 17 percent.
7
<PAGE>
MERIT MEDICAL SYSTEMS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
GROSS MARGIN. Gross margin as a percentage of sales for the third quarter of
1999 was 39.0% compared to 38.5% for the same period of 1998. For the nine
months ended September 30, 1999 gross margin was 38.5% compared to 37.9% for
the first nine months of 1998. The increase in gross margin for the three and
nine months ended September 30, 1999 was primarily due to favorable changes
in product mix, price strategies and economies of scale associated with
increased sales.
OPERATING EXPENSES. Operating expenses were 30.4% of sales for the three
months ended September 30,1999 compared to 29.3% for the third quarter of
1998. For the first nine months of 1999 operating expenses increased to 31.0%
compared to 30.1% for the same period in 1998. Selling, general and
administrative expenses as a percentage of sales were 25.5% and 26.3% for the
three and nine months ended September 30, 1999 compared to 25.2% and 24.9%
for the same periods in 1998. The increase was primarily due to additions to
the MIS department to address the implementation of the Company's Oracle
integrated business information system and Y2K compliance issues, as well as
strengthening its OEM sales and new business development departments.
OPERATING INCOME. During the quarter ended September 30, 1999, the Company
reported record income from operations of $1.7 million compared to $1.5
million for the comparable period in 1998. Operating income for the first
nine months of 1999 was also a record $4.3 million vs. $4.0 million for the
same period in 1998. The increase in net earnings for the three and nine
months ended September 30, 1999 was attributable to an increase in sales with
improved gross margins and a reduction in the effective tax rate offset in
part by the increase in operating expenses.
LIQUIDITY AND CAPITAL RESOURCES. At September 30, 1999, the Company's working
capital increased significantly to $28.6 million which represented a current
ratio of 3.6 to 1 up from $15.8 million and a current ratio of 2.0 to 1 at
December 31, 1998. During the nine months ended September 30, 1999 the
principal sources of funds were $2.9 million generated from operations, $20.3
million in net long-term debt and $.3 million from the issuance of common
stock. During the same period the Company invested $8.1 million in plant,
equipment, inventory and intangibles for the acquisition of the Mallinckrodt
Angleton Catheter Division; $3.5 million in the purchase of the 28% of the
minority shares of Sentir Semiconductor not previously owned by the Company;
$4.0 million in equipment, and $7.6 million in payments on the line of
credit. These factors resulted in an increase of $.3 million in cash for the
nine months ended September 30, 1999.
On August 11, 1999, the Company renewed an available secured bank line of
credit to $28 million for a term of six years. The line of credit bears
interest at or below the bank's prime rate, or can be fixed at between 140
and 160 points over LIBOR and contains various conditions and restrictions.
At September 30, 1999, the outstanding balance under the line of credit was
$24.2 million. Historically, the Company has incurred significant expenses in
connection with product development and introduction of new products.
Substantial capital has also been required to finance growth in inventories
and receivables, particularly with the recent acquisitions and the
introduction of new product lines. The Company's principal source of funding
for these and other expenses has been the sale of equity and cash generated
from operations, secured loans on equipment and bank lines of credit. The
Company believes that its present sources of liquidity and capital are
adequate for its current operations.
YEAR 2000. In 1996 the Company began the conversion of the principal computer
software systems to a new integrated system to support future growth and
improve productivity. The Company has completed a review of its business
information systems with regard to Year 2000 compliance and is either
replacing or correcting those computer systems that have been found to have
date-related deficiencies. A new Oracle integrated business information
system for the order administration, financial and manufacturing processes
was implemented and completed in November 1998. Through September 30, 1999
the Company had incurred approximately $3.8 million in costs to improve the
Company's information technology systems and for Year 2000 readiness efforts.
Of this amount, a substantial portion represents the costs of implementing
and transitioning to new computer hardware and software for the Company's
Oracle enterprise-wide business systems. Substantially all of these costs
have been capitalized. The Company anticipates incurring an additional
$500,000 in connection with the Year 2000 readiness efforts. The Company
expects to have all Year 2000 readiness efforts completed by December 31,
1999. The Company believes its non-IT systems and products have been assessed
and found to be Year 2000 compliant. The Company relies on third-party
providers for materials and services such as telecommunications, utilities,
financial services and other key services. Interruption of those materials or
services due to Year 2000 issues could affect the Company's operations. The
Company has completed the process of contacting its major suppliers and has
determined that all major
8
<PAGE>
MERIT MEDICAL SYSTEMS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
suppliers are in the process of ensuring Year 2000 compliance. However, since
the Company is dependent on key third parties, there can be no guarantee that
the Company's efforts will prevent a material adverse impact on its financial
position, results of operations or liquidity in future periods in the event
that a significant number of suppliers and /or customers experience business
disruptions as a result of their lack of Year 2000 readiness. The Company is
in the process of implementing the Oracle system in its Irish facility with a
planned completion date for November of 1999. Both the Company's cost
estimates and completion time frames could be influenced by the Company's
ability to successfully identify all Year 2000 issues, the nature and amount
of corrective action required, the availability and cost of trained personnel
in this area and the Year 2000 success that key third parties and customers
attain. While these and other unforeseen factors could have a material
adverse impact on the Company's financial position, results of operations or
liquidity in future periods, management believes that it has implemented an
effective Year 2000 compliance program that will minimize the possible
negative consequences to the Company. The foregoing discussion of the
Company's Year 2000 readiness includes forward-looking statements, including
estimates of the time frames and costs for addressing the known Year 2000
issues confronting the Company, and is based upon management's current
estimates, which were derived using numerous assumptions. There can be no
assurance that these estimates will be achieved, and actual events and
results could differ materially from those anticipated. Specific factors that
might cause such material differences include, but are not limited to, the
availability of personnel with required remediation skills, the ability of
the Company to identify and correct or replace all relevant computer code and
the success of the third parties with whom the Company does business in
addressing their Year 2000 issues.
FORWARD-LOOKING STATEMENTS. Statements contained in this document which are
not purely historical are forward- looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. These encompass Merit's
beliefs, expectations, hopes or intentions regarding the future. All
forward-looking statements included in this release are made as of the date
hereof and are based on information available to Merit as of such date. Merit
assumes no obligation to update any forward-looking statement. It is
important to note that actual outcomes and Merit's actual results could
differ materially from those in such forward-looking statements. Factors that
could cause actual results to differ materially include risks and
uncertainties related to future market growth such as product acceptance,
product recalls, competition and the overall regulatory environment.
ITEM 3: Quantitative and Qualitative Disclosure About Market Risk.
MARKET RISK DISCLOSURES. The Company does not engage in significant
derivative financial instruments. The Company does experience risk associated
with foreign currency fluctuations, and interest rate risk associated with
its variable rate debt; however, such risks have not been material to the
Company and, accordingly, the Company has not deemed it necessary to enter
into agreements to hedge such risks. The Company may enter into such
agreements in the event that such risks become material in the future.
9
<PAGE>
MERIT MEDICAL SYSTEMS, INC.
- ---------------------------
PART II - OTHER INFORMATION
ITEM 4: EXHIBITS AND REPORTS ON FORM 8-K
(a) Reports on Form 8-K- August 20, 1999 Acquisition of Angleton,
Texas division of Mallinckrod, Inc.
(b) Exhibits 1.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
S - K No. Description Exhibit No.
- --------------------------------------------------------------------------------
<S> <C> <C>
10 Zions Bank Agreement 1
- --------------------------------------------------------------------------------
27 Financial Data Schedule 2
- --------------------------------------------------------------------------------
</TABLE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MERIT MEDICAL SYSTEMS, INC.
- ------------------------------------------
REGISTRANT
Date: NOVEMBER 12, 1999
----------------------- -------------------------------------------
FRED P. LAMPROPOULOS
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Date: NOVEMBER 12, 1999
----------------------- -------------------------------------------
KENT W. STANGER
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
10
<PAGE>
AMENDED AND RESTATED
LOAN AGREEMENT
Between
ZIONS FIRST NATIONAL BANK
Lender
and
MERIT MEDICAL SYSTEMS, INC.
MERIT HOLDINGS, INC.
SENTIR SEMICONDUCTOR, INC.
Borrowers
Effective Date: August 11, 1999
<PAGE>
AMENDED AND RESTATED
LOAN AGREEMENT
TABLE OF CONTENTS
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Article 1 - Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . 1
Article 2 - Loan Description . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.1. Amount of Loan. . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.2. Nature and Duration of Loan . . . . . . . . . . . . . . . . 4
Section 2.3. Promissory Note . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.4. Prepayment of Loan. . . . . . . . . . . . . . . . . . . . . 5
Section 2.5. Limitations on Advances . . . . . . . . . . . . . . . . . . 5
Section 2.6. Notice and Manner of Borrowing. . . . . . . . . . . . . . . 5
Section 2.7. Loan Fee. . . . . . . . . . . . . . . . . . . . . . . . . . 5
Article 3 - Security for Loan. . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.1. Collateral. . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.2. Security for Obligations Under Loan Agreement . . . . . . . 6
Section 3.3. Perfection of Security Interest . . . . . . . . . . . . . . 6
Section 3.4. Release of Lender as Condition to Lien Termination. . . . . 6
Article 4 - Conditions to Loan Disbursements . . . . . . . . . . . . . . . . . 6
Section 4.1. Conditions to Loan Disbursements. . . . . . . . . . . . . . 6
Section 4.2. No Default, Adverse Change, False or Misleading
Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Article 5 - Representations and Warranties . . . . . . . . . . . . . . . . . . 7
Section 5.1. Organization and Qualification. . . . . . . . . . . . . . . 7
Section 5.2. Authorization . . . . . . . . . . . . . . . . . . . . . . . 9
Section 5.3. No Governmental Approval Necessary. . . . . . . . . . . . . 9
Section 5.4. Accuracy of Financial Statements. . . . . . . . . . . . . . 9
Section 5.5. No Pending or Threatened Litigation . . . . . . . . . . . . 9
Section 5.6. Full and Accurate Disclosure. . . . . . . . . . . . . . . .10
Section 5.7. Compliance With ERISA . . . . . . . . . . . . . . . . . . .10
Section 5.8. Compliance With All Other Applicable Law. . . . . . . . . .11
Section 5.9. Environmental Representations and Warranties. . . . . . . .11
Section 5.10. Operation of Business . . . . . . . . . . . . . . . . . . .11
Section 5.11. Payment of Taxes. . . . . . . . . . . . . . . . . . . . . .11
Article 6 - Borrowers' Covenants . . . . . . . . . . . . . . . . . . . . . . .11
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Section 6.1. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . .12
Section 6.2. Continued Compliance With ERISA . . . . . . . . . . . . . .12
Section 6.3. Continued Compliance With Applicable Law. . . . . . . . . .12
Section 6.4. Prior Consent for Amendment or Change . . . . . . . . . . .12
Section 6.5. Payment of Taxes and Obligations. . . . . . . . . . . . . .12
Section 6.6. Financial Statements and Reports. . . . . . . . . . . . . .13
Section 6.7. Financial Covenants . . . . . . . . . . . . . . . . . . . .13
Section 6.8. Restriction on Acquisitions . . . . . . . . . . . . . . . .14
Section 6.9. Negative Pledge . . . . . . . . . . . . . . . . . . . . . .14
Section 6.10. Mergers, Consolidations, and Purchase and Sale of
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
Section 6.11. Dividends and Loans. . . . . . . . . . . . . . . . . . . .15
Section 6.13. Insurance. . . . . . . . . . . . . . . . . . . . . . . . .16
Section 6.14. Inspection. . . . . . . . . . . . . . . . . . . . . . . . .16
Section 6.15. Operation of Business . . . . . . . . . . . . . . . . . . .16
Section 6.16. Maintenance of Records and Properties . . . . . . . . . . .16
Section 6.17. Notice of Claims. . . . . . . . . . . . . . . . . . . . . .17
Section 6.18. Environmental Covenants . . . . . . . . . . . . . . . . . .17
Article 7 - Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
Section 7.1. Events of Default . . . . . . . . . . . . . . . . . . . . .18
Section 7.2. No Waiver of Event of Default . . . . . . . . . . . . . . .19
Article 8 - Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
Section 8.1. Remedies upon Event of Default. . . . . . . . . . . . . . .19
Section 8.2. Rights and Remedies Cumulative. . . . . . . . . . . . . . .19
Section 8.3. No Waiver of Rights . . . . . . . . . . . . . . . . . . . .20
Article 9 - General Provisions. . . . . . . . . . . . . . . . . . . . . . . .20
Section 9.1. Governing Agreement . . . . . . . . . . . . . . . . . . . .20
Section 9.2. Borrowers' Obligations Cumulative . . . . . . . . . . . . .20
Section 9.3. Payment of Expenses and Attorney's Fees . . . . . . . . . .20
Section 9.4. Right to Perform for Borrowers. . . . . . . . . . . . . . .21
Section 9.5. Assignability . . . . . . . . . . . . . . . . . . . . . . .21
Section 9.6. Third Party Beneficiaries . . . . . . . . . . . . . . . . .21
Section 9.7. Governing Law . . . . . . . . . . . . . . . . . . . . . . .21
Section 9.8. Severability of Invalid Provisions. . . . . . . . . . . . .21
Section 9.9. Interpretation of Loan Agreement. . . . . . . . . . . . . .22
Section 9.10. Survival and Binding Effect of Representations,
Warranties, and Covenants. . . . . . . . . . . . . . . . . . . . . .22
Section 9.11. Indemnification . . . . . . . . . . . . . . . . . . . . . .22
Section 9.12. Environmental Indemnification . . . . . . . . . . . . . . .22
Section 9.13. Interest on Expenses and Indemnification, Collateral,
Order of Application . . . . . . . . . . . . . . . . . . . . . . . .23
Section 9.14. Limitation of Consequential Damages . . . . . . . . . . . .23
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Section 9.15. Waiver and Release of Claims. . . . . . . . . . . . . . . .23
Section 9.16. Revival Clause. . . . . . . . . . . . . . . . . . . . . . .24
Section 9.17. Arbitration . . . . . . . . . . . . . . . . . . . . . . . .24
Section 9.18. Notices . . . . . . . . . . . . . . . . . . . . . . . . . .26
Section 9.19.Duplicate Originals. . . . . . . . . . . . . . . . . . . . .27
Section 9.20. Amendment and Restatement . . . . . . . . . . . . . . . . .28
Section 9.21. Integrated Agreement and Subsequent Amendment . . . . . . .28
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EXHIBITS
Exhibit A - Promissory Note
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<PAGE>
AMENDED AND RESTATED
LOAN AGREEMENT
This Amended and Restated Loan Agreement is made and entered into by and
between Zions First National Bank (hereinafter "Lender") and Merit Medical
Systems, Inc., a Utah corporation ("Merit Medical"), Merit Holdings, Inc., a
Utah corporation ("Merit Holdings"), and Sentir Semiconductor, Inc., a Utah
corporation ("Sentir") (Merit Medical, Merit Holdings and Sentir are
collectively called the "Borrowers").
Lender and Borrowers have entered into a Loan Agreement dated October
10, 1995 (as previously amended, the "Original Loan Agreement"). Lender and
Borrowers desire to amend and restate the Original Loan Agreement in the form
of this Amended and Restated Loan Agreement.
For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Lender and Borrowers agree as follows:
ARTICLE 1 - DEFINITIONS
SECTION 1.1. DEFINITIONS
Terms defined in the singular shall have the same meaning when used in
the plural and vice versa. As used herein, the term:
"Banking Business Day" means any day not a Saturday, Sunday, legal
holiday in the State of Utah, or day on which national banks in the State of
Utah are authorized to close.
"Borrowing Base" means the sum of (a) 75% of the net book value, as
determined by Lender, of all accounts receivable of Borrowers in which Lender
has a first priority, fully perfected security interest, (b) 45% of the net
book value, as determined by Lender, of all inventory of Borrowers in which
Lender has a first priority, fully perfected security interest, (c) 70% of
the appraised value, acceptable to Lender, of all real property of Borrowers
in which Lender has a first priority, fully perfected lien, (d) 70% of the
appraised value, acceptable to Lender, of all equipment of Borrowers in which
Lender has a first priority, fully perfected security interest, and (e) (i)
55% of the net book value, as determined by Lender, of all equipment of
Borrowers for which there is not an appraisal acceptable to Lender and in
which Lender has a fully perfected security interest minus (ii) the
outstanding principal amount owing by Borrowers in respect of all such
equipment which is subject to a security interest superior to the security
interest of Lender in such equipment.
"Collateral" shall have the meaning set forth in Section 3.1 COLLATERAL.
"Computation Period" means any period of four consecutive fiscal
quarters of Merit Medical ending on the last day of a fiscal quarter.
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"EBITDA" means, for any Computation Period, consolidated earnings of
Merit Medical before interest, taxes, depreciation, and amortization;
earnings, interest, taxes, depreciation, and amortization shall have the
meanings used in accordance with generally accepted accounting principles
consistent with those used in the preparation of the financial statements
previously submitted to Lender by Borrowers. For purposes of calculating
EBITDA, if Merit Medical has made an acquisition during the Computation
Period for which the calculation is to be made, such calculation shall be
made as if such acquisition had occurred on the first day of such Computation
Period.
"Effective Date" shall mean the date the parties intend this Loan
Agreement to become binding and enforceable, which is the date stated at the
conclusion of this Loan Agreement.
"Environmental Condition" shall mean any condition involving or relating
to Hazardous Materials and/or the environment affecting the Real Property,
whether or not yet discovered, which could or does result in any damage,
loss, cost, expense, claim, demand, order, or liability to or against
Borrowers or Lender by any third party (including, without limitation, any
government entity), including, without limitation, any condition resulting
from the operation of any Borrower's business and/or operations in the
vicinity of the Real Property and/or any activity or operation formerly
conducted by any person or entity on or off the Real Property.
"Environmental Health and Safety Law" shall mean any legal requirement
that requires or relates to:
a. advising appropriate authorities, employees, and the public of
intended or actual releases of Hazardous Materials, violations of discharge
limits or other prohibitions, and of the commencement of activities, such
as resource extraction or construction, that do or could have significant
impact on the environment;
b. preventing or reducing to acceptable levels the release of
Hazardous Materials;
c. reducing the quantities, preventing the release, or minimizing
the hazardous characteristics of wastes that are generated;
d. assuring that products are designed, formulated, packaged, and
used so that they do not present unreasonable risks to human health or the
environment when used or disposed of;
e. protecting resources, species, or ecological amenities;
f. use, storage, transportation, sale, or transfer of Hazardous
Materials or other potentially harmful substances;
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g. cleaning up Hazardous Materials that have been released,
preventing the threat of release, and/or paying the costs of such clean up
or prevention; or
h. making responsible parties pay for damages done to the health of
others or the environment or permitting self-appointed representatives of
the public interest to recover for injuries done to public assets.
"Event of Default" has the meaning set forth in Section 7.1 EVENTS OF
DEFAULT.
"Facility Amount" means twenty-eight million dollars ($28,000,000.00) as
such amount is reduced by two hundred fifty thousand dollars ($250,000.00) on
the last day of each quarter commencing with the quarter ending March 31,
2001.
"Hazardous Materials" means (i) "hazardous waste" as defined by the
Solid Waste Disposal Act, as amended by the Resource Conservation and
Recovery Act of 1976 (42 U.S.C. Section 6901 et. seq.), including any future
amendments thereto, and regulations promulgated thereunder, and as the term
may be defined by any contemporary state counterpart to such act; (ii)
"hazardous substance" as defined by the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (42 U.S.C. Section 9601 et. seq.),
including any future amendments thereto, and regulations promulgated
thereunder, and as the term may be defined by any contemporary state
counterpart of such act; (iii) asbestos; (iv) polychlorinated biphenyls; (v)
underground or above ground storage tanks, whether empty or filled or
partially filled with any substance; (vi) any substance the presence of which
is or becomes prohibited by any federal, state, or local law, ordinance,
rule, or regulation; and (vii) any substance which under any federal, state,
or local law, ordinance, rule or regulation requires special handling or
notification in its collection, storage, treatment, transportation, use or
disposal.
"Loan" means the loan to be made pursuant to Article 2 LOAN DESCRIPTION.
"Loan Agreement" means this agreement, together with any exhibits,
amendments, addendums, and modifications.
"Organizational Documents" means, in the case of a corporation, its
Articles of Incorporation and By-Laws; in the case of a general partnership,
its Articles of Partnership; in the case of a limited partnership, its
Articles of Limited Partnership; in the case of a limited liability company,
its Articles of Organization and Operating Agreement, if any; in the case of
a limited liability partnership, its Articles of Limited Liability
Partnership; and all amendments, modifications, and changes to any of the
foregoing which are currently in effect.
"Performance Pricing Ratio" means the ratio of (a) borrowed debt of
Borrowers as of the last day of the Computation Period most recently ended to
(b) EBITDA for the Computation Period most recently ended.
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"Promissory Note" means the promissory note to be executed by Borrowers
pursuant to Section 2.3 PROMISSORY NOTE in the form of Exhibit A hereto,
which is incorporated herein by reference, and any and all renewals,
extensions, modifications, and replacements thereof.
"Real Property" means any and all real property or improvements thereon
owned or leased by Borrowers or in which Borrowers have any other interest of
any nature whatsoever.
"Reducing Available Borrowing Base" has the meaning set forth in Section
2.5 LIMITATIONS OR ADVANCES.
"Security Documents" means all security agreements, assignments,
pledges, deeds of trust, mortgages, and other documents which create or
evidence any security interest, assignment, lien or other encumbrance in
favor of Lender to secure any or all of the obligations created or
contemplated by this Loan Agreement, the Promissory Note, the Security
Documents, or any other agreements, documents, obligations, and transactions
contemplated by this Loan Agreement.
ARTICLE 2 - LOAN DESCRIPTION
SECTION 2.1. AMOUNT OF LOAN
Upon fulfillment of all conditions precedent set forth in this Loan
Agreement, and so long as no Event of Default exists, and no other breach has
occurred under this Loan Agreement or any Security Documents, Lender agrees
to loan Borrowers an amount equal to the Facility Amount.
SECTION 2.2. NATURE AND DURATION OF LOAN
The Loan shall be a reducing revolving loan payable in full upon the
date and upon the terms and conditions provided in the Promissory Note.
Lender and Borrowers intend the Loan to be in the nature of a line of credit
under which Borrowers may repeatedly draw funds on a revolving basis in
accordance with the terms and conditions of this Loan Agreement and the
Promissory Note. The right of Borrowers to draw funds and the obligation of
Lender to advance funds shall not accrue until all of the conditions set
forth in Article 4 CONDITIONS TO LOAN DISBURSEMENTS have been fully
satisfied, and shall terminate: (a) upon occurrence of an Event of Default
or (b)upon maturity of the Promissory Note, unless the Promissory Note is
renewed or extended by Lender, in which case such termination shall occur
upon the maturity of the final renewal or extension of the Promissory Note.
Upon such termination, any and all amounts owing to Lender pursuant to the
Promissory Note and this Loan Agreement shall thereupon be due and payable in
full.
SECTION 2.3. PROMISSORY NOTE
The Loan shall be evidenced by the Promissory Note of Borrowers to
Lender. The Promissory Note shall be executed and delivered to Lender upon
execution and delivery of this Loan Agreement. Proceeds of the Promissory
Note may be disbursed by Lender by wire transfer.
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SECTION 2.4. PREPAYMENT OF LOAN
Borrowers may prepay all or any portion of the Loan at any time, subject
to any prepayment penalty set forth in the Promissory Note. Any prepayment
received by Lender after 2:00 p.m. mountain standard or daylight time
(whichever is in effect on the date the prepayment is received) shall be
deemed received on the following Banking Business Day.
SECTION 2.5. LIMITATIONS ON ADVANCES
Notwithstanding anything to the contrary in this Loan Agreement or the
Promissory Note, no advances shall be made on the Loan under the Promissory
Note if, after making the requested advance, the total, principal amount of
all advances outstanding will exceed the lesser of the following (the
"Reducing Available Borrowing Base"):
(i) the Facility Amount,
(ii) an amount equal to (a) 3.5 times EBITDA for the Computation Period
most recently ended less (b) other borrowed debt of Borrowers, and
(iii) the Borrowing Base.
Borrowers will at all times maintain personal and real property so that
the total, aggregate, principal amount of all advances at any time
outstanding and unpaid shall be in compliance with this formula. If at any
time the total, aggregate, principal amount of all such advances outstanding
and unpaid exceeds the amount allowable under this formula, Borrowers shall
immediately make payment to Lender in a sufficient amount to bring the amount
of such advances back into formula.
SECTION 2.6. NOTICE AND MANNER OF BORROWING
Borrowers shall give Lender same day notice of any advances requested
under the Promissory Note.
SECTION 2.7. LOAN FEE
Borrowers shall pay to Lender a fee for the Loan for so long as this
Loan Agreement is in effect. The loan fee shall be an amount equal to three
hundred seventy-five thousandths percent (.375%) per annum of the unused
portion of the Loan, calculated on the average unused portion of the Loan for
each calendar quarter. The loan fee shall be payable quarterly, in arrears,
and shall be due upon receipt of a statement therefor from Lender.
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ARTICLE 3 - SECURITY FOR LOAN
SECTION 3.1. COLLATERAL
The Loan and Promissory Note shall be secured by such collateral as and
to the extent provided in the Security Documents (the "Collateral"), which
shall include, without limitation, the following:
a. A security interest in all accounts receivable, inventory,
equipment, general intangibles, and patents of Borrowers.
b. A deed of trust upon real property of Merit Medical located in
Salt Lake County, Utah.
SECTION 3.2. SECURITY FOR OBLIGATIONS UNDER LOAN AGREEMENT
All obligations of Borrowers under this Loan Agreement are secured by
the Collateral.
SECTION 3.3. PERFECTION OF SECURITY INTEREST
Borrowers agree to execute and deliver any financing statements and
other documents (properly endorsed, if necessary) reasonably requested by
Lender for perfection or enforcement of any security interest or lien, and to
give good faith, diligent cooperation to Lender, and to perform such other
acts reasonably requested by Lender for perfection and enforcement of any
security interest or lien. Lender is authorized to file, record, or
otherwise utilize such documents as it deems necessary to perfect and/or
enforce any security interest or lien granted hereunder.
SECTION 3.4. RELEASE OF LENDER AS CONDITION TO LIEN TERMINATION
In recognition of Lender's right to have all its attorneys fees and
expenses incurred in connection with this Loan Agreement secured by the
Collateral, notwithstanding payment in full of the Loan and all other
obligations secured by the Collateral, Lender shall not be required to
release, reconvey, or terminate any security interest, trust deed, mortgage,
assignment, or other lien on the Collateral unless and until Borrowers have
executed and delivered to Lender general releases in form and substance
satisfactory to Lender.
ARTICLE 4 - CONDITIONS TO LOAN DISBURSEMENTS
SECTION 4.1. CONDITIONS TO LOAN DISBURSEMENTS
Lender's obligation to disburse any of the Loan proceeds is expressly
subject to, and shall not arise until all of the conditions set forth below
have been satisfied. All of the documents referred to below must be in a
form and substance acceptable to Lender.
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a. This Loan Agreement, the Promissory Note, the Security Documents,
and all other documents contemplated by this Loan Agreement to be delivered
to Lender prior to funding have been fully executed and delivered to
Lender.
b. All of the documents contemplated by this Loan Agreement which
require filing or recording have been properly filed and recorded so that
all of the liens and security interests granted to Lender in connection
with the Loan will be properly created and perfected and will have a
priority acceptable to Lender.
c. All other conditions precedent provided in or contemplated by
this Loan Agreement, the Security Documents, or any other agreement or
document have been performed.
d. As of the date of disbursement of all or any portion of the Loan
proceeds, the following shall be true and correct: (1) all representations
and warranties made by Borrowers in this Loan Agreement are true and
correct as of the date of such disbursement; and (2) no Event of Default
has occurred under the Loan Agreement and no conditions exist and no event
has occurred, which, with the passage of time or the giving of notice, or
both, would constitute an Event of Default under this Loan Agreement.
All conditions precedent set forth in this Loan Agreement, the Security
Documents, or in any other document relating to the Loan are for the sole
benefit of Lender and may be waived unilaterally by Lender.
SECTION 4.2. NO DEFAULT, ADVERSE CHANGE, FALSE OR MISLEADING STATEMENT
Lender's obligation to advance any funds at any time pursuant to this
Loan Agreement and the Promissory Note shall, at Lender's sole discretion,
terminate upon the occurrence of any Event of Default or upon the occurrence
of any material adverse change in any Borrower's organization or affairs or
in any matter concerning which an agreement, covenant, representation, or
warranty has been made herein, or upon the determination by Lender that any
of any Borrower's representations made herein or in connection with this Loan
Agreement were false or materially misleading when made. Upon the exercise
of such discretion, Lender shall be relieved of all further obligations under
this Loan Agreement, the Promissory Note, and all other agreements,
documents, obligations, and transactions contemplated by this Loan Agreement.
ARTICLE 5 - REPRESENTATIONS AND WARRANTIES
SECTION 5.1. ORGANIZATION AND QUALIFICATION
Merit Medical represents and warrants that it is a corporation duly
organized and existing in good standing under the laws of the State of Utah.
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Merit Medical represents and warrants that it is duly qualified to do
business in each jurisdiction where the conduct of its business requires
qualification.
Merit Medical represents and warrants that it has the full power and
authority to own its property and to conduct the business in which it engages
and to enter into and perform its obligations under this Loan Agreement, the
Promissory Note, any Security Documents, and all agreements, documents,
obligations, and transactions contemplated by this Loan Agreement.
Merit Medical represents and warrants that it has delivered to Lender or
Lender's counsel accurate and complete copies of its Organizational Documents
which are operative and in effect as of the Effective Date.
Merit Holdings represents and warrants that it is a corporation duly
organized and existing in good standing under the laws of the State of Utah.
Merit Holdings represents and warrants that it is duly qualified to do
business in each jurisdiction where the conduct of its business requires
qualification.
Merit Holdings represents and warrants that it has the full power and
authority to own its property and to conduct the business in which it engages
and to enter into and perform its obligations under this Loan Agreement, the
Promissory Note, any Security Documents, and all agreements, documents,
obligations, and transactions contemplated by this Loan Agreement.
Merit Holdings represents and warrants that it has delivered to Lender
or Lender's counsel accurate and complete copies of its Organizational
Documents which are operative and in effect as of the Effective Date.
Sentir represents and warrants that it is a corporation duly organized
and existing in good standing under the laws of the State of Utah.
Sentir represents and warrants that it is duly qualified to do business
in each jurisdiction where the conduct of its business requires qualification.
Sentir represents and warrants that it has the full power and authority
to own its property and to conduct the business in which it engages and to
enter into and perform its obligations under this Loan Agreement, the
Promissory Note, any Security Documents, and all agreements, documents,
obligations, and transactions contemplated by this Loan Agreement.
Sentir represents and warrants that it has delivered to Lender or
Lender's counsel accurate and complete copies of its Organizational Documents
which are operative and in effect as of the Effective Date.
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SECTION 5.2. AUTHORIZATION
Each Borrower represents and warrants that the execution, delivery, and
performance by such Borrower of this Loan Agreement, the Promissory Note, the
Security Documents and all agreements, documents, obligations, and
transactions herein contemplated have been duly authorized by all necessary
action on the part of such Borrower and are not inconsistent with such
Borrower's Organizational Documents or any resolution of the Boards of
Directors of such Borrower, do not and will not contravene any provision of,
or constitute a default under, any indenture, mortgage, contract, or other
instrument to which such Borrower is a party or by which such Borrower is
bound, and that upon execution and delivery hereof and thereof, this Loan
Agreement, the Promissory Note and the Security Documents will constitute
legal, valid, and binding agreements and obligations of such Borrower,
enforceable in accordance with their respective terms.
SECTION 5.3. NO GOVERNMENTAL APPROVAL NECESSARY
Each Borrower represents and warrants that no consent by, approval of,
giving of notice to, registration with, or taking of any other action with
respect to or by any federal, state, or local governmental authority or
organization is required for such Borrower's execution, delivery, or
performance of this Loan Agreement, the Promissory Note, the Security
Documents or any other agreements, documents, obligations, or transactions
contemplated by this Loan Agreement.
SECTION 5.4. ACCURACY OF FINANCIAL STATEMENTS
Each Borrower represents and warrants that all of its financial
statements heretofore delivered to Lender have been prepared in accordance
with generally accepted accounting principles consistently applied and fully
and fairly represent such Borrower's financial condition as of the date
thereof, and fully and fairly represent the results of such Borrower's
operations for the period or periods covered thereby. Each Borrower
represents and warrants that since the date of the most recent financial
statements delivered to Lender, there has been no material adverse change in
its financial condition.
Each Borrower represents and warrants that all of its pro forma
financial statements heretofore delivered to Lender have been prepared
consistently with such Borrower's actual financial statements and fully and
fairly represent such Borrower's anticipated financial condition as of the
date thereof, and fully and fairly represent the anticipated results of such
Borrower's operations for the period or periods covered thereby.
SECTION 5.5. NO PENDING OR THREATENED LITIGATION
Each Borrower represents and warrants that except as Lender has been
otherwise advised in writing, together with an analysis by such Borrower's
counsel, there are no actions, suits, or proceedings pending or, to such
Borrower's knowledge, threatened against or affecting such Borrower in any
court or before any governmental commission, board, or authority which, if
adversely determined, would have a material adverse affect on such Borrower's
financial condition,
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conduct of its business, or ability to perform its obligations under this
Loan Agreement, the Promissory Note, the Security Documents or any other
agreement, document, obligation, or transaction contemplated by this Loan
Agreement.
SECTION 5.6. FULL AND ACCURATE DISCLOSURE
Each Borrower represents and warrants that this Loan Agreement, the
financial statements referred to herein, any loan application submitted to
Lender, and all other statements furnished by such Borrower to Lender in
connection herewith contain no untrue statement of a material fact and omit
no material fact necessary to make the statements contained therein or herein
not misleading. Each Borrower represents and warrants that it has not failed
to disclose in writing to Lender any fact that materially and adversely
affects, or is reasonably likely to materially and adversely affect, such
Borrower's business, operations, properties, prospects, profits, condition
(financial or otherwise), or ability to perform its obligations under this
Loan Agreement, the Promissory Note, the Security Documents, or any other
agreement, document, obligation, or transaction contemplated by this Loan
Agreement.
SECTION 5.7. COMPLIANCE WITH ERISA
Each Borrower represents and warrants that such Borrower is in
compliance in all material respects with all applicable provisions of the
Employee Retirement Income Security Act of 1974 ("ERISA"), as amended, and
the regulations and published interpretations thereunder. Neither a
Reportable Event as set forth in Section 4043 of ERISA or the regulations
thereunder ("Reportable Event") nor a prohibited transaction as set forth in
Section 406 of ERISA or Section 4975 of the Internal Revenue Code of 1986, as
amended, has occurred and is continuing with respect to any employee benefit
or other plan established, maintained, or to which contributions have been
made by such Borrower or any trade or business (whether or not incorporated)
which together with such Borrower would be treated as a single employer under
Section 4001 of ERISA ("ERISA Affiliate") for its employees which is covered
by Title IV of ERISA ("Plan"); no notice of intent to terminate a Plan has
been filed nor has any Plan been terminated; no circumstances exist that
constitute grounds under Section 4042 of ERISA entitling the Pension Benefit
Guaranty Corporation ("PBGC") to institute proceedings to terminate, or
appoint a trustee to administrate a Plan, nor has the PBGC instituted any
such proceedings; neither such Borrower nor any ERISA Affiliate has
completely or partially withdrawn under Section 4201 or 4204 of ERISA from
any Plan described in Section 4001(a)(3) of ERISA which covers employees of
such Borrower or any ERISA Affiliate ("Multi-employer Plan"); and such
Borrower and each ERISA Affiliate has met its minimum funding requirements
under ERISA with respect to all of its Plans and the present fair market
value of all Plan assets exceeds the present value of all vested benefits
under each Plan, as determined on the most recent valuation date of the Plan
and in accordance with the provisions of ERISA and the regulations thereunder
for calculating the potential liability of such Borrower or any ERISA
Affiliate to the PBGC or the Plan under Title IV of ERISA; and neither such
Borrower nor any ERISA Affiliate has incurred any liability to the PBGC under
ERISA.
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SECTION 5.8. COMPLIANCE WITH ALL OTHER APPLICABLE LAW
Each Borrower represents and warrants that it has complied with all
applicable statutes, rules, regulations, orders, and restrictions of any
domestic or foreign government, or any instrumentality or agency thereof
having jurisdiction over the conduct of such Borrower's business or the
ownership of its properties, which may have a material impact or affect upon
the conduct of such Borrower's business or the ownership of its properties.
SECTION 5.9. ENVIRONMENTAL REPRESENTATIONS AND WARRANTIES
Each Borrower represents and warrants that, except as Lender has been
otherwise previously advised by such Borrower, no Hazardous Materials are now
located on, in, or under the Real Property, nor is there any Environmental
Condition on, in, or under the Real Property and neither Borrowers nor, to
such Borrower's knowledge, after due inquiry and investigation, any other
person has ever caused or permitted any Hazardous Materials to be placed,
held, used, stored, released, generated, located or disposed of on, in or
under the Real Property, or any part thereof, nor caused or allowed an
Environmental Condition to exist on, in or under the Real Property. Each
Borrower further represents and warrants that no investigation,
administrative order, consent order and agreement, litigation or settlement
with respect to Hazardous Materials and/or Environmental Condition is
proposed, threatened, anticipated or in existence with respect to the Real
Property.
SECTION 5.10. OPERATION OF BUSINESS
Each Borrower represents and warrants that such Borrower possesses all
licenses, permits, franchises, patents, copyrights, trademarks, and trade
names, or rights thereto, to conduct its business substantially as now
conducted and as presently proposed to be conducted, and such Borrower is not
in violation of any valid rights of others with respect to any of the
foregoing.
SECTION 5.11. PAYMENT OF TAXES
Each Borrower represents and warrants that such Borrower has filed all
tax returns (federal, state, and local) required to be filed and has paid all
taxes, assessments, and governmental charges and levies, including interest
and penalties, on the Collateral and on such Borrower's property, business
and income, except such as are being contested in good faith by proper
proceedings and as to which adequate reserves are maintained.
ARTICLE 6 - BORROWERS' COVENANTS
Borrowers make the following agreements and covenants, which shall
continue so long as this Loan Agreement is in effect and so long as any
Borrower is indebted to Lender for obligations arising out of, identified in,
or contemplated by this Loan Agreement.
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SECTION 6.1. USE OF PROCEEDS
Each Borrower shall use the proceeds of the Loan solely for the purposes
identified to Lender in applying for the Loan.
No Borrower shall, directly or indirectly, use any of the proceeds of
the Loan for the purpose of purchasing or carrying any margin stock within
the meaning of Regulation U of the Board of Governors of the Federal Reserve
System, or to extend credit to any person or entity for the purpose of
purchasing or carrying any such margin stock or for any purpose which
violates, or is inconsistent with, Regulation X of said Board of Governors,
or for any other purpose not permitted by Section 7 of the Securities
Exchange Act of 1934, as amended, or by any of the rules and regulations
respecting the extension of credit promulgated thereunder.
SECTION 6.2. CONTINUED COMPLIANCE WITH ERISA
Each Borrower covenants that, with respect to all Plans (as defined in
5.7 COMPLIANCE WITH ERISA) which such Borrower currently maintains or to
which such Borrower is a party or which such Borrower may hereafter adopt,
such Borrower shall continue to comply with all applicable provisions of
ERISA and with all representations made in 5.7 COMPLIANCE WITH ERISA,
including, without limitation, conformance with all funding standards,
prohibited transaction rules, multi-employer plan rules, and necessary
reserve requirements.
SECTION 6.3. CONTINUED COMPLIANCE WITH APPLICABLE LAW
Each Borrower shall conduct its business in a lawful manner and in
compliance with all applicable federal, state, and local laws, ordinances,
rules, regulations, and orders; shall maintain in good standing all licenses
and organizational or other qualifications reasonably necessary to its
business and existence; and shall not engage in any business not authorized
by and not in accordance with its Organizational Documents and other
governing documents.
Section 6.4. PRIOR CONSENT FOR AMENDMENT OR CHANGE
No Borrower shall modify, amend, waive, or otherwise alter such
Borrower's corporate structure or fail to enforce its Organizational
Documents, or other governing documents without Lender's prior written
consent.
Section 6.5. PAYMENT OF TAXES AND OBLIGATIONS
Each Borrower shall pay when due all taxes, assessments, and
governmental charges and levies on the Collateral and on such Borrower's
property, business, and income, and all material obligations of such Borrower
of whatever nature, except such as are being contested in good faith by
proper proceedings and as to which adequate reserves are maintained.
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Section 6.6. FINANCIAL STATEMENTS AND REPORTS
Each Borrower shall provide Lender with such financial statements and
reports as Lender may reasonably request, and such statements and reports
shall be prepared in accordance with generally accepted accounting principles
and shall fully and fairly represent such Borrower's financial condition and
the results of its operations for the period or periods covered. As to all
financial statements and reports which such Borrower has furnished or may in
the future furnish to Lender, such Borrower acknowledges and agrees that it
has a fiduciary duty to ensure that such statements and reports are accurate
and complete.
Until requested otherwise by Lender, Borrowers shall provide the
following financial statements and reports to Lender:
a. Annual audited financial statements with an unqualified opinion
for each fiscal year of each Borrower from an independent accounting firm
and in a form acceptable to Lender, to be delivered to Lender within one
hundred twenty (120) days of the end of the fiscal year. Each Borrower
shall also submit to Lender copies of any management letters or other
reports submitted to such Borrower by independent certified public
accountants in connection with examination of the financial statements of
such Borrower made by such accountants.
b. Quarterly 10 Q reports for each Borrower in a form acceptable to
Lender, to be delivered to Lender within forty-five (45) days of the end of
the fiscal quarter. The quarterly 10 Q reports shall include a
certification by the chief financial officer or chief executive officer of
such Borrower that they have been prepared in accordance with generally
accepted accounting principles.
c. Within thirty (30) days of the end of each month, Borrowers shall
submit to Lender a Borrowing Base Certificate in a form provided by or
acceptable to Lender demonstrating that the outstanding balance on the Loan
is in compliance with the terms and conditions of this Loan Agreement.
d. Within forty-five (45) days of the end of each fiscal quarter,
Borrowers shall submit to Lender a compliance certificate in a form
acceptable to Lender certifying and showing that Borrowers are in
compliance with the financial covenants provided in Section 6.7 FINANCIAL
COVENANTS and containing a listing of all new patent applications filed by
any Borrower and all new patents issued to any Borrower. The compliance
certificate shall be signed by the chief executive officer or chief
financial officer of each Borrower.
Section 6.7. FINANCIAL COVENANTS
a. WORKING CAPITAL. Merit Medical will maintain at all times an
excess of current assets over current liabilities of not less than
twenty-five million dollars ($25,000,000.00).
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Current assets means the assets treated as current assets in accordance
with generally accepted accounting principles consistent with those used in
the preparation of the financial statements submitted to Lender by Merit
Medical. Current liabilities means all liabilities treated as current
liabilities in accordance with generally accepted accounting principles
consistent with those used in the preparation of the financial statements
previously submitted to Lender by Merit Medical, including, without
limitation, (1) all obligations payable on demand or within one year after
the date on which the determination is made, and (2) final maturities and
sinking fund payments required to be made within one year after the date on
which the determination is made, but excluding all such liabilities or
obligations which are renewable or extendable at the option of Borrowers to a
date more than one year from the date of determination.
b. DEBT TO EQUITY RATIO. Merit Medical will maintain at all times a
ratio of total liabilities to tangible net worth of not greater than two to
one (2:1).
Tangible net worth means the excess of total assets over total
liabilities, total assets and total liabilities each to be determined in
accordance with generally accepted accounting principles consistent with
those applied in the preparation of the financial statements previously
submitted by Merit Medical to Lender excluding, however, from the
determination of total assets all assets which would be classified as
intangible assets under generally accepted accounting principles, including,
without limitation, goodwill, licenses, patents, trademarks, trade names,
copyrights, and franchises.
c. BORROWED DEBT TO EBITDA. Merit Medical shall maintain a ratio of
(a) borrowed debt of Borrowers as of the last day of the Computation Period
most recently ended to (b) EBITDA for the Computation Period most recently
ended of not greater than three and five-tenths to one (3.5:1) as of the last
day of each Computation Period.
Section 6.8. RESTRICTION ON ACQUISITIONS
Any acquisition by any Borrower in excess of one million dollars
($1,000,000.00) must be approved in writing by Lender prior to such
acquisition.
Section 6.9. NEGATIVE PLEDGE
No Borrower will create, incur, assume, or suffer to exist any mortgage,
deed of trust, pledge, lien, security interest, hypothecation, assignment,
deposit arrangement, or other preferential arrangement, charge, or
encumbrance (including, without limitation, any conditional sale, other title
retention agreement, or finance lease) of any nature, upon or with respect to
any of its properties or assets, now owned or hereafter acquired, or sign or
file, under the Uniform Commercial Code of any jurisdiction, a financing
statement under which such Borrower appears as debtor, or sign any security
agreement authorizing any secured party thereunder to file such financing
statement, except those contemplated by this Loan Agreement and liens for
taxes and assessments not yet due and payable or, if due and payable, those
being contested in good faith by appropriate proceedings and for which
appropriate reserves are maintained. Notwithstanding anything to the
contrary in this Loan Agreement or any of the Security Documents, Borrowers
may purchase, sell, lease back, or
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otherwise finance the acquisition of equipment (which does not constitute
inventory) upon terms and conditions as may give rise to one or more purchase
money security interest (s) in and upon such purchased, leased, or acquired
equipment, or which constitute a sale/lease back arrangement. The continued
existence, attachment, or perfection of such purchase money security interest
shall in no way be deemed to violate any undertaking, representation,
warranty, or covenant of Borrowers to Lender.
Section 6.10. MERGERS, CONSOLIDATIONS, AND PURCHASE AND SALE OF ASSETS
No Borrower shall wind up, liquidate, or dissolve itself, reorganize,
merge, or consolidate with or into, or convey, sell, assign, transfer, lease,
or otherwise dispose of (whether in one transaction or a series of
transactions) all or substantially all of its assets (whether now owned or
hereafter acquired) to any person or entity, or acquire all or substantially
all of the assets or the business of any person or entity.
Section 6.11. DIVIDENDS AND LOANS
Merit Medical shall not (a) declare or pay any dividends, (b) purchase,
redeem, retire or otherwise acquire for value any of their capital stock now
or hereafter outstanding, (c) make any distribution of assets to its
stockholders, investors, or equity holders, whether in cash, assets, or in
obligations of Merit Medical, (d) allocate or otherwise set apart any sum for
the payment of any dividend or distribution on, or for the purchase,
redemption, or retirement of any shares of their capital stock or equity
interests, or (e) make any other distribution by reduction of capital or
otherwise in respect of any shares of their capital stock or equity
interests, without, in each case, the prior written consent of Lender, which
consent shall not be unreasonably withheld..
No Borrower shall make any loans or pay any advances of any nature
whatsoever to any person or entity, except advances in the ordinary course of
business to employees, vendors, suppliers, and contractors.
Section 6.12. INVENTORY, ACCOUNTS RECEIVABLE, AND PATENTS.
Each Borrower shall furnish to Lender:
a. A monthly accounts receivable aging report within thirty (30)
days of the end of each month, in a form acceptable to Lender.
b. A quarterly accounts payable aging report within thirty (30) days
of the end of each quarter, in a form acceptable to Lender.
c. A monthly inventory report within thirty (30) days of the end of
each month, in a form acceptable to Lender.
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d. At least semi-annually and at other reasonable times as requested
by Lender, a list of the names, addresses and phone numbers of all account
debtors on such Borrower's accounts, in a form acceptable to Lender.
e. A quarterly report showing all patent applications filed by such
Borrower during the quarter most recently ended and all new patents issued
to such Borrower during the quarter most recently ended, to be delivered to
Lender within forty-five (45) days of the end of each quarter.
Each Borrower hereby authorizes Lender to verify such Borrower's accounts
through written or verbal verification methods at the discretion of Lender.
Section 6.13. INSURANCE
Each Borrower shall maintain insurance with financially sound and
reputable insurance companies or associations in such amounts and covering
such risks as are usually carried by companies engaged in the same or a
similar business and similarly situated, which insurance may provide for
reasonable deductibility from coverage thereof.
Section 6.14. INSPECTION
Each Borrower shall at any reasonable time and from time to time, permit
Lender or any representative of Lender to examine and make copies of and
abstracts from the records and books of account of, and visit and inspect the
properties and assets of, such Borrower, and to discuss the affairs,
finances, and accounts of such Borrower with any of such Borrower's officers
and directors and with such Borrower's independent accountants.
Section 6.15. OPERATION OF BUSINESS
Each Borrower shall maintain all licenses, permits, franchises, patents,
copyrights, trademarks, and trade names, or rights thereto, to conduct its
business substantially as now conducted and as presently proposed to be
conducted, and such Borrower shall not violate any valid rights of others
with respect to any of the foregoing. Each Borrower shall continue to engage
in a business of the same general type as now conducted.
Section 6.16. MAINTENANCE OF RECORDS AND PROPERTIES
Each Borrower shall keep adequate records and books of account in which
complete entries will be made in accordance with generally accepted
accounting principles consistently applied, reflecting all financial
transactions of such Borrower. Each Borrower shall maintain, keep and
preserve all of its properties (tangible and intangible) necessary or useful
in the proper conduct of its business in good working order and condition,
ordinary wear and tear excepted.
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Section 6.17. NOTICE OF CLAIMS
Each Borrower shall promptly notify Lender in writing of all actions,
suits or proceedings filed or threatened against or affecting such Borrower
in any court or before any governmental commission, board, or authority
which, if adversely determined, would have a material adverse effect on such
Borrower's financial condition, conduct of business, or ability to perform
its obligations under this Loan Agreement, the Promissory Note, the Security
Documents or any other agreement, document, obligation, or transaction
contemplated by this Loan Agreement.
Section 6.18. ENVIRONMENTAL COVENANTS
Each Borrower covenants that it will:
a. Not permit the presence, use, disposal, storage or release of any
Hazardous Materials on, in, or under the Real Property, except in the
ordinary course of such Borrower's business under conditions that are
generally recognized to be appropriate and safe and that are in strict
compliance with all applicable Environmental Health and Safety Laws.
b. Not permit any substance, activity or Environmental Condition on,
in, under or affecting the Real Property which is in violation of any
Environmental Health and Safety Laws.
c. Comply with the provisions of all Environmental Health and Safety
Laws.
d. Notify Lender immediately of any discharge of Hazardous
Materials, Environmental Condition, or environmental complaint or notice
received from any governmental agency or any other party.
e. Upon any discharge of Hazardous Materials or upon the occurrence
of any Environmental Condition, immediately contain and remove the same in
strict compliance with all Environmental Health and Safety Laws, promptly
pay any fine or penalty assessed in connection therewith, and immediately
notify Lender of such events.
f. Permit Lender to inspect the Real Property for Hazardous
Materials and Environmental Conditions, to conduct tests thereon, and to
inspect all books, correspondence, and records pertaining thereto.
g. From time to time upon Lender's request, and at such Borrower's
expense, provide a report (including all validated and unvalidated data
generated for such reports) of a qualified independent environmental
engineer acceptable to Lender, satisfactory to Lender in scope, form, and
content, and provide to Lender such other and further assurances reasonably
satisfactory to Lender, that such Borrower is in compliance with these
covenants concerning Hazardous Materials and Environmental Conditions, and
that any past violation
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thereof has been corrected in compliance with all applicable Environmental
Health and Safety Laws.
h. Immediately advise Lender of any additional, supplemental, new,
or other information concerning any Hazardous Materials or Environmental
Conditions relating to the Real Property.
ARTICLE 7- DEFAULT
Section 7.1. EVENTS OF DEFAULT
Time is of the essence of this Loan Agreement. The occurrence of any of
the following events shall constitute a default under the Promissory Note and
this Loan Agreement and shall be termed an "Event of Default":
a. Any Borrower shall fail to pay when due, any principal of, or
interest on, the Promissory Note or any fee, expense or other payment
required under this Loan Agreement, the Promissory Note, the Security
Documents, or any agreement, document, obligation, or transaction
contemplated by this Loan Agreement, and any such payment remains unpaid
for a period of ten (10) Banking Business Days thereafter.
b. Any Borrower shall fail in the performance of any obligation,
covenant, agreement, or liability created by this Loan Agreement, the
Promissory Note, the Security Documents, or any agreement, document,
obligation, or transaction contemplated by this Loan Agreement, and such
failure remains uncured for a period of ten (10) days after Lender gives
Borrowers written notice of such failure.
c. Any representation, warranty, or financial statement made by or
on behalf of any Borrower in this Loan Agreement, the Security Documents,
or any document contemplated by this Loan Agreement is materially false or
materially misleading when made or furnished.
d. Any material indebtedness of any Borrower to Lender or others
under any note, indenture, agreement, or undertaking is accelerated.
e. Default or an event which, with the passage of time or the giving
of notice or both would constitute a default, occurs on any material
indebtedness of any Borrower under any note, indenture, agreement, or
undertaking.
f. Any Borrower becomes dissolved or terminated.
g. A receiver, trustee, or custodian is appointed for any part of
any Borrower's property, or any part of such Borrower's property is
assigned for the benefit of creditors.
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h. Any proceeding is commenced or petition filed under any
bankruptcy or insolvency law by or against any Borrower.
i. Any judgment or regulatory fine is entered against any Borrower
which may materially affect such Borrower.
j. Any Borrower becomes insolvent or fails to pay its debts as they
mature.
k. Default occurs or any Borrower fails to comply with any term in
any of the Security Documents.
l. Any material adverse change occurs in any Borrower's condition,
or any event occurs which may cause a material adverse change in such
Borrower's condition.
Section 7.2. NO WAIVER OF EVENT OF DEFAULT
No course of dealing or delay or failure to assert any Event of Default
shall constitute a waiver of that Event of Default or of any prior or
subsequent Event of Default.
ARTICLE 8- REMEDIES
Section 8.1. REMEDIES UPON EVENT OF DEFAULT
Upon the occurrence of an Event of Default, and at any time thereafter,
all or any portion of the obligations due or to become due from Borrowers to
Lender, whether arising under this Loan Agreement, the Promissory Note, the
Security Documents or otherwise, at the option of Lender and without notice
to Borrowers of the exercise of such option, shall accelerate and become at
once due and payable in full, and Lender shall have all rights and remedies
created by or arising from this Loan Agreement, the Promissory Note, the
Security Documents, all other documents contemplated by this Loan Agreement,
and all other rights and remedies existing at law, in equity, or by statute.
Additionally, Lender shall have the right, immediately and without prior
notice or demand, to set off against any Borrower's obligations to Lender,
whether or not due, all money and other amounts owed by Lender in any
capacity to any Borrower, including, without limitation, checking accounts,
savings accounts, and other depository accounts, and Lender shall be deemed
to have exercised such right of setoff and to have made a charge against any
such money or amounts immediately upon occurrence of an Event of Default,
even though such charge is entered on Lender's books subsequent thereto.
Section 8.2. RIGHTS AND REMEDIES CUMULATIVE
The rights and remedies herein conferred are cumulative and not
exclusive of any other rights or remedies, and shall be in addition to every
other right, power, and remedy that Lender may have,
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whether specifically granted herein, or hereafter existing at law, in equity,
or by statute; and any and all such rights and remedies may be exercised from
time to time and as often and in such order as Lender may deem expedient.
Section 8.3. NO WAIVER OF RIGHTS
No delay or omission in the exercise or pursuance by Lender of any
right, power, or remedy shall impair any such right, power, or remedy or
shall be construed to be a waiver thereof.
ARTICLE 9- GENERAL PROVISIONS
Section 9.1. GOVERNING AGREEMENT
In the event of conflict or inconsistency between this Loan Agreement
and the Security Documents or other agreements, documents, obligations, or
transactions contemplated by this Agreement (excluding the Promissory Note),
the terms, provisions and intent of this Loan Agreement shall govern.
Section 9.2. BORROWERS' OBLIGATIONS CUMULATIVE
Every obligation, covenant, condition, provision, warranty, agreement,
liability, and undertaking of any Borrower contained in this Loan Agreement,
the Promissory Note, the Security Documents, and all agreements, documents,
obligations, and transactions contemplated by this Loan Agreement shall be
deemed cumulative and not in derogation or substitution of any of the other
obligations, covenants, conditions, provisions, warranties, agreements,
liabilities, or undertakings of such Borrower contained herein or therein.
Section 9.3. PAYMENT OF EXPENSES AND ATTORNEY'S FEES
Borrowers shall pay all reasonable expenses of Lender relating to the
negotiation, drafting of documents, and documentation of the Loan, including,
without limitation, title insurance, recording fees, filing fees, and
reasonable attorneys fees and legal expenses.
Upon occurrence of an Event of Default, Borrowers agree to pay all
costs, and expenses, including reasonable attorney fees and legal expenses,
incurred by Lender in enforcing, or exercising any remedies under, this Loan
Agreement, the Promissory Note, or the Security Documents, or any other
rights and remedies.
Borrowers agree to pay all expenses, including reasonable attorney fees
and legal expenses, incurred by Lender in any bankruptcy proceedings of any
type involving any Borrower, this Loan Agreement, the Security Documents, or
the Collateral, including, without limitation, expenses incurred in modifying
or lifting the automatic stay, determining adequate protection, use of cash
collateral or relating to any plan of reorganization.
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Section 9.4. RIGHT TO PERFORM FOR BORROWERS
Lender may, in its sole discretion and without any duty to do so, elect
to discharge taxes, tax liens, security interests, or any other encumbrance
upon the Collateral or any other property or asset of any Borrower, to pay
any filing, recording, or other charges payable by any Borrower, or to
perform any other obligation of any Borrower under this Loan Agreement or
under the Security Documents.
Section 9.5. ASSIGNABILITY
No Borrower may assign or transfer this Loan Agreement, the Promissory
Note, the Security Documents or any agreement, document, obligation, or
transaction contemplated by this Loan Agreement, and any such purported
assignment or transfer is void.
Lender may assign or transfer this Loan Agreement, the Promissory Note,
the Security Documents, and any agreement, document, obligation, or
transaction contemplated by this Loan Agreement.
Section 9.6. THIRD PARTY BENEFICIARIES
The Loan, this Loan Agreement, the Promissory Note, the Security
Documents, and all other agreements, documents, obligations, and transactions
contemplated by this Loan Agreement are made for the sole and exclusive
benefit of Borrowers and Lender and are not intended to benefit any other
third party. No third party may claim any right or benefit or seek to
enforce any term or provision of this Loan Agreement, the Loan, the
Promissory Note, the Security Documents, or any other agreement, document,
obligation, or transaction contemplated by this Loan Agreement.
Section 9.7. GOVERNING LAW
This Loan Agreement, the Promissory Note, the Security Documents, and
all agreements, documents, obligations, and transactions contemplated by this
Loan Agreement shall be governed by and construed in accordance with the laws
of the State of Utah, except to the extent that any such document expressly
provides otherwise.
Section 9.8. SEVERABILITY OF INVALID PROVISIONS
With respect to this Loan Agreement, the Promissory Note, the Security
Documents, and all agreements, documents, obligations, and transactions
contemplated by this Loan Agreement, any provision hereof or thereof which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction only, be ineffective only to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
thereof, and any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction.
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Section 9.9. INTERPRETATION OF LOAN AGREEMENT
The article and section headings in this Loan Agreement are inserted for
convenience only and shall not be considered part of the Loan Agreement nor
be used in its interpretation.
All references in this Loan Agreement to the singular shall be deemed to
include the plural when the context so requires, and vice versa. References
in the collective or conjunctive shall also include the disjunctive unless
the context otherwise clearly requires a different interpretation.
Section 9.10. SURVIVAL AND BINDING EFFECT OF REPRESENTATIONS, WARRANTIES, AND
COVENANTS
All agreements, representations, warranties, and covenants made herein
by Borrowers shall survive the execution and delivery of this Loan Agreement
and shall continue in effect so long as any obligation to Lender contemplated
by this Loan Agreement is outstanding and unpaid, notwithstanding any
termination of this Loan Agreement. All agreements, representations,
warranties, and covenants made herein by Borrowers shall survive any
bankruptcy proceedings involving any Borrower. All agreements,
representations, warranties, and covenants in this Loan Agreement shall bind
the party making the same, and its successors and, in Lender's case, assigns,
and all rights and remedies in this Loan Agreement shall inure to the benefit
of and be enforceable by each party for whom made, and their respective
successors and, in Lender's case, assigns.
Section 9.11. INDEMNIFICATION
Borrowers shall indemnify Lender for any and all claims and liabilities,
and for damages which may be awarded or incurred by Lender, and for all
reasonable attorney fees, legal expenses, and other out-of-pocket expenses
incurred in defending such claims, arising from or related in any manner to
the negotiation, execution, or performance by Lender of this Loan Agreement,
the Promissory Note, the Security Documents, or any of the agreements,
documents, obligations, or transactions contemplated by this Loan Agreement,
but excluding any such claims based upon breach or default by Lender or gross
negligence or willful misconduct of Lender.
Lender shall have the sole and complete control of the defense of any
such claims. Lender is hereby authorized to settle or otherwise compromise
any such claims as Lender in good faith determines shall be in its best
interests.
Section 9.12. ENVIRONMENTAL INDEMNIFICATION
Borrowers shall indemnify Lender for any and all claims and liabilities,
and for damages which may be awarded or incurred by Lender, and for all
reasonable attorney fees, legal expenses, and other out-of-pocket expenses
arising from or related in any manner, directly or indirectly, to (1)
Hazardous Materials located on, in, or under the Real Property; (2) any
Environmental Condition on, in, or under the Real Property; (3) violation of
or non-compliance with any Environmental Health and Safety Law; (4) any
breach or violation of Section 5.9 ENVIRONMENTAL REPRESENTATIONS AND
WARRANTIES and/or Section 6.18 ENVIRONMENTAL COVENANTS; and/or (5) any
activity or omission,
22
<PAGE>
whether occurring on or off the Real Property, whether prior to or during the
term of the loans secured hereby, and whether by Borrowers or any other
person or entity, relating to Hazardous Materials or an Environmental
Condition. The indemnification obligations of Borrowers under this Section
shall survive any reconveyance, release, or foreclosure of the Real Property,
any transfer in lieu of foreclosure, and satisfaction of the obligations
secured hereby.
Lender shall have the sole and complete control of the defense of any
such claims. Lender is hereby authorized to settle or otherwise compromise
any such claims as Lender in good faith determines shall be in its best
interests.
Section 9.13. INTEREST ON EXPENSES AND INDEMNIFICATION, COLLATERAL, ORDER OF
APPLICATION
All expenses, out-of-pocket costs, attorneys fees and legal expenses,
amounts advanced in performance of obligations of Borrowers, and
indemnification amounts owing by Borrowers to Lender under or pursuant to
this Agreement, the Promissory Note, and/or any Security Documents shall be
due and payable upon demand. If not paid upon demand, all such expenses,
out-of-pocket costs, attorneys fees and legal expenses, and indemnification
amounts shall bear interest at the default rate provided in the Promissory
Note from the date of disbursement until paid to Lender, both before and
after judgment. All such amounts advanced in performance of obligations of
Borrowers shall bear interest at the default rate provided in the Promissory
Note from the date of disbursement until paid to Lender, both before and
after judgment. Lender is authorized to disburse funds under the Promissory
Note for payment of all such obligations.
Payment of all such obligations shall be secured by the Collateral and
by any Security Documents.
All payments, recoveries, and advances on the Promissory Note shall be
applied to payment of the foregoing obligations, the Promissory Note, and all
other amounts owing to Lender by Borrowers in such order and priority as
determined by Lender. Payments on the Promissory Note shall be applied first
to accrued interest and the remainder, if any, to principal.
Section 9.14. LIMITATION OF CONSEQUENTIAL DAMAGES
Lender and its officers, directors, employees, representatives, agents,
and attorneys, shall not be liable to any Borrower for consequential damages
arising from or relating to any breach of contract, tort, or other wrong in
connection with the negotiation, documentation, administration or collection
of the Loan.
Section 9.15. WAIVER AND RELEASE OF CLAIMS
Each Borrower (i) represents that it has no defenses to or setoffs
against any indebtedness or other obligations owing to Lender or its
affiliates (the "Obligations"), nor claims against Lender or its affiliates
for any matter whatsoever, related or unrelated to the Obligations, and (ii)
releases Lender and its affiliates from all claims, causes of action, and
costs, in law or equity, existing as of
23
<PAGE>
the date of this Loan Agreement, which such Borrower has or may have by
reason of any matter of any conceivable kind or character whatsoever, related
or unrelated to the Obligations, including the subject matter of this Loan
Agreement. This provision shall not apply to claims for performance of
express contractual obligations owing to any Borrower by Lender or its
affiliates.
Section 9.16. REVIVAL CLAUSE
If the incurring of any debt by any Borrower or the payment of any money
or transfer of property to Lender by or on behalf of such Borrower should for
any reason subsequently be determined to be "voidable" or "avoidable" in
whole or in part within the meaning of any state or federal law (collectively
"voidable transfers"), including, without limitation, fraudulent conveyances
or preferential transfers under the United States Bankruptcy Code or any
other federal or state law, and Lender is required to repay or restore any
voidable transfers or the amount or any portion thereof, or upon the advice
of Lender's counsel is advised to do so, then, as to any such amount or
property repaid or restored, including all reasonable costs, expenses, and
attorneys fees of Lender related thereto, the liability of such Borrower
shall automatically be revived, reinstated and restored and shall exist as
though the voidable transfers had never been made.
Section 9.17. ARBITRATION
ARBITRATION DISCLOSURES:
1. ARBITRATION IS FINAL AND BINDING ON THE PARTIES AND SUBJECT TO
ONLY VERY LIMITED REVIEW BY A COURT.
2. IN ARBITRATION THE PARTIES ARE WAIVING THEIR RIGHT TO LITIGATE IN
COURT, INCLUDING THEIR RIGHT TO A JURY TRIAL.
3. DISCOVERY IN ARBITRATION IS MORE LIMITED THAN DISCOVERY IN COURT.
4. ARBITRATORS ARE NOT REQUIRED TO INCLUDE FACTUAL FINDINGS OR
LEGAL REASONING IN THEIR AWARDS. THE RIGHT TO APPEAL OR SEEK MODIFICATION
OF ARBITRATORS' RULINGS IS VERY LIMITED.
5. A PANEL OF ARBITRATORS MIGHT INCLUDE AN ARBITRATOR WHO IS OR WAS
AFFILIATED WITH THE BANKING INDUSTRY.
6. IF YOU HAVE QUESTIONS ABOUT ARBITRATION, CONSULT YOUR ATTORNEY OR
THE AMERICAN ARBITRATION ASSOCIATION.
(a) Any claim or controversy ("Dispute") between or among the parties
and their assigns, including but not limited to Disputes arising out of or
relating to the Loan, the Collateral, this Loan Agreement, the Promissory
Note, the Security Documents, the Guarantee, this Section 9.17
24
<PAGE>
ARBITRATION, this arbitration provision ("arbitration clause"), or any
related agreements or instruments relating hereto or delivered in connection
herewith ("Related Documents"), and including but not limited to a Dispute
based on or arising from an alleged tort, shall at the request of any party
be resolved by binding arbitration in accordance with the applicable
arbitration rules of the American Arbitration Association ("the
Administrator"). The provisions of this arbitration clause shall survive any
termination, amendment, or expiration of any of the aforesaid documents or
Related Documents. The provisions of this arbitration clause shall supersede
any prior arbitration agreement between or among the parties. If any
provision of this arbitration clause should be determined to be
unenforceable, all other provisions of this arbitration clause shall remain
in full force and effect.
(b) The arbitration proceedings shall be conducted in Salt Lake City,
Utah, at a place to be determined by the Administrator. The Administrator
and the arbitrator(s) shall have the authority to the extent practicable to
take any action to require the arbitration proceeding to be completed and the
arbitrator(s)' award issued within one-hundred-fifty (150) days of the filing
of the Dispute with the Administrator. The arbitrator(s) shall have the
authority to impose sanctions on any party that fails to comply with time
periods imposed by the Administrator or the arbitrator(s), including the
sanction of summarily dismissing any Dispute or defense with prejudice. The
arbitrator(s) shall have the authority to resolve any Dispute regarding the
terms of any of the aforesaid documents, this arbitration clause or Related
Documents, including any claim or controversy regarding the arbitrability of
any Dispute. All limitations periods applicable to any Dispute or defense,
whether by statute or agreement, shall apply to any arbitration proceeding
hereunder and the arbitrator(s) shall have the authority to decide whether
any Dispute or defense is barred by a limitations period and, if so, to
summarily enter an award dismissing any Dispute or defense on that basis.
The doctrines of compulsory counterclaim, res judicata, and collateral
estoppel shall apply to any arbitration proceeding hereunder so that a party
must state as a counterclaim in the arbitration proceeding any claim or
controversy which arises out of the transaction or occurrence that is the
subject matter of the Dispute. The arbitrator(s) may in the arbitrator(s)'
discretion and at the request of any party: (1) consolidate in a single
arbitration proceeding any other claim or controversy involving another party
that is substantially related to the Dispute where that other party is bound
by an arbitration clause with the Lender, such as borrowers, guarantors,
sureties, and owners of collateral; (2) consolidate in a single arbitration
proceeding any other claim or controversy that is substantially similar to
the Dispute; and (3) administer multiple arbitration claims or controversies
as class actions in accordance with the provisions of Rule 23 of the Federal
Rules of Civil Procedure.
(c) The arbitrator(s) shall be selected in accordance with the rules
of the Administrator from panels maintained by the Administrator. A single
arbitrator shall have expertise in the subject matter of the Dispute. Where
three arbitrators conduct an arbitration proceeding, the Dispute shall be
decided by a majority vote of the three arbitrators, at least one of whom
must have expertise in the subject matter of the Dispute and at least one of
whom must be a practicing attorney. The arbitrator(s) shall award to the
prevailing party recovery of all costs and fees (including attorneys' fees
and costs, arbitration administration fees and costs, and arbitrator(s)'
fees). The arbitrator(s), either during the pendency of the arbitration
proceeding or as part of the arbitration award, also may grant provisional or
ancillary remedies including but not limited to an award of injunctive
relief, foreclosure, sequestration, attachment, replevin, garnishment, or the
appointment of a receiver.
25
<PAGE>
(d) Judgment upon an arbitration award may be entered in any court
having jurisdiction, subject to the following limitation: the arbitration
award is binding upon the parties only if the amount does not exceed four
million dollars ($4,000,000.00); if the award exceeds that limit, either
party may demand the right to a court trial. Such a demand must be filed
with the Administrator within thirty (30) days following the date of the
arbitration award; if such a demand is not made within that time period, the
amount of the arbitration award shall be binding. The computation of the
total amount of an arbitration award shall include amounts awarded for
attorneys' fees and costs, arbitration administration fees and costs, and
arbitrator(s)' fees.
(e) No provision of this arbitration clause, nor the exercise of any
rights hereunder, shall limit the right of any party to: (1) judicially or
non-judicially foreclose against any real or personal property collateral or
other security; (2) exercise self-help remedies, including but not limited to
repossession and setoff rights; or (3) obtain from a court having
jurisdiction thereover any provisional or ancillary remedies including but
not limited to injunctive relief, foreclosure, sequestration, attachment,
replevin, garnishment, or the appointment of a receiver. Such rights can be
exercised at any time, before or during initiation of an arbitration
proceeding, except to the extent such action is contrary to the arbitration
award. The exercise of such rights shall not constitute a waiver of the
right to submit any Dispute to arbitration, and any claim or controversy
related to the exercise of such rights shall be a Dispute to be resolved
under the provisions of this arbitration clause. Any party may initiate
arbitration with the Administrator; however, if any party initiates
litigation and another party disputes any allegation in that litigation, the
disputing party--upon the request of the initiating party--must file a demand
for arbitration with the Administrator and pay the Administrator's filing
fee. The parties may serve by mail a notice of an initial motion for an
order of arbitration.
(f) Notwithstanding the applicability of any other law to any of the
aforesaid documents, the arbitration clause, or Related Documents between or
among the parties, the Federal Arbitration Act, 9 U.S.C. Section 1 ET SEQ.,
shall apply to the construction and interpretation of this arbitration clause.
Section 9.18. NOTICES
All notices or demands by any party to this Loan Agreement shall, except
as otherwise provided herein, be in writing and may be sent by certified
mail, return receipt requested. Notices so mailed shall be deemed received
when deposited in a United States post office box, postage prepaid, properly
addressed to the applicable Borrower or Lender at the mailing addresses
stated herein or to such other addresses as such Borrower or Lender may from
time to time specify in writing. Any notice so addressed and otherwise
delivered shall be deemed to be given when actually received by the addressee.
26
<PAGE>
Mailing addresses:
Lender:
Zions First National Bank
Commercial Loan Department
P.O. Box 25822
One South Main Street
Salt Lake City, Utah 84125
Attention: Greg O. Nordfelt
With a copy to:
Callister Nebeker & McCullough
Gateway Tower East Suite 900
10 East South Temple
Salt Lake City, Utah 84133
Attention: Glen F. Strong, Esq.
Borrowers:
Merit Medical Systems, Inc.
1600 West Merit Parkway
South Jordan, Utah 84095
Attention: Kent Stanger
Merit Holdings, Inc.
1600 West Merit Parkway
South Jordan, Utah 84095
Attention: Kent Stanger
Sentir Semiconductor, Inc.
1600 West Merit Parkway
South Jordan, Utah 84095
Attention: Kent Stanger
Section 9.19. DUPLICATE ORIGINALS
Two or more duplicate originals of this Loan Agreement and the Security
Documents may be signed by the parties, each duplicate of which shall be an
original but all of which together shall constitute one and the same
instrument.
27
<PAGE>
Section 9.20. AMENDMENT AND RESTATEMENT
Upon the effectiveness of this Loan Agreement (i) the outstanding "Loan"
made under the Original Loan Agreement shall be deemed to have been made as
the Loan under this Loan Agreement and such Loan shall be deemed to be
evidenced by the Promissory Note, (ii) the Original Loan Agreement shall be
deemed to be restated in the form of this Loan Agreement (except such
provisions thereof which by their terms survive any termination thereof), and
(iii) Lender shall return to Borrower the "Promissory Note" under the
Original Loan Agreement marked to show that such note has been superseded.
Section 9.21. INTEGRATED AGREEMENT AND SUBSEQUENT AMENDMENT
This Loan Agreement, the Promissory Note, the Security Documents, and
the other agreements, documents, obligations, and transactions contemplated
by this Loan Agreement constitute the entire agreement between Lender and
Borrowers, and may not be altered or amended except by written agreement
signed by Lender and Borrowers. PURSUANT TO UTAH CODE SECTION 25-5-4,
BORROWERS ARE NOTIFIED THAT THESE AGREEMENTS ARE A FINAL EXPRESSION OF THE
AGREEMENT BETWEEN LENDER AND BORROWERS AND THESE AGREEMENTS MAY NOT BE
CONTRADICTED BY EVIDENCE OF ANY ALLEGED ORAL AGREEMENT.
All prior and contemporaneous agreements, arrangements and
understandings between the parties hereto as to the subject matter hereof
are, except as otherwise expressly provided herein, rescinded.
Effective Date: August 11, 1999.
Lender:
Zions First National Bank
By:
------------------------------------
Title:
---------------------------------
Borrowers:
Merit Medical Systems, Inc.
By:
------------------------------------
Title:
---------------------------------
28
<PAGE>
Merit Holdings, Inc.
By:
------------------------------------
Title:
---------------------------------
Sentir Semiconductor, Inc.
By:
------------------------------------
Title:
---------------------------------
29
<PAGE>
EXHIBIT A
PROMISSORY NOTE
30
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MERIT
MEDICAL SYSTEMS, INC.'S CONSOLIDATED BALANCE SHEET AND INCOME STATEMENT FOR THE
NINE MONTH PERIOD ENDING SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 731,436
<SECURITIES> 0
<RECEIVABLES> 12,575,003
<ALLOWANCES> (284,338)
<INVENTORY> 24,553,726
<CURRENT-ASSETS> 39,502,934
<PP&E> 35,895,329
<DEPRECIATION> (14,110,964)
<TOTAL-ASSETS> 68,638,603
<CURRENT-LIABILITIES> 10,857,057
<BONDS> 24,228,151
0
0
<COMMON> 18,084,309
<OTHER-SE> 13,109,414
<TOTAL-LIABILITY-AND-EQUITY> 68,638,603
<SALES> 56,601,881
<TOTAL-REVENUES> 56,601,881
<CGS> 34,796,574
<TOTAL-COSTS> 34,796,574
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 87,007
<INTEREST-EXPENSE> 676,575
<INCOME-PRETAX> 3,493,220
<INCOME-TAX> 1,165,567
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,246,576
<EPS-BASIC> 0.30
<EPS-DILUTED> 0.29
</TABLE>
