Second Amendment to Construction Loan and Permanent Financing Agreement between CryoLife, Inc. and Bank of America, N.A.

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Summary

This amendment updates the loan agreement between CryoLife, Inc. and Bank of America, N.A. It increases the revolving line of credit to $10 million, sets a termination date of July 30, 2005, and revises certain definitions and terms. The line of credit is for CryoLife’s working capital and general corporate needs, with interest based on a floating LIBO rate plus 1.25%. The lender is not required to make advances after the termination date or in case of default. Other terms of the original agreement remain in effect.

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EX-10.1 3 cryolife10q93002ex101.txt SECOND AMENDMENT EXHIBIT 10.1 SECOND AMENDMENT TO CONSTRUCTION LOAN AND PERMANENT FINANCING AGREEMENT This Second Amendment to Construction Loan and Permanent Financing Agreement (this "Amendment") is made and entered into as of July 30, 2002 by and between CRYOLIFE, INC. (the "Borrower"), and BANK OF AMERICA, N.A. (the "Lender"); W I T N E S S E T H: WHEREAS, the Borrower and the Lender have made and entered into that Construction Loan and Permanent Financing Agreement, dated as of April 25, 2000, as amended through the date hereof (the "Original Loan Agreement" and, as amended hereby, the "Loan Agreement"; capitalized terms used herein and not otherwise defined shall have the meanings ascribed thereto in the Loan Agreement); WHEREAS, the Borrower's obligations to the Lender are secured by that certain Security Agreement, dated as of April 25, 2000, as amended through the date hereof (the "Original Security Agreement" and, as so amended, the "Security Agreement"); WHEREAS, pursuant to the Original Loan Agreement, the Lender has extended to the Borrower a construction/permanent loan facility in the original principal amount of up to $8,000,000; WHEREAS, the Lender has previously extended to the Borrower a revolving loan facility in the original principal amount of up to $2,000,000, which has expired; WHEREAS, Borrower desires to obtain a new revolving loan facility of up to $10,000,000 and to make certain other changes to the Loan Agreement; WHEREAS, the Borrower desires to amend certain provisions of the Loan Agreement, and the Lender is willing to agree to the same on the terms and conditions set forth herein; NOW THEREFORE, for and in consideration of the foregoing and for ten dollars ($10.00) and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE 1. AMENDMENTS TO LOAN AGREEMENT SECTION 1.1 DEFINITION AMENDMENTS. The following definitions in Section 1.1 of the Loan Agreement are hereby amended in their entirety to read as follows: "Adjusted LIBO Rate" means: (i) with respect to the Construction Loan (and Term Loan), the LIBO Rate divided by a percentage equal to one (1) minus the then average stated maximum amount (stated as a decimal) of all reserve requirements applicable to any member of the Federal Reserve System in respect of Eurocurrency liabilities as defined in Regulation D of the Board of Governors of the Federal Reserve System (or any successor categories for such liabilities under such Regulation D). The Adjusted LIBO Rate shall be set on the date of Closing and shall be recalculated each thirtieth (30th) day thereafter. The Adjusted LIBO Rate, once so calculated or recalculated, shall remain in effect until the next scheduled recalculation date. If any recalculation date for the Adjusted LIBO Rate is not a Business Day, the recalculation of the Adjusted LIBO Rate shall be made on the next Business Day following such date. (ii) with respect to the Line of Credit, the fluctuating rate of interest (rounded upwards, if necessary to the nearest 1/100 of 1%) appearing on Telerate Page 3750 (or any successor page) as the 1 month London interbank offered rate for deposits in United States Dollars at approximately 11:00 a.m. (London time) on the second preceding business day, as adjusted from time to time in Lender's sole discretion for then-applicable reserve requirements, deposit insurance assessment rates and other regulatory costs; if for any reason such rate is not available, the term "LIBOR Daily Floating Rate" shall mean the fluctuating rate of interest equal to the rate of interest (rounded upwards, if necessary to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as the 1 month London interbank offered rate for deposits in United States Dollars at approximately 11:00 a.m. (London time) on the second preceding day, as adjusted from time to time in Lender's sole discretion for then-applicable reserve requirements, deposit insurance assessment rates and other regulatory costs; provided, however, if more than one rate is specified on Reuters Screen LIBO page, the applicable rate shall be the arithmetic mean of all such rates (the "Index"). The Index is not necessarily the lowest charged by Lender on its loans, Lender may make loans based on other rates as well and if the Index becomes unavailable during the term of this Line of Credit, Lender may designate a substitute index after notice to Borrower. The interest rate change applicable to the Line of Credit will not occur more often than each date of such change in the Index. "Advances" means, (i) with respect to the Construction Loan, any direct or indirect advance made by Lender to Borrower pursuant to Article Two of this Agreement, and (ii) with respect to the Line of Credit, any direct or indirect advance made by Lender to Borrower pursuant to Article IIIA of this Agreement. "Commitment" means, (i) with respect to the Construction Loan (and Term Loan), $8,000,000, and (ii) with respect to the Line of Credit, $10,000,000. "Commitment Letter" means, (i) with respect to the Construction Loan (and Term Loan), that certain letter from Lender to Borrower dated March 9, 2000, a copy of which is attached hereto as Exhibit B, and (ii) with respect to the Line of Credit, that certain letter from Lender to Borrower dated June 18, 2002, a copy of which is attached hereto as Exhibit B-1. 2 "Line of Credit" means the revolving line of credit extended by Lender to Borrower pursuant to Section IIIA hereof. "Loan" means (i) either the Construction Loan or the Term Loan, or both, as the context may require, or (ii) the Line of Credit, or both (i) and (ii) as the context may require. "Note" means (i) with respect to the Construction Loan (and Term Loan), the promissory note, dated as of April 25, 2000, from Borrower to Lender, in the principal amount of $8,000,000, as amended, modified, supplemented, restated or renewed from time to time, and (ii) with respect to the Line of Credit, the promissory note, dated as of July 30, 2002, from Borrower to Lender, in the principal amount of $10,000,000, as amended, modified, supplemented, restated or renewed from time to time. SECTION 1.2 NEW DEFINITIONS. The following definitions are hereby added in Section 1.1 of the Loan Agreement to read in their entirety as follows: "Line of Credit Commitment" means $10,000,000. "Termination Date" means July 30, 2005. SECTION 1.3 LOAN AGREEMENT AMENDMENT. The Loan Agreement is hereby amended by adding a new Article IIIA to read in its entirety as follows: 3.01A The Line of Credit. (a) From time to time upon Borrower's request, and subject to the terms and conditions of this Agreement, Lender agrees to advance to Borrower prior to the Termination Date amounts which do not exceed the Line of Credit Commitment in aggregate outstanding principal amount at any one time. Notwithstanding anything in this Agreement to the contrary, Lender shall not be obligated hereunder to make any Advance under the Line of Credit on or after the earlier of (i) the Termination Date or (ii) the occurrence of a Default or Event of Default hereunder. Subject to the terms and conditions hereof, prior to the Termination Date, Borrower, at its option, from time to time may borrow, repay and reborrow all or any portion of the Line of Credit. (b) The proceeds of the Line of Credit may be used by Borrower only to finance Borrower's and its Subsidiaries' working capital and other general corporate needs. (c) The Advances under the Line of Credit shall bear interest at a floating rate per annum equal to the Adjusted LIBO Rate plus one and one-quarter percent (1.25%). To the extent permitted by law, any overdue interest on the Advances under the Line of Credit shall bear interest, payable on demand, for each day until paid at a rate equal to the Default Rate. (d) Borrower shall pay to Lender unused facility fees for Borrower's Line of Credit facility hereunder during the term hereof computed on the daily average unused portion of the Line of Credit Commitment at a rate per annum 3 of one-quarter of one percent (.25%). Such unused facility fees shall be payable by Borrower to Lender monthly in arrears, commencing on August 31, 2002, and continuing to be due on the last Business Day of each month thereafter as well as on the Termination Date. (e) Interest on the principal amount of the Advances under the Line of Credit shall be due and payable monthly in arrears on the first (1st) day of each calendar month commencing September 1, 2002 with respect to all interest accrued during the calendar month immediately preceding the interest payment date, and on the Termination Date. (f) The outstanding principal balance of the Advances under the Line of Credit, together with all accrued but unpaid interest thereon, shall be due and payable in full on the Termination Date. (g) Borrower hereby authorizes Lender automatically to deduct from Borrower's account numbered ###-###-#### the amount of any interest payments on Line of Credit when and as due. If the funds in the account are insufficient to cover any such interest payment, Lender shall not be obligated to advance funds to cover the payment. At any time and for any reason, Borrower or Lender may voluntarily terminate automatic payments of interest on the Line of Credit. In the event that Borrower terminates the automatic payment arrangement with Lender, Borrower agrees that the interest rate for the Line of Credit will increase, at the discretion of the Lender, by one-half percentage point (0.50%) per annum over the rate of interest stated above, and the amount of each interest installment will be increased accordingly. The effective rate of interest under the Line of Credit shall not in any event exceed the maximum rate permitted by law. (h) The Line of Credit may be prepaid, in whole or in part, by Borrower at any time or from time to time hereafter without premium or penalty. (i) All of the Advances under the Line of Credit shall constitute one loan by Lender to Borrower. Lender shall maintain a loan account on its books in which shall be recorded all Advances under the Line of Credit, all payments made by Borrower on the Line of Credit and all other appropriate debits and credits as provided in this Agreement and the Note with respect thereto, including without limitation all charges, expenses and interests. All entries in such account shall be made in accordance with the Lender's customary accounting practices as in effect from time to time. Lender shall render to Borrower a monthly statement setting forth the balance of such account, including principal, interest, expenses and fees, and each such statement shall, absence manifest error or omissions, be presumed correct and binding upon Borrower and shall constitute an account stated unless, within thirty (30) days after receipt of any such statement from Lender, Borrower shall deliver to Lender a written objection thereto specifying the error or errors of omission or omissions, if any, contained in such statement. 4 (g) All interest and fees owing by Borrower to Lender hereunder or under the other Financing Documents shall be computed on the basis of a 360-day year and the actual days elapsed. SECTION 1.4 LOAN AGREEMENT AMENDMENT. Section 5.02 of the Loan Agreement shall apply to the Construction Loan Advances only and the Loan Agreement is hereby further amended by adding a new Section 5.03 to read in its entirety as follows: 5.03 Conditions Precedent to Each Line of Credit Advance. The following conditions, in addition to any other requirements set forth in this Agreement, shall have been met or performed by the date of such Line of Credit Advance with respect to any request for a Line of Credit Advance and each request for an Advance (whether or not a written Advance request is required) shall be deemed to be a representation that all such conditions have been satisfied: (a) All provisions of the Commitment Letter with respect to the Line of Credit shall have been complied with; (b) Borrower's representations and warranties set forth herein and in the other Financing Documents shall remain true and correct in all material respects; (c) No Default or Event of Default shall have occurred under this Agreement or under any other Financing Document; (d) There shall have occurred no act, omission or undertaking which would, singly or in the aggregate, have a materially adverse effect upon the business, assets, liabilities, financial condition, results of operations or financial prospects of Borrower, or upon the ability of Borrower to perform any material obligations arising under the Financing Documents; (e) The proposed Advance shall not cause the outstanding principal balance of the Line of Credit to exceed the Line of Credit Commitment. (f) Borrower shall have delivered such further documentation or assurances as Lender may reasonably require. SECTION 1.5 LOAN AGREEMENT AMENDMENT. The Loan Agreement is hereby amended by adding new Section 7.25 to read in its entirety as follows: 7.25 New Subsidiaries. Within thirty (30) days after Borrower's creation or acquisition of any Subsidiary, Borrower shall cause such Subsidiary to guaranty the repayment of the Liabilities and Obligations to Lender, pursuant to a Subsidiary Guaranty and other documents as are acceptable in all respects to the Lender. Borrower also shall provide Lender with any and all closing certificates, opinions of counsel and other closing documents as the Lender may request with respect to such guaranty and other documents. 5 SECTION 1.6 LOAN AGREEMENT AMENDMENT. The reference to "$5,000,000" in Section 8.03(iii)(e) of the Loan Agreement is hereby amended to read "$10,000,000". SECTION 1.7 LOAN AGREEMENT AMENDMENT. Section 8.08(c) of the Loan Agreement is hereby amended in its entirety to read as follows: (c) Borrower shall not permit its Leverage Ratio to exceed 0.5 to 1.0 at any time. SECTION 1.8 LOAN AGREEMENT AMENDMENT. Section 8.08(d) of the Loan Agreement is hereby amended in its entirety to read as follows: (d) Borrower shall not permit its Net Worth at any time after the date of this Agreement to be less than $90,000,000 plus (i) 80% of the positive amount of Net Income of Borrower for each fiscal quarter ending after the date hereof and (ii) the amount of any increase in Net Worth resulting from the issuance of stock, corporate reorganizations, recapitalizations or any similar event. SECTION 1.9 LOAN AGREEMENT AMENDMENT. The Loan Agreement is hereby amended by adding a new Section 8.12 to read in its entirety as follows: 8.12 Investments. Borrower shall not make loans or advances to any Person, or investments in any Person, except for (a) investments permitted by Section 8.03 hereof, (b) U.S. dollar denominated time deposits and certificates of deposit issued by Lender or another domestic commercial bank of recognized standing having capital and surplus in excess of $500,000,000, (c) securities issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided the full faith and credit of the United States of America is pledged in support thereof), (d) municipal bonds or equity securities that have an investment grade rating from a nationally recognized ratings service, and (e) loans and advances not in excess of $250,000 in the aggregate at any time. SECTION 1.10 LOAN AGREEMENT AMENDMENT. Notwithstanding anything to the contrary herein, all notices and communications to the Lender shall be directed to the following address: Bank of America, N.A. Jacksonville CLSC; Attn: Notice Desk 9000 Southside Blvd., 3rd Floor Jacksonville, FL 32256 SECTION 1.11 EXHIBITS. The Loan Agreement is hereby amended by adding a new Exhibit B-1 in the form attached hereto as Exhibit B-1, Exhibit E to the Loan Agreement is hereby amended in its entirety to read in the form attached hereto as Exhibit E, and Schedule 6.05 to the Loan Agreement is hereby amended in its entirety to read in the form attached hereto as Schedule 6.05. 6 ARTICLE 2. CONDITIONS TO EFFECTIVENESS SECTION 2.1 CONDITIONS. The amendments to the Loan Agreement set forth in this Amendment shall become effective as of the date first above written (the "Effective Date") after all of the conditions set forth in Sections 2.2 through 2.6 hereof shall have been satisfied. SECTION 2.2 EXECUTION OF AMENDMENT. This Amendment shall have been executed and delivered by the Borrower. SECTION 2.3 EXECUTION OF REVOLVING NOTE. The Revolving Note shall have been executed and delivered by the Borrower. SECTION 2.4 GUARANTIES. Each of Cryolife Acquisition Corp., Cryolife Europa, Ltd., Cryolife Technology, Inc., AuraZyme Pharmaceuticals Inc. and Cryolife International, Inc. shall have executed and delivered a guaranty of Borrower's Obligations and Liabilities. SECTION 2.5 SECRETARIAL AND INCUMBENCY CERTIFICATE. The Lender shall have received counterparts of a Secretarial and Incumbency Certificate from the Borrower and each corporate Guarantor. SECTION 2.6 REPRESENTATIONS AND WARRANTIES. (a) As of the Effective Date, except as modified by Schedule 4.06 hereto, the representations and warranties set forth in the Loan Agreement, and the representations and warranties set forth in each of the Loan Documents, shall be true and correct in all material respects; (b) as of the Effective Date, no Defaults or Events of Default shall have occurred and be continuing; (c) the Lender shall have received from the Borrower a certificate dated the Effective Date, certifying the matters set forth in subsections (a) and (b) of this Section 2.6. ARTICLE 3. MISCELLANEOUS SECTION 3.1 ENTIRE AGREEMENT; NO NOVATION OR RELEASE. This Amendment, together with the Loan Documents, as in effect on the Effective Date, reflects the entire understanding with respect to the subject matter contained herein, and supersedes any prior agreements, whether written or oral. This Amendment is not intended to be, and shall not be deemed or construed to be, a satisfaction, novation or release of the Loan Agreement or any other Loan Document. Except as expressly amended hereby, all representations, warranties, terms, covenants and conditions of the Loan Agreement and the other Loan Documents shall remain unamended and unwaived and shall continue in full force and effect. SECTION 3.2 FEES AND EXPENSES. All fees and expenses of the Lender incurred in connection with the issuance, preparation and closing of the transactions contemplated hereby shall be payable by the Borrower promptly upon the submission of the bill therefor. If the Borrower shall fail to promptly pay such 7 bill, the Lender is authorized to pay such bill through an advance of funds under the Loan. SECTION 3.3 CHOICE OF LAW; SUCCESSORS AND ASSIGNS. This Amendment shall be construed and enforced in accordance with and governed by the internal laws (as opposed to the conflicts of laws provisions) of the State of Georgia. This Amendment shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns. WITNESS the hand and seal of each of the undersigned as of the date first written above. LENDER: BANK OF AMERICA, N.A. By: /s/ Ken Topham ----------------------------------------- Title: Vice President -------------------------------------- BORROWER: CRYOLIFE, INC. By: /s/ D. A. Lee ---------------------------------------- Title: VP & CFO ------------------------------------ Attest: /s/ Suzanne K. Gabbert ------------------------------------ Title: Asst. Corp. Secretary ------------------------------------- [Seal] 8 Exhibit "B-1" 9 [Bank of America Letterhead] June 18, 2002 Mr. Ashley Lee Chief Financial Officer Cryolife, Inc. 1655 Roberts Boulevard, NW Kennesaw, GA 30144 Re: Letter of Commitment Dear Mr. Lee: Bank of America (hereafter the "Bank") is pleased to offer you a commitment (hereafter the "Commitment") for a loan (hereafter the "Loan"), subject to the following terms and conditions: 1. BORROWER: Cryolife, Inc. GENERAL CORPORATE USE LINE:
2A. LOAN AMOUNT: Up to Ten Million & 00/100 Dollars ($10,000,000.00). 2B. USE OF PROCEEDS: The proceeds from this loan will be used for general corporate use including the funding of future acquisitions by the Borrower. 2C. TERMS: The Terms of this proposed loan shall be for a thirty-six (36) month period from closing. Payments will be interest only with principal due at maturity. 2D. INTEREST RATE: Interest on the daily unpaid balance from Loan date until maturity at a floating rate of 30-Day LIBOR, as determined by Bank of America and adjusted for reserves, deposit insurance assessments and other regulatory costs, plus 1.25%. This line shall bear a fee of 25 basis points per annum based on the unused portion of the Loan Amount. 3. LOAN ADVANCES: Borrower may borrow, repay, and reborrow funds under the Loan at its option during the term of the Loan. 4. COLLATERAL: The Acquisition Line shall be secured at all Cryolife, Inc. June 18, 2002 Page 2 of 8 times by a valid, perfected, first priority security interest in all Accounts Receivable, Inventory, Equipment and Leasehold Improvements of the Borrower of every description now or hereafter acquired or existing. Note that the Bank will continue a negative pledge against the intangible assets of the company. The Acquisition Line shall be cross pledged and collateralized by the existing Term Loan. 5. GUARANTORS: The Loan and the other Obligations shall be fully guaranteed by the Subsidiaries of Borrower pursuant to a Subsidiary Guaranty (or confirmation of an existing Guaranty, as applicable) which shall be duly executed and delivered by each Subsidiary to Lender in connection with this Agreement. The list of guarantors is and is not limited to the following: Cryolife Acquisition Corp. Cryolife Technology, Inc. Cryolife Foreign Sales, Inc. Cryolife Europa, LTD. AuraZyme Pharmaceuticals, Inc. 6. SPECIAL PROVISIONS: a. Borrower will provide the Bank, annually, within one hundred twenty (120) days of the end of its fiscal year end, with CPA Audited financial statements to include a statement of revenues and expenditures as well as a balance sheet. Three statements shall be presented on a consolidated basis. b. Borrower will provide the Bank with quarterly internally-prepared financial statements within forty-five (45) days of the end of each quarter. These statements shall be presented on a consolidated basis. Cryolife, Inc. June 18, 2002 Page 3 of 8 c. Each Financial statement submitted to the Bank shall be accompanied by a duly completed Compliance Certificate executed on behalf of Borrower by its Chief Financial Officer. d. Borrower will provide to the Bank from time to time such financial or other information, as the Bank shall reasonably request. e. Borrower will maintain adequate property damage insurance, naming the Bank as mortgagee/loss payee, and furnish evidence thereof at Loan closing. f. Borrower will provide the Bank with certain legal information at Loan closing to include "Articles of Incorporation", "Certificate of Incorporation", "Corporate Resolution", and a "Certificate of Good Standing" with the Office of the Secretary of State. g. Borrower will maintain all primary operating deposit accounts with Bank of America during the life of the Loan. h. Borrower will maintain certain financial covenants as described on Exhibit "A" attached. 7. COSTS, EXPENSES, AND ATTORNEY'S FEES: Borrower shall pay to Bank immediately upon demand the full amount of all costs and expenses, including reasonable attorneys' fees (to include outside counsel fees and all allocated costs of Bank's in-house counsel if permitted by applicable law), incurred by Bank in connection with negotiation and preparation of this Agreement and each of the Loan Documents. 8. EXTENSIONS OF CREDIT: In an amount not to exceed $250,000.00, Borrower can make loans or advances to any partnership, corporation, individual or other entity, including the normal extensions of trade credit Cryolife, Inc. June 18, 2002 Page 4 of 8 in the ordinary course of Borrower's business. 9. OUTSIDE BORROWING: Borrower shall not create, incur, assume or become liable in any manner for any indebtedness in excess of $250,000.00 (for borrowed money, deferred payment for the purchase of assets, lease payments, as surety or guarantor for the debt of another, or otherwise) other than to Bank, except for normal trade debts incurred in the ordinary course of Borrower's business. 10. SUCCESSORS AND ASSIGNS: This Commitment shall be binding on all parties thereto, their successors, assigns and representatives. 11. COUNTERPARTS: This Commitment may be executed simultaneously in two or more counterparts, each of which shall be deemed an original for evidentiary purposes, but all of which together shall constitute one and the same instrument. 12. DEFAULT: Borrower shall be in default under this Commitment and under any and all promissory notes executed by Borrower in favor of Bank and any and all other documents, instruments, deeds of trust, mortgages, security agreements, guarantees executed and/or delivered by Borrower in connection with the Loan (collectively, the "Loan Documents"), if it shall default in the payment of any amounts due and owing under the Loan or to some other party (if the default to some other party would materially impact the Borrower's ability to operate their business) or should it fail to timely and properly perform, keep and observe any term, covenant, agreement or condition in this Commitment or any of the Loan Documents. 13. CANCELLATION: The Bank reserves the right to cancel this Cryolife, Inc. June 18, 2002 Page 5 of 8 Commitment and terminate the obligation thereunder at any time upon the occurrence of any of the following: (a) Failure of the Borrower to comply with any of the applicable conditions of this Commitment within the time specified, (b) Non-payment of any of the fees or expenses to be paid by the Borrower in connection with this Commitment, or (c) Any filing by or against the Borrower of any petition in bankruptcy or insolvency or for the appointment of a receiver, or the reorganization of Borrower under such conditions or the making of any assignment for the benefit of creditors. 14. ERRORS OR OMISSIONS: Borrower agrees that should any inadvertent errors or omissions later be discovered in any documents executed at closing, Borrower shall promptly execute such corrective documents and remit such sums as may be required to adjust or correct such errors or omissions. 15. MATERIAL ADVERSE CHANGE: This Commitment is conditioned upon there having occurred no act, omission or undertaking which would, singly, or in the aggregate, have a materially adverse effect upon the business, assets, liabilities, financial condition, results of operations or business prospects of the Borrower, and any of its subsidiaries or of any Guarantor, or upon the ability of the Borrower to perform any material obligations arising under the Loan Documents. 16. ARBITRATION: Any controversy or claim between or among the parties hereto including but not limited to those arising out of or relating to this Commitment or any related instruments, agreements or documents including any claim based on or arising from an alleged tort, shall be determined by binding arbitration in accordance with the Federal Cryolife, Inc. June 18, 2002 Page 6 of 8 Arbitration Act (or if not applicable, the applicable state law), and the rules of practice and procedure for the arbitration of commercial disputes of Judicial Arbitration and Mediation Services, Inc. (J.A.M.S.) as supplemented by any special rules set forth in any of the Loan Documents. Judgment upon any arbitration award may be entered in any court having jurisdiction. Any party to this Commitment may bring an action, including a summary or expedited proceeding, to compel arbitration of any controversy or claim to which this Commitment applies in any court having jurisdiction over such action. 17. LOAN AGREEMENT: Borrower shall execute a Loan Agreement at Loan closing in form and substance satisfactory to Bank. 18. INCORPORATION INTO DOCUMENTATION: At the time of Loan closing, this executed Letter of Commitment shall become a part of the Loan documentation. 19. ENTIRE AGREEMENT: This Commitment, together with Loan Documents, supersede all prior written or oral understandings or agreements between Borrower and Bank with respect to the matters addressed in the Loan Documents.
If the terms and conditions of this Letter of Commitment meet with your approval, please indicate your acceptance by signing and returning the original to us. This Letter of Commitment shall become null and void if not accepted within fifteen (15) days of the date hereof, and closed within thirty (30) days of acceptance of this Commitment. Cryolife, Inc. June 18, 2002 Page 7 of 8 Thank you for banking with Bank of America. Sincerely, /s/ Ken Topham - -------------------------------------------- Ken Topham Vice President Signed and accepted the 19th day of June, 2002. BORROWER: Cryolife, Inc. BY: /s/ D. A. Lee ------------------------------ NAME: D. Ashley Lee ------------------------------ TITLE: VP & CFO ------------------------------ Cryolife, Inc. June 18, 2002 Page 8 of 8 EXHIBIT "A" Debt Coverage Ratio: Borrower shall not permit its Debt Coverage Ratio for any fiscal quarter or year-end to be less than 1.3 to 1.0. The Debt Coverage Ratio is defined as, with respect to any particular fiscal period of Borrower, the ratio of (a) Borrower's EBITDAR for the consecutive 4-quarter period ending therewith to (b) the sum (without duplication) of (i) Borrower's Current Maturities of Funded Debt for the immediately succeeding consecutive 4-quarter period plus (ii) Borrower's Interest Expense for the consecutive 4-quarter period ending therewith plus (iii) Borrower's Rental Expense for the immediately succeeding consecutive 4-quarter period, all as determined on a consolidated basis. Leverage Ratio. Borrower agrees to maintain a ratio of Total Liabilities to its Net Worth of no greater than 0.5 to 1.0 at all times. Total Liabilities shall mean, as of any particular date, the amount which all liabilities of Borrower would be shown on a consolidated balance sheet of Borrower at such date prepared in accordance with generally accepted accounting principles consistently applied. Net Worth means, as of any particular date, Borrower's total shareholder's equity (including capital stock, additional paid-in capital, and retained earnings after deducting treasury stock) which would appear as such on a consolidated balance sheet of Borrower prepared in accordance with generally accepted accounting principles as then in effect. Net Worth Minimum. Borrower agrees to maintain a minimum net worth of $90,000,000 at all times. Borrower shall increase its minimum net worth by 80% of the positive amount of Net Income of Borrower for each fiscal year period after the date hereof and the amount of any increase in Net Worth resulting from the issuance of stock, corporate reorganizations, capitizations or similar event. Net Worth means, as of any particular date, Borrower's total shareholder's equity (including capital stock, additional paid-in capital, and retained earnings after deducting treasury stock) which would appear as such on a consolidated balance sheet of Borrower prepared in accordance with generally accepted accounting principles as then in effect. Maximum Annual Capital Expenditures. Borrower agrees to spend no more than $5,000,000 annually on capital expenditures. Borrower shall not make Capital Expenditures in excess of $5,000,000 in the aggregate in any fiscal year. Exhibit "E" FORM OF COMPLIANCE CERTIFICATE This Certificate is delivered pursuant to that certain Loan Agreement, dated as of April 25, 2000, as amended (the "Agreement"), by and between CRYOLIFE, INC., a Florida corporation (the "Borrower"), and BANK OF AMERICA, N.A., a national banking association (the "Lender"). All capitalized terms used in this Certificate which are defined in the Agreement are used in this Certificate with the same meanings given such terms in the Agreement. Unless otherwise defined in the Agreement, all accounting terms used herein shall have the meaning given such terms under generally accepted accounting principles consistently applied ("GAAP"). I hereby certify, to the best of my knowledge and believe and in my representative capacity on behalf of the Borrower, to the Lender as follows: 1. I am the duly qualified and acting chief financial officer of the Borrower. 2. I have prepared or reviewed the financial statements of the Borrower as of and for the period ending _________________, _____, true, complete and correct copies of which are attached hereto as Exhibit 1 (collectively, the "Financial Statements"). 3. The Financial Statements were prepared in accordance with GAAP and fairly present the financial position and results of operations of the Borrower (and its consolidated subsidiaries, if any) as of and for the period ending on the date of the Financial Statements (subject to normal year-end adjustments). 4. I further certify that as of, and for the period ending on, the date of the Financial Statements, and except as may be disclosed on Exhibit 2 attached hereto (all of the following being calculated on a consolidated basis and in accordance with GAAP and the Agreement): (a) The Borrower's Leverage Ratio did not exceed 0.5 to 1.0 at any time during such period; (b) The Borrower's Debt Coverage Ratio was not less than 1.3 to 1.0 for such period; (c) The Borrower's Net Worth was not less than __________________ [insert an amount equal to $90,000,000 plus 80% of the positive aggregate amount of Net Income of Borrower for each fiscal quarter beginning with quarter ending 6/30/2002 plus aggregate proceeds from issuance of stock, corporate reorganizations, recapitalization or any similar event]; and (d) The Borrower's Capital Expenditures for such fiscal year (or for the portion thereof ending with such period) did not exceed $5,000,000 in total. Attached hereto as Exhibit 3 are calculations demonstrating whether or not the Borrower was in compliance, as of and for the period ending on the date of the Financial Statements, with the covenants in the Loan Agreement which are summarized in items (a) through (e) above. 5. No Default or Event of Default has occurred and is continuing as of the date of this Certificate other than those Defaults or Events of Defaults (if any) which are described on the aforesaid Exhibit 2 attached hereto. I represent the foregoing information to be true and correct to the best of my knowledge and belief and I execute this Certificate in my representative capacity on behalf of the Borrower as of this _____ day of ---------------, - -----. -------------------------------------------- Name: Title: Schedule 6.05 A. CryoLife as a Defendant: 1. Gregory A. Link and Diane Link, as Husband & Wife v. Abington Memorial Hospital, V. Paul Addonizio, M.D. and CryoLife, Inc. Date Filed: September 15, 2000 Case No. 2000-01095 Court of Common Pleas, Montgomery County, Pennsylvania 2. Ann Regner, Leo J. Regner, Michael Shawn Steele and Brandon Steele vs. Inland Eye & Tissue Bank of Redlands; Inland Eye & Tissue Bank of Bakersfield; Pacific Coast Tissue Bank; Doheny Eye & Tissue Transplant Bank; Northern California Transplant Bank; University of California, San Diego, Regional Tissue Bank; University of California, Irvine, Willed Body Program; Musculoskeletal Transplant Foundation; American Red Cross; CryoLife, Inc.; Dr. Steven Burres; Fascia Biosystems; Edwards Life Sciences, LLP; Tissue Banks International; TBI, Inc. d/b/a Northern CA Transplant Bank; Gensci Orthobiologics, Inc.; Osteotech, Inc.; Lifecell Corporation; and Does 1 to 400, Inclusive. Date Filed: May 4, 2000 Case No. SCVSS 66746 Superior Court of California, San Bernardino County, Central District 3. Majid Sadeghi and Sandra Sadeghi, as Husband and Wife v. CryoLife, Inc.; CryoLife International, Inc.; Jefferson Health System, Inc., d/b/a Bryn Mawr Hospital; Main Line Health, Inc., d/b/a Bryn Mawr Hospital; Orthopaedic Specialists; and William D. Emper, M.D. Date Filed: June 21, 2001 Case No. 002695 Court of Common Pleas, Philadelphia County, Pennsylvania 4. Pamela Drahos, as Mother and Next Friend of Cassidy Dawn Chandler-Drahos a/k/a Chandler v. CryoLife, Inc.; St. Francis Hospital, Inc.; and Dr. Richard D. Ranne. Date Filed: May 18, 2000 Case No. CJ 2000-281 District Court In and For Wagoner County, State of Oklahoma 5. Lee Travis Montgomery and wife, Ann Montgomery v. CryoLife, Inc. Date Filed: January 22, 2002 Case No. 3:02-CV-29 United States District Court. Eastern District of Tennessee, Northern Division 6. Alan J. Minvielle v. CryoLife, Inc., Jeffrey Carter, M.D., and Does 1 through 100, Inclusive. Date Filed: April 10, 2002 Case No. CV 143210 Superior Court of California, County of Santa Cruz 7. Kenneth Alesescu and Pamela Alesescu v.CryoLife, Inc.; Midwest Transplant Network; Mercy General Hospital; and Does 1-50, Inclusive. Date Filed: July 2, 2002 Case No. 02AS04017 Superior Court of California, County of Sacramento 8. Julie S. Dayton v. CryoLife, Inc.; and Breg, Inc. Date Filed: June 11, 2002 Case No. 3:02-CV-305 United States District Court, Eastern District of Tennessee, Northern Division at Knoxville 9. William G. Karnes and wife Kelly C. Karnes v. CryoLife, Inc. Date Filed: June 20, 2002 Case No. 3:02-CV-330 United States District Court, Eastern District of Tennessee, Northern Division at Knoxville 10. Steve Lykins, as Trustee for the benefit of the next of kin of Brian Lykins, Deceased v. CryoLife, Inc.; Intermountain Donor Services, Inc.; Michael White, John Doe, Inc., 1 through 5, and John Does Individually, 1 through 5. Date Filed: July 12, 2002 Case No. 0210561324 Superior Court of Cobb County, State of Georgia 11. Joann Savitt, individually and on behalf of all other persons similarly situated v. Doheny Eye & Tissue Bank, Tissue Banks International, Lifecell Corp.; CryoLife, Inc.; Osteotech, Inc.; and Does 1-199, Inclusive. Date Filed: June 7, 2002 Case No. BC275521 Superior Court of California, County of Los Angeles B. CryoLife Acquisition Corporation (f/k/a Ideas for Medicine) as defendant: 1. David A. Ganz, Dr. William I. Ganz and Cecelia Hecht as co-personal representatives of the Estate of Jean Ganz, deceased v. Dr. Alan S. Livingstone; Dr. Jorge De La Pedraja; University of Miami, a private University d/b/a University of Miami School of Medicine; The Public Health Trust of Dade County d/b/a Jackson Memorial Hospital; and CryoLife, Inc. Date Filed: June 13, 2001 Case No. 00-13275 CA 06 Circuit Court of the Eleventh Judicial Circuit In and For Dade County, FL, General Jurisdiction Division 2. Bernard Michaels, as Administrator of the estate of Irene Michaels v. Our Lady of Victory Hospital of Lackawanna, Perala S. Rao, M.D., Perala S. Rao, P.C., Frederick M. Occhino, M.D., Frederick M. Occhino, M.D., P.C., Leo M. Michalek, M.D., and Ideas for Medicine, Inc. Date filed: August 15, 2000 Case No. 12000/7109 Supreme Court of New York: Erie County C. The following is a list of law firms that have filed or are contemplating filing class actions alleging securities law violations by CryoLife, Inc. CryoLife has not yet been served in any of these suits. Berger & Montague, P.C. Cauley Geller Bowman & Coates, LLP Charles J. Piven, P.A. Holzer & Holzer Mark McNair, P.A. Leo W. Desmond Schiffrin & Barroway, LLP Wolf Popper LLP Chitwood & Harley D. In addition, CryoLife is aware of the following suits that may be filed by the following individuals, but CryoLife has not yet been served: Hailey Moulton Timothy C. Talton Andrew T. Swanson, III and/or Andrew T. Swanson, Jr. (father) Benjamin Saile Ramona Pursley Kevin Ryan Wheeler, a minor, and Kimberly Leahew, individually and parent and next friend of Kevin Ryan Wheeler Date Filed: July 2, 2002 Case No. 46834 Circuit Court for Rutherford County, Tennessee E. On June 17, 2002 CryoLife, Inc. received a warning letter from the Food and Drug Administration. 1549728