**Exhibit 4.12**

 

**FOURTH AMENDED AND RESTATED FORBEARANCEAGREEMENT**

 

This Fourth Amended and Restated Forbearance Agreement (the“Agreement”) is made effective the 1st day of February, 2003, and isby and among American Medical Technologies, Inc. a Delaware corporation (the“Borrower”) and Bank One, N. A. (formerly known as Bank One, Michiganand collectively with its predecessors and assignors shall be referred toherein as the “Lender”).

 

W I T N E S S E T H:

 

In consideration of the sum of Ten Dollars ($10.00), the mutualcovenants and agreements contained herein and other valuable consideration, thereceipt and sufficiency of which are hereby acknowledged, the parties agree asfollows:

 

1.                                       Recitations.

 

1.1                                 The Credit Agreement.  On orabout September 21, 2000, the Lender and the Borrower executed a certain Lineof Credit Agreement (the “Credit Agreement”) providing for certain loans madeby Lender to Borrower and evidenced by a Revolving Business Credit Note (the“Note”). Among other documents executed contemporaneously with the CreditAgreement were a Continuing Security Agreement and UCC-1 Financing Statements(collectively, the “Loan Documents”).

 

1.2                                 The First Amendment.  On orabout March 20, 2001, the Lender and Borrower executed that certain letter agreementconstituting an amendment to the Credit Agreement (the “First Amendment”)providing for certain amendments to the Credit Agreement as set forth therein.

 

1.3                                 The Second Amendment.  On or about June 25, 2001, the Lender andBorrower executed that certain letter agreement constituting an amendment tothe Credit Agreement (the “Second Amendment”) providing for certain amendmentsto the Credit Agreement as set forth therein.

 

1.4                                 The Credit CardBalance.  Borrower is furtherindebted to Lender in the approximate amount of $140,134.62 resulting fromcharges made by Borrower utilizing a business charge card line of credit (the“Credit Card Balance”).

 

1.5                                 Payable Status.  All obligations of Borrower are in defaultand are presently due and payable and Borrower has requested that Lender: (a)forbear from taking any actions to collect the amounts due under the LoanDocuments, and (b) agree to the other terms and conditions set forth herein.The Lender is willing to agree to the Borrower’s request on the condition thatthe Borrower fully and faithfully perform its obligations under the LoanDocuments, including but not limited to, the Credit Agreement, as amended.

 

1.6                                 The ForbearanceAgreement.  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

 

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Loan Documents for a period ending onDecember 20, 2001 in reliance upon the covenants,representations, and warranties of Borrower contained in the ForbearanceAgreement.

 

1.7                                 The Amended & Restated Forbearance Agreement.  AtBorrower’s request, Borrower and Lenderentered into that certain Amended and Restated Forbearance Agreement datedDecember 20, 2001 (the “A&R Forbearance Agreement”) whereby the Lenderagreed to forbear from exercising certain of its rights and remedies under theLoan Documents for a period ending on February 18, 2002 in reliance upon the covenants,representations, and warranties of Borrower contained in the A&R Forbearance Agreement.  TheA&R Forbearance Agreementamended and restated the terms and provisions of the ForbearanceAgreement.

 

1.8                                 The Second Amended & Restated ForbearanceAgreement.  At Borrower’s request, Borrower and Lender entered into that certainSecond Amended and Restated Forbearance Agreement dated February 18, 2002 (the“Second A&R Forbearance Agreement”) whereby the Lender agreed to forbearfrom exercising certain of its rights and remedies under the Loan Documents fora period ending on September 15, 2002 in reliance upon the covenants,representations, and warranties of Borrower contained in the Second A&R Forbearance Agreement.  TheSecond A&R Forbearance Agreement amended and restated the terms andprovisions of the A&R Forbearance Agreement.

 

1.9                                 The Third Amended & Restated ForbearanceAgreement.  At Borrower’s request, Borrower and Lender entered into that certainThird Amended and Restated Forbearance Agreement dated October 30, 2002 (the“Third A&R Forbearance Agreement”) whereby the Lender agreed to forbearfrom exercising certain of its rights and remedies under the Loan Documents fora period ending on January 31, 2003 in reliance upon the covenants,representations, and warranties of Borrower contained in the Third A&R Forbearance Agreement.  As partof the consideration for Lender agreeing, at Borrower’s request, to enter intothe Third A&R ForbearanceAgreement, the Borrower granted Lender or a designated subsidiary of Lender aStock Purchase Warrant dated October 30, 2002, for the right to purchase721,510, shares of the Borrower’s common stock pursuant to the terms andconditions as set forth in the Stock Purchase Warrant.  TheThird A&R Forbearance Agreement amended and restated the terms andconditions of the Second A&R Forbearance Agreement.  This Agreement is intended to amend andrestate the terms and provisions of the Third A&R ForbearanceAgreement.

 

1.10                           Borrower’s Request.  Borrower continues to be in defaultin the payment and/or performance of the Note and other Loan Documents.  Borrower acknowledges that the indebtednessevidenced by the Note is due and owing to the Lender without right of setoff,and such indebtedness has not been paid in accordance with the terms of theLoan Documents.  Borrower has requestedthat the Lender forebear from exercising its rights and remedies under the LoanDocuments for a period of time as specified herein in reliance upon thecovenants, representations, and warranties of Borrower and for other good andvaluable consideration.

 

The term “Loan Documents” shall include the Credit Agreement, the Note,the First Amendment, the Second Amendment, the Credit Card Balance, theForbearance Agreement, the A&R Forbearance Agreement, the Second A&RForbearance Agreement, the Third A&R Forbearance Agreement, this Agreementand all guaranties and other writings, documents, instruments, securityagreements contemplated herein or therein, respectively.  The term “Obligations” shall include theNote, the Credit

 

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Card Balance, all obligations as otherwise set forth in any of the LoanDocuments and all other obligations pursuant to which Borrower or any guarantormay owe performance or payment to Lender. The term “Indebtedness” shall include the Note, the Credit Card Balanceand all other indebtedness owing from Borrower or any guarantor to Lender.

 

2.                                       Acknowledgmentof Amounts Due and Maturity Date.  Lender and Borrower acknowledge that as of the beginning of business onFebruary 25, 2003, the outstanding balance in respect of the Indebtedness wasas follows:

 
|                 |   | **Principal** |         | **Accrued  and Unpaid Interest** |   |
|----------------------|--------|---------------|--------------|----------------------------------|--------|
|                 |   |          |         |                             |   |
| Note:                |   | $             | 1,655,656.25 |                             | $      | 9,485.53 |   |
|                 |   |          |         |                             |   |
| Credit Card Balance: |   | $             | 140,134.62   |                             |   |   |
|                      |        |               |              |                                  |        |  |  |

 

Subject to Section 16 hereof,Borrower waives any and all rights to notice of payment default or any otherdefault, protest and notice of protest, dishonor, diligence in collecting andthe bringing of suit against any party, notice of intention to accelerate,notice of acceleration, demand for payment and other notices whatsoeverregarding the Credit Agreement, as amended, the Indebtedness, or any other LoanDocuments, and further waives any claims that any notices previously given areinsufficient for any reason.  Borrowerfurther agrees that the Indebtedness set forth above is presently due andpayable in full to Lender without discount or offset, and any claims ordefenses thereto are waived and released herein.

 

3.                                       NoFurther Advances.  Borrower acknowledgesand agrees that it shall not be entitled to, nor shall Borrower request, anyadditional advances under the Credit Agreement, the Note, or any other LoanDocuments.  Furthermore, Borrower shallnot request nor shall Lender be obligated to issue any further or additionalletters of credit.

 

4.                                       NoWaiver. The execution, delivery andperformance of this Agreement by Lender and the acceptance by Lender ofperformance of Borrower hereunder (a) shall not constitute a waiver or releaseby Lender of any default that may now or hereafter exist under the LoanDocuments, (b) shall not constitute a novation of the Loan Documents as it isthe intent of the parties to modify the Loan Documents as expressly set outherein, and (c) except as expressly provided in this Agreement, shall bewithout prejudice to, and is not a waiver or release of, Lender’s rights at anytime in the future to exercise any and all rights conferred upon Lender by theLoan Documents or otherwise at law or in equity, including but not limited tothe right to accelerate the Indebtedness, if not already accelerated, and toinstitute collection proceedings against Borrower and/or any right against anyother person or entity not a party to this Agreement.  Similarly, the execution, delivery, and performance of thisAgreement by Borrower and the acceptance by Borrower of the performance byLender hereunder shall not, subject to the express provisions of thisAgreement, constitute a waiver or release of any of Borrower’s rights under theLoan Documents; provided, however, that Borrower waives any and all claims nowor hereafter arising from or related to any delay by Lender in exercising anyrights or remedies under the Loan Documents, including, without limitation, anydelay in foreclosing on any collateral securing 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

 

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collection of the Indebtednessagainst Borrower or any guarantor, or exercise any other remedies available toit under the Loan Documents or under applicable law for a period of timecommencing on the date hereof and extending through and including May 31, 2003at 5:00 p.m. (the “Forbearance Period”). Upon termination of the Forbearance Period, or otherwise under theprovisions of this Agreement, or if all amounts due and owing under the CreditAgreement, the Indebtedness or other Loan Documents, are not paid in full on orbefore the expiration of the Forbearance Period, Lender may seek to forecloseupon any collateral and to exercise any other remedies to which Lender may beentitled under the Loan Documents, or applicable law to collect amounts dueunder the Indebtedness, the Credit Agreement or any other Loan Documents.  Borrower agrees that Borrower will notduring the Forbearance Period, initiate any action of any kind against Lenderwith respect to the Loan Documents, exercise any remedy available under theLoan Documents or otherwise, or make or suffer to exist any type of demand uponLender with respect to the Obligations.

 

6.                                       InterestRate.  During the ForbearancePeriod, all Indebtedness 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.

 

7.                                       InterestPayments. Borrower shall continue to make the interest payments required bythe Forbearance Agreement on or before the 15th day of each monthuntil the Indebtedness is paid in full. Such payments shall continue on March 15, 2003, at which time theBorrower shall pay all accrued and unpaid interest due on the Indebtedness.

 

8.                                       Final Payment.  The Borrower shall pay alloutstanding principal and all accrued and unpaid interest on or before the endof the Forbearance Period.

 

9.                                       LoanFee.  Borrower acknowledges andaffirms that a loan fee in the amount of $50,000.00 is due and owing to theLender pursuant to the terms of the Second A&R Forbearance Agreement (the“Loan Fee”).  Borrower shall pay Lenderthe Loan Fee on or before the expiration of the Forbearance Period or upon anevent of default as set forth herein, and such payment shall not be applied tothe payment of the Indebtedness. Notwithstanding the foregoing, if the Borrower pays the Lender the entire outstandingIndebtedness on or before the expiration of the Forbearance Period and providedno event of default has occurred, the Lender agrees to waive the payment of theLoan Fee.

 

10.                                 ForbearanceFee.  Borrower acknowledges andaffirms that a forbearance fee in the aggregate amount of $100,000.00 is dueand owing to the Lender pursuant to the terms of the Third A&R ForbearanceAgreement (the “Forbearance Fee”).  TheBorrower shall pay the Lender the Forbearance Fee on or before the expirationof the Forbearance Period or upon an event of default as set forth herein, andsuch payment shall not be applied to the payment of the Indebtedness.  Notwithstanding the foregoing, if the Borrower pays the Lender the entire outstandingIndebtedness on or before the expiration of the Forbearance Period and providedno event of default has occurred, the Lender agrees to waive the payment of theForbearance Fee.

 

11                                    TangibleNet Worth.   Paragraph 6.3(H) of theCredit Agreement is amended to read as follows:  “Permit its Tangible Net Worth plus Subordinated Debt to be lessthan $2,000,000.00.”

 

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12.                                 BorrowingBase.        Notwithstanding any otherprovision of this Agreement or the Loan Documents, the aggregate principalamount of the Indebtedness outstanding at any one time shall not exceed theBorrowing Base.   Should theIndebtedness exceed the Borrowing Base, Borrower shall immediately prepay theexcess amount to Lender.  “BorrowingBase” means the sum of 75% of Eligible Accounts and 40% of EligibleInventory.  “Eligible Accounts” means anAccount of the Borrower: (i) which arises from a bona fide, outright sale ofinventory or for services performed, or expenses incurred in the normal courseof business; (ii) which is based upon a valid, enforceable and legally bindingorder or contract; (iii) as to which an invoice for payment has been sent tothe account debtor and for which the account debtor is unconditionallyobligated and liable to make payment thereof; (iv) in and to which the rightsof the Borrower are absolute and not subject to any assignment, claim, lien orsecurity interest (except in favor of Lender); (v) except as otherwise agreedby Lender, which is not an intracompany account or an account receivablebetween the Borrower and any affiliate of the Borrower; (vi) which is notevidenced by any note, chattel paper, trade acceptance, draft, check or otherinstrument with respect thereto or in payment thereof; (vii) except asotherwise agreed by Lender, as to which the account Borrower thereof has notdied and is not the subject of dissolution, liquidation, termination ofexistence, insolvency, business failure, receivership, bankruptcy, readjustmentof debt, assignment for the benefit of creditors or similar proceedings; (viii)which has not been outstanding for more than 90 days from date of invoice; (ix)which is not owed by an account debtor not a resident of the United States; (x)which is not an account owed by a debtor from which 20% or more of theaggregate amount owed from such debtor is more than 90 days past due from thedate of invoice; (xi) which is not owed by any governmental entity; (xii) whichis not owed by a contractor; (xiii) which is not an account that is bonded orsecured by a bond; and (xiv) which is not an account otherwise unacceptable toLender.  At any particular date, theEligible Accounts shall be the sum of the unpaid principal balance of all ofthe Eligible Accounts, as defined above. “Eligible Inventory” shall mean that Inventory physically located in theUnited States owned by the Borrower and in which Lender holds a perfected firstpriority security interest that constitutes: (a) finished goods in marketablecondition; and (b) raw materials reasonably necessary to meet the Borrower’sproduction requirements for a period of twelve (12) months.  For purposes hereof, Eligible Inventoryshall be valued at the lower of cost or market value.

 

13.                                 BorrowingBase Certificate and Compliance Statement.   Prior to the 20th day of each and every monthhereafter, the Borrower shall provide to Lender a Borrowing Base Certificateand Compliance Statement in the form attached hereto as Exhibit “A” signed byan officer of Borrower.

 

14.                                 TaxRefunds.  Upon the first to occur ofan event of default as set forth in Section 21 of this Agreement or the terminationof the Forbearance Period, the Borrower shall pay Lender 50% of any federal orstate tax refunds from any governmental entity (the “Refunds”) including, butnot limited to, 50% of the $202,000.00 in Refunds received by Borrower beforethe date of this Agreement.  Any refundpayment received by Lender shall be applied to the payment of the Indebtedness.

 

15.                                 Purchase Agreement.  As acondition for Lender agreeing to enter this Agreement, Borrower agrees that itshall execute a purchase and sale agreement regarding the sale of Borrower onor before April 15, 2003.  If Borrowerfails to execute a purchase and sale agreement by April 15, 2003, thisAgreement shall automatically terminate on such date.

 

16.                                 Compliance with Loan Documents. During the term of this Agreement, Borrowershall fully and faithfully comply with all of the terms of the Loan Documentsincluding the Forbearance

 

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Agreement,the A&R Forbearance Agreement, the Second A&R Forbearance Agreement andthe Third A&R Forbearance Agreement, the terms of which shall remain infull effect unless modified herein. Upon Borrower’s failure to fully and faithfully timely pay Lender any ofthe payments set forth in this Agreement, the term of this Agreement shallimmediately end and terminate without the necessity of notice or demand, andLender shall be entitled to pursue any and all remedies.  Upon the occurrence of Borrower’s failure tofully and faithfully perform any other obligation with respect to the LoanDocuments, the Borrower shall be entitled to such notice and opportunity tocure, if any, as provided in the Loan Documents.

 

17.                                 Patents.  Borrower hereby agrees that it will take anyaction reasonably requested by the Lender to insure the attachment, perfectionand first priority of, and the ability of the Lender to enforce, the Lender’ssecurity interest in all of the Borrower’s patents received, patentapplications or patents that are pending and other intellectual propertyincluding, without limitation, any filings that may need to be made with theUnited States Patent and Trademark Office, any other governmental entity oragency or any other entity or agency of any kind.

 

18.                                 Representations and Warranties. In order to induce Lender to execute,deliver, and perform this Agreement, Borrower warrants and represents to Lenderthat:

 

(a)                                  this Agreement is not being made or entered intowith the actual intent to hinder, delay, or defraud any entity or person;

 

(b)                                 this Agreement is not intended by the parties tobe a novation of the Loan Documents and, except as expressly modified herein,all terms, conditions, rights and obligations as set out in the Loan Documentsare hereby reaffirmed and shall otherwise remain in full force and effect as originallywritten and agreed;

 

(c)                                  no action or proceeding, including, withoutlimitation, a voluntary or involuntary petition for bankruptcy under anychapter of the Federal Bankruptcy Code, has been instituted by or against theBorrower;

 

(d)                                 tothe best of Borrower’s knowledge, and with the sole exception of financialstatements projecting profitability for the periods ending September 30, 2002,and December 31, 2002, all balance sheets, and cash flow statements, and allinformation provided by Borrower to Lender prior to the date hereof, including,without limitation, all financial statements, balance sheets, and cash flowstatements, were, at the date of delivery, and are, as of the date hereof, trueand correct in all material respects. Borrower recognizes and acknowledges that Lender is entering into thisAgreement based in part on the financial information provided to Lender byBorrower and that the truth and correctness of that financial information is amaterial inducement to Lender in entering into this Agreement.  During the term of this Agreement, Borroweragrees 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, orsimilar items furnished to Lender;

 

(e)                                  thisAgreement and the Loan Documents constitute the entire agreement among Lenderand Borrower with respect to this matter;

 

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(f)                                    Borrowerhereby reaffirms to Lender that Lender has a perfected first priority securedinterest in all of Borrower’s patents received, applied for or that are pendingand other intellectual property and that Lender has the ability to enforceLender’s security interest in such patents and other intellectual property; and

 

(g)                                 attachedhereto as Exhibit “B” is a complete list of all of Borrower’s patents that havebeen received, applied for or that are pending and Borrower confirms that noother patents, patent applications or pending patents exist.

 

19.                                 Bankruptcy.   In entering into thisAgreement, Borrower and Lender hereby stipulate, acknowledge and agree thatLender gave up valuable rights and agreed to forbear from exercising legalremedies available to it in exchange for the promises, representations,acknowledgments and warranties of Borrower as contained herein and that Lenderwould not have entered into this Agreement but for such promises,representations, acknowledgments, agreements, and warranties, all of which havebeen accepted by Lender in good faith, the breach of which by Borrower in anyway, at any time, now or in the future, would admittedly and confessedlyconstitute cause for dismissal of any such bankruptcy petition pursuant to 11 U.S.C.§ 1112(b).  As additional considerationfor Lender agreeing to forbear from immediately enforcing its rights andremedies under this Agreement and in the Loan Documents, including but notlimited to the institution of foreclosure or collection proceedings, Borroweragrees that in the event a bankruptcy petition under any Chapter of theBankruptcy Code (11 U.S.C. §101, etseq.) is filed by or againstany Borrower at any time after the execution of this Agreement, Lender shall beentitled to the immediate entry of an order from the appropriate bankruptcycourt granting Lender complete relief from the automatic stay imposed by §362of the Bankruptcy Code (11 U.S.C. §362) to exercise its foreclosure and otherrights, including but not limited to obtaining a foreclosure judgment andforeclosure sale, upon the filing with the appropriate court of a motion forrelief from the automatic stay with a copy of this Agreement attachedthereto.  Borrower specifically agrees(i) that upon filing a motion for relief from the automatic stay, Lender shallbe entitled to relief from the stay without the necessity of an evidentiaryhearing and without the necessity or requirement of the Lender to establish orprove the value of any collateral, the lack of adequate protection of itsinterest in any collateral, or the lack of equity in any collateral; (ii) thatthe lifting of the automatic stay hereunder by the appropriate bankruptcy courtshall be deemed to be “for cause” pursuant to §362(d)(1) of the Bankruptcy Code(11 U.S.C. §362 (d)(1); and (iii) that Borrower will not directly or indirectlyoppose or otherwise defend against Lender’s efforts to gain relief from theautomatic stay. This provision is not intended to preclude Borrower from filingfor protection under any Chapter of the Bankruptcy Code.  The remedies prescribed in this paragraphare not exclusive and shall not limit Lender’s rights under the Loan Documents,this Agreement or under any law.  All ofthe above terms and conditions have been freely bargained for and are allsupported by reasonable and adequate consideration and the provisions hereinare material inducements for Lender entering into this Agreement.

 

20.                                 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

 

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broad andcomprehensive as possible.  However,this release will not cover any intentional torts or acts of gross negligence.

 

21.                                 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 a petition for bankruptcy underany chapter of the Federal Bankruptcy Code or takes advantage of any otherdebtor relief law, or an involuntary petition for bankruptcy under any chapterof the Federal Bankruptcy Code is filed against Borrower, or any other judicialaction is taken with respect to Borrower by any creditor;

 

(b)                                 Lender discovers that any representation orwarranty made herein by Borrower was or is untrue, incorrect or misleading inany material respect;

 

(c)                                  Afterthe date of this Agreement, and except for the financial covenants set forth inSection 6.3 (I) and (J) of the Credit Agreement, Borrower’s breach or defaultin the performance of any covenant or agreement contained in this Agreement orthe Loan Documents;

 

(d)                                 Lenderreceives any draft or request for payment in respect of any letter of credit.

 

(e)                                  Borrower’s failure to comply with any of theterms and conditions of this Agreement.

 

22.                                 Authorization To File Financing Statements. The Borrower hereby irrevocablyauthorizes Lender at any time and from time to time to file in any UniformCommercial Code jurisdiction any financing statements and amendments theretothat: (i) indicate the collateral as that set forth in the Loan Documents, and(ii) contain any other information required by part 5 of Article 9 of theUniform Commercial Code for the sufficiency or filing office acceptance of anyfinancing statement or amendment.  TheBorrower agrees to furnish any of the foregoing information to the Lenderpromptly upon request. The Borrower ratifies its authorization for the Lenderto have filed any like initial financing statements or amendments thereto iffiled prior to the date hereof.  The Lendermay add any supplemental language to any such financing statement as the Lendermay determine to be necessary or helpful in acquiring or preserving rightsagainst third parties.

 

23.                                 Miscellaneous.

 

23.1  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.

 

23.2                           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.

 

23.3                           Choice of Law.  It is the intention of theparties hereto that the laws of the State of Michigan shall govern the validityof this Agreement, construction ofits terms and the interpretation of the rights and duties of the parties.

 

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23.4                           Paragraph Headings. Headings contained in this Agreementare for reference purposes only and shall not affect in any way the meaning orinterpretation of this agreement.

 

23.5                           Authority.  Each party, for itself, itssuccessors and assigns, hereby represents and warrants that it has the fullcapacity and authority to enter into, execute, deliver and perform this Agreement, and that such execution, delivery andperformance does not violate any contractual or other obligation by which it isbound.

 

23.6                           Controlling Agreement.  ThisAgreement shall be construed to govern and control over any inconsistentprovisions that may be contained in the Agreement or any other Loan Documents.

 

23.7                           Expenses.  Borrower agrees to pay allcosts and expenses incurred by Lender in connection with this Agreement,including charges for recording, filing, appraisal and legal fees.

 

THIS AGREEMENT REPRESENTS THEFINAL AGREEMENT AMONG THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF ANDMAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR ORAL OR WRITTEN, CONTEMPORANEOUS,OR SUBSEQUENT ORAL AGREEMENTS AMONG THE PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.

 

IN WITNESS WHEREOF, the parties have executedthis agreement as of the date and year first above written.

 
|   | BORROWER:                                                    |
|--------|--------------------------------------------------------------|
|   |                                                         |
|   | AMERICAN  MEDICAL TECHNOLOGIES, INC.  a Delaware corporation |
|   |                                                         |
|   | By:                                                          | /s/ Roger W.  Dartt |   |
|   |                                                         |
|   |                                                         |
|   | LENDER:                                                      |
|   |                                                         |
|   | BANK ONE, N.A.                                               |
|   |                                                         |
|   | By:                                                          | /s/  Tipton J. Burch |   |

 

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**EXHIBIT“A”**

 

BORROWING BASECERTIFICATE AND COMPLIANCE STATEMENT

 
|   | *BORROWING BASE CALCULATION* |
|--------|------------------------------|

 
| **DATE:**                                                                                                                                                                                                                                                                          |   |                       ,         |                                                                                                                     |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                               |   |                                                                                                                                                                   |                                                                                                                     |
| ***Total Accounts Receivable***                                                                                                                                                                                                                                                    |   | $                                                                                                                                                                      |                      |   |
|                                                                                                                                                                                                                                                                               |   |                                                                                                                                                                   |                                                                                                                     |
| **Less the Following**:                                                                                                                                                                                                                                                            |   |                                                                                                                                                                   |                                                                                                                     |
|                                                                                                                                                                                                                                                                               |   |                                                                                                                                                                   |                                                                                                                     |
| Invoices  over 90 days old                                                                                                                                                                                                                                                         |   | $                                                                                                                                                                      |                      |   |
| Intracompany  Accounts                                                                                                                                                                                                                                                             |   | $                                                                                                                                                                      |                      |   |
| Affiliate  Accounts                                                                                                                                                                                                                                                                |   | $                                                                                                                                                                      |                      |   |
| Foreign Accounts                                                                                                                                                                                                                                                                   |   | $                                                                                                                                                                      |                      |   |
| Receivables  subject to any assignment, claim, lien or security interest (except in favor  of Bank)                                                                                                                                                                                |   | $                                                                                                                                                                      |                      |   |
| Receivables  evidenced by any note, chattel paper, trade acceptance, draft check or other  instrument                                                                                                                                                                              |   | $                                                                                                                                                                      |                      |   |
| Receivables  in which the account debtor thereof has died or is the subject of  dissolution, liquidation, termination of existence, insolvency, business  failure, receivership, bankruptcy, readjustment of debt, assignment for the  benefit of creditors or similar proceedings |   | $                                                                                                                                                                      |                      |   |
| Receivables  which owed by an account debtor from which 20% or more of the aggregate  amount owed from such debtor is more than 90 days past due from the date of  invoice                                                                                                         |   | $                                                                                                                                                                      |                      |   |
| Receivables  owed by a Contractor                                                                                                                                                                                                                                                  |   | $                                                                                                                                                                      |                      |   |
| Receivables  that are bonded or secured by a bond                                                                                                                                                                                                                                  |   | $                                                                                                                                                                      |                      |   |
| Receivables  owed by any type of governmental entity                                                                                                                                                                                                                               |   | $                                                                                                                                                                      |                      |   |
| Other  ineligible accounts as specified by Bank                                                                                                                                                                                                                                    |   | $                                                                                                                                                                      |                      |   |
|                                                                                                                                                                                                                                                                               |   |                                                                                                                                                                   |                                                                                                                     |
| **Total Eligible Accounts Receivable:**                                                                                                                                                                                                                                            |   | $                                                                                                                                                                      |                      |   |
|                                                                                                                                                                                                                                                                               |   |                                                                                                                                                                   |                                                                                                                     |
| Multiplied  by 75% eligibility factor                                                                                                                                                                                                                                              |   | X .75                                                                                                                                                                  |                                                                                                                     |

 

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| ***Receivable Borrowing Base***                                                                                                                                                                                               |   | $            |                      |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------|--------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                                                          |   |         |                                                                                                                     |
| ***Eligible Inventory shall include only  inventory owned by Borrower that is located in the United States and in which  Bank holds a perfected first priority security interest and which is  comprised of the following:*** |   | See footnote | (1)                                                                                                                      |
|                                                                                                                                                                                                                          |   |         |                                                                                                                     |
| Finished  goods in marketable condition                                                                                                                                                                                       |   | $            |                      |   |
| Raw  materials reasonably necessary to meet Borrower’s production requirements for  a 12 month period                                                                                                                    |   | $            |                      |   |
|                                                                                                                                                                                                                          |   |         |                                                                                                                     |
| **Total Eligible Inventory:**                                                                                                                                                                                                 |   | $            |                      |   |
|                                                                                                                                                                                                                          |   |         |                                                                                                                     |
| Multiplied  by 40% eligibility factor                                                                                                                                                                                         |   | X .40        |                                                                                                                     |
|                                                                                                                                                                                                                          |   |         |                                                                                                                     |
| ***Inventory Borrowing Base***                                                                                                                                                                                                |   | $            |                      |   |
|                                                                                                                                                                                                                          |   |         |                                                                                                                     |
| ***Total Borrowing Base***                                                                                                                                                                                                    |   | $            |                      |   |

 

----

(1)                                  Forpurposes hereof, Eligible Inventory shall be valued at the lower of cost ormarket value.

 
| *II.* | *TANGIBLE NET WORTH CALCULATION* |
|-------|----------------------------------|

 
| Tangible Net  Worth                |   | **$**  |                      |   |
|------------------------------------|--------|--------|--------------------------------------------------------------------------------------------------------------------------|--------|
|                               |   |   |                                                                                                                     |
| Plus  Subordinated Debt            |   |   |                                                                                                                     |
|                               |   |   |                                                                                                                     |
| Less Floor                         |   | $      | (2,000,000                                                                                                               | )      |
|                               |   |   |                                                                                                                     |
| **Tangible Net Worth Calculation** |   | $      |                      |   |

 

11

----

 

**III.****                                 COMPLIANCESTATEMENT**

 

I herebycertify that (i) the information set forth in the Borrowing Base Calculationand the Tangible Net Worth Calculation is complete and accurate, (ii) I have noknowledge of any material fact, which would adversely affect the Borrowing BaseCalculation or the Tangible Net Worth Calculation as set forth above, (iii) asof the date of this Borrowing Base Certificate and Compliance Statement, theBorrower is in compliance with all representations, warranties and covenantsset forth in the Loan Documents, including without limitation, the FourthAmended and Restated Forbearance Agreement.

 

 
|   | AMERICAN  MEDICAL TECHNOLOGIES, INC.   a Delaware corporation |
|--------|---------------------------------------------------------------|
|   |                                                          |
|   |                                                          |
|   | By:                                                           |   |   |
|   |                                                          | Name: |   |   |
|   |                                                          | Title: |   |   |
|        |                                                               |  |  |  |  |  |

 

 

ACKNOWLEDGMENT

 
| STATE  OF                        | )           |
|-----------------------------------------------------------------------------------------------------------------------------------------------------|-------------|
|                                                                                                                                                | )  ss. |
| COUNTY  OF                                           | )           |

 

The foregoinginstrument was acknowledged before me on                   ,        by                       , as                  of American Medical Technologies, Inc., a Delaware corporation.

 

 
|                    |                      |   |
|-------------------------|---------------------------|--------|
|                    | Notary Public             |
|                    |                      |
| My  commission expires: | My  commission number is: |
|                    |                      |
|                    |                      |   |   |
| [Seal]                  |                      |
|                         |                           |        |  |  |

 

12

----

 

**EXHIBIT “B”**

 

**LISTOF PATENTS RECEIVED, APPLIED FOR OR THAT ARE PENDING**

 

 
| **Item # on  List** |   | **Patent No.** |   | **Status** |   |
|---------------------|--------|----------------|--------|------------|--------|
| 1                   |   | 4,521,194      |   |       |   |
| 2                   |   | 4,635,897      |   |       |   |
| 3                   |   | 4,708,534      |   |       |   |
| 4                   |   | 4,733,503      |   |       |   |
| 5                   |   | 4,818,230      |   |       |   |
| 6                   |   | 4,893,440      |   |       |   |
| 7                   |   | 4,940,411      |   |       |   |
| 8                   |   | 5,055,048      |   |       |   |
| 9                   |   | 5,122,060      |   |       |   |
| 10                  |   | 5,123,845      |   |       |   |
| 11                  |   | 5,180,304      |   | Abandoned  |   |
| 12                  |   | 5,207,576      |   |       |   |
| 13                  |   | 5,228,852      |   | Abandoned  |   |
| 14                  |   | 5,232,367      |   |       |   |
| 15                  |   | 5,257,935      |   |       |   |
| 16                  |   | 5,275,561      |   |       |   |
| 17                  |   | 5,275,564      |   | Abandoned  |   |
| 18                  |   | 5,310,344      |   |       |   |
| 19                  |   | 5,324,200      |   | Abandoned  |   |
| 20                  |   | 5,330,354      |   |       |   |
| 21                  |   | 5,334,016      |   |       |   |
| 22                  |   | 5,334,019      |   |       |   |
| 23                  |   | 5,342,198      |   |       |   |
| 24                  |   | 5,350,299      |   |       |   |
| 25                  |   | 5,390,204      |   |       |   |
| 26                  |   | 5,507,739      |   | Abandoned  |   |

 

13

----

 
| 27     |   | 5,525,058   |   |                  |   |
|--------|--------|-------------|--------|-----------------------|--------|
| 28     |   | 5,621,745   |   |                  |   |
| 29     |   | 5,746,596   |   |                  |   |
| 30     |   | 5,748,655   |   | Inactive/Client  Drop |   |
|   |   |        |   |                  |   |
| 31     |   | 5,752,829   |   |                  |   |
| 32     |   | 5,759,031   |   | Abandoned             |   |
| 33     |   | 5,832,013   |   | Inactive/Client  Drop |   |
| 34     |   | 6,019,605   |   |                  |   |
| 35     |   | 6,075,714   |   |                  |   |
| 36     |   | 6,309,216B1 |   |                  |   |

 

14

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