Document:

Koss Exhibit 10.16 Third Amendment to Credit Agreement

AMENDMENT NO. 3 TO CREDIT AGREEMENT
THIS AMENDMENT NO. 3 TO CREDIT AGREEMENT (this “Amendment”), entered into as of July 23, 2014, is by and between Koss Corporation, a Delaware corporation (“Borrower”), and JPMorgan Chase Bank, N.A. (“Lender”) under the Credit Agreement defined below.
W I T N E S S E T H:
WHEREAS, Borrower and Lender entered into that certain Credit Agreement dated as of May 12, 2010 (as amended to date, the “Credit Agreement”), pursuant to which Lender agreed to extend credit to Borrower upon the terms and subject to the conditions set forth therein; and
WHEREAS, Borrower has requested that Lender enter into this Amendment for the purpose of making certain modifications and amendments to the Credit Agreement as described herein, and Lender is willing to agree to such modifications, all on the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the terms and conditions contained herein, the parties hereto hereby agree as follows:
1.Definitions.  All capitalized terms used and not otherwise defined herein shall have the meanings given to such terms by the Credit Agreement as amended hereby.
2.    Amendments.  Upon satisfaction of the conditions set forth in Section 3 below, the Credit Agreement shall be amended as follows:
		
	a.
	All references to the Credit Agreement in the Credit Agreement or any of the Loan Documents shall refer to the Credit Agreement as amended hereby.  

		
	b.
	Section 1.01 (Defined Terms) shall be amended as follows:

i.    The final sentence of the definition of “Applicable Rate” set forth therein shall be revised follows:
For purposes of the foregoing, (a) the Applicable Rate shall be determined as of the end of each fiscal quarter of Borrower based upon Borrower’s annual or quarterly consolidated financial statements delivered pursuant to Section 5.01 and (b) each change in the Applicable Rate resulting from a change in the Leverage Ratio shall be effective during the period commencing on and including the date of delivery to Lender of such consolidated financial statements indicating such change and ending on the date immediately preceding the effective date of the next such change, provided that the Leverage Ratio shall be deemed to be in Category 4 (a) at the option of Lender if Borrower fails to deliver the annual or quarterly consolidated 

financial statements required to be delivered by it pursuant to Section 5.01, during the period from the expiration of the time for delivery thereof until such consolidated financial statements are delivered, and (b) automatically for any period during which the denominator of the Leverage Ratio is less than $0.
ii.    The definition of “Current Ratio” shall be deleted in its entirety.
iii.    The definition of “Revolving Commitment” set forth therein shall be revised to read as follows:
“Revolving Commitment” means the commitment of Lender to make Revolving Loans and issue Letters of Credit, as such commitment may be reduced from time to time pursuant to Section 2.08.  Effective as of the Third Amendment Effective Date, the amount of Lender’s Revolving Commitment is $5,000,000.
iv.    A new definition shall be added to Section 1.01 in appropriate alphabetical order as follows:
“Third Amendment Effective Date” means the date on which the conditions to effectiveness of the Amendment No. 3 to Credit Agreement dated as of July [__], 2014 are satisfied.
		
	c.
	Section 5.01(b) shall be amended in its entirety to read as follows:

(b)    within 30 days after the end of each calendar month, its consolidated balance sheet and related statements of operations, stockholders’ equity and cash flows as of the end of and for such calendar month and the then elapsed portion of the fiscal year, setting forth in each case in comparative form the figures for the corresponding period or periods of (or, in the case of the balance sheet, as of the end of) the previous fiscal year, all certified by one of its Financial Officers as presenting fairly in all material respects the financial condition and results of operations of Borrower and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes;
		
	d.
	Section 5.01(e) shall be amended in its entirety to read as follows:

(e)    as soon as available but in any event within 30 days of the end of each calendar month, and at such other times as may be requested by Lender, as of the period then ended, a Borrowing Base Certificate and supporting information in connection therewith, together with any additional reports with respect to the Borrowing Base as Lender may reasonably request;

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	e.
	Section 6.12(a) shall be amended in its entirety to read as follows:

(a)    Minimum Cumulative EBITDA.  Borrower will not permit its EBITDA to be at any time less than the applicable cumulative monthly amount: (a) for the fiscal quarter ending September 30, 2104, ($193,000) (b) for the period of two fiscal quarters ending December 31, 2014, $377,000, (c) for the period of three fiscal quarters ending March 31, 2015, $438,000 and (d) for the period of four fiscal quarters ending June 30, 2015, $567,000.
f.    Section 6.12(b) shall be amended by deleting the dollar amount “8,000,000” and replacing it with the dollar amount “13,500,000”.
		
	g.
	Section 6.12(c) shall be amended in its entirety to read as follows:

(c)    Reserved.
		
	h.
	Exhibit A shall be replaced by Exhibit A attached hereto.

3.    Conditions:  Notwithstanding the foregoing, this Amendment shall not become effective unless and until Lender receives:
a.    a fully-executed copy of this Amendment; 
b.    a fully-executed copy of an Assignment of Life Insurance Policy as Collateral;
c.    a certificate of the secretary of Borrower, certifying as to incumbency, organizational documents and authorization of this amendment; and
d.    such other certificates or documents as Lender or its counsel may reasonably request.
4.    Representations and Warranties.  Borrower repeats and reaffirms the representations and warranties set forth in Article III of the Credit Agreement as though made on and as of the date hereof, except for representations or warranties that are made as of a particular date.  Borrower also represents and warrants that the execution, delivery and performance of this Amendment, and the documents required herein, are within the corporate powers of Borrower, have been duly authorized by all necessary corporate action and do not and will not (i) require any consent or approval of the shareholders of Borrower; (ii) violate any provision of the articles of incorporation or by-laws of Borrower or of any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award presently in effect having applicability to Borrower or any subsidiary of Borrower; (iii) require the consent or approval of, or filing a registration with, any governmental body, agency or authority, other than routine filings with the U.S. Securities and Exchange Commission; or (iv) result in any breach of or constitute a default under, or result in the imposition of any lien, charge or encumbrance upon any property of Borrower or any subsidiary of Borrower pursuant to, any indenture or other agreement or instrument under which Borrower or any subsidiary of Borrower is a party or by which it or its properties may be bound or affected.  This 

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Amendment constitutes the legal, valid and binding obligation of Borrower enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy or similar laws affecting the enforceability of creditors’ rights generally.
5.    Obligations Enforceable, Etc.  Borrower acknowledges and agrees that its obligations under the Credit Agreement are not subject to any offset, defense or counterclaim assertable by Borrower and that the Credit Agreement and the Loan Documents are valid, binding and fully enforceable according to their respective terms.  Except as expressly provided above, the Credit Agreement and the Loan Documents shall remain in full force and effect, and this Amendment shall not release, discharge or satisfy any present or future debts, obligations or liabilities to Lender of Borrower or of any debtor, guarantor or other person or entity liable for payment or performance of any of such debts, obligations or liabilities of Borrower, or any security interest, lien or other collateral or security for any of such debts, obligations or liabilities of Borrower or such debtors, guarantors, or other persons or entities, or waive any default, and Lender expressly reserves all of its rights and remedies with respect to Borrower and all such debtors, guarantors or other persons or entities, and all such security interests, liens and other collateral and security.  This is an amendment and not a novation.  Without limiting the generality of the foregoing, all present and future debts, obligations and liabilities of Borrower under the Credit Agreement, as amended, are and shall continue to be secured by the Security Agreement and any other Collateral Documents.  
6.    Fees and Expenses.  As contemplated by Section 8.03(a) of the Credit Agreement, Borrower shall be responsible for the payment of all fees and out-of-pocket disbursements incurred by Lender in connection with the preparation, execution and delivery of this Amendment.  Borrower further acknowledges and agrees that, pursuant to and on the terms set forth in such Section 8.03(a), Borrower is and shall be responsible for the payment of other fees, expenses, costs and charges arising under or relating to the Credit Agreement, as amended hereby, and the Loan Documents, as set forth in such Section 8.03(a).
7.    Entire Agreement.  This Amendment and the other documents referred to herein contain the entire agreement between Lender and Borrower with respect to the subject matter hereof, superseding all previous communications and negotiations, and no representation, undertaking, promise or condition concerning the subject matter hereof shall be binding upon Lender unless clearly expressed in this Agreement or in the other documents referred to herein.
8.    Miscellaneous.  The provisions of this Amendment shall inure to the benefit of any holder of any Obligations, and shall inure to the benefit of and be binding upon any successor to any of the parties hereto.  All agreements, representations and warranties made herein shall survive the execution of this Amendment and the making of the loans under the Credit Agreement, as so amended.  This Amendment shall be governed by and construed in accordance with the internal laws of the State of Wisconsin.  This Amendment may be signed in any number of counterparts with the same effect as if the signatures thereto and hereto were upon the same instrument.  This Amendment is solely for the benefit of the parties hereto and their permitted successors and assigns.  No other person or entity shall have any rights under, or because of the existence of, this Amendment.

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IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and year first above written.

KOSS CORPORATION

By: /s/ David Smith_____________        
Name:  David Smith
Title:    Executive Vice President and Chief                Financial Officer

JPMORGAN CHASE BANK, N.A.

By: /s/Glenn M. Margraff__________________
Name:  Glenn M. Margraff
Title:    Authorized Signatory

[Signature Page to Amendment No. 3 to Credit Agreement]

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EXECUTION VERSION

 

FORBEARANCE AGREEMENT

FORBEARANCE AGREEMENT dated as of August 25, 2014 (this "Forbearance") with respect to that certain Credit Agreement dated as of May 12, 2014 (as amended, supplemented or otherwise modified, the "Credit Agreement"), by and among PhotoMedex, Inc., as borrower (the "Borrower"), the Loan Parties from time to time party thereto, the Lenders from time to time party thereto, and JPMorgan Chase Bank, N.A., as administrative agent (the "Administrative Agent"), among others.

W I T N E S S E T H :

WHEREAS, pursuant to the Credit Agreement, the Lenders have made Loans and other extensions of credit to the Borrower which remain outstanding;

WHEREAS, one or more Events of Default have occurred and are continuing;

WHEREAS, notwithstanding the existence of such Events of Default, the Borrower has requested that the Administrative Agent and the Lenders forbear from taking certain remedial actions under the Credit Agreement and the other Loan Documents; and

WHEREAS, the Administrative Agent and the Lenders are willing to forbear from taking certain remedial actions under the Credit Agreement and the other Loan Documents with respect to such Events of Default, but only on the terms and conditions set forth herein;

NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:

ARTICLE I

DEFINITIONS

Section 1.1                            Defined Terms.  Unless otherwise defined herein, capitalized terms used herein have the meanings assigned in the Credit Agreement and the other Loan Documents, and the following terms shall have the following meanings:

 

"Cash Flow Forecast" is defined in Section 4.1 (b).

"Cash on Hand" shall mean, as of any Business Day, the greater of (a) the average aggregate daily book balance of all monies on deposit in all accounts maintained at all financial institutions by the Loan Parties and their Subsidiaries during the five (5) prior Business Days, and (b) the aggregate daily book balance of all monies on deposit in all accounts maintained at all financial institutions by the Loan Parties and their Subsidiaries on such Business Day.

"Collateral Certificate" shall mean a fully completed and executed collateral certificate in the form attached as Annex A hereto, certified by the Borrower as being true and correct.

"Consultant" shall mean a financial advisor retained by the Borrower to assist with the financial restructuring of the businesses of the Borrower and its Subsidiaries, whose identity and scope of engagement shall be at all times acceptable to the Administrative Agent and the Required Lenders.

"Effective Date" shall mean the date hereof, but only upon satisfaction or waiver of the conditions precedent specified in Article V of this Forbearance.

"Expiration Date" shall mean October 31, 2014.

"Forbearance Fee" is defined in Section 7.2 (b).

"Forbearance Period" shall mean the period beginning on the Effective Date and ending on the earlier of (a) the Expiration Date or (b) the Termination Date.

"Israeli Proceeds" shall mean not less than $8,000,000 repatriated from Radiancy (Israel) Ltd.

"Specified Events of Default" shall mean (i) the Borrower's failure to maintain a Leverage Ratio for any fiscal quarter ending on or prior to June 30, 2014, of less than 2.50 to 1.00 in accordance with Section 6.11(a) of the Credit Agreement and (ii) the Borrower's failure to maintain a Fixed Charge Coverage Ratio for the trailing 12 months ending on any date on or prior to June 30, 2014, of more than 1.25 to 1.00 in accordance with Section 6.11(b) of the Credit Agreement.

"Termination Date" shall mean the date on which any event identified in Article III of this Forbearance shall occur.

ARTICLE II

FORBEARANCE

Section 2.1                            Forbearance.  (a)   Subject to the terms and conditions hereof, the Administrative Agent and the Required Lenders hereby agree to forbear, during the Forbearance Period, from the exercise of any and all rights or remedies they may have with respect to, and only with respect to, the Loan Parties under the Credit Agreement, the other Loan Documents and applicable law, solely in respect of the Specified Events of Default.

(b)  For the avoidance of doubt, the agreements of the Administrative Agent and the Required Lenders in this Article II shall not apply to any Defaults or Events of Default other than the Specified Events of Default.  The Borrower further acknowledges and agrees (i) that it shall not be permitted to request any Borrowings or other extensions of credit so long as any Default or Event of Default (including the Specified Events of Default) shall continue and (ii) interest shall accrue pursuant to Section 2.11(c) of the Credit Agreement from and after the Effective Date so long as any Default or Event of Default (including the Specified Events of Default) shall continue.

ARTICLE III

EVENTS OF TERMINATION

Upon the occurrence of any of the following events:

(a)            any Loan Party shall default in the observance of any agreement contained in this Forbearance; or

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(b)            the occurrence of a Default or Event of Default (other than a Specified Event of Default);

then, and in any such event, the provisions of Article II of this Forbearance shall immediately and automatically terminate and thereafter such Article shall have no force or effect.

ARTICLE IV

AGREEMENTS

Section 4.1                           Reporting.  (a)  The Borrower shall furnish, or cause to be furnished, to the Administrative Agent on behalf of the Lenders, as soon as practicable, but in no event later than August 31, 2014, the management's internal financial statements, which shall have been reviewed by the Consultant (and incorporate the reasonable comments of the Consultant) and shall include its consolidated balance sheet and related statements of operations, stockholders' equity and cash flows as of the end of and for the calendar month of July 2014 and the then elapsed portion of such fiscal year, setting forth in each case in comparative form the figures for (i) such period as previously forecasted by the Borrower and (ii) the corresponding period of (or, in the case of the balance sheet, as of the end of) the previous fiscal year.  The Borrower shall consult with, and incorporate the reasonable comments of, the Consultant in connection with the preparation of such financial statements.

(b)  Beginning September 5, 2014, the Borrower shall furnish, or cause to be furnished, to the Administrative Agent on behalf of the Lenders, on Thursday of each week, a thirteen week rolling cash flow forecast which shall detail all sources and uses of cash on a weekly basis and shall report any variances from the prior report, and which, to the extent necessary, shall be reforecast in its entirety as of the end of each month (including a variance analysis with respect to such reforecast).  Each thirteen week rolling cash flow forecast shall be in form and substance satisfactory to the Administrative Agent and the Required Lenders (a "Cash Flow Forecast").

(c)  Within thirty (30) days after the end of each calendar month, the Borrower shall furnish, or cause to be furnished, to the Administrative Agent on behalf of the Lenders the management's internal financial statements, which shall have been reviewed by the Consultant (and incorporate the reasonable comments of the Consultant) and shall include its consolidated balance sheet and related statements of operations, stockholders' equity and cash flows as of the end of and for such calendar month and the then elapsed portion of such fiscal year, setting forth in each case in comparative form the figures for (i) such period or periods as previously forecasted by the Borrower and (ii) the corresponding period or periods of (or, in the case of the balance sheet, as of the end of) the previous fiscal year.

(d)  Within thirty (30) days after the end of each calendar month, the Borrower shall furnish, or cause to be furnished, to the Administrative Agent and each Lender a status report on all actions, suits or proceedings by or before any arbitrator or Governmental Authority pending against or, to the knowledge of any Loan Party, threatened against or affecting any Loan Party or any Subsidiary, including, without limitation, all actions, suits or proceedings pending before the Israel District Court for Tel Aviv and the U.S. District Court for the Eastern District of Pennsylvania.  Each status report shall be in form and substance satisfactory to the Administrative Agent and the Required Lenders.

Section 4.2                            Collateral.  The Borrower shall, on or before September 12, 2014, deliver to the Administrative Agent and the Lenders a Collateral Certificate.

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Section 4.3                            Retention of Consultant.  (a)  The Borrower shall have retained the Consultant and delivered the engagement letter with respect thereto to the Administrative Agent and the Lenders and shall continue the retention of the Consultant at all times during the Forbearance Period.  The Borrower agrees that the Administrative Agent and the Lenders shall have continuous, direct access to the Consultant and shall promptly receive all non-privileged reports and other work product prepared by Consultant for the Borrower and/or its Subsidiaries from time to time.

 

(b)  The Borrower shall cooperate in all respects with any financial advisor that may after the Effective Date be retained by the Administrative Agent in its sole discretion and shall promptly (but no later than seven days after the delivery of any invoice) pay or reimburse the Administrative Agent for all reasonable and documented fees and out-of-pocket expenses incurred in connection therewith, including any retainer that may be required.

Section 4.4                            Further Agreements.  (a)  Notwithstanding Section 6.01 of the Credit Agreement, during the Forbearance Period, the Loan Parties and their Subsidiaries shall not incur, or commit to incur, Indebtedness, other than Indebtedness permitted under Sections 6.01(a), (b), (c), (e) (to the extent that such Indebtedness under clause (e) does not exceed $250,000), (f), (g), (h), (k), (l), (m) and (p) of the Credit Agreement.

 

(b)  Notwithstanding Section 6.04 of the Credit Agreement, during the Forbearance Period, the Loan Parties and their Subsidiaries shall not make, or commit to make, Capital Expenditures in excess of $250,000 per fiscal quarter (not including the purchase of, or the classification as Capital Expenditures of, any XTRAC or VTRAC equipment) in the aggregate.

 (c)  Notwithstanding Sections 6.04 and 6.09 of the Credit Agreement, during the Forbearance Period, no Loan Party shall, nor shall any Loan Party permit any Subsidiary to, make any investment or any other interest in any Affiliate, other than investments set forth in the then-current Cash Flow Forecast in a party that is or becomes a Loan Party prior to the making of such investment and any other investments agreed to by the Administrative Agent and the Required Lenders.

(d)  Notwithstanding Section 6.07 of the Credit Agreement, during the Forbearance Period, no Loan Party shall, nor shall any Loan Party permit any Subsidiary to, enter into any Swap Agreement.

(e)  Notwithstanding Section 6.08 of the Credit Agreement, during the Forbearance Period, the Loan Parties and their Subsidiaries shall not declare, pay or make any dividend or distribution on any shares of capital stock or other interests.

(f)  Notwithstanding Section 2.06 of the Credit Agreement, during the Forbearance Period, (i) no outstanding Borrowing may be converted to or continued as a Eurodollar Borrowing and (ii) unless repaid, each Eurodollar Borrowing shall be converted to a CBFR Borrowing at the end of the Interest Period applicable thereto.

(g)  The Borrower shall furnish, or cause to be furnished, to the Administrative Agent and each Lender, as soon as practicable, but in no event later than September 12, 2014, an analysis (the "Tax Analysis") of the tax consequences associated with (i) any Subsidiary organized under the laws of the State of Israel or any political subdivision thereof or the United Kingdom or any political subdivision thereof (each a "Foreign Subsidiary") becoming a Loan Guarantor (a "Foreign Guarantor") and (ii) the pledge of 100% of the issued and outstanding Equity Interests of the Foreign Subsidiaries (a "Foreign Pledge").  The Tax Analysis shall be in form and substance satisfactory to the Administrative Agent and the Required Lenders.  In the event that the Administrative Agent and the Required Lenders determine in their reasonable discretion, following good faith consultation with the Loan Parties and their tax advisors,

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upon review of the Tax Analysis that such actions would not have materially adverse tax consequences (including not materially impairing the tax attributes of any Loan Party) to the Loan Parties, then, as promptly as practicable, (i) such applicable Foreign Subsidiary shall become a Loan Guarantor under the Credit Agreement and/or (ii) such applicable Loan Party shall pledge 100% of the issued and outstanding Equity Interests of such applicable Foreign Subsidiary, in each case, pursuant to documentation satisfactory to the Administrative Agent.

(h)  The Borrower shall prepay the Term Loans as follows:  (i) on September 1, 2014, $937,500 which shall be applied in direct order of maturity; (ii) on October 1, 2014, $937,500 which shall be applied to the Term Loan in direct order of maturity; and (iii) on October 24, 2014, an amount equal to 75% of Cash on Hand in excess of $20 million measured on October 22, 2014 which shall be applied to the outstanding Revolving Loans.  On October 24, 2014, the Borrower shall deliver to the Administrative Agent a certificate of a Financial Officer certifying in reasonable detail as to Cash on Hand as of October 22, 2014.

(i)  The Borrower agrees that, following its review and analysis of the Cash Flow Forecast, it shall apply the Israeli Proceeds (or some portion thereof) to make additional prepayments on the Revolving Loans to the extent that it determines in its reasonable business judgment that such prepayments would not impair the ongoing operations of the Loan Parties and their Subsidiaries. The Borrower shall undertake such review and analysis, and thereafter make any prepayment, as promptly as possible following the Effective Date.

Section 4.5                            Forbearance Agreement Deemed Agreements Under the Credit Agreement.  For purposes of the Credit Agreement, the agreements of the Loan Parties contained in this Forbearance shall be deemed to be, and shall be, agreements under the Credit Agreement.  Any breach on the part of the Loan Parties in respect of any agreement contained in this Forbearance shall constitute an Event of Default.

 

ARTICLE V

CONDITIONS PRECEDENT

This Forbearance shall not become effective unless and until each of the conditions precedent set forth below has been satisfied or the satisfaction thereof shall have been waived in accordance with the terms hereof:

(a)            Receipt by the Administrative Agent of counterparts of this Forbearance, duly executed and delivered by the Administrative Agent, the Required Lenders and the Loan Parties;

(b)            Receipt by the Administrative Agent of payment in full in cash of its invoiced and unpaid reasonable and documented fees and out-of-pocket expenses incurred in connection with the Credit Agreement or the other Loan Documents (which shall be deemed to include this Forbearance), including, without limitation, the reasonable fees and disbursements of the Administrative Agent's counsel and advisors;

(c)            Receipt by the Administrative Agent of the Forbearance Fee in full, in cash; and

(d)            Receipt by the Administrative Agent, for the account of each Lender, of (i) $1,000,000 which shall be applied in inverse order of maturity as a prepayment of Term Loans (which amount shall be funded from the Israeli Proceeds), and (ii) $3,750,000 which shall be applied as a prepayment of those Term Loans otherwise due and payable on August 31, 2014, in each case, together with all accrued and unpaid interest thereon.

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ARTICLE VI

INTERPRETATION

Section 6.1                            Continuing Effect of the Credit Agreement.  The Loan Parties, the Administrative Agent and the Lenders hereby acknowledge and agree that the Credit Agreement shall continue to be and remain unchanged and in full force and effect in accordance with its terms, except as expressly provided herein.

 

Section 6.2                            No Limitation on Remedies after Forbearance Period.  The Loan Parties hereby acknowledge and agree that, at the end of the Forbearance Period, the provisions of Article II of this Forbearance shall be of no force and effect and the Administrative Agent and the Lenders shall be free, in accordance with the Credit Agreement and the other Loan Documents, to declare the Loans and all other amounts outstanding under the Credit Agreement to be due and payable and to exercise and enforce, or to take steps to exercise and enforce, all other rights, powers, privileges and remedies available to them under the Credit Agreement, any other Loan Document or applicable law on account of the Specified Events of Default (or any other Default or Event of Default) as if this Forbearance had not been entered into by the parties hereto.

 

Section 6.3                            No Waiver; Other Defaults or Events of Default.  (a)  Nothing contained in this Forbearance shall be construed or interpreted or is intended as a waiver of any rights, powers, privileges or remedies that the Administrative Agent or the Lenders have or may have under the Credit Agreement or any other Loan Document on account of the Specified Events of Default, except as expressly provided herein.

 

(b)            Nothing contained in this Forbearance shall be construed or interpreted or is intended as a waiver of or limitation on any rights, powers, privileges or remedies that the Administrative Agent or the Lenders have or may have under the Credit Agreement or any other Loan Document on account of any Default or Event of Default other than the Specified Events of Default.

 

ARTICLE VII

MISCELLANEOUS

Section 7.1                            Representations and Warranties.  The Loan Parties hereby represent and warrant as of the date hereof that, after giving effect to this Forbearance, (a) no Default or Event of Default has occurred and is continuing, except the Specified Events of Default and (b) all representations and warranties of the Loan Parties contained in the Loan Documents (which shall be deemed to include this Forbearance) are true and correct in all material respects with the same effect as if made on and as of such date, except that Section 3.07 of the Credit Agreement shall be deemed to exclude any Specified Events of Default.

 

Section 7.2                            Payment of Fees and Expenses.  (a)  The Borrower agrees to pay or reimburse the Administrative Agent upon demand, for all its reasonable and documented out-of-pocket costs and expenses incurred in connection with the Credit Agreement or the other Loan Documents (which shall be deemed to include this Forbearance), including, without limitation, the reasonable fees and disbursements of the Administrative Agent's counsel and advisors.

 

(b)  The Borrower agrees to pay the Administrative Agent, for the pro rata account of the Lenders, a forbearance fee (the "Forbearance Fee") in an aggregate amount equal to .25% of the Principal Indebtedness (as defined below) outstanding immediately prior to the Effective Date.  The Forbearance Fee shall be deemed earned in full on the Effective Date, and shall be payable to the Administrative Agent, for the pro rata account of the Lenders.

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Section 7.3                            Confirmation of Indebtedness.  The Loan Parties hereby confirm and acknowledge that, as of the Effective Date, (i) the Borrower is truly and justly indebted to the Lenders, without defense, counterclaim or offset of any kind, (ii) the Borrower is liable to the Lenders in respect of Loans made under the Credit Agreement in the aggregate principal amount of $85,000,000 (exclusive of Letters of Credit) (the "Principal Indebtedness") and (iii) each Guarantor is contingently liable to the Lenders in respect of such amount.

 

Section 7.4                            Counterparts.  This Forbearance may be executed by the parties hereto in any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument.

 

Section 7.5                            GOVERNING LAW.  THIS FORBEARANCE AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS FORBEARANCE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

 

Section 7.6                            Reservation of Rights.  Notwithstanding anything contained in this Forbearance to the contrary, the Loan Parties acknowledge that the Administrative Agent and the Lenders do not waive, and expressly reserve, the right to exercise, at any time during the Forbearance Period, any and all of their rights and remedies under (a) the Credit Agreement, any other Loan Document and applicable law in respect of the Specified Events of Default against any Person other than any Loan Party and (b) the Credit Agreement, any other Loan Document and applicable law in respect of any Default or Event of Default other than the Specified Events of Default.

 

Section 7.7                            Consent of Guarantors.  Each Guarantor hereby (a) consents to the transactions contemplated hereby and (b) acknowledges and agrees that the guarantees (and all security therefore) contained in the Credit Agreement and the other Loan Documents previously executed by it are, and shall remain, in full force and effect after giving effect to this Forbearance and all other prior modifications to the Credit Agreement.

 

Section 7.8                            Release.  The Loan Parties, on behalf of themselves and successors-in-title, legal representatives and assignees and, to the extent the same is claimed by right of, through or under any of the Loan Parties, for its past, present and future employees, agents, representatives, officers, directors, shareholders, and trustees (each, a "Releasing Party" and collectively, the "Releasing Parties") hereby release, waive, and forever relinquish all claims, demands, obligations, liabilities and causes of action of whatever kind or nature (including, without limitation, any so-called "lender liability" claims, interest or other carrying costs, penalties, legal, accounting and other professional fees and expenses and incidental, consequential and punitive damages payable to third parties, or any claims arising under 11 U.S.C. §§ 541-550 or any claims for avoidance or recovery under any other federal, state or foreign law equivalent), whether known or unknown, which any of the Releasing Parties have, may have, or might assert at the time of execution of the Forbearance against the Administrative Agent, the Lenders and/or their respective parents, affiliates, participants, officers, directors, employees, agents, attorneys, accountants, consultants, successors and assigns, directly or indirectly, which occurred, existed, was taken, permitted or begun prior to the execution of this Forbearance, arising out of, based upon, or in any manner connected with (i) any transaction, event, circumstance, action, failure to act or occurrence of any sort or type, whether known or unknown, with respect to the Credit Agreement, any other Loan Document and/or the administration thereof or the Obligations created thereby; (ii) any discussions, commitments, negotiations, conversations or communications with respect to the refinancing, restructuring or collection of any Obligations related to the Credit Agreement, any other Loan Document and/or the administration thereof or the Obligations created thereby, or (iii) any matter related to the foregoing, in each case, prior to the execution of this Forbearance.

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IN WITNESS WHEREOF, the parties hereto have caused this Forbearance to be duly executed and delivered by their proper and duly authorized officers as of the date first above written.

PHOTOMEDEX, INC.,

 a Nevada corporation

By:    /s/ Dennis M. McGrath                                 

Name: Dennis M. McGrath

 Title: President and Chief Financial Officer

LCA-VISION INC.,

 a Delaware corporation

By: /s/ Dennis M. McGrath                                  

Name: Dennis M. McGrath

 Title: President

RADIANCY, INC.,

 a Delaware corporation

By:    /s/ Dolev Rafaeli                                                                                                                                 

Name: Dolev Rafaeli

 Title: President and Chief Executive Officer

PHOTOMEDEX TECHNOLOGY, INC.,

 a Delaware corporation

By:     /s/ Dennis M. McGrath                                     

Name: Dennis M. McGrath

 Title: President

LUMIERE, INC.,

 a Nevada corporation

By:  /s/ Dennis M. McGrath                                      

Name: Dennis M. McGrath

 Title: President

 

 

 

S-1

 

JPMORGAN CHASE BANK, N.A., as Administrative Agent and a Lender

By:   /s/ Lauren Daley                      

Name: Lauren Daley

 Title: Authorized Officer

 

 

S-2

 

  

 

PNC BANK, N.A., as a Lender

By:   /s/ Gregory S. Buchanan           

Name:  Gregory S. Buchanan

 Title: Sr. Vice President

 

S-3

 

BANK LEUMI LE-ISRAEL B.M., as a Lender

By:   /s/ Warach Yigal                        

Name: Warach Yigal

 Title: Operation Manager

By:   /s/Dominitz Tamar                                 

Name: Dominitz Tamar

 Title: Customer Relationship Manager

 

 

S-4

 

ANNEX A

COLLATERAL CERTIFICATE

Reference is made to the Credit Agreement dated as of May 12, 2014 (as amended, supplemented or otherwise modified, the "Credit Agreement"), by and among PhotoMedex, Inc., as borrower (the "Borrower"), the Loan Parties from time to time party thereto, the Lenders from time to time party thereto, and JPMorgan Chase Bank, N.A., as administrative agent (the "Administrative Agent"), among others..  Capitalized terms used but not defined herein shall have the meanings ascribed thereto in the Credit Agreement.

The Borrower hereby (i) acknowledges and agrees that this Collateral Certificate is a Loan Document and (ii) certify that all of the information contained herein is true and correct.

EACH SCHEDULE HEREIN SHALL BE PREPARED ON AN ENTITY BY ENTITY BASIS.  ACCORDINGLY, THE SCHEDULES SHALL CLEARLY REFLECT THE REQUESTED INFORMATION IN RESPECT OF EACH ENTITY.

SECTION 1.  CAPITAL STRUCTURE

(a)            Capital Structure.  Schedule 1(a) identifies the Loan Parties and their Subsidiaries and every entity owned, in whole or in part, by the Loan Parties and their Subsidiaries.  As part of such identification the following information with respect to each entity (as applicable) is provided:  (A) jurisdiction of organization, (B) number of shares authorized, (C) number of shares outstanding, (D) percentage ownership interests, (E) member interests and (F) number of shares or member interests covered by outstanding options, warrants, rights of conversion or purchase and similar rights.

See Schedule 1(a)

(b)            Trade Names, Division Names, Etc.  Schedule 1(b) is a list of all other names (including trade names or similar appellations) used by the Loan Parties and their Subsidiaries and every entity owned, in whole or in part, by the Loan Parties and their Subsidiaries, or any of their divisions or other business units used in connection with the conduct of their businesses or the ownership of their properties at any time during the past five years.

See Schedule 1(b)

SECTION 2.  LOCATIONS OF PERSONAL PROPERTY

        

(a)            Chief Executive Office.  Schedule 2(a) is a list of locations of the chief executive offices of the Loan Parties and their Subsidiaries and every entity owned, in whole or in part, by the Loan Parties and their Subsidiaries.

See Schedule 2(a)

(b)            Principal Place of Business.  The following is a list of locations of the principal places of business of the Loan Parties and their Subsidiaries and every entity owned, in whole or in part, by the Loan Parties and their Subsidiaries.

See Schedule 2(b)

(c)            Places of Business.  Schedule 2(c) is a list of locations of places of business of the Loan Parties and their Subsidiaries and every entity owned, in whole or in part, by the Loan Parties and their Subsidiaries, that were not otherwise identified in Schedules 2(a) or 2(b).

See Schedule 2(c)

(d)            Receivables and General Intangibles.  Schedule 2(d) is a list of locations of general intangibles and records of receivables of the Loan Parties, their Subsidiaries and every entity owned, in whole or in part, by the Parent, the Loan Parties and their Subsidiaries.

See Schedule 2(d)

(e)            Equipment and Inventory.  Schedule 2(e) is a list of locations of equipment and inventory owned by the Loan Parties and their Subsidiaries and every entity owned, in whole or in part, by the Loan Parties and their Subsidiaries.

See Schedule 2(e)

(f)            Books and Records.  Schedule 2(f) is a list of locations of all books and records held by the Loan Parties and their Subsidiaries and every entity owned, in whole or in part, by the Loan Parties and their Subsidiaries, relating to any of the collateral, including, without limitation, accounts, contract rights, chattel paper, general intangibles and mobile goods and all corporate or business records, customer lists, credit files, computer program printouts or other computer material and records.

See Schedule 2(f)

(g)            Commercial Tort Claims.  Schedule 2(g) is a list of all commercial tort claims (as defined in Article 9 of the Uniform Commercial Code) held by the Loan Parties and their Subsidiaries and every entity owned, in whole or in part, by the Loan Parties and their Subsidiaries.

See Schedule 2(g)

SECTION 3.  INTELLECTUAL PROPERTY

(a)            Patents and Patent Applications.  Schedule 3(a) is a list of all patents and patent applications owned or submitted by the Loan Parties and their Subsidiaries and every entity owned, in whole or in part, by the Loan Parties and their Subsidiaries.

See Schedule 3(a)

(b)            Trademarks and Trademark Applications.  Schedule 3(b) is a list of all trademarks (including all State trademarks, service marks and tradename registrations) and trademark applications owned or submitted by the Loan Parties and their Subsidiaries and every entity owned, in whole or in part, by the Loan Parties and their Subsidiaries.

See Schedule 3(b)

(c)            Copyrights and Copyright Applications.  Schedule 3(c) is a list of all copyrights and copyright applications owned or submitted by the Loan Parties and their Subsidiaries and every entity owned, in whole or in part, by the Loan Parties and their Subsidiaries.

See Schedule 3(c)

(d)            Licenses.  Schedule 3(d) is a list  of all patent, trademark and copyright licenses under which the Loan Parties and their Subsidiaries and every entity owned, in whole or in part, by the Loan Parties and their Subsidiaries, are licensors or licensees.

See Schedule 3(d)

SECTION 4.  REAL PROPERTY

(a)            Fee Properties.  Schedule 4(a) is a list of all real property owned in fee by the Loan Parties and their Subsidiaries and every entity owned, in whole or in part, by the Loan Parties and their Subsidiaries.

See Schedule 4(a)

(b)            Leased Properties.  Schedule 4(b) is a list of all real property leased by the Loan Parties and their Subsidiaries and every entity owned, in whole or in part, by the Loan Parties and their Subsidiaries.

See Schedule 4(b)

 SECTION 5.   DEPOSIT ACCOUNTS AND DEBT

(a)            Deposit Accounts.  Schedule 5(a) is a list of all deposit accounts (including certificates and instruments evidencing such deposit accounts) held by the Loan Parties and their Subsidiaries and every entity owned, in whole or in part, by the Loan Parties and their Subsidiaries.

See Schedule 5(a)

            (b)            Debt.  Schedule 5(b) is a list of all debt payable to the Loan Parties and their Subsidiaries and every entity owned, in whole or in part, by the Loan Parties and their Subsidiaries, including without limitation, all inter-company notes.

See Schedule 5(b)

SECTION 6.   ADDITIONAL PROPERTY

 

(a)            Collateral Held by Third Parties.  Schedule 6(a) is a list of all names and addresses of all persons or entities, other than the Loan Parties and their Subsidiaries and every entity owned, in whole or in part, by the Loan Parties and their Subsidiaries, that have possession or are intended to have possession of collateral, including, without limitation, lessees, consignees, warehousemen or purchasers of chattel paper.

See Schedule 6(a)

(b)            Ownership Interests of Third Parties.  Schedule 6(b) is a list of all names and addresses of all persons or entities which hold leases or other ownership interests in personal property held and used by the Loan Parties and their Subsidiaries and every entity owned, in whole or in part, by the Loan Parties and their Subsidiaries, such as lessors, consignors or conditional sales vendors with purchase money liens on collateral.

See Schedule 6(b)

(c)            Fixtures.  Schedule 6(c) is a list identifying the locations of fixtures owned by the Loan Parties and their Subsidiaries and every entity owned, in whole or in part, by the Loan Parties and their Subsidiaries.

See Schedule 6(c)

SCHEDULE 7.   LIENS AND OTHER SECURITY INTERESTS

(a)            Liens and other Security Interests.  The following is (i) a list of all entities that have a lien or other security interest on any property owned by the Loan Parties and their Subsidiaries and every entity owned, in whole or in part, by the Loan Parties and their Subsidiaries, (ii) a list of all such property subject to a lien or other security interest (including, without limitation, all real property, personal property and intellectual property) and (iii) a list of all security documents creating such lien or other security interest.

See Schedule 7(a)

            IN WITNESS WHEREOF, we have hereunto set our hand to this __th day of October 2014.

PHOTOMEDEX, INC.

By:                                                                                    

Name:  Dennis M. McGrath

 Title:  President and Chief Financial Officer

LCA-VISION INC.

By:                                                                                    

Name:  Dennis M. McGrath

 Title:  President

RADIANCY, INC.

By:                                                                                    

Name:  Dolev Rafaeli

 Title:  President and Chief Executive Officer

PHOTOMEDEX TECHNOLOGY, INC.

By:                                                                                    

Name:  Dennis M. McGrath

 Title:   President

LUMIERE, INC.

By:                                                                                    

Name:  Dennis M. McGrath

 Title:   President

Attachments:

	
Schedule 1(a)

	
 

	
Capital Structure

	
Schedule 1(b)

	
 

	
Trade Names, Division Names, Etc.

	
Schedule 2(a)

	
 

	
Chief Executive Office

	
Schedule 2(b)

	
 

	
Principal Place of Business

	
Schedule 2(c)

	
 

	
Places of Business

	
Schedule 2(d)

	
 

	
Receivables and General Intangibles

	
Schedule 2(e)

	
 

	
Equipment and Inventory

	
Schedule 2(f)

	
 

	
Books and Records

	
Schedule 2(g)

	
 

	
Commercial Tort Claims

	
Schedule 3(a)

	
 

	
Patents and Patent Applications

	
Schedule 3(b)

	
 

	
Trademarks and Trademark Applications

	
Schedule 3(c)

	
 

	
Copyrights and Copyright Applications

	
Schedule 3(d)

	
 

	
Licenses

	
Schedule 4(a)

	
 

	
Fee Properties

	
Schedule 4(b)

	
 

	
Leased Properties

	
Schedule 5(a)

	
 

	
Deposit Accounts

	
Schedule 5(b)

	
 

	
Debt

	
Schedule 6(a)

	
 

	
Collateral Held by Third Parties

	
Schedule 6(b)

	
 

	
Ownership Interests of Third Parties

	
Schedule 6(c)

	
 

	
Fixtures

	
Schedule 7(a)

	
 

	
Liens and other Security Interests

 

 

 

 

 

SCHEDULE 1(a)

CAPITAL STRUCTURE

SCHEDULE 1(b)

TRADE NAMES, DIVISION NAMES, ETC.

COMPANY                                                      NAMES, TRADE NAMES AND SIMILAR APPELLATIONS

SCHEDULE 2(a)

CHIEF EXECUTIVE OFFICES

COMPANY                                                      ADDRESS

SCHEDULE 2(b)

PRINCIPAL PLACES OF BUSINESS

COMPANY                                                      ADDRESS

SCHEDULE 2(c)

PLACES OF BUSINESS

COMPANY                                                      ADDRESS

SCHEDULE 2(d)

RECEIVABLES AND GENERAL INTANGIBLES

SCHEDULE 2(e)

EQUIPMENT AND INVENTORY

SCHEDULE 2(f)

BOOKS AND RECORDS

SCHEDULE 2(g)

COMMERCIAL TORT CLAIMS

SCHEDULE 3(a)

PATENTS AND PATENT APPLICATIONS

SCHEDULE 3(b)

TRADEMARKS AND TRADEMARK APPLICATIONS

SCHEDULE 3(c)

COPYRIGHTS AND COPYRIGHT APPLICATIONS

SCHEDULE 3(d)

LICENSES

SCHEDULE 4(a)

FEE PROPERTIES

SCHEDULE 4(b)

LEASED PROPERTIES

SCHEDULE 5(a)

DEPOSIT ACCOUNTS

SCHEDULE 5(b)

DEBT

SCHEDULE 6(a)

COLLATERAL HELD BY THIRD PARTIES

SCHEDULE 6(b)

OWNERSHIP INTERESTS OF THIRD PARTIES

SCHEDULE 6(c)

FIXTURES

SCHEDULE 7(a)

LIENS AND OTHER SECURITY INTERESTS

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