**Exhibit 4.13**

 

**SECOND AMENDED ANDRESTATED FORBEARANCE AGREEMENT**

 

                ThisAmended and Restated Forbearance Agreement (the “Agreement”) is made effectivethe 18th day of February, 2002, and is by and among American MedicalTechnologies, Inc. a Delaware corporation (the “Borrower”) and Bank One,Michigan, (the “Lender”).

 

W I T N E S S E TH:

 

                Inconsideration of the sum of Ten Dollars ($10.00), the mutual covenants andagreements contained herein and other valuable consideration, the receipt andsufficiency of which are hereby acknowledged, the parties agree as follows:

 

1.             Recitations.

 

1.1           TheCredit Agreement.  On or about September 21, 2000, the Lenderand the Borrower executed a certain Line of Credit Agreement (the “CreditAgreement”) providing for certain loans made by Lender to Borrower andevidenced by a Revolving Business Credit Note (the “Note”). Among otherdocuments executed contemporaneously with the Credit Agreement were aContinuing Security Agreement and UCC-1 Financing Statements (collectively, the“Loan Documents”).

 

1.2           TheFirst Amendment.  On or about March 20, 2001, the Lender andBorrower executed that certain letter agreement constituting an amendment tothe Credit Agreement (the “First Amendment”) providing for certain amendmentsto the Credit Agreement as set forth therein.

 

1.3           The Second Amendment. On or about June 25, 2001, the Lender and Borrower executed that certainletter agreement constituting an amendment to the Credit Agreement (the “SecondAmendment”) providing for certain amendments to the Credit Agreement as setforth therein.

 

1.4           The Credit Card Balance.  Borrower is further indebted to Lender inthe approximate amount of $100,000.00 resulting from charges made by Borrowerutilizing a business charge card line of credit (the “Credit Card Balance”).

 

1.5           Payable Status.  Except for the Credit Card Balance, allobligations of Borrower are in default and are presently due and payable andBorrower has requested that Lender: (a) forbear from taking any actions tocollect the amounts due under the Loan Documents, and (b) agree to the otherterms and conditions set forth herein. The Lender is willing to agree to theBorrower’s request on the

 

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condition that theBorrower fully and faithfully perform its obligations under the Loan Documents,including but not limited to, the Credit Agreement, as amended.

 

1.6           The Forbearance Agreement.  At Borrower’s request, Borrower and Lender entered into that certainForbearance Agreement dated November 6, 2001 (the “Forbearance Agreement”)whereby the Lender agreed to forbear from exercising certain of its rights andremedies under the Loan Documents for a period ending on December 20, 2001 inreliance upon the covenants, representations, and warranties of Borrowercontained in the Forbearance Agreement.

 

1.7           The Amended &Restated Forbearance Agreement.  At Borrower’s request, Borrower and Lender entered into that certainAmended and Restated Forbearance Agreement dated December 20, 2001 (the “ A&RForbearance Agreement”) whereby the Lender agreed to forbear from exercisingcertain of its rights and remedies under the Loan Documents for a period endingon February 18, 2002 in reliance upon the covenants, representations,and warranties of Borrower contained in the Forbearance Agreement.  ThisAgreement is intended to amend and restate the terms and provisions of theA&R Forbearance Agreement.

 

1.8           Borrower’s Request.  Borrowercontinues to be in default in the payment and/or performance of the Note andother Loan Documents.  Borroweracknowledges that the indebtedness evidenced by the Note is due and owing tothe Lender without right of setoff, and such indebtedness has not been paid inaccordance with the terms of the Loan Documents.  Borrower has requested that the Bank forebear from exercising itsrights and remedies under the Loan Documents for a period of time as specifiedherein in reliance upon the covenants, representations, and warranties ofBorrower and for other good and valuable consideration.

 

 

The term “Loan Documents”shall include the Credit Agreement, the Note, the First Amendment, the SecondAmendment, the Credit Card Balance, the Forbearance Agreement, the A&RForbearance Agreement and all writings, documents, instruments, securityagreements contemplated therein, respectively. The term “Obligations” shall include the Note, the Credit Card Balanceand all other obligations pursuant to which Borrower may owe performance orpayment to Lender.  The term“Indebtedness” shall include the Note, the Credit Card Balance and all otherindebtedness owning from Borrower to Lender.

 

2.             Acknowledgment of Amounts Dueand Maturity Date.   Lender andBorrower acknowledge that as of the beginning of business on February 18, 2002the outstanding balance in respect of the Indebtedness was as follows:

 

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|                 |   | **Principal** |         | **Accrued  and Unpaid Interest** |   |
|----------------------|--------|---------------|--------------|----------------------------------|--------|
| Note:                |   | $             | 1,745,656.25 |                             | $      | 11,031.57 |   |
|                 |   |          |         |                             |   |
| Credit Card Balance: |   | $             | 98,007.55    |                             |   |   |
|                      |        |               |              |                                  |        |  |  |

 

Borrower waives any andall rights to notice of payment default or any other default, protest andnotice of protest, dishonor, diligence in collecting and the bringing of suitagainst any party, notice of intention to accelerate, notice of acceleration,demand for payment and other notices whatsoever regarding the Credit Agreement,as amended, the Indebtedness, or any other Loan Documents, and further waiveany claims that any notices previously given are insufficient for anyreason.  Borrower further agrees thatthe Indebtedness set forth above is presently due and payable in full to Lenderwithout discount or offset, and any claims or defenses thereto are waived andreleased herein.

 

3.             No Further Advances.  Borrower acknowledges and agrees that itshall not be entitled to, nor shall Borrower request, any additional advancesunder the Credit Agreement, the Note, or any other Loan Documents.  Furthermore, Borrower shall not request norshall Lender be obligated to issue any further or additional letters of credit.

 

4.             NoWaiver. The execution, delivery andperformance of this Agreement by Lender and the acceptance by Lender of performance of Borrower hereunder (a) shall notconstitute a waiver or release by Lender of any default that may now orhereafter exist under the Loan Documents, (b) shall not constitute a novationof the Loan Documents as it is the intent of the parties to modify the LoanDocuments as expressly set out herein, and (c) except as expressly provided inthis Agreement, shall be without prejudice to, and is not a waiver or releaseof, Lender’s rights at any time in the future to exercise any and all rightsconferred upon Lender by the Loan Documents or otherwise at law or in equity,including but not limited to the right to accelerate the Indebtedness, if notalready accelerated, and to institute collection proceedings against Borrowerand/or any right against any other person or entity not a party to thisAgreement.  Similarly, the execution,delivery, and performance of this Agreement by Borrower and the acceptance byBorrower of the performance by Lender hereunder shall not, subject to theexpress provisions of this Agreement, constitute a waiver or release of any ofBorrower’s rights under the Loan Documents; provided, however, that Borrowerwaives any and all claims now or hereafter arising from or related to any delayby Lender in exercising any rights or remedies under the Loan Documents,including, without limitation, any delay in foreclosing on any collateralsecuring the Indebtedness.

 

5.             Forbearance.So long as this Agreement is not terminated as provided herein, the Lenderagrees not to foreclose or attempt to foreclose any collateral securing theIndebtedness, institute suit for collection of the Indebtedness againstBorrower, or exercise any other remedies available to it under the LoanDocuments or under applicable law for a period of time commencing on the datehereof and extending through and including September 15, 2002 at 5:00 p.m. (the“Forbearance Period”).  Upon terminationof the Forbearance Period, or otherwise under the provisions of this Agreement,or if all amounts due and owing under the Credit Agreement, the

 

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Indebtedness orother Loan Documents are not paid in full on or before the expiration of theForbearance Period, Lender may seek to foreclose upon any collateral and toexercise any other remedies to which Lender may be entitled under the LoanDocuments, or applicable law to collect amounts due under the Indebtedness, theCredit Agreement or any other Loan Documents. Borrower agrees that Borrower will not during the Forbearance Period,initiate any action of any kind against Lender with respect to the LoanDocuments, exercise any remedy available under the Loan Documents or otherwise,or make or suffer to exist any type of demand upon Lender with respect to theObligations.

 

6.             Borrower’sManagement.  Borrower shall continueto comply with the requirements for a Crisis Manager as set forth in Paragraph6 of the Forbearance Agreement.

 

7.             Interest Rate.  During the Forbearance Period, allIndebtedness owed by Borrower to Lender under the Loan Documents shall continue to bear interest at the per annumrate equal to the sum of the Prime Rate plus four percent (4.0%).  The Prime Rate shall be that variable perannum rate announced, from time to time, by the Lender as its Prime Rate.

 

8.             Interest Payments. Borrowershall continue to make the interest payments required by the ForbearanceAgreement.  Such payments shall begin onApril 15, 2002 at which time the Borrower shall pay all accrued and unpaidinterest due on the Indebtedness.  Allaccrued and unpaid interest thereafter shall be paid on or before the 15thday of each month thereafter until the Indebtedness is paid in full.

 

9.             PrincipalPayments.  During the ForbearancePeriod, the Borrower shall make the following principal payments:

 
| April 15, 2002     |   | $      | 30,000.00                |
|--------------------|--------|--------|--------------------------|
| May 15, 2002       |   |   | 30,000.00                |
| June 15, 2002      |   |   | 30,000.00                |
| July 15, 2002      |   |   | 40,000.00                |
| August 15, 2002    |   |   | 40,000.00                |
| September 15, 2002 |   |   | All  remaining principal |

 

10.           Loan Fees.  Simultaneously with the execution of thisAgreement, Borrower shall pay to Lender a non-refundable loan fee to Lender inthe sum of Twenty Five Thousand and no\100s dollars ($25,000.00) which loan feeshall be earned when paid.  In the eventthe indebtedness is not paid in full on or before the expiration of theForbearance Period, in addition to all other Indebtedness, the Borrower shallpay a non-refundable loan fee to Lender in the sum of Fifty Thousand andno\100s dollars ($50,000.00) which loan fee shall be earned when paid.

 

11.           Tangible Net Worth.  Paragraph 6.3(H) of the Credit Agreement isamended to read as follows:  “Permit itsTangible Net Worth plus Subordinated Debt to

 

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be less than$4,500,000.00.”

 

12.           Junior Liens.    Notwithstanding the terms of the LoanDocuments, the Borrower may grant a lien on its Accounts and Inventory so longas: (a) such lien is second in priority and junior to that of the Lender; (b)no later than the time that such lien is granted, Borrower pays to Lender thesum of One Hundred Thousand and no\100s Dollars ($100,000.00); and (c) theholder of any such junior lien executes a subordination agreement in favor of Lenderprior to such lien being granted that is acceptable in form to Lender and thatprovides, at a minimum, that no principal payments shall be made to the holderof the junior lien until the Indebtedness is paid in full.  Until the Indebtedness is paid in full,Borrower shall make no such principal payments to any junior lien holder.

 

13.           Borrowing Base.  Notwithstanding any other provision of thisAgreement or the Loan Documents, the aggregate principal amount of theIndebtedness outstanding at any one time shall not exceed the BorrowingBase.   Should the Indebtedness exceedthe Borrowing Base, Borrower shall immediately prepay the excess amount toLender.  “Borrowing Base” means the sumof 75% of Eligible Accounts and 30% of Eligible Inventory.  “Eligible Accounts” means an Account of theBorrower: (i) which arises from a bona fide, outright sale of inventory or forservices performed, or expenses incurred in the normal course of business; (ii)which is based upon a valid, enforceable and legally binding order or contract;(iii) as to which an invoice for payment has been sent to the account debtorand for which the account debtor is unconditionally obligated and liable tomake payment thereof; (iv) in and to which the rights of the Borrower areabsolute and not subject to any assignment, claim, lien or security interest(except in favor of Lender); (v) except as otherwise agreed by Lender, which isnot an intracompany account or an account receivable between the Borrower andany affiliate of the Borrower; (vi) which is not evidenced by any note, chattelpaper, trade acceptance, draft, check or other instrument with respect theretoor in payment thereof; (vii) except as otherwise agreed by Lender, as to whichthe account Borrower thereof has not died and is not the subject ofdissolution, liquidation, termination of existence, insolvency, businessfailure, receivership, bankruptcy, readjustment of debt, assignment for thebenefit of creditors or similar proceedings; (viii) which has not beenoutstanding for more than 90 days from date of invoice; (ix) which is not owedby an account debtor not a resident of the United States; (x) which is not anaccount owed by a debtor from which 20% or more of the aggregate amount owedfrom such debtor is more than 90 days past due from the date of invoice; (xi)which is not owed by any governmental entity; (xii) which is not owed by acontractor; (xiii) which is not an account that is bonded or secured by a bond;and (ixv) which is not an account otherwise unacceptable to Lender.  At any particular date, the EligibleAccounts shall be the sum of the unpaid principal balance of all of theEligible Accounts, as defined above; provided, however, that Accounts from anyone account debtor shall not exceed 20% of the Eligible Accounts, unlessotherwise approved by Lender.  “EligibleInventory” shall mean that Inventory physically located in the United Statesowned by the Borrower and in which Lender holds a perfected first prioritysecurity interest that constitutes: (a) finished goods in marketable condition;and (b) raw materials reasonably necessary to

 

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meet theBorrower’s production requirements for a period of six (6) months.  For purposes hereof, Eligible Inventoryshall be valued at the lower of cost or market value.

 

14.           Borrowing Base Certificate andCompliance Statement.   Prior to the20th day of each and every month hereafter, the Borrower shallprovide to Lender a Borrowing Base Certificate and Compliance Statement in a formacceptable to Lender and signed by an officer of Borrower.

 

15.             Tax Refunds.  In addition to the other payments requiredherein, should the Borrower receive any federal or state tax refunds from anygovernmental entity, it shall pay 75% of any such refunds to Lender forapplication to the Indebtedness.

 

16.           Compliancewith Loan Documents.  During theterm of this Agreement, Borrower shall fully and faithfully comply with all ofthe terms of the Loan Documents including the Forbearance Agreement, the termsof which shall remain in full effect unless modified herein.  Upon Borrower’s failure to fully andfaithfully timely pay Lender any of the payments set forth in this Agreement,the term of this Agreement shall immediately end and terminate without thenecessity of notice or demand, and Lender shall be entitled to pursue any andall remedies.  Upon the occurrence ofBorrower’s failure to fully and faithfully perform any other obligation withrespect to the Loan Documents or, they shall be entitled to such notice andopportunity to cure, if any, as provided in the Loan Documents.

 

17.           Representations and Warranties. Inorder to induce Lender to execute, deliver, and perform this Agreement,Borrower warrants and represents to Lender that:

 
| (a)    |   | this  Agreement is not being made or entered into with the actual intent to hinder,  delay, or defraud any entity or person;                                                                                                                                                                                                                                                                                                                                                                                      |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| (b)    |   | this  Agreement is not intended by the parties to be a novation of the Loan  Documents and, except as expressly modified herein, all terms, conditions,  rights and obligations as set out in the Loan Documents are hereby reaffirmed  and shall otherwise remain in full force and effect as originally written and  agreed;                                                                                                                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| (c)    |   | no  action or proceeding, including, without limitation, a voluntary or  involuntary petition for bankruptcy under any chapter of the Federal  Bankruptcy Code, has been instituted by or against any Borrower;                                                                                                                                                                                                                                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| (d)    |   | to the best of Borrower’s knowledge, and with the sole exception of  financial statements projecting profitability for the period ending December  31, 2001, all balance sheets, and cash flow statements, and all information  provided by Borrower to Lender prior to the date hereof, including, without  limitation, all financial statements, balance sheets, and cash flow  statements, was, at the date of delivery, and is, as of the date hereof, true  and correct in all respects.  Borrower |

 

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|   |   | recognizes and acknowledges that Lender is entering into this  Agreement based in part on the financial information provided to Lender by  each of them and that the truth and correctness of that financial information  is a material inducement to Lender in entering into this Agreement.  During the term of this Agreement,  Borrower agrees to advise Lender promptly in writing of any and all new  information, facts, or occurrences that would in any way materially  supplement, contradict, or affect any financial statements, balance sheets,  cash flow statements, or similar items furnished to Lender. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| (e)    |   | this Agreement and the Loan Documents constitute the entire agreement  among Lender and Borrower with respect to this matter.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |

 

18.           Bankruptcy.   In entering into this Agreement, Borrowerand Lender hereby stipulate, acknowledge and agree that Lender gave up valuablerights and agreed to forbear from exercising legal remedies available to it inexchange for the promises, representations, acknowledgments and warranties ofBorrower as contained herein and that Lender would not have entered into thisAgreement but for such promises, representations, acknowledgments, agreements,and warranties, all of which have been accepted by Lender in good faith, thebreach of which by Borrower in any way, at any time, now or in the future,would admittedly and confessedly constitute cause for dismissal of any suchbankruptcy petition pursuant to 11 U.S.C. § 1112(b).  As additional consideration for Lender agreeing to forbear fromimmediately enforcing its rights and remedies under this Agreement and in theLoan Documents, including but not limited to the institution of foreclosure orcollection proceedings, Borrower agrees that in the event a bankruptcy petitionunder any Chapter of the Bankruptcy Code (11 U.S.C. §101, etseq.)is filed by or against any Borrower at any time after the execution of thisAgreement, Lender shall be entitled to the immediate entry of an order from theappropriate bankruptcy court granting Lender complete relief from the automaticstay imposed by §362 of the bankruptcy Code (11 U.S.C. §362) to exercise itsforeclosure and other rights, including but not limited to obtaining aforeclosure judgment and foreclosure sale, upon the filing with the appropriatecourt of a motion for relief from the automatic stay with a copy of thisAgreement attached thereto.  Borrowerspecifically agrees (i) that upon filing a motion for relief from the automaticstay, Lender shall be entitled to relief from the stay without the necessity ofan evidentiary hearing and without the necessity or requirement of the Lenderto establish or prove the value of any collateral, the lack of adequateprotection of its interest in any collateral, or the lack of equity in anycollateral; (ii) that the lifting of the automatic stay hereunder by theappropriate bankruptcy court shall be deemed to be “for cause” pursuant to§362(d)(1) of the bankruptcy Code (11 U.S.C. §362 (d)(1); and (iii) thatBorrower will not directly or indirectly oppose or otherwise defend againstLender’s efforts to gain relief from the automatic stay. This provision is notintended to preclude Borrower from filing for protection under any Chapter ofthe Bankruptcy Code.  The remediesprescribed in this paragraph are not exclusive and shall not limit Lender’srights under the Loan Documents, this Agreement or under any law.  All of the above terms and conditions havebeen freely bargained for and are all supported by reasonable and adequateconsideration and the provisions herein are material inducements for Lender enteringinto

 

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this Agreement.

 

19.           Release**.**  Borrower hereby remises, releases, andforever discharges Lender, its successors and assigns, its officers, directors,employees, agents and attorneys (collectively, “Released Parties”) of and fromall actions, causes of action, suits, proceedings, debts, contracts, claims,damages, liability and demands whatsoever, known or unknown, in law or equity,which Borrower ever had or now has, by reason of any matter, cause, or thingwhatsoever arising from the actions or inactions of the Released Parties priorto the date hereof including any matter relating to the Agreement, the LoanDocuments (collectively, “Released Matters”); and Borrower covenants not to sueany of the Released Parties with respect to the Released Matters.  The release and covenant not to sue setforth in this Section are intended by the parties to be as broad andcomprehensive as possible.  However,this release will not cover any intentional torts or acts of gross negligence.

 

20.           Default.  Lender shall be entitled to pursue each andevery remedy hereunder and under the Loan Documents, at Lender’s sole option,upon the occurrence of any of the following:

 

(a)                                       Borrower files apetition for bankruptcy under any chapter of the Federal Bankruptcy Code ortakes advantage of any other debtor relief law, or an involuntary petition forbankruptcy under any chapter of the Federal Bankruptcy Code is filed againstBorrower, or any other judicial action is taken with respect to Borrower by anycreditor;

 

(b)                                      Lender discoversthat any representation or warranty made herein by Borrower was or is untrue,incorrect or misleading in any material respect;

 

(c)                                       After the date of this Agreement, andexcept for financial covenants relating to the Borrower’s profitability for theperiods ending December 31, 2001 and March 30, 2002, Borrower’s breach ordefault in the performance of any covenant or agreement contained in thisAgreement or the Loan Documents;

 

(d)                                      Lender receives any draft or request forpayment in respect of any letter of credit.

 

21.           Miscellaneous.

 

                                                                21.1  Successors and Assigns. All of the grants, covenants,terms, conditions and agreements hereof shall be binding upon and inure to thebenefit of all of the assigns and successors in interest of the parties hereto.

 

                                                                21.2         Modification. Neither this Agreement nor any provision hereof may be changed,altered, waived, amended, or discharged orally, but only by an instrumentreduced to writing, signed by all parties hereto.

 

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                                                                21.3         Choice of Law. It is the intention of the parties hereto that the laws of the State ofMichigan shall govern the validity of this Agreement,construction of its terms and the interpretation of the rights and duties of theparties.

 

                                                                21.4.        Paragraph Headings. Headings contained in this Agreement are forreference purposes only and shall not affect in any way the meaning orinterpretation of this agreement.

 

                                                                21.5.        Authority. Each party, for itself, its successors and assigns, hereby representsand warrants that it has the full capacity and authority to enter into,execute, deliver and perform this Agreement, andthat such execution, delivery and performance does not violate any contractualor other obligation by which it is bound.

 

                                                                21.6.        Controlling Agreement.  This Agreement shall be construed to govern and control over anyinconsistent provisions that may be contained in the Agreement or any otherLoan Documents.

 

**THIS AGREEMENTREPRESENTS THE FINAL AGREEMENT AMONG THE PARTIES WITH RESPECT TO THE SUBJECTMATTER HEREOF AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR ORAL OR WRITTEN,CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS AMONG THE PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONGTHE PARTIES.**

 

 

                IN WITNESS WHEREOF, the partieshave executed this agreement as of the date and year first above written.
|   |   |                                                        |
|--------|--------|-------------------------------------------------------------|
|   |   | BORROWER:                                                   |
|   |   |                                                        |
|   |   | AMERICAN MEDICAL  TECHNOLOGIES, INC. a Delaware corporation |
|   |   |                                                        |   |   |   |   |
|   |   |                                                        |   |   |   |   |
|   |   |                                                        |   |   |   |   |
|   |   | By:                                                         | /s/ Benjamin J. Gallant |
|        |        |                                                             |  |  |  |  |  |

 

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|   |   | LENDER:            |
|--------|--------|--------------------|
|   |   |               |
|   |   | BANK ONE, MICHIGAN |
|   |   |               |   |   |   |   |
|   |   |               |   |   |   |   |
|   |   |               |   |   |   |   |
|   |   | By:                | /s/ Tipton Burch |

 

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