Exhibit 10.2
PRIVATE & CONFIDENTIAL
July 30, 1999
Mr. Ken Legere, President
Island Critical Care Corporation
29 Hollahan Street Nepean, Ontario
K2J3W9
Dear Mr. Legere:
On the basis of the application for a working capital loan and non
repayable contribution, we are pleased to extend the following offer. THIS
OFFER SUPERSEDES OUR OFFER DATED APRIL 21,1998.
AMOUNT & PTTRPOSE OF CREDIT
$1,500,000.00 (One Million Five Hundred Thousand Dollars) in total ("The
Credit Project").
$200,000.00 (Two Hundred Thousand Dollars) in total "Equity Investor
Incentive".
The Credit is made available to Island Critical Care Corporation, the
Borrower, for the following purpose ("The Credit Project"): To finance
inventory, work in progress and receivables.
The Credit is to be used solely for the purpose outlined above.
SECURITY
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The following security (hereinafter referred to collectively as the
"Security") evidenced by documents, registrations, filings and opinions of
Counsel satisfactory to P.E.I. Lending Agency is to be provided prior to any
funds being disbursed:
A Demand Note in the amount of $1,500,000.00 to be executed by Island
Critical Care Corporation.
Hypothecation of a secured Demand Debenture, in the minimum amount of $
1,500,000.00 representing a first Fixed Charge on land, buildings, accounts
receivable and inventory and a Floating Charge on all other assets of the
Company.
A Registered General Assignment of Book Debts.
Fire Insurance on inventory.
The Personal Guarantee and postponement of claim of Kenneth R. Legere in
the amount of $1,500,000.00
Assignment of the Island Critical Care Corporation common shares held by
Kenneth R. Legere.
Key man Life Insurance in the amount of $300,000.00
CONTINGENT CONDITIONS
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Prior to the closing of the Credit transaction and the disbursement of any
part of the funds, we will require:
An application fee of $5,000.00
PRIOR TO ACCESSING THIS LINE OF CREDIT, THE COMPANY MUST DEMONSTRATE THEY
HAVE A FULLY OPERATIONAL PULSE OXIMETER, TOGETHER WITH THE NECESSARY LICENSES
AND CERTIFICATION REQUIRED TO COMMERCIALLY PRODUCE AND MARKET THIS PRODUCT.
Written confirmation of a repayable contribution from ACOA in the minimum
amount of $300,000.00.
Written confirmation of a non repayable contribution from HRDC in the
minimum amount of $300,000.00.
Confirmation of a cash equity investment in the amount of $800,000.00 .
Confirmation of fire insurance required under this offer.
All required security documentation is at your own expense and is to be in
a form satisfactory to P.E.I. Lending Agency and its legal counsel and to be
executed, delivered and registered in all necessary or appropriate places as
P.E.I. Lending Agency deems necessary.
Certified copies of all documents evidencing all corporate action taken by
the Borrower and/or Guarantor(s) authorizing the acceptance of this Credit Offer
and the execution and delivery of all security documentation.
In the event the Atlantic Canada Opportunities Agency and/or Human Resource
Development Corporation do not contribute the specified amounts stipulated in
this offer, the shareholders, may increase their equity component equal to or
greater than, that in which was to be provided by ACOA and/or HRDC.
GENERAL CONDITIONS TO DISBURSEMENT
Notwithstanding anything herein to the contrary, P.E.L Lending Agency shall
have the right, as its option, to terminate this commitment, and shall not be
required to disburse all or any further part of the loan and, at any time or
times, the balance owing on the credit may, at its option, become immediately
due and payable:
If an Event of Default has occurred or an event which, with the lapse of
time or with notice and lapse of time specified herein would become an Event of
Default, shall have occurred and be continuing; or;
If in the opinion of P.E.I, Lending Agency, there has been any material
adverse change in the business, assets or financial condition of the Borrower;
or
If there is any action, proceeding or investigation pending or threatened
against the Borrower, which would in the opinion of P.E.L Lending Agency, if
successful have a material adverse effect on the Borrower; or
If there is or has been any material discrepancy or inaccuracy in any
written or oral representations, statements or information made or furnished to
P.E.I. Lending Agency at any time.
If, in the opinion of P.E.I. Lending Agency, any money loaned has not
been, or is not being applied for the purpose for which it was advanced, or if
the security materially depreciates in value.
IF BY MARCH 30, 2000, ISLAND CRITICAL CARE CORPORATION IS UNABLE TO
DEMONSTRATE THEY HAVE A FULLY OPERATIONAL PULSE OXIMETER, TOGETHER WITH THE
NECESSARY LICENSES AND CERTIFICATION REQUIRED TO COMMERCIALLY PRODUCE AND MARKET
THIS PRODUCT, THIS OFFER OF CREDIT WILL BE WITHDRAWN, AND THE COMPANY WILL BE
REQUIRED TO REAPPLY TO THE AGENCY FOR FUNDING.
NEGATIVE COVENANTS
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During the term of the Loan and as long as you are indebted or otherwise
liable to P.E.I. Lending Agency, the company will not, without the prior
written consent of P.E.I. Lending Agency:
Make any loans or advances to shareholders or affiliated companies.
Create contingent liabilities via corporate guarantees. It is our
understanding there are no such contingent liabilities currently in existence.
Outflows of funds from Island Critical Care Corporation to affiliated
companies; their shareholders/directors or otherwise as bonuses, dividends, etc
may not exceed 100% of surplus cash flow after the Agency's debt retirements and
capital spending funded from operations.
Will not undertake any capital expenditures in excess of $25,000.00 in the
aggregate, in any fiscal year and for the purpose of this clause "capital
expenditures" shall mean any expenditures which, in accordance with generally
accepted accounting principles, are chargeable to a capital or fixed asset
account. This covenant excludes, capital spending contemplated with this
financing package.
The company will not make any material change in the Loan without the
consent of the P.E.I. Lending Agency.
FINANCIAL STATEMENTSAND REPORTS
---------------------------------
The borrower shall, at its expense, deliver to P.E.I. Lending Agency
financial statements in form and content as P.E.I. Lending Agency may in its
discretion require, on the following basis:
Monthly, within 20 days of the end of the period, the borrower will provide
financial statements including income statement and balance sheet; an aged list
of accounts receivable, payables, a summary of inventory and work in progress.
Within 120 days after the end of each fiscal year, a copy of the annual Audited
financial statements of the Borrower, which shall include a balance sheet and a
statement of revenue and expense, prepared by a firm of independent chartered
accountants in accordance with generally accepted accounting principles; Upon
request by P.E.I. Lending Agency, such other financial statements, reports and
information in respect of the financial conditions and operations of the
Borrower as may be deemed necessary.
DISBURSEMENT OF FUNDS
-----------------------
The Loan will be disbursed through our office and funded monthly, based on
the cash flow forecast, previous month's Income Statement, Balance Sheet and
Inventory Declaration certified by an Officer of the company or its designate.
Proceeds will be disbursed in multiples of $25,000.00, once a month, on a date
mutually agreed upon between the P.E.I. Lending Agency and Island Critical Care
Corporation.
LIFE INSURANCE
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The Loan must carry Keyman Life Insurance in the minimum amount of
$300,000.00. Enterprise PEI, as an agent for Crown Life of Canada, can provide
this coverage. The current rate, which is subject to an annual review, is:
$ .36 per $1,000.00 per month for the first $100,000.00 of coverage;
For loans over $100,000.00 (per $1,000.00 of coverage)
Age
---
35-44 $.18 per $1,000.00 per month
45-49 $.36 per $1,000.00 per month
50-54 $.62 per $1,000.00 per month
55-59 $1.04 per $1,000.000 per month
60-64 $1.49 per $1,000.00 per month
Should you choose to insure your loan through this Agency, the premium will
be charged to your account automatically for this protection. Final coverage
and rates will be determined at the time of receiving the Borrower's acceptance
of this offer.
TERMS OF REPAYMENTThe terms of repayment
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of the Credit are as follows:
The principal amount of the credit will be payable on demand, but more
specifically from cash flow.
In any event, it is understood that the full amount owing will be paid no
later than July 31, 2000.
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Interest will be charged monthly on outstanding advances at the prime
lending rate as charged to us by the Toronto Dominion Bank, from time to time
plus 2.75% percent per annum, and is to be paid monthly.
All payments of interest will be charged directly to the company*s business
account via the electronic debit system on the first of each month.
EVENTS OF DEFAULT
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Any one or more of the following events shall constitute an Event of
Default (whether any such Event of Default shall be voluntary or involuntary or
be effected by operation of law or pursuant to or in compliance with any
judgment, decree or order of any court of any order, rule or regulation of any
administrative government body):
If the Borrower makes default in the payment of any sum which is due and
owing to P.E.I. Lending Agency hereunder and such default shall have continued
for a period of fifteen (15) days;
(b) If the Borrower shall neglect to observe or perform any other covenant
or condition herein contained on its part to be observed or performed and, if
the same is capable of being cured, after notice in writing has been given by
P.E.L Lending Agency specifying such default and requiring the Borrower to cure
the same, the Borrower shall have failed to cure the same within a period of
fifteen (15) days;
(c) If an order shall be made or an effective resolution be passed for the
winding-up or the liquidation of the Borrower;
(d) If the Borrower shall make an assignment for the benefit of its
creditors or shall be declared bankrupt or make a proposal under the Bankruptcy
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Act or if a custodian or sequestrator or receiver or a receiver and manager
- ---
or any other officer with similar powers shall be appointed of the Borrower or
its property;
(e) If an encumbrancer shall take possession of the property of the
Borrower or any substantial part thereof or of a distress or execution or any
similar process be levied or enforced against such property and remain
unsatisfied for such period as would permit such property or such part thereof
to be sold thereunder;
(f) If the Borrower shall make an application to any court for an order
under the Companies Creditors Arrangement Act;
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(g) If P.E.I. Lending Agency in good faith believes that the ability to
pay any monies hereby secured or to perform any covenant or condition hereof is
impaired or that the mortgaged property is in danger of being lost, damaged or
confiscated;
(h) If the Borrower ceases to carry on its business;
(i) The making of any representation or warranty by the Borrower or the
application in any document or certificate furnished to P.E.I. Lending Agency
in connection herewith or pursuant hereto which 'shall prove at any time to be
materially incorrect, as of the date made. P.E.I. Lending Agency may, at any
time it deems it necessary to protect its loans or security, obtain the advice
and assistance of such lawyers, accountants, engineers or other professional or
expert personnel as it may deem necessary, and the expense in this connection
shall, on a solicitor and client basis, be borne by the Borrower.
ACKNOWLEDGMENT
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The Borrower acknowledges that it has independently satisfied itself
respecting the feasibility of the Credit Project and have not relied in any way
upon any oral or written representations by P.E.I. Lending Agency or the fact
the Loan is being made.
The Borrower acknowledges that it recognizes that, although P.E.I. Lending
Agency is a Crown Corporation, it operates on the basis of an independent body
for the purpose of dealing with applications for financial assistance made to
it. Applications are considered strictly on their own merits and independent of
other government corporations or agencies and without regard to any possible
understanding with any government department and representatives.
ACCEPTANTANCE
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This offer of credit must be accepted in writing, within 30 days, by way of
a Resolution of the Directors of Island Critical Care Corporation, and we
enclose a form that may be used in this regard; also, by the signatures of
Guarantors, namely - Kenneth R. Leger and Schiller Canada Inc., as indicated on
the enclosed duplicate copy of this letter.
Upon receipt of the written acceptance and fulfillment of contingent
conditions, we will have the required loan documents prepared by our Solicitor.
All fees will be on the account of the Borrower.
Enterprise P.E.I. is pleased to extend this offer to you.
Yours truly.
ENTERPRISE P.E.I.
/s/ Per: D.C. Aitken
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D.C. Aitken
Account Manager
ACCEPTED ON BEHALF OF THE BORROWER
ISLAND CRITICAL CARE CORPORATION
Per: /s/ Kenneth Legere
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Kenneth Legere
ACCEPTED ON BEHALF OF THE GUARANTORS
/s/ Kenneth Legere
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Kenneth Legere
SCHILLER CANADA INC.
Per: Kenneth Legere
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Kenneth Legere