EX-10.1 2 fzmd-ex101_17.htm EX-10.1 fzmd-ex101_17.htm

Exhibit 10.1

 

 

 

 

 

 

 

 

 

 

 

 

 

CREDIT AND SECURITY AGREEMENT

 

 

between

 

 

FUSE MEDICAL, INC.,

AND THOSE ENTITIES LISTED ON SCHEDULE 1 HERETO

 

 

each a Borrower and collectively the Borrowers and

CNH FINANCE FUND I, L.P.

 

 

as the Lender

 

 

Dated as of December 14, 2021

 

 

 

 

 


Exhibit 10.1

 

 

 

CREDIT AND SECURITY AGREEMENT

 

Table of Contents

Page

 

 

 

I.

DEFINITIONS1

 

1.1

General Terms1

 

1.2

Specific Terms1

 

II.

ADVANCES, PAYMENT AND INTEREST21

 

2.1

Advances21

 

2.3

Interest23

 

2.5

Revolving Facility Collections; Repayment; Borrowing Availability and Controlled Deposit Accounts25

 

 

2.7

Repayment of Excess Advances27

 

2.8

Payments by Lender27

 

2.10

Collateral Administration28

 

2.11

Power of Attorney31

 

2.12

Setoff Rights32

 

3.1

Facility Fee32

 

3.2

Unused Line Fee32

 

3.3

Collateral Management Fee32

 

3.4

Early Termination Fees33

 

3.5

Software Interface Fee33

 

3.6

Computation of Fees; Lawful Limits33

 

3.7

Default Rate of Interest34

 

3.8

Acknowledgement of Joint and Several Liability34

 

IV.

CONDITIONS PRECEDENT37

 

4.1

Conditions to Closing and Advances37

 

V.

REPRESENTATIONS AND WARRANTIES40

1

 


Exhibit 10.1

 

 

 

 

5.1

Organization and Authority40

 

5.2

Loan Documents41

 

5.4

Properties42

 

5.5

Other Agreements42

 

5.6

Litigation42

 

5.7

Labor Matters43

 

5.9

Financial Statements and Reports43

 

5.10

Compliance with Law44

 

5.11

Intellectual Property44

 

5.12

Licenses and Permits45

 

5.13

Disclosure45

 

5.15

Agreements with Affiliates46

 

5.16

Insurance46

 

5.18

Accounts47

 

5.19

Healthcare Permits47

 

5.22

Material Contracts48

 

VI.

AFFIRMATIVE COVENANTS49

 

6.2

Payment of Obligation52

 

6.5

Insurance52

 

6.6

True Books53

 

6.7

Inspection; Period Audits53

 

6.8

Further Assurances; Post Closing54

 

6.9

Payment of Indebtedness54

 

6.10

Lien Terminations55

 

6.11

Use of Proceeds55

 

6.13

Taxes and Other Charges56

 

6.14

Payroll Agent56

 

6.15

Hazardous Substances57

 

6.16

Reserved57

 

6.17

Healthcare Permits57

 

VII.

NEGATIVE COVENANTS57

 

7.1

Financial Covenants57

2

 


Exhibit 10.1

 

 

 

 

7.5

Prohibited Payments58

 

7.6

Transactions with Affiliates59

 

7.8

Asset Sales60

 

7.9

Management60

 

7.10

Restrictive Agreements60

 

7.11

Modifications of Certain Agreements61

 

7.13

Deposit Accounts61

 

7.14

Truth of Statements62

 

7.15

IRS Form 882162

 

7.16

Cash Advance Loans62

 

VIII.

EVENTS OF DEFAULT62

 

8.1

Events of Default62

 

9.1

Rights and Remedies65

 

9.2

Application of Proceeds66

 

10.1

Waivers68

 

10.3

Jury Waiver69

 

10.4

Cooperation in Discovery and Litigation69

 

XI.

EFFECTIVE DATE AND TERMINATION69

 

11.1

Effectiveness and Termination69

 

11.2

Survival70

 

XII.

ASSIGNMENTS AND PARTICIPATIONS70

 

12.1

Assignments70

 

12.2

Participations71

 

12.3

Defaulting Participants71

3

 


Exhibit 10.1

 

 

 

 

12.4

Definitions72

 

XIII.

MISCELLANEOUS72

 

13.3

Revival of Obligations73

 

13.4

Indemnity73

 

13.5

Notice74

 

13.7

Expenses75

 

13.8

Entire Agreement76

 

13.9

Lender Approvals76

 

13.10

Confidentiality76

 

13.11

USA PATRIOT Act77

 

13.12

Release of Lender77

 

4

 


Exhibit 10.1

 

 

 

ANNEX I

 

Financial and Loan Covenants

 

EXHIBITS

 

Exhibit A-Borrowing Certificate

 

Exhibit B-Compliance Certificate

 

SCHEDULES

 

Schedule 1-List of Borrowers

 

Schedule 2.4-Borrowers’ Account for Funding Wires Schedule 2.5-Borrowers’ Deposit Accounts Schedule 5.3-Organizational Information

Schedule 5.4-Real Property Owned or Leased Schedule 5.6-Litigation

Schedule 5.11-Intellectual Property Schedule 5.16-Insurance

Schedule 5.17A-Corporate Names

 

Schedule 5.17B-Business and Collateral Locations Schedule 5.21-Environmental Exceptions Schedule 5.22-Material Contracts

Schedule 5.23-Third-Party Payor Billing Numbers Schedule 7.2(a)Permitted Indebtedness

Schedule 7.2(b)Permitted Contingent Obligations

 

Schedule 7.3-Liens

 

Schedule 7.6Permitted Affiliates

 

5

 


Exhibit 10.1

 

 

 

6

 


Exhibit 10.1

 

CREDIT AND SECURITY AGREEMENT

 

This CREDIT AND SECURITY AGREEMENT (this Agreement”) dated as of December 14, 2021, is entered into between FUSE MEDICAL, INC., a Delaware corporation (“Fuse”), those entities listed on Schedule 1 attached hereto and any additional borrower that may hereafter be added to this Agreement (together with Fuse, individually and/or collectively, Borrower” and/or “Borrowers”), and CNH FINANCE FUND I, L.P., a Delaware limited partnership (the Lender”).

 

RECITALS

 

WHEREAS, Borrowers have requested that Lender make available to Borrowers the revolving credit facility (the Revolving Facility”) as described herein; and

 

WHEREAS, Lender is willing to make the Revolving Facility available to Borrowers under the terms and subject to the conditions set forth herein.

 

AGREEMENT

 

In consideration of the foregoing and for other good and valuable consideration, the receipt and adequacy of which hereby are acknowledged, Borrowers and Lender hereby agree as follows:

 

 

I.

DEFINITIONS

 

 

1.1

General Terms

 

For purposes of this Agreement, in addition to the definitions above and elsewhere in this Agreement, the terms listed below shall have the meanings set forth. All capitalized terms used which are not specifically defined shall have meanings provided in Article 9 of the UCC to the extent the same are used or defined therein. Unless otherwise specified herein, any agreement or contract referred to herein shall mean such agreement as modified, amended or supplemented from time to time. Unless otherwise specified, as used in the Loan Documents or in any certificate, report, instrument or other document made or delivered pursuant to any of the Loan Documents, all accounting terms not defined elsewhere in this Agreement shall have the meanings given to such terms in and shall be interpreted in accordance with GAAP applied on a basis consistent with the most recent audited consolidated financial statements of the Borrowers and their consolidated Subsidiaries delivered to Lender on or prior to the Closing Date.

 

 

1.2

Specific Terms

 

“Account Debtor” shall mean “account debtor”, as defined in Article 9 of the UCC, and any other obligor in respect of an Account.

 

“Accounts” shall mean all of Borrowers’ (i) accounts (as that term is defined in the UCC),

(ii)payment intangibles (as that term is defined in the UCC), and (iii) all other rights of payment, collection or reimbursement (whether owed directly to a Borrower or assigned to a Borrower by a patient or other third party), whenever due, that arose out of, or will arise out of, the rendering of

 

 


Exhibit 10.1

 

services, the provision of room, board or other daily living assistance, or the sale, assignment, lease or license of Equipment, prosthetics, pharmaceutical or other Goods, whether before or after the date of this Agreement and including all of Borrowers’ rights of payment, collection or reimbursement with respect to such services from any insurer, federal or state government agency or other third party; whether billed on a fee for service, monthly per patient capitation charge or any other basis, whether or not the accounts, payment intangibles, or rights of payment, collection or reimbursement have been invoiced or billed, written off, partially paid, currently assigned to collection agencies or other third party service vendors. Without limiting the foregoing, Accounts shall also include all monies due or to become due to Borrowers and obligations to Borrowers in any form (whether arising in connection with contracts, contract rights, instruments, or Chattel Paper), in each case whether or not earned by performance, now or hereafter in existence, and all documents of title or other documents representing any of the foregoing, and all collateral security and guaranties of any kind, now or hereafter in existence, given by any Person with respect to any of the foregoing.

 

“Accrediting Organization” shall mean any Person from which any Borrower has received an accreditation as of the Closing Date or thereafter.

 

“ACH” shall mean automated clearing house.

 

“Advance” shall mean a borrowing under the Revolving Facility. Any amounts paid by Lender on behalf of any Borrower or any Guarantor under any Loan Document shall also be an Advance for purposes of this Agreement. Each Advance shall increase the principal amount outstanding hereunder.

 

“Affiliate” shall mean, as to any Person, any other Person (a) that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such Person, (b) who is a director or officer (i) of such Person, (ii) of any Subsidiary of such Person, or (iii) of any Person described in clause (a) above with respect to such Person, (c) which, directly or indirectly through one or more intermediaries, is the beneficial or record owner (as defined in Rule 13d-3 of the Securities Exchange Act of 1934, as amended, as the same is in effect on the date hereof) of ten percent (10%) or more of any class of the outstanding Voting Stock of such Person and (d) any spouses, parents, descendants and siblings of any of the Persons described in clauses (a), (b) and (c) above. For purposes of this definition, the term “control” (and the correlative terms, “controlled by” and “under common control with”) shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the administrative management or policies (even without the power to direct or cause the direction of the clinical/medical management or policies), whether through ownership of securities or other interests, by contract or otherwise.

 

AmBio means AmBio Staffing, LLC, a Texas limited liability company.

 

“Applicable Margin” shall mean one and three-quarters percent (1.75%).

 

“Applicable Rate” shall mean the interest rate applicable from time to time to Advances under this Agreement.

 

Credit and Security Agreement, Page 2

 


Exhibit 10.1

 

“Availability” shall mean the Revolving Loan Limit less all Revolving Loans outstanding, minus any reserves against Availability imposed by Lender in its Permitted Discretion.

 

“Bankruptcy Code” shall mean Title 11 of the United States Code entitled “Bankruptcy”, as the same may be amended, modified or supplemented from time to time, and any successor statute thereto.

 

“Billing Date” shall mean the date on which Borrower first submits a duly completed and supported claim or bill to an Account Debtor for payment and collection of an Account or sold Inventory.

 

“Books and Records” shall mean Borrowers’ books and records specifically relating to Accounts, including, but not limited to, ledgers, records indicating, summarizing, or evidencing Accounts and all computer programs, disc or tape files, printouts, runs, and other computer prepared information with respect to the foregoing and any software necessary to operate the same.

 

“Borrower” and “Borrowers” shall mean the entity(ies) described as such in the first paragraph of this Agreement and each of their successors and permitted assigns.

 

“Borrowing Base” shall mean, as of any date of determination:

 

(a)the Net Collectible Value of Eligible Receivables, as such Net Collectible Value is determined by Lender with reference to the most recent Borrowing Certificate, other factors reasonably deemed relevant by Lender and otherwise in accordance with this Agreement; provided, however, that if as of such date of determination the most recent Borrowing Certificate is of a date more than four (4) Business Days before such date, the Borrowing Base shall be determined by Lender in its sole discretion; plus

 

 

(b)

the lesser of (i) the Borrowing Base Eligible Inventory Cap, or (ii) eighty percent (80%)

multiplied by the Net Orderly Liquidation Value of the Eligible Inventory; minus

 

(c)the amount of any reserves or adjustments against the Borrowing Base provided for in this Agreement or determined by Lender from time to time, in its Permitted Discretion.

 

Borrowing Base Eligible Inventory Cap shall mean the lesser of (i) fifty percent (50%) of the amount calculated in clause (a) of the definition of Borrowing Base, and (ii) $1,500,000.00.

 

“Borrowing Certificate” shall mean a Borrowing Certificate substantially in the form of Exhibit A.

 

“Borrowing Date” shall have the meaning assigned to that term in Section 2.4.

 

“Business Day” shall mean any day other than a Saturday, Sunday, Good Friday or other day on which the Federal Reserve or Lender is closed. Unless specifically referenced in this Agreement as a Business Day, all references to “days” shall be to calendar days.

 

Credit and Security Agreement, Page 3

 


Exhibit 10.1

 

“Capital Lease” shall mean, as to any Person, a lease or any interest in any kind of property or asset by that Person as lessee that is, should be or should have been recorded as a “capital lease” of such Person in accordance with GAAP.

 

“Capitalized Lease Obligations” shall mean all obligations of any Person under Capital Leases, in each case, taken at the amount thereof accounted for as a liability in accordance with GAAP.

 

“Cash Advance Loan” means any loan, debt, advance, merchant cash advance, business cash advance, ACH business loan, or other indebtedness or financing arrangement (whether such financing is on or off balance sheet, secured or unsecured) incurred by Borrowers based on or to be repaid by Account proceeds or Borrowers’ other revenue, or by ACH pull or withholding from any of Borrowers’ Controlled Deposit Accounts, other than the Operating Accounts.

 

“CERCLA” shall mean the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C.A. § 9601 et seq., as the same may be amended from time to time.

 

“Change of Control” shall mean any of the following: (a) the occurrence of a merger, consolidation, reorganization, recapitalization or share or interest exchange, sale or transfer or any other transaction or series of transactions as a result of which the owners, directly or indirectly, of a majority of any Borrower’s Voting Stock or voting power as of the date hereof cease to be entitled to elect or appoint at least a majority of such Borrower’s Board of Directors (or equivalent governing body), or (b) the resignation, termination, replacement, death, disability or any other event the result of which is the failure of the existing senior management of any Borrower to function in their current capacities, unless, (i) in the case of a replacement, the replacement is reasonably acceptable to Lender, or (ii) in all other cases a replacement reasonably satisfactory to Lender is identified and engaged within 60 days following such event, or (c) the sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of any Borrower’s assets to, or a consolidation or merger with or into, any other Person, other than any such transaction where immediately thereafter the surviving Person is a direct or indirect Subsidiary of a Borrower.

 

Client Service Agreements” means the collective reference to (a) the Professional Employer Organization Client Service Agreement dated January 1, 2017, between Fusion and AmBio, and (b) the Professional Employer Organization Client Service Agreement dated January 1, 2015, between CPM and AmBio

 

“Closing” shall mean the date of the initial Advance under the Revolving Facility.

 

“Closing Date” shall mean the date the Closing occurs.

 

“Collateral” shall mean, collectively and each individually, all collateral or security identified in Section 2.9, together with any additional collateral or security now or hereafter granted to Lender by any Borrower or Guarantor pursuant to a Loan Document.

 

“Collateral Access Agreement” shall mean a third-party agreement setting forth the rights of the Lender with respect to Collateral located on any premises leased by a Borrower, or Collateral held, handled or processed by a warehouseman, processor, shipper, customs broker or freight

 

Credit and Security Agreement, Page 4

 


Exhibit 10.1

 

forwarder, repairman, mechanic, consignee or bailee, in each case, in form and substance reasonably satisfactory to Lender.

 

“Collateral Management Fee” shall have the meaning assigned to the term in Section

3.3.

 

“Collection Bank” shall mean a depository bank reasonably acceptable to Lender.

 

“Commercial Deposit Account” shall mean a deposit account established and maintained

in a Borrower’s name, which is used solely to collect payments with respect to such Borrower’s Accounts and other Collateral.

“Compliance Certificate” shall have the meaning assigned to the term in Section 6.1(a). “Concentration Account” shall have the meaning assigned to the term in Section 2.5. “Contingent Obligation” shall mean, with respect to any Person, any direct or indirect

liability of such Person: (a) with respect to any Indebtedness of another Person (a “Third Party Obligation”) if the purpose or intent of such Person incurring such liability, or the effect thereof, is to provide assurance to the obligee of such Third Party Obligation that such Third Party Obligation will be paid or discharged, or that any agreement relating thereto will be complied with, or that any holder of such Third Party Obligation will be protected, in whole or in part, against loss with respect thereto; (b) with respect to any undrawn portion of any letter of credit issued for the account of such Person or as to which such Person is otherwise liable for the reimbursement of any drawing; (c) under any swap contract, to the extent not yet due and payable, valued at the termination value thereof pursuant to the related master agreement, (d), to make take-or-pay or similar payments, if required regardless of nonperformance by any other party or parties to an agreement or (e) for any obligations of another Person pursuant to any Guaranty (other than a Guaranty of the Obligations or any part thereof) or pursuant to any agreement to purchase, repurchase or otherwise acquire any obligation or any property constituting security therefor, to provide funds for the payment or discharge of such obligation or to preserve the solvency, financial condition or level of income of another Person. The amount of any Contingent Obligation shall be equal to the amount of the obligation so guaranteed or otherwise supported or, if not a fixed and determinable amount, the maximum amount so guaranteed or otherwise supported.

 

“Controlled Deposit Accounts” shall mean each Commercial Deposit Account, Operating Account, and if applicable, the master collections account established by a Borrower in accordance with Section 2.5(b).

 

“Control Agreements” shall mean each deposit account control agreement, deposit account instructions and service agreement or similar agreements on each Commercial Deposit Account, Operating Account, and if applicable, the master collections account established by a Borrower in accordance with Section 2.5(b).

 

CPM means CPM Medical Consultants, LLC, a Texas limited liability company.

 

Credit and Security Agreement, Page 5

 


Exhibit 10.1

 

CPM Acquisition Agreement” means the United Purchase Agreement dated as of December 15, 2017, between NC 143 Family Holdings LP and Fuse.

 

“Credit Party” shall mean any Guarantor under a Guaranty of the Obligations or any part thereof, any Borrower and any other Person (other than Lender or a participant of a Lender), whether now existing or hereafter acquired or formed, that becomes obligated as a borrower, guarantor, surety, indemnitor, pledgor, assignor or other obligor under any Loan Document, and Credit Parties means all such Persons, collectively.

 

“Debtor Relief Law” shall mean, collectively, the United States Bankruptcy Code and all other applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization or similar debtor relief laws from time to time in effect affecting the rights of creditors generally, as amended from time to time.

 

“Default” shall mean (a) any event, fact, circumstance or condition that, with the giving of applicable notice or passage of time or both, would, unless cured or waived, constitute, be, become or result in an Event of Default and (b) any Event of Default.

 

“Default Rate” shall have the meaning assigned to the term in Section 3.7.

 

“Distribution” shall mean (a) any dividend or other distribution (whether in cash, securities or other property) on any Equity Interest in a Borrower (except those payable solely in its Equity Interests of the same class or its common Equity Interests), (b) any payment by a Borrower on account of (i) the purchase, redemption, retirement, defeasance, surrender, cancellation, termination or acquisition of any Equity Interests in such Borrower or any claim respecting the purchase or sale of any Equity Interest in such Borrower, (ii) any option, warrant or other right to acquire any Equity Interests in such Borrower, or (iii) amounts paid by a Borrower to any Affiliate of any Borrower, other than Permitted Affiliates, or (c) any loan or advance to an Affiliate of Borrowers.

 

“Dollars” or “$” shall mean the lawful and freely-transferrable currency of the United States of America.

 

Earn-Out has the meaning specified in the CPM Acquisition Agreement.

 

Eligible Inventory” means Inventory that is owned by the Borrowers’ and arising in the ordinary course of Borrowers’ business, which meets the following criteria:

 

a.it is subject to a first-priority Lien in favor of Lender and no other Lien (other than Permitted Liens) or rights of any other Person, including the rights of a purchaser that has made progress payments and the rights of a surety that has issued a bond to assure Borrower’s performance with respect to such Inventory;

 

b.it is located on a premises in the continental United States to which Lender has received a Collateral Access Agreement; unless such Inventory is in transit, in which event such Inventory is subject to a bill of lading or other document of title;

 

 

c.

it is covered by casualty insurance acceptable to Lender;

 

Credit and Security Agreement, Page 6

 


Exhibit 10.1

 

d.it meets all standards imposed by applicable Law, including with respect to its production, acquisition, shipping or importation;

 

e.any covenant, representation or warranty contained in the Loan Documents with respect to such Inventory has not been breached in any material respect;

 

f.it is not covered by a negotiable document of title, unless such document has been delivered to Lender with all necessary endorsements;

 

g.it is not excess, obsolete, unsalable, shopworn, seconds, damaged, unfit for sale, unfit for further processing, is of substandard quality, is not of good and merchantable quality, free from any defects, or has been marked with a warehouse code of “quarantine”;

 

 

h.

it is not a work in progress, placed on consignment, or held for rental or lease;

 

i.it is not subject to any licensing, patent, royalty, trademark, trade name or copyright agreement with any third parties, which agreement restricts the ability of Lender to sell or otherwise dispose of such Inventory;

 

j.it does not have an expiration date within the next six (6) months, and does not consist of products for which Borrowers have more than a six-month supply on hand;

 

k.it does not consist of Inventory that can be transported or sold only with licenses that are not readily available or of any substances defined or designated as hazardous or toxic waste, hazardous or toxic material, hazardous or toxic substance, or similar term, by any environmental law or any Governmental Authority applicable to Borrower or its business, operations or assets;

 

l.it does not consist of (i) discontinued items, (ii) slow-moving or excess items held in inventory, (iii) used items held for resale, (iv) marketing materials, (v) display items or packing or shipping materials, (vi) manufacturing supplies, or (vii) instruments used to install implants; and

 

m.it does not fail to meet such other specifications and requirements which may from time to time be established by Lender in its sole discretion. Lender and Borrower agree that Inventory shall be subject to periodic appraisal by Lender and that valuation of Inventory shall be subject to adjustment pursuant to the results of such appraisal. Notwithstanding the foregoing, the valuation of Inventory shall be subject to any legal limitations on sale and transfer of such Inventory.

 

“Eligible Billed Receivables” shall mean each Account arising in the ordinary course of Borrowers’ business, which meets the following criteria:

 

a.it is subject to a valid perfected first priority security interest in favor of Lender, subject to no other Lien (other than Permitted Liens);

 

Credit and Security Agreement, Page 7

 


Exhibit 10.1

 

b.it is evidenced by an invoice, statement, electronic submission or other documentary evidence satisfactory to Lender which has been submitted to the Account Debtor for payment in accordance with applicable Law;

 

c.it is in substantial compliance and conformance with any requisite procedures, requirements and regulations governing payment by such Account Debtor with respect to such Account, and is properly payable directly to a Borrower;

 

d.it is outstanding for no more than 150 days after the Billing Date with respect to such Account; provided that if more than fifty percent (50%) in Net Collectible Value of the Accounts payable by any one Third-Party Payor are outstanding for more than 150 days after such Accounts’ Billing Date, no Accounts payable by such Third-Party Payor shall be Eligible Billed Receivables;

 

e.it arises out of a completed, bona fide sale, assignment, lease, license and related delivery of Goods by a Borrower in the ordinary course of business, in accordance with applicable Law, and in accordance with the terms and conditions of all purchase orders, contracts, certifications, participations, certificates of need and other agreements and documents relating thereto or forming a part of the contract between a Borrower and the Account Debtor;

 

f.it does not represent the sale of Goods or rendering of services to an Account Debtor with respect to which the obligation of payment by the Account Debtor is or may be conditional for any reason, including accounts arising with respect to Goods that were

(i) not sold on an absolute basis, (ii) sold on a bill-and-hold sale basis, (iii) sold on a consignment sale basis, (iv) sold on a guaranteed sale basis, (v) sold on a sale or return basis, or (vi) sold on the basis of any other similar understanding;

 

g.it is not payable by (i) any Affiliate of Borrower or its Subsidiaries, (ii) an individual, (iii) an Account Debtor that does not maintain its principal place of business in the continental United States, (iv) a Governmental Authority, unless all applicable Laws respecting the assignment of such Account have been complied with, (v) a beneficiary, recipient or subscriber individually and not directly by a third-party obligor, or (vi) an Account Debtor that has suspended business, made a general assignment for the benefit of creditors, is unable to pay its debts generally as they become due, has filed a petition or sought relief under any Debtor Relief Laws, or is subject to a proceeding that could reasonably be expected to impair the validity, enforceability or collectability of such Account, reduce the amount payable of such Account, or delay payment of such Account;

 

h.except to the extent taken into consideration in determining Net Collectible Value, any portion of an Account that is subject to any offset, credit (including any resource or other income credit or offset), lien, deduction, defense, discount, chargeback, freight claim, allowance, adjustment, dispute or counterclaim, is not for a liquidated amount or is contingent in any respect shall not be included as an Eligible Billed Receivable;

 

i.except to the extent taken into consideration in determining Net Collectible Value, there is no agreement with an Account Debtor for any deduction from such Accounts,

 

Credit and Security Agreement, Page 8

 


Exhibit 10.1

 

except for discounts or allowances made in the ordinary course of business for prompt payment, all of which discounts or allowances are reflected in the calculation of the face value of each invoice related thereto, such that only the discounted amount of such Accounts after giving effect to such discounts and allowances shall be considered an Eligible Billed Receivable;

 

j.except to the extent taken into consideration in determining Net Collectible Value, any portion of the account that includes late charges or finance charges shall not be included as an Eligible Billed Receivable;

 

k.no covenant, agreement, representation or warranty with respect to such Accounts contained in any Loan Document has been breached in any material respect and remains uncured;

 

l.if the total Eligible Billed Receivables payable by an Account Debtor exceeds fifteen percent (15%) of all Eligible Billed Receivables, then any Accounts in excess of such fifteen percent (15%) will be considered ineligible;

 

m.it is not evidenced by Chattel Paper or an Instrument, unless such Chattel Paper or Instrument has been delivered to Lender;

 

 

n.

it does not represent the sale of Goods that have not been shipped;

 

o.it does not arise from or relate to a letter of protection or similar agreement between an attorney, a healthcare provider, and an individual;

 

p.no return, rejection, loss or damage of Goods related to it has occurred, but only to the extent that such Goods have been so returned, rejected, lost or damaged;

 

 

q.

the Account is payable to a Borrower only in Dollars; and

 

r.such Account meets such specifications and requirements other than as set forth above, which may from time to time be established by Lender, in Lender’s sole discretion, by written notice to Borrowers.

 

“Eligible Receivables” shall mean Eligible Billed Receivables, and such additional Accounts as may be permitted under Section 2.1(e).

 

“Environmental Laws” shall mean all federal, state, local, and foreign laws now or hereafter in effect relating to pollution or protection of the environment, including laws relating to emissions, discharges, releases, or threatened releases of pollutants, contaminants, chemicals, or industrial, toxic, or hazardous substances or wastes or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, removal, transport, or handling of pollutants, contaminants, chemicals, or industrial, toxic, or hazardous substances or wastes, and any and all regulations, notices, or demand letters issued, entered, promulgated, or approved thereunder.

 

“Equipment” shall mean “equipment” as defined in Article 9 of the UCC.

 

Credit and Security Agreement, Page 9

 


Exhibit 10.1

 

Equity Interests means shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any of the foregoing, but excluding any debt securities convertible into any of the foregoing.

 

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as the same may be amended, modified or supplemented from time to time, and any successor statute thereto, and any and all rules or regulations promulgated from time to time thereunder.

 

“ERISA Plan” shall mean any “employee benefit plan,” as such term is defined in Section 3(3) of ERISA (other than a Multiemployer Plan), which any Borrower maintains, sponsors or contributes to, or, in the case of an employee benefit plan which is subject to Section 412 of the Code or Title IV of ERISA, to which any Borrower or any member of the Controlled Group may have any liability, including any liability by reason of having been a substantial employer within the meaning of Section 4063 of ERISA at any time during the preceding five (5) years, or by reason of being deemed to be a contributing sponsor under Section 4069 of ERISA. For purposes of this definition, a “Controlled Group” shall mean all members of any group of corporations and all members of a group of trades or businesses (whether or not incorporated) under common control which, together with any Borrower, are treated as a single employer under Section 414(b), (c), (m) or (o) of the Code or Section 4001(b) of ERISA.

“Event of Default” shall mean the occurrence of any event set forth in Article VIII. Existing Amegy Loan Agreement means the Amended and Restated Business Loan

Agreement, dated as of December 31, 2017, among ZB, N.A. (d/b/a Amegy Bank) and the Borrowers, as amended.

 

Existing SBA Loan Agreement” means the U.S. Small Business Administration Loan Authorization and Agreement, dated May 12, 2020, between the U.S. Small Business Association and Fuse, as amended.

 

“Facility Cap” shall mean the maximum principal amount that may be outstanding hereunder which amount shall initially be $5,000,000.00, subject to such increases as may be made pursuant to Section 2.1(c).

 

“Facility Fee” shall have the meaning set forth in Section 3.1.

 

“GAAP” shall mean generally accepted accounting principles in the United States of America in effect from time to time.

 

“General Intangible” shall mean “general intangible” as defined in Article 9 of the UCC.

 

“Governmental Authority” shall mean any federal, state, municipal, national, local or other governmental department, court, commission, board, bureau, agency or instrumentality or political subdivision thereof, or any entity or officer exercising executive, legislative or judicial, regulatory or administrative functions of or pertaining to any government or any court, in each

 

Credit and Security Agreement, Page 10

 


Exhibit 10.1

 

case, whether of the United States or a state, territory or possession thereof, a foreign sovereign entity or country or jurisdiction or the District of Columbia.

 

“Guarantor” shall mean any guarantor of the Obligations or any part thereof, including any guarantor of the accuracy of any one or more representations or warranties of Borrowers contained in this Agreement. As of the date of this Agreement, there are no Guarantors.

 

“Guaranty” shall mean any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Indebtedness or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, Goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise), or (b) entered into for the purpose of assuring in any other manner the obligee of such Indebtedness or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part), provided, however, that the term Guaranty shall not include endorsements for collection or deposit in the ordinary course of business. The term “Guaranty” used as a verb has a corresponding meaning. The term “Guaranties shall mean the plural of Guaranty.

 

“Hazardous Substances” shall mean petroleum and petroleum products and compounds containing them, including gasoline, diesel fuel and oil; explosives, flammable materials; radioactive materials; polychlorinated biphenyls and compounds containing them; lead and lead- based paint; asbestos or asbestos-containing materials; underground or above-ground storage tanks, whether empty or containing any substance; any substance the presence of which is prohibited by any Environmental Laws; any contaminant, pollutant, waste or substance that is likely to cause immediately or at some future time harm or degradation to the surrounding environment or risk to human health; toxic mold, any substance that requires special handling; and any other material or substance now or in the future defined, classified or listed as a “hazardous substance,” “hazardous material,” “hazardous waste,” “toxic substance,” “toxic pollutant,” “contaminant,” “pollutant”, “radioactive”, “dangerous” or other words of similar import within the meaning of any Environmental Law, including: (a) any “hazardous substance” defined as such in (or for purposes of) CERCLA, or any so-called “superfund” or “superlien” Law, including the judicial interpretation thereof; (b) any “pollutant or contaminant” as defined in 42 U.S.C.A. § 9601(33); (c) any material now defined as “hazardous waste” pursuant to 40 C.F.R. Part 260;

(d)any petroleum or petroleum by-products, including crude oil or any fraction thereof; (e) natural gas, natural gas liquids, liquefied natural gas, or synthetic gas usable for fuel; (f) any “hazardous chemical” as defined pursuant to 29 C.F.R. Part 1910; (g) any toxic or harmful substances, wastes, materials, pollutants or contaminants (including asbestos, polychlorinated biphenyls (“PCB’s”), flammable explosives, radioactive materials, infectious substances, materials containing lead- based paint or raw materials which include hazardous constituents); and (h) any other toxic substance or contaminant that is subject to any Environmental Laws or other past or present requirement of any Governmental Authority. Notwithstanding the foregoing, Hazardous Substances shall not include substances in kinds and amounts commonly used in the operation of businesses of similar kind and nature to the business engaged in by Borrowers in accordance with all applicable Laws (including, but not limited to, Environmental Laws) and prudent business

 

Credit and Security Agreement, Page 11

 


Exhibit 10.1

 

management practices and in a manner that does not result in any contamination of all or any portion of properties utilized by Borrowers.

 

“Hazardous Substances Contamination” shall mean contamination (whether now existing or hereafter occurring) of the improvements, buildings, facilities, personalty, soil, groundwater, air or other elements on or of the relevant property by Hazardous Substances, or any derivatives thereof, or on or of any other property as a result of Hazardous Substances, or any derivatives thereof, generated on, emanating from or disposed of in connection with the relevant property.

 

“Healthcare Laws” shall mean all applicable Laws relating to (i) the production, possession, control, warehousing, marketing, sale and distribution of pharmaceuticals, medical devices, implants, or Equipment, (ii) patient healthcare, (iii) patient healthcare information, (iv) personnel, or (v) operating policies, including (a) all federal and state fraud and abuse laws, including the federal Anti-Kickback Statute (42 U.S.C. §1320a-7b(6)), the Stark Law (42 U.S.C.

§1395nn), the civil False Claims Act (31 U.S.C. §3729 et seq.), (b) TRICARE, (c) HIPAA, (d) Medicare, (e) Medicaid, (f) the Patient Protection and Affordable Care Act (P.L. 111-1468), (g) The Health Care and Education Reconciliation Act of 2010 (P.L. 111-152), (h) quality, safety and accreditation standards and requirements of all applicable state laws or regulatory bodies, (i) all laws, policies, procedures, requirements and regulations pursuant to which Healthcare Permits are issued, and (j) any and all other applicable health care laws, regulations, manual provisions, policies and administrative guidance, each of (a) through (j) as may be amended from time to time.

 

“Healthcare Permit” shall mean a Permit (a) issued or required under Healthcare Laws applicable to the business of any Borrower or any of its Subsidiaries or necessary in the possession, ownership, warehousing, marketing, promoting, sale, labeling, furnishing, distribution or delivery of Goods or services under Healthcare Laws applicable to the business of any Borrower or any of its Subsidiaries, (b) issued by any Person from which any Borrower has, as of the Closing Date, received an accreditation, or (c) issued or required under Healthcare Laws applicable to the ownership or operation of any business location of a Borrower.

 

“HIPAA” shall mean the Health Insurance Portability and Accountability Act of 1996, as the same may be amended, modified or supplemented from time to time, and any successor statute thereto, and any and all rules or regulations promulgated from time to time thereunder.

 

“HIPAA Compliant” shall mean that the applicable Person is in compliance with each of the applicable requirements of the so-called “Administrative Simplification” provisions of HIPAA, and is not and could not reasonably be expected to become the subject of any civil or criminal penalty, process, claim, action or proceeding, or any administrative or other regulatory review, survey, process or proceeding (other than routine surveys or reviews conducted by any government health plan or other accreditation entity) that would reasonably be expected to result in any of the foregoing or that could reasonably be expected to materially and adversely affect such Person’s business, operations, assets, properties or condition (financial or otherwise), in connection with any actual or potential violation by such Person of the provisions of HIPAA.

 

“Indebtedness” of a Person shall mean at any date, without duplication, (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds,

 

Credit and Security Agreement, Page 12

 


Exhibit 10.1

 

debentures, notes or other similar instruments, (c) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business and, with respect to entities other than CoreLink, LLC, not more than 120 days past due, and with respect to CoreLink, LLC, not more than 90 days past due, or that are subject to a Permitted Contest, (d) all Capital Leases of such Person, (e) all non-Contingent Obligations of such Person to reimburse any bank or other Person in respect of amounts paid under a letter of credit, banker’s acceptance or similar instrument, (f) the liquidation value of all Equity Interests of such Person subject to repurchase or redemption other than at the sole option of such Person,

(g) all obligations secured by a Lien on any asset of such Person, whether or not such obligation is otherwise an obligation of such Person, (h) “earnouts,” purchase price adjustments, profit sharing arrangements, deferred purchase money amounts and similar payment obligations or continuing obligations of any nature of such Person arising out of purchase and sale contracts to the extent, in each case, shown on a balance sheet of such Person in accordance with GAAP, (i) all Indebtedness of others guaranteed by such Person, (j) off-balance sheet liabilities or Pension Plan or Multiemployer Plan liabilities of such Person, and (k) payment obligations arising under non-compete agreements.

 

“Indemnified Persons” shall have the meaning assigned to the term in Section 13.4.

 

“Intellectual Property” shall mean, with respect to any Person, all patents, patent applications and like protections, including improvements divisions, continuation, renewals, reissues, extensions and continuations in part of the same, trademarks, trade names, trade styles, trade dress, service marks, logos and other business identifiers and, to the extent permitted under applicable Law, any applications therefor, whether registered or not, and the goodwill of the business of such Person connected with and symbolized thereby, copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative works, whether published or unpublished, technology, know-how and processes, operating manuals, trade secrets, computer hardware and software, rights to unpatented inventions and all applications and licenses therefor, used in or necessary for the conduct of business by such Person and all claims for damages by way of any past, present or future infringement of any of the foregoing.

 

“Landlord Waiver and Consent” shall mean a waiver/consent in form and substance reasonably satisfactory to Lender from the owner/lessor of 1565 North Central Expressway, Suite 200, Richardson, TX 75080, and any other premises not owned by a Borrower at which billing operations are conducted or Books and Records are maintained or, at the request of Lender, any of the Collateral is now or hereafter located, for the purpose of providing Lender access to such Collateral, in each case as such may be modified, amended or supplemented from time to time and subordinating in favor of Lender any claims that the owner/lessor may have against such Borrower or against any of the Collateral.

 

“Laws” shall mean any and all federal, state, provincial, territorial, municipal, local and foreign statutes, laws, judicial decisions, regulations, ordinances, rules, judgments, orders, decrees, codes, injunctions, permits, and governmental agreements, whether now or hereafter in effect, which are applicable to any Credit Party in any particular circumstance. Laws includes Environmental Laws and Healthcare Laws.

 

Credit and Security Agreement, Page 13

 


Exhibit 10.1

 

“Leases” shall have the meaning assigned to the term in Section 6.1(h)(i).

 

“Lien” shall mean any mortgage, pledge, security interest, encumbrance, restriction, lien or charge of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement or any lease in the nature thereof), or any other arrangement pursuant to which title to the property is retained by or vested in some other Person for security purposes. For the purposes of this Agreement and the other Loan Documents, any Credit Party or any Subsidiary shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, Capital Lease or other title retention agreement relating to such asset.

 

“Loan” or “Loans” shall mean, individually and collectively, all Advances under the Revolving Facility.

 

“Loan Documents” shall mean, collectively and each individually, this Agreement, any documents that provide, as security for all or any portion of the Obligations, a Lien on any assets in favor of Lender, the Guaranties and any documents evidencing a security interest in assets as collateral for the Guaranties, the Control Agreements, the Uniform Commercial Code Financing Statements and all other documents or instruments necessary to create or perfect the Liens in the Collateral, the Subordination Agreements, the Landlord Waiver and Consents, the Borrowing Certificates, and all other agreements, documents, instruments and certificates heretofore or hereafter executed or delivered to Lender in connection with any of the foregoing or the Loans, as the same may be amended, restated, modified or supplemented from time to time; all of which shall be in form and substance acceptable to Lender in its sole discretion.

 

“Material Adverse Effect” or “Material Adverse Change” shall mean any event, act, condition or occurrence of whatever nature (including any adverse determination in any litigation, arbitration, or governmental investigation or proceeding), whether singly or in conjunction with any other event or events, act or acts, condition or conditions, occurrence or occurrences, whether or not related, which results, directly or indirectly in (a) a material adverse change in, or a material adverse effect upon, any of (i) the condition (financial or otherwise), operations, business, or properties of the Credit Parties taken as a whole, (ii) the rights and remedies of Lender under any Loan Document, or the ability of any Credit Party to perform any of its obligations under any Loan Document to which it is a party, (iii) the legality, validity or enforceability of any Loan Document,

 

(iv)

the existence, perfection or priority of any security interest granted in any Loan Document,

(v)the value of any material Collateral; or (vi) the use or scope of any Healthcare Permits; (b) an impairment to the likelihood that Eligible Receivables in general will be collected and paid in the ordinary course of business of any Borrower and upon substantially the same schedule and with substantially same frequency as such Borrower’s recent collections history; or (c) the imposition of a fine against or the creation of any liability of any Credit Party to any Governmental Authority in excess of $50,000.

 

“Material Contracts” shall have the meaning set forth in Section 5.22.

 

“Net Collectible Value” shall mean the amount that Lender reasonably expects from time to time to be collected with respect to Eligible Receivables from third-party payors within 150 days of the Billing Date taking into account historical and recent collection rates for each payor

 

Credit and Security Agreement, Page 14

 


Exhibit 10.1

 

class, entitled reimbursement pursuant to any contract or arrangement between a Borrower and the applicable Account Debtor(s), offsets, historical returns, rebates, discounts, credits and allowances, and other factors that affect the collectability of Eligible Receivables.

 

Net Orderly Liquidation Value means the net amount (after all costs of sale), expressed in terms of money, which Lender, in its good faith discretion, estimates can be realized from a sale, as of a specific date, given a reasonable period to find a purchaser(s), with the seller being compelled to sell on an as-is/where-is basis.

 

“Obligations” shall mean all present and future obligations, Indebtedness and liabilities of any Credit Party to Lender at any time and from time to time of every kind, nature and description, direct or indirect, secured or unsecured, joint and several, absolute and contingent, due or to become due, matured or unmatured, now existing or hereafter arising, contractual or tortious, liquidated or unliquidated, under any of the Loan Documents or under applicable Law including all applicable fees, charges, expenses and all amounts paid or advanced by Lender on behalf of or for the benefit of any Credit Party for any reason at any time, including in each case obligations of performance as well as obligations of payment and interest that accrue after the commencement of any proceeding under any Debtor Relief Law by or against any such Person.

 

“Operating Account” shall mean a deposit account established and maintained in a Borrower’s name, which (i) is used to receive Advances or for such Borrower’s operating disbursements, and (ii) does not receive Account collections or any other Collateral proceeds.

 

“Organizational Documents” shall mean, with respect to any Person other than a natural person, the documents by which such Person was organized (such as a certificate of incorporation, certificate of limited partnership or articles of organization, and including any certificates of designation for preferred Equity Interests) and which relate to the internal governance of such Person (such as bylaws, a partnership agreement or an operating, limited liability company or members agreement), including any and all shareholder agreements or voting agreements relating to the Equity Interests of such Person.

 

“Permit” shall mean all governmental licenses, authorizations, provider numbers, supplier numbers, registrations, permits, drug or device authorizations and approvals, certificates, franchises, qualifications, accreditations, consents and approvals of a Credit Party required under all applicable Laws and required for such Credit Party in order to carry on its business as now conducted, including Healthcare Permits.

 

“Permitted Affiliates” shall mean the entities set forth on Schedule 7.6.

 

“Permitted Contest” shall mean, with respect to any tax obligation or other obligation allegedly or potentially owing from any Borrower or its Subsidiary to any governmental tax authority or other third party, a contest maintained in good faith by appropriate proceedings promptly instituted and diligently conducted and with respect to which such reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made on the books and records and financial statements of the applicable Credit Party(ies); provided, however, that (a) compliance with the obligation that is the subject of such contest is effectively stayed during such challenge; (b) Borrowers’ and their Subsidiaries’ title to, and its right to use,

 

Credit and Security Agreement, Page 15

 


Exhibit 10.1

 

the Collateral is not adversely affected thereby and Lender’s Lien and priority on the Collateral are not adversely affected, altered or impaired thereby; (c) Borrowers have given prior written notice to Lender of a Borrower’s or its Subsidiary’s intent to so contest the obligation; (d) the Collateral or any part thereof or any interest therein shall not be in any danger of being sold, forfeited or lost by reason of such contest by Borrowers or its Subsidiaries; (e) Borrowers have given Lender notice of the commencement of such contest and upon request by Lender, from time to time, notice of the status of such contest by Borrowers and confirmation of the continuing satisfaction of this definition; (f) a final determination of such contest could not result in Lender’s Lien and its priority on the Collateral being adversely affected, altered or impaired; and (g) upon a final determination of such contest, Borrowers and its Subsidiaries shall promptly comply with the requirements thereof.

 

Permitted Contingent Obligations means (a) Contingent Obligations under or permitted by the Loan Documents; (b) Contingent Obligations resulting from endorsements for collection or deposit in the ordinary course of business; (c) Contingent Obligations incurred in the ordinary course of business with respect to surety and appeal bonds, performance bonds and other similar obligations; (d) Contingent Obligations arising with respect to indemnification obligations in the ordinary course of business, (e) Contingent Obligations existing or arising in connection with any security deposit for the sole purpose of securing a lease of real property; (f) the Earn-Out,

(g) Contingent Obligations listed on Schedule 7.2(b), (h) customary indemnifications agreements in favor of officers and directors, and (i) other Contingent Obligations not permitted by clauses (a) through (h) above, not to exceed $25,000 in the aggregate at any time outstanding.

 

“Permitted Discretion” shall mean a determination made by Lender in good faith and in the exercise of reasonable business judgment.

 

“Permitted Indebtedness” shall mean: (i) Indebtedness under the Loan Documents, (ii) Capitalized Lease Obligations and secured only by the Equipment being leased pursuant to such Capitalized Lease Obligations and accessions and attachments thereto and products and proceeds thereof; (iii) a purchase-money obligations, as defined in Section 9-103(a) of the UCC, provided that the aggregate amount thereof outstanding at any time shall not exceed $10,000, (iv) Indebtedness in connection with advances made by any direct or indirect holder of an Equity Interest in any Borrower in order to cure any Default of the financial and loan covenants set forth on Annex I; provided, however, that such Indebtedness shall be on an unsecured basis, subordinated in right of repayment and remedies to all of the Obligations and to all of Lender’s rights and in form and substance reasonably satisfactory to Lender; (v) accounts payable to trade creditors, other than CoreLink, LLC, not more than 120 days past due or that are subject to a Permitted Contest; (vi) accounts payable to CoreLink, LLC not more than 90 days past due or that are subject to a Permitted Contest, (vii) borrowings incurred in the ordinary course of business and not exceeding $10,000 individually or in the aggregate outstanding at any one time; provided, however, that such Indebtedness shall be on an unsecured basis, subordinated in right of repayment and remedies to all of the Obligations and to all of Lender’s rights and in form and substance satisfactory to Lender; (viii) Indebtedness in the form of insurance premiums financed through the applicable insurance company; (ix) Indebtedness outstanding on the date of this Agreement and set forth on Schedule 7.2(a) (but not including any refinancings, extensions, increases or amendments to such Indebtedness other than extensions to the maturity thereof without any other

 

Credit and Security Agreement, Page 16

 


Exhibit 10.1

 

change in terms); (x) Indebtedness of Borrowers under corporate credit cards through and including December 15, 2021, (xi) Subordinated Debt, and (xii) any other Indebtedness to which Lender may expressly consent in writing prior to its incurrence, which consent shall be in the sole discretion of Lender. Notwithstanding the foregoing, Borrower shall incur no Indebtedness if the incurrence of such Indebtedness will, directly or indirectly, cause a Default or an Event of Default under this Agreement. Borrowers shall not make prepayments on an existing or future Indebtedness to any Person other than to Lender or to the extent specifically permitted by this Agreement or any subsequent agreement between Borrower and Lender.

 

“Permitted Liens” shall mean: (a) deposits or pledges of cash to secure obligations under worker’s compensation, social security or similar laws, or under unemployment insurance (but excluding Liens arising under ERISA, or, with respect to any Pension Plan or Multiemployer Plan, the Code) pertaining to a Borrower’s or its Subsidiary’s employees, if any; (b) deposits or pledges of cash to secure bids, tenders, contracts (other than Indebtedness for borrowed money), leases, statutory obligations, surety and appeal bonds and other obligations of like nature arising in the ordinary course of business; (c) carrier’s, warehousemen’s, mechanic’s, workmen’s, materialmen’s or other like Liens on Collateral, other than any Collateral which is part of the Borrowing Base, arising in the ordinary course of business with respect to obligations which are not overdue by more than 30 days, or which are being contested pursuant to a Permitted Contest;

(d)Liens on Collateral, other than Accounts, for taxes or other governmental charges not at the time delinquent or thereafter payable without penalty or the subject of a Permitted Contest; (e) attachments, appeal bonds, judgments and other similar Liens on Collateral other than Accounts, for sums not exceeding $100,000 (to the extent not paid or covered by insurance as to which the relevant insurance company has not denied coverage) in the aggregate arising in connection with court proceedings; provided, however, that the execution or other enforcement of such Liens is effectively stayed and the claims secured thereby are the subject of a Permitted Contest; (f) Liens and encumbrances in favor of Lender under the Loan Documents; (g) Liens on Collateral, other than Collateral which is part of the Borrowing Base, existing on the date hereof and set forth on Schedule 7.3; (h) Liens on Borrowers’ accounts derived from Inventory consigned or sold by CoreLink, LLC to CPM, (i) any Lien on any Equipment (and accessions and attachments thereto and products and proceeds thereof) securing Indebtedness permitted under subpart (i) or (iii) of the definition of Permitted Indebtedness, provided, however, that such Lien attaches concurrently with or within thirty (30) days after the acquisition thereof, (j) easements, rights of way, restrictions (including zoning restrictions), covenants, encroachments, and other similar real estate charges or encumbrances, minor defects or irregularities in title and other similar real estate Liens, in each case solely affecting real property, none of which, individually or collectively, (a) interfere in any material respect with the ordinary conduct of the business of Borrower or any Subsidiary thereof or (b) materially or adversely affect the value of the real property; (k) leases, subleases, licenses or sublicenses of the assets or properties of Borrower or Subsidiary, in each case entered into in the ordinary course of Borrower or Subsidiary and not interfering in any material respect with the business of Borrower or any Subsidiary thereof; (l) bankers’ Liens, rights of setoff and other similar Liens existing solely with respect to cash and cash equivalents on deposit in one or more accounts maintained by any Borrower or Subsidiary, in each case in the ordinary course of business in favor of any bank or other financial institutions with which such accounts are maintained, securing solely customary amounts owing to such bank or financial institution with respect to cash management and operating account arrangements; (m) Liens consisting of precautionary filings of

 

Credit and Security Agreement, Page 17

 


Exhibit 10.1

 

UCC financing statements filed with respect to operating leases permitted hereunder and any interest of title of a lessor under any operating lease permitted hereunder; and (n) non-exclusive licenses of Intellectual Property granted in the ordinary course of business, (o) any interest or title of a lessor or sublessor under any lease not prohibited by this Agreement, (p) Liens on insurance policies and the proceeds thereof securing insurance premium financings permitted under this Agreement, and (q) any other Liens to which Lender may expressly consent in writing, which consent shall be in the sole discretion of Lender.

 

“Permitted Modifications” shall mean (a) such amendments or other modifications to a Borrower’s or Subsidiary’s Organizational Documents as are required under this Agreement or by applicable Law and fully disclosed to Lender within thirty (30) days after such amendments or modifications have become effective, and (b) such amendments or modifications to a Borrower’s or Subsidiary’s Organizational Documents (other than those involving a change in the name of a Borrower or Subsidiary or involving a reorganization of a Borrower or Subsidiary under the laws of a different jurisdiction) that would not adversely affect the rights and interests of Lender and fully disclosed to Lender within thirty (30) days after such amendments or modifications have become effective.

 

“Person” shall mean any natural person, corporation, limited liability company, professional association, limited partnership, general partnership, joint stock company, joint venture, association, company, trust, bank, trust company, land trust, business trust or other organization, whether or not a legal entity, and any Governmental Authority or any other entity of whatever nature.

 

Primary Warehouse” means that certain warehouse located at 1565 North Central Expressway, Suite 200, Richardson, TX 75080.

 

“Prime Rate” shall mean a fluctuating interest rate per annum equal at all times to the rate of interest announced, from time to time, within Wells Fargo Bank at its principal office in San Francisco as its “prime rate,” with the understanding that the “prime rate” is one of Wells Fargo Bank’s base rates (not necessarily the lowest of such rates) and serves as the basis upon which effective rates of interest are calculated for those loans making reference thereto and is evidenced by the recording thereof after its announcement in such internal publications as Wells Fargo Bank may designate; provided that Lender may, upon prior written notice to Borrowers, choose a reasonably comparable index or source to use as the basis for the Prime Rate, and further provided, that in no event shall the Prime Rate be lower than such rate as in effect as of the Closing Date, and further provided, that each change in the fluctuating interest rate shall take effect simultaneously with the corresponding change in the Prime Rate.

 

“Related Property” shall mean, with respect to each Account, the following: (i) all records of any nature evidencing or related to the Account, including contracts, invoices, charges slips, credit memoranda, notes and other instruments and other documents, books, records and other information (including computer data) (ii) all security interests or liens and property subject thereto from time to time purporting to secure payment of such Account, whether pursuant to the contract related to such Account or otherwise, including all rights of stoppage in transit, replevin, reclamation, Supporting Obligations and Letter of Credit Rights, and all claims of lien filed or held by Borrowers on personal property; (iii) all rights to any Goods whose sale gave rise to such

 

Credit and Security Agreement, Page 18

 


Exhibit 10.1

 

Account, including returned or repossessed Goods; (iv) all Instruments, Documents, Chattel Paper and General Intangibles arising from, related to or evidencing such Account; (v) all UCC financing statements covering any collateral securing payment of such Account; (vi) all guaranties and other agreements or arrangements of whatever character from time to time supporting or securing payment of such Account whether pursuant to the contract related to such Account or otherwise; and (vii) all proceeds and amounts received or receivable arising from any of the foregoing.

 

“Revolving Facility Termination” shall mean any of the following:

 

 

a.

a termination of the Revolving Facility by any Borrower under Section 11.1;

 

b.any other voluntary or involuntary prepayment in full of the Obligations by any Borrower or any other Person occurs (other than reductions to zero of the outstanding balance of the Revolving Facility resulting from the ordinary course operation of the provisions of Section 2.5), whether by virtue of Lender’s exercising its right of set-off or otherwise;

 

c.Lender demands or Borrowers are otherwise required to make payment in full of the Obligations upon the occurrence of an Event of Default in accordance with this Agreement;

 

d.Lender terminates its obligations to make Advances hereunder upon the occurrence of an Event of Default in accordance with this Agreement; or

 

e.any payment reduction or reduction of the outstanding balance of the Revolving Facility is made during a bankruptcy, reorganization or other proceeding or is made pursuant to any plan of reorganization or liquidation or any Debtor Relief Law.

 

“Revolving Loan” shall mean the aggregate of the loans made pursuant to Section 2.1(a).

 

“Revolving Loan Limit” shall mean, at any time, the lesser of (a) the Facility Cap and (b) eighty-five percent (85%) the Borrowing Base.

 

“Software Interface Fee” shall have the meaning assigned to the term in Section 3.5.

 

“Subordination Agreement” shall mean each agreement between Lender and another creditor of a Borrower, as the same may be amended, supplemented, restated or otherwise modified from time to time in accordance with the terms thereof, pursuant to which Indebtedness or other obligations owing from a Borrower or the Liens securing such Indebtedness granted by a Borrower to such creditor are subordinated in any way to the Obligations and the Liens created under the Loan Documents, the terms and provisions of such Subordination Agreements to have been agreed to by and be acceptable to Lender in the exercise of its sole discretion, which may include requirements that the Subordinated Debt (i) not mature prior to the end of the Term, and (ii) not require any payment other than interest during the Term, and (iii) will receive no payments following an Event of Default.

 

Credit and Security Agreement, Page 19

 


Exhibit 10.1

 

“Subordinated Debt” means the Subordinated Notes, the Earn-Out and any other Indebtedness of Borrowers that is subordinated to the Obligations pursuant to a Subordination Agreement and that otherwise contains terms and conditions satisfactory to Lender.

 

Subordinated Notes” means the collective reference to (a) the Promissory Note dated May 6, 2020, executed by Fuse and payable to the order of NC 143 Family Holdings, LP in the original principal amount of $180,000, (b) the Promissory Note dated May 6, 2020, executed by Fuse and payable to the order of Reeg Medical Industries, Inc. in the original principal amount of

$20,000, (c) the Promissory Note dated October 19, 2016, executed by Fuse and payable to the order of NC 143 Family Holdings, LP in the original principal amount of $50,000, (d) the Amended and Restated Promissory Note dated October 19, 2016, executed by Fuse and payable to the order of NC 143 Family Holdings, LP in the original principal amount of $50,000, and (e) the Amended and Restated Promissory Note dated October 19, 2016, executed by Fuse and payable to the order of Reeg Medical Industries, Inc. in the original principal amount of $50,000.

 

“Subsidiary” shall mean (i) as to a Borrower, any Person in which more than fifty percent (50%) of all Equity Interests is owned directly or indirectly by such Borrower through one or more of its Subsidiaries, and (ii) as to any other Person, any Person in which more than fifty percent (50%) of all Equity Interests is owned directly or indirectly by such Person through one or more of such Person’s Subsidiaries. Unless the context otherwise requires, each reference to a Subsidiary shall be a reference to a Subsidiary of a Borrower.

 

“Test Period” shall have the meaning assigned to that term in Annex I.

 

“Term” shall mean the period commencing on the date set forth on the first page hereof and ending on January 1, 2025.

 

“Termination Date” shall mean the earlier to occur of (a) the end of the Term, (b) any date on which Lender accelerates the maturity of the Loans pursuant to Article VIII, or (c) the termination date stated in any notice of termination of this Agreement provided by Borrowers in accordance with Section 11.1.

 

“Termination Fee” shall mean one percent (1.0%) of the Facility Cap if a Revolving Facility Termination occurs before the end of the Term. The Termination Fee is an “Obligation,” as that term is defined herein.

 

“UCC” and “Uniform Commercial Code” shall mean the Uniform Commercial Code of the State of New York or of any other state the laws of which are required to be applied in connection with the perfection of security interests in any Collateral.

 

“United States” and U.S. shall mean the United States of America.

 

“Unused Line Fee” shall have the meaning assigned to the term in Section 3.2.

 

Voting Stock” means, with respect to any Person, Equity Interests issued by such Person the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election

 

Credit and Security Agreement, Page 20

 


Exhibit 10.1

 

of directors (or persons performing similar functions) of such Person, even though the right to so vote has been suspended by the happening of such contingency.

 

 

1.3

Other Definitional and Interpretative Provisions

 

References in this Agreement to “Articles”, “Sections”, “Annexes”, “Exhibits”, or “Schedules” shall be to Articles, Sections, Annexes, Exhibits or Schedules of or to this Agreement unless otherwise specifically provided. Any term defined herein may be used in the singular or plural. “Include”, “includes” and “including” shall be deemed to be followed by “without limitation”. Except as otherwise specified or limited herein, references to any Person include the successors and assigns of such Person. References “from” or “through” any date mean, unless otherwise specified, “from and including” or “through and including”, respectively. Unless otherwise specified herein, the settlement of all payments and fundings hereunder between or among the parties hereto shall be made in lawful money of the United States and in immediately available funds. Unless otherwise specified herein, all amounts (including, for the avoidance of doubt, for purposes of calculating the Borrowing Base) shall be calculated in Dollars. References to any statute or act shall include all related current regulations and all amendments and any successor statutes, acts and regulations. All amounts used for purposes of financial calculations required to be made herein shall be without duplication. References to any statute or act, without additional reference, shall be deemed to refer to federal statutes and acts of the United States. References to any agreement, instrument or document shall include all schedules, exhibits, annexes and other attachments thereto. As used in this Agreement, the meaning of the term “material” or the phrase “in all material respects” is intended to refer to an act, omission, violation or condition which reflects or could reasonably be expected to result in a Material Adverse Effect. All references herein to times of day shall be references to daylight or standard time, as applicable, in New York City. Unless the context requires otherwise, any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein),

 

 

1.4

Time is of the Essence

 

Time is of the essence in Borrowers’ and each other Credit Party’s performance under this Agreement and all other Loan Documents.

 

 

II.

ADVANCES, PAYMENT AND INTEREST

 

 

2.1

Advances

 

(a)Subject to the provisions of this Agreement, Lender shall make Advances to Borrowers under the Revolving Facility from time to time during the Term, and not more than once per each week unless agreed to by Lender and subject to the processing fees set forth in Section 2.4; provided that, notwithstanding any other provision of this Agreement (but subject to the provisions of this Section 2.1(a)), the principal amount at any one time outstanding under the Revolving Facility shall not exceed the Revolving Loan Limit. The Revolving Facility is a revolving credit facility, which may be drawn, repaid and redrawn, from time to time as permitted under this Agreement. Any determination as to whether there is availability within the Borrowing

 

Credit and Security Agreement, Page 21

 


Exhibit 10.1

 

Base for Advances shall be made by Lender in its Permitted Discretion and is final and binding upon Borrowers. Unless otherwise permitted by Lender, each Advance requested by Borrowers shall be in an amount of at least $25,000. Subject to the provisions of this Agreement, Borrowers may request Advances under the Revolving Facility up to and including the Availability. Lender may, in Lender’s sole discretion, withhold from Advances made to Borrowers such amounts as may be necessary to pay interest on the Revolving Facility and other Obligations hereunder, and Lender shall identify any such withholds on the applicable Borrowing Certificate prior to its execution by Borrowers. In addition, Advances under the Revolving Facility automatically may, in the discretion of Lender, be made for the payment of interest on the Revolving Facility and other Obligations on the date when due to the extent of Availability and as provided for herein. Lender shall identify any such Advances on the monthly interest statements provided to Borrowers under Section 2.2(b).

 

(b)Lender has established the eighty-five percent (85%) advance rate for purposes of determining the Revolving Loan Limit. Lender shall have the right to establish and readjust from time to time, in its Permitted Discretion, reserves (without duplication of other reserves) against the Borrowing Base, which reserves shall have the effect of reducing the amounts otherwise eligible to be disbursed to Borrowers under the Revolving Facility pursuant to this Agreement.

 

(c)The Facility Cap may, at Borrowers’ request and with the consent of Lender, which consent shall be in the Lender’s sole discretion, be increased in increments of

$250,000. In the event that the Facility Cap is increased, Borrowers shall pay to Lender a Facility Fee in an amount equal to one percent (1.0%) of the amount by which the Facility Cap is increased.

 

(d)Lender may in its sole discretion make one or more Advances in excess of Availability. The making of any Advance(s) in excess of Availability shall not be deemed an acknowledgement that any additional such Advance(s) will be made or may be required to be made; nor shall any such Advance(s) be deemed to establish any course of conduct, waiver, or estoppel that would obligate Lender to make any further such Advance or prevent Lender from treating Borrowers’ failure to repay such Advance(s) as a Default or an Event of Default. Each time an Advance causes the principal balance under the Revolving Facility to exceed the Availability (whether because of an intentional Advance in excess of Availability or a reduction in the Borrowing Base or otherwise), Lender may charge an over-advance fee of ten percent (10%) of the amount by which the principal balance exceeds the Availability as a result of such Advance such excess is not paid in accordance with Section 2.7. Such over-advance fee shall be in addition to any other fees, charges or other provisions that may increase the Applicable Rate of interest hereunder and the assessment or collection of such over-advance fee shall not, unless Lender specifically agrees in writing to the contrary, prevent Lender from considering any such over- advance arising from a reduction in the Borrowing Base, or the circumstances giving rise to any over advance, from being a Default or an Event of Default. The over-advance fee shall be paid on the first Business Day of each week if the amount outstanding hereunder is in excess of the Availability at any time during the immediately preceding week.

 

(e)Borrowers may request from time to time certain otherwise non-Eligible Receivables to be included as Eligible Receivables for purposes of calculating Availability. If after underwriting such non-Eligible Receivables, Lender determines in its sole discretion to include

 

Credit and Security Agreement, Page 22

 


Exhibit 10.1

 

them as Eligible Receivables, Borrowers shall pay to Lender an additional underwriting fee in an amount equal to two percent (2%) of the Borrowing Base attributable to such non-Eligible Receivables at such time as such Accounts are included in the Borrowing Base. Payment of such additional underwriting fee shall be made, at the discretion of Lender: (i) by application of available funds in the Concentration Account pursuant to Section 2.5, (ii) by application of Advances under the Revolving Facility pursuant to this Section 2.1, or (iii) upon two Business Days’ notice, directly by Borrowers. In addition, Lender may, in its sole discretion require an amendment to this Agreement including additional representations, warranties or covenants, as a condition for including such non-Eligible Receivables as Eligible Receivables.

 

 

2.2

Evidence of Obligations; Maturity

 

(a)Lender shall maintain, in accordance with its usual practice, electronic or written records evidencing the outstanding Obligations to Lender, including the amounts of principal, interest, fees and other amounts payable and paid to Lender from time to time under this Agreement.

 

(b)The entries made in the electronic or written records maintained pursuant to subsection (a) above shall be prima facie evidence of the existence and amounts of the Obligations therein recorded; provided, however, that the failure of the Lender to maintain such records or any error therein shall not in any manner affect Borrowers’ obligation to repay the Obligations in accordance with their terms. Subject to the foregoing, Advances under the Revolving Facility may also be evidenced by a promissory note, payable to the order of Lender, duly executed and delivered by Borrowers and dated as of the date hereof, evidencing Borrowers’ aggregate indebtedness to Lender resulting from Advances under the Revolving Facility, from time to time. Lender hereby is authorized, but is not obligated, to enter the amount of each Advance under the Revolving Facility and the amount of each payment or prepayment principal or interest thereon in the appropriate spaces on the reverse of or on an attachment to the promissory note. Lender shall account to Borrowers on a monthly basis with a statement of Advances under the Revolving Facility, the amounts outstanding hereunder, and charges and payments made pursuant to this Agreement, and in the absence of manifest and demonstrable error, such accounting rendered by Lender shall be deemed final, binding and conclusive unless Lender is notified by Borrowers in writing to the contrary within thirty (30) days of Borrowers’ receipt of each accounting, which notice shall be deemed an objection only to items specifically objected to therein.

 

(c)All amounts outstanding hereunder and other Obligations shall be due and payable in full, if not earlier in accordance with this Agreement, on the Termination Date.

 

 

2.3

Interest

 

Interest shall accrue daily on the principal amount outstanding from time to time hereunder at a rate per annum equal to the Prime Rate plus the Applicable Margin calculated on the basis of a 360-day year and adjusted for the actual number of days elapsed in each interest calculation period. Interest shall be payable by Borrowers monthly in arrears but in no event later than the first day of each calendar month, commencing January 1, 2022. Interest payments shall, at the discretion of the Lender, be made (i) by application of funds in the Concentration Account as set forth in Section 2.5, (ii) by an Advance on the Revolving Facility, as set forth in Section 2.1,

 

Credit and Security Agreement, Page 23

 


Exhibit 10.1

 

without any further action by Borrowers, or (iii) upon two Business Days’ notice, directly by Borrowers. Interest shall continue to accrue on the principal amount outstanding from time to time until the payment in full in cash of the Obligations and termination of this Agreement. Any accrued but unpaid interest shall be added to the Obligations and increase the principal amount outstanding hereunder on the first Business Day of each month.

 

2.4Revolving Facility Disbursements; Requirement to Deliver Borrowing Certificate

 

So long as no Default or Event of Default shall have occurred and be continuing, Borrowers may give Lender written notice requesting an Advance under the Revolving Facility by delivering to Lender not later than 11:00 a.m. (New York City time) at least two but not more than four Business Days before the proposed borrowing date of such requested Advance (the Borrowing Date”), a completed Borrowing Certificate and relevant supporting documentation satisfactory to Lender in its Permitted Discretion, which shall (i) specify the proposed Borrowing Date of such Advance which shall be a Business Day, (ii) specify the principal amount of such requested Advance, and (iii) certify the matters specified therein. In the event that Borrowers do not request an Advance during any two consecutive calendar weeks, Borrowers shall, on the last Business Day of the second such week (and more frequently if Lender shall so request) and thereafter every five (5) Business Days until the Obligations are paid in cash in full and this Agreement is terminated, deliver to Lender a completed Borrowing Certificate. On each Borrowing Date, Borrowers authorize Lender to disburse the proceeds of the requested Advance to the account(s) as set forth on Schedule 2.4 (or to such other account as to which Borrowers shall expressly instruct Lender in writing), in all cases for credit by the recipient of such proceeds to the appropriate Borrower, via Federal funds wire transfer no later than 4:00 p.m. (New York City time); provided, however, if any amounts are then due to Lender on account of any interest, fees or expense reimbursements pursuant to the Loan Documents at the time such Advance is requested, Lender is authorized (but not required) to identify such liabilities on the Borrowing Certificate prior to Borrowers’ execution thereof and to reduce the proceeds to Borrowers with respect to such Advance by the amount of such interest, fees or expense reimbursements and to retain such amounts as payment of such interest, fees or expense reimbursements. It is understood and agreed that Lender shall have no responsibility for the application of proceeds disbursed pursuant to Schedule 2.4 and such proceeds so disbursed shall be deemed to have been disbursed to the Borrower entitled thereto. Lender shall charge a processing fee of $150.00 for the first Advance each calendar week and $450.00 for each additional Advance during such calendar week. In the event that the written notice by Borrowers requesting an Advance under the Revolving Facility does not comply with the foregoing requirements within the timing parameters set forth above, Lender is under no obligation to provide the requested Advance. If, however, Lender nonetheless determines to provide the requested Advance, Lender may charge Borrowers an irregular Advance fee of one percent (1%) of the amount of such requested Advance. Such irregular Advance fee shall be paid, at the discretion of Lender: (i) by application of available funds in the Concentration Account pursuant to Section 2.5, (ii) by application of Advances under the Revolving Facility pursuant to Section 2.1, or (iii) upon two Business Days’ notice, directly by Borrowers.

 

Credit and Security Agreement, Page 24

 


Exhibit 10.1

 

2.5Revolving Facility Collections; Repayment; Borrowing Availability and Controlled Deposit Accounts

 

(a)Each Borrower shall establish and maintain at a Collection Bank and at Borrowers’ expense:

 

(i)a Commercial Deposit Account, which shall be subject to a blocked deposit account control agreement between such Borrower, Lender and a Collection Bank; and

 

(ii)an Operating Account, which shall be subject to a springing deposit account control agreement between such Borrower, Lender and a Collection Bank.

 

(b)The Control Agreements on each Commercial Deposit Account shall instruct the Collection Bank to transfer, on each Business Day, all funds on deposit therein to (i) a deposit account established and maintained by Lender or an Affiliate of Lender at such bank as Lender may communicate to the Collection Bank from time to time (the Concentration Account”), or

(ii)a master collections account established and maintained in the name of a Borrower, which is subject to a blocked deposit account control agreement between such Borrower, Lender and a Collection Bank, which causes all funds on deposit in such master collections account to be transferred to the Concentration Account on each Business Day.

 

(c)Each Borrower hereby agrees to direct and cause each payor of such Borrower’s other Accounts and Collateral to remit all payments with respect thereto to its Commercial Deposit Account. Borrowers further agree not to (A) change such directives to payors without the prior written consent of Lender, (B) terminate any Controlled Deposit Account or Control Agreement, and (C) terminate or modify, or attempt to terminate or modify, the standing transfer order in any Controlled Deposit Agreement.

 

(d)Borrowers hereby acknowledge and agree that any violation of this Section 2.5 would be an Event of Default hereunder, would cause irreparable harm to the Lender for which there would be no adequate remedy at law, and agree and consent to entry of an order by a court of competent jurisdiction granting the Lender specific performance of the terms and provisions of this Agreement as to Borrowers. At the request of Lender, Borrowers shall also enter into a lockbox agreement with the Collection Bank providing for the receipt of deposits at an address specified in such lockbox agreement and the deposit of funds received at such address to the applicable Controlled Deposit Account.

 

(e)To the extent that any Account collections or any other cash payments received by a Borrower or an Affiliate of a Borrower are not sent directly to the appropriate Controlled Deposit Account, such collections and proceeds shall be held in trust for the benefit of the Lender and immediately remitted (and in any event within one (1) Business Day), in the form received (or, with respect to cash, by check or wire transfer), to the appropriate Controlled Deposit Account for immediate transfer to the Concentration Account. Borrowers acknowledge and agree that compliance with the terms of this Section 2.5 is an essential term of this Agreement, and that, in addition to and notwithstanding any other rights Lender may have hereunder under any other Loan Document, under applicable Law or equity, upon each and every failure by any Borrower or any Affiliates of any Borrower to cause collections with respect to Accounts to be deposited into the

 

Credit and Security Agreement, Page 25

 


Exhibit 10.1

 

appropriate Controlled Deposit Account as set forth in this Section 2.5, Lender shall be entitled to assess Borrowers with a non-compliance fee in an amount equal to ten percent (10%) of the amount of such collections; provided that such non-compliance fee shall be in addition to any other fees, charges or other provisions that may increase the Applicable Rate of interest hereunder and the assessment or collection of such non-compliance fee shall not, unless Lender specifically agrees in writing to the contrary, prevent Lender from considering any such non-compliance to be a Default or an Event of Default.

 

(f)For purposes of calculating interest, all funds transferred to the Lender’s Concentration Account shall be subject to a three (3) Business Day clearance period and all interest accruing on such funds during such clearance period shall accrue for the benefit of Lender. All funds transferred to the Concentration Account shall be applied to reduce the Obligations hereunder in the following order of priority: (i) payment of any fees and expense reimbursements due to Lender under the Loan Documents, (ii) any of Borrowers’ Obligations not included in items

(iii)and (iv) below, (iii) to any interest then due and owing hereunder, and (iv) to the principal amount outstanding hereunder. For purposes of determining Availability, all funds transferred to the Concentration Account in accordance with this Section shall be applied in accordance with the foregoing sentence as of the date of the transfer.

 

(g)If there is a positive balance in favor of Borrowers in the Concentration Account, such positive balance shall not accrue interest in favor of Borrowers, but shall be available to Borrowers in accordance with the terms of this Agreement.

 

(h)At all times, Borrowers and their Affiliates shall direct all collections or proceeds it receives on Accounts or from other Collateral to the account(s) and in the manner specified by Lender in its Permitted Discretion so long as any amounts are outstanding under the Revolving Facility.

 

(i)Borrowers shall provide Lender with all information (including user identifications and passwords) necessary for Lender to have online view-only access to all information regarding each Borrower’s deposit accounts.

 

(j)As of the date of this Agreement, Schedule 2.5 identifies each Borrower’s deposit accounts, the depository bank at which such accounts are maintained, the type of Control Agreements on such accounts (if any), and the second lien secured party to such Control Agreements (if any).

 

 

2.6

Promise to Pay; Manner of Payment

 

Borrowers promise to pay principal, interest and all other amounts payable hereunder, or under any other Loan Document, without any right of rescission and without any deduction whatsoever, including any deduction for any setoff, counterclaim or recoupments, and notwithstanding any damage to, defects in or destruction of the Collateral or any other event, including obsolescence of any property or improvements. Unless paid in accordance with Section 2.5, all payments made by Borrowers (other than payments automatically paid through Advances under the Revolving Facility as provided herein), shall be made only by wire transfer on the date when due, without offset or deduction for counterclaim, in Dollars, in immediately available funds

 

Credit and Security Agreement, Page 26

 


Exhibit 10.1

 

to such account as may be indicated in writing by Lender to Borrowers from time to time. Any such payment received after 4:00 p.m. (New York City time) on the date when due shall be deemed received on the following Business Day. Whenever any payment hereunder shall be stated to be due or shall become due and payable on a day other than a Business Day, the due date thereof shall be extended to, and such payment shall be made on, the next succeeding Business Day, and such extension of time in such case shall be included in the computation of payment of any interest (at the interest rate then in effect during such extension) or fees, as the case may be.

 

 

2.7

Repayment of Excess Advances

 

Subject to the following sentence, any balance of Advances under the Revolving Facility outstanding at any time in excess of the Revolving Loan Limit shall be immediately due and payable by Borrowers upon demand (or, if such overadvance was created as a result of Lender’s adjustment of the advance rates for Availability or eligibility criteria, then within five (5) Business Days, unless such adjustment by Lender was the result of any misrepresentation or fraud of a Borrower, in which case there shall be no grace period and any such overadvance shall be immediately due and payable), whether or not a Default or Event of Default has occurred or is continuing and shall be paid in the manner specified in Section 2.6. Notwithstanding the foregoing, if Lender intentionally makes an Advance that is in excess of Availability, such Advance shall be repaid within five (5) Business Days of a demand for repayment or when it is otherwise required to be repaid pursuant to other Sections of this Agreement.

 

 

2.8

Payments by Lender

 

Should any amount, interest or other Obligation required to be paid under any Loan Document remain unpaid after it is due and payable and after the expiration of any cure period, if applicable, such amount may be paid by Lender, which payment shall be deemed a request for an Advance under the Revolving Facility as of the date such payment is due, and Borrowers irrevocably authorize disbursements of any such funds to Lender by way of direct payment of the relevant amount, interest or other Obligations. No payment or prepayment of any amount by Lender or any other Person shall entitle any Person to be subrogated to the rights of Lender under any Loan Document unless and until the Obligations have been fully performed and paid in cash and this Agreement has been terminated. Any sums expended by Lender as a result of any Borrower’s or any Guarantor’s failure to pay, perform or comply with any Loan Document or any of the Obligations may be charged to Borrowers’ account as an Advance under the Revolving Facility and added to the Obligations and thereby increase the principal amount outstanding hereunder. Lender shall provide Borrowers with prompt written notice of any disbursements or expenditures by Lender pursuant to this Section.

 

 

2.9

Grant of Security Interest; Collateral

 

(a)To secure the payment and performance of the Obligations, and without limiting any grant of any Lien and security interest in any other Loan Document, each Borrower hereby grants to Lender a continuing security interest in and Lien upon, and pledges to Lender, all of its right, title and interest in and to the following, whether now owned or hereafter created, acquired or arising and wherever located (collectively and each individually, the Collateral”):

 

Credit and Security Agreement, Page 27

 


Exhibit 10.1

 

 

(i)

all Accounts and Related Property;

 

 

(ii)

all of Borrower’s deposit accounts;

 

 

(iii)

all Books and Records, whether or not related to any Collateral;

 

(iv)all of Borrower’s other personal property and fixtures, including all Goods, Inventory, Equipment, furniture, General Intangibles (including payment intangibles and software), Chattel Paper (whether tangible or electronic), Supporting Obligations, Investment Property, Financial Assets, Documents, Instruments (including any Promissory Notes), Securities, Securities Accounts, contract rights or rights to payment of money, leases, Permits, license agreements, franchise agreements, Commercial Tort Claims, Equity Interests in direct and indirect subsidiaries, machinery, cash, Letter-of-Credit Rights (whether or not the letter of credit is evidenced by a writing), Intellectual Property, copyrights, trademarks, patents, and tradestyles; and

 

(v)any and all claims, rights and interests in any of the above and all substitutions for, additions, attachments, accessories, accessions and improvements to and replacements, products, Proceeds and insurance proceeds of any or all of the foregoing.

 

(b)Each Borrower authorizes the Lender to file or record financing statements and other filing or recording documents or instruments with respect to the Collateral in such form and in such offices as the Lender determines appropriate to perfect the security interests of the Lender under this Agreement. Each Borrower authorizes the Lender to use collateral descriptions such as “all personal property” or “all assets” in each case “whether now owned or hereafter acquired”, or using words of similar import.

 

(c)Upon the execution and delivery of this Agreement, and upon the proper filing of the necessary financing statements without any further action, Lender will have a good, valid and perfected first priority Lien and security interest in all Collateral which may be perfected by the filing of financing statements, subject to no transfer or other restrictions or Liens of any kind in favor of any other Person except for Permitted Liens. No financing statement relating to any of the Collateral is on file in any public office except those (i) on behalf of Lender, or (ii) in connection with Permitted Liens.

 

 

2.10

Collateral Administration

 

(a)All Collateral (except funds required to be deposited in the Controlled Deposit Accounts) will at all times be kept by Borrowers at the locations set forth on Schedule 5.17B (including warehouses) hereto and shall not, without concurrent written notice to Lender, be moved therefrom and in any case shall not be moved outside the continental United States.

 

(b)Borrowers shall in all material respects keep accurate and complete records of their Accounts and all payments and collections thereon and shall submit such records to Lender on such periodic basis as Lender may request. After the occurrence and during the continuance of an Event of Default, and upon Lender’s request, Borrowers shall execute and deliver to Lender formal written assignments of all of their Accounts weekly or daily as Lender may request, including all

 

Credit and Security Agreement, Page 28

 


Exhibit 10.1

 

Accounts created since the date of the last assignment, together with copies of claims, invoices or other information related thereto. To the extent that collections from such assigned Accounts exceed the amount of the Obligations, such excess amount shall not accrue interest in favor of Borrowers, but shall be available to Borrowers upon Borrowers’ written request.

 

(c)Any of Lender’s officers, employees, representatives or agents shall have the right, at any time during normal business hours upon reasonable prior notice to Borrowers, to verify the validity, amount or any other matter relating to any Accounts. Borrowers shall cooperate fully with Lender in an effort to facilitate and promptly conclude such verification.

 

(d)Lender shall have the right at all times after the occurrence and during the continuance of an Event of Default to notify Account Debtors owing Accounts to Borrowers that their Accounts have been assigned to Lender and to collect such Accounts directly in its own name and to charge collection costs and expenses, including reasonable attorneys’ fees, to Borrowers.

 

(e)As and when determined by Lender in its Permitted Discretion, Lender shall have the right to perform the searches described in clauses (i) and (ii) below against Borrowers and Guarantors (the results of which are to be consistent with Borrowers’ representations and warranties under this Agreement), at Borrowers’ reasonable expense: (i) UCC searches with the Secretary of State or local filing offices of the state where each Borrower is organized; and (ii) bankruptcy, judgment, federal, state and local tax lien and litigation searches, in each jurisdiction in which such actions, or Liens may be recorded.

 

(f)Borrowers (i) shall provide prompt written notice to their current bank to transfer all items, collections and remittances to the Concentration Account, (ii) shall direct each Account Debtor to make payments to the appropriate Controlled Deposit Account as set forth in Section 2.5, and Borrowers hereby authorize Lender, upon any failure to send such notices and directions within ten (10) days after the date of this Agreement (or ten (10) days after the Person becomes an Account Debtor), to send any and all similar notices and directions to such Account Debtors, and

(iii) shall do anything further that may be lawfully required by Lender to secure Lender and effectuate the intentions of the Loan Documents.

 

(g)As of the date of this Agreement, no Borrower has any ownership interest in any Chattel Paper (as defined in Article 9 of the UCC), letter of credit rights, commercial tort claims, Instruments, documents or Investment Property (other than Equity Interests in any Subsidiaries of such Borrower disclosed on Schedule 5.3) and Borrowers shall give notice to Lender promptly (but in any event not later than the delivery by Borrowers of the next Borrowing Certificate required pursuant to Section 2.4 above) upon the acquisition by any Borrower of any such Chattel Paper, letter of credit rights, commercial tort claims, Instruments (other than checks received in the ordinary course of business which shall be deposited in CPM’s Commercial Deposit Account in accordance with Section 2.5), documents, or Investment Property, in each case having a value in excess of $25,000. No Person other than any Lender has “control” (as defined in Article 9 of the UCC) over any deposit account, Investment Property (including Securities Accounts and Commodities Accounts), Letter of Credit Rights or electronic Chattel Paper in which any Borrower has any interest (except for such control arising by operation of law in favor of any bank or securities intermediary or commodities intermediary with whom any deposit account, Securities Account or Commodities Account of Borrowers is maintained).

 

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Exhibit 10.1

 

(h)Borrowers will conduct a physical count of the Inventory at least once per year and at such other times as Lender requests, and Borrower shall provide to Lender a written accounting of such physical count in form and substance satisfactory to Lender. Borrowers will use commercially reasonable efforts to at all times keep their Inventory in good and marketable condition. In addition to the foregoing, from time to time, Lender may require Borrowers to obtain and deliver to Lender appraisal reports in form and substance and from appraisers reasonably satisfactory to Lender stating the then current fair market values and the Net Orderly Liquidation Value of all or any portion of Inventory owned by Borrower or any Subsidiaries.

 

(i)Borrowers shall deliver to Lender all tangible Chattel Paper and all Instruments (other than checks received in the ordinary course of business which shall be deposited in CPM’s Commercial Deposit Account in accordance with Section 2.5) and Documents, in each case having a value in excess of $25,000, owned by any Borrower and constituting part of the Collateral duly endorsed and accompanied by duly executed instruments of transfer or assignment, all in form and substance satisfactory to Lender. Borrowers shall provide Lender with “control” (as defined in Article 9 of the UCC) of all electronic Chattel Paper owned by any Borrower and constituting part of the Collateral by having Lender identified as the assignee on the records pertaining to the single authoritative copy thereof and otherwise complying with the applicable elements of control set forth in the UCC. Borrowers also shall deliver to Lender all security agreements securing any such Chattel Paper and securing any such Instruments. Borrowers will mark conspicuously all such Chattel Paper and all such Instruments and Documents with a legend, in form and substance reasonably satisfactory to Lender, indicating that such Chattel Paper and such Instruments and Documents are subject to the security interests and Liens in favor of Lender created pursuant to this Agreement and the Loan Documents.

 

(j)Borrowers shall deliver to Lender all letters of credit on which any Borrower is the beneficiary and which give rise to letter of credit rights owned by such Borrower which constitute part of the Collateral in each case duly endorsed and accompanied by duly executed instruments of transfer or assignment, all in form and substance reasonably satisfactory to Lender. Borrowers shall take any and all actions as may be necessary or desirable, or that Lender may request, from time to time, to cause Lender to obtain exclusive “control” (as defined in Article 9 of the UCC) of any such letter of credit rights in a manner reasonably acceptable to Lender.

 

(k)Borrowers shall promptly advise Lender upon any Borrower becoming aware that it has any interests in any commercial tort claim having a value in excess of $25,000 that constitutes part of the Collateral, which such notice shall include descriptions of the events and circumstances giving rise to such commercial tort claim and the dates such events and circumstances occurred, the potential defendants with respect such commercial tort claim and any court proceedings that have been instituted with respect to such commercial tort claims, and Borrowers shall, with respect to any such commercial tort claim, execute and deliver to Lender such documents as Lender shall request to perfect, preserve or protect the Liens, rights and remedies of Lender with respect to any such commercial tort claim.

 

(l)No Inventory or other material Collateral shall at any time be in the possession or control of any warehouse, consignee (other than hospitals), bailee or any of Borrowers’ agents or processors without prior written notice to Lender and the receipt by Lender of a Collateral Access Agreement, except for Inventory in transit. Borrowers have notified Lender that Inventory is

 

Credit and Security Agreement, Page 30

 


Exhibit 10.1

 

currently located at the locations set forth on Schedule 5.17B. Except with respect to hospitals that are in the possession of consigned Inventory of Borrowers, Borrowers shall, upon the request of Lender, notify any such warehouse, consignee, bailee, agent or processor of the security interests and Liens in favor of Lender created pursuant to this Agreement