SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to ____________
Commission file number 0-10701
TATONKA ENERGY, INC.
(Name of small business issuer in its charter)
Oklahoma, USA 73-1457920
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
9603 White Rock Trail, Suite 100, Dallas, Texas 75238
(Address of principal executive offices)
(214) 340-9912
(Issuer's telephone number)
3535 Northwest Parkway, Dallas, TX 75225
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes No X
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 49,099,069 shares of Common
Stock, $.001 par value, as of October 1, 1998.
Transitional Small Business Disclosure Format (check one): Yes No X
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<TABLE>
<CAPTION>
INDEX
PART I - FINANCIAL INFORMATION Page
<S> <C> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheets at June 30, 1998 (unaudited) and 1
December 31, 1997
Consolidated Statements of Operations for the three months ended 3
June 30, 1998 and 1997 (unaudited) and for the six months ended
June 30, 1998 and 1997 (unaudited)
Consolidated Statement of Changes in Shareholders' Deficit for the 4
six months ended June 30, 1998 (unaudited)
Consolidated Statements of Cash Flows for the six months ended 5
June 30, 1998 and 1997 (unaudited)
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition 9
or Plan of Operation
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities and Use of Proceeds 12
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 17
</TABLE>
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<TABLE>
<CAPTION>
Tatonka Energy, Inc. and Subsidiary
CONSOLIDATED BALANCE SHEETS
December 31, June 30,
ASSETS 1997 1998
------------ -----------
<S> <C> <C>
(Unaudited)
CURRENT ASSETS
Cash $ 37,233 $ 116
Accounts receivable - trade, less allowance for
doubtful accounts and contractual allowances
of $1,668,867 and $1,328,678, respectively 2,280,547 2,303,712
Receivable - related party 58,270 82,870
----------- -----------
Total current assets 2,376,050 2,386,698
PROPERTY AND EQUIPMENT
Clinic and medical equipment 3,561,415 3,561,690
Automobiles -- --
Furniture and equipment 89,797 95,042
Computer hardware and software 54,616 68,380
Leasehold improvements 381,420 381,420
----------- -----------
4,087,248 4,106,532
Less accumulated depreciation and amortization (2,889,189) (3,120,259)
----------- -----------
1,198,059 986,273
----------- -----------
OTHER ASSETS
Deferred income tax asset 354,000 354,000
Other 13,533 17,321
----------- -----------
367,533 371,321
----------- -----------
$ 3,941,642 $ 3,744,292
=========== ===========
</TABLE>
1
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<TABLE>
<CAPTION>
Tatonka Energy, Inc. and Subsidiary
CONSOLIDATED BALANCE SHEETS - CONTINUED
Pro forma
shareholders'
LIABILITIES AND SHAREHOLDERS' December 31, June 30, deficit at
DEFICIT 1997 1998 June 30, 1998
------------ ----------- -------------
<S> <C> <C> <C>
(Unaudited) (Note A)
CURRENT LIABILITIES
Current maturities of long-term debt $ 1,173,830 $ 2,170,613
Accounts payable - trade 192,407 478,509
Payable to factor 758,755 561,404
Accrued expenses 176,419 291,440
Deferred income tax liability 695,000 663,000
----------- -----------
Total current liabilities 2,996,411 4,164,966
LONG-TERM LIABILITIES
Long-term debt, less current maturities 1,646,254 281,785
Deferred rent 33,902 33,902
----------- -----------
Total liabilities 4,676,567 4,480,653
SHAREHOLDERS' DEFICIT
Common stock - $1 par value per share;
authorized, issued and outstanding,
1,000 shares 1,000 -- --
Common stock - $.001 par value per share;
authorized, 50,000,000 shares; issued
and outstanding, 49,099,069 shares -- 49,099 78,431
Series "A" nonvoting convertible preferred
stock, $1 par value per share; issued
and outstanding, 135,139 shares -- 135,139 135,139
Additional paid-in capital 22,254 7,127 --
Unearned ESOP compensation (333,532) (276,991) (276,991)
Retained earnings (accumulated deficit) 422,935 (650,735) (672,940)
----------- ----------- -----------
112,657 (736,361) (736,361)
Less treasury stock, at cost (226 shares) (847,582) -- --
----------- ----------- -----------
Total shareholders' deficit (734,925) (736,361) (736,361)
----------- ----------- ===========
$ 3,941,642 $ 3,744,292
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
2
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<TABLE>
<CAPTION>
Tatonka Energy, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended June 30, Six months ended June 30,
---------------------------- ----------------------------
1997 1998 1997 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Patient revenue
Gross billings $ 1,307,461 $ 1,436,957 $ 2,875,260 $ 2,718,748
Less allowances (444,502) (421,801) (1,138,628) (857,610)
------------ ------------ ------------ ------------
Net patient revenue 862,859 1,015,156 1,736,632 1,861,138
Operating expenses (776,410) (1,053,522) (1,644,883) (1,794,975)
------------ ------------ ------------ ------------
Operating profit (loss) 86,449 (38,366) 91,749 66,163
Other income (expenses)
Interest expense (86,317) (53,729) (201,047) (128,844)
Factoring fees (26,549) (17,465) (51,318) (34,161)
Miscellaneous income (expense) 75 55 112 (4,378)
------------ ------------ ------------ ------------
(112,791) (71,139) (252,253) (167,383)
------------ ------------ ------------ ------------
Net loss before income
tax benefit (26,342) (109,505) (160,504) (101,220)
Deferred income tax benefit 9,000 (38,000) 58,000 36,000
------------ ------------ ------------ ------------
NET LOSS $ (17,342) $ (71,505) $ (102,054) $ (65,220)
============ ============ ============ ============
Loss per share - basic and diluted $ -- -- -- --
Weighted average shares 39,583,513 49,099,069 39,583,513 44,341,291
Pro forma loss per share - basic and diluted $ -- -- -- --
Weighted average shares 69,415,409 78,930,965 69,415,409 73,673,187
</TABLE>
The accompanying notes are an integral part of this statement.
3
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<TABLE>
<CAPTION>
Tatonka Energy, Inc. and Subsidiary
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIT
(Unaudited)
Retained
Additional Unearned earnings
Common stock Preferred paid-in ESOP (accumulated
------------------------
Shares Amount stock capital compensation deficit)
----------- ----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1998 1,000 $ 1,000 $ -- $ 22,254 $ (333,532) $ 422,935
Merger of Tatonka Energy, Inc.
and Phy. Med., Inc. and
recapitalization 49,098,069 48,099 135,139 (22,254) -- (1,008,450)
Amortization of unearned ESOP
compensation, net of taxes
of $4,000 -- -- -- 7,127 56,541 --
Net loss -- -- -- -- -- (65,220)
----------- ----------- ----------- ----------- ----------- -----------
Balance at June 30, 1998 49,099,069 $ 49,099 $ 135,139 $ 7,127 $ (276,991) $ (650,735)
=========== =========== =========== =========== =========== ===========
Treasury stock
-----------------------
Shares Amount Total
----------- ----------- -----------
Balance at January 1, 1998 226 $ (847,582) $ (734,925)
Merger of Tatonka Energy, Inc.
and Phy. Med., Inc. and
recapitalization (226) 847,582 116
Amortization of unearned ESOP
compensation, net of taxes
of $4,000 -- -- 63,668
Net loss -- -- (65,220)
----------- ----------- -----------
Balance at June 30, 1998 -- $ -- $ (736,361)
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
4
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<TABLE>
<CAPTION>
Tatonka Energy, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six months
ended June 30,
-----------------------
1997 1998
---------- ----------
<S> <C> <C>
Cash flows from operating activities
Net loss $(117,504) $ (65,220)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 311,530 231,070
Amortization of unearned ESOP compensation 74,168 67,668
Deferred income taxes (65,000) (36,000)
Changes in operating assets and liabilities
Receivables (8,620) (47,765)
Prepaid expenses and other current assets -- --
Other assets 116 (3,788)
Accounts payable and other current liabilities 88,939 401,123
Other noncurrent liabilities -- --
--------- ---------
Net cash provided by operating activities 283,629 547,088
Cash flows from investing activities
Purchase of property assets (1,649) (19,284)
Proceeds from sale of assets -- --
Merger -- 116
--------- ---------
Net cash provided by (used in)
investing activities (1,649) (19,168)
Cash flows from financing activities
Proceeds from (payments to) factoring company - net 193,602 (197,351)
Repayments of debt (478,562) (367,686)
Purchase of treasury stock -- --
--------- ---------
Net cash used in financing activities (284,960) (565,037)
--------- ---------
Net increase (decrease) in cash (2,980) (37,117)
Cash at beginning of year 2,980 37,233
--------- ---------
Cash at end of year $ -- $ 116
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 194,278 $ 58,716
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
5
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Tatonka Energy, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - BASIS OF PRESENTATION
Effective April 3, 1998, Tatonka Energy, Inc. ("Tatonka") acquired 80% of the
outstanding capital stock of Phy Med Diagnostic Imaging Center Dallas, Inc.
("Phy Med"), pursuant to an agreement and plan of reorganization and merger
(the Agreement). The Agreement provides that consideration given by Tatonka
consists of the issuance of 68,915,409 Tatonka common shares. However,
pending shareholder approval of an increase in the authorized common shares
of Tatonka, only 39,583,513 shares have been issued. Shareholders' deficit in
the accompanying balance sheet reflects on the Tatonka shares actually
issued. Pro forma shareholders' deficit and pro forma loss per share reflect
the additional 29,331,896 shares that are required to be issued upon
shareholder approval.
At the date of the merger, Tatonka had nominal assets, consisting only of
$116 in cash and no liabilities. The terms of the merger result in the former
Phy Med shareholders owning approximately 87% of the outstanding Tatonka
common stock. Therefore, the merger has been accounted for as a
recapitalization of Phy Med. The accompanying financial statements which have
been captioned "Tatonka Energy, Inc.", pending shareholder approval to change
the name to Phy Med, Inc., are those of Phy Med for all periods presented.
Phy Med is referred to herein as "the Company".
The consolidated financial statements contained herein have been prepared by
the Company pursuant to the rules and regulations of the Securities and
Exchange Commission. In the opinion of management, all adjustments necessary
for a fair presentation of the consolidated financial position as of June 30,
1997 and 1998 have been made. In addition, all such adjustments made, in the
opinion of management, are of a normal recurring nature. The results of
operations for the interim periods presented are not necessarily indicative
of the results to be expected for the full fiscal year.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted for the interim periods pursuant to
the interim reporting rules of the Securities and Exchange Commission. The
interim consolidated financial statements should be read in conjunction with
the audited consolidated financial statements and related notes of Phy. Med.,
Inc. for the year ended December 31, 1997, included in the Company's Form
8-K/A.
NOTE B - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
The Company is engaged in the business of operating a diagnostic imaging
center, located in Dallas, Texas.
A summary of the significant accounting policies applied in the preparation
of the accompanying financial statements follows.
6
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Tatonka Energy, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE B - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -
Continued
Revenue Recognition and Receivables
Net patient revenue is recorded as services are rendered, at the estimated
realizable amounts from patients, third-party payers and others based upon
contractual arrangements. Provisions are made for estimated uncollectible
accounts and are reflected in the financial statements as bad debts, included
in operating expenses.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation and amortization are provided for in amounts
sufficient to relate the cost of depreciable assets to operations over their
estimated service lives, which range from three to five years, by the
straight-line method. Leasehold improvements are amortized by the
straight-line method over the lives of the respective leases or the service
lives of the improvements, whichever is shorter.
Deferred Rent
The cost of the Company's lease for office space is accounted for by the
straight-line method. The difference between the net cash requirements of the
lease and straight-line method is reflected on the balance sheet as deferred
rent.
Use of Estimates
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and
assumptions that effect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements, the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
NOTE C - LOSS PER SHARE
Loss per share has been calculated based upon the number of shares
(39,583,513) issued by Tatonka on April 3, 1998, for the acquisition of Phy
Med, with retroactive application to all periods presented. For the period
subsequent to April 3, 1998, weighted average shares outstanding include also
the outstanding shares of Tatonka (9,515,556) held by the pre-merger Tatonka
shareholders.
No effect has been given in the calculation of loss per share to the effect
of the Series A convertible preferred stock, because the result of assumed
conversion is antidilutive.
7
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Tatonka Energy, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE D - FINANCING DEFAULTS
At June 30, 1998, the Company was in arrears on payments due on a note to DVI
Finance Company (DVI) (balance of $267,657 at June 30, 1998) and an equipment
financing lease (balance of $1,595,861 at June 30, 1998) accounted for as a
capital lease.
In August 1998, DVI filed a lawsuit against the Company and obtained an
injunction that prohibits the Company from disbursing funds without the
consent of DVI. DVI has indicated it may apply to the court for a receiver
for the Company. If DVI were to file such an application, the equipment
lessor could be expected to join in the application.
As a result of the lease default, the outstanding balance is subject to being
called by the lender, although no such demand has been made. The outstanding
balances on the note and the equipment lease have been classified as current
liabilities in the balance sheet at June 30, 1998.
8
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Item 2. Management's Discussion and Analysis of Financial Condition or Plan of
Operation
(a) Plan of Operation.
Not applicable.
(b) Management's Discussion and Analysis of Financial Condition and
Results of Operations.
RESULTS OF OPERATIONS
The following table sets forth operating data of the Company as a
percentage of net sales for the periods indicated:
Six Months Ended
June 30,
-----------------
1998 1997
------ ------
Net patient revenue 100.0% 100.0%
Operating expenses 96.4 94.7
------ ------
Operating profit 3.6 5.3
Interest expense 6.9 11.6
Other expense 2.1 2.9
------ ------
Net loss before income tax benefit (5.4) (9.2)
Deferred income tax benefit 1.9 3.3
------ ------
Net income (loss) (3.5)% (5.9)%
====== ======
Six Months Ended June 30, 1998 Compared with Six Months Ended June 30, 1997
Net patient revenues increased by 7.17% to $1,861,138 for the six months
ended June 30, 1998 from $1,736,632 for the six months ended June 30, 1997.
Operating expenses increased by 9.1% to $1,794,975 for the six months
ended June 30, 1998 from $1,644,883 for the six months ended June 30, 1997, due
primarily to the expenses resulting from the reorganization and merger effective
April 3, 1998 between Tatonka Energy, Inc. ("Tatonka") and Phy.Med., Inc.
("PhyMed")($100,000) ; the installation costs associated with a new
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radiology information system ($45,000); and, to the Company's expanded
operations through its capitated services contracts ($168,000). Operating
expenses, excluding the reorganization, systems installation costs and the costs
associated with the capitated services contract decreased by 9.8% to $1,482,000
for the six months ended June 30, 1998. As a percentage of net revenues,
operating expenses, excluding the reorganization, systems installation costs and
the costs associated with the capitated services contract, decreased from 94.7%
for the six months ended June 30, 1997 to 79.6% for the six months ended June
30, 1998.
Operating profit decreased by 27.9% to $66,163 for the six months ended
June 30, 1998 from $91,749 for the six months ended June 30, 1997. This decrease
is due primarily to the reorganization and systems installation expenses. As a
percentage of net patient revenues, operating profit decreased to 3.6% for the
six months ended June 30, 1998 from 5.3% in the comparable prior year period.
Operating profit, excluding the reorganization and systems installation expense,
increased by 229.9% to $211,000 for the six months ended June 30, 1998. As a
percentage of net patient revenues, operating profit, excluding the
reorganization and systems installation expense, increased to 11.3% for the six
months ended June 30, 1998.
Interest expense decreased by 38.9% to $128,844 for the six months ended
June 30, 1998 from $211,047 for the six months ended June 30, 1997. This
decrease was attributable primarily to the notes related to the purchase of
treasury stock; to the ESOP stock acquisitions; and, to the retirement of
certain other equipment related notes. As a percentage of net patient revenues,
interest expense decreased to 6.9% for the six months ended June 30, 1998 from
11.6% for the six months ended June 30, 1997.
Other expenses include factoring fees and miscellaneous income and
expenses. The Company is slowly reducing its use of the factoring firm and that
expense has decreased to $34,161 for the six months ended June 30, 1998 from
$51,318 for the same period in 1997. Factoring fees, as a percentage of net
patient revenues decreased from 3.0% in 1997 to 1.8% in 1998.
Net loss decreased by 36.1% to a net loss of $65,220 for the six months
ended June 30, 1998 from net loss of $102,054 for the comparable prior year
period. This decrease is due primarily to reduction of operating expenses and
the decrease in interest expense. Net income, excluding the reorganization and
systems installation expense of $213,000 (less the related tax effect of
$76,000) would have been approximately $72,000, compared to a net loss for the
six months ended June 30, 1997, of $102,054.
LIQUIDITY AND CAPITAL RESOURCES
PhyMed was started on an original investment in 1990 of $1,000 and has
used factoring of account receivables as a means of financing internal growth
and operations. Equipment has been acquired through capital leases over the
years. The same factoring company has been used throughout PhyMed's history. In
February 1998 the factoring company demanded that PhyMed repay approximately
$200,000 in uncollected old accounts. A compromise was reached reducing the
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advance from the factor from 54% to 38%, approximately, of the face value of the
claims submitted until the old balance is retired. PhyMed only submits worker's
compensation claims for factoring. These represent approximately 25% of total
claims filed. The total amount outstanding to the factoring firm has been
reduced from $758,755 at December 31, 1997 to $561,404 at June 30, 1998.
The reduction of indebtedness to the factoring company during the six
months ended June 30, 1998 resulted in $197,351 less cash available for
operations. This coupled with the one-time expenses related to the
reorganization and a systems installation resulted in an increase in accounts
payable and accrued expenses at June 30, 1998. PhyMed is in default on certain
equipment financings with Siemens Credit Corporation ("Siemens") and a
subsidiary of DVI Capital ("DVI"). These financings constitute $1,985,268 of the
$2,452,398 of long-term debt (including current maturities) reflected on the
Company's June 30,1998 Consolidated Balance Sheet. Additionally the real estate
lease related to the premises occupied by PhyMed is in default and at November
30, 1998 was in arrears approximately $49,269.44. Although PhyMed has made
payments as its cash flow permitted, at June 30, 1998, these financings and
lease are over 90 days in arrears, and under the financing terms are in default.
At June 30, 1998 PhyMed was continuing to make partial payments on these
obligations and was negotiating with DVI and Siemens about restructuring these
financings. In August 1998, DVI filed suit seeking payment on its financing and
obtained an injunction against PhyMed disbursing funds without the consent of
DVI. During the existence of the injunction, DVI has consented to the payment of
payroll and other essential expenses, as well as payment to DVI. During this
period, payments have not been paid to Siemens and are in arrears $295,446 at
November 30, 1998. It has not threatened to initiate legal proceedings.
At November 30, 1998 PhyMed still owes DVI approximately $264,338. PhyMed
is currently negotiating to refinance this indebtedness. DVI has indicated it
may apply to the court for the appointment of a receiver for PhyMed. If DVI were
to file such an application, Siemens could be expected to join in the
application, too. If the court granted the application, the present management
of PhyMed and Tatonka Energy, Inc. would lose control of PhyMed until Siemens
and DVI, their attorneys and the cost of the receivership had been paid in full.
If the Company, through PhyMed, were unable to continue to have the use of the
equipment, the lack of availability would have a material adverse effect on the
Company.
In addition, PhyMed is working with other financing sources to refinance
its accounts receivable, which would pay-off the present factoring company's
balance as of November 30, 1998, of approximately $365,883 and provide
approximately $435,000 in working capital. There is no assurance that any
restructuring or refinancing will take place or that it will take place in terms
favorable to PhyMed.
The defaults under the equipment financing and real estate lease also
constitute a non-monetary event of default under PhyMed's 1993 loan agreement
with Alan Luckett. He is a founder and former 50% owner of PhyMed. This credit
is for the installment payout portion of the price paid for the
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1993 purchase of his stock by PhyMed and its Employee Stock Option Plan. On
October 24, 1998 Mr. Luckett signed a waiver of these non-monetary events of
default.
Management is developing a refinancing plan that it believes will allow
the Company to increase its financial strength; and, grow through acquisitions
and increase in same store sales. However, there is no assurance the Company
will be able to accomplish any of this, or do so profitably.
EFFECTS OF INFLATION
Inflation is not a material factor affecting the Company's business.
General operating expenses such as salaries and employee benefits are, however,
subject to normal inflationary pressures.
SEASONALITY
The Company's results of operations, have, in some years, varied
significantly from quarter to quarter, for reasons particular to each quarter.
For instance, hospital admissions and doctor visits (and, therefore, the
Company's imaging revenues) are typically lower during holiday periods, and at
other times when physicians traditionally take their own vacations.
GENERAL TRENDS AND UNCERTAINTIES
The Company's future revenues and results of operations may be
substantially affected by proposed reforms of the nation's healthcare system and
by potential reductions in reimbursement rates and policies imposed by federal
and state government and other third-party reimbursement programs (from which
the Company derives a material portion of its receipts). Continuing pressures on
pricing structures applicable to the Company's services, or inability to renew
existing contracts, could have the effect of reducing the Company's revenues and
operating profit margins. The Company is unable to predict the nature or extent
of any such changes and/or the effects thereof on the Company.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in Securities and Use of Proceeds
On April 3, 1998, George C. Barker, ("Barker"), individually and as
Trustee for the Phy.Med., Inc. Employee Stock Ownership Plan (the "ESOP"),
acquired control of the Company. Prior to such date, such parties owned all the
outstanding shares of Phy.Med., Inc., a Texas corporation
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("PhyMed"), and on such date they acquired from the Company, in the aggregate,
immediate ownership of and the right to receive an aggregate of 68,915,409
authorized but unissued shares of Common Stock, $.001 par value, of the Company,
as presently constituted, which, if all such shares were presently outstanding,
would constitute 87.9% of the Company's then outstanding 78,430,965 shares of
Common Stock (86.9% of the 79,331,896 shares which would be outstanding on a
fully diluted basis).
The terms of the acquisition contemplate a 1-for-10 reverse stock split
which will become effective shortly after the 1998 Annual Meeting of
Shareholders. Upon the effectiveness of such reverse split, Barker and the ESOP
will own 6,891,541 shares of 7,843,097 shares, $.01 par value, outstanding
(7,933,190 shares on a full diluted basis). (The Company will continue to have
50,000,000 shares of Common Stock authorized.)
On March 6, 1998, certain parties entered into an Agreement and Plan of
Reorganization and Merger (the "Agreement"). The parties were Barker and the
ESOP, in their capacity as the shareholders of PhyMed, PhyMed itself, the
Company and Tatonka Subsidiary, Inc., a newly-formed and wholly-owned subsidiary
of the Company. The Agreement was consummated on April 3, 1998, by means of a
statutory merger of Tatonka Subsidiary, Inc. into PhyMed, with PhyMed being the
surviving corporation. As a result of the merger, PhyMed is now an 80% owned
subsidiary of the Company, and the ESOP owns the remaining 20% of PhyMed.
Prior to the merger, there were 800 common shares of PhyMed outstanding,
of which 500 were owned by Barker, individually, and 300 were owned by the ESOP.
In the merger, the 500 PhyMed common shares owned by Barker were converted
into immediate ownership of and the right to receive 53,840,163 shares of Common
Stock of the Company, and 140 of the 300 PhyMed common shares owned by the ESOP
were converted in like manner into 15,075,246 shares of Common Stock of the
Company. The remaining 160 PhyMed common shares held by the ESOP now constitute
the 20% of PhyMed common shares not owned by the Company.
The Company has 50,000,000 shares of Common Stock authorized for issuance
and, at the time of the merger, had 9,916,487 shares issued and outstanding or
reserved for issuance. To the extent that the terms of the merger would have
resulted in the issuance of more than 50,000,000 shares, the excess over
50,000,000 shall not be issued until such time as the stockholders of the
Company have approved an appropriate amendment to the Company's Certificate of
Incorporation. Prior to such approval, Barker and the ESOP will continue to have
a contractual right, pursuant to the Agreement and the Articles of Merger filed
with the Secretary of State of Texas at the time of the merger, to receive such
excess shares, subject to such required stockholder approval.
In summary, Barker and the ESOP received an aggregate of 39,583,513 shares
of the Company at the time of the merger, the same being 80.6% of the 49,099,069
shares then outstanding. Of such number, Barker, individually, received
30,924,620 shares (approximately 63%) of the outstanding shares, and the ESOP
received 8,658,893 shares (approximately 17.6%), both percentages on a
fully-diluted basis.
13
<PAGE>
Barker and the ESOP continue to have a contractual right to receive, in
the aggregate, an additional 29,331,896 shares, which will result in their
having, collectively, 86.9% of the then outstanding Common Stock of the Company
on a fully-diluted basis. Of such additional shares, 22,915,544 will be received
by Barker, individually, and 6,416,352 shares will be received by the ESOP.
The parties to the Agreement contemplate that the Board of Directors and
stockholders of the Company will approve an amendment to the Company's
Certificate of Incorporation approving a 1- for-10 reverse stock split
(including an increase in the par value of the Common Stock from $.001 to $.01)
and a change of the Company's name to "PhyMed, Inc.". Upon the effectiveness of
such reverse stock split, all outstanding shares of common stock of the Company,
including the shares which were issued to Barker and the ESOP upon the
effectiveness of the merger, will represent one-tenth (1/10th) as many shares.
In addition, all shares reserved for issuance, including the shares which the
Company will still have a contractual obligation to issue to Barker and the
ESOP, will become rights to receive one-tenth (1/10th) as many shares. The
unissued shares due Barker and the ESOP from the merger will then be immediately
issued because the Company will then have a sufficient number of authorized but
unissued shares to issue for this purpose.
Item 3. Defaults Upon Senior Securities
See Item 2(b), "Liquidity and Capital Resources."
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
1.1 Agreement and Plan of Reorganization and Merger dated as of March
6, 1998 by and among Tatonka Energy, Inc. Tatonka Energy
Subsidiary, Inc. Phy. Med., Inc. and the Stockholders of PhyMed,
Inc. (Exhibit 1)*
1.2 Amendment to Agreement and Plan of Reorganization and Merger
dated as of March 6, 1998, by and among Tatonka Energy, Inc.
Tatonka Energy Subsidiary, Inc. Phy.
14
<PAGE>
Med., Inc. and the Stockholders of PhyMed, Inc.
3.1 Loan and Security Agreement by and between Phymed, Inc., as
Borrower, and Patrick A. Luckett, as Lender, and George C.
Barker, as Guarantor, dated September 21, 1993
3.2 $800,000 Note dated September 21, 1993, from PhyMed, Inc. to
Patrick A. Luckett
3.3 $800,000 Note dated September 21, 1993, from Phy.Med., Inc.
Employee Stock Ownership Plan to Patrick A. Luckett
3.4 Note Purchase Agreement (undated but) executed September 21,
1993, by and between Patrick A. Luckett, Phy.Med., Inc. and the
Employee Stock Ownership Plan of Phy.Med., Inc.
3.5 Guaranty Agreement dated September 21, 1993, signed by George C.
Barker in favor of Patrick Alan Luckett
3.6 Limited Waiver of Certain Rights and Remedies executed by Patrick
Alan Luckett on October 24, 1998.
10.1 Employment Agreement dated October 1, 1993, between Phy.Med.,
Inc. and George C. Barker (assumed by the Company on April 3,
1998) (Exhibit 10.5)**
10.2 Stock Option Agreement dated May 4, 1998, between the Company and
George C. Barker.(Exhibit 10.6)**
10.3 Stock Option Agreement dated May 4, 1998, between the Company and
Joe R. Love. (Exhibit 10.7)**
10.4 Stock Option Agreement dated May 4, 1998, between the Company and
Joe P. Foor. (Exhibit 10.8)**
10.5 Letter agreement dated March 31, 1998, by and among the Company
and CCDC, Inc.
15
<PAGE>
and Joe Foor. (Exhibit 10.9)**
10.6 Loan and Security Agreement (undated) between Medical Equipment
Finance Company and Phy.Med., Inc. [This is the "DVI" financing
document. Medical Equipment Finance Company is a subsidiary of
DVI.]
10.7 Equipment Lease Agreement, effective July 11, 1995, between
Siemens Credit Corporation and Phy.Med., Inc.
10.8 Promissory Note of Phy.Med., Inc. (undated) to Siemens Credit
Corporation in the original principal amount of $175,000
10.9 (Real Estate) Lease Agreement made and entered in as of March 15,
1996, between Cocanougher Feed Co., Inc. d/b/a Cocanougher Asset
Management, ("Lessor"), and PhyMed, Inc., d/b/a PhyMed Diagnostic
Imaging Center ("Lessee").
27 Financial Data Schedule
- -------------------------------------------
* Incorporated by reference to the exhibit number set forth in
parentheses, which exhibit was filed with the Company's Form 8-K filed April 20,
1998)
** Incorporated by reference to the exhibit number set forth in
parentheses, which exhibit was filed with the Company's Form 10-KSB for the
fiscal year ended December 31, 1997. The Form 10- KSB was filed on June 16,
1998.
(b) Reports on Form 8-K
Not applicable
16
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
has caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
TATONKA ENERGY, INC.
Registrant
Date: December 3, 1998 BY: /s/ George C. Barker
-----------------------
George C. Barker
Chairman of the Board, President and Chief
Executive Officer (Principal Executive Officer
and Principal Financial Officer)
17
<PAGE>
INDEX OF EXHIBITS
Exhibit No. Description
----------- -----------
1.1 Agreement and Plan of Reorganization and Merger dated as of March
6, 1998 by and among Tatonka Energy, Inc. Tatonka Energy
Subsidiary, Inc. Phy. Med., Inc. and the Stockholders of PhyMed,
Inc. (Exhibit 1)*
1.2 Amendment to Agreement and Plan of Reorganization and Merger
dated as of March 6, 1998, by and among Tatonka Energy, Inc.
Tatonka Energy Subsidiary, Inc. Phy. Med., Inc. and the
Stockholders of PhyMed, Inc.
3.1 Loan and Security Agreement by and between Phymed, Inc., as
Borrower, and Patrick A. Luckett, as Lender, and George C.
Barker, as Guarantor, dated September 21, 1993
3.2 $800,000 Note dated September 21, 1993, from PhyMed, Inc. to
Patrick A. Luckett
3.3 $800,000 Note dated September 21, 1993, from Phy.Med., Inc.
Employee Stock Ownership Plan to Patrick A. Luckett
3.4 Note Purchase Agreement (undated but) executed September 21,
1993, by and between Patrick A. Luckett, Phy.Med., Inc. and the
Employee Stock Ownership Plan of Phy.Med., Inc.
3.5 Guaranty Agreement dated September 21, 1993, signed by George C.
Barker in favor of Patrick Alan Luckett
3.6 Limited Waiver of Certain Rights and Remedies executed by Patrick
Alan Luckett on October 24, 1998.
10.1 Employment Agreement dated October 1, 1993, between Phy.Med.,
Inc. and George C. Barker (assumed by the Company on April 3,
1998) (Exhibit 10.5)**
18
<PAGE>
10.2 Stock Option Agreement dated May 4, 1998, between the Company and
George C. Barker.(Exhibit 10.6)**
10.3 Stock Option Agreement dated May 4, 1998, between the Company and
Joe R. Love. (Exhibit 10.7)**
10.4 Stock Option Agreement dated May 4, 1998, between the Company and
Joe P. Foor. (Exhibit 10.8)**
10.5 Letter agreement dated March 31, 1998, by and among the Company
and CCDC, Inc. and Joe Foor. (Exhibit 10.9)**
10.6 Loan and Security Agreement (undated) between Medical Equipment
Finance Company and Phy.Med., Inc. [This is the "DVI" financing
document. Medical Equipment Finance Company is a subsidiary of
DVI.]
10.7 Equipment Lease Agreement, effective July 11, 1995, between
Siemens Credit Corporation and Phy.Med., Inc.
10.8 Promissory Note of Phy.Med., Inc. (undated) to Siemens Credit
Corporation in the original principal amount of $175,000
10.9 (Real Estate) Lease Agreement made and entered in as of March 15,
1996, between Cocanougher Feed Co., Inc. d/b/a Cocanougher Asset
Management, ("Lessor"), and PhyMed, Inc., d/b/a PhyMed Diagnostic
Imaging Center ("Lessee").
27 Financial Data Schedule
- -------------------------------------------
* Incorporated by reference to the exhibit number set forth in
parentheses, which exhibit was filed with the Company's Form 8-K filed April 20,
1998)
** Incorporated by reference to the exhibit number set forth in
parentheses, which exhibit was filed with the Company's Form 10-KSB for the
fiscal year ended December 31, 1997. The Form 10- KSB was filed on June 16,
1998.
19
EXHIBIT 1.2 TO FORM 10-QSB
AMENDMENT TO
AGREEMENT AND PLAN OF REORGANIZATION AND MERGER
This Amendment to Agreement and Plan of Reorganization and Merger (this
"Amendment"), is dated as of March 6, 1998, by and among TATONKA ENERGY, INC.,
an Oklahoma corporation ("Tatonka"), TATONKA ENERGY SUBSIDIARY, INC., a Texas
corporation and a wholly-owned subsidiary of Tatonka ("Tatonka Sub"), PHY. MED.,
INC., a Texas corporation (the "Company") and GEORGE C. BARKER, a Texas resident
("Barker") and the EMPLOYEE STOCK OWNERSHIP PLAN OF PHY. MED., INC. (the
"ESOP")(Barker and the ESOP are collectively the "Stockholders").
Recitals
A. The parties have entered into an Agreement and Plan of Reorganization
and Merger dated as of March 6, 1998 (the "Agreement"), pursuant to which
Tatonka, Tatonka Sub, and the Company intend that Tatonka Sub be merged with and
into the Company, and that the Company be the sole surviving corporation
(sometimes called the "Surviving Corporation"), and Tatonka Sub be the
disappearing corporation (sometimes called the "Disappearing Corporation").
B. Tatonka, Tatonka Sub and the Company have each determined to engage in
the transactions contemplated hereby, pursuant to which (i) Tatonka Sub will
merge with and into the Company upon the terms and conditions set forth in this
Agreement and in accordance with the laws of the State of Texas, (ii) 80% of the
outstanding shares of the Company Common Stock shall be converted at such time
into shares of common stock, par value $.001 per share, of Tatonka (the "Tatonka
Common Stock") as set forth in this Agreement, and (iii) the Company shall
become an 80% owned subsidiary of Tatonka.
C. Recital F of the Agreement incorrectly states that Tatonka has
9,916,487 shares of Common Stock issued and outstanding or reserved for
issuance, when the correct number is 10,416,487 shares issued and outstanding or
reserved for issuance.
D. Section 2.11 contains several erroneous numbers of shares and
percentages.
E. "Exhibit A-Merger Consideration" to Exhibit "A" to the Articles of
Merger erroneously
20
<PAGE>
states:
"The Stockholders shall receive the following Tatonka Common Stock as
their Merger Consideration:
George C. Barker.........................................54,230,788 shares
The ESOP..................................................5,184,621 shares
Total Merger Consideration..............................69,415,409 shares"
NOW, THEREFORE, in consideration of the preceding recitals and their
mutual desire that the Agreement read correctly, the parties mutually agree to
correct said errors, as follows:
1. Recital F correctly reads as follows:
"F. Tatonka has 50,000,000 shares of Common Stock authorized for
issuance and 10,416,487 shares issued and outstanding or reserved for
issuance. Issuance at the effective Time of all the shares representing
the Merger Consideration would result in the issuance of more than such
50,000,000 authorized shares."
2. Section 2.11 of Exhibit "A" attached to the Articles of Merger
correctly reads as follows:
"Section 2.11 Percentage Protection Provision. The parties to this
Agreement agree that they are entering into this Agreement with the
intention that Barker and the ESOP will have at least 86.87% of the shares
of Tatonka Common Stock outstanding after (a) the Effective Time and (b)
the conversion of all the Tatonka Preferred Stock, but before the exercise
of any of the three stock options contemplated to be issued by Tatonka
(after the Effective Time) and referred to in Section 4.4 of this
Agreement. The numbers of shares of Tatonka Common Stock set forth on
Exhibit A as being issued to Barker and the ESOP at the Effective Time are
based on the assumptions that (a) no more than 9,515,556 shares of Tatonka
Common Stock, as presently constituted, will be outstanding at the
Effective Time (exclusive of any shares that may be issued upon conversion
of Tatonka Preferred Stock prior to the Effective Time), (b) no more than
900,931 shares will be issued upon conversion of all the Tatonka Preferred
Stock, (c) no other shares of Tatonka Common Stock will be issued by
virtue of any rights to receive any shares of Tatonka Common Stock or
other securities of Tatonka that exist at the date of this Agreement or
will exist at the Effective Time, and (d) the aggregate of 10,416,487
shares enumerated in (a) and (b) above will constitute no more than 13.13%
of the shares of Tatonka Common Stock outstanding after the events
described above.
21
<PAGE>
The parties to this Agreement covenant and agree that if more than the
10,416,487 shares of Tatonka Common Stock referred to in the foregoing
paragraph are ultimately issued by Tatonka as a consequence of the matters
referred to in such paragraph, Tatonka shall issue to Barker and the ESOP,
pro rata, such additional number of shares of Tatonka Common Stock as
shall be necessary to increase their collective ownership percentage of
all shares of Tatonka Common Stock outstanding after the events described
above to 86.87%."
3. (2) "Exhibit A-Merger Consideration," which is attached to Exhibit "A"
to the Articles of Merger, correctly reads as set forth below:
"Exhibit A - Merger Consideration
(As Corrected)
The Stockholders shall receive the following Tatonka Common Stock as their
Merger Consideration:
George C. Barker.........................................53,840,164 shares
The ESOP.................................................15,075,245 shares
Total Merger Consideration..............................68,915,409 shares"
IN WITNESS WHEREOF, the parties have duly executed this Amendment to
Agreement and Plan of Reorganization and Merger as of the date first written
above.
TATONKA: TATONKA ENERGY, INC.
By: /s/ Joe Foor
-----------------------------
Joe Foor
President
TATONKA SUB: TATONKA ENERGY SUBSIDIARY, INC.,
22
<PAGE>
By: /s/ Joe Foor
-----------------------------
Joe Foor
President
THE COMPANY: PHY. MED., INC.
By: /s/ George C. Barker
-----------------------------
George C. Barker
President
BARKER:
/s/ George C. Barker
-----------------------------
George C. Barker
ESOP: EMPLOYEE STOCK OWNERSHIP
PLAN OF PHY. MED, INC.
By: /s/ George C. Barker, Trustee
-----------------------------
George C. Barker, Trustee
23
EXHIBIT 3.1 TO FORM 10-QSB
LOAN AND SECURITY AGREEMENT
by and between
Phymed, Inc.
as Borrower
and
Patrick A. Luckett
as Lender
and George C. Barker
as Guarantor
$800,000.00
September 21, 1993
24
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE 1.
DEFINITIONS AND REFERENCES
.....................................................................5
ARTICLE 2.
THE LOAN.............................................................11
Section 2.1. Maximum Principal Debt..........................11
Section 2.2. Note............................................11
Section 2.3 Interest Rate...................................11
Section 2.4 Proceeds........................................11
Section 2.5 Term............................................11
Section 2.6. Voluntary Prepayment............................11
Section 2.7 Mandatory Prepayments...........................11
ARTICLE 3.
INTEREST.............................................................12
Section 3.1. Computation of Interest.........................12
Section 3.2. Maximum Interest................................12
Section 3.3. Interest after Default..........................13
ARTICLE 4.
PAYMENT..............................................................13
Section 4.1. Payment.........................................13
Section 4.2 Place of Payment................................13
Section 4.3 Payment Due on Non-Business Days................13
Section 4.4 Principal and Interest Payments.................13
ARTICLE 5
CONDITIONS TO FUNDING................................................14
Section 5.1. Closing Conditions..............................14
Section 5.2. Conditions to Each Advance......................16
REPRESENTATIONS AND WARRANTIES.......................................17
COVENANTS OF BORROWER AND GUARANTORS.................................22
SECURITY AGREEMENT...................................................30
EVENTS OF DEFAULT AND REMEDIES....................................32
25
<PAGE>
MISCELLANEOUS........................................................38
EXHIBITS
A. Form of Note
B. Form of Opinion of Counsel to Borrower
C. Form of Guaranty Agreement
D. Form of Waiver and Consent of Landlord
26
<PAGE>
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "Agreement") is made as of the ____
day of September 21, 1993 [sic], between Phy. Med., Inc., a Texas corporation
("Borrower"), Patrick A. Luckett, ("Lender") and George C. Barker ("Guarantor").
W I T N E S S E T H:
WHEREAS, Borrower, Phy.Med., Inc. Employee Stock Ownership Plan ("ESOP")
have agreed to purchase from Patrick A. Luckett 500 shares of stock ownership
interest in Borrower for Two Million Dollars ($2,000,000.00); and
WHEREAS, Patrick A. Luckett has agreed to sell 200 shares of his stock
ownership interest in Borrower to Borrower for Eight Hundred Thousand Dollars
($800,000.00) and 300 shares of his stock ownership interest in Borrower to ESOP
for One Million Two Hundred Thousand Dollars ($1,200,000.00); and
WHEREAS, Borrower has agreed to pay for the stock it is purchasing with
the Note, as hereinafter defined; and
WHEREAS, ESOP has agreed to pay for the stock with a note and security
agreement to be executed in conjunction with the execution of this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Borrower, Lender and Guarantor
hereby agree as follows:
ARTICLE 1.
DEFINITIONS AND REFERENCES
The following definitions shall apply to the following terms wherever used
in the Loan Documents (as hereinafter defined), except where the terms are
expressly defined otherwise or where the context clearly requires otherwise:
"Account Debtor" means any Person or Persons having a contractual
arrangement with Borrower as the primary obligor(s) and any cosigner(s) on or in
respect of any Receivable.
27
<PAGE>
"Advance" means extension of credit as part of the Purchase Price for the
purchase of the Stock in the amount of $800,000.00.
"Advance Date" means the date of this Agreement.
"Affiliate" means, as to any Person, each other Person that directly or
indirectly (through one or more intermediaries or otherwise) controls, is
controlled by, or is under common control with, such Person, including but not
limited to any parent, subsidiary, joint venture or partnership and any other
entity or corporation at least fifteen percent (15%) of the voting shares or
assets of which are owned directly or indirectly by Borrower or any or all, in
the aggregate or individually, guarantor.
"Agreement" means this Loan and Security Agreement, with any and all
exhibits and schedules attached hereto and all written and executed amendments,
supplements and modifications hereof.
"Base Interest Rate" means the rate of ten percent (10%) per annum.
"Blocked Accounts" means the accounts described in Section 2.10 hereof.
"Borrower" means Phymed, Inc., a Texas corporation.
"Business Day" means a day, other than a Saturday or Sunday, on which
commercial banks are open for business with the public in Dallas, Texas.
"Capital Expenditures" means all of Borrower's capital expenditures,
including, but not limited to, the purchase of vehicles, real estate, buildings
and leasehold interests.
"Closing Date" means the date referred to in the preamble of this
Agreement, which shall be the effective date of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, together with all regulations, rulings and interpretations thereof and
thereunder by the Internal Revenue service or its successor.
"Collateral" means all property of any kind which is subject to a Lien in
favor of Lender.
"Compensation" means the entire amount of salaries and wages paid on a
calendar year basis including, but not limited to, overtime payments and
commissions before reductions on account of any withholding, such as income
taxes and social security taxes, and also including management fees, consulting
fees, non-business related expenses, bonuses, dividends or other distributions
on equity securities, vehicle, clothing or other allowances, insurance premiums,
retirement benefits and contributions to pension or profit sharing plans and any
other prerequisites of employment or ownership but excluding reasonable expense
account allowances.
"Debt" means, as to any Person, all indebtedness, liabilities and
obligations of such Person,
28
<PAGE>
excluding unearned or deferred revenues, whether primary or secondary, direct or
indirect, absolute or contingent.
"Default Rate" means the lesser of the Base Rate plus four percent (4%)
per annum or the Highest Lawful Rate.
"EBITDA" means Borrower's Net Income plus (a) interest expense, (b) tax
expenses (but less tax refunds), (c) depreciation expense and (d) amortization
expense.
"Environmental Activity" shall mean any storage, holding, manufacture,
emission, discharge, generation, processing, treatment, abatement, removal,
disposition, handling, transportation or disposal, or any actual, proposed or
threatened release of any "{Hazardous Materials" from, under, into or on any
property now or formerly owned, leased, or operated by the Borrower, including
but not limited to (i) the migration or emanation of "Hazardous Materials" from
such property onto or into the environment beyond the physical boundaries of the
property; (ii) the off-site disposal of Hazardous Materials from such property'
and (iii) including but not limited to activity occurring in connection with
ambient air, surface and subsurface soil conditions, and all surface and
subsurface waters.
"Environmental Condition" shall mean (i) the presence or existence in, on,
at, or under any property now or formerly owned, leased, or operated by the
Borrower of any Hazardous Materials, underground or above-ground storage tanks,
wells, covered-over surface impoundments or similar areas, any "facility," as
that term is defined under applicable Environmental Requirements, or wetlands
and (ii) the presence or existence in, on, at, or under the environment beyond
the physical boundaries of such property of any Hazardous Materials, which
migrated or emanated from the property.
"Environmental Costs" shall mean any of the following which arise in any
manner in connection with Environmental Activity or an Environmental Condition,
regardless of whether based in contract, tort, implied or express warranty,
strict liability, Environmental Requirement or otherwise: all liabilities,
losses, judgments, damages, punitive damages, consequential damages, treble
damages, costs and expenses (including, without limitation, the reasonable fees
and disbursements of legal counsel and environmental consultants, all costs
related to the performance of any required or necessary assessments,
investigations, remediation, response, containment, closure, restoration,
repair, cleanup or detoxification of any property now or formerly owned, leased,
or operated by the Borrower or any part thereof, the preparation and
implementation of any maintenance, monitoring, closure, remediation, abatement
or other plans required by an environmental agency or by Environmental
Requirements and any other costs recovered or recoverable under any
Environmental Requirement), fines, penalties or monetary sanctions.
Environmental Costs shall include, without limitation, damages for personal
injury or death, or injury to property or to natural resources.
"Environmental Requirements" shall mean all Laws relating to pollution,
the protection or regulation of human health, natural resources, or the
environment, or the emission, discharge, release or threatened release of
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or waste or "Hazardous Materials" into the environment (including,
without limitation, ambient air, surface water, ground water or land or soil).
29
<PAGE>
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, together with all rules and regulations promulgated
with respect thereto.
"ERISA Plan" means any pension benefit plan subject to Title IV of ERISA
maintained by Borrower or any Affiliate thereof to which Borrower is required to
contribute.
"Event of Default" has the meaning given it in Section 9.1.
"Fiscal Year" means a twelve-month period ending on December 31, of any
year.
"GAAP" means those generally accepted accounting principles, applied on a
consistent basis, as set forth in Opinions of the Accounting Principles Board of
the American Institute of Certified Public Accountants or in statements of the
Financial Accounting Standards Board and/or their successors which are
applicable in the circumstances as of the date in question, and the requisite
that such principles be applied on a consistent basis means that the accounting
principles observed in a current period are comparable in all material respects
to those applied in a preceding period.
"Guarantor" means any Person which has guaranteed, or may in the future
guarantee, some or all of the Indebtedness including, without limitation, the
following: George C. Barker.
"Guaranty" means the Guaranty Agreement, as may be amended from time to
time, executed by the Guarantor in connection herewith substantially in the form
of Exhibit "C" hereto.
"Hazardous Materials" shall mean any substance which is or contains (i)
any "hazardous substance" as now or hereafter defined in ss.101(14) of the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended ("CERCLA") (42 U.S.C. ss.9601 et seq.) or any regulations promulgated
under CERCLA; (ii) any "hazardous waste" as now or hereafter defined in the
Resource Conservation and Recovery Act (42 U.S.C. ss.6901 et seq.) ("RCRA") or
regulations promulgated under RCRA; (iii) any substance regulated by the Toxic
Substances Control Act (15 U.S.C. ss.2601 et seq.); (iv) gasoline, diesel fuel,
or other petroleum hydrocarbons; (v) asbestos and asbestos containing materials,
in any form, whether friable or non-friable; (vi) polychlorinated biphenyls;
(vii) radon gas; and any additional substances or materials which are now or
hereafter classified or considered to be hazardous or toxic under environmental
Requirements or the common law, or any other applicable laws relating to any
property owned, leased, or operated by Borrower. Hazardous Materials shall
include, without limitation, any substance the presence of which on such
property (A) requires reporting, investigation or remediation under
Environmental Requirements; (B) causes or threatens to cause a nuisance on
adjacent property or poses or threatens to pose a hazard to the health or safety
of persons on any such property or adjacent property; or (C) which, if it
emanated or migrated from such property, could constitute a trespass.
30
<PAGE>
"Highest Lawful Rate" means the maximum nonusurious interest rate, if any,
that at any time or from time to time may be contracted for, taken, reserved,
charged or received on the Loan under the Laws of the United States and the Laws
of such states as may be applicable thereto which are presently in effect or, to
the extent allowed by Law under such applicable Laws of the United States and
the Laws of such states, which may hereafter be in effect and which allow a
higher maximum nonusurious interest rate than applicable Laws now allow.
"Indebtedness" means the sum of all Debt from time to time owing by
Borrower to Lender under or pursuant to any of the Loan Documents.
"Inventory" means all goods in operable or repairable condition, new or
used, of whatever kind or nature, wherever located, now owned or hereafter
acquired, and all returns, repossessions, exchanges, substitutions,
replacements, attachments, parts, accessories and accessions thereto and
thereof, and all other goods used or intended to be used in conjunction
therewith, held for lease or rental in the ordinary course of the business of
Borrower, and all proceeds thereof (whether in the form of cash, instruments,
chattel paper, general intangibles, accounts or otherwise).
"Law or Laws" means statute(s), law(s), ordinance(s), regulation(s),
order(s), writ(s), injunction(s) or decree(s) of any political or governmental
body or Tribunal (federal, state, county, municipal, foreign, or domestic or
otherwise) having competent jurisdiction.
"Lender" means Patrick A. Luckett, or any successor thereto or assignee
thereof.
"Lien" means, with respect to any property or assets, any right or
interest therein of a creditor to secure Debt owed to him or any other
arrangement with such creditor which provides for the payment of such Debt out
of such property or assets or which allows him to have such Debt satisfied out
of such property or assets prior to the general creditors of any owner thereof,
including without limitation, any lien, mortgage, security interest, pledge,
deposit, production payment, rights of a vendor under any title retention or
conditional sale agreement or lease substantially equivalent thereto, or any
other charge or encumbrance, whether arising by law or agreement or otherwise,
but excluding any right of offset which arises without agreement in the ordinary
course of business.
"Loan" means the loan made by Lender pursuant to Article 2 and evidenced
by the Note.
"Loan Maturity Date" means ______________, unless the Loan is terminated
prior to such date, pursuant to Section 9.2.
"Loan Documents" means this Agreement, the Note, the Guaranty and all
other agreements, certificates, legal opinions and other documents, instruments
and writings (other than term sheets, commitment letters, or similar documents
used in the negotiation hereof) heretofore or hereafter delivered in connection
herewith or therewith.
"Maximum Principal Debt" means the maximum amount to be advanced by Lender
hereunder as determined in accordance with Section 2.1 hereof.
"Monthly Payment Date" means the tenth (10th) day of each calendar month
during the term of
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this Agreement.
"Net Income" means, for any period for which the amount thereof is to be
determined, the gross revenues of Borrower on a consolidated basis for such
period less all expenses and other proper charges (including taxes on income),
determined in accordance with GAAP but excluding any extraordinary gain or loss
as determined in accordance with GAAP.
"Net Worth" means the total stockholder's equity of Borrower, as
determined in accordance with GAAP, including, but not limited to, contributed
capital stock, additional paid in capital and current and prior period retained
earnings less treasury stock and shareholder distributions.
"Note" means the promissory note of Borrower, dated as of the Closing Date
and substantially in the form of Exhibit "A", duly executed and delivered to
Lender by Borrower and payable to the order of Lender in the principal amount of
$800,000.00, as modified or extended from time to time, and any promissory note
issued in exchange or replacement therefor.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
thereto.
"Person" means an individual, corporation, partnership, association, joint
stock company, trust or trustee thereof, estate or executor thereof,
unincorporated organization or joint venture, court or governmental unit or any
agency or subdivision thereof, or any other legally recognizable entity.
"Plan" means any employee benefit plan as defined in Section 3(3) of ERISA
and maintained by Borrower or an Affiliate of Borrower or any such Plan to which
Borrower or any of its Affiliates is required to contribute on behalf of any of
its employees or has within the preceding five (5) years made contributions.
"Potential Event of Default" means any event or condition which with
notice of the lapse of time or both would give rise to an Event of default.
"Receivables" means all of Borrower's right to payment arising out of or
related to the lease or rental of Inventory by the Borrower in the ordinary
course of business, including, but not limited to, all accounts, installment
sales contracts, accounts receivable, instruments, chattel paper and contract
rights, now owned or hereafter acquired by Borrower, and all proceeds therefrom.
"Reportable Event" means a reportable event as defined in Title IV of
ERISA.
"Stock" means 200 shares of common stock of Phymed, Inc. held in the name
of Lender and transfer to Borrower of even date herewith pursuant to the Stock
Purchase Agreement.
"Stock Purchase Agreement" means that certain Stock Purchase Letter
Agreement executed by Borrower, Guarantor and Lender, dated April 27, 1993, for
the purchase of the Stock by Borrower from Lender.
"Termination Event" means (a) the occurrence with respect to any ERISA
Plan of (i) a reportable event described in Sections 4043(b)(5) or (6) of ERISA
or (ii) any other reportable event
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described in Section 4043(b) of ERISA other than a reportable event not subject
to the provision for 30-day notice to the Pension Benefit Guaranty Corporation
pursuant to a waiver by such corporation under Section 4043(a) of ERISA, or (b)
the withdrawal of Borrower or of any Affiliate of Borrower from an ERISA Plan
during a plan year in which it was a "substantial employer" as defined in
Section 4001(a)(2) of ERISA, or (c) the filing of a notice of intent to
terminate any ERISA Plan or the treatment of any ERISA Plan amendment as a
termination under Section 4041 of ERISA, or (d) the institution of proceedings
to terminate any ERISA Plan by the Pension Benefit Guaranty Corporation under
Section 4042 of ERISA, or (e) any other event or condition which might
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any ERISA Plan.
"Tribunal" means any agency, board, business, commission, court,
department, instrumentality or tribunal of any political or government authority
having competent legislative, judicial or arbitral jurisdiction."
ARTICLE 2.
THE LOAN
Section 2.1. Maximum Principal Debt. Subject to the terms and conditions
of this Agreement, Lender agrees to make the Advance, pursuant to this Article
2.
Section 2.2. Note. The Loan made by Lender pursuant to this Article 2
shall be evidenced by the Note.
Section 2.3 Interest Rate. The outstanding principal balance of the
Note shall accrue interest at the Base Interest Rate.
Section 2.4 Proceeds. The repayment hereunder of the Loan is for the
payment of $800,000.00 of the purchase price for the purchase of the Stock.
Section 2.5 Term. The Loan shall be due and payable according to the
terms of the Note but no later than the Loan Due Date.
Section 2.6. Voluntary Prepayment. At its option on any Business Day,
Borrower may prepay to Lender the principal balance of the Loan in whole or in
part; provided, however, that any partial voluntary prepayment of principal
shall be applied to principal payments due in the reverse order of maturity
(i.e.: the last principal payment due shall be credited first).
Section 2.7 Mandatory Prepayments. In the event Borrower sells,
transfers, assigns or otherwise disposes of all or any portion of the
Collateral, other than in the ordinary course of business, Borrower shall pay
immediately to Lender the proceeds of any such sale, transfer or assignment as a
prepayment of principal of the Loan. Additionally, in the event Borrower makes a
distribution of earnings to its shareholders (excluding any contribution to a
deferred compensation plan indicating an employee stock ownership plan),
Borrower shall pay immediately to Lender an amount equal to such distribution to
its shareholders as a prepayment of principal of the Loan.
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ARTICLE 3.
INTEREST
Section 3.1. Computation of Interest. Subject to the provisions of Section
3.2, all interest payable hereunder shall be computed for the actual number of
days elapsed during any period for which interest is calculated (including the
first day and excluding the last day) on the basis of a year consisting of three
hundred sixty (360) days. The interest payable on the outstanding principal
balance of the Loan shall be calculated by first determining the amount of
interest on the principal balance of the Loan outstanding from time to time at
the Base Interest Rate hereunder from the Closing Date through the date of
determination, then deducting the aggregate amount of interest previously paid
on such principal balance from time to time to determine the amount of interest
then payable. The principal balance of the Loan for the purpose of computing
interest shall be the principal balance of the Loan at the end of any Business
Day on which interest shall be computed hereunder.
If a rate of interest applicable to the Loan at any time would exceed the
Highest Lawful Rate but for the limitation contained in section 3.2, then the
actual rate of interest to accrue on the unpaid principal amount of the Loan
shall be limited to the Highest Lawful Rate, but any subsequent reductions in
such applicable rate shall not reduce the interest rate payable upon the unpaid
amount thereof below the Highest Lawful Rate until such time as the total amount
of interest accrued on the unpaid principal amount of the Loan equals the amount
of interest that would have accrued if such applicable rate had at all times
been in effect.
Section 3.2. Maximum Interest. It is the intention of the parties hereto
to conform strictly to the usury Laws in force that apply to this transaction.
Accordingly, all agreements among the parties hereto (including, without
limitation, the Loan Documents), whether now existing or hereafter arising and
whether written or oral, are hereby limited so that in no contingency, whether
by reason of acceleration of the maturity of the Loan or otherwise, shall the
interest (and all other sums that are deemed to be interest) contracted for,
charged or received by Lender with respect to the Loan and the Note, exceed the
Highest Lawful Rate. If, from any circumstance whatsoever, interest under the
Loan and/or the Note would otherwise be payable in excess of the Highest Lawful
Rate, and if from any circumstance Lender shall ever receive anything of value
deemed interest by applicable Law in excess of the Highest Lawful Rate, then
Lender's receipt of such excess interest shall be deemed a mistake and the same
shall, so long as no Event of Default shall be continuing, at the option of
Borrower, either be repaid to Borrower or credited to the unpaid principal;
provided, however, that if an Event of Default shall have occurred and be
continuing, and Lender shall receive excess interest during such period, then
Lender shall have the option of either crediting such excess amount to principal
or refunding such excess amount to Borrower. If the Loan is prepaid or the
maturity of the Loan is accelerated by reason of an election of Lender, then
unearned interest, if any, shall be canceled and, if theretofore paid, shall
either be refunded to Borrower or credited on the Loan, as the Lender elects.
All interest paid or agreed to be paid to Lender shall, to the extent allowed by
applicable Law, be amortized, prorated, allocated, and spread throughout the
full period until payment in full of the principal (including the period of any
renewal or extension) so that the interest for such full period shall not exceed
the Highest Lawful Rate. Notwithstanding that the
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parties hereto in good faith deem each and every fee provided by this Agreement
to be a bona fide fee for services rendered and to be rendered separate and
apart from the lending of money or the provision of credit, if any such fee is
ever determined by a Tribunal or by Lender to constitute interest, then the
treatment of such fee for usury purposes shall be controlled by the provisions
of this Section 3.2
Section 3.3. Interest after Default. Subject to Section 3.2 above, past
due principal, interest, fees, expenses and other sums due Lender from Borrower
shall accrue interest at the Default Rate until paid.
ARTICLE 4.
PAYMENT
Section 4.1. Payment. All payments and prepayments of principal, interest
and other charges or fees hereunder shall be made in lawful currency of the
United States of America in immediately available funds, without setoff,
counterclaim or deduction of any kind. Funds received later than 10:00 a.m.
Dallas, Texas time shall be deemed to have been received by Lender on the
following Business Day. Notwithstanding the foregoing, all items of payment,
solely for the purpose of determination of a Potential Event of Default or an
Event of Default, shall be deemed received upon actual receipt by Lender unless
the same is subsequently dishonored for any reason.
Section 4.2 Place of Payment. All payments and prepayments of principal,
interest and other charges hereunder to Lender shall be made at the principal
office of Lender in Dallas, Texas or at such other location as Lender shall
direct or upon Lender's request in accordance with Section 2.10 hereof.
Section 4.3 Payment Due on Non-Business Days. If any payment of principal
or interest on the Note, or if any other payment or fee provided for in the Loan
Documents, falls due on a day other than a Business Day, then such due date will
be extended to the next succeeding Business Day, unless otherwise required by
the provisions of this Agreement, and interest will accrue through the actual
date of such payment and be payable by Borrower in respect of any such extension
of principal.
Section 4.4 Principal and Interest Payments. Principal and interest
payments shall be due and payable as required in the Note pursuant to the terms
and provisions hereof.
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ARTICLE 5
CONDITIONS TO FUNDING
Section 5.1. Closing Conditions. The obligation of Lender to make the
Advance with respect to the Loan is conditioned upon prior satisfaction of all
requirements set forth in this Article 5 and upon the prior receipt by Lender of
the documentation set forth in this Section 5.1 (all of which shall be
satisfactory to Lender in its sole discretion):
(a) Articles of Incorporation and Certificates. Copies of the Articles
of Incorporation, and all amendments thereto, of Borrower, to be
accompanied by (i) a certificate of the Secretary of State of the state of
incorporation of Borrower dated not more than thirty (30) days prior to
the Closing Date, to the effect that such copies are correct and complete,
and (ii) a certificate of the Secretary of Borrower, dated as of the
Closing Date, to the effect that each such copy is correct and complete
and that no changes have occurred therein after the dates of the foregoing
official certificates;
(b) Bylaws. Copies of the bylaws, and all amendments thereto, of
Borrower, to be accompanied by a certificate, dated as of the Closing
Date, of the Secretary of Borrower that each such copy is correct and
complete.
(c) Good Standing. A certificate of the Comptroller or other
appropriate officer of the state of incorporation of Borrower bearing a
date not more than ten (10) days prior to the Closing Date, to the effect
that borrower is in good standing in the state of incorporation of
Borrower.
(d) Existence. A certificate of the Secretary of State or other
appropriate officer of the state of the state of incorporation of Borrower
bearing a date not more than ten (10) days prior to the Closing Date, to
the effect that Borrower is a corporation duly organized and existing
under the laws of the state of incorporation of Borrower;
(e) Incumbency. A certificate of incumbency naming all officers of
Borrower who will be authorized to execute or attest any of the loan
documents on behalf of Borrower executed by the Secretary of Borrower,
together with specimen signatures, dated as of the Closing Date;
(f) Resolutions. Copies of resolutions of the Board of Directors of
Borrower, satisfactory to Lender, approving the execution of this
Agreement and such of the Loan Documents to which Borrower is a party and
authorizing the performance of the obligations of Borrower contemplated in
this Agreement and in such other Loan Documents, accompanied by a
certificate of the Secretary of Borrower, dated as of the Closing Date,
that such copies are complete and correct copies of resolutions duly
adopted at a meeting of such Board of Directors, and that such resolutions
have not been amended, modified or revoked in any respect, and are in full
force and effect as of the Closing Date;
(g) Other Certificates. Certificates of Borrower's good standing and
qualification to do business, issued by appropriate officials in any state
in which Borrower owns property subject
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to the Loan Documents;
(h) Stock Purchase Documents. Documents which evidence the sale of the
Stock, including but not limited to, the Stock Purchase Agreement;
(i) Insurance. Evidence of endorsements or riders in favor of Lender
for all insurance policies maintained by Borrower in accordance with the
requirements of Section 6.20, together with loss payee endorsements from
such insurance companies with respect to insurance in favor of Lender
which provide that (i) the policy will remain in force for the benefit of
Lender for at least thirty (30) days after Lender receives written notice
of cancellation of same; (ii) the insurance carrier will not reduce or
cancel the policy at the request of the insured or amend the endorsement
or delete it without at least thirty (30) days prior written notice being
received by Lender; and (iii) the insurance cannot be invalidated as to
Lender by any act or neglect of the insured;
(j) Vehicle Titles. Evidence of the notation of the Lien of Lender on
all certificates of title for all motor vehicles owned by Borrower;
(k) Note. The Note;
(l) Guaranty. From the Guarantor, an absolute and unconditional
guaranty of the timely repayment of the Indebtedness (or a portion
thereof) and the due and punctual performance of the obligations of
Borrower hereunder, which shall be satisfactory to Lender in form and
substance. Borrower will cause each Guarantor to deliver to Lender,
simultaneously with his delivery of such guaranty, written evidence
satisfactory to Lender and his counsel that such Guarantor has taken all
action necessary to duly approve and authorize his execution, delivery and
performance of such guaranty and any other documents which he is required
to execute, and that such guaranty is valid, binding, and enforceable in
accordance with its terms;
(m) Stock Pledge Agreement. A Stock Pledge Agreement executed by the
Guarantor in favor of Lender.
(n) Opinion of Counsel. An executed opinion of counsel to Borrower and
Guarantor, dated as of the Closing Date and substantially in the form of
Exhibit "B" and to such other matters as Lender may reasonably request;
(o) Financing Statements, etc. All financing statements, mortgages,
deeds of trust and all other documents or instruments requested by Lender
to evidence the Liens granted by Borrower pursuant to the Loan Documents,
duly executed by the Borrower;
(p) Releases. Duly executed UCC-3 termination statements or similar
documents with respect to prior Liens on the Collateral;
(q) Leases. Copies of all leases (the "Leases") granting Borrower the
right to occupy each location at which it is conducting business;
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(r) Waiver and Consent of Landlord. A Landlord's Lien Waiver and
Consent for each Lease, substantially in the form of Exhibit "D" hereto;
and
(s) Other Documents. Any and all other documents or certificates
reasonably requested by Lender in connection with the execution of this
Agreement.
Section 5.2. Conditions to Each Advance. In addition to the conditions
precedent stated elsewhere herein, Lender shall not be obligated to make an
Advance unless:
(a) Advance Request. By the time specified in Section 2.4, Borrower
shall have delivered an Advance Request, duly executed, for such Advance
containing the certifications required herein;
(b) Representations. The representations and warranties made by
Borrower in any Loan Document are true and correct in all material
respects at and as if made as of the Advance Date;
(c) Articles of Incorporation and Bylaws. Lender shall have received
current copies of the items required to be delivered by Sections 5.1(a)
and (b) hereof if there has been any amendment to or revision of any such
items;
(d) No Default. On the Advance Date, no Event of Default, or Potential
Event of Default, has occurred and is continuing or would be caused by the
requested Advance;
(e) Compliance with Provisions. Borrower shall have performed and
complied in all material respects with all agreements and conditions
required to be performed or complied with by it herein or in any of the
Loan Documents at or prior to the time of the Advance;
(f) Necessary Approvals. All necessary authorizations and approvals by
or from any governmental agency or other third party to the transactions
contemplated by this Agreement required of Borrower shall have been duly
obtained and shall be in full force and effect on the Advance Date;
(g) Additional Evidence. If requested by Lender, Borrower shall have
delivered to Lender a certificate reasonably satisfactory to Lender
certifying any of the matters set forth in this Agreement which are
necessary to enable Borrower to qualify for the Advance;
(h) Use of Proceeds. The proceeds of such Advance shall be used for the
purposes set forth in Section 2.5; and
(i) Legal Limitation. Lender shall be permitted to make the Advance by
applicable Law.
ARTICLE 6.
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REPRESENTATIONS AND WARRANTIES
Borrower and Guarantor represents and warrants, as of the date hereof and
on the date of each Advance, the following:
Section 6.1. Corporate Existence and Qualification. Borrower is a
corporation duly organized, validly existing and in good standing under the laws
of the State of its incorporation. Borrower is duly qualified to transact
business as a foreign corporation and is in good standing in every jurisdiction
where it is doing business. Borrower has all requisite power, authority,
licenses and permits material to the ownership and operation of its respective
properties and to the carrying on of its respective business.
Section 6.2. Capacity. Borrower has all requisite corporate power and
authority to borrow under, to execute and deliver, and to perform under, the
Loan Documents to which it is a party.
Section 6.3. No Conflict. The execution and delivery of, and performance
under, the Loan Documents by Borrower (a) do not violate any applicable law; (b)
are not in contravention of the terms of the Borrower's articles of
incorporation or bylaws, or the terms of any credit or loan agreement,
indenture, lease, franchise, marketing agreement, license, mortgage or deed of
trust, or other material agreement, undertaking or arrangement (written or oral)
to which the Borrower is a party or by which it (or its assets) may be bound;
and (c) will not give rise to the creation of any Lien, charge or encumbrance
upon any assets of the Borrower.
Section 6.4. Consent. No authorization, approval, consent, or notice under
the provisions of the articles of incorporation or bylaws of the Borrower or
under any other relevant agreement, undertaking, or arrangement or applicable
law or by any additional Tribunal or Person is required with respect to the
execution and delivery of this Agreement, the Note or the other Loan Documents
or with respect to the performance of any covenant or agreement contained herein
or therein.
Section 6.5. Enforceability of Loan Documents; Due Authorization. Borrower
has taken all requisite corporate action to authorize the (a) execution and
deliver of the Loan Documents to which it is a party, (b) consummation of all
transactions contemplated thereby, and (c) performance and discharge of its
obligations thereunder. This Agreement, the Note and each other Loan Document to
be executed and delivered by Borrower as contemplated herein, when executed and
delivered by all parties thereto, will constitute the valid, legal and binding
obligation of Borrower enforceable against Borrower in accordance with their
terms.
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Section 6.6. Properties; No Liens.
(a) Borrower has good and marketable leasehold title to all of its
leased real properties and no such leasehold properties are subject to any
Liens.
(b) Borrower has good and marketable title to all the personal
property owned by it and no such personal properties are subject to any
Liens, except for liens approved in writing by Lender.
Section 6.7. Financial Condition.
(a) The Borrower's financial statements were prepared in
accordance with past practices of Borrower, consistently applied, and
fairly present the financial condition results of operations of
Borrower, on the dates or for the periods indicated therein.
(b) Since the 31st day of March, 1993, there has been no
material adverse change in the assets, liabilities, condition
(financial or otherwise) or business operations of Borrower.
Section 6.8. Full Disclosure. Neither this Agreement nor any other
document, certificate or written statement furnished to Lender by or on behalf
of Borrower or the Guarantor in connection herewith contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements contained herein or therein not misleading. There
is no fact peculiar to Borrower or Guarantor which materially adversely affects
or is likely to materially adversely affect the business, condition or
operations (financial or otherwise) of Borrower or Guarantor taken as a whole,
which has not been set forth in this Agreement or in other documents,
certificates and written statements furnished to Lender by or on behalf of
Borrower or Guarantor prior to the date hereof in connection with the
transactions contemplated hereby.
Section 6.9. No Defaults Under Documents. Neither Borrower nor the
Guarantor is in default or in violation (nor has any event or condition occurred
which, with notice or lapse of time or both, would constitute a default or
violation) under the Loan Documents, under any charter document or indenture, or
under any credit or loan agreement, indenture, lease, franchise, marketing
agreement, license, mortgage, deed of trust or any other material agreement,
undertaking or arrangement (written or oral) to which it is a party or under
which it or any of its assets may be bound.
Section 6.10. Existing Litigation. There are no material actions, suits
or proceedings pending, or, to the best knowledge of Borrower and the Guarantor,
threatened against or affecting the assets of Borrower or the Guarantor or the
consummation of the transactions contemplated hereby, at law or in equity or
before or by any governmental authority or instrumentality or before any
arbitrator of any kind and, to the best knowledge of Borrower and the Guarantor,
there is no valid basis for any such action, proceeding or investigation.
Neither Borrower nor the Guarantor is subject to any judgment, order, writ,
injunction or decree of any court or governmental agency. There is not a
reasonable likelihood of an adverse determination of any pending proceeding
which
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would, individually or in the aggregate, have a material adverse effect on the
business operations or financial condition of Borrower.
Section 6.11. Liabilities. Neither Borrower nor the Guarantor has any
contingent or direct liabilities or unrealized or unanticipated losses which in
the aggregate are material, or any material commitments of an unusual or
burdensome character. Neither Borrower nor the Guarantors is a party to, or
bound by, any contract or agreement or subject to any charter or other corporate
restriction having a material adverse effect on the financial condition or
business operations of Borrower.
Section 6.12. Taxes. All tax returns of Borrower and the Guarantor
required by law to be filed have been filed and all taxes imposed upon Borrower
and the Guarantor or their respective properties, which are due and payable,
have been paid; and no amounts of taxes not reflected on such returns are
payable by Borrower or the Guarantor other than taxes as are being diligently
contested in good faith by appropriate legal proceedings and as to which
adequate reserves (determined in accordance with GAAP) have been provided, none
of which, individually or collectively, will have a material adverse effect on
the financial condition or business operation of Borrower or the Guarantor.
Section 6.13. ERISA.
(a) Schedule 6.13 attached hereto lists each Plan that is
maintained, administered or contributed to for the benefit of the
employees of Borrower.
(b) Except as otherwise identified in Schedule 6.13 attached
hereto, no Plan constitutes a "Multi-Employer Plan" as defined in
Section 3(37) of ERISA (a "Multi- Employer Plan").
(c) Neither Borrower has incurred any withdrawal liability,
which has not been satisfied, to any Multi-Employer Plan.
(d) Each Plan has been maintained in substantial compliance
with its terms and with its requirements prescribed by any and all
statutes, orders, rules and regulations, including but not limited to
ERISA and the Code, which are applicable to such Plan.
(e) The funding method used in connection with each Plan which
is subject to the minimum funding requirements of ERISA is acceptable
and the actuarial assumptions used in connection with funding each such
Plan are reasonable. The assets of each such Plan are sufficient to
discharge all liabilities under such Plan, on an ongoing basis and on a
termination basis, and there is no "accumulated funding deficiency," as
defined in Section 302(a)(2) of ERISA, with respect to any plan year of
any such Plan. There is no basis for the PBGC or a court to terminate
any Plan which is covered by Title IV of ERISA and no such Plan has
ever obtained a minimum funding waiver.
(f) With respect to each Plan, no prohibited transaction (as
defined in Section 406 of ERISA or Section 4975 of the Code) has
occurred which would, directly or indirectly,
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result in any liability of Borrower, no Reportable Event has occurred
and no claims exist against such a Plan or its assets, other than
claims benefits in the ordinary course.
Section 6.14. Compliance with Laws. Neither Borrower or the Guarantor
is in violation of any laws, rules, regulations, orders, and decrees applicable
to the Borrower or the Guarantor.
Section 6.15. Subsidiaries. Borrower has no Subsidiaries.
Section 6.16. Capital Structure. Borrower's authorized, issued and
outstanding capital stock is as described in Schedule 6.16 attached hereto. All
of such issued and outstanding shares are duly authorized, validly issued and
fully paid and have not been issued in violation of any preemptive or similar
rights. Borrower does not have outstanding any securities convertible into or
exchangeable for its capital stock, nor any rights to subscribe for or to
purchase, any options for the purchase of, or any agreements providing for the
issuance (contingent or otherwise) of, or any calls, commitments or claims of
any character relating to, its capital stock or securities convertible into or
exchangeable for its capital stock.
Section 6.17. Judgments. There are no material outstanding or unpaid
judgments that have been outstanding for more than five (5) Business Days
against Borrower or the Guarantor that have not been adequately bonded. Neither
Borrower or the Guarantor is a party to any reorganization, arrangement,
composition, readjustment, dissolution, rehabilitation, liquidation, or similar
proceeding under any provision of any Law, or has consented to the filing of any
petition against it under any such Law.
Section 6.18. Securities Laws. None of the transactions contemplated in
connection with this Agreement violate any provision of the securities laws of
the United States, including the Securities Act of 1934, as amended, and the
rules and regulations promulgated thereunder by the Securities Exchange
Commission, or the securities and "blue sky" laws of the various states.
Borrower has not, nor has any Person acting or purporting to act on behalf of
Borrower, directly or indirectly, offered the Note for sale to, solicited any
offer to buy the Note from, otherwise negotiated in respect thereof with any
Person, or done (or omitted to do) any other act so as to bring the issuance or
sale thereof tot he Lender within the registration requirements of the
Securities Act of 1933, as amended. Borrower has complied with or are exempt
from the registration provisions of all securities or "blue sky" laws of the
various states applicable to the issuance or sale of the Note to the Lender.
Section 6.19. Employee Controversies. There are no material labor
disputes (a) pending or (b) to the best knowledge of Borrower and the Guarantor,
threatened or anticipated between Borrower and any group or groups of their
respective employees.
Section 6.20. Insurance. Borrower maintains insurance (a) of such types
as is usually carried by corporations of established reputation engaged in the
same or similar businesses and similarly situated with financially sound,
responsible and reputable insurance companies or associations (or, as to workers
compensation or similar insurance, with an insurance fund or by self-insurance
authorized by the jurisdiction in which its operations are carried on) and (b)
in such amounts (and with co-insurance and deductibles) as such insurance is
usually carried by corporations of established
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reputation engaged in the same or similar businesses and similarly situated, but
in any event, with respect to improvements to real property and tangible
personal property, in amounts not less than the greater of either full
replacement cost or net book value.
Section 6.21. Names and Places of Business. Borrower has not, during
the preceding five years, had, been known by or used any other corporate, trade,
or fictitious name. Borrower owns no inventory (as defined in the Uniform
Commercial Code applicable in Texas) which is located in any state other than
the States of Texas. The chief executive office and principal place of business
of Borrower are (and for the preceding five years have been) located at 9603
White Rock Trail, Suite 100, Dallas, Texas 75258.
Section 6.22. Receivables.
(a) Each Receivable reflects a contractual arrangement with an
Account Debtor which has been accepted by the Account Debtor, without
dispute, offset, defense or counterclaim.
(b) If the Receivable is based upon a written agreement,
Borrower is in possession of the contracts which are the basis of each
Receivable.
Section 6.23. Location of Collateral. All Collateral is kept at the
locations described on Schedule 6.23 attached hereto.
Section 6.24. Consignment. No Inventory is held by Borrower pursuant
to consignment, sale or return, sale on approval or similar arrangements.
Section 6.25. Condition of Collateral. Lender will have valid and
perfected first priority security interests in the Collateral described in the
Loan Documents, subject to no other Lien, when the financing statements are
signed by Borrower and filed in the appropriate governmental offices, except as
set forth on Schedule 6.25 attached hereto. No financing statement is on file in
any public office with respect to the Collateral other than financing statements
covering the Liens created by the Loan Documents, except as set forth on
Schedule 6.25 attached hereto.
Section 6.26. Vehicles. All motor vehicles owned by Borrower are
described on Schedule 6.26 attached hereto.
Section 6.27. Environmental Representations and Warranties.
(a) No Hazardous Materials are now located in, on, at, upon or
under any property currently owned, leased, or operated by Borrower, or
have or threaten to migrate or emanate to adjacent property, in a
manner or quantity requiring reporting investigation, or remediation
under, or in violation of, Environmental Requirements, and, to the best
of Borrower's knowledge, no Hazardous Materials have been located in,
on, at, upon or under
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any such property, or migrated or emanated from such property at any
time prior to or during the time Borrower owned, leased, or operated
such property in a manner or quantity requiring reporting,
investigation, or remediation under, or in violation of, Environmental
Requirements;
(b) Borrower has all permits, licenses or authorizations that
it is required to have by any Environmental Requirement in order to
operate any aspect of its business; any and all Environmental Activity
of Borrower, and all Environmental Conditions of property currently
owned, leased, or operated by Borrower are in compliance with all
Environmental Requirements, and to the best of Borrower's knowledge,
were in compliance prior to the time of the ownership, tenancy or
operation of such property by Borrower;
(c) With respect to any past or present Environmental Activity
of Borrower and any Environmental Condition, Borrower is not aware of,
and has not received notice of, any past, present or future events,
conditions, circumstances, activities, practices, incidents, actions,
or plans which may result in Environmental Costs or which may give rise
to any common law or legal liability based on or related to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling or the emission, discharge, release or
threatened release into the environment, of any pollutant, contaminant,
chemical, or industrial toxic or hazardous substance or waste or
Hazardous Materials.
ARTICLE 7.
COVENANTS OF BORROWER AND GUARANTORS
Section 7.12. Affirmative Covenants. Borrower and Guarantor warrant,
covenant and agree that until the full and final payment of the Indebtedness and
the termination of this Agreement that it will do the following:
(a) Books, Financial Statements and Reports. At all times
maintain full and accurate books of account and records. Borrower will
maintain a standard and consistent system of accounting and will
furnish the following statements and reports to Lender at Borrower's
expense:
(i) Annual Financial Statements. As soon as
available, and in any event within ninety (90) days after the
end of each Fiscal Year, complete financial statements of
Borrower together with all notes thereto, prepared in
reasonable detail in accordance with the standards previously
utilized by the Borrower. These financial statements shall
contain a balance sheet as of the end of such Fiscal Year and
statements of earnings, of cash flows, and of changes in
stockholders' equity for such Fiscal Year. Borrower agrees to
provide certified audited financial statements to Lender, if
required by a purchaser of the Note pursuant to a bona fide
offer to purchase Lender's rights under the Note and this
Agreement. If Borrower has a certified audit prepared, for any
reason, Borrower agrees to deliver a copy of such to Lender.
Borrower agrees to provide Lender with a copy of any reports
delivered to any other lender of Borrower.
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(ii) Quarterly Financial Statements. As soon as
available and in any event within fifteen (15) days after the
end of each calendar quarter, a quarterly Profit and Loss
Statement, Balance Sheet and cash flow statement, in a form
previously utilized by the Borrower, certified as true and
correct by the President of Borrower.
(iii) Statement of Receivables. Upon the request of
Lender, a Statement of Receivables listing the aggregate
remaining balance of such Receivables, the payment history
thereon and the name and address of the Account Debtor
thereon.
(iv) Tax Returns. Upon the request of Lender, a
complete and accurate copy of Borrower's tax return is filed
with the Internal Revenue Service.
(v) Business Plans. As soon as available, and in any
event within thirty (30) days prior to the beginning of each
Fiscal Year, a copy of Borrower's financial operating budget
for the next Fiscal Year and any future modification thereof,
as created.
(b) Other Information. On and after the Closing Date, furnish
to Lender (I) any information which Lender may from time to time
reasonably request concerning any covenant, provision or condition of
the Loan Documents or any matter in connection with the Collateral or
the Borrower's businesses and operations and (ii) all evidence which
Lender may from time to time reasonably request as to the accuracy and
validity of or compliance with all representations, warranties and
covenants made by Borrower in the Documents, the satisfaction of all
conditions contained therein, and all other matters pertaining thereto.
(c) Audits/Inspections. On and after the Closing Date, permit
representatives appointed by Lender, including independent accountants,
agents, attorneys, appraisers and any other persons, to visit and
inspect Borrower's property, including its books of account, other
books and records, and any facilities or other business assets, and to
make extra copies therefrom and photocopies and photographs thereof,
and to write down and record any information such representatives
obtain, and Borrower shall permit Lender or its representatives to
investigate and verify the accuracy of the information furnished to
Lender in connection with the Loan Documents and to discuss all such
matters with its officers, employees and representatives. Lender agrees
that, until the occurrence of an Event of Default, it will take all
reasonable steps to keep confidential (in accordance with its normal
practices) any information given to it by Borrower; provided, however,
that this restriction shall not apply to information which (I) has at
the time in question entered the public domain as a result of actions
taken by Persons other than Lender, (ii) is required to be disclosed by
Law or by any order, rule or regulation (whether valid or invalid) of
any Tribunal, (iii) is disclosed to another lender, a regulator or to
the Affiliates, auditors, attorneys, or agents of Lender, or (iv) is
furnished to purchasers or prospective purchasers of the Note of or
participation's or other interests in the Loan or the Note, The visits
and inspections shall be prearranged, at reasonable times, as agreed
upon by Borrower and Lender.
(d) Notice of Material Events and Change of Address. Promptly
notify Lender
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of (i) any material adverse change in Borrower's financial condition or
Borrower's financial condition, (ii) the occurrence of any Event of
Default or Potential Event of Default, (iii) the acceleration of the
maturity of any Debt owed by Borrower or of any default by Borrower
under any indenture, mortgage, agreement, contract or other instrument
to which it is a party or by which it or its properties is bound, if
such acceleration or default might have a material adverse effect upon
Borrower's financial condition, (iv) any material adverse claim
asserted against Borrower or with respect to Borrower's, (v) the
occurrence of any Termination Event, (vi) the filing of any suit or
proceeding against Borrower in which an adverse decision could have a
material adverse effect upon Borrower's financial condition, business
or operations, (vii) notice from any Tribunal, the substance of which
might have a material adverse effect on the financial condition or
business operations of Borrower, or (viii) any material change in its
accounting practices or procedures. Upon the occurrence of any of the
foregoing, Borrower will take all necessary or appropriate steps to
remedy promptly any such material adverse change, Event of Default,
Potential Event of Default or default, to protect against any such
adverse claim, to defend any such suit or proceeding, and to resolve
all controversies on account of any of the foregoing. Borrower will
also notify Lender in writing at least twenty (20) Business Days prior
to the date that Borrower changes its name or the location of its chief
executive office or principal place of business or the place where it
keeps its books and records concerning the Collateral, furnishing with
such notice any necessary financing statement amendments or requesting
Lender and its counsel to prepare the same.
(e) Maintenance of Properties. Maintain, preserve, protect,
and keep all property used or useful in the conduct of its business in
good condition and in compliance with all applicable Laws and from time
to time make all repairs, renewals and replacements needed to enable
the business and operations carried on in connection therewith to be
promptly and advantageously conducted at all times.
(f) Maintenance of Existence and Qualifications. Maintain and
preserve its corporate existence and its rights and franchises in full
force and effect and qualify to do business as a foreign corporation in
all states or jurisdictions where required by applicable Law.
(g) Payment of Trade Debt, Taxes, etc. (i) Timely file all
required tax returns; (ii) timely pay all taxes, assessments, and other
government charges or levies imposed upon it or upon its income,
profits or property; (iii) within thirty (30) days after the same
becomes due, pay all Debt owed by it on ordinary trade terms to
vendors, suppliers and other Persons providing goods and services used
by it in the ordinary course of its business; (iv) pay and discharge
when due all other Debt now or hereafter owed by it; and (v) maintain
appropriate accruals and reserves for all of the foregoing Debt in
accordance with GAAP.
(h) Insurance. Keep (or cause to be kept) adequately insured,
by financially sound and reputable insurers, the Collateral and all
other property of a character usually insured by similar Persons
engaged in the same or similar businesses and otherwise comply with the
provisions of the Loan Documents pertaining to insurance. Maintain
adequate insurance against its liability for injury to Persons or
property, which insurance shall be by financially sound and reputable
insurers and shall without limitation provide the following
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coverages: comprehensive general liability, worker's compensation,
automobile liability, flood damage, earthquake, vandalism, malicious
mischief and business interruption insurance. Borrower shall have all
of its insurance policies on the Collateral name Lender as loss-payee
and shall have the insurance company provide Lender with such evidence
of insurance as Lender requests.
(i) Payment of Expenses. Whether or not the transactions
contemplated by this Agreement are consummated, promptly (and in any
event, within three (3) days after any invoice or other statement or
notice) pay all reasonable costs and expenses incurred by or on behalf
of Lender (including attorneys' fees) in connection with the defense or
enforcement of the Loan Documents, and (v) the amendment, restructuring
or "workout" of any of the Loan Documents.
(j) Compliance with Agreements and Law. Perform all material
obligations it is required to perform under the terms of each
indenture, mortgage, deed of trust, security agreement, lease,
franchise, agreement, contract or other instrument or obligation to
which it is a party or by which it or any of its properties is bound
and conduct its business, affairs, and all Environmental Activity in
compliance with all Laws, regulations, and orders applicable thereto
(including all Environmental Requirements) which are material to
Borrower, to Lender, or to any Collateral.
(k) Leases and Contractual Obligations. Make all payments and
otherwise comply in all material respects with all of its obligations
in respect of all leaseholds comprising real property and keep, and
take all action to keep, the leases on all such leaseholds in full
force and effect, and exercise all rights to renew such leases and not
allow such leases to lapse or be terminated or any rights to renew such
leases to be forfeited or canceled (including, without limitation,
leases that contain performance standards as a condition to the right
to renew the same), and promptly notify Lender of any material defaults
with respect to such leases, and comply in all material respects with
all of its other contractual obligations.
(l) Meetings. From time to time, as reasonably requested by
Lender, cause its representatives to meet with representative(s) of
Lender and discuss its financial condition, business operations, and
future plans.
(m) Fiscal Year. Maintain a fiscal year which ends on December
31.
(n) Character of Business. Continue to engage in substantially
the same type of business engaged in as of the Closing Date.
(o) Inspection of Properties. Once ever twelve months, and
more frequently if Lender has reasonable grounds for concern, Lender
(by its officers, employees and agents) at any time and from time to
time, either prior to or after the occurrence of an event of default,
may contract for the services of persons (the "Site Reviewers") to
perform environmental site assessments ("Site Assessments") on any
property (the "Property") owned, leased, or operated by Borrower for
the purpose of determining whether there exists
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on the Property any Environmental Condition or Environmental Activity,
or other use of the Property which is in violation of Environmental
Requirements or could reasonably be expected to result in Environmental
Costs. The Site Assessments may be performed at any time or times, upon
reasonable notice to Borrower. Borrower hereby grants, and shall cause
any tenant to grant, to Lender, its agents, attorneys, employees,
consultants, and contractors and the Site Reviewers, an irrevocable
license and authorization to enter upon and inspect the Property and
perform such tests, including without limitation, subsurface testing,
soil and ground water testing, and other tests which may physically
invade the Property, as the Lender, in its sole discretion, determines
is necessary to protect its liens, assignments, and/or security
interests in the Property. Borrower will supply to the Site Reviewers
such historical and operational information regarding the Property as
may be reasonably requested by the Site Reviewers to facilitate the
Site Assessments and will make available for meetings with the Site
Reviewers appropriate personnel having knowledge of such matters. The
cost of performing such Site Assessments shall be paid by Borrower upon
demand of Lender.
(p) Litigation. Give prompt written notice to Lender of any
material proceeding, claim or dispute that is not fully covered by
insurance any material labor dispute resulting in or threatening to
result in a strike against it, or any proposal by any public authority
respecting a condemnation or taking of any material portion of any
material property or other asset (but only when such proposal becomes
known to Borrower, and take or cause to be taken all such steps as are
necessary or appropriate to defend, negotiate or respond to such
proceedings, disputes or proposals.
(q) Collateral Security. (a) Ensure that all Liens granted in
favor of the Lender hereunder shall be valid, enforceable, perfected
and first priority Liens, except as set for on Schedule 6.25 attached
hereto; (b) perform all such acts and execute all such documents as
Lender may reasonably request in order to enable Lender to report, file
and record every instrument that Lender may deem necessary in order to
perfect and maintain the Liens granted to Lender in the Collateral, and
otherwise do all things necessary to perfect, and maintain as
perfected, first priority Liens with respect to all Liens of the Lender
now existing or hereafter granted in the Collateral; (c) immediately
notify the Lender in writing of any damage to or material adverse
occurrence concerning the Collateral; and (d) keep the Collateral
located within the State of Texas.
(r) Authorizations and Approvals. Obtain, at its own expense,
all such licenses, authorizations, consents, permits and approvals as
may be required to enable it to comply with its obligations hereunder
and under the other Loan Documents.
(s) Experienced Management. Employ and retain management and
supervisory personnel adequate for the proper management, supervision
and conduct of its properties,
(t) Protection of Business Records. Borrower hereby agrees to
take all necessary protective actions in order to prevent destruction
of Borrower's business records, including but not limited to: (i) if
Borrower maintains its business records or back up business records on
a manual system, then such records shall be kept in a fire proof
cabinet; and (ii) if its
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records are computerized, then Borrower agrees to create a tape or
diskette "back-up" of the computerized information, and (a) maintain a
complete and accurate duplicate copy of such tape or diskette "back-up"
at a secure off-site location, and (b) upon Lender's request, provide
Lender with a complete and accurate duplicate copy of its tapes or
diskettes containing information current through the end of the
calendar month.
(u) Financial Statements of Guarantor. The Guarantor will
furnish to Lender annually personal financial statements in form
reasonably satisfactory to Lender and certified by such Guarantor and a
copy of each Guarantor's personal Federal Income Tax Return (including
all schedules thereto and amendments thereof) filed during the term
hereof, within thirty (30) days of the filing of the same and a
statement as to any material and adverse changes to Guarantor's
financial condition.
(v) Additional Information. Further Assurances. Upon the
request of Lender, provide to Lender such additional information or
reports as Lender may reasonably request and take such actions or care
necessary to comply with the terms of the Loan Documents.
Section 7.2. Negative Covenants. Borrower warrants, covenants and
agrees that until the full and final payment of the Indebtedness and the
termination of this Agreement, it will not do the following without the prior
written consent of Lender:
(a) Limitations on Liens. Create, assume or permit to exist
any Lien, including, without limitation, any purchase money security
interest, upon any of the properties or assets which it now owns or
hereafter acquires, except Liens at any time existing in favor of
Lender and as set forth on Schedule 6.25 attached hereto.
(b) Limitation on Sales of Collateral. Sell, transfer, lease,
exchange, alienate or dispose of any Collateral or any material
interest therein, including without limitation any sale or pledge of
Receivables, except as set forth on Schedule 6.25 attached hereto, or
in the ordinary course of business. Any such sale, transfer, lease,
exchange or disposition shall subject the Borrower to the mandatory
prepayment of principal set forth in Section 2.8.
(c) Limitation on Investments and New Businesses. Make any
expenditure or commitment or incur any obligation or enter into or
engage in any transaction except in the ordinary course of business,
including, but not limited to, the opening of any new store location or
the incurrence of any expense not specifically related to the day to
day operation of the business of Borrower,(ii) engage directly or
indirectly in any business or conduct any operations except in
connection with or incidental to its present businesses and operations,
or (iii) make any material change in the manner in which it currently
conducts its businesses and operations.
(d) Financial Ratios and Requirements. Permit Borrower's Net
Worth to be less than $1,000,000.00.
(e) Limit on Indebtedness. Incur or assume any Debt other than
the Indebtedness, except accounts payable incurred in the ordinary
course of business or as set forth on
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Schedule 6.25 attached hereto.
(f) Other Guaranties. Be or become liable with respect to any
guaranty (including without limitation any agreement, instrument or
arrangement in which the economic effect is substantially equivalent to
a guaranty).
(g) Dividends. Directly or indirectly declare or pay any
dividends or make any other distribution upon any shares of its capital
stock of any class, or purchase, redeem or otherwise acquire or retire
or make any provisions for redemption, acquisition or retirement of any
shares of its capital stock of any class or warrants or operations to
purchase any such shares. Notwithstanding the foregoing, Borrower may
make distributions to its Shareholders (dividends or otherwise)
provided that it makes the Mandatory Prepayment set forth in Section
2.7 hereof.
(h) Capital Expenditures. Make Capital Expenditures in an
aggregate amount in excess of $150,000.00 for any Fiscal Year.
(i) Capital Leases. Directly or indirectly incur, assume,
guaranty or have outstanding any capitalized lease obligations other
than those existing on the Closing Date and those incurred during the
term hereof provided that the aggregate amount of annual lease
obligations is not in excess of $150,000.00 for any Fiscal Year.
(j) Loans or Extensions of Credit. Directly or indirectly
loan, invest in, or extend credit to any Person.
(k) Issuance of Securities. Authorize or issue any shares of
capital stock other than common stock and preferred stock currently
outstanding, or issue shares of common stock or preferred stock or
convertible indebtedness, options, warrants, or other securities
evidencing or representing a right to purchase or receive common stock
or preferred stock.
(l) Investments. Make any investments in securities, whether
by case purchase or by a transfer of assets.
(m) Transactions with Affiliates. Enter into any transaction,
including, without limitation, the purchase, sale or exchange of
property or the rendering of any service, with any Affiliate except in
the ordinary course of, and pursuant to the reasonable requirements of,
business and upon fair and reasonable terms no less favorable than
would be obtained in a comparable arm's-length transaction with a
Person not an Affiliate.
(n) Compensation. Permit the Compensation of George C. Barker
to exceed $240,000.00 in any calendar year, or permit the total
aggregate Compensation of Borrower to all of its officers, directors
and Guarantors to exceed $480,000.00 for any calendar year.
(o) Negative Pledge of Assets. Pledge, mortgage, hypothecate
or grant a lien or security interest in, or permit or suffer the
creation or existence of any pledge, mortgage,
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hypothecation, lien or security interest in or encumbrance on, any of
its assets, except to Lender or as set forth on Schedule 6.25 attached
hereto.
(p) Merger, Consolidation, Liquidation and Acquisition.
Acquire all or substantially all of the assets or capital stock of
another Person.
(q) Change in Accounting Methods. Change its method of
accounting including, without limitation, its method of depreciation
and accounting for Receivables, except as required by GAAP or by the
pronouncements of the Financial Accounting Standards Board and as
consented to by its independent certified public accountants and
promptly reported to Lender.
(r) Modification of Existing Agreements. Amend, modify, or
otherwise change in any respect, adverse to Borrower or Lender, any
material agreement, instrument, or arrangement (written or oral) by
which Borrower or any of its assets, are bound.
(s) Change of Control. Permit any change in the control of
Borrower.
(t) Tax Consolidation. File any consolidated income tax return
with any Person or Persons.
(u) Other Agreements. Enter into any material agreement or
arrangement that would be violated or breached by the performance of
its obligations hereunder or under any of the Loan Documents.
(v) No Amendments. Amend its articles of incorporation or
bylaws.
(w) Management Fees. Permit the payment of any management fees
other than the payment of salaries to employees or consultants of
Borrower who provide services to Borrower; provided, that in no
instance shall such salaries or consulting fees exceed the fair market
value of such service. Notwithstanding the foregoing, any consulting
agreement entered into by and between Patrick A. Luckett and Borrower
in conjunction with the Stock Purchase Agreement shall not be subject
to the terms of this covenant.
ARTICLE 8.
SECURITY AGREEMENT
Section 8.1. Grant of Security Interest. As collateral security for the
payment and performance of the Indebtedness and any and all other liabilities of
Borrower to Lender, direct or contingent, of any nature whatsoever, including
both purchase money and non-purchase money transactions, Borrower hereby grants
to Lender a continuing security interest in the following, whether such property
is now owned or existing or is owned, acquired, or arises hereafter, including,
without limitation, acquisition by contract or by operation of law:
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(a) all inventory, equipment (including any and all computer
hardware and components), machinery and fixtures of Borrower, in all
forms and wherever located, and all parts and products thereof, all
accessories thereto, and all documents therefor;
(b) all accounts and receivables of Borrower;
(c) all goods or other property represented by or securing any
account or receivable of Borrower;
(d) all rights of Borrower as a seller of goods or an unpaid
seller or lienor, including without limitation stoppage in transit,
replevin and reclamation;
(e) all contract rights of Borrower including, without
limitation, rental lease contracts for Inventory;
(f) all other rights of Borrower to the payment of money,
including, without limitation, amounts due from Affiliates of Borrower,
tax refunds and insurance proceeds;
(g) all rights of Borrower in goods as to which a receivable
shall have arisen;
(h) all goods, instruments, documents, policies and
certificates of insurance, securities, chattel paper, deposits, cash or
other property owned by Borrower or in which it has an interest;
(i) all general intangibles of Borrower (including, without
limitation, any rights of Borrower to retrieval from third parties of
electronically processed and recorded information pertaining to any of
the foregoing property);
(j) all files, records, books, ledger cards (including without
limitation, computer programs, tapes and related electronic data
processing software) and writings of Borrower or in which it has an
interest in any way relating to the foregoing property;
(k) all licenses, patents, patent applications, copyrights,
trademarks, trademark applications, trade names, assumed names, service
marks and service mark applications of Borrower;
(l) all other personal property of Borrower of any kind or
type whatsoever, including without limitation all signage pertaining to
any store locations of Borrower; and
(m) all additions, substitutions, replacements, accessions,
proceeds and products of all of the foregoing described in this Section
8.1.
Section 8.2. Power of Attorney. Borrower hereby designates and appoints
Lender and each of its designees or agents as attorney-in-fact of Borrower,
irrevocably and with power of substitution, with authority to take any or all of
the following actions upon the occurrence and during the continuance of an Event
of Default: (i) demand, collect, receipt for, settle, compromise, adjust, give
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discharges and releases, all as Lender may determine; (ii) commence and
prosecute any actions in any court for the purposes of collecting any such
Collateral and enforcing any other rights in respect thereof; (iii) defend,
settle or compromise any action brought and, in connection therewith, give such
discharge or release as Lender may deem appropriate; (iv) receive, open and
dispose of mail addressed to Borrower and endorse checks, notes, drafts,
acceptances, money orders, bills of lading, warehouse receipts or other
instruments or documents evidencing payment, shipment or storage of the goods
giving rise to such Collateral on behalf of an in the name of Borrower or
securing, or relating to such Collateral;' (v) sell, assign, transfer, make any
agreement in respect of, or otherwise deal with or exercise rights in respect
of, any such Collateral or the goods or services which have given rise thereto,
as fully and completely as though Lender were the absolute owner thereof for all
purposes; and (vi) adjust and settle claims under any insurance policy related
thereto.
Section 8.3. No duty of Lender. Lender shall have no duty as to the
collection or protection of the Collateral nor as to the preservation of any
rights pertaining thereto. Borrower hereby releases Lender from any claims,
causes of action and demands at any time arising out of the Collateral and its
use and/or any actions taken by Lender with respect thereto, and Borrower hereby
agrees to indemnify Lender and to hold Lender harmless from any and all such
claims, causes of action and demands.
Section 8.4. Collection of Receivables. Prior to the Lender exercising
its right to collect the Receivables pursuant to this Section 8.4, Borrower
shall collect with diligence the Receivables. After the occurrence of, and
during the continuation of an Event of Default, Borrower shall, at the request
of Lender, notify the Account Debtors on the Receivables of the Liens provided
for in this Agreement and direct such Account Debtors to pay Receivables
directly to Lender. Lender itself may, at any time after the occurrence of and
during the continuation of an Event of Default, so notify the Account Debtors.
Section 8.5. Perfection and Protection of Liens. Borrower will from
time to time deliver to Lender any financing statements, continuation
statements, extension agreements and other documents, properly completed and
executed (and acknowledged when required) by Borrower in form and substance
satisfactory to Lender, for the purpose of perfecting, confirming, or protecting
Lender's Liens and other rights in the Collateral.
Section 8.6. Notice of Assignment. All Receivables, instruments,
documents and other agreements entered into by Borrower and covering any of the
use or proceeds of Collateral shall contain (by way of stamp or other means
satisfactory to Lender) the following language:
"COLLATERALLY ASSIGNED TO PATRICK A. LUCKETT."
Section 8.7. Future Receivable Financing. Notwithstanding any provision
contained herein to the contrary, at any time during the term, Lender hereby
grants Borrower the right to acquire financing using its accounts receivable as
collateral. Such accounts receivable financing may be up to $750,000.00 of
credit advanced. Borrower shall have the right to grant a first and superior
lien on Borrower's accounts receivable. Lender hereby agrees to fully
subordinate any and all rights and liens in Borrower's accounts receivable to
such accounts receivable lender.
ARTICLE 9.
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EVENTS OF DEFAULT AND REMEDIES
Section 9.1. Nature of Event. An Event of Default shall exist if any
of the following occurs and is continuing:
(a) Principal and Interest. Borrower fails to make any payment
or prepayment of principal and/or interest on the Note when due and
payable, and such failure continues for five (5) days after written
notice thereof is given by Lender to Borrower;
(b) Fees. Borrower fails to pay when due any fee required
hereunder or any other payment (other than the payments referred to in
Sections 9.1(a) above required by the Loan Documents and such failure
continues for ten (10) days after written notice thereof is given by
Lender to Borrower;
(c) Loan Documents. Borrower or Guarantor fail to perform or
to observe any covenant or agreement contained herein or in any of the
Loan Documents, and such failure remains unremedied for thirty (30)
days after written notice thereof being given by Lender to Borrower;
(d) Other Agreements. Other than as set forth in Section
9.1(f) below, Borrower fails to duly observe, perform or comply with
any agreement with any Person or any term or condition of any
instrument and such failure is not remedied within thirty (30) days
after written notice thereof given by Lender to Borrower;
(e) Representations and Warranties. Any representation or
warranty previously, presently or hereafter made by or on behalf of
Borrower in connection with any Loan Document is materially incorrect,
false or misleading in any respect when made or deemed to be made;
(f) Debt. Borrower (i) fails to duly pay when the same becomes
due and payable any Debt owed by it to any Person other than Lender
for borrowed money or money otherwise owed under any note, bond, or
similar instrument or (ii) breaches or defaults in the performance of
any agreement or instrument by which any Debt described in the
preceding clause (i) is issued, evidenced, governed, or secured, which
breach or default, with notice or the passage of time, or both, allows
the maturity of such Debt to be accelerated;
(g) Receivership. A receiver, custodian, liquidator or trustee
of Borrower or the Guarantor or any of their assets is applied for by
court order; an order for relief under any bankruptcy or insolvency
Laws is sought after the filing of a petition by or against Borrower or
the Guarantor; any of their assets are subject to an action seeking to
replevy, sequester, garnish, attach or levy against such; or a petition
to reorganize or rehabilitate Borrower or the Guarantor under any
bankruptcy, reorganization or insolvency Laws is filed against Borrower
or the Guarantor and such actions are not dismissed within thirty (30)
days of its
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initiation;
(h) Reorganization. Borrower or the Guarantor requests
reorganization, arrangement, composition, readjustment, dissolution,
rehabilitation, liquidation or similar relief under any provision of
any present or future Law or consents to the filing of any petition
against it under such Law and such actions are not dismissed within
thirty (30) days of its initiation;
(i) Assignment for Benefit of Creditors. Borrower or the
Guarantor (i) makes a general assignment for the benefit of its
creditors, (ii) admits in writing its inability to pay its debts
generally as they become due, (iii) generally fails to pay its debts as
they become due, (iv) consents to the appointment of a receiver,
trustee or liquidator of all or any part of its assets, or (v)
otherwise commits any similar act;
(j) Judgments. Any judgment, writ or warrant of attachment or
any similar process is entered or filed against Borrower or the
Guarantor or any of their assets and remains unpaid, unvacated,
unbonded or unstayed for thirty (30) days or for at least ten (10) days
prior to the date on which such assets may be lawfully sold to satisfy
such judgment, writ or warrant;
(k) ERISA. Lender determines that (i) any ERISA Affiliate of
Borrower has an "accumulated funding deficiency," within the
requirements of Section 412 of ERISA, with respect to any Plan, (ii)
any ERISA Affiliate of Borrower has a material liability to PBGC or
otherwise under ERISA in connection with any Plan or (iii) a Reportable
Event exists for which a "thirty day notice" has been or could be given
to any ERISA Affiliate of Borrower; or
(l) Enforceability of Loan Documents. Any of the Loan
Documents shall, in whole or in part, (i) cease to be legal, valid,
binding agreements enforceable against any Person executing the same,
(ii) in any way be terminated or become or be declared ineffective or
inoperative by any Tribunal, or (iii) in any way cease to give or
provide the respective Liens, rights, titles, interest, remedies,
powers or privileges intended to be created thereby.
Notwithstanding any other provision relating to notices and
opportunities to remedy defaults contained in this Agreement, if a
Potential Event of Default exists because of a willful breach by
Borrower or the Guarantor of any representation, warranty or covenant
contained in this Agreement or in any of the other Loan Documents and
if such Potential Event of Default would adversely affect the rights of
Lender in relation to other creditors of Borrower or the Guarantor
prior to expiration of the cure period for such Potential Event of
Default, then Lender may exercise the remedies set forth in Section 9.2
without giving such notice and opportunity to remedy such event or
condition.
Section 9.2. Default Remedies. Upon and after an Event of Default,
Lender shall have and may exercise the following rights and remedies, which
individual remedies shall not be exclusive and which individual remedies shall
be cumulative and in addition to each and every other remedy
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set forth herein and in the Loan Documents and the other agreements and
documents executed in connection with the transactions contemplated:
(a) The right to (i) accelerate the entire outstanding
principal balance together with all accrued but unpaid interest on the
Indebtedness and all other sums due and payable by Borrower to Lender
without demand, presentment, notice of dishonor, notice of intent to
demand or accelerate payment, diligence in collection, grace, notice
and protest or legal process of any kind, all of which Borrower hereby
expressly waives, (ii) terminate its commitment to lend hereunder, and
(iii) immediately, without any period of grace, enforce payment of the
Indebtedness by exercising any and all of the rights granted herein.
(b) In any jurisdiction where enforcement of rights hereunder
is sought, Lender shall have, in addition to all other rights and
remedies provided for herein or otherwise available to it, the rights
and remedies of a secured party under the Uniform Commercial Code, as
amended, in the applicable jurisdiction
(c) Lender may, at its option, without notice or demand, take
immediate possession of the Collateral, and for that purpose Lender
may, so far as Borrower can give authority therefor, enter upon any
premises on which any of the Collateral is situated and remove the same
therefrom or remain on such premises and in possession of such
Collateral for purposes of conducting a sale or enforcing the rights of
Lender under this Agreement. Borrower will, upon demand, make the
Collateral available to Lender at a place and time designated by Lender
which is reasonably convenient to Lender and Borrower. Lender may
collect and receive all income and proceeds in respect to the
Collateral and may apply the Collateral and any and all income and
proceeds in respect of the Collateral to the payment of all obligations
of Borrower to Lender.
(d) Lender may sell, lease or otherwise dispose of the
Collateral at a public or private sale or sales, in lots or in bulk,
for cash or on credit, with or without having the Collateral at the
place of sale, and upon terms and in such manner as Lender may
determine in accordance with applicable Law, and Lender may purchase
any Collateral at any such sale. The requirement of reasonable notice
to Borrower of the time and place of any public sale of the Collateral
or of the time after which any private sale either by Lender or at its
option, through a broker, or any other intended disposition thereof is
to be made, shall be met if such notice is mailed, postage prepaid, to
Borrower at the address of Borrower designated herein at least ten (10)
days before the date of any public sale or at least ten (10) days
before the time after which any private sale or other disposition is to
be made. Lender shall not be obligated to make any sale of the
Collateral regardless of notice of sale having been given. Lender may
adjourn any public or private sale without further notice, be made at
the time and place to which it was so adjourned. Upon any such sale or
sales the Collateral so purchased shall be held by the purchaser
absolutely free from any claims or rights of whatsoever kind or nature,
including any equity of redemption and any similar rights, all such
equity of redemption and any similar rights being hereby expressly
waived and released by Borrower. In the event any consent, approval or
authorization of any governmental agency will be necessary to
effectuate any such sale or sales, Borrower shall execute all such
applications or other instruments as may be required.
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(e) Prior to any disposition of Collateral pursuant to this
Agreement, Lender may, at its option, cause any of the Collateral to be
repaired or reconditioned in such manner and to such extent as to make
it saleable, and any reasonable sums expended therefor by Lender shall
be repaid by Borrower and become part of the Indebtedness.
(f) In addition to the remedies provided for herein or
otherwise available to Lender, Lender is hereby granted a license or
other right to use, without charge, Borrower's labels, patents,
copyrights, rights of use in any name, trade secrets, trade styles,
trade names, trademarks and advertising matter, or any property of a
similar nature, as it pertains to the Collateral, in completing
production of advertising for sale and selling any Collateral, and
Borrower's rights under all licenses and franchise agreements shall
inure to Lender's benefit. Lender shall have the right to sell, lease
or otherwise dispose of the Collateral, or any part thereof, for cash,
credit or any combination thereof, and Lender may purchase all or part
of the Collateral at public or, if permitted by law, private sale and,
in lieu of actual payment of such purchase price, may set off the
amount of such price against the Indebtedness owing to Lender. The
proceeds realized from the sale of any Collateral shall be applied
first to the reasonable costs, expenses and attorney's fees and
expenses incurred by Lender for collection and acquisition, completion,
protection, removal, storage, sale and delivery of the Collateral;
second, to interest due upon any of the Indebtedness; third, to the
principal balance owing on the Indebtedness; and the remainder, if any,
to Borrower. If any deficiency shall arise, Borrower shall remain
liable to Lender therefor.
(g) The right to contact Account Debtors of Borrower and
demand that payment on any Receivables be made directly to Lender, if
Lender holds a first and superior lien on such Receivables.
(h) The right to appoint or seek appointment of a receiver,
custodian or trustee of Borrower or any of its assets pursuant to court
order.
(i) Exercise any and all rights and remedies afforded by the
Laws of any applicable jurisdiction, the Loan Documents or as otherwise
afforded by any Laws or equity.
(j) Exercise any rights of setoff that Lender may have under
applicable Law against each and every account and other property,
Collateral or other asset of Borrower in the possession or under the
control of Lender.
Section 9.3. Application of Proceeds. All amounts realized by Lender
with respect to the Indebtedness, including amounts realized with respect to the
Collateral under or by virtue of the Loan Documents, including any sums which
may be held by Lender, or the proceeds of any thereof, shall be applied (i)
first, to the payment of the costs and expenses owing under Section 7.1(i)
hereof or under any of the other Loan Documents, including reasonable
compensation to Lender and its agents and attorneys, of all expenses,
liabilities and advances made or furnished or incurred by or on behalf of Lender
under this Agreement or any Loan Document or any amendment to, restructuring or
"workout" of same; (ii) second, to the payment of any other sums due to Lender,
or any successors or assigns thereof, pursuant to the terms of any Loan
Document, except for principal of and accrued
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and unpaid interest on the Note; (iii) third, to the payment of accrued and
unpaid interest on and the outstanding principal of the Note; (iv) fourth, to
the payment of the outstanding principal of the Note; and (v) fifth, the
surplus, if any, to Borrower, or to whomever shall be lawfully entitled to
receive the same, as a court of competent jurisdiction may direct.
Section 9.4. Performance by Lender. Should any covenant, duty or
agreement of Borrower fail to be performed in accordance with the terms of the
Loan Documents, Lender may, at its option, perform or attempt to perform or
enforce such covenant, duty or agreement on behalf of Borrower. All amounts
expended in connection therewith, together with interest from the date incurred,
shall become a part of the Indebtedness. Notwithstanding the foregoing, it is
expressly understood that Lender does not assume any liability or responsibility
for the performance of any duties of Borrower hereunder or under any of the
other Loan Documents or other control over the management and affairs of
Borrower.
Section 9.5. Cumulative Rights. All rights and remedies available to
Lender hereunder and under the other Loan Documents shall be cumulative of and
in addition to all other rights and remedies granted to Lender at Law or in
equity, whether or not the Indebtedness (or any portion thereof) is due and
payable and whether or not Lender has instituted any suit for collection,
foreclosure or any other action in connection with the Loan Documents.
Section 9.6. General Indemnity. Borrower promises to indemnify Lender,
upon demand, from and against any and all liabilities, obligations, claims,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever which may be imposed on, incurred
by, or asserted against Lender or any of its directors, officers or employees or
agents (including, accountants, attorneys and other professionals hired by
Lender) (whether or not caused by any negligent act or omission of any kind by
Lender) growing out of or resulting from the Loan Documents and the transactions
and events at any time associated therewith (including without limitation the
enforcement of the Loan Documents and the defense of Lender's actions and
inactions in connection with the Loan).
Section 9.7. Environmental Indemnity by Borrower. Borrower hereby
indemnifies and agrees to hold Lender, its directors, officers, and employees
(collectively the "Indemnitee") harmless from and against any and all
Environmental Costs arising in any manner in connection with:
(a) Any Environmental Condition in existence at any property
(the "Controlled Property") now or formerly owned, leased, or operated
by Borrower; the occurrence, at any time during or prior to the
ownership, tenancy, or operation of the Controlled Property by
Borrower, of any Environmental Activity; or any failure of Borrower or
any third party to comply with all applicable Environmental
Requirements relating to the Controlled Property;
(b) Any failure of any representation or warranty set forth in
Article 6 to be correct in all respects as of the date of this
Agreement or any subsequent date during the term hereof or any
extensions thereto and a breach of any of the covenants contained in
this Agreement.
(c) The transportation to, disposal at, or migration onto or
into adjacent property
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or any off-site location of any Hazardous Materials from any Controlled
Property as a result of Environmental Activity or an Environmental
Condition that occurred or existed during or prior to the use of the
Controlled Property by Borrower, whether or not the transportation or
disposal was conducted in full compliance with Environmental
Requirements;
(d) Any claim, demand or cause of action, or any action or
other proceeding, including any investigation, inquiry, order, hearing,
action by or before any Tribunal, whether meritorious or not, brought
or asserted against Indemnitee which is alleged to or directly or
indirectly relates to, arises from or is based on any of the matters
described in clauses (a) through (c) of this Section 9.7.
(e) The obligations of this Section 9.7 shall include the
obligation to defend Indemnitee against any claim or demand for
Environmental Costs, the obligation to pay and discharge any
Environmental Costs imposed on Indemnitee, and the obligation to
reimburse Indemnitee for any Environmental Costs incurred or suffered
by Indemnitee, provided in each instance that the claim for
Environmental Costs arises in connection with a matter for which
Indemnitee is entitled to indemnification under this Agreement. The
scope of this indemnification shall also include indemnification
against Environmental Costs whether or not they are caused in whole or
in part by the negligence of Indemnitee. This Section 9.7 shall
expressly survive the full payment of the Note, any foreclosure(s) on
the Collateral, and/or the termination of this Agreement.
Section 9.8. Borrower's Remedies. No action, suit or proceeding may be
initiated or commended by Borrower or Guarantor against Lender under the terms
of this Agreement or by reason of any conduct or omission in any way related to
this Agreement unless Lender receives written notice from Borrower or Guarantor
specifically setting forth the claim of Borrower or Guarantor within one hundred
eighty (180) days after Borrower or Guarantor discover or should have discovered
the event or occurrence which Borrower or Guarantor assert gave rise to such
claim. Moreover, in any event, Lender shall never be liable to Borrower or
Guarantor for consequential or exemplary damages, whatever the nature of the
alleged breach by the Lender of the obligations of Lender hereunder.
ARTICLE 10.
MISCELLANEOUS
Section 10.1. Waiver and Amendment. No failure or delay by Lender in
exercising any right, power or remedy under any of the Loan Documents shall
operate as a waiver thereof or of any other right, power or remedy, nor shall
any single or partial exercise by Lender of any such right, power or remedy
preclude any other or further exercise thereof or of any other right, power or
remedy. No waiver of any provision of any Loan Document and no consent to any
departure therefrom shall ever be effective unless it is in writing and signed
by Lender, and then such waiver or consent shall be effective only in the
specific instances and for the purposes for which given and to the extent
specified in such writing. No notice to or demand on Borrower shall entitle
Borrower to any other or further notice or demand in similar or other
circumstances. No modification, amendment or supplement to this Agreement or the
other Loan Documents shall be valid or effective
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unless the same is in writing and signed by the party against whom it is sought
to be enforced. The acceptance by Lender at any time and from time to time of a
partial payment of the Indebtedness shall not be deemed to be a waiver of any
Event of Default then existing. No waiver by Lender of any Event of Default
shall be deemed to be a waiver of any other then existing or subsequent Event of
Default.
Section 10.2. Survival of Agreements. All of the various
representations, warranties, covenants and agreements in the Loan Documents
shall survive the execution and delivery of this Agreement and the other Loan
Documents and performance hereof and thereof, including without limitation the
making or granting of the security interests and the delivery of the Note and
the other Loan Documents, and shall further survive until all of the
Indebtedness is paid in full to Lender and all of Lender's obligations to
Borrower are terminated.
Section 10.3. Release. By execution of this Agreement, Borrower hereby
releases, waives, discharges and relinquishes Lender, his Affiliates,
representatives, attorneys, agents, heirs and assigns from any and all claims,
demands, charges or causes of action, now existing or hereafter arising,
relating to or arising from the discussion, negotiation or execution of this
Agreement, the Loan Documents, any other document executed in connection
herewith or therewith, or from any of the transactions contemplated hereby,
which claims, demands, charges or causes of action are hereby released, waived,
discharged and relinquished by Borrower to the extent that such claims, demands,
charges and causes of action may be validly released or waived under applicable
law, it being hereby understood by the parties hereto that the release and
waiver in favor of Lender set forth herein shall not extend to any claim, demand
or cause of action the waiver of which by Borrower is expressly prohibited by
applicable state or federal law. Notwithstanding the foregoing, this Release
shall not be applicable to any term, representation, covenants or other
provision of this Stock Purchase Agreement.
Section 10.4. Relief in Bankruptcy. Borrower hereby agrees that, in
consideration of the recitals and mutual covenants contained herein, and for
other good and valuable consideration, in the event Borrower shall (i) file with
any bankruptcy court of competent jurisdiction or be the subject of any petition
under Title 11 of the U.S. Code, as amended, (ii) be the subject of any order
for relief issued under such Title 11 of the U.S. Code, as amended, (iii) file
or be the subject of any petition seeking any reorganization rearrangement,
composition, adjustment, liquidation, dissolution, or similar relief under any
present or future state act or law relating to bankruptcy, insolvency or other
relief for debtors, (iv) have sought or consented to or acquiesced to any
appointment of any trustee, receiver, conservator, or liquidator, (v) be the
subject of any order, judgment or decree entered by any court of competent
jurisdiction approving a petition filed against such part for any
reorganization, rearrangement, composition, adjustment, liquidation,
dissolution, or similar relief under any present or future federal or state act
of law relating to bankruptcy, insolvency or relief for debtors, Lender shall
thereupon be entitled to relief from the automatic stay imposed by Section 362
of Title 11 of the U.S. Code, as amended, or otherwise, on or against the
exercise of the rights and remedies otherwise available to Lender as provided
herein, in the Loan Documents, any other document or instrument executed in
connection herewith or therewith, and as otherwise provided by applicable state
and federal law.
Section 10.5. No Obligation Beyond Maturity. Borrower agrees and
acknowledges that upon
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the maturity of the Loan, Lender shall have no obligation to renew, extend,
modify or rearrange the Loan and shall have the right to require all amounts due
and owing under the Loan to be paid in full upon the maturity thereof.
Section 10.6. Notices. All notices, requests, consents, demands and
other communications required or permitted under any Loan Document shall be in
writing and, unless otherwise specifically provided in such Loan Document, shall
be deemed sufficiently given or furnished if delivered by personal delivery, by
telecopy or telex, by expedited delivery service with proof of delivery, or by
registered or certified United States mail, first class postage prepaid, at the
addresses specified below (unless changed by similar notice in writing given by
the particular Person whose address is to be changed). Any such notice or
communication shall be deemed to have been given either at the time of personal
delivery or, in the case of delivery service or mail, as of the date of first
attempted delivery at the address and in the manner provided herein, or in the
case of delivery service or mail, as of the date of first attempted delivery at
the address and in the manner provided herein, or, in the case of telecopy or
telex, upon receipt.
Lender's address:
c/o John Dee Evans, Esq.
Hoge, Evans & Holmes, L.C.
17772 Preston Road
First Floor
Dallas, Texas 75252
Borrower's address:
9603 White Rock Trail, Suite 100
Dallas, Texas 75258
Attention: George Baker
With a copy to:
Bruce B. Hart
Meadow Park, Suite 610
10440 N. Central Expressway
Dallas, Texas 75231
Section 10.7. Successors and Assigns. The Loan Documents shall be
binding and shall inure to the benefit of the parties thereto and their
respective successors and assigns; provided, however, that Borrower may not
assign or transfer any of its rights or delegate any of its duties or
obligations under any Loan Document without the prior written consent of Lender.
Lender agrees he will not transfer or assign in any manner any rights in the
Loan Documents, unless he has given Borrower and Guarantor the right to purchase
the rights under the Loan Documents on the same terms and conditions as offered
to any proposed transferee. Lender must give Borrower and Guarantor thirty (30)
days prior written notice of such proposed transfer. Borrower and Guarantor
shall have such thirty (30) days to match such offer and finalize the transfer.
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Section 10.8. GOVERNING LAW/VENUE. THE LOAN DOCUMENTS SHALL BE DEEMED
CONTRACTS AND INSTRUMENTS MADE UNDER THE LAWS OF THE STATE OF TEXAS AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE
OF TEXAS AND THE LAWS OF THE UNITED STATES OF AMERICA, EXCEPT WITH RESPECT TO
SPECIFIC LIENS, OR THE PERFECTION THEREOF, EVIDENCED BY LOAN DOCUMENTS COVERING
REAL OR PERSONAL PROPERTY WHICH BY THE LAWS APPLICABLE THERETO ARE REQUIRED TO
BE CONSTRUED UNDER THE LAWS OF ANOTHER JURISDICTION. BORROWER HEREBY IRREVOCABLY
SUBMITS ITSELF TO THE NON-EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS
OF THE STATE OF TEXAS AND AGREES AND CONSENTS THAT SERVICE OF PROCESS MAY BE
MADE UPON IT IN ANY LEGAL PROCEEDING RELATING TO THE LOAN DOCUMENTS OR THE
INDEBTEDNESS BY ANY MEANS ALLOWED UNDER TEXAS OR FEDERAL LAW. VENUE FOR ANY
LEGAL PROCEEDING MAY BE TARRANT COUNTY, TEXAS; PROVIDED, THAT LENDER MAY CHOOSE
ANY VENUE IN ANY STATE WHICH IT DEEMS APPROPRIATE IN THE EXERCISE OF ITS SOLE
DISCRETION.
Section 10.0. Severability. If any term or provision of any Loan
Document shall be determined to be illegal or unenforceable all other terms and
provisions of the Loan Documents shall nevertheless remain effective and shall
be enforced to the fullest extent permitted by applicable law.
Section 10.10. Counterparts. This Agreement may be separately executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to constitute one
and the same Agreement.
Section 10.11. Financial Standards. Unless otherwise expressly provided
herein or Lender otherwise consents, all financial statements and reports
furnished to Lender hereunder shall be prepared and all financial computations
and determinations pursuant hereto shall be made in accordance with GAAP.
Section 10.12. Fees. The fees described in this Agreement represent
compensation for services rendered and to be rendered separate and apart from
the lending of money or the provision of credit and do not constitute
compensation for the use, detention or forbearance of money. The obligation of
Borrower to pay each fee described herein shall be in addition to, and not in
lieu of, the obligation of Borrower to pay interest, other fees described herein
and expenses otherwise described in this Agreement. Fees shall be payable when
due in Dallas, Texas, in immediately available funds. All fees shall (a) be
non-refundable when due, (b) to the fullest extent permitted by applicable Law,
bear interest, if no paid when due, at the Default Rate (subject to Section 3.2
above) and (c) be secured by all of the Collateral.
Section 10.13. Headings. The headings, captions, table of contents and
arrangements used in this Agreement or the other Loan Documents are, unless
specified otherwise, for convenience only and shall not be deemed to limit,
amplify or modify the terms of this Agreement or the other Loan Documents.
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Section 10.14. Articles, Sections, etc. All references to "Article,"
"Articles," "Section," "Sections," "Subsection," "Subsections," "paragraph" or
"paragraphs" contained herein are, unless specifically indicated otherwise,
references to articles, sections, subsections and paragraphs of this Agreement.
All references to "Exhibits" or "Schedules" contained herein are references to
"Exhibits" or "Schedules" attached hereto. All such Exhibits or Schedules are
made a part hereof for all purposes, the same as if set forth herein verbatim,
it being understood that, if any Exhibit or Schedule attached hereto which is to
be executed and delivered contains blanks or is otherwise required to be updated
from time to time, the same shall be completed correctly and in accordance with
the terms and provisions contained herein and as contemplated herein prior to or
at the time of the execution and delivery thereof.
Section 10.15. Number and Gender of Words. Whenever the singular number
is used, the same shall include the plural where appropriate, and words of any
gender shall include each other gender where appropriate.
Section 10.16. Service of Process. Borrower hereby waives personal
service of any and all process upon it and irrevocably appoints Bruce B. Hart,
as its registered agent for the purpose of accepting Service of Process within
the State of Texas. Borrower also consents to Service of Process by Registered
Mail directed to its address indicated above and service so made shall be deemed
to be completed ten (10) days after the same shall have been posted. Lender
agrees to promptly forward by registered mail (no return receipt required) any
process served upon Bruce B. Hart, as agent for Borrower, at its address set
forth herein.
Section 10.17. LEGAL COUNSEL. BORROWER ACKNOWLEDGES THAT IT HAS BEEN
REPRESENTED BY INDEPENDENT LEGAL COUNSEL IN CONNECTION WITH ALL MATTERS
CONCERNING THIS AGREEMENT, INCLUDING BUT NOT LIMITED TO THE NEGOTIATION,
ACCEPTANCE AND EXECUTION OF THE AGREEMENT; THAT IT HAS RELIED UPON THE ADVICE OF
ITS INDEPENDENT LEGAL COUNSEL IN AGREEING TO THE TERMS AND CONDITIONS HEREIN AND
IN EXECUTING THIS AGREEMENT; AND THAT IT HAS FREELY AND VOLUNTARILY ENTERED INTO
THIS AGREEMENT AS THE PRODUCT OF ARM'S LENGTH NEGOTIATIONS.
Section 10.18. ENTIRETY; WRITTEN LOAN AGREEMENT. THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS EMBODY THE ENTIRE AGREEMENT BETWEEN THE PARTIES AND
SUPERSEDE ALL PRIOR AGREEMENTS AND UNDERSTANDINGS, IF ANY, RELATING TO THE
SUBJECT MATTER HEREOF. THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO ORAL AGREEMENTS BETWEEN THE PARTIES.
Section 10.19. WAIVER OF JURY TRIAL. BORROWER AND LENDER EACH HEREBY
WAIVE ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION, CAUSE OF ACTION,
SUIT OR PROCEEDINGS (a) ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT,
DOCUMENT, OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR (b) IN
ANY WAY
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CONNECTED WITH OR RELATED TO OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO
OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT, OR ANY OTHER INSTRUMENT, DOCUMENT
OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS
RELATED HERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND
WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE. BORROWER AND LENDER HEREBY
AGREE AND CONSENT THAT ANY SUCH CLAIM, DEMAND, ACTION, CAUSE OF ACTION, SUIT OR
PROCEEDING SHALL BE DECIDED BY A COURT TRIAL, WITHOUT A JURY, AND THAT ANY PARTY
MAY FILE AN ORIGINAL COUNTERPART OR COPY OF THIS AGREEMENT WITH ANY COURT AS
WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR
RIGHT TO TRIAL BY JURY.
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IN WITNESS WHEREOF, this Agreement is executed as of the date first
written above.
BORROWER:
PHY. MED., INC.
By: /s/ George C. Barker
---------------------------------
GEORGE C. BARKER, President
GUARANTOR:
/s/ George C. Barker
-----------------------------------
GEORGE C. BARKER
LENDER:
/s/ Patrick A. Luckett
------------------------------------
PATRICK A. LUCKETT
65
<PAGE>
LIST OF EXHIBITS TO LOAN AND SECURITY AGREEMENT
A - Form of Note
B - Form of Opinion of Counsel to Borrower
C - Form of Guaranty Agreement
D - Form of Waiver and Consent of Landlord
66
EXHIBIT 3.2 TO FORM 10-QSB
NOTE
$800,000.00 September 21, 1993
FOR VALUE RECEIVED, Phymed, Inc., a Texas [sic] ("Borrower"), promises
to pay to the order of Patrick A. Luckett, ("Lender"), in accordance with the
terms of that certain Loan and Security Agreement dated as of September 21, 1993
between Borrower, Lender and Guarantor (as amended, supplemented or otherwise
modified in writing from time to time, the "Agreement"), the principal sum of
Eight Hundred Thousand Dollars ($800,000.00) or such lesser amount as shall be
outstanding on such date under the Loan made by Lender pursuant to the
Agreement, together with interest on the unpaid principal balance of the Loan
made by Lender pursuant to the Agreement at the rates per annum specified in the
Agreement, pursuant to the Schedule of Payments attached hereto and incorporated
herein as Exhibit "A". All sums hereunder are payable to Lender at his address
at c/o John Dee Evans, Esq., Hoge, Evans & Holmes, L.C., 17772 Preston Road,
First Floor, Dallas, Texas 75252, or at such other locations as Lender may
designate from time to time, in lawful currency of the United States of America
and in immediately available funds. All payments and prepayments made hereunder
shall be made without setoff, counterclaim or deduction of any kind. Capitalized
terms used herein, unless otherwise defined, shall have the meanings given to
such terms in the Agreement.
1. Loan Agreement. This Note evidences one Advance under the Loan
made by Lender to Borrower pursuant to the Agreement and has
been executed and delivered pursuant to, and is governed by,
the terms and provisions of the Agreement. This Note, and all
outstanding principal and accrued and unpaid interest
hereunder, may be declared due prior to the expressed maturity
date hereof as provided in the Agreement, reference to which
is hereby made for a complete statement of the terms thereof.
2. Principal and Interest. Principal prepayments and interest
payments shall be due and payable as provided in the
Agreement; provided, however, that the interest payable shall
not exceed the Highest Lawful Rate.
3. Waiver. Borrower, and each surety, endorser, guarantor and
other party now or hereafter liable for the payment of any
sums of money payable on this Note, hereby severally (a)
waive demand, presentment for payment, notice of nonpayment,
protest, notice of protest, notice of intent to accelerate,
notice of acceleration and all other notices, filing of suit
and diligence in collecting this Note or enforcing any other
security with respect to same, (b) agree to any
substitution, subordination, exchange or release of any such
security or the release of any parties primarily or
secondarily liable hereon, (c) agree that Lender shall not
be required first to institute suit or exhaust its remedies
hereon against Borrower, or others liable or to become
liable hereon or to enforce its rights against them or any
security with respect to same, (d) consent to any and all
renewals, extensions, indulgences, releases or changes,
regardless of the number of such renewals, extensions,
indulgences, releases or
67
<PAGE>
changes, without notice hereof, and (e) agree to the
application of any deposit balance with Lender as payment or
part payment hereon or as an offset hereto. No waiver by
Lender of any of its rights or remedies hereunder or under any
other document evidencing or securing this Note or otherwise
shall be considered a waiver of any other subsequent right or
remedy of Lender; no delay or omission in the exercise or
endorsement by Lender of any rights or remedies shall ever by
construed as a waiver of the same or any other right or remedy
of Lender; and no exercise or enforcement of any such right or
remedy shall ever be held to exhaust any right or remedy of
Lender.
4. Event of Default. Failure to pay this Note or any installment
of principal or payment of interest when due in accordance
with the terms of this Note or the Agreement or the occurrence
of any Event of Default shall, as provided in the Agreement,
mature this Note and the principal then remaining unpaid, with
interest then accrued, shall at once become due and payable.
5. Attorney's Fees and Cost of Collection. If this Note is not
paid at maturity and is placed in the hands of an attorney for
collection, or if it is collected through a bankruptcy or any
other court, then Lender shall be entitled to reasonable
attorneys' fees and other costs of collection.
6. Limitation on Interest. Borrower acknowledges and agrees that
it is the intention of the parties hereto to conform
strictly to the usury Laws in force that apply to this
transaction. Accordingly, this Note is hereby limited so
that in no contingency, whether by reason of acceleration of
the maturity of the Loan or otherwise, shall the interest
(and all other sums that are deemed to be interest)
contracted for, charged or received by Lender with respect
to the Loan and the Note exceed the Highest Lawful Rate. If,
from any circumstance whatsoever, interest under the Loan
and/or the Note would otherwise be payable in excess of the
Highest Lawful Rate, and if from any circumstance Lender
shall ever receive anything of value deemed interest by
applicable Law in excess of the Highest Lawful Rate, then
Lender's receipt of such excess interest shall be deemed a
mistake and the same shall, so long as no Event of Default
shall be continuing, at the option of Borrower, either be
repaid to Borrower or credited to the unpaid principal;
provided, however, that if an Event of Default shall have
occurred and be continuing, and Lender shall receive excess
interest during such period, then Lender shall have the
option of either crediting such excess amount to principal
or refunding such excess amount for Borrower. If the Loan is
prepaid or the maturity of the Loan is accelerated by reason
of an election of Lender, then unearned interest, if any,
shall be canceled and, if theretofore paid, shall either be
refunded to Borrower or credited on the Loan, as Lender
elects. All interest paid or agreed to be paid to Lender
shall, to the extent allowed by applicable Law, be
amortized, prorated, allocated, and spread throughout the
full period until payment in full of principal (including
the period of any renewal or extension) so that the interest
for such full period shall not exceed the Highest Lawful
Rate.
68
<PAGE>
7. GOVERNING LAW/VENUE. THIS NOTE SHALL BE DEEMED A CONTRACT
AND INSTRUMENT MADE UNDER THE LAWS OF THE STATE OF TEXAS AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF TEXAS AND THE LAWS OF
THE UNITED STATES OF AMERICA. BORROWER HEREBY IRREVOCABLY
SUBMITS ITSELF TO THE NON- EXCLUSIVE JURISDICTION OF THE
STATE AND FEDERAL COURTS OF THE STATE OF TEXAS AND AGREES
AND CONSENTS THAT SERVICE OF PROCESS MAY BE MADE UPON IT IN
ANY LEGAL PROCEEDING RELATING TO THE LOAN DOCUMENTS OR THE
OBLIGATIONS BY ANY MEANS ALLOWED UNDER TEXAS OR FEDERAL LAW.
VENUE FOR ANY LEGAL PROCEEDING MAY BE DALLAS COUNTY, TEXAS;
PROVIDED, THAT LENDER MAY CHOOSE ANY VENUE IN ANY STATE
WHICH IT DEEMS APPROPRIATE IN THE EXERCISE OF ITS SOLE
DISCRETION.
8. WAIVER OF JURY TRIAL. BORROWER AND LENDER EACH HEREBY WAIVE
ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION,
CAUSE OF ACTION, SUIT OR PROCEEDINGS (a) ARISING UNDER THIS
NOTE OR ANY OTHER INSTRUMENT, DOCUMENT, OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR (b) IN ANY
WAY CONNECTED WITH OR RELATED TO OR INCIDENTAL TO THE
DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT
TO THIS AGREEMENT, OR ANY OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR
THE TRANSACTIONS RELATED HERETO, IN EACH CASE WHETHER NOW
EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN
CONTRACT, TORT OR OTHERWISE. BORROWER AND LENDER HEREBY
AGREE AND CONSENT THAT ANY SUCH CLAIM, DEMAND, ACTION, CAUSE
OF ACTION, SUIT OR PROCEEDING SHALL BE DECIDED BY A COURT
TRIAL, WITHOUT A JURY, AND THAT ANY PARTY MAY FILE AN
ORIGINAL COUNTERPART OR COPY OF THIS AGREEMENT WITH ANY
COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES
HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
69
<PAGE>
BORROWER:
PHYMED, INC.,
A Texas corporation
By: /s/ George C. Barker
---------------------------
GEORGE C. BARKER, PRESIDENT
70
<PAGE>
<TABLE>
<S> <C> <C>
EXHIBIT "A"
LOAN PAYMENT SCHEDULE
PRINCIPAL AMOUNT 800,000.00
INTEREST RATE (ANNUALLY) 10.0000%
PMT. PAYMENT AMOUNT APPLIED TO: PRINCIPAL
NO. AMOUNT INTEREST PRINCIPAL BALANCE
ORIGINAL PRINCIPAL 800,000.00
1 12,500.00 6,666.67 5,833.33 794,166.67
2 12,500.00 6,618.06 5,881.94 788,284.73
3 12,500.00 6,569.04 5,930.96 782,353.77
4 12,500.00 6,519.61 5,980.39 776,373.38
5 12,500.00 6,469.78 6,030.22 770,343.16
6 12,500.00 6,419.53 6,080.47 764,262.69
7 12,500.00 6,368.86 6,131.14 758,131.55
8 12,500.00 6,317.76 6,182.24 751,949.31
9 12,500.00 6,266.24 6,233.76 745,715.55
10 12,500.00 6,214.30 6,285.70 739,429.85
11 12,500.00 6,161.92 6,338.08 733,091.77
12 12,500.00 6,109.10 6,390.90 726,700.87
13 12,500.00 6,055.84 6,444.16 720,256.71
14 12,500.00 6,002.14 6,497.86 713,758.85
15 12,500.00 5,947.99 6,552.01 707,206.84
16 12,500.00 5,893.39 6,606.61 700,600.23
17 12,500.00 5,838.34 6,661.66 693,938.57
18 12,500.00 5,782.82 6,717.18 687,221.39
19 12,500.00 5,726.84 6,773.16 680,448.23
20 12,500.00 5,670.40 6,829.60 673,618.63
21 12,500.00 5,613.49 6,886.51 666,732.12
22 12,500.00 5,498.24 7,001.76 652,556.10
23 12,500.00 5,498.24 7,001.76 652,786.46
24 12,500.00 5,439.89 7,060.11 645,726.35
25 12,500.00 5,381.05 7,118.95 638,607.40
26 12,500.00 5,321.73 7,178.27 631,429.13
27 12,500.00 5,261.91 7,238.09 624,191.04
28 12,500.00 5,201.59 7,298.41 616,892.63
29 12,500.00 5,140.77 7,359.23 609,533.40
30 12,500.00 5,079.45 7,420.55 602,112.85
31 12,500.00 5,017.61 7,482.39 594,630.46
32 12,500.00 4,955.25 7,544.75 587,085.71
33 12,500.00 4,892.38 7,607.62 579,478.09
34 12,500.00 4,828.98 7,671.02 571,807.07
35 12,500.00 4,765.06 7,734.94 564,072.13
36 12,500.00 4,700.60 7,799.40 556,272.73
37 25,000.00 4,635.61 20,364.39 535,908.34
38 25,000.00 4,465.90 20,534.10 515,374.24
39 25,000.00 4,294.79 20,705.21 494,669.03
40 25,000.00 4,122.24 20,877.76 473,791.27
41 25,000.00 3,948.26 21,051.74 452,739.53
42 25,000.00 3,772.83 21,227.17 431,512.36
43 25,000.00 3,595.94 21,404.06 410,108.30
71
<PAGE>
44 25,000.00 3,417.57 21,582.43 388,525.87
45 25,000.00 3,237.72 21,762.28 366,763.59
46 25,000.00 3,056.36 21,943.64 344,819.95
47 25,000.00 2,873.50 22,126.50 322,693.45
48 25,000.00 2,689.11 22,310.89 300,382.56
49 25,000.00 2,503.19 22,496.81 277,885.75
50 25,000.00 2,315.71 22,684.29 255,201.46
51 25,000.00 2,126.68 22,873.32 232.328.14
52 25,000.00 1,936.07 23,063.93 209,264.21
53 25,000.00 1,743.87 23,256.13 186,008.08
54 25,000.00 1,550.07 23,449.93 162,558.15
55 25,000.00 1,354.65 23,645.35 138,912.80
56 25,000.00 1,157.61 23,842.39 115,070.41
57 25,000.00 958.92 24,041.08 91,029.33
58 25,000.00 758.58 24,241.42 66,787.91
59 25,000.00 556.57 24,443.43 42,344.48
60 25,000.00 352.87 24,647.13 17,697.35
61 17,844.83 147.48 17,697.35
--------- ------ ---------
1,067,844.83 267,844.83 800,000.00
============ ========== ==========
</TABLE>
72
EXHIBIT 3.3 TO FORM 10-QSB
NOTE
(1) FOR VALUE RECEIVED, the undersigned PHY.MED., INC. EMPLOYEE STOCK
OWNERSHIP PLAN ("Maker"), hereby promises to pay to the order of Patrick A.
Luckett ("Payee"), at c/o John Dee Evans, Hoge, Evans & Holmes, L.C., 17772
Preston Road, First Floor, Dallas, Texas 75252, in lawful money of the United
States of America, the principal sum of EIGHT HUNDRED THOUSAND AND NO/100
DOLLARS ($800,000.00), together with interest on the outstanding principal
balance from day to day remaining as herein specified, as follows:
(2) The principal and interest of this Note shall be due and payable
pursuant to the amortization schedule set forth on Exhibit "A", beginning on
November 1, 1993, and monthly installments shall be due and payable on the same
day of each month thereafter with a final payment being due and payable on
December 1, 2000, at which time all remaining principal and interest shall be
paid.
(3) The outstanding principal balance hereof shall bear interest at TEN
PERCENT (10%) per annum compounded monthly. All past due principal and interest
shall bear interest at the rate of ten percent (10%) per annum, compounded
semi-annually.
(4) Maker shall have the right to prepay, at any time and from time to
time without premium or penalty, the entire unpaid principal balance of this
Note or any portion thereof, any such partial prepayments to be applied first to
accrued and unpaid interest due as of the date of such partial prepayment and
any remaining amount to the outstanding principal hereof.
(5) Notwithstanding anything herein to the contrary, this Note shall be
without recourse against the Maker, except as permitted by applicable law with
respect to a loan to a leveraged employee stock ownership plan (as defined in
Section 4975(e)(7) of the Internal Revenue Code of 1986, as amended). Payee
shall not have any right to assets of Maker other than (i) the Collateral [as
such term is defined in the Security (Pledge) Agreement executed coincident
herewith (the "Security (Pledge) Agreement")], (ii) contributions (other than
contributions of employer securities) that are made by or on behalf of PHY.MED.,
INC. (the "Employer") to enable Maker to meet its obligations hereunder
("Contributions"), and (iii) earnings attributable to the Collateral and the
investment of such Contributions. Notwithstanding anything herein to the
contrary, the amount of payments to be made hereunder shall not exceed (a) the
sum of all cash Contributions theretofore received by Maker from the Employer to
meet the obligations hereunder and earnings attributable to the investment of
such Contributions less (b) all payments of principal and interest theretofore
made by or on behalf of Maker hereon in prior years.
(6) The failure of Maker to make a payment in accordance with the
provisions of paragraphs (2) or (3) of this Note shall constitute an event of
default ("Event of Default") under this Note (notwithstanding the limitations of
the last sentence of paragraph (5) of this Note, but will not result in the
acceleration of payments not yet due hereunder; provided, however, that an Event
of Default shall not occur hereunder until a payment required under this Note is
past-due by more than
73
<PAGE>
fifteen (15) days after written notice of such default by Payee to Maker. If an
Event of Default occurs, the rights and remedies of Payee or any other holder or
transferee of this Note shall be limited to those provided in the Security
(Pledge) Agreement, and
in no event can any recovery as a result of an Event of Default exceed the
dollar amount of such default.
(7) Notwithstanding anything to the contrary contained herein, no
provisions of this Note shall require the payment or permit the collection of
interest in excess of the Maximum Rate. If any excess of interest in such
respect is herein provided for, or shall be adjudicated to be so provided, in
this Note or otherwise in connection with this loan transaction, the provisions
of this paragraph shall govern and prevail, and neither Maker nor the sureties,
guarantors, successors or assigns of Maker shall be obligated to pay the excess
amount of such interest, or any other excess sum paid for the use, forbearances
or detention of sums loaned pursuant hereto. If for any reason interest in
excess of the Maximum Rate shall be deemed charged, required, permitted,
collected, or received by any court of competent jurisdiction, any such excess
shall be applied as a payment and reduction of the principal of indebtedness
evidenced by this Note; and, if the principal amount hereof has been paid, in
full, any remaining excess shall forthwith be paid to Maker. Maximum Rate as
used herein shall mean the maximum rate permitted by applicable law.
(8) This Note has been entered into in Dallas County, Texas, and it
shall be performable for all purposes in Dallas County, Texas, and Maker and
each surety, guarantor, endorser and other party ever liable for payment of any
sums of money payable on this Note, jointly or severally waive the right to be
sued hereon elsewhere. Courts within the State of Texas shall have jurisdiction
over any and all disputes arising under or pertaining to this Note; and venue in
any such dispute shall be laid in the county or judicial district of Payee's
principal place of business. This Note shall be governed by and construed in
accordance with the laws of the State of Texas and the applicable laws of the
United States of America.
(9) Maker and each surety, guarantor, endorser and other party ever
liable for payment of any sums of money payable on this Note jointly and
severally waive presentment and demand for payment, protest, notice of protest
and non-payment or dishonor, notice of acceleration or intent to accelerate,
diligence in collection, and grace, and consent to all extensions without notice
for any period or periods of time and partial payments, before or after
maturity, without prejudice to the holder. The holder shall similarly have the
right to deal in any way, at any time, with one or more of the foregoing parties
without notice to any other party, and to grant any such party any extensions of
time for payment of any of said indebtedness, or to release part or all of the
collateral securing this Note or to grant any other indulgences or forbearances
whatsoever, without notice or to any other party and without in any way
affecting the personal liability of any party hereunder.
74
<PAGE>
EXECUTED AND EFFECTIVE this ______ day of September, 1993.
PHY.MED., INC. EMPLOYEE STOCK
OWNERSHIP PLAN
By: /s/ George C. Barker
----------------------------
GEORGE C. BARKER, Trustee
75
<PAGE>
EXHIBIT "A"
AMORTIZATION SCHEDULE
Payment No. Payment Date Payment
- ----------- ------------ -------
1 11-01-93 $10,000.00
2 12-01-93 10,000.00
3 01-01-94 10,000.00
4 02-01-94 10,000.00
5 03-01-94 10,000.00
6 04-01-94 10,000.00
7 05-01-94 10,000.00
8 06-01-94 10,000.00
9 07-01-94 10,000.00
10 08-01-94 10,000.00
11 09-01-94 10,000.00
12 10-01-94 50,000.00
13 11-01-94 10,000.00
14 12-01-94 10,000.00
15 01-01-95 10,000.00
16 02-01-95 10,000.00
17 03-01-95 10,000.00
18 04-01-95 10,000.00
19 05-01-95 10,000.00
20 06-01-95 10,000.00
21 07-01-95 10,000.00
22 08-01-95 10,000.00
23 09-01-95 10,000.00
24 10-01-95 50,000.00
25 11-01-95 10,000.00
26 12-01-95 10,000.00
27 01-01-96 10,000.00
28 02-01-96 10,000.00
29 03-01-96 10,000.00
30 04-01-96 10,000.00
31 05-01-96 10,000.00
32 06-01-96 10,000.00
33 07-01-96 10,000.00
34 08-01-96 10,000.00
35 09-01-96 10,000.00
36 10-01-96 50,000.00
37 11-01-96 10,000.00
38 12-01-96 10,000.00
76
<PAGE>
Payment No. Payment Date Payment
- ----------- ------------ -------
39 01-01-97 $10,000.00
40 02-01-97 10,000.00
41 03-01-97 10,000.00
42 04-01-97 10,000.00
43 05-01-97 10,000.00
44 06-01-97 10,000.00
45 07-01-97 10,000.00
46 08-01-97 10,000.00
47 09-01-97 10,000.00
48 10-01-97 50,000.00
49 11-01-97 10,000.00
50 12-01-97 10,000.00
51 01-01-98 10,000.00
52 02-01-98 10,000.00
53 03-01-98 10,000.00
54 04-01-98 10,000.00
55 05-01-98 10,000.00
56 06-01-98 10,000.00
57 07-01-98 10,000.00
58 08-01-98 10,000.00
59 09-01-98 10,000.00
60 10-01-98 50,000.00
61 11-01-98 10,000.00
62 12-01-98 10,000.00
63 01-01-98 10,000.00
64 02-01-98 10,000.00
65 03-01-98 10,000.00
66 04-01-99 10,000.00
67 05-01-99 10,000.00
68 06-01-99 10,000.00
69 07-01-99 10,000.00
70 08-01-99 10,000.00
71 09-01-99 10,000.00
72 10-01-99 50,000.00
73 11-01-99 10,000.00
74 12-01-99 10,000.00
75 01-01-00 10,000.00
76 02-01-00 10,000.00
77 03-01-00 10,000.00
78 04-01-00 10,000.00
79 05-01-00 10,000.00
80 06-01-00 10,000.00
81 07-01-00 10,000.00
77
<PAGE>
Payment No. Payment Date Payment
- ----------- ------------ -------
82 08-01-00 10,000.00
83 09-01-00 10,000.00
84 10-01-00 50,000.00
85 11-01-00 10,000.00
86 12-01-00 1,924.54
78
EXHIBIT 3.4 TO FORM 10-QSB
NOTE PURCHASE AGREEMENT
This Note Purchase Agreement ("Agreement") entered into this ____ day
of _______, 1993, by and between Patrick A. Luckett ("Luckett"), Phy.Med., Inc.,
a Texas corporation ("PhyMed") and the Employee Stock Ownership Plan of
Phy.Med., Inc. ("ESOP")
W I T N E S S E T H:
WHEREAS, the ESOP has agreed to purchase 300 shares of PhyMed stock
from Luckett for the purchase price $1,200,000.00;
WHEREAS, the ESOP has agreed to pay Luckett such purchase with
$400,000.00 in cash and an $800,000.00 Note of even date herewith;
WHEREAS, PhyMed deemed it in its best interest to purchase the ESOP
Note on or after 5 years from the date hereof.
For and in consideration of the covenants, representations and
warranties set forth herein, Luckett, PhyMed and the ESOP hereby agrees as
follows:
16. PhyMed hereby agrees that it shall purchase from Luckett the
ESOP Note from Luckett, upon the terms as set forth herein.
17. The purchase price for the Note shall be the amount of the
outstanding principal balance of the Note on the date of
notice by Luckett to PhyMed exercising its rights pursuant to
this Agreement, as set forth hereinbelow.
18. Luckett shall have the right to require that PhyMed purchase
the Note for the purchase price set forth above on or after 5
years, but before the expiration of 6 years, from the date of
the Agreement, upon written notice to PhyMed. Such notice
shall be by certified mail, return receipt requested addressed
to the President of PhyMed at its the current principal
business address.
19. Upon receipt of notice by PhyMed, that Luckett is exercising
his rights pursuant to this Agreement, PhyMed shall have 30
days from the date of such notice to close the transaction
contemplated herein and pay the purchase price for the Note.
20. Both parties agree to execute any and all documentation
necessary to consummate the closing of the purchase of the
Note as contemplated herein.
79
<PAGE>
21. This Agreement is performable in Dallas, Dallas County, Texas
and shall be construed according to the laws of the State of
Texas.
/s/ Patrick A. Luckett
------------------------------------
PATRICK A. LUCKETT
PHY.MED., INC.
By: /s/ George C. Barker
------------------------------------
GEORGE C. BARKER, President
EMPLOYEE STOCK OWNERSHIP OF
PHY.MED., INC.
By: /s/ George C. Barker
------------------------------------
GEORGE C. BARKER, Trustee
(Executed for the purpose of consenting
to the Sale of the ESOP)
80
EXHIBIT 3.5 TO FORM 10-QSB
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT (this "Guaranty") is made as of the 21st day of
September, 1993 by George C. Barker ("Guarantor") in favor of Patrick Alan
Luckett (the "Lender").
For valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, and in order to induce the Lender to extend credit to Phy.
Med., Inc. * a Texas corporation ("PhyMed") and Phy. Med., Inc. Employee Stock
Ownership Plan ("ESOP") (collectively referred to herein as the "Borrower"),
Guarantor hereby undertake and agree as follows:
1. The Guaranty. Guarantor hereby guaranties to Lender, absolutely and
unconditionally, the prompt and full payment and performance when due of the
indebtedness and obligations evidenced by that certain Loan and Security
Agreement and that certain Note in the original principal amount of Eight
Hundred Thousand Dollars ($800,000.00) executed by PhyMed in favor of Lender of
even date herewith and that certain Note in the original principal amount of
Eight Hundred Thou~and Dollars ($800,000.00) executed by ESOP in favor of Lender
of eve~ date herewith, and any and all renewals, modifications, and extensions
thereof, and all other indebtedness and obligations of Borrower to Lender,
whether direct or indirect, absolute or contingent, due or to become due, now
existing or hereafter arising, whether incurred by or arising from agreements or
dealings between Lender and Borrower or by or from any agreements or dealings
with any third party by which Lender may be or become in any manner whatsoever a
creditor of Borrower, wheresoever and howsoever incurred and any ultimate unpaid
balance thereof and whether the same is from time to time reduced and thereafter
increased or entirely extinguished and thereafter incurred again, and whether
Borrower be bound severally or jointly, alone or with others, and whether as
principal or as surety (all of which indebtedness, obligations and liabilities
referred to in this sentence may be referred to herein as "Indebtedness"). This
Guaranty is a guaranty of payment, not collection, and is intended to be and
shall be construed to be a continuing guaranty. Lender, in its sole discretion,
may proceed against Guarantor with or without having instituted any demand or
action against or having obtained or executed upon any judgment against Borrower
or other guarantors or sureties or asserting any rights against any collateral
or security for the Indebtedness.
2. Obligations Not Impaired. This Guaranty and all of the obligations
of Guarantor hereunder shall remain in full force and effect without regard to
and shall not be affected or impaired by: (a) any renewal, extension, amendment,
modification of or addition or supplement to the Indebtedness, or any documents
given in connection with any of the Indebtedness (all of which may hereinafter
be referred to as the "Agreements"); (b) any extension, indulgence or other
action or inaction in respect of any of the Agreements or the Indebtedness or
any acceptance of security for, or other guaranties of, any of the Agreements or
the Indebtedness, or any release, exchange, or alteration of any or all of such
security or guaranties; (c) any default by Borrower under, or any lack of due
execution, invalidity or unenforceability of, or any irregularity or other
defect in, any of the Indebtedness or the Agreements; (d) any waiver by Lender
of any required performance of any condition precedent or waiver of any
requirement imposed by any of the Indebtedness or the Agreements; (e) any
exercise or non-exercise of any right, remedy, power or privilege in respect of
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this Guaranty or any of the Indebtedness or the Agreements; (f) any sale, lease,
transfer or other disposition of the assets of Borrower to, or any consolidation
or merger of Borrower with or into, any other person, corporation, or entity, or
any transfer or other disposition by Guarantor or any other holder of any shares
of capital stock of Borrower; (g) the addition of a new guarantor or guarantors
or any suit against, compromise with or release of any other guarantor; (h)
Lender's failure to use diligence in preserving the liability of any person with
respect to the Indebtedness or bringing suit to enforce the collection of the
Indebtedness; (i) any bankruptcy, insolvency, reorganization or similar
proceedings involving or affecting Borrower; (j) any release or subordination of
any security interest of Lender in the assets of Borrower; (k) any change in the
status, composition, structure or name of Borrower, including, but not limited
to, change by reason of merger, dissolution, consolidation, reorganization or
addition or withdrawal of a partner or limited partner; (l) the validity or
enforceability of any promissory note, loan document or other agreement
evidencing all or a part of the Indebtedness; (m) any defense arising by reason
of any disability or other defense of Borrower or any endorser, guarantor,
co-maker or other person; or (n) any other circumstances which might otherwise
constitute a legal or equitable discharge or defense of a guarantor, other than
a written release signed by Lender.
3. Waiver. Guarantor unconditionally waives: (a) notice of any of the
matters referred to in Paragraph 2 above; (b) all notices which may be required
by statute, rule of law or otherwise to preserve any right of Lender, including
without limitation, notice to Guarantor of default, intent to accelerate,
acceleration, presentment to and demand of payment or performance from Borrower
and protest for non-payment or dishonor; (c) any exercise by Lender of any
right, remedy, power or privilege in connection with any of the Agreements; (d)
any requirement of promptness or diligence on the part of Lender.
4. Modification/Revocation. No modification, consent or waiver of any
provision of this Guaranty, nor consent to any departure by Guarantor therefrom,
shall be effective unless the same shall be executed by Lender and Guarantor and
then shall be effective only in the specific instance and for the purpose for
which given. This is a continuing guaranty relating to all of the Indebtedness,
including Indebtedness arising under successive transactions which from time to
time continue or renew the Indebtedness after it has been satisfied. The
obligations of Guarantor hereunder may be terminated only as to future
transactions and only by giving written notice thereof to Lender at its address
set forth hereinbelow by certified U.S. mail, postage prepaid, return receipt
requested. No such revocation shall be effective until the fifth business day
(excluding Saturdays, Sundays and holidays) following the date of actual receipt
thereof by Lender. Notwithstanding the effectuation of such revocation, this
Guaranty shall continue in full force and effect as to any and all Indebtedness
which is outstanding on the effective date of revocation and all extensions and
renewals of said Indebtedness,and all interest thereon both then and thereafter
accruing, and all attorneys' fees, court costs and collection charges
theretofore and thereafter incurred in endeavoring to collect or enforce any
rights and remedies relative to said Indebtedness against Borrower, the
Guarantor and other guarantors or in asserting Lender's right against any
collateral or security (whether or not suit be brought).
5. Full Performance. Nothing shall discharge or satisfy any liability
or obligation of Guarantor hereunder excepts the full performance and
satisfaction of the entire Indebtedness and all other liabilities and
obligations of Borrower to Lender, whether now or hereafter existing. Guarantor
further agrees that to the extent that Borrower makes a payment or payments to
Lender, which
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payment or payments or any part thereof are subsequently invalidated, declared
to be fraudulent or preferential, set aside and/or required to be repaid to a
trustee, receiver or any other party under any state or federal bankruptcy or
receivership law, common law or equitable cause, then to the extent of such
payment or repayment, the obligation or part thereof intended to be satisfied
shall be revived and continued in full force and effect as if said payment had
not been made.
6. Benefit to Guarantor/Condition of Guarantor. Guarantor acknowledges
and warrants that Guarantor derives and expects to derive financial and other
benefits, directly or indirectly, from each and every extension of credit from
Lender to Borrower and from each and every renewal, extension, release of
collateral or other relinquishment of legal rights made or granted or to be made
or granted by Lender to Borrower. Guarantor further represents and warrants to
Lender that, as of the date of this Guaranty, the fair market value of
Guarantor's respective assets exceed Guarantors' respective liabilities;
Guarantor is meeting current liabilities as they mature; the financial
statements furnished to Lender by Guarantor are true, complete and correct in
all material respects, do not omit any facts or circumstances necessary to make
the statements therein not misleading, and include in any footnotes all
contingent liabilities of the undersigned; there has been no material adverse
change in the financial condition of Guarantor since the date of the financial
statement; there are no pending material court or administrative proceedings or
undischarged judgments against Guarantor, and no federal or state tax liens
against Guarantor; and Guarantor is not in default or claimed to be in default
under any agreement requiring the repayment of money. Guarantor agrees to
furnish Lender with immediate written notice of any material adverse change in
its financial condition, including, without limitation, litigation commenced,
tax liens filed, defaults claimed under their indebtedness for borrowed money or
bankruptcy proceedings commenced against Guarantor. Guarantor also agrees to
provide Lender with an updated financial statement upon written request for such
by Lender and hereby affirm that any. updated financial statements shall comply
with the warranties and representations hereinabove set forth. Guarantor further
agrees to provide annual tax returns to Lender upon written request for such
returns by Lender.
7. Rights and Remedies. All rights and remedies of the Lender hereunder
are cumulative of each other and of every other right or remedy which the Lender
may have at law or in equity or under any contract or document, and the exercise
of one or more rights or remedies shall not prejudice or impair the concurrent
or subsequent exercise of other rights or remedies. Lender shall not be required
to pursue any other remedies before invoking the benefits of this Guaranty;
specifically Lender shall not be required to take any action against Borrower or
any other person or to exhaust its remedies against collateral and other
security. This Guaranty is secured by a lien on certain Phy. Med., Inc. stock
pursuant to that certain Security Pledge) Agreement of even date herewith
("Stock Pledge"). Notwithstanding any provision contained herein to the
contrary, Lender's recovery pursuant to this Guaranty is solely limited to
Lender's rights pursuant to the Security Pledge) Agreement and Lender shall not
have any right to recover any deficiency in addition to the foreclosure under
the Security Pledge) Agreement.
8. Costs of Collection. Guarantor agrees to reimburse Lender for all
expenses (including, without limitation, reasonable legal fees) incurred by
Lender in connection with the collection of any sums payable by Guarantor
hereunder.
9. Notice. All written notices shall be given to Guarantor at 9603
White Rock Trail, Suite 100, Dallas, Texas or at such other address(es) as
Guarantor may specify hereafter. Any notice
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that Lender may elect to give Guarantor shall be deemed effective when forwarded
by mail to the above address (or at such other address as Guarantor may specify,
in writing, to Lender). All written notices shall be given to Lender as follows:
Alan Luckett, do John Dee Evans, Hoge, Evans & Holmes, L.C., 17772 Preston Road,
First Floor, Dallas, Texas 75252 or at such other address(es) as Lender may
specify hereafter.
10. Successors and Assigns. This Guaranty shall be binding upon
Guarantor and upon his heirs, executors and administrators, or successors and
assigns (as the case may be) of Guarantor, and shall inure to the benefit of
Lender's successors and assigns; all references herein to Borrower and to
Guarantor shall be deemed to include their successors and assigns or heirs,
executors and administrators (as the case may be). Guarantor may not sell,
transfer or assign any of their obligations or liabilities under this Guaranty
without the express written consent of Lender. Lender may sell, transfer or
assign this Guaranty, in its sole discretion, without notice, and each
successive assignee shall have the right to enforce this Guaranty for its
benefit.
11. Severability. In the event that any obligation hereunder becomes
unavailable or unenforceable for whatever reason, such provision or obligation
shall be deemed null and void to the extent of such unavailability or
unenforceability and shall be deemed severable from but shall not invalidate any
other obligation or provision hereunder. In the event that the Guarantor is
released from any obligations hereunder or such obligations become unenforceable
or unavailable with respect to Guarantor for whatever reason, such release,
unavailability or unenforceability shall be severable and all other obligations
hereunder shall continue in effect with respect to Guarantor.
12. Subordination and Subrogation. Guarantor agrees that any
indebtedness of the Borrower to Guarantor or any indebtedness arising or
accruing out of any payment which Guarantor may make pursuant to this Guaranty
shall be fully subordinate and junior in priority in right of payment to any
indebtedness of Borrower to Lender and Guarantor shall have no right of
subrogation, reimbursement or indemnity whatsoever, nor any right of recourse
for any such indebtedness, unless and until the entire principal balance,
accrued interest and all other amounts required to be paid under and pursuant to
the Indebtedness and the Agreements shall have been paid in full. The Guarantor
hereby agrees that such indebtedness of Borrower to Guarantor, present and
future, is hereby assigned to Lender and all monies received by Guarantor in
respect thereof shall be received in trust for Lender and forthwith upon receipt
shall be paid over to Lender, all without in any way limiting or lessening the
liability of Guarantor under this Guaranty.
13. Limitation on Interest. Guarantor acknowledges and agrees that
Guarantor and Lender intend to contract in strict compliance with applicable
usury laws, if any, from time to time in effect. In furtherance thereof,
Guarantor stipulates and agrees that none of the terms and provisions contained
in this Guaranty shall ever be construed to create a contract to pay, for the
use, forbearance or detention of money, interest in excess of the maximum amount
of interest permitted to be charged by applicable law from time to time in
effect. All agreements between Guarantor and Lender, whether now existing or
hereafter arising and whether written or oral, are hereby implied so that in no
contingency, whether by reason of demand for payment of any indebtedness
guaranteed hereby or otherwise, shall the interest contracted for, charged or
received by Lender exceed the maximum amount permissible under applicable law.
If, from any circumstance whatsoever, interest would otherwise be payable to
Lender in excess of the maximum lawful amount, the interest payable to Lender
shall be reduced to the maximum amount permitted under applicable law; and, if
from any
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circumstance Lender shall ever receive anything of value deemed interest by
applicable law in excess of the maximum lawful amount, an amount equal to any
excessive interest shall be applied to the reduction of the principal of the
indebtedness guaranteed hereby and not to the payment of interest, or if such
excessive interest exceeds the unpaid balance of principal of the indebtedness
guaranteed hereby such excess shall be refunded to Guarantor or other
appropriate party. All interest paid or agreed to be paid to the Lender shall,
to the extent permitted by applicable law, be amortized, prorated, allocated and
spread throughout the full period until payment in full of the principal of the
Indebtedness guaranteed hereby (including the period of any renewal or extension
thereof) so that interest thereon for such full period shall not exceed the
maximum amount permitted by applicable law.
14. Headings. The headings of paragraphs or subparagraphs of this
Guaranty are intended for convenience only and shall not in any way control or
affect the meaning or Construction of any provision of this Guaranty.
15. GOVERNING LAW/VENUE. THIS GUARANTY SHALL BE DEEMED A CONTRACT AND
INSTRUMENT MADE UNDER THE LAWS OF THE STATE OF TEXAS AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS AND
THE LAWS OF THE UNITED STATES OF AMERICA. GUARANTOR HEREBY IRREVOCABLY SUBMIT
HIMSELF TO THE NON- EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS OF
THE STATE OF TEXAS AND AGREE AND CONSENT THAT SERVICE OF PROCESS MAY BE MADE
UPON THEM IN ANY LEGAL PROCEEDING RELATING TO THIS GUARANTY BY ANY MEANS ALLOWED
UNDER TEXAS OR FEDERAL LAW. VENUE FOR ANY LEGAL PROCEEDING MAY BE TARRANT
COUNTY, TEXAS.
16. LEGAL COUNSEL. GUARANTOR ACKNOWLEDGES THAT THEY HAVE BEEN
REPRESENTED BY INDEPENDENT LEGAL COUNSEL IN CONNECTION WITH ALL MATTERS
CONCERNING THIS GUARANTY, INCLUDING BUT NOT LIMITED TO THE NEGOTIATION,
ACCEPTANCE AND EXECUTION OF THE GUARANTY; THAT THEY HAVE RELIED UPON THE ADVICE
OF ms INDEPENDENT LEGAL COUNSEL IN AGREEING TO THE TERMS AND CONDITIONS HEREIN
AND IN EXECUTING THIS GUARANTY; AND THAT HE HAVE FREELY AND VOLUNTARILY ENTERED
INTO THIS GUARANTY AS THE PRODUCT OF ARMS LENGTH NEGOTIATIONS.
17. WAIVER OF JURY TRIAL. GUARANTOR AND LENDER EACH HEREBY WAIVE ANY
RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION, CAUSE OF ACTION, SUIT OR
PROCEEDINGS (a) ARISING UNDER THIS GUARANTY OR ANY OTHER INSTRUMENT, DOCUMENT,
OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR (b) IN ANY WAY
CONNECTED WITH OR RELATED TO OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO
OR ANY OF THEM WITH RESPECT TO THIS GUARANTY, THE LOAN AGREEMENT, OR ANY OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH
OR THE TRANSACTIONS RELATED HERETO, IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE.
GUARANTOR AND LENDER
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HEREBY AGREE AND CONSENT THAT ANY SUCH CLAIM, DEMAND, ACTION, CAUSE OF ACTION,
SUIT OR PROCEEDING SHALL BE DECIDED BY A COURT TRIAL, WITHOUT A JURY, AND THAT
EITHER PARTY MAY FILE AN ORIGINAL COUNTERPART OR COPY OF THIS AGREEMENT WITH ANY
COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF
THEIR RIGHT TO TRIAL BY JURY.
IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of the date
first above written.
/s/ George C. Barker
--------------------------------
GEORGE C. BARKER
86
EXHIBIT 3.6 TO FORM 10-QSB
Limited Waiver of Certain
Rights and Remedies
The undersigned Lender hereby waives those rights and remedies arising
from the application of Section 7.1 (j); Section 7.2 and Section 9.1 (c), (d)
and (f) of the Loan and Security Agreement by and between Phymed Inc. as
borrower and Patrick A. Luckett as Lender and George C. Barker as Guarantor,
dated September 21, 1993.
/s/ Patrick Alan Luckett
-----------------------------------
Patrick Alan Luckett
October 24, 1998
87
EXHIBIT 10.6 TO FORM 10-QSB
LOAN AND SECURITY AGREEMENT
Loan #94-05-0128
THIS LOAN AND SECURITY AGREEMENT ("Agreement") is made as of the date
set forth below BETWEEN:
Secured Party: MEDICAL EQUIPMENT FINANCE COMPANY; and
Debtor: Phy. Med., Inc.
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1. Certain Definitions. The following terms shall have the following
respective meanings
(a) Advance. Advances of funds to the Debtor pursuant to Section 2
hereof and schedules which may be executed between Secured Party and Debtor
from time to time.
(b) Collateral. "Collateral" shall have the meaning set forth in
Section 2.2 hereof.
(c) Event of Default. Those events set forth in Section 11 hereof.
(d) Monthly Loan Repayment. The amount set forth in any Schedule
executed in connection with any Advance under this Agreement.
(e) Schedule(s). Any and all or each (as the context shall require) of
the Loan and Collateral Schedules of the Debtor, to be executed by the
parties under this Agreement.
(f) Secured Obligations. The payment of the principal and interest as
set forth in each and all of the Schedules, and the payment of all
additional amounts and other sums at any time due and owing under the
Schedules for this Agreement, and the performance and observance of all
covenants and conditions contained herein and therein.
(g) Supplier. The entity from whom the Debtor purchased the Collateral
including manufacturers, dealers, sellers and vendors.
2. Purpose of Financing and Description of Loans; Grant of Security
Interest Collateral.
(a) Secured Party agrees, subject to the terms and conditions of this
Agreement, to make Advances to the Debtor in an aggregate amount to be
determined by Secured Party in its sole and absolute discretion.
(b) Debtor agrees that the proceeds of any Advance will be used solely
to acquire the Collateral as described in the Schedule executed in
connection with said advance.
(c) The amount of any Advances to Debtor shall be set forth on the
Schedule executed in connection with said Advance.
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(d) The term of repayment of any Advance made under this Agreement
(the "Term") shall commence on the date set forth in the Schedule executed
in connection with said Advance and shall continue for the period set forth
in said Schedule, and for all extensions and renewals of such period.
(e) Debtor shall pay to Secured Party the Monthly Loan Repayment for
each Advance in amounts and on the dates set forth in the Schedule executed
in connection with said Advance, whether or not Secured Party has rendered
an invoice to Debtor. Debtor agrees to pay the Monthly Loan Repayment to
Secured Party at the office of the Secured Party set forth below, or to
such entity and/or at such other place as Secured Party may from time to
time designate by notice to Debtor. Any other amounts required to be paid
to Secured Party under this Agreement are due upon Debtor's receipt of
Secured Party's invoice and will be payable as directed in the invoice.
Payments under this Agreement may be applied to the Debtor's then accrued
Secured Obligations in such order as Secured Party may choose.
(f) The Advances shall not be subject to prepayment or redemption in
whole or in part prior to the expiration of the Term set forth in the
Schedule executed in connection with said Advance.
2.1 Grant of Security Interest. In consideration of the Advances to be
made by Secured Party to Debtor under this Agreement, and to secure the payment
and performance of the Security Obligations, Debtor hereby grants and assigns to
Secured Party, its successors and assigns, a security interest in the Collateral
described in Section 2.2 below.
2.2 Collateral. All equipment, inventory, accounts, accounts,
receivable, contract rights, chattel paper, cash and cash equivalents, fixtures
and intangibles of borrower including all furniture, fixtures, and equipment or
other property described in any and all Schedule(s) executed pursuant to this
Agreement whether now owned or hereafter acquired, and all substitutions,
renewals or replacements of and alterations, additions or improvements, if any,
to such Collateral, together with, in each and every case, all proceeds thereof.
Each item of collateral shall secure not only the specific Advances made by
Secured Party to Debtor as set forth in any Schedule, but also all other present
and future indebtedness or obligations of Debtor to Secured Party of every kind
and nature whatsoever. Debtor warrants and agrees that the Collateral will be
used primarily for business or commercial purposes and that regardless of the
manner of affixation, the Collateral shall remain personal property and shall
not become part of the real estate. Debtor agrees to keep the Collateral at the
locations set forth in the Schedule(s) covering said Collateral and will not
make any change in the location of the Collateral within such state, and will
not remove the Collateral from such state without the prior written consent of
Secured Party.
3. Time is of the Essence; Late Charges. Time is of the essence in this
Agreement and if any Monthly Loan Repayment is not paid within the ten (10) days
after the due date thereof, Secured Party shall have the right to add and
collect, and Debtor agrees to pay:
(a) A late charge on and in addition to, such Monthly Loan
Repayment equal to five percent (5%) of such Monthly Loan Repayment or
a lesser amount if established by any State or Federal statute
applicable thereto; and
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(b) Interest on such Monthly Loan Repayment from thirty (30) days
after the due date until paid at the rate of eighteen percent (18%)
per annum.
4. No Warranties. This Agreement is solely a financing agreement.
Debtor acknowledges that: The Collateral has or will have been selected and
acquired solely by Debtor for Debtor's purposes; Secured Party is not the
manufacturer, dealer, vendor or supplier of the Collateral; the Collateral is of
a size, design, capacity, description and manufacture selected by Debtor; Debtor
is satisfied that the Collateral is suitable and fit for its purposes; and
SECURED PARTY HAS NOT MADE AND DOES NOT MAKE ANY WARRANTY OR REPRESENTATION
WHATSOEVER, EITHER EXPRESS OR IMPLIED, AS TO THE FITNESS, CONDITION,
MERCHANTABILITY, DESIGN OR OPERATION OF THE COLLATERAL, ITS FITNESS FOR ANY
PARTICULAR PURPOSE, THE VALUE OF THE COLLATERAL, THE QUALITY OR CAPACITY OF THE
MATERIALS IN THE COLLATERAL OR WORKMANSHIP IN THE COLLATERAL, NOR ANY OTHER
REPRESENTATION OR WARRANTY WHATSOEVER.
4.1 No Agency. Debtor acknowledges and agrees that none of the
manufacturer, Vendor, dealer or supplier, nor any salesman, representative, or
other agent of the manufacturer, dealer, vendor or supplier, is an agent of
Secured Party. No salesman, representative or agent of the manufacturer, dealer,
vendor or supplier is authorized to waive or alter any term or condition of this
Agreement, and no representation as to the Collateral or any other matter by any
manufacturer, dealer, vendor or supplier shall in any way affect Debtor's duty
to pay the Monthly Loan Repayment and perform his other obligations as set forth
in this Agreement.
5. Acceptance. Execution by Debtor and Secured Party of the Schedule
covering the Collateral will conclusively establish that such Collateral has
been included under and will be subject to all of the terms and conditions of
this Agreement. If Debtor has not furnished Secured Party with an executed
Schedule by the earlier of fourteen (14) days after receipt thereof or
expiration of the commitment set forth in any applicable Equipment Financing
Commitment, Secured Party may terminate its obligation to make any Advances with
respect to any applicable Collateral.
6. Insurance and Risk of Loss. All risk of loss of, damage to, or
destruction of the Collateral shall at all times be borne by Debtor. Debtor will
procure forthwith and maintain property and general liability insurance with
extended or combined additional coverage on the Collateral for the full
insurable value thereof for the life of this Agreement and any Schedule(s) plus
such other insurance as Secured Party may specify, and promptly deliver each
policy to Secured Party with a standard long form endorsement attached showing
Secured Party or assigns as additional insureds and loss payees. Each insurer
shall agree by endorsement upon such policy issued by it or by independent
instrument furnished to Secured Party and Debtor that it will give Secured party
and Debtor thirty (30) days written notice before the policy in question shall
be materially altered or canceled. Secured Party's acceptance of policies in
lesser amounts or risks shall not be a waiver of Debtor's foregoing obligation.
7. Debtor's Representations and Warranties. Debtor represents and
warrants to Secured Party as follows:
(a) Debtor is duly organized and existing under the laws of the
State of its
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formation without limit as to the duration of its existence, and is authorized
and in good standing to do business in said State; Debtor has corporate powers
and adequate authority, rights and franchises to own its own property and to
carry on its business as now conducted, and is duly qualified and in good
standing in each state in which the character of the properties owned by it
therein or the conduct of its business makes such qualifications necessary; and
Debtor has the corporate power and adequate authority to make and carry out this
Agreement.
(b) The execution, delivery and performance of this Agreement are
duly authorized and do not, to the best of the Debtor's knowledge,
require the consent or approval of any governmental body or other
regulatory authority; are not in contravention of or in conflict with
any law, regulation or any term or provision of its articles of
formation or bylaws, and this Agreement is a valid and binding
obligation of Debtor legally enforceable in accordance with its terms.
(c) The execution, delivery and performance of this Agreement
will not contravene or conflict with any agreement, indenture of
undertaking to which Debtor is a party or by which it or any of its
property may be bound by or affected, and will not cause any lien,
charge or other encumbrance to be created or imposed upon any such
property by reason thereof.
(d) There is no material litigation or other proceeding pending
or threatened against or affecting Debtor, and it is not in default
with respect to any order, writ, injunction, decree or demand of any
court or other governmental or regulatory authority. The balance
sheets of Debtor and the related profit and loss statements and other
financial data as submitted in writing by Debtor to Secured Party in
connection with the Agreement, are true and correct, and said balance
sheets and profit and loss statements truly represent the financial
condition of Debtor as of the dates thereof.
(e) Debtor has good and valid title to the Collateral which is
free from and will be kept free from all liens, claims, security
interests and encumbrances, except for the security interest granted
hereby.
(f) No financing statement covering the Collateral or any
proceeds thereof is on file in favor of anyone other than Secured
Party, but if such other financing statement is on file, it will be
terminated or subordinated.
(g) All necessary action, including the filing of UCC-1 Financing
Statements, has or will be made to give Secured Party a first priority
security interest in the Collateral. Debtor agrees to permit Secured
Party to pre-file any UCC-1 Financing Statement pursuant to California
Commercial Code 9402.
8. Debtor's Agreements. Debtor agrees:
(a) To defend at Debtor's own cost and expense any action,
proceeding or claim affecting the Collateral.
(b) To pay reasonable attorneys fees and other expenses incurred
by Secured Party in enforcing its rights in the event of Debtor's
default under this Agreement.
(c) To pay promptly all taxes, assessments, license fees and
other public or private
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charges when levied or assessed against the Collateral or this Agreement and
this obligation shall survive the termination of this Agreement.
(d) That if a certificate of title is required or permitted by
law, Debtor shall obtain such certificate with respect to the
Collateral, showing the security interests of Secured Party thereon
and in any event do everything necessary or expedient to preserve or
perfect the security interest of Secured Party.
(e) That Debtor will not misuse, fail to keep in good repair,
secrete, or without the prior written consent of Secured Party, and
notwithstanding Secured Party's claim to proceeds, sell, rent, lend,
encumber or transfer any of the Collateral. The Collateral shall be
maintained in accordance with the manufacturer's specifications and
shall at all times be eligible for the manufacturer's maintenance
program.
(f) That Secured Party may enter upon Debtor's premises or
wherever the Collateral may be located at any reasonable time to
inspect the Collateral and Debtor's books and records pertaining to
the Collateral, and Debtor shall assist Secured Party in ;making such
inspection.
(g) That the security interest granted by Debtor to Secured Party
shall continue effective irrespective of the payment of the Secured
Obligations, so long as there are any obligations of any kind,
including obligations under guaranties or assignments, owed by Debtor
to Secured Party.
(h) To mark and identify the Collateral with all information and
in such manner as Secured Party may request from time to time and
replace promptly any such markings or identifications which are
removed, defaced or destroyed.
(i) To indemnify and hold Secured Party harmless from and against
all claims, losses, liabilities (including negligence, tort and strict
liability), damages, judgments, suits and all legal proceedings, and
any and all costs and expenses in connection therewith (including
attorney's fees) arising out of or in any manner connected with the
manufacture, purchase, financing, ownership, delivery, rejection,
nondelivery, possession, use, transportation, storage, operation,
maintenance, repair, return or other disposition of the Collateral or
with this Agreement, including, without limitation, claims for injury
to, or death of, persons and for damage to property, and give Secured
Party prompt notice of such claims or liability.
(j) That Debtor will not part with possession of or control of or
suffer or allow to pass out of its possession or control items of
Collateral or change the location of the Collateral or any part
thereof from the address shown in the appropriate Schedule without the
prior written consent of Secured Party.
(k) That Debtor shall not ASSIGN OR IN ANY WAY DISPOSE OF ALL OR
ANY PART OF ITS RIGHTS OR OBLIGATIONS UNDER THIS AGREEMENT OR SELL,
LEASE, TRANSFER, PLEDGE OR HYPOTHECATE ANY PART OF THE COLLATERAL.
DEBTOR'S INTEREST IN THIS AGREEMENT AND THE COLLATERAL IS NOT
ASSIGNABLE AND WILL NOT BE ASSIGNED OR TRANSFERRED BY OPERATION OF
LAW. CONSENT TO ANY OF THE FOREGOING PROHIBITED ACTS APPLIES ONLY IN
THE GIVEN INSTANCE AND IS NOT CONSENT TO SUBSEQUENT LIKE ACT BY DEBTOR
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OR ANOTHER ENTITY.
9. Events of Default. Any of the following events or conditions shall
constitute an Event of Default hereunder:
(a) Debtor's failure to pay any Monthly Loan Repayment or any
installment of the principal or interest due under any Schedule when
and after the same shall become due and payable, whether at the due
date thereof, or at the date fixed for prepayment or by acceleration
or otherwise;
(b) Debtor failure to observe or perform any covenant or
agreement to be observed or performed by Debtor under this Agreement,
any Schedule or any other instrument or Agreement delivered by Debtor
to Secured Party in connection with this or any other transaction;
(c) Any representation or warranty made by Debtor herein or in
any report, certificate, financial or other statement furnished in
connection with the Agreement shall prove to be false or misleading in
any material respect; or
(d) Debtor is (i) adjudicated insolvent or a bankrupt, or ceases,
becomes unable, or admits in writing its inability, to pay its debts
as they mature, or makes a general assignment for the benefit of, or
enters into any composition or arrangement with, creditors; (ii)
applies for or consents to the appointment of a receiver, trustee or
liquidator of it or of a substantial part of its property, or
authorizes such application or consent, or proceedings seeking such
appointment shall be instituted against it without such authorization,
consent or application and continues undismissed for a period of 60
calendar days; (iii) authorizes or files a voluntary petition in
bankruptcy or applies for or consents to the application of any
bankruptcy, reorganization in bankruptcy, arrangement, readjustments
or debts, insolvency, dissolution, moratorium or other similar laws of
any jurisdiction, or authorizes such application or consent, or
proceedings to such end shall be instituted against it without such
authorization, application or consent and such proceedings instituted
against it shall continue undismissed for a period of 60 calendar
days; or
(e) Secured Party, in good faith, believes the prospect of
payment or performance is impaired or in good faith believes the
Collateral is insecure;
(f) Any agreement made by a guarantor, surety or endorser for
Debtor's default in any obligation or liability to Secured Party or
any guaranty obtained in connection with this transaction is
terminated or breached.
10. Secured Party's Remedies. Debtor agrees that when an Event of
Default has occurred and is continuing, Secured Party shall have the rights,
options, duties and remedies of a Secured Party and Debtor shall have the rights
and duties of a Debtor under the Uniform Commercial Code in effect in each
jurisdiction where the Collateral or any part thereof is located and, without
limiting the foregoing, Secured Party may exercise one or more or all, and in
any order, of the remedies hereinafter set forth:
(a) By notice in writing to Debtor, declare the entire unpaid
principal balance due under any, each, and all Schedule(s) to be
immediately due and payable; and thereupon all such
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unpaid balance(s), together with all accrued and unpaid interest thereon, shall
be immediately due and payable;
(b) Personally, or by agents or attorneys, take immediate
possession of the Collateral or any portion thereof and for that
purpose pursue the same wherever it may be found and enter any of the
premises of Debtor with or without notice, demand, process of law or
legal procedure, and search for, take possession of, remove, keep and
store the same, or use, operate, or lease the same until sold and
otherwise exercise any and all of the rights and powers of Debtor in
respect thereof;
(c) Either with or without taking possession and without
instituting any legal proceedings whatsoever (having first given
notice of such sale by mail to Debtor once at least 10 calendar days
prior to the date of such sale, and any other notice of such sale
which may be required by law, if said notice is sufficient), sell and
dispose of the Collateral or any part thereof at public auction(s) to
the highest bidder, or at a private sale(s) in one lot as an entirety
or in several lots, and either for cash or for credit and on such
terms as Secured Party may determine, and at any place (whether or not
it is in the location of the Collateral or any part thereof,
designated in the notice above referred to. Any such sale or sales may
be adjourned from time to time by announcement of the time and place
appointed for such sale or sales, or for such adjourned sales or sales
without further notice, and Secured Party may bid and become the
purchaser at any such sale;
(d) Secured Party may proceed to protect and enforce this
Agreement and any Schedule(s) by suit or suits or proceedings in
equity, at law or in bankruptcy, and whether for the specific
performance of any covenant or agreement herein contained, or
execution or aid of any power herein granted, or for foreclosure
hereunder, or for the appointment of a receiver or receivers for the
Collateral, or any party thereof, or for the enforcement of any
proper, legal or equitable remedy available under applicable law.
(e) Secured Party may require Debtor to assemble the Collateral
and return it to Secured Party at a place to be designated by Secured
Party which is reasonably convenient to both parties.
(f) Debtor agrees to pay the Secured Party all expenses or
retaking, holding, preparing for sale, or selling the Collateral in
addition to attorneys' fees as set forth above.
11. Acceleration Clause. In case of any sale of the Collateral, or any
part thereof, pursuant to any judgment or decree of any court or otherwise in
connection with the enforcement of any of the terms of this Agreement, the
outstanding principal due under any Schedule, if not previously due, the
interest accrued thereon and all other sums required to be paid by Debtor
pursuant to this Agreement shall at once become and be immediately due and
payable.
12. Exercise of Rights. No delay or omission of Secured Party in the
exercise of any right or power arising from any default shall act as a waiver of
or impair any such right or power or prevent its exercise during the continuance
of such default. No waiver by Secured Party of any such default, whether such
waiver be full or partial, shall extend to or be taken to affect any subsequent
default, nor shall it impair the rights resulting therefrom except as may be
otherwise provided therein. The giving, taking or enforcement of any other or
additional security, collateral, or
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guarantee for the payment of the Secured Obligations shall not operate to
prejudice, waive, or affect the security of this Agreement or any rights,
powers, or remedies hereunder, and Secured Party shall not be required to look
first to enforce or exhaust such other additional security, collateral, or
guarantees. All rights, remedies, and options of Secured Party hereunder, or by
law shall be cumulative.
13. Assignment by Secured Party. SECURED PARTY MAY ASSIGN OR TRANSFER
THIS AGREEMENT OR SECURED PARTY'S INTEREST IN THE COLLATERAL WITHOUT NOTICE TO
DEBTOR. Any assignee of Secured Party shall have all of the rights but none of
the obligations, of Secured Party under this Agreement, and Debtor agrees that
it will not assert against any assignee of Secured Party any defense,
counterclaim or offset that Debtor may have against
Secured Party.
14. Non-Terminable Agreement; Obligations Unconditional. This Agreement
cannot be canceled or terminated except as expressly provided herein. Debtor
hereby agrees that Debtor's obligation to pay all Secured Obligations shall be
absolute and unconditional and Debtor will not be entitled to any abatement of
Monthly Loan Repayments or other payments due under this Agreement or any
reduction thereof under circumstances or for any reason whatsoever. Debtor
hereby waives any and all existing and future claims, as offsets, against any
Monthly Loan repayments and other payments due under this Agreement as and when
due regardless of any offset or claim which may be asserted by Debtor or on its
behalf. The obligations and liabilities of Debtor hereunder will survive the
termination of this Agreement.
15. Additional Documents. In connection with and in order to provide
effective evidence of the security interest in the Collateral granted Secured
Party under this Agreement, Debtor will execute and deliver to Secured Party
such financing statements and similar documents as Secured Party requests.
Debtor authorizes Secured Party where permitted by law to make filings of such
financing statements without Debtor's signature. Debtor further agrees to
furnish Secured Party:
(a) On a timely basis, Debtor's future financial statements,
including Debtor's most recent annual report, balance sheet and income
statement, prepared in accordance with generally accepted accounting
principles, which reports, Debtor warrants, shall fully and fairly
represent the true financial condition of Debtor;
(b) any other financial information normally provided by Debtor
to the public; and
(c) Such other financial data or information relative to this
Agreement and the Collateral, including, without limitation, copies of
Suppliers' proposals and purchase orders and agreements, listings of
serial numbers or other identification data and confirmations of such
information, as Secured Party may from time to time reasonably
request. Debtor will procure and/or execute, have executed, have
acknowledged, and/or deliver to Secured Party, record and file such
other documents and notices as Secured Party deems necessary or
desirable to protect its interest in and rights under this Agreement
and Collateral. Debtor will pay for all filings, searches, title
reports, legal and other fees incurred by Secured Party in connection
with any documents to be provided by Debtor pursuant to this Agreement
and any other similar documents Secured Party may procure.
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16. Miscellaneous.
(a) Successors and Assigns. Whenever any of the parties hereto is
referred to, such reference shall be deemed to include the successors
and assigns of such parties, and all the covenants, promises, and
agreements in this Agreement contained by or on behalf of Debtor or
Secured Party shall bind and inure to the benefit of the respective
successors and assigns of each party whether so expressed or not.
(b) Partial Invalidity. The enforceability or invalidity of any
provision(s) of that Agreement shall not render any other provision(s)
herein contained unenforceable or invalid.
(c) Communications. All communications provided for herein shall
be in writing and shall be deemed to have been given (unless otherwise
required by the specific provisions in respect of any matter) (i) when
addressed and delivered personally or (ii) three (3) calendar days
following deposit in the United States mail, registered or certified,
postage prepaid, and addressed to the address set forth beneath the
respective parties' signature lines below, or as to Debtor or Secured
Party at such other address as they may designate by notice duly given
in accordance with this Section to the other party.
(d) Counterpart; Governing Law. This Agreement may be executed,
acknowledged, and delivered in any number of counterparts, each of
such counterparts constituting any original but all together only one
Agreement. This Agreement and any Schedule shall be construed and
enforced in accordance with and governed by the laws of the State of
California. Debtor agrees to submit to the jurisdiction of the State
and/or Federal Courts in California.
(e) Entire Agreement. This Agreement constitutes the entire
understanding or agreement between Secured Party and Debtor and there
is no understanding or agreement, oral or written, which is not set
forth herein. This Agreement may not be amended except by a writing
signed by Secured Party and Debtor and shall be binding upon and inure
to the benefit of the parties hereto, their permitted successors and
assigns.
DATED:
DEBTOR: SECURED PARTY:
PHY.MED., INC. MEDICAL EQUIPMENT FINANCE
COMPANY
By: /s/George C. Barker By: /s/ [Signature is Illegible]
--------------------------- ---------------------------------
GEORGE C. BARKER [Stamped Name is Illegible]
(Print Name) (Print Name)
Its PRESIDENT Its VICE PRESIDENT
--------------------------- ---------------------------------
(Title) (Title)
Address: Address:
One Park Plaza, Suite 800
Irvine, CA 92714
96
EXHIBIT 10.7 TO FORM 10-QSB
SIEMENS EQUIPMENT LEASE AGREEMENT
LESSOR: Siemens Credit Corporation
5300 Broken Sound Boulevard, N.W.
Boca Raton, FL 33487-3509
(800) 327-4443 * (407) 994-7400
LESSEE: PHY.MED., INC.
BILLING ADDRESS: 9603 White Rock Trail, Ste. 100
(Dallas County)
Dallas, TX 75238
EQUIPMENT LOCATION: Same As Above
VENDOR: Siemens Medical Systems, Inc.
AGREEMENT #: 130-0001365-000
PAYMENT SCHEDULE
Lease Term Number of
(In Months) Lease Payments Lease Payment Amount
60 60 #1 - 03 @ $ -0-
#4 - 60 @ $32,310.00
- --------------------------------------------------------------------------------
Payment
Period: [] Monthly [] Quarterly [] Other:
- --------------------------------------------------------------------------------
Advance Lease Payments
#(3) SEE SUPPLEMENT 2 TOTALING $
---------------- ----------------
DUE DATE(S):
- --------------------------------------------------------------------------------
EQUIPMENT DESCRIPTION
Siemens Magnetom 1.5 T Vision as described in Vendor Quote #131012 (New)
Interest 218,050.00
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TOTAL EQUIPMENT COST: $1,623,620.00
- --------------------------------------------------------------------------------
TERMS AND CONDITIONS OF AGREEMENT
1. LEASE: Lessor hereby leases to Lessee and Lessee leases from Lessor, subject
to the terms and conditions of this Equipment Lease Agreement (herein
"Equipment").
2. TERM AND LEASE PAYMENTS: The Lease shall become effective at the time of
Lessor's acceptance of the Lease (by execution hereof) at the address set forth
above the by an authorized representative of Lessor, and shall continue in
effect through the last day of the lease term specified above (herein "Lease
Term"). The Lease Term shall commence upon the earlier of (i) completion of
installation of the Equipment, (ii) first commercial use of the Equipment, or
(iii) sixty (60) days from shipment of the of the bulk of the equipment if
completion of installation has been delayed due to causes beyond the reasonable
control of Lessor or vendor; (herein "Commencement Date"). For said Lease Term,
Lessee agrees to pay to Lessor the number of lease payments specified above,
each in the amount specified above (herein "Lease Payments") for the payment
periods specified above (herein "Payment Periods"), including any Advance Lease
Payments specified above, with the first Lease Payment being due on the
Commencement Date, and the remaining Lease Payments being due on the same day of
each consecutive Payment Period thereafter for the duration of the Lease Term.
Lessee agrees to pay on demand, as a late charge, 1.5% per month limited by the
maximum rate permitted by law, on all overdue payments hereunder, whether such
payments are due prior to or after a Default (as hereinafter defined). All
payments provided for herein shall be payable at the office of Lessor set forth
above, or at any other place designated by Lessor. The Lease is a net lease and
Lessee shall not be entitled to any abatement of, reduction of, or setoff
against Lease Payments for any reason whatsoever. The Lease may not be
terminated or canceled for any reason whatsoever, except as expressly provided
herein. No amounts hereunder may be prepaid without the written consent of
Lessor.
3. DISCLAIMER OF WARRANTIES; LIMITATION OF REMEDY; LIMITATION OF
LIABILITY: Lessee has selected both the Equipment and the supplier from whom at
Lessee's request Lessor agrees to purchase the Equipment. LESSEE ACKNOWLEDGES
THAT LESSOR HAS NO SPECIAL FAMILIARITY OR EXPERTISE WITH RESPECT TO THE
EQUIPMENT. LESSEE AGREES THAT THE EQUIPMENT LEASED HEREUNDER IS LEASED "AS IS"
AND IS OF A SIZE, DESIGN AND CAPACITY SELECTED BY LESSEE AND THAT LESSEE IS
SATISFIED THAT THE SAME IS SUITABLE FOR LESSEE'S PURPOSES, AND THAT EXCEPT AS
MAY OTHERWISE BE SPECIFICALLY PROVIDED IN THE LEASE, LESSOR HAS MADE NO
REPRESENTATION OR WARRANTY AS TO ANY MATTER WHATSOEVER. LESSOR DISCLAIMS ALL
WARRANTIES WITH RESPECT TO THE EQUIPMENT INCLUDING BUT NOT LIMITED TO THE
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, IN
NO EVENT SHALL LESSOR BE LIABLE FOR ANY LOSS OF USE, REVENUE, ANTICIPATED
PROFITS OR SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF
OR IN CONNECTION WITH THE LEASE OR THE USE, PERFORMANCE OR MAINTENANCE OF THE
EQUIPMENT. If the Equipment is not properly installed, does not operate as
represented or warranted by the vendor, manufacturer and/or service company or
is unsatisfactory for any reason, Lessee shall make any claim on account thereof
solely against the vendor, manufacturer and/or service company and shall,
nevertheless, pay Lessor all amounts
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payable under the Lease and shall not set up against Lessee's obligations any
such claims as a defense, counterclaim, deduction, setoff or otherwise. For the
Lease Term, Lessor hereby appoints Lessee as Lessor's agent, so long as no
Default (as hereinafter defined) has occurred and is continuing, to assert at
Lessee's expense (if any) and to the extent permitted by applicable law, any
right Lessor may have against any vendor, manufacturer and/or service company to
enforce any product warranties with respect to the Equipment, provided however,
Lessee shall indemnify and defend Lessor from and against all claims, expenses,
damages, losses and liabilities incurred or suffered by Lessor in connection
with any such action taken.
4. TITLE; IDENTIFICATION; PERSONAL PROPERTY: Lessee acknowledges that, subject
to the provisions of Section 10 hereof, title to the Equipment shall at all
times be vested in Lessor, and no right, title or interest in the Equipment
shall pass to Lessee other than conditioned upon Lessee's compliance with and
fulfillment of the terms and conditions of the Lease, the right to possess and
use the Equipment for the full Lease Term. Lessee agrees not to sell, assign,
sublet, pledge or otherwise encumber any interest in the Lease or the Equipment
and agrees to keep the same free from any lien, encumbrance, right of distraint
or any other claim which may be asserted by any third party. Lessee shall
immediately notify Lessor in writing of any tax or other liens attaching to the
Equipment. Lessor may require plates or markings to be affixed to or placed on
the Equipment indicating Lessor's interest. Lessor and Lessee hereby confirm
their intent that the Equipment always remain and be deemed personal property
even though said Equipment may hereafter become attached or affixed to realty.
Lessee shall obtain all such waivers as Lessor may reasonably require to
acknowledge Lessor's title to and assure Lessor's right to remove the Equipment,
including any landlord and mortgagee waivers.
5. PAYMENT OF TAXES; GENERAL INDEMNIFICATION: Lessee shall pay promptly to
Lessor when due, all taxes, fees and assessments, including but not limited to,
all license and registration fees, sales, use, property, gross receipts, excise,
transaction, ad valorem, privilege, intangible, stamp or other taxes or charges,
together with any fines, penalties or interest thereon, now or hereafter imposed
by any governmental body, upon or with respect to, any of the Equipment or the
use, possession, ownership, leasing, operation, delivery or return thereof
(excluding however, franchise taxes and any taxes based on the net income of
Lessor). Any fees, taxes or other amounts paid by Lessor upon failure of Lessee
to make such payments set forth in this Section 5 shall be payable by Lessee to
Lessor upon demand by Lessor. Lessee agrees to indemnify and hold Lessor
harmless from and against any and all claims, losses, liabilities, damages,
penalties, actions and suits (including reasonable legal costs and expenses in
connection therewith) incurred by Lessor which result from, or relate to, the
manufacture, purchase, ownership, maintenance, modification, delivery,
installation, possession, condition, use, acceptance, rejection, operation or
return of the Equipment.
6. INSTALLATION AND DELIVERY: Lessee shall provide a suitable installation
environment for the Equipment as specified in the applicable manufacturer's or
vendor's manuals, and except as otherwise specified by the manufacturer or
vendor, furnish all labor required for unpacking and placing each item of
Equipment in the desired location. Lessee shall also be responsible for any
delivery, rigging, destination and installation charges charged by the
manufacturer or vendor with respect to the Equipment.
7. OPERATION; USE; INSPECTION: For the full Lease Term, Lessee shall operate the
Equipment in accordance with all applicable manufacturer and vendor manuals or
instructions by fully qualified
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and duly authorized personnel only, in accordance with all applicable laws and
regulations. The equipment shall be used for business purposes only and only for
its normally intended purpose. For said Lease Term, Lessee shall properly
maintain the Equipment or cause it to be properly maintained, by a fully
qualified service company, and shall immediately notify Lessor in writing of the
entity maintaining the Equipment and of any change of such entity. Such
maintenance shall be performed in accordance with all requirements necessary to
enforce all product warranty rights. All operating and maintenance costs with
respect to the Equipment shall be borne by Lessee. Lessee shall not: (a) use,
operate or locate the Equipment in any area excluded from coverage by any
insurance required under the Lease; (b) abandon the Equipment; (c) alter the
Equipment; (d) permit the Equipment to be removed from the equipment location
specified above (herein "Equipment Location"), or any subsequent location,
without the prior written consent of Lessor, which consent shall not be
unreasonably withheld; (e) without the prior written consent of Lessor, allow
the Equipment or any item of it, to be affixed to realty in such manner as to
cause the Equipment or such item to become a fixture; or (f) without the prior
written consent of Lessor, affix or install any accessory, equipment or device
on any item of Equipment if such (i) is not readily removable, or (ii) will
impair the originally intended function or use of such Equipment. All additions,
repairs, parts, accessories, equipment and devices attached or affixed to any
item of Equipment which are not readily removable, shall become the property of
Lessor and part of the Equipment for all purposes hereof. Lessor shall have the
right from time to time during normal business hours to enter upon the Equipment
Location or elsewhere for the purpose of confirming the existence, condition or
proper maintenance of the Equipment.
8. RISK OF LOSS; INSURANCE: (a) Lessee agrees that it shall bear all risk of
loss, damage to or destruction of the Equipment. Lessee shall give Lessor prompt
notice of any damage to or loss of the Equipment or of any occurrence arising
from the possession, use or operation of the equipment resulting in death or
bodily injury or damage to property. In the event of damage to any item(s) of
Equipment, Lessee shall immediately place such item(s) in good repair (with no
abatement of Lease Payments), with the proceeds of any insurance recovery
applied to the cost of such repair. Should any item(s) of Equipment become lost,
stolen, destroyed, worn out, damaged beyond repair, condemned, confiscated,
seized or requisitioned (herein "Event of Loss"), Lessee shall, at the option of
Lessor, either (i) replace the same with like equipment in good repair (with no
abatement of Lease Payments), or (ii) pay to Lessor on the lease payment date
immediately following such Event of Loss (herein "Loss Payment Date"), the pro
rata portion relating to such item(s) of the greater of (A) the Fair Market
Value (as hereinafter defined) of the Equipment calculated as of the lease
payment date immediately prior to such Event of Loss, or (B) the stipulated loss
value of the Equipment as set forth in the schedule hereto (herein "Stipulated
Loss Value") calculated for the Payment Period immediately preceding the Loss
Payment Date, plus any and all Lease Payments and other payments due but unpaid
as of the day immediately preceding the Loss Payment Date relating to such
item(s) whereupon the Lease shall terminate as to such item(s) and Lessor shall
adjust the remaining Lease Payments and stipulated loss value schedule
accordingly.
(b) For the Lease Term, Lessee, at its expense, shall maintain
comprehensive general liability insurance, and "fire and allied perils" and "all
risks" property insurance with respect to the Equipment, both in such amounts as
Lessor shall require, except that such property insurance shall be in an amount
at least equal to the greater of the full replacement value of the Equipment or
the applicable Stipulated Loss Value thereof; and such insurance shall be placed
with carriers acceptable to Lessor. The liability insurance policy shall name
Lessor as additional insured and the property
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insurance policy shall name Lessor as loss payee to the extent its interest may
appear, and both policies shall provide that they may not be canceled or altered
without at least thirty (30) days prior written notice to Lessor. Lessee shall
furnish to Lessor within thirty (30) days of delivery of the Equipment, a
certificate of insurance that such coverage is in effect, however, Lessor shall
be under no duty either to ascertain the existence of or to examine such
insurance policies or to advise Lessee in the event that such insurance coverage
does not comply with the requirements hereof.
9. DEFAULT AND REMEDIES: (a) Any of the following shall constitute a default by
Lessee hereunder (herein "Default"): (i) failure by Lessee to pay any amounts
hereunder when due and such remains unremedied for a period of ten (10) days
from the due date; or (ii) failure by Lessee to comply with any provisions or
perform any of its obligations arising under the Lease or under any other
documents or agreements related hereto and such remains unremedied by Lessee for
a period of twenty (20) days; or (iii) any representations or warranties made or
given by Lessee in connection with the Lease or any other document or agreement
related hereto were false or misleading when made; or (iv) subjection of the
Equipment to levy or execution or other judicial process which is not or cannot
be removed within thirty (30) days from the execution thereof; or (v)
commencement of any insolvency, bankruptcy or similar proceedings by or against
Lessee or any guarantor of any of Lessee's obligations hereunder (herein
"Guarantor"), including any assignment by Lessee for the benefit of creditors,
and in the case of any such involuntary proceedings, such is not dismissed
within thirty (30) days of institution; or (vi) any act of Lessee which imperils
the value of the Equipment or the prospect of full performance of Lessee's
obligations hereunder, including but not limited to the liquidation or
dissolution of Lessee or the commencement of any acts relative thereto, or
without the prior written consent of Lessor, any sale or other disposition of
all or substantially all of the assets of Lessee, or any merger or consolidation
of Lessee unless Lessee is the surviving entity, or the cessation of business by
Lessee; or (vii) a default by Lessee under any other agreement with Lessor or
any assignee of the Lease; or (viii) the death or dissolution of Lessee or of
any Guarantor, the withdrawal of any partner of Lessee if Lessee is a
partnership, or the inability of Lessee or of any Guarantor hereunder to perform
any of the obligations contained herein or in any applicable guaranty.
(b) Upon any Default, Lessor may exercise any one or more of the
following remedies (which remedies shall be cumulative): (i) terminate the
Lease; (ii) declare all remaining Lease Payments for the balance of the Lease
Term discounted at a per annum rate of six percent (6%), plus all other amounts
due from Lessee hereunder, immediately due and payable in full; (iii) by notice
to Lessee declare the Stipulated Loss Value of the Equipment calculated for the
Payment Period immediately following such notice (herein "Calculation Date")
immediately due and payable, together with (A) all due but unpaid Lease Payments
through the day prior to the Calculation Date, and (B) all other amounts due
hereunder (including late charges); (iv) secure peaceable repossession and
removal of the Equipment by Lessor or its agent without judicial process; (v)
demand that Lessee return the Equipment to Lessor in accordance with Section 11
hereof; (vi) sell, lease or otherwise dispose of the Equipment at public or
private sale without advertisement or notice except that required by law, upon
such terms and at such place as Lessor may deem advisable and Lessor may be the
purchaser at any such sale; (vii) demand that Lessee pay all expenses in
connection with the Equipment relating to its retaking, refurbishing, selling or
the like; (viii) exercise any other right or remedy which may be available to it
under applicable law or proceed by appropriate court action to enforce the Lease
or recover damages for the breach hereof. To the extent permitted by applicable
law, Lessee waives all rights it may have to limit or modify any of Lessor's
rights and remedies hereunder, including but
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not limited to, any right of Lessee to require Lessor to dispose of the
Equipment or otherwise mitigate its damages hereunder.
10. PURCHASE OPTION: Provided no Default has occurred and is continuing and
provided the Lease shall not have previously terminated, Lessee shall have the
option, exercisable by written notice to Lessor received by Lessor at least
ninety (90) but not more than one hundred eight (180) days before the expiration
of the Lease Term, to purchase on the day following the last day of such term
(herein "Purchase Date"), all but not less than all of the Equipment subject to
the Lease for its Fair Market Value. Fair Market Value shall mean the value
which would be obtained in an arm's- length transaction between an informed and
willing buyer-user (other than a Lessee currently in possession or a used
equipment dealer) under no compulsion to buy, and an informed and willing seller
under compulsion to sell and, in such determination, costs of removal from the
location of current use shall not be a deduction from such value. Fair Market
Value shall be determined by the mutual agreement of Lessor and Lessee in
accordance with the preceding sentence. If Lessee and Lessor cannot agree, Fair
Market Value shall be determined by a qualified independent equipment appraiser
selected by Lessor and approved by Lessee, and Lessee shall pay the cost of
apprisal. Provided Lessee has exercised such option, Lessee shall pay to Lessor
on the Purchase Date the aforementioned purchase price in cash, together with
all sales and other taxes applicable to the transfer of the Equipment and any
other amounts as may then be due and owing hereunder, whereupon Lessor shall
transfer its interest in the Equipment to Lessee without recourse or warranty,
on an as-is, where-is basis. In the event that Lessee fails to exercise such
purchase option, Lessee shall (upon termination of the Lease) return the
Equipment to Lessor on demand, in accordance with the provisions of Section 11
hereof.
11. RETURN OF EQUIPMENT: Upon demand of Lessor pursuant to Section 9 or 10
hereof, Lessee, at its own risk and expense, shall immediately return the
Equipment to Lessor, packed for shipment in accordance with Manufacturer's
specifications, in good working order and eligible for manufacturer's
maintenance. If available freight prepaid and insured, to such location within
the continental United States as Lessor shall designate.
12. LESSEE REPRESENTATIONS AND ASSURANCES: Lessee represents: that it is duly
organized and validly existing under the laws of its state of organization and
by consummation of this transaction, Lessee is not in violation of any
governmental statute or regulation, nor will consummation of this transaction
cause any breach, default or violation of the certificate of incorporation or
by-laws (if Lessee is a corporation), the partnership certificate or partnership
agreement (if Lessee is a partnership) or any judgment, decree or agreement, all
as may apply to Lessee; that this transaction was duly authorized by appropriate
corporate or partnership action (as applicable); and the Lease is enforceable in
accordance with its terms. Lessee shall promptly execute and deliver to Lessor
such further documents and take such further action as Lessor may reasonably
request in order to more effectively carry out the intent and purpose of the
Lease. Lessee shall provide Lessor with audited and other financial statements
and such other information as Lessor shall reasonably request from time to time.
13. NOTICES; CHANGES; FILINGS: Notices, requests or other communications
required hereunder to be sent to either party shall be in writing and shall be
(a) by United States first class mail, postage prepaid, and addressed to the
other party at the address specified above (or to such other address as such
party shall have designated by proper notice) or (b) by personal delivery.
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Lessee consents to service of process by certified mail at its address above (or
to such other address as Lessee shall have designated ;by proper notice) in
connection with any legal action brought by Lessor. Lessee authorizes Lessor to
fill in descriptive material herein (including serial numbers) and to correct
any patent errors hereunder. Lessee shall execute and authorizes Lessor to file
with such authorities and at such locations as Lessor may deem appropriate.
Uniform Commercial Code financing statements relating to the Equipment and/or
the Lease, and Lessee agrees to reimburse Lessor upon demand for all costs
incurred relative thereto. In addition, Lessee agrees that an original or a
photocopy of the Lease (including any addenda, attachments and amendments
hereto) may be filed by Lessor as a Uniform Commercial Code financing statement.
Lessee agrees to immediately notify Lessor in writing, of any change in Lessee's
name or address, or discontinuance of its place or places of business.
14. ASSIGNMENT BY LESSOR: The Lease or any interest of Lessor herein may be
assigned by Lessor. UPON NOTICE OF SUCH ASSIGNMENT LESSEE AGREES TO PAY DIRECTLY
TO ASSIGNEE WITHOUT ABATEMENT, DEDUCTION OR SETOFF ALL AMOUNTS WHICH BECOME DUE
HEREUNDER AND FURTHER AGREES THAT IT WILL NOT ASSERT AGAINST ASSIGNEE ANY
DEFENSE, COUNTERCLAIM OR SETOFF FOR ANY REASON WHATSOEVER IN ANY ACTION FOR
PAYMENT OR POSSESSION BROUGHT BY ASSIGNEE. Upon any such assignment, such
assignee (herein "Assignee") shall have and be entitled to any and all rights
and remedies of Lessor hereunder, all references in the Lease to Lessor shall
include Assignee except that Assignee shall not be chargeable with any
obligations or liabilities of Lessor hereunder. Lessee shall (if requested by
Lessor) acknowledge in writing any assignments (including any material terms of
the Lease) in a form supplied by Lessor.
15. MISCELLANEOUS: THE LEASE OR ANY PART HEREOF, MAY NOT BE ASSIGNED BY LESSEE
WITHOUT THE WRITTEN CONSENT OF LESSOR and shall be binding upon and inure to the
benefit of the parties hereto, their legal representatives, permitted successors
and assigns. No amendment hereunder shall be effective unless in writing signed
by the parties hereto and no waiver hereunder shall be effective unless in
writing, signed by the party to be charged. No failure to exercise, no delay in
exercising, and no single or partial exercise on the part of Lessor of any
right, remedy, or power hereunder, shall operate as a waiver thereof or preclude
Lessor from exercising any other right, remedy or power hereunder. Any provision
of the Lease which is unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability, without invalidating the remaining provisions hereof. No
action, regardless of form, arising out of the Lease may be brought by Lessee
more than two (2) years after the cause of action has arisen. The
representations, warranties, obligations and indemnities of Lessee under the
Lease shall survive the termination of the Lease to the extent required for
their full observance and performance. The obligations of each co-maker (if any)
of the Lease, shall be primary, joint and several, and each such co-maker hereby
irrevocably consents to any extension of time for payments and/or the execution
of any refinancing agreement relative to the Lease. In the event that Lessee
fails to meet any of its obligations hereunder, Lessor may at its option satisfy
such obligation and Lessee shall reimburse Lessor on demand therefor. In the
event that legal or other action is required to enforce Lessor's rights under
the Lease (including the exercise of remedies under Section 9 hereof). Lessee
agrees to reimburse Lessor on demand for its reasonable attorneys' fees and its
other related costs and expenses. The captions in the Lease are for convenience
only and shall not define or limit any of the terms hereof. THE LEASE SHALL BE
GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA
WITHOUT GIVING
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EFFECT TO THE PRINCIPLES OF CONFLICT OF LAWS THEREOF.
IN WITNESS WHEREOF, the parties hereto have duly executed the Lease as of the
dates set forth below. For all purposes hereof, the date of the Lease shall be
the date of Lessor's acceptance as set forth below.
By execution hereof, the
signer certifies that (s)he
has read the entire Lease,
front and back, that Lessor
or its representatives have
made no agreements or
representations except as
set forth herein and that
(s)he is duly authorized
ACCEPTED BY: to execute the Lease on
behalf of Lessee.
LESSOR: LESSEE:
SIEMENS CREDIT CORPORATION PHY.MED., INC.
BY: /s/ Isolde Vengelis BY: /s/ George C. Barker
------------------------------ ----------------------------
(Authorized Signature) (Authorized Signature)
NAME: ISOLDE VENGELIS NAME: GEORGE C. BARKER
(Printed or Typed) (Printed or Typed)
TITLE: ASST. TREASURER TITLE: PRESIDENT
--------------------------- ----------------
DATE: JUL 11, 1995 DATE: 6-27-95
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August 18, 1997
Mr. George C. Barker
Phy.Med., Inc.
9603 White Rock Trail
Suite 100
Dallas, TX 75238
RE: Equipment Lease Agreement ("Agreement") #130-0001365-000
Equipment ("Equipment") - Magnetom 1.5 T. Visio
Contract Service Agreement #130-0001365-001
Dear Mr. Barker:
This is to advise you that included are the two amendments for the above
referenced. The combined payment structure would bring you to the desired
$25,000.00 a month in rental payments (plus applicable sales/use tax) for the
period of August through April of 1998. The remainder period is $54,921.71 a
month (plus applicable sales/use tax). Your prompt answer is required with your
first installment. I have provided an invoice as part of the documents in order
to facilitate the transaction.
Please review, execute the amendments, and forward back to me in the attached
return envelope.
Sincerely,
/s/ George Abreu
George Abreu
Compliance & Recovery Manager
attachment
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CONTRACT AMENDMENT
Contract #130-0001365-000
Supplement #3
This Amendment shall become part of that certain Equipment Lease Agreement
130-0001365-000 (the "Agreement") between Siemens Credit Corporation (Lessor)
and Phy.Med. Inc. (Lessee). If there be any conflict between the terms of this
Amendment and the terms of the Lease, the terms of this Amendment shall control.
Capitalized terms used herein and not otherwise defined herein, unless the
context otherwise requires, shall have the same meanings set forth in the Lease
Agreement. Lessor and Lessee hereby amend the Lease as follows:
Lease payments
Effective with the Lease Payment due 08/01/97 the Lease payments shall change:
from: $32,310.00 each for 8 months $64,620.00 each for 1 month
$32,310.00 each for 11 months $64,620.00 each for 1 month
$32,310.00 each for 20 months $0.00 each for 3 months
$32,310.00 each for 1 month
to: $18,500.00 each for 9 months
$43,232.46 each for 41 months
LESSOR: Siemens Credit Corporation LESSEE: Phy.Med. Inc.
BY: BY: /s/ George C. Barker
NAME: NAME: George C. Barker
TITLE: TITLE: President
DATE: DATE: 9-15-97
106
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CONTRACT AMENDMENT
Contract #130-0001365-000
Supplement #1
This Amendment shall become part of that certain Equipment Lease Agreement
130-0001365-001 (the "Agreement") between Siemens Credit Corporation (Lessor)
and Phy.Med. Inc. (Lessee). If there be any conflict between the terms of this
Amendment and the terms of the Lease, the terms of this Amendment shall control.
Capitalized terms used herein and not otherwise defined herein, unless the
context otherwise requires, shall have the same meanings set forth in the Lease
Agreement. Lessor and Lessee hereby amend the Lease as follows:
Lease payments
Effective with the Lease Payment due 08/01/97 the payments shall change:
from: $11,083.00 each for 44 months
to: $6,500.00 each for 9 months
$11,689.25 each for 41 months
LESSOR: Siemens Credit Corporation LESSEE: Phy.Med. Inc.
BY: BY: /s/ George C. Barker
---------------------
NAME: NAME: George C. Barker
-------------------
TITLE: TITLE: President
-------------------
DATE: DATE: 9-15-97
-------------------
107
EXHIBIT 10.8 TO FORM 10-QSB
PROMISSORY NOTE
#130-0001389-000
U.S.$175,000.00 ---------------------
(Date of Note)
Boca Raton, Florida
The undersigned (the "Maker"), organized under and validly existing by virtue of
the laws of the state of its organization, having its principal place of
business at its address specified below, for value received, hereby
unconditionally promises to pay to the order of Siemens Credit Corporation (the
"Payee"), a corporation organized and validly existing under the laws of the
State of Delaware and having its principal place of business at 5300 Broken
Sound Boulevard, N.W., Boca Raton, FL 33487, in lawful money of the United
States of America and in immediately available funds, the principal amount of
One Hundred Seventy Five Thousand and 00/100 Dollars ($175,000.00), with
interest at the rate of ten percent (10%) per annum on the principal amount
hereof remaining from time-to-time unpaid, such principal and interest to be
paid in sixty (60) installments of $3,688.00 each followed by N/A (N/A)
installments of N/A each, beginning on Date of Note above and on each successive
monthly anniversary thereafter until fully paid. The Maker authorizes the Payee
to insert on the line above as the date of the Promissory Note, the date that
the Payee disburses funds with respect hereto. All payments made pursuant to the
terms of the Promissory Note shall be made free and clear of, and without
deduction for, withholding, setoff or counterclaim of any kind.
The principal hereof and accrued interest hereon may be prepaid at any time
without penalty or become forthwith due and payable as provided herein. Payments
hereunder not made when due shall bear interest at a per annum rate of eighteen
percent (18%), limited by the maximum rate permitted by law.
The Maker shall be in default of the Promissory Note ("Default") upon the
occurrence of any of the following events: (a) failure by the Maker to pay when
due any amounts due hereunder and such continues unremedied for a period of five
(5) days; (b) failure by the Maker to comply with any provisions or to perform
any of its obligations arising under any documents or agreements executed and/or
delivered in connection herewith ("Documents") and such remains unremedied by
the Maker for a period of twenty (20) days; (c) any representations or
warranties made or given by the Maker in connection with the Promissory Note or
any Documents were false or misleading when made; (d) filing by the Maker of a
petition for relief under the Bankruptcy Code or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in
effect; or seeking the appointment of a trustee, receiver, liquidator, custodian
or other similar official of it or any substantial part of its property; or
consenting to any such relief; or making a general assignment for the benefit of
creditors; or failing generally to pay its debts as they become due; or taking
any action to authorize any of the foregoing; (e) filing of an involuntary
petition or the commencement of any other proceeding against the Maker seeking
liquidation, reorganization or other relief with respect to it or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in
effect, or seeking the appointment of a trustee, receiver, liquidator, custodian
or other similar official of it or for any substantial part of its property,
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and such involuntary case or other proceeding shall remain undismissed for a
period of thirty (30) days; or the issuance of a warrant of attachment,
execution or similar process against the Maker and such warrant remains neither
unbonded, unstayed nor undismissed for a period of thirty (30) days from
issuance; (f) any act of the Maker which imperils the prospect of full
performance under the Promissory Note or any Documents including but not limited
to the liquidation or dissolution of the Maker, or the commencement of any acts
relative thereto, or without the prior written consent of the holder of the
Promissory Note, any sale or other disposition of all or substantially all of
the assets of the Maker including any merger or consolidation of the Maker
unless the Maker is the surviving entity; (g) default by the Maker of its
obligations under the indenture, note, agreement or undertaking; (h) any
substantial; impairment of value, loss, damage or destruction to any collateral
given in connection herewith or the Documents, not materially covered by
insurance; (i) if any of the Documents shall fail to be in full force and effect
or shall fail to be a legal, valid, binding and an enforceable obligation or
agreement, or any lien created hereunder or by any Documents shall fail at any
time for any reason to be duly perfected and first priority; (j) subjection of
any collateral given in connection wherewith or any Documents, to levy or
execution or other judicial process which is not or cannot be removed within
thirty (30) days from the subjection thereof.
In the event of any Default by the Maker hereunder, the entire remaining
principal balance and accrued interest hereunder shall, upon notice, forthwith
become immediately due and payable, together with interest on such amount to the
date of payment, at a rate of interest of eighteen percent (18.0%) per annum,
limited, however, by the maximum rate permitted by law.
Neither the failure on the part of the holder of the Promissory Note in
exercising any right or remedy nor any single or partial exercise or the
exercise of any other right or remedy shall operate as any waiver. No
modification or waiver of any provision of the Promissory Note, nor any
departure by the Maker therefrom, shall in any event be effective unless the
same shall be in writing by the holder and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose given. The
Maker agrees to pay all costs and expenses, including but not limited to
reasonable attorneys' fees which may be incurred in connection with the
enforcement and/or collection of the Promissory Note. The Maker hereby waives
demand for payment, presentment, protest and notice of any kind in connection
with the delivery, acceptance, performance, default or enforcement of the
Promissory Note and hereby consents to any extensions of time, renewals,
releases of any party to the Promissory Note, waivers or modifications that may
be granted or consented to by the holder of the Promissory Note in respect of
the time of payment or any other provisions of the Promissory Note.
Anything in the Promissory Note to the contrary notwithstanding, in the event
that any payment of interest hereunder shall exceed the legal limit, such amount
in excess of such limit shall be deemed a payment of principal hereunder.
The terms and provisions hereof shall inure to the benefit of, and be binding
upon, the respective successors and assigns of the undersigned and the Payee.
THE PROMISSORY NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF FLORIDA, WITHOUT GIVING EFFECT TO THE PRINCIPLES OF
CONFLICT OF LAWS THEREOF.
IN WITNESS WHEREOF, the undersigned has caused the Promissory Note to be
executed by its
109
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authorized representative, who certifies that (s)he has all necessary authority
on behalf of the Maker to execute the Promissory Note and bind the Maker to the
terms hereof.
MAKER: PHY MED, Inc.
9603 White Rock Trail, #100
Dallas, TX 75238
BY: /s/ George C. Barker
----------------------------------
(Authorized Signature)
NAME: George C. Barker
--------------------------------
(Printed or Typed)
110
<PAGE>
PAY PROCEEDS AUTHORIZATION
FOR PROMISSORY NOTE
PHY MED, Inc.
9603 White Rock Trail, #100
Dallas, TX 75238
Siemens Credit Corporation
5300 Broken Sound Boulevard, N.W.
Boca Raton, FL 33487-3509
(800) 327-4443 * (407) 994-7400
RE: AUTHORIZATION TO PAY PROCEEDS
Ladies and Gentlemen:
We have requested that you make a loan to us in the principal amount of
$175,000.00 pursuant to Promissory Note #130-0001389-000. In connection
therewith, this letter irrevocably authorizes you to pay the proceeds of the
loan directly to:
Siemens Medical Systems, Inc.
186 Wood Avenue South
Iselin, NJ 08830
In order to discharge our obligations to them as follows:
AUTHORIZED
INVOICE # CONTRACT DESCRIPTION PAYMENT AMOUNT
- --------- -------------------- --------------
Promissory Note #130-0001389-000
for a cash loan. $175,000.00
PHY MED, Inc.
BY: /s/ George C. Barker
--------------------------
(Signature)
NAME: George C. Barker
------------------------
(Printed or Typed)
TITLE: President
------------------------
DATE: 8-16-95
------------------------
111
EXHIBIT 10.9 TO FORM 10-QSB
LEASE AGREEMENT
THIS LEASE AGREEMENT is made and entered in as of the fifteenth (15th) day of
March 1996, by and between Cocanougher Feed Co., Inc. d/b/a Cocanougher Asset
Management, ("Lessor"), and PhyMed, Inc., d/b/a PhyMed Diagnostic Imaging Center
("Lessee"). IN CONSIDERATION of the mutual agreement contained herein and other
valuable consideration, IT IS AGREED as follows: PREMISES: (a) Subject to the
terms and conditions of this Lease, Lessor hereby leases to Lessee, and Lessee
hereby leases from Lessor, 15062 square feet of rentable area on the 1st and 2nd
floor(s), designated as Suites 100 and 204, in Lessor's building (the
"Building"), located at 9603 White Rock Trail, Dallas, Dallas County, Texas. The
area hereby leased in the Building (and hereinafter referred to as "Leased
Premises") is shown outlined on the floor plan drawing attached hereto as
Exhibit "A."
TERM: This Lease is for a term (the "Term") of Eighty four (84) months,
commencing on March 1, 1996 (the "Commencement Date"), and expiring on February
28, 2003 (the "Expiration Date"), unless sooner terminated in accordance with
other provisions of this Lease.
RENT:
As rental for the Lease and use of the Leased Premises, Lessee shall pay to
Lessor the Base Rent and the Additional Rent called for in this Paragraph 3. As
used herein, the term "Rent" includes both Base Rent and Additional Rent. All
Rent shall be paid without demand and without deduction, abatement or setoff
except as otherwise provided in this Lease. All Rent, and other payments due and
becoming due by Lessee to Lessor under this Lease shall be made at Lessor's
address given below or at such other places as Lessor may from time-to-time
designate by written notice given to Lessee.
Lessee agrees to pay to Lessor, monthly in advance, on the first day of each
calendar month during the Term hereof, monthly base rental payments ("Base
Rent") in the amount of eleven thousand four hundred forty seven dollars and
twelve cents ($11,610.29). If Lessee occupies the Leased Premises on a date
other tan the first day of a calendar month, the Base Rent of that month shall
be prorated. The rent for the months of March 1996, April 1996, and June 1996
will be abated.
In addition to Base Rent, Lessee shall pay to Lessor monthly during the dates
specified, along with the Base Rent, an Additional Rent ("Additional Rent") in
the amount of:
From March 1, 1997 to February 28, 1998, Three hundred forty eight dollars and
thirty one cents ($348.31) From March 1, 1998 to February 28, 1998, Seven
hundred seven dollars and seven cents ($707.07) From March 1, 1999 to February
29, 2000, One thousand seventy six dollars and fifty nine cents ($1076.59) From
March 1, 2000 to February 28, 2001, One thousand four hundred fifty seven
dollars and twenty cents ($1457.20) From March 1, 2001 to February 28, 2002, One
thousand eight hundred forty nine dollars and
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twenty two cents ($1849.22)
From March 1, 2002 to February 28, 2003, Two thousand two hundred fifty three
dollars and no cents ($2253.00)
Lessee shall retain deposit with Lessor (the "Security Deposit") $48,421.07 as
security for the full and faithful performance of every provision of this Lease
to be performed by Lessee. If Lessee defaults with respect to any provision of
this Lease, including (without limitation) the provisions relating to the
payment of Rent, Lessor may use, apply or retain all or any part of the Security
Deposit for the payment of any Rent or any other sum in default or for the
payment of any other amount which Lessor may spend or become obligated to spend
by reason of Lessee's default, or to compensate Lessor for any other loss, cost
or damage which Lessor may suffer by reason of Lessee's Default. If any portion
of the Security Deposit is so used or applied, Lessee shall, within ten days
after written demand therefor, deposit cash with Lessor in an amount sufficient
to restore the Security Deposit to its original amount. Lessor shall not be
liable for payments of interest with respect to the Security Deposit. If Lessee
shall fully and faithfully perform every provision of this Lease to be performed
by Lessee, the Security Deposit, or any balance thereof remaining, shall be
returned to Lessee, or, at Lessor's option, to the last transferee of Lessee's
interest hereunder, at the expiration of the Term and upon Lessee's vacation of
the Leased Premises. In the event the Building is sold, the Security Deposit
shall be transferred to the new owner.
If any increase in the fire and extended coverage insurance premiums paid by
Lessor for the Building in which Lessee occupies space is caused by Lessee's use
and occupancy of the Leased Premises, or if Lessee vacates the Leased Premises
and causes an increase in such premiums, then Lessee shall pay as Additional
Rent the amount of such increase to Lessor.
OPERATION EXPENSE REIMBURSEMENT: Intentionally omitted.
OPERATING EXPENSES: Intentionally omitted.
SIGNS:
Lessor shall furnish and install Lessee's name and suite number on the building
directory. Lessor shall also furnish and install at the entrance door to
Lessee's premises a uniform suite number plate and a name plate. Signs, name
plates or graphics which are wholly within the Leased Premises and not visible
from the exterior of the Building or from public spaces within the Building will
be permitted without the consent of the Lessor. Lessor shall furnish and install
Lessee's name (PhyMed Diagnostic Imaging) on an outside sign approximately 20
feet by 2 feet on the northwest side of the Building.
Lessee agrees that no other signs of any description shall be erected or painted
in or about the Leased Premises. Lessee shall, at Lessor's option, remove all
signs at the termination of this Lease, and the installation of removal shall be
in such manner as to avoid any injury, defacement or overloading of the Building
or other improvements.
USAGE:
Lessee warrants and represents to Lessor that the Leased Premises shall be used
and occupied only for the purposes of general office use, medical diagnostic
imaging and physician office use.
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Lessee shall occupy the Leased Premises, conduct its business and control its
agents, employees, invitees and visitors in such a manner as is lawful,
reputable and will not create any nuisance or otherwise interfere with any,
annoy or disturb any other tenant in its normal business operations or Lessor in
its management of the Building.
Lessee shall not commit, or suffer to be committed, any waste on the Leased
Premises, nor shall Lessee permit the Leased Premises to be used in any way
which would, in the opinion of Lessor, cause Lessor's fire and extended coverage
insurance to be canceled or the rate therefor to be increased (or, at Lessor's
option shall pay any such increase).
The sidewalks, halls, exits, entrances, elevators, stairways and Common Areas
shall not be obstructed by Lessee or used for any purpose other than for ingress
to or egress from the Leased Premises. The hallways, exits, entrances, elevators
and stairways of the Building are for the use of the general public, but Lessor
shall in all cases retain the right to control and prevent access thereto by any
persons whose presence, in the judgment of Lessor, shall be prejudicial to the
safety, character, reputation and interest of the Building and its tenants.
Certain areas ("Common Areas") of the Building as it exists from time-to-time
may be designated by Lessor as Common Areas for the common use of all tenants,
including (among other facilities), corridors, elevators, halls, lobbies,
deliver stairways, drinking fountains, public toilets and the like, all of which
will be subject to Lessor's sole management and control.
Lessee shall not use, nor shall Lessee permit its licensees, employees, invitees
or agents, to use any portion of the Leased Premises in any way that causes
interference with or deterioration of Metroplex Telephone Company's signal
quality in its transmission of cellular telephone and radio communication
signals or prohibit Metroplex Telephone Company in any way from operating in
compliance with rules and regulations established by the Federal Communications
Commission or any other regulatory body. In the event of any such interference
and that interference does not cease promptly, the parties acknowledge that
continuing interference may cause irreparable injury and, therefore, the injured
party shall have the right, in addition to any other rights that it may have at
law or in equity, to bring action to enjoin such interference. In the event such
interference is in violation of the Federal Communications Commission
regulations, Metroplex Telephone Company shall also have the right to pursue any
remedies that may be available to it against such interfering party.
CERTIFICATE OF OCCUPANCY: Lessee may, prior to the commencement of the term of
this Lease, apply for a Certificate of Occupancy from the municipality in which
the Demised Premises are located. If Lessee is unable to obtain a Certificate of
Occupancy prior to the Commencement Date, Lessee shall have the right to
terminate this Lease by written notice to Lessor if Lessor or Lessee is
unwilling or unable to cure the defects which prevented the issuance of the
Certificate of Occupancy. Lessor may, but has no obligation to, cure any such
defects preventing the issuance of a Certificate of Occupancy, including any
repairs, installations, or replacements of any items which are not presently
existing on the Demised Premises, or which have not been expressly agreed upon
by Lessor in writing.
INSURANCE AND INDEMNITY: Lessee's Insurance. Lessee, at its sole cost and
expense, shall obtain and maintain in effect as long as this Lease remains in
effect and during such other time as Lessee occupies the Premises or any part
thereof, insurance policies providing at least the following coverages:
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General Liability Insurance, in occurrence form, insuring Lessee against any and
all liability for injury to or death of a person or persons, and for damage to
or destruction of property, occasioned by or arising out of or in connection
with the use or occupancy of the Premises or the business operated by Lessee
thereon, and including contractual liability coverage for Lessee's indemnity
obligations under this Lease (other than those contained in Paragraph 18
hereof), to afford protection with a minimum combined single limit of liability
of at least One Million Dollars ($1,000,000.00); and
Workers Compensation and similar insurance offering statutory coverage and
containing statutory limits and employer's liability insurance in form and
amount deemed reasonable by Lessee in the exercise of its prudent business
judgment.
Such policies will be maintained in companies having a "General Policyholders
Rating" of at least B plus as set forth in the most current issue of "Best's
Insurance Guide," and will be written as primary policy coverage and not
contributing with, or in excess of, any coverage which Lessor shall carry.
Lessee shall deposit certificates of such required insurance with Lessor prior
to the earlier to occur of (x) the Commencement Date of this Lease, or (y) shall
not be canceled or materially altered except after thirty (30) days' written
notice to Lessor. Lessee shall have the right to provide the coverages required
herein under blanket policies provided that the coverage afforded shall not be
diminished by reason thereof.
Lessee's Property. All furnishings, fixtures, equipment, and property
of every kind and description of Lessee and persons claiming by or through
Lessee which may be on the Premises shall be at the sole risk and hazard of
Lessee and no part of loss or damage thereto for whatever cause is to be charged
to or borne by Lessor.
Lessee's Insurance. Lessor shall at all times during the term of this
Lease maintain a policy or policies of insurance with the premiums paid in
advance, issued by and binding upon some solvent insurance company, such company
having a "General Policyholder's Rating" of at least B plus as set forth in the
most recent issue of "Best's Insurance Guide," insuring the Building against
lost or damage by fire, explosion or other hazards and contingencies to the
extent of at least 80% of replacement cost; provided, that Lessor shall not be
obligated in any way or manner to insure any personal property (including, but
not limited to, any furniture, machinery, goods or supplies) of Lessee or which
Lessee may have upon or within the Leased Premises or any fixtures installed by
or paid for by Lessee upon or within the Leased Premises or any improvements
made by or for Lessee.
JANITORIAL SERVICE: Lessor shall furnish janitorial services during the term of
this Lease. The janitorial service shall be provided five times per week during
the term of this Lease. Lessee shall pay for cost of cleaning services required
by non-standard improvements or special operations.
BUILDING SERVICES: Lessee shall bear all electric costs (including air
conditioning, electrical costs) for the Premises described in paragraph (1)
above, during the term of this Lease. Lessee shall pay all telephone charges.
Lessor shall furnish water for Lessee during the term of this Lease. Lessor
shall furnish Lessee hot and cold water at those points of supply provided for
general use of other tenants in the Building, central heating and air
conditioning (at times Lessor normally furnishes these services to other tenants
in the Building, and a temperatures and in
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amounts as are considered by Lessor to be standard), routine maintenance,
painting and electrical lighting service for all public areas and special
service areas of the Building in the manner and to the extent deemed by Lessor
to be standard. Failure by Lessor to any extent to furnish these defined
services, or any cessation thereof, resulting from causes beyond the control of
Lessor shall neither render Lessor liable in any respect for damages to either
person or property, be construed as an eviction of Lessee, create an abatement
of rent nor relieve Lessee from fulfillment of any covenant of this Lease.
Should any of the equipment or machinery break down, or for any cause cease to
function properly, Lessor shall use reasonable diligence to repair the same
promptly, but Lessee shall have no claim for rebate on account of any
interruption I service occasioned from the repairs.
REPAIRS AND MAINTENANCE:
Unless otherwise expressly provided, Lessor shall not be required to make any
improvements, replacements or repairs of any kind or character to the Leased
Premises during the term of this Lease, except repairs to walls, doors,
corridors, windows and other structures and equipment within and serving the
Leased Premises, and additional maintenance as may be necessary because of
damage by persons other than Lessee, its agents, employees, invitees, licensees
or visitors, and as may be necessary because of damage by persons other than
Lessee, its agents, employees, invitees, licensees or visitors, and as may be
necessary solely because of the negligence of Lessor, which repairs shall be
made by Lessor at its expense beginning not more than fifteen days after written
notice by Lessee. Lessor shall not be liable to Lessee, except as expressly
provided in this Lease, for any damage or inconvenience, and Lessee shall not be
entitled to any abatement or reduction of Rent, b reason of any repairs,
alterations or additions made by Lessor under this Lease. Subject to 30 days
prior written notice notifying Lessor of specific repairs that are the
responsibility of Lessor as defined in this Paragraph 12(a), and allowing Lessor
reasonable time to make said repairs, Lessee shall be entitled to a prorated per
day and prorated per square foot abatement or reduction of rent for any of the
days following the notice period for that specific effected area of this Lease,
b reason of any unreasonable failure by Lessor to make said repairs.
All requests for repairs or maintenance that are the responsibility of Lessor
pursuant to any provision of this Lease must be made in writing to Lessor at the
address set forth below.
CARE OF LEASED PREMISES:
Lessee shall, at its own cost and expense, repair or replace any damages or
injury to all or any part of the Leased Premises caused by Lessee or Lessee's
agents, employees, invitees, licensees or visitors; provided, however, if Lessee
fails to make the repairs or replacements promptly, Lessor may, at its option,
make the repairs or replacements and Lessee shall reimburse the cost to Lessor
on demand.
Lessee shall not allow any damage to be committed on any portion of the Leased
Premises, and upon expiration or termination of this Lease, by lapse of time or
otherwise, Lessee shall deliver the Leased Premises to Lessor in as good
condition as at the date of first possession of Lessee, ordinary wear and tear
excepted. The cost and expense of any repairs necessary to restore the condition
of the Leased Premises shall be borne by Lessee, and if Lessor undertakes to
restore the Leased Premises, Lessee shall reimburse Lessor for the costs
thereof.
COMPLIANCE WITH LAWS, RULES AND REGULATIONS: Lessee shall comply with all
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laws, ordinances, orders, rules and regulations of state, federal, municipal or
other agencies or bodies having jurisdiction relating to the use, condition and
occupancy of the Leased Premises. Lessee will comply with the rules of the
Building adopted by Lessor which are set forth on Exhibit "B" attached to this
Lease. Lessor shall have the right at all times to change the rules and
regulations of the Building or to amend them in any reasonable manner as may be
deemed advisable for the safety, care and cleanliness, and for the preservation
of good order, of the Leased Premises. All changes and amendments in the rules
and regulations of the Building will be sent by Lessor to Lessee in writing and
shall thereafter be carried out and observed by Lessee.
LESSEE'S PLANS, SPECIFICATIONS AND INSTALLATION OF IMPROVEMENTS:
Lessor shall make improvements to the Leased Premises in accordance with the
plans and specifications attached hereto as Exhibit "C." All work shall be
performed in a good and workmanlike manner and in accordance with all city
ordinances and codes. Work shall commence immediately upon execution of the
Lease and shall be pursued diligently until completion.
ALTERATIONS AND IMPROVEMENTS: Lessee shall not make or allow to be made any
alterations or physical additions in or to the Leased Premises without first
obtaining the written consent of Lessor. Except as otherwise provided below in
this Paragraph 16, all repairs, replacement, alterations, additions and
improvements which may be made on or installed in the Leased Premises by Lessee
shall remain upon and be surrendered with the Leased Premises and becomes the
property of Lessor upon expiration or termination of this Lease. Lessee shall
have the option of removing any additions, alterations, additions and
improvements which it made during the term of this Lease, in which case it shall
restore the premises to the condition existing prior to the time Lessee took
possession. Should Lessee choose not to remove any repairs, replacement,
alterations, additions and improvements, they shall become the property of the
Lessor upon expiration of the Lease. This clause shall not apply to moveable
equipment or furniture owned by Lessee which may be removed by Lessee at the end
of the Term of this Lease if Lessee is not then in default and if such equipment
and furniture is not then subject to any other rights, liens and interests of
Lessor.
FIRE AND CASUALTY:
If any part of the Leased Premises shall be damaged by fire, the elements,
casualty or otherwise, but is not thereby rendered untenable or unfit for
occupancy, then the Lessor shall, at its expense, cause such damage to be
repaired to substantially the condition as provided for in Paragraph 15 above,
all work to be done in a good and workmanlike manner. The rent shall not be
abated and the insurance proceeds from such damage shall be paid to and retained
by the Lessor.
If the Leased Premises shall be damaged by fire, the elements, casualty or
otherwise so that the Leased Premises are rendered partially untenable or unfit
for occupancy, then the Lessor, at its expense, shall cause the damage to be
repaired to substantially the condition as provided for in Paragraph 15 above,
all work to be done in a good and workmanlike manner. The rent shall be bated
proportionately from the time of the damage until the Leased Premises are
repaired and fit for occupancy, and the insurance proceeds from such damage
shall be paid to and retained by the Lessor.
If the Leased Premises shall be damaged by fire, the elements, casualty or
otherwise, so that the Leased Premises are totally destroyed or rendered more
than 70% unfit for occupancy, and
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cannot be repaired in ninety (90) days, then either party reserves the right to
cancel this lease within thirty (30) days after the casualty occurs, and if
either party exercises such option, then this lease shall come to and end in the
same manner as though the term had expired, and the insurance proceeds from such
damage shall be paid to and retained by the Lessor. In the event the lease is
not canceled, the Lessor shall, at its expense, rebuild the Leased Premises to
substantially the condition as provided for in Paragraph 15 above, all repairs
to be done in a good and workmanlike manner. The rent shall be abated during the
time that Leased Premises are unfit for occupancy, and the insurance proceeds
shall be paid and retained by the Lessor.
HAZARDOUS SUBSTANCES:
Lessor shall indemnify and hold harmless the Lessee from any and all claims,
damages, fines, judgments, penalties, costs, expenses or liabilities (including,
without limitation, any and all sums paid for settlement of claims, attorney's
fees, consultant and expert fees) arising during or after the Term from or in
connection with the presence or suspected presence of Hazardous Substances in,
or about the Land, Building or Premises, except to the extent that the Hazardous
Substances are present as a result of acts of Lessee, Lessee's agents,
employees, contractors or invitees.
Lessee shall not cause or permit any Hazardous Substances to be used, stored,
generated or disposed of in, on or about the Land, Building or Premises by
Lessee, its agents, employees, contractors or invitees, except for such
Hazardous Substances as are normally utilized in the environment of Lessee's
Intended Use and are necessary to Lessee's business. Any such Hazardous
Substances permitted or generated on the Premises as hereinabove provided, and
all containers therefor, shall be used, kept, stored and disposed of in a manner
that complies with all Environmental Laws. Lessee shall indemnify and hold
harmless the Lessor from any and all claims, damages, fines, judgments,
penalties, costs, expenses or liabilities (including, without limitation, any
and all sums paid for settlement of claims, attorney's fees, consultant and
expert fees) arising during or after the Term from or in connection with the
use, storage, generation or disposal of Hazardous Substances in, on or about the
Land, Building or Premises by Lessee, Lessee's agents, employees, contractors or
invitees.
Notwithstanding anything to the contrary stated hereinabove, the indemnification
contained in subparagraph (b) above shall not include any consequential damages
(e.g., loss of rent, use and profits) incurred by Lessee, but shall expressly
include, without limitation, any and all costs incurred due to the investigation
of the site or any cleanup, removal or restoration mandated by or pursuant to
any Environmental Laws. The indemnifications contained herein shall survive any
expiration or termination of the Term, but shall terminate three (3) years after
any such expiration or termination except with respect to any specific claims
which have been given in writing by either party to the other prior to the
expiration of said three-year period.
As used herein, "Hazardous Substances" means any substance which is toxic,
ignitable, reactive, or corrosive or which is regulated by "Environmental Laws."
The term "Environmental Laws" means federal, state and local laws and
regulations, judgments, orders and permits governing safety and health and the
protection of the environment, including without limitation the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. 9601 et seq.
As amended (CERCLA), the Resource Conservation and Recovery Act, as amended 42
U.S.C. 6901 et seq., the Clean Water Act, 33 U.S.C. 1251 et seq., the Clean Air
Act, 42 U.S.C. 7401 et seq., the Toxic Substance Control Act, 15 U.S.C. 2601 et
seq., and the Safe Drinking
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Water Act, 42 U.S.C. 300f through 300j. "Hazardous Substances" includes any and
all materials or substances which are defined as "hazardous waste," "extremely
hazardous waste," or a "hazardous substance" pursuant to state, federal or local
governmental law. "Hazardous Substances" also includes asbestos, polychlorinated
biphenyls ("PCBs") and petroleum products.
WAIVER OF SUBROGATION: Lessor and Lessee, for themselves and their respective
insurance carriers, agree to, and do hereby, release each other of and from any
and all claims, demands and causes of action that each may have or claim to have
against the other for injury to persons or for loss or damage to the property of
the other, whether real or personal, caused by or resulting from any risk
insured against by any valid and collectible insurance policy, notwithstanding
that any such injury, loss or damage may be due to or result from the negligence
of either of the parties hereto or their respective officers, agents or
employees, but only to the extent of any recovery collectible under such
insurance.
HOLD HARMLESS AND RELEASE:
Lessee shall indemnify and save Lessor harmless from and against all claims and
suits for damages, including the cost and expense incurred by Lessor in
investigating into and defending against any such claim or suit, arising or
which may be alleged to arise, from any act or omission on the part of Lessee or
Lessee" agents, employees, contractors, or arising, or which may be alleged to
arise, from any injury to any person or damage to or loss of the property of any
person occurring in the Leased Premises regardless of however such injury,
damage or loss may have been caused or may be alleged to have been caused.
Lessor shall not be responsible or liable to Lessee, or Lessee's employees,
agents, customers or invitees, for bodily injury or property damage occurring by
reason of the act or omission of any tenant in the Building, including the
Lessee named herein, or any tenants' employees, agents, contractors, customers
or invitees.
PEACEFUL ENJOYMENT: Lessor warrants that it has full right to execute and to
perform this Lease and upon Lessee's payment of the required Rents and
performing the terms, conditions, covenants and agreements contained in this
Lease, shall peaceably and quietly have, hold and enjoy the Leased Premises
during the full Term of this Lease as well as any extension or renewal thereof.,
It is agreed that by occupying the premises, that Lessee accepts them and
acknowledges that they are in the condition that calls for in this Lease.
LESSOR'S RIGHT OF ENTRY: Lessor, its agent and representatives, may have access
to and the right to enter upon the Leased Premises during normal business hours
to examine the condition thereof, to make any repairs or maintenance required to
be made by Lessor under this Lease, to show the Leased Premises to prospective
purchasers, mortgagees or tenants or prospective tenants and for any other
purpose deemed reasonable by Lessor, provided Lessor has permission from Lessee
or Lessor gives notice to Lessee at least 24-hours prior to entry, the time
being necessary for scheduling requirements. At the request of either Lessor or
Lessee, any agent or other representative of Lessor entering upon the Leased
Premises as provided in this Paragraph 24 below shall be accompanied by a
representative of Lessee.
BROKERS: Landlord and Tenant each represent and warrant to the other that it has
had no with any real estate broker or agent in connection with the negotiation
of this Lease, except Chris Thevenet whose commission shall be payable by
Landlord, and that it knows of no other real
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estate broker of agent who is or might be entitled to a commission in connection
with this Lease. Landlord and Tenant each agree to indemnify, defend and hold
the other harmless from all costs and liabilities, including reasonable
attorney's fees and costs, arising out of or in connection with claims made by
any other broker or individual who alleges that it is entitled to commissions or
fees with regard to this Lease as a result of dealings it had with the
indemnifying party.
ASSIGNMENT, SUBLEASING AND LIENS:
Without Lessor's written consent, Lessee may not sell, assign, mortgage, pledge,
hypothecate or otherwise transfer any of Lessee's rights under this Lease.
Lessee shall remain fully liable hereunder. Lessee shall have the right to
sublease to physicians.
Lessee shall not create or permit the existence of any lien upon the Leased
Premises. If, because of any act or omission of Lessee or Lessee's employees,
agents, contractors or subcontractors, any mechanic's lien or other lien, charge
or order for payment of money shall be filed against Lessor or against or placed
upon all or any portion of the Leased Premises or the Building, Lessee shall, at
Lessee's own cost and expense, cause the same to be discharged of record, or a
bond furnished to Lessor for discharge of the same, within thirty days after the
filing thereof, and Lessee shall indemnify and save Lessor harmless against and
from all costs, liabilities, suits, penalties, claims and demands, including
attorney's fees, resulting therefrom. Any bond provided pursuant to this
subparagraph shall be in a form and amount satisfactory to Lessor with sureties
acceptable to Lessor.
Lessee shall pay prior to delinquency all taxes assessed against or levied upon
its occupancy of the Leased Premises, or upon the fixtures, furnishings,
equipment and other personal property and fixtures of Lessee located in the
Leased Premises. If nonpayment thereof could give rise to a lien on the real
estate, and, to the extent possible, Lessee shall cause all of the same to be
assessed and billed separately from the property of Lessor.
The rights of Lessor under this Lease may be assigned. Upon written notice from
Lessor, Lessee shall, to the extent specified in the notice, make any or all
Rent Payments coming due hereunder to Lessor's assignee as designated in such
notice.
LESSOR'S LIEN:
In addition to all other liens in Lessor's favor provided by operation of law,
Lessor shall have, and Lessee hereby grants to Lessor, a continuing security
interest upon all goods, wares, equipment, fixtures, furniture, improvements and
other personal property of any description now owned or hereafter acquired by
Lessee and now or hereafter situated on the Leased Premises and all proceeds
thereof. The security interest granted by extension hereof or of any part
hereof. Upon the occurrence of an Event of Default (as herein defined), and at
any time thereafter, in addition to the other rights and remedies of Lessor,
Lessor may exercise all of the rights and remedies of Lessor, Lessor may
exercise all of the rights and remedies of a secured party under the Uniform
Commercial Code of Texas with respect to the collateral covered by the security
interest granted in this Paragraph 25. Lessee agrees that in any instance in
which notice of any disposition of collateral is required by law, notice given
in accordance with this Lease not less than ten (10) days prior to such intended
disposition will be reasonable notice. Upon request by Lessor, Lessee shall
execute all such financing statements as Lessor may request to perfect the
security interest created herein. Lessor may file a copy of this Lease as a
financing statement.
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The security interest granted in Paragraph 25(a) above shall be secondary to all
purchase money security interests or liens on the following: Siemens 1.5 Vision
MRI Scanner, Toshiba .5 MRI Scanner, Toshiba XPEED CT Scanner, GE Radiography Rm
with Tomo, Siemens C-Arm, BE R & F Room, Siems R & F Room, ISG Allegro 3-D
system, Konica L1-21, S4 Laser, and Toshiba Lumbar Quad Coil.
INTEREST: Any past due Rent or other payments becoming due from Lessee to Lessor
under this Lease shall bear interest from the end of the grace period for such
Rent or other payment until paid, at the highest lawful rate. Such grace period
being from the first (1st) day through the fifth (5th) day of the month in which
the Rent is due.
DEFAULT BY LESSEE: As used in this Lease, the term "Event of Default" means the
occurrence or existence of any of the following events or conditions:
Lessee's failure to make punctual payment when due of any Rent or other payment
becoming due hereunder; or Lessee's failure to keep or perform punctually and
fully any other of Lessee's covenants, agreements or undertakings contained in
this Lease and Lessee's failure to remedy such failure or nonperformance within
thirty (30) days after notice thereof is given by Lessor to Lessee; or Lessee's
insolvency or business failure or the commencement of any proceedings by or
against Lessee under any provisions of the Bankruptcy Code, as amended, or any
other law (state or federal) for the relief of debtors, or a receiver or trustee
is appointed for the Leased Premises or for all or any substantial part of the
assets of the Lessee, or Lessee makes any assignment for the benefit of
creditors or any transfer or conveyance in fraud or creditors; or Lessee deserts
or abandons any substantial portion of the Leased Premises.
REMEDIES FOR LESSEE'S DEFAULT:
Upon the occurrence or existence of an Event of Default and at any time
thereafter:
Lessor may take any action permitted by law to enforce the payment or
performance of Lessee's obligations hereunder; Lessor may cure the default and
recover from Lessee as provided in Paragraph 29 below; Lessor may terminate this
Lease by giving Lessee notice of termination; Lessor may enter upon and take
possession of the Leased Premises and expel or remove Lessee, without being
liable for so doing or for any action taken by Lessor in so doing, and relet the
Leased Premises and receive the rent therefor.
All the rights and remedies of Lessee created in this Lease are in addition to
those otherwise created whether by law or agreement. All rights and remedies of
Lessor are cumulative and may be exercised singly or concurrently. A waiver by
Lessor of any Event of Default or any right or remedy on any occasion will not
be a bar to the exercise of any remedy on any subsequent occasion. Exercise by
Lessor of any right or remedy granted by this Lease or otherwise available to
Lessor shall not be deemed to be an acceptance of surrender of the Leased
Premises by Lessee, whether by agreement or by operation of law, any such
surrender to be affected only by the written agreement of Lessor and Lessee.
No termination of this Lease nor any action taken by Lessor upon the occurrence
or existence of an Event of Default will relieve Lessee from liability for the
payment of performance of any of
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Lessee's obligations under this Lease, and Lessor may enforce any such liability
notwithstanding any termination.
RECOVERY FROM LESSEE:
Lessee will be liable to Lessor for any deficiency remaining should rents and
other payments actually received by Lessor from any new tenant upon a reletting
pursuant to subparagraph (a)(iv) of Paragraph 28 be less than the Rents and
other payments for which lessee is obligated under the terms of this Lease.
All the rights and remedies of Lessee created in this Lease are in addition to
those otherwise created whether by law or agreement. All rights and remedies of
Lessor are cumulative and may be exercised singly or concurrently. A waiver by
Lessor of any Event of Default or any right or remedy on any occasion will not
be a bar to the exercise of any remedy on any subsequent occasion. Exercise by
Lessor of any right or remedy granted by this Lease or otherwise available to
Lessor shall not be deemed to be an acceptance of surrender of the Leased
Premises by Lessee, whether by agreement or by operation of law, any such
surrender to be affected only by the written agreement of Lessor and Lessee.
If it is necessary for Lessor to bring suit in order to collect any deficiency
from Lessee, Lessor may allow such deficiencies to accumulate and bring an
action on several or all of the accrued deficiencies at any one time. Any such
suit will be without prejudice to the right of Lessor to bring a similar action
for any subsequent deficiency or deficiencies. Any amount collected by Lessor
from subsequent tenants for any calendar month in excess of the monthly Rent and
other charges provided in this Lease shall be credited to Lessee in reduction of
Lessee's liability for any calendar month for which the amount collected by
Lessor may be less than the monthly Rent and other charges provided in this
Lease.
If Lessee fails to keep or perform punctually any of Lessee's covenants,
agreements or undertakings contained in this Lease, Lessor may take such action
as, in the judgment of Lessor, necessary to cure such failure ore
nonperformance, and Lessee shall, upon demand, reimburse Lessor for all costs
and expenses incurred by Lessor in so doing. No action taken by Lessor under
this subparagraph (d) will be a waiver of any Event of Default which may have
occurred or exist or any right or remedies to which Lessor is otherwise
entitled.
ACTS OF GOD: Lessor shall not be required to perform any covenant or obligation
in this Lease, or be liable in damages to Lessee, if the performance or
nonperformance of the covenant or obligation is delayed, caused by or prevented
by an act of God or force majeure.
ATTORNEY'S FEES: In the event Lessee defaults in the performance of any of their
terms, covenants, agreements or conditions contained in this Lease and Lessor
places in the hands of an attorney for enforcement of all or any part of this
Lease, the collection of any Rent due or to become due or recovery of the
possession of the Leased Premises, Lessee agrees to pay Lessor reasonable
attorney's fees for the services of the attorney, whether suit is actually filed
or not. In no event shall the attorney's fees be less than fifteen percent (15%)
of the outstanding balance owed by Lessee to Lessor.
SURRENDER OF LEASED PREMISES:
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Upon expiration or termination of this Lease, Lessee shall deliver the Leased
Premises to Lessor clean and in good order and repair, fair wear and tear
excepted, failing which Lessor may restore the Premises to such condition and
Lessee shall pay the cost thereof to Lessor upon demand.
If Lessee is not in default in the payment or performance of its obligation
under this Lease, upon expiration or termination of their Lease, Lessee may
remove from the Leased Premises all of its trade fixtures and other personal
property, such removal to be completed upon expiration of this Lease or, in the
case of termination, within ten days after termination.
HOLDING OVER: In the event of holding over by Lessee after the expiration or
termination of this Lease, the hold over shall be as a tenant at will and all of
the terms and provisions of this Lease shall be applicable during that period,
except that Lessee shall pay Lessor as rental for the period of such hold over
an amount equal to one hundred fifty percent (150%) of the Rent which would have
been payable by Lessee had the holdover period been a part of the original Term
of this Lease. If holding over, Lessee agrees to vacate and deliver the Leased
Premises to Lessor upon Lessee's receipt of notice from Lessor to vacate. The
rent payable during the hold over period shall be payable to Lessor on demand.
No holding over by Lessee, whether with or without consent of Lessor, shall
operate to extend this Lease except as otherwise expressly provided.
SURVIVAL OF OBLIGATIONS: All of Lessee's obligations under this Lease shall
survive expiration or termination of this Term of the Lease.
RIGHTS OF MORTGAGE: Lessee accepts this Lease subject and subordinate to any
recorded mortgagee, deed of trust or other lien presently existing upon the
Leased Premises. Lessor is hereby irrevocably vested with full power and
authority to subordinate Lessee's interest under this Lease to any mortgage,
deed of trust or other lien hereafter placed on the Leased Premises, and Lessee
agrees, upon demand, to execute additional instruments subordinating this Lease
as Lessor may require. If the interests of Lessor under this Lease shall be
transferred by reason of foreclosure or other proceedings for endorsement of any
mortgage on the Leased Premises, Lessee shall be bound to the transferee
(sometimes called the "Purchaser") under the terms, covenants and conditions of
this Lease for the balance of the term remaining, and any extensions or
renewals, with the same force and effect as if the Purchaser were Lessor under
this Lease, and Lessee agrees to attorn to the Purchaser, including the
mortgagee under any such mortgage if it be the Purchaser, as its Lessor the
attornment to be effective and self-operating without the execution of any
further instruments upon the Purchaser succeeding to the interest of Lessor
under this Lease. The respective rights and obligations of Lessee and the
Purchaser upon the attornment, to the extent of the then remaining balance of
the term of this Lease, and any extensions and renewals, shall be and are the
same as set forth in this Lease.
ESTOPPEL CERTIFICATES: Lessee agrees to furnish promptly, from time-to-time,
upon request of Lessor or Lessor's mortgagee, a statement certifying that Lessee
is in possession of the Leased Premises; the Leased Premises are acceptable; the
Lease is in full force and effect; the Lease is unmodified; Lessee claims no
present charge, lien, or claim offset against rent; the rent is paid for the
current month, but is not paid and will not be paid for more than one month in
advance; there is no existing default by reason of some act of omission by
Lessor; and such other matters as may be reasonably required by Lessor or
Lessor's mortgagee.
SUCCESSORS: This Lease shall be binding upon and inure to the benefit of Lessor
and Lessee
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and their respective heirs, personal representatives, successors and, subject to
Paragraph 24, assigns. It is hereby covenanted and agreed that should Lessor's
interest in the Leased Premises cease to exist for any reason during the term of
the Lease, then notwithstanding the happening of such event this lease
nevertheless shall remain unimpaired and in full force and effect and Lessee
hereunder agrees to attorn to the then owner of the Leased Premises.
RENT TAX: If applicable in the jurisdiction where the Leased Premises are
situated, Lessee shall pay and be liable for all rental, sales and sur taxes or
other similar taxes, if any, levied or imposed by any city, state, county or
other governmental body having authority, such payments to be in addition to all
other payments required to be paid to Lessor by Lessee and under the terms of
this Lease. Any such payment shall be paid concurrently with the payment of the
rent upon which the tax is based as set forth above.
NOTICE:
All Rent and other payments required to be made by Lessee shall be payable to
Lessor at the address set forth below, or any other address Lessor may specify
from time-to-time by written notice delivered to Lessee.
Any notice or document required or permitted to be delivered by this Lease shall
be deemed to be delivered (whether or not actually received) when deposited in
the United States Mail, postage prepaid, certified mail, return receipt
requested, addressed to the parties at the respective addresses set out below:
LESSOR: LESSEE:
Robert Cocanougher George Barker
Cocanougher Asset Management Phymed Inc.
6851 N.E. Loop 820, Suite #247 9603 White Rock Trail, #300
Ft. Worth, TX 76180 Dallas, TX 75238
DEFINITIONS: These definitions apply to the terms defined as those terms are
used throughout this Lease.
"Abandon" means the vacating of all or a substantial portion of the Leases
Premises by Lessee, whether or not Lessee is in default of the rental payments
due under this Lease.
An "act of God" is defined for the purpose of this Lease as strikes, lockouts,
sit-downs, material or labor restrictions by any governmental authority, riots,
floods, washouts, explosions, earthquakes, fire, storms, acts of the public
enemy, wars, insurrections and any other cause not reasonably within the control
of Lessor and which by the exercise of due diligence Lessor is unable, wholly or
in part, to prevent or overcome.
The "Commencement Date" shall be the date set forth in Paragraph 2. The
Commencement Date shall constitute the commencement of this Lease for all
purposes, whether or not Lessee has actually taken possession.
"Real Property tax" means all city, state and county taxes and assessments
including special district taxes or assessments.
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The captions appearing in this Lease are inserted only as a matter of
convenience and in no way define, limit, construe or describe the scope or
intent of such paragraph.
ENTIRE AGREEMENT AND LIMITATION OF WARRANTIES: It is expressly agreed by
Lessee, as a material consideration for the execution of this Lease, that this
Lease, with the specific references to written extrinsic documents, is the
entire agreement of the parties; that there are, and were, no verbal
representations, warranties, understanding, stipulations, agreements or promises
pertaining to this Lease or the expressly mentioned written extrinsic documents
not incorporated in writing in this Lease. Lessor and Lessee expressly agree
that there are and shall be no implied warranties or merchantability, fitness or
of any other kind arising out of this Lease. It is likewise agreed that this
Lease may not be altered, waived, amended or extended except by an instrument in
writing signed by both Lessor and Lessee.
NO OFFER: The submission of this Lease for examination or the negotiation of the
transaction described herein or the execution of this Lease by only one of the
parties shall not in any way constitute an offer to lease on behalf of either
Lessor or Lessee, and this Lease shall not be binding on either party until
duplicate originals thereof, duly executed on behalf of both parties, have been
delivered to each of the parties hereto.
OTHER PROVISIONS:
We the undersigned parties, hereby, agree to submit to arbitration administered
by the American Arbitration Association. We further agree that any controversy
be submitted to three arbitrators selected from the panels of arbitrators of the
American Arbitration Association. We further agree that we will faithfully
observe this agreement and their rules, that we will abide by and perform any
award rendered by the arbitrators, and that a judgment of the court having
jurisdiction may be entered on the award.
Lessor agrees to replace the carpet, with quality new carpet, in the common
areas on the first floor of Aspen Center, 9603 Whiterock Trail, Dallas, Texas,
before December 31, 1996.
Lessor agrees to replace the carpet, with quality new carpet, in Suite 100 of
Aspen Center, 9603 Whiterock Trail, Dallas, Texas, before December 31, 1996.
Lessor reserves the right to construct the dividing wall shown in Exhibit "A" in
Suite 204. Lessor also reserves the right to construct a hallway, as also shown
in Exhibit "A" in Suite 204, connecting the adjoining suites on each side of the
demised premises in Suite 204.
LESSOR: LESSEE:
Cocanougher Feed Co., Inc. PhyMed, Inc.
By Robert Cocanougher, Executive Vice President By George C. Barker, President
Signed /s/ Robert Cocanougher Signed /s/ George C. Barker
---------------------------- -----------------------
125
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<NAME> TATONKA ENERGY, INC.
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<PERIOD-START> JAN-01-1998
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