UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Form
8-K
Current
Report
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of
1934
Date
of
Report (Date
of
earliest event reported):
January 31, 2006
RITA
Medical Systems, Inc.
(Exact
name of registrant as specified in its charter)
000-30959
(Commission
File Number)
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Delaware
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94-3199149
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(State
or other jurisdiction of incorporation)
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(I.R.S.
Employer Identification No.)
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46421
Landing Parkway
Fremont,
CA 94538
(Address
of principal executive offices, with zip code)
(510)
771-0400
(Registrant's
telephone number, including area code)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see
General
Instruction A.2. below):
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Written
communications pursuant to Rule 425 under the Securities Act (17
CFR
230.425)
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR
240.14d-2(b))
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR
240.13e-4(c))
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Item
1.01 Entry
into a Material Definitive Agreement.
On
January
31, 2006, RITA Medical Systems, Inc., a Delaware corporation (the “Company”),
entered into a Revolving Credit and Security Agreement (the “Credit Agreement”)
for a revolving line of credit with CapitalSource Finance LLC (“CapitalSource”).
A copy of the Credit Agreement is attached hereto as Exhibit 10.92.
The
Credit
Agreement provides for a revolving line of credit of up to $7,000,000. The
description of the material terms of the Credit Agreement included in Item
2.03
to this Current Report on Form 8-K is incorporated by reference into this Item
1.01.
Item
2.03 Creation
of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet
Arrangement of a Registrant.
As
discussed in Item 1.01 above, on January 31, 2006, the Company entered into
a
Credit Agreement with CaptialSource. The Credit Agreement provides for a
revolving credit facility in the principal amount of up to $7,000,000. The
amout of principal available for the Company to borrow at any time is limited
to
the aggregate of (i) varying percentages of the amount of the Company's eligible
receivables and (ii) varying percentages of the amount of the Company's eligible
finished goods inventory. The applicable percentages are determined based on
the
level of the Company's EBITDA (as defined in the Credit Agreement) for the
prior
quarter and its inventory turns ratio. In addition, the amount otherwise
available to borrow based on the aforementioned criteria is required to be
reduced by a required liquidity reserve of between $1,000,000 to $1,500,000
depending on the level of the Company's EBITDA (as defined in the Credit
Agreement) for the prior quarter.
The
obligations under the Credit Agreement are secured by a security interest in
substantially all of the tangible and intangible assets of the Company and
its
subsidiaries. The Credit Agreement provides for the use of a lockbox for the
collection of the Company's receivables. Borrowings under the revolving credit
facility bear interest at a floating rate equal to Citibank, N.A.’s prime rate
(the “Prime Rate”) plus 1.25%, provided, however, that the Prime Rate shall not
be less than 7.25%. Interest on advances is payable on the first day of each
calendar month. The full amount borrowed under the revolving credit facility
will mature on the earlier of (i) January 31, 2009 or (ii) 30 days before the
maturity date of the debt in the Senior Subordination Agreement, dated as of
January 31, 2005, by and among Atlas Master Fund, Ltd.
("Atlas"), CapitalSource and the Company (the "Subordination Agreement").
Pursuant to the terms of the Subordination Agreement, the claims, demands,
rights and remedies of Atlas were subordinated to the claims, rights and
remedies of CapitalSource. A copy of the Subordination Agreement is
attached hereto as Exhibit 10.93.
The
Credit
Agreement also includes requirements to maintain financial covenants in order
to
be eligible to borrow including (i) a minimum level quarterly EBITDA (as defined
in the Credit Agreement) of ($325,000) during 2006, ($150,000) during 2007,
and
$62,500 during 2008, and (ii) cash balances of no less than $1,000,000 to
$2,500,000 depending on the level of EBITDA (as defined in the Credit Agreement)
for the prior quarter.
The
Credit
Agreement contains affirmative covenants that require the Company to promise,
among other things, to deliver financial statements and other financial
information to CapitalSource, to maintain its insurance policies, to allow
inspection of its operations, to provide a customary right of first refusal
to
CapitalSource in the event that a third party proposes a debt financing, to
pay
its taxes and to maintain its inventory. The Credit Agreement also contains
negative covenants that will limit the ability of the Company to, among other
things, incur additional indebtedness, create any liens on any of its
collateral, make certain investments, pay dividends, enter into certain
transactions with affiliates, amend its charter documents, transfer its assets
or make payments on permitted subordinated debt. The Credit Agreement contains
customary Events of Default (as defined in the Credit Agreement), including,
but
not limited to: (a) non-payment of amounts due; (b) material breach of
representations, warranties or covenants under the Credit Agreement or the
documents pertaining thereto; (c) insolvency; (d) receivership or bankruptcy;
(e) certain changes in control; (f) loss of collateral; (g) withdrawal of United
States Food and Drug Administration approval of products; (h) recall of
products; or (i) other material adverse changes. Upon the occurrence of an
event
of default, the amounts due outstanding under the revolving credit facility
may
be accelerated and may become immediately due and payable. In addition, upon
the
occurrence of an event of default, CapitalSource shall, among other things,
have
the right to (a) apply any property of the Company and its subsidiaries held
by
CapitalSource to reduce the obligations; (b) foreclose on liens; (c) take
possession of or sell any collateral or pledged securities; and (d) reduce
the
amount of capital available under the revolving credit facility.
The
Company paid a commitment fee of $140,000, plus legal out-of-pocket costs
incurred by CapitalSource of approximately $83,000, in connection with the
Credit Agreement. The Company must also pay a collateral management fee equal
to
0.05% of the average outstanding principal amount of the revolving credit
facility each month and must pay a monthly unused line fee equal to 0.04% per
month of the difference derived by subtracting (i) the daily average amount
of
the balances under the revolving credit facility outstanding during the
preceding month, from (ii) $7,000,000. Additionally, the Company is obligated
to
pay a termination fee of up to $210,000 if it decides to terminate the Credit
Agreement prior to its expiration.
The
Company has not yet requested any advances under the revolving credit facility.
The Credit Agreement provides that advances under the revolving credit facility
can be used by the Company as a manufacturer and distributor of medical products
and devices and for payments to CapitalSource.
The
foregoing summary of the Credit Agreement does not purport to be complete and
is
qualified in its entirety by reference to the Credit Agreement itself, a copy
of
which is filed as Exhibit 10.92 to this Current Report on Form 8-K.
Item
9.01 Financial
Statements and Exhibits.
10.92
Revolving
Credit and Security Agreement by and among RITA Medical Systems, Inc., Horizon
Medical Products, Inc., RITA Medical Systems Netherlands, BV, RITA Medical
Systems France, S.A.R.L. and CapitalSource Finance LLC dated as of January
31,
2006
10.93
Senior
Subordination Agreement, dated as of
January 31, 2006, by and among Atlas Master Fund, Ltd., CaptialSource Finance
LLC and RITA Medical Systems, Inc.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant
has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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RITA
MEDICAL
SYSTEMS, INC. |
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Date:
February 6, 2006
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By: |
/s/ Michael
Angel |
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Michael
Angel |
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Chief
Financial Officer |
RITA
MEDICAL SYSTEMS, INC.
INDEX
TO EXHIBITS
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Exhibit
Number
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Description
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10.92
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Revolving
Credit and Security Agreement by and among RITA Medical Systems,
Inc.,
Horizon Medical Products, Inc., RITA Medical Systems Netherlands,
BV, RITA
Medical Systems France, S.A.R.L. and CapitalSource Finance LLC dated
as of
January 31, 2006
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10.93
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Senior
Subordination Agreement, dated as of January 31, 2006, by and among
Atlas
Master Fund, Ltd., CaptialSource Finance LLC and RITA Medical Systems,
Inc. |