SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ____ to ____
Commission file number 0-17787
MEDICAL INNOVATIONS, INC.
Exact name of registrant as specified in its charter
DELAWARE 76-0280551
State or other jurisdiction IRS Employer Identification Number
of incorporation
ONE RIVERWAY, SUITE 2300, HOUSTON, TEXAS 77056
Address of principal executive offices Zip code
(713) 688-6600
Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.0075 par value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant was approximately $12,424,000 as of March 8, 1996. Solely for
purposes of this computation, market value was determined by the published
closing price of $1.375 of the Registrant's Common Stock on March 8, 1996. The
number of shares of Common Stock $.0075 par value, outstanding as of March 8,
1996 was 15,954,880.
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TABLE OF CONTENTS
MEDICAL INNOVATIONS, INC.
1995 FORM 10-K ANNUAL REPORT
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PART I PAGE
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Item 1. Business....................................................................... 1
Item 2.
Properties..................................................................... 9
Item 3. Legal Proceedings.............................................................. 9
Item 4. Submission of Matters to a Vote of Security Holders............................ 9
PART II
Item 5. Market for Registrant's Common Stock and Related Stockholder Matters........... 10
Item 6. Selected Financial Data........................................................ 10
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................................... 12
Item 8. Financial Statements and Supplementary Data.................................... 19
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure....................................... 19
PART III
Item 10. Directors and Executive Officers of the Registrant............................. 20
Item 11. Executive Compensation......................................................... 22
Item 12. Security Ownership of Certain Beneficial Owners of Management.................. 25
Item 13. Certain Relationships and Related Transactions................................. 27
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K.......................................................... 29
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ii
PART I
ITEM 1. BUSINESS
A. GENERAL DEVELOPMENT OF THE BUSINESS
Medical Innovations, Inc. (the "Company") is in the business of providing
specialized and high-tech home healthcare services, home medical equipment,
homemaker services, and intravenous therapies. This full complement of home
healthcare services is designed to address the specific needs of patients in a
variety of diagnostic groups, including patients receiving treatment for cancer,
diabetes, wounds, AIDS and high risk pregnancies. The Company has a staff of
full time nursing, homemaker, pharmacy, and therapy personnel and access to
carefully screened registries of qualified clinicians, all of whom interact with
physicians to implement a customized plan of home healthcare for each patient.
Substantially all products used by the Company in its home infusion therapies
are prepared in pharmacies owned by the Company. The Company also provides
comprehensive home healthcare management and consulting services to hospitals,
skilled nursing facilities, and other providers under contractual arrangements.
The Company believes that its home healthcare business is part of a growing
industry. Pressure to reduce healthcare costs through shorter institutional
stays, combined with the escalating price of healthcare, the aging of the
American population and an increasing awareness by consumers that quality
healthcare can be administered at home, has resulted in rapid growth of the
market for home healthcare. Moreover, physicians are increasingly being asked by
patients and payors to oversee healthcare services at home, or in other
environments which are less costly than hospitalization. The Company offers
healthcare services in environments familiar to the patient, with systems that
assist the physician in maintaining control of medical treatment, at a price
that the Company believes compares favorably with alternative means of
treatment.
The Company has grown rapidly since the beginning of 1993, due primarily to
acquisitions which are described below.
Effective January 1, 1993, the Company acquired substantially all of the
operating assets, except cash and accounts receivable, of Preferred Homecare,
Inc. and Preferred Pharmacy, Inc. (collectively, "Preferred"), a provider of
home infusion therapy and skilled homecare services in the Houston, Texas area.
Effective May 1, 1993, the Company acquired all of the issued and outstanding
shares of common stock of Physician's Visiting Nurse Service, Inc. ("PVNS"), a
provider of skilled homecare and homemaker services exclusively in the state of
Texas.
Effective September 1, 1993, the Company acquired all of the outstanding common
stock of Advance Healthcare, Inc. ("Advance"), a provider of home intravenous
therapies in the Richmond, Virginia area.
Effective February 11, 1994, the Company acquired certain assets of STAT
Specialty Home Health Care, Inc. ("STAT"), a provider of skilled homecare
services in the Texas Rio Grande Valley and Houston areas.
Effective April 1, 1994, the Company acquired all of the outstanding common
stock of PRN Home Health Care, Inc. of Nevada and its affiliated companies
(collectively "PRN Nevada"), a provider of skilled homecare and homemaker
services in the state of Nevada.
On January 31, 1995, the Company acquired certain assets of PharmaThera, Inc.'s
branch operation in Pensacola, Florida ("PharmaThera Branch"), a provider of
infusion therapy services in the Pensacola, Florida area.
1
On May 19, 1995, the Company acquired all of the outstanding common stock of
Hospital HomeCare Corporation ("HHCC"), a provider of homecare management and
consulting services in various states, in a "stock for stock" merger accounted
for as a pooling of interests.
For additional information concerning the Company's acquisitions, including the
consideration paid, see Note 2 to the accompanying consolidated financial
statements.
As of December 31, 1995, the Company provided its home healthcare services in
Texas, Nevada, Virginia, and Florida and its homecare management services in
Texas, Nevada and various other states.
The Company's strategy has been to expand through acquisitions, develop
additional complementary healthcare services, increase the number of patients
served in its existing markets, introduce new therapies, and provide management
and consulting services to other providers of home healthcare. As described
above, the Company completed seven acquisitions in 1993 through 1995, and formed
a management services division in late 1993. The management services division
was expanded in May 1995 by the merger with HHCC and in September 1995 by the
execution of a five-year contract to start-up and manage the homecare operations
of Horizon/CMS Healthcare Corporation ("Horizon").
SUBSEQUENT EVENT: PROPOSED MERGER OF COMPANY
On February 13, 1996, the Company announced that it had agreed to be acquired in
a "stock for stock" merger by Horizon, which is expected to be completed during
the latter part of the second quarter of 1996. As a result of this proposed
transaction, the Company has suspended any discussions or negotiations with
other companies regarding potential acquisitions or other business combinations.
See also Note 14 to the accompanying consolidated financial statements.
B. FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The Company operates in one industry segment. Information regarding that segment
and the products and services within that segment is discussed below.
C. NARRATIVE DESCRIPTION OF BUSINESS
SERVICES PROVIDED
The Company provides services through teams of clinicians, including homemakers,
home health aides, licensed practical nurses, licensed registered nurses,
registered pharmacists, physical therapists, occupational therapists, speech
therapists, and medical social workers. In most of the Company's operations, its
clinicians form tightly knit interdisciplinary teams, each of which provides
home healthcare to patients in a defined geographic area. In connection with the
administration of home infusion therapies, the Company's pharmacies prepare the
necessary pharmaceuticals, such as nutritional solutions, antineoplastic
chemotherapy agents, antibiotics and other medications.
The Company has established written policies and procedures prescribing
standards for patient care and has established an internal quality assurance
program including chart audits, pharmacy surveys, patient interviews and
customer questionnaires. The Company conducts clinical and operational audits of
each branch office on a periodic basis to assure compliance with these
standards. The clinical staff actively participate with the corporate staff in
the quality assurance program.
2
To assist in maintaining high standards for quality care, the Company has
established medical advisory boards comprised of prominent physicians that
provide advice on specific medical issues. The Company also consults from time
to time with medical specialists on clinical procedures and new therapies. In
addition, the Company has sought and obtained accreditation from the Joint
Commission on Accreditation of Healthcare Organizations (JCAHO) for most of its
operations. The Company's healthcare specialists and home nursing staff must
meet experience and training criteria. In accordance with state and federal
regulations, each member of such staff is tested and evaluated at the time of
employment, prior to providing patient care.
NURSING SERVICES. The Company offers a full line of intermittent and
extended services for both infusion and general nursing needs of patients. The
Company maintains an extensive registry of carefully screened staff, including
registered nurses, licensed vocational nurses, and home health aides. Skilled
nursing services include the following: (i) administering injections; (ii)
changing dressings and other care for wounds, incisions and stomas; (iii)
monitoring vital signs; (iv) catheter care; (v) drawing lab samples; (vi)
administering enteral nutrition therapy; and (vii) patient education. Infusion
nursing services include attended infusion drug administrations, catheter
placements and blood transfusions.
PERSONAL ASSISTANCE. Homemakers and home health aides provide hourly or
around-the-clock assistance with bathing, hygiene tasks, bed linen changes and
general cleaning of the patient's living area and other personal care needs.
PHYSICAL THERAPY. Physical therapists provide structured therapies for
the patient's improved ambulation, use of equipment, prostheses training,
therapies for the patient's increased bed mobility, prescribed exercise
programs, and needed therapy to improve activities of daily living.
OCCUPATIONAL THERAPY. Occupational therapists provide structured
therapies for the patient's improved upper body mobility, training in home for
bath activities and equipment, and increased independence in the patient's
activities of daily living.
SPEECH THERAPY. Speech therapists provide structured therapies for the
patient's increased communication skills and improved swallowing techniques
following a trauma.
MEDICAL SOCIAL SERVICES. Company employees counsel patients to
alleviate stresses encountered during illnesses by providing needed information
and support, as well as coordination of community services for the patient and
family.
EQUIPMENT AND ENTERAL THERAPY. The Company provides durable medical
equipment and medical supplies that are needed to complete therapy in the home
are coordinated by nurse managers and patient service representatives. Infusion
pumps and supplies are stocked, maintained and dispensed according to industry
standards in the Company's pharmacies. Patients receive comprehensive training
and counseling on all medical supplies provided as part of their therapies.
SPECIALIZED HOME HEALTHCARE PROGRAMS. The Company develops special
programs to address specific patient needs, managed care companies and
physicians as an effective way to reduce healthcare costs and ensure quality
patient care.
FACILITY STAFFING. The Company currently provides nurse staffing
services to hospitals and other institutions in Virginia and Nevada.
MANAGEMENT SERVICES. The Company provides comprehensive homecare
management and consulting services to hospitals, rural health clinics, skilled
nursing facilities, and other providers under contractual arrangements.
3
REIMBURSEMENT FOR SERVICES
Patients, their insurers or other third-party payors, if applicable, are billed
directly by the Company for its products and services provided. Nursing services
are generally billed at a specified rate per visit or per hour and
pharmaceuticals are priced based on "per diem" rates or on an item-by-item
basis.
Virtually all of the Company's revenue is attributable to amounts from
third-party payors. Like other medical service providers, the Company is subject
to lengthy collection periods as a result of third-party payment procedures.
Consequently, management of accounts receivable through effective billing and
reimbursement procedures is critical to the Company's financial success.
Before a patient begins home healthcare services, reimbursement specialists
contact the patient's third-party payor to determine eligibility for, and the
extent of, insurance coverage. The billing and reimbursement process requires
the collection, review and approval of a significant number of documents.
Certain payors such as Medicare, Medicaid, and some managed care plans require
very specific procedures and documentation prior to providing reimbursement. The
Company's reimbursement specialists work closely with third-party payors and are
directly responsible for assessing patient coverage, ensuring the adequacy of
documentation, submitting the documentation and claims to the third-party
payors, and expediting payment. The Company accepts assignments of insurance
benefits from the patient and, in most instances, the third-party payors
reimburse the Company directly.
Reimbursement coverage is provided through private sources, such as insurance
companies, self-insured employers and patients, as well as through Medicare,
Medicaid, and other government programs. During 1995, the Company's payor mix
was approximately 51% Medicare, 6% Medicaid, 20% other government programs, and
23% private insurance and private pay. Private healthcare insurance typically
reimburses a higher amount for a given therapy and provides a broader range of
benefits than Medicare and most other government programs. In addition,
reimbursement from government payors is generally based on the cost of services
provided, which is subject to examination and retroactive adjustment after
reimbursement. The Company has not had a material amount of claims refused by
insurance companies or a material amount of reimbursement by government payors
adjusted downward upon final settlement (see also Note 6 to accompanying
consolidated financial statements). From time to time, the Company enters into
negotiated pricing arrangements with third parties, including Health Maintenance
Organizations (HMOs) and Preferred Provider Organizations (PPOs). Such "managed
care" arrangements are becoming more prevalent in the healthcare industry. The
Company will continue to enter into such pricing arrangements to the extent such
arrangements provide for adequate reimbursement for services provided.
In addition to extensive, existing healthcare regulation, there have been
numerous initiatives on the federal and state levels for comprehensive reforms
affecting the payment for and availability of healthcare services. The United
States Congress is currently reviewing extensive Medicare reform, which may
include drastic changes to the healthcare industry as providers face pressure to
contain costs associated with Medicare. In addition, the Company anticipates
that both Congress and state legislatures will continue to review comprehensive
reform legislation that may affect fundamental changes in the nation's
healthcare system. The scope of any healthcare reform, whether at the federal or
state level, is uncertain. The profitability of the Company could be adversely
affected by any new government regulation limiting the levels of reimbursement
and by the continuing efforts of governmental and private payors to
independently reduce costs by lowering reimbursement rates, increasing medical
review of bills for services, and negotiating for reduced payment rates.
4
Currently, Medicare reimbursement for home healthcare nursing services and
supplies are under a cost-based model that does not necessarily encourage
efficiency or cost effectiveness. However, in the near future, the Company
believes it is likely that some form of a prospective reimbursement system will
be in place that will provide an incentive for home healthcare companies to
reduce costs while maintaining quality in their services. The Company has been
and will continue to focus on reducing its costs and developing superior patient
outcomes in anticipation of such change.
The Company is compensated on a fixed fee basis, per patient visit fee basis, or
combination thereof, under its management and consulting services contracts with
hospitals, skilled nursing facilities, and other providers.
PROGRAM EDUCATION AND PATIENT BASE EXPANSION
Expanding the base of healthcare services to patients is highly dependent upon
the professional reputation of the service provider and its ability to respond
to client demands at competitive prices. Since patients are obtained primarily
through referrals from physicians and case managers, the Company emphasizes
establishing and maintaining professional relationships with referral sources in
the areas where the Company does business.
The Company maintains a program education staff which contacts physicians, third
party payors and other referral sources, explaining the Company's comprehensive
home healthcare program. Typically, a source will make initial referrals to the
Company on a trial basis after it becomes familiar with the scope and quality of
the Company's patient care services. To obtain referrals, the Company emphasizes
high quality, reliability of patient service, and its geographic coverage area,
plus detailed reporting and consultation with referral sources.
The Company provides information about its services to a wide range of patient
referral sources, such as physicians, medical groups, hospital discharge
planners, prepaid health plans, nursing agencies, and case managers. An
important element of the Company's expansion is to provide information to
referral sources concerning the availability of home infusion care and the
cost-saving advantages of home therapy. The Company may also assist referral
sources in establishing procedures for the identification of candidates for whom
home healthcare may be appropriate. Primarily due to escalating pressures to
contain healthcare costs, third-party payors are participating to a greater
extent in decisions regarding healthcare alternatives and, consequently, are
becoming more important in the referral process. The Company endeavors to ensure
that its services and products are provided in a manner and at a price which
enables patients to utilize third-party reimbursement through insurance and
non-governmental subsidies.
The Company from time to time may enter into contractual and other arrangements
with medical professionals, institutions and third-party payors, which may
include arrangements with prepaid health plans, under which the Company agrees
to provide services to members of the organization at negotiated prices.
SUPPLIERS
The Company purchases all pharmaceuticals and other materials and buys or rents
equipment required in connection with the Company's business from a number of
suppliers. The Company has not experienced, and does not anticipate that it will
experience, difficulty in purchasing such materials or renting such equipment.
In the event that its current suppliers cease to sell materials or rent
equipment to the Company, the Company believes that alternate sources can
readily be located to adequately meet its needs at comparable prices.
5
FUTURE EXPANSION
As discussed above, the Company has agreed to be acquired by Horizon. Such
transaction is expected to be completed in the latter part of the second quarter
of 1996. In addition to this proposed combination with Horizon, one of the
largest providers in the United States of post-acute healthcare services, the
Company plans to continue its growth and expansion in a number of ways. Such
plans include expansion of its existing operations through new product lines and
services, joint venture arrangements with other providers, and additional
management service contracts. As a result of the Horizon transaction, the
Company has suspended all discussions and negotiations with other companies
regarding potential acquisitions and other business combinations. In recent
years, acquisitions have resulted in a substantial portion of the Company's
expansion.
SEASONALITY
Company revenues have not historically been seasonal in nature.
DEPENDENCE ON CUSTOMERS
As a result of the Company's existing bases of clients and referral sources, the
Company is not dependent on any single customer or group of customers.
Notwithstanding the foregoing, a large portion of the Company's revenues are
derived from government programs as further discussed above and in Note 3 to the
accompanying consolidated financial statements.
BACKLOG
Backlog is not meaningful in the healthcare service business.
ENVIRONMENT LIABILITY
Due to the nature of the Company's business, and because it does not own or
lease any real property (other than office facilities), Company management
believes that the Company has no potential material environmental liabilities.
RESEARCH AND DEVELOPMENT
The Company has not expended material amounts on research and development
activities in the past; however, it has a group whose emphasis is to develop
diagnosis-specific programs to enhance the Company's position in the home
healthcare services business.
COMPETITION
The home healthcare business is highly fragmented, with a large number of small
providers serving local markets and a smaller number of larger regional and
national providers. The Company believes that the number of providers is
declining due to the continuing consolidation within the healthcare industry.
The Company competes with a large number of companies and programs in most areas
in which it provides services and products. These competitors include major
national and regional companies, hospital-based programs, physician groups and
nursing agencies. The Company believes that the principal competitive factors
are a reputation for quality service, a range of services, experience, and
price. Provider size is also becoming an important factor as a result of the
increased emphasis on "managed care."
6
The competitive factors most important to attracting referral sources and
patients for the Company's home nursing and its other services and products are
name recognition in the marketplace, reputation for quality of service,
geographic area covered, and price, as well as provider size.
The Company's competitors in the home infusion business include a large number
of home healthcare providers of various sizes that offer intravenous therapy as
their only home healthcare product and service. The development of alternative
means of treating infections or administering nutrition which do not involve
infusion therapy also could adversely affect the Company's home infusion
business. The Company competes in this market based upon a number of factors,
including quality of care and service, the ability to service the geographic
area, the ability to develop and maintain relationships with referral sources,
and price.
Competition for the Company's management services division is currently
relatively limited as compared to its other services and products, but could
increase as other companies with home healthcare expertise enter this market. In
addition, the hospitals and other providers that are customers, or potential
customers of the Company's management services, may decide to perform such
management internally.
GOVERNMENT REGULATION
STATE REGULATION. Healthcare services are subject to substantial regulation by
the various states in which the Company conducts its business. In particular,
the Company's facilities are subject to state laws governing pharmacies, home
health agencies, nursing services, health planning and professional ethics. The
United States Food and Drug Administration and Drug Enforcement Agency also
require each facility containing a pharmacy to be registered to dispense
controlled substances. These regulations impose substantive standards on the
level of home healthcare provided, as well as licensing and record keeping
requirements. Such licenses generally require annual renewal. The state
governmental bodies that presently regulate the Company are the state
departments of health, the state boards of pharmacy and the state departments of
public safety. Additionally, the Company's nurses and pharmacists are licensed
by respective state agencies. The failure of a facility to obtain, renew or
maintain any required regulatory approvals or licenses could adversely affect
continued expansion of the Company and could prevent such facility from offering
its existing services to patients.
Some of the states in which the Company operates have laws that prohibit certain
direct and indirect payments or fee-splitting arrangements between healthcare
providers and referral sources that are designed to induce or encourage the
referral of patients to, or the recommendation of, a particular provider for
medical products and services. In addition, some states restrict certain
business relationships between physicians and pharmacies. Possible sanctions for
violation of these restrictions include loss of licensure and civil and criminal
penalties. These statutes vary from state to state, are often vague and have
seldom been interpreted by the courts or regulatory agencies. The Company
believes that it currently has no relationship which would be considered to be
in violation of these statutes in any material respect and intends to structure
referral arrangements, if any, with healthcare providers in compliance with the
relevant state statutes.
FEDERAL REGULATION. The Company has Medicare-certified home healthcare agencies
in Texas, Virginia and Nevada. The Health Care Financing Administration of the
Department of Health and Human Services promulgates, through its selected
intermediaries and administrators, certain controls and standards applicable to
the provision of services and reimbursement of those services to Medicare
patients. The business of the Company may be impacted by changes in these
regulations. In addition, the Company is subject to laws and regulations which
relate to business corporations in general, including antitrust laws,
occupational health and safety laws and environmental laws which, among other
things, include the disposal, transportation, and handling of hazardous and
infectious wastes. None of these laws and regulations have had a material
adverse effect on the Company's business or competitive position or required
material capital expenditures on the part of the Company.
7
The Company is also subject to Section 112B(b) of the Social Security Act
(commonly known as the Federal Illegal Remuneration Law), which prohibits
certain actions and practices deemed by Congress to be fraudulent or abusive in
nature. In particular, the Federal Illegal Remuneration Law prohibits financial
arrangements between providers of healthcare services to government healthcare
program (including Medicare and Medicaid) beneficiaries, such as the Company,
and potential referral sources, such as physicians, that are designed to induce
patient referrals to the providers. The Federal Illegal Remuneration Law
contains both civil and criminal sanctions. The prohibitions contained in this
statute have been broadly construed by federal courts and administrative
agencies charged with enforcement of the statute and apply to any type of
financial transaction between providers of healthcare services to Medicare and
Medicaid beneficiaries and referral sources. The Company believes that it
currently has no financial relationship which would be considered to be in
violation of the Federal Illegal Remuneration Law in any material respects.
In addition to the Federal Illegal Remuneration Law, Section 1877 of the Social
Security Act (commonly known as the Stark Law) imposes certain restrictions upon
referring physicians and providers of certain designated health services under
the Medicare and Medicaid programs. Subject to certain exceptions, the Stark Law
provides that if a physician (or a family member of a physician) has a financial
relationship with an entity, (i) the physician may not make a referral to the
entity for the furnishing of designated health services reimbursable under the
Medicare and Medicaid programs, and (ii) the entity may not bill for designated
health services furnished pursuant to a prohibited referral. Entities and
physicians committing an act in violation of the Stark Law are subject to civil
money penalties and exclusion from the Medicare and Medicaid programs. The
designated health services include home health services, outpatient prescription
drugs, durable medical equipment, and other services furnished through the
Company's facilities. Financial relationships subject to the Stark Law are
defined to include compensation arrangements, as well as investment interests
such as that held by investors in the Company. Thus, physicians who invest in
the Company, or have family members who invest in the Company, will be
prohibited from referring Medicare and Medicaid patients to facilities owned by
the Company. The Company intends to monitor interests held by physicians or
family members of physicians and comply with the referral prohibitions, as well
as structure all compensation arrangements with physicians, if any, in
compliance with the requirements of the Stark Law.
The Company believes that it is in material compliance with all applicable laws
and regulations. The Company is unable to accurately predict what additional
legislation, if any, may be enacted in the future relating to the Company's
business or the healthcare industry, including third-party reimbursement, or
what effect any such legislation may have on the Company.
FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES
The Company has had no foreign or export sales during the three year period
ended December 31, 1995.
EMPLOYEES
At December 31, 1995, the Company employed approximately 780 full-time
executive, administrative, program education, technical and patient care
employees. The Company utilizes, on a part-time, hourly or per visit basis,
nurses, nurse aides and attendants. The Company maintains registries of over
3,000 nurses, nurse aides and attendants in Texas, Virginia, Nevada and Florida.
To date, the Company has not experienced any shortages in the availability of
qualified nursing or other professionals.
8
ITEM 2. PROPERTIES
As of December 31, 1995, the Company leased approximately 8,600 square feet of
space in Houston, Texas for its corporate offices. The Company also leased
office space for all of its other operations, including four locations in
Virginia, one location in Florida, four locations in Nevada, and approximately
thirty-five locations in Texas. These other facilities range in size from
approximately 380 square feet to approximately 18,000 square feet, with the
average size being approximately 3,200 square feet. The Company believes that
such facilities are generally adequate and suitable for its current operating
activities. The Company does not, nor does it plan to, own any real property.
Aggregate monthly rent for the Company's facilities was approximately $141,500
as of December 31, 1995.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company or any of
its subsidiaries is a party or of which any of their property is the subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the last quarter of the current fiscal year covered by this report, there
were no matters submitted to a vote of security holders.
9
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Company's common stock trades on the Nasdaq SmallCap Market under the symbol
MIXX.
As of March 8, 1996, the Company had 221 holders of record for its common stock.
The Company estimates that there were approximately 1,800 beneficial owners of
the common stock as of March 8, 1996.
The following table sets forth the quarterly high and low sales prices for the
Company's common stock:
COMMON STOCK MIXX
-------------------------------
HIGH LOW
------- ---------
FISCAL YEAR ENDED DECEMBER 31, 1994
First Quarter 2-1/2 1-11/16
Second Quarter 2-3/16 1-3/4
Third Quarter 2-11/32 1-9/16
Fourth Quarter 1-11/16 1-3/8
FISCAL YEAR ENDED DECEMBER 31, 1995
First Quarter 1-5/8 1-1/4
Second Quarter 1-7/8 1-1/4
Third Quarter 2-11/16 1-21/32
Fourth Quarter 2-7/32 1-13/32
The listed quotations reflect interdealer prices, without retail mark-up,
mark-down or commissions, and may not necessarily represent actual transactions.
The Company has never paid cash dividends on its common stock. The Company
presently intends to retain earnings to finance the expansion of its business
and, therefore, does not expect to pay any cash dividends in the foreseeable
future. Any determination as to the payment of cash dividends will depend upon
the Company's earnings, general financial condition, capital needs and other
factors deemed pertinent by the Board of Directors, as well as any limitations
imposed by the Company's lenders under its financing arrangements. The Company's
current credit facilities prohibit the payment of dividends.
ITEM 6. SELECTED FINANCIAL DATA
The following selected statement of operations and balance sheet data have been
derived from the Company's consolidated financial statements. The financial data
set forth below should be read in conjunction with the Consolidated Financial
Statements, related Notes and other financial information included elsewhere
herein and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
10
SELECTED FINANCIAL DATA(1)
IN THOUSANDS (EXCEPT PER SHARE INFORMATION)
<TABLE>
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YEAR ENDED DECEMBER 31: ......... 1995(2) 1994(4) 1993(8) 1992 1991
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REVENUES ........................ $69,389 $60,378(6) $34,577 $ 9,958 $ 9,288
INCOME (LOSS) FROM OPERATIONS ... 2,860(3) 1,786(5)(6) 1,632(6) (369) 259
NET INCOME (LOSS) ............... 1,110 610 7 742 (307) 113
NET INCOME (LOSS) PER
COMMON SHARE ................. 0.07 0.04 0.05 (0.03) 0.01
<CAPTION>
BALANCE SHEET DATA
AS OF DECEMBER 31: .............. 1995 1994 1993 1992 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
TOTAL ASSETS .................... $29,090 $27,593 $20,841 $ 4,373 $ 3,614
WORKING CAPITAL ................. 5,223 3,812 1,991 2,209 583
LONG-TERM DEBT .................. 10,590 10,040 4,266 672 20
STOCKHOLDERS' EQUITY ............ 9,339 8,071 7,785 2,111 1,138
</TABLE>
(1) Restated to reflect the merger with HHCC in May 1995 which was accounted
for as a pooling of interests.
(2) Includes eleven months of results from the PharmaThera Branch which was
acquired on January 31, 1995.
(3) Includes a reduction of expenses of approximately $245,000 resulting from
the abatement of nonrecurring payroll tax penalties and interest
attributable to prior years.
(4) Includes approximately eleven months of results from STAT which was
acquired effective February 11, 1994, and nine months of results from PRN
Nevada which was acquired effective April 1, 1994.
(5) Includes income of approximately $533,000 relating to PVNS preacquisition
Medicare Cost Reports. See Note 6 to accompanying consolidated financial
statements.
(6) Includes payroll tax penalties and employee injury costs of $151,000 in
1993 and $134,000 in 1994 which were recovered in 1994 pursuant to the PVNS
settlement. See Note 2 to accompanying consolidated financial statements.
(7) Includes a pre-tax gain of $128,500 from sale of a minority interest in the
Company's Pensacola, Florida operation. See Note 13 to accompanying
consolidated financial statements.
(8) Includes a full year of results of Preferred which was acquired effective
January 1, 1993, eight months of results from PVNS which was acquired
effective May 1, 1993, and four months of results of Advance which was
acquired effective September 1, 1993.
11
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table presents selected financial information for the periods
indicated as a percentage of revenues and sets forth the percentage dollar
increase (decrease) of such items from period to period.
<TABLE>
<CAPTION>
PERCENTAGE CHANGE
FROM PRIOR YEAR
PERCENTAGE OF REVENUES YEAR ENDED DECEMBER 31,
YEAR ENDED DECEMBER 31, ----------------------
--------------------------------------- 1995 VS. 1994 VS.
1995 1994 1993 1994 1993
--------- --------- --------- ---------- ------
<S> <C> <C> <C> <C> <C>
REVENUES 100.0% 100.0% 100.0% 14.9% 74.6%
DIRECT PATIENT CARE 60.1% 62.5% 61.9% 10.6% 76.3%
SELLING, GENERAL & ADMINISTRATIVE 34.0% 32.7% 31.5% 19.5% 81.3%
PROVISION FOR DOUBTFUL ACCOUNTS 1.7% 1.6% 1.9% 24.3% 44.2%
MERGER TRANSACTION COSTS .1% .3% --% (65.4)% N/A
------- -------- ------ --------- ------
INCOME FROM OPERATIONS 4.1% 2.9% 4.7% 60.2% 9.4%
GAIN ON SALE OF MINORITY INTEREST --% .2% --% N/A N/A
INTEREST EXPENSE 1.5% 1.4% 1.2% 24.1% 104.3%
------- ------- ------ ------- -------
INCOME BEFORE INCOME TAXES 2.6% 1.7% 3.5% 70.1% (13.0)%
INCOME TAX PROVISION 1.0% .7% 1.3% 53.7% (5.3)%
------- -------- ------ ------- --------
NET INCOME 1.6% 1.0% 2.2% 82.0% (17.8)%
======= ======= ====== ======= =======
</TABLE>
1995 COMPARED TO 1994
REVENUES. Revenues for 1995 were $69,389,360, an increase of $9,011,212, or
14.9%, over 1994 revenues of $60,378,148. Of this increase, approximately
$2,658,000 was due to the acquisition of PRN Nevada effective April 1, 1994. A
full year of PRN Nevada revenues were included in 1995, while 1994 included only
nine months of PRN Nevada revenues. Also, an increase of approximately $748,000
was attributable to the PharmaThera Branch acquisition on January 31, 1995, and
accordingly, 1994 did not include any PharmaThera Branch revenues. The
management division's revenues increased by $1,021,000, or 64.4%, primarily as
the result of contracts entered into in 1995 and the recognition of
approximately $212,000 in revenues resulting from the early termination of two
management contracts in 1995. The remaining increase of $4,584,000 was comprised
of (i) an increase in revenues of $4,727,000, or 11.3%, in Texas nursing and
pharmacy operations, (ii) an increase in revenues from Virginia nursing and
pharmacy operations of $1,481,000, or 21.7%, (iii) a decrease in revenues of
$1,254,000, or 66.5%, in the New Jersey operation which was closed in July 1995,
and (iv) a decrease in revenues of $334,000, or 4.0%, in the Nevada nursing
operations as this location continues to experience an increase in management
contract activity. On a company-wide basis in 1995, nursing and related revenues
increased by $4,470,000, or 11.0%, homemaker revenues increased by $1,634,000,
or 13.8%, and pharmacy revenues increased by $1,921,000, or 31.6%, compared to
1994. The Company's revenues have been affected by changes in reimbursement
policies and rates of various third party payors; however, it is impossible to
determine the exact magnitude thereof.
12
DIRECT PATIENT CARE. Costs of direct patient care in 1995 were $41,731,088, an
increase of $3,981,259, or 10.6%, over 1994, resulting primarily from the
corresponding increase in revenues described above. As a percentage of revenues,
such costs were 60.1% in 1995, compared to 62.5% in 1994. The decrease as a
percentage of revenues is attributable to several factors, including (i) the
increase in management services revenue, which costs are included in selling,
general and administrative expenses, (ii) elimination of unprofitable nurse
staffing services in one of the Houston, Texas branches, which had a higher than
normal direct patient care cost as a percentage of revenues, (iii) reduction in
employee injury claims in the self-insured Texas nursing and homemaker
operations, and (iv) the substantial increase in pharmacy revenues which has a
lower direct patient care cost as a percentage of revenues than nursing
services.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. In 1995, selling, general and
administrative expenses were $23,576,444, an increase of $3,845,062, or 19.5%
over such expenses of $19,731,382 in 1994. A large portion of the increase
amounting to approximately $2,800,000 is attributable to the addition of key
management and other administrative personnel in the clinical operating
divisions and increased corporate overhead (primarily personnel) to support the
Company's growth. Also, $725,000 of the increase is associated with the PRN
Nevada acquisition, effective April 1, 1994. A full year of PRN Nevada selling,
general and administrative expenses was included in 1995, while 1994 included
only nine months of such expenses. Additionally, an increase of $506,000 is
attributable to the PharmaThera Branch, which was acquired on January 31, 1995,
and accordingly, 1994 did not include any PharmaThera Branch expenses. During
1995, selling, general and administrative expenses were reduced by approximately
$245,000, resulting from the abatement of non-recurring payroll tax penalties
attributable to prior periods. As a percentage of revenues, selling, general and
administrative expenses increased from 32.7% in 1994 to 34.0% in 1995 due
primarily to the reasons set forth above.
PROVISION FOR DOUBTFUL ACCOUNTS. The provision for doubtful accounts was
$1,159,695 in 1995, an increase of $226,544, or 24.3% over the 1994 provision of
$933,151. The increase is primarily related to the corresponding revenue
increase described above, particularly the pharmacy revenue. As a percentage of
revenue, the provision for doubtful accounts in 1995 and 1994 was approximately
the same (1.7% and 1.6%, respectively).
MERGER TRANSACTION COSTS. Costs of $61,774 were expensed in 1995 in connection
with the merger of HHCC into the Company. See Note 2 to the accompanying
consolidated financial statements concerning HHCC merger transaction costs.
INCOME FROM OPERATIONS. Income from operations was $2,860,359 in 1995, an
increase of $1,074,838 or 60.2%, over 1994. The increase is principally
attributable to growth in the management services division, which increased by
$1,464,000 over 1994. Also, income from the Texas and Nevada operations
increased 13.5% ($479,000) and 18.2% ($127,000), respectively. In 1995, an
abatement of payroll tax penalties originating in a prior year reduced selling,
general and administrative expenses by $245,000, thus increasing income from
operations. These increases in 1995 were offset by increased corporate overhead
of $662,000 to support the Company's growth, a decrease in operating income in
the Virginia operations of 58.5% ($277,000), operating losses in Florida of
$163,000, which had nominal losses in 1994, and increased operating losses of
$142,000 in the New Jersey operation, which was closed in July 1995. Emphasis
has been placed on improving the operating results in Florida and Virginia, with
a focus on increasing the business volume of these operations, as well as a
reduction of certain costs and expenses not expected to impact the Company's
ability to achieve revenue increases in such markets. During 1995, adjustments
to the reserve for government program settlements resulted in a net charge
against income of approximately $62,600, as compared to a net credit to income
of $479,000 in 1994, a decrease of approximately $541,400 in income from
operations between the two years. The 1995 results of operations were also lower
by approximately $116,000 due to the difference in merger transaction costs
being recognized in 1995 and 1994.
13
INTEREST EXPENSE. Interest expense increased $207,443, or 24.1%, to $1,067,189
in 1995, compared to $859,746 in 1994, primarily due to increases in the prime
interest rate in 1995 over 1994. When applying the percentage increase in
average interest rates to interest expense incurred in 1994, this equates to a
$204,000 increase in expense for 1995. The remainder of the increase results
from interest on additional debt incurred in connection with the Company's
acquisitions and for working capital purposes.
PROVISION FOR INCOME TAXES. The effective tax rate for 1995 is 38.1% compared to
42.2% in 1994. Such effective tax rate was lower in 1995, primarily due to a
permanent book and tax difference created by a nontaxable abatement of certain
payroll tax penalties and interest in 1995. See also Note 7 to the accompanying
consolidated financial statements for more detailed information concerning the
items causing the difference between the effective tax rate and the statutory
tax rate of 34% for these periods and the differences between the two periods.
1994 COMPARED TO 1993
REVENUES. Revenues for 1994 were $60,378,148, an increase of $25,800,944, or
74.6%, compared to 1993 revenues of $34,577,204. Of this increase, approximately
$8,350,000 was due to the effect of the PVNS acquisition effective May 1, 1993.
A full year of PVNS revenues was included in 1994, while 1993 included only
eight months. Another $8,411,000 of the 1994 revenue increase was due to the
acquisition of PRN Nevada effective April 1, 1994. Additionally, the
acquisitions of Advance and STAT (effective September 1, 1993 and February 11,
1994, respectively) had an increasing effect on revenues of approximately
$1,700,000. The remaining 1994 increase in revenues of approximately $7,340,000
was due primarily to the growth in the number of patients served by the
Company's nursing operations in Texas which, combined with infusion operations,
grew approximately 26% ($6,610,000), and the growth of infusion and nursing
business in Virginia, which increased approximately 17% ($858,000) compared to
1993. The growth in Texas and Virginia was somewhat offset by a decrease of 22%
($545,000) in revenues of the New Jersey operations. On a company-wide basis,
nursing revenues increased 100% ($20,466,000) in 1994 compared to 1993.
Homemaker services revenue increased 83% ($5,385,000) in 1994 over 1993. Also,
management services revenue increased 34% ($369,000) in 1994 over 1993. These
increases were somewhat offset by a decrease in pharmacy revenues of 7%
($438,000), due partially to a decrease in volume and lower reimbursement rates.
The Company's revenues have been affected by changes in reimbursement policies
and rates of various third party payors; however, it is impossible to determine
the exact magnitude thereof.
DIRECT PATIENT CARE. Costs of direct patient care in 1994 were $37,749,829, an
increase of $16,337,995, or 76.3%, over 1993 direct patient care costs of
$21,411,834, resulting primarily from the corresponding increase in revenues
from patient volume described above. As a percentage of revenues, such costs
were 62.5% and 61.9% of revenues in 1994 and 1993, respectively. The Company
continues to experience close involvement by payors in referring and managing
patients. Accordingly, the Company makes extensive use of personnel who are paid
on a "per patient visit" basis. This enables adjustments of personnel costs to
be made in response to changes in reimbursement and volume without being
burdened with a large full-time staff.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. In 1994, selling, general and
administrative expenses were $19,731,382, an increase of $8,845,385, or 81.3%,
over such expenses of $10,885,997 in 1993. The increase was due primarily to the
acquisitions of PVNS and PRN Nevada, expansion of operations in Virginia and
Texas, and increased corporate overhead costs to support the Company's growth.
As a percentage of revenues, such costs increased to 32.7% in 1994 compared to
31.5% in 1993. The percentage increase was attributable to the need for the
Company to expand its management resources for anticipated continuing growth
which had not yet been offset by a corresponding growth in revenues. Corporate
overhead
14
increased by approximately $1,081,000, or 52%, in 1994 over such costs totalling
approximately $2,086,000 in 1993. Also, amortization of excess costs over net
assets of acquired companies increased to approximately $306,000 in 1994 as
compared to approximately $133,000 in 1993, an increase of $173,000, or 129%,
due to the increase in excess cost over net assets of acquired companies from
various acquisitions in 1993 and 1994. Selling, general and administrative
expenses were reduced by $285,000 in 1994, pursuant to the PVNS settlement, for
the recovery of costs of which $134,000 and $151,000 were previously charged
against 1994 and 1993 income, respectively. See also Note 2 to the accompanying
consolidated financial statements.
PROVISION FOR DOUBTFUL ACCOUNTS. Although the provision for doubtful accounts of
$933,151 in 1994 increased $286,115 over the 1993 provision of $647,036, as a
percentage of revenues such provision decreased to 1.6% in 1994, compared to
1.9% in 1993, primarily as the result of a change in the Company's payor mix.
The Company's revenues from government programs, including Medicare and
Medicaid, increased from 68% in 1993 to 79% in 1994, primarily because of the
acquisitions of PVNS and PRN Nevada, whose revenues from government programs
represent a proportionately higher percentage of total revenues. For the most
part, a contractual allowance is recognized directly against revenues from
government programs as compared to a provision for doubtful accounts for certain
other payors.
MERGER TRANSACTION COSTS. Costs of $178,265 were recognized in 1994 in
connection with the merger of HHCC into the Company. See also Note 2 to the
accompanying consolidated financial statements.
INCOME FROM OPERATIONS. Income from operations was $1,785,521 in 1994, a 9.4%
increase over income from operations of $1,632,337 for 1993. However, as a
percentage of revenues, income from operations decreased to 2.9% in 1994 as
compared to 4.7% for 1993. This percentage decrease is primarily attributable to
lower margins resulting from the change in the Company's service and payor mix
as described above, reduced profitability of the Houston, Texas and New Jersey
operations, losses in the Florida start-up operation, and increased corporate
overhead costs to support the Company's growth. Various operational changes
continued to be implemented in the Houston, Texas and New Jersey, as well as the
Virginia operations to achieve increased profitability. Further, in 1994, income
of $479,000 was recognized in connection with changes in estimates of the
reserve for government program settlements. This amount consisted of (i) income
of $200,000 as a result of final settlement of the PVNS June 30, 1992 Cost
Report, (ii) income of $333,000 related to favorable revisions in proposed audit
adjustments and reopenings of the PVNS Cost Reports for the years ended June 30,
1990 and 1991, and (iii) expense of $54,000 related to post-acquisition Cost
Reports. See also Note 6 to the accompanying consolidated financial statements.
GAIN ON SALE OF MINORITY INTEREST. In the second quarter of 1994, the Company
sold a 20% ownership interest and a 5% net profits interest in its then existing
Pensacola, Florida home healthcare business for cash, and realized a pre-tax
gain of $128,500, as more fully described in Note 13 to the accompanying
consolidated financial statements.
INTEREST EXPENSE. Interest expense increased $438,907, or 104.3%, to $859,746 in
1994, compared to $420,839 in 1993, primarily as a result of interest on debt
incurred in connection with the PVNS and PRN Nevada acquisitions and for working
capital purposes to fund the Company's operations and growth, including the post
acquisition operations of PVNS and PRN Nevada. A portion of the increase was
also attributable to increases in the prime interest rate charged by banks in
1994 over 1993. The weighted average of the prime interest rate in 1994 was
7.1%, compared to 6.0% in 1993. Virtually all of the Company's borrowings bear
interest at floating interest rates based on prime.
PROVISION FOR INCOME TAXES. The Company's effective tax rate in 1994 was
approximately 42.2% compared to 38.8% in 1993. See Note 7 to the accompanying
consolidated financial statements for detailed information regarding the
difference in the effective tax rates between 1993 and 1994 and the items
causing the differences between the effective tax rates and the statutory rate
of 34% in both years.
15
EXCESS COST OVER NET ASSETS OF ACQUIRED COMPANIES
"Excess cost over net assets of acquired companies" comprises a significant
portion of the Company's total assets. The Company reviews the carrying value of
this asset for potential impairment at each balance sheet date. The principal
factors considered by the Company in its recoverability assessment include
market share and competitive conditions, technological and regulatory changes
(including reimbursement), demand trends and earnings trends of the acquired
companies. The Company is not currently aware of any adverse changes in these
factors that would result in an impairment of this asset in the future. However,
projection of current facts and circumstances to future periods is inherently
uncertain.
Management believes that the "excess cost over net assets of acquired companies"
has an unlimited useful life and therefore has assigned a forty-year
amortization period for this asset. In determining that the life of this asset
is unlimited, management considered factors such as: (1) the market share,
locations, reputation and related business attributes of each acquisition as
discussed above; (2) the nature of the home healthcare industry, which is
positively impacted by aging trends and the continued transfer of patients from
high-cost, acute care settings to home healthcare; (3) the increasing acceptance
by medical professionals of home healthcare as a better alternative to
institutionalized care; and (4) the nature of the personal services provided,
which will be continuously needed in the future and are not subject to
obsolescence. Reductions to the estimated useful life of this asset could have a
material effect on the Company's results of operations. The Company is not
currently aware of any events or trends which would indicate a reduction in the
useful life should be made. See Notes 1 and 2 to the accompanying consolidated
financial statements.
LIQUIDITY AND CAPITAL RESOURCES
The following table sets forth, for the periods indicated, the level of the
Company's cash and working capital and its current and debt-to-equity ratios.
LIQUIDITY AND CAPITAL RESOURCES
(DOLLAR AMOUNTS, NOT RATIOS, IN THOUSANDS)
AS OF DECEMBER 31: 1995 1994 1993
--------- --------- ---------
CASH, CASH EQUIVALENTS &
SHORT-TERM INVESTMENTS ......... $ 293 $ 1,616 $ 2,216
WORKING CAPITAL ................... $ 5,223 $ 3,812 $ 1,991
CURRENT RATIO ..................... 1.61 1.43 1.23
DEBT TO EQUITY RATIO .............. 2.11 2.42 1.68
GENERAL
The Company has entered into various debt obligations with a bank and others,
including the former owners of acquired companies, resulting in total
outstanding borrowings of approximately $11,760,000 at December 31, 1995. Such
total debt amount is exclusive of a contractual obligation to the former owners
of PVNS, which is addressed in the discussion below concerning the Company's
other commitments. The terms and other information regarding such borrowings
(including an additional borrowing and debt refinancing subsequent to December
31, 1995) are more fully described in Notes 2, 5 and 12 to the accompanying
consolidated financial statements.
16
Between December 31, 1994 and January 31, 1996, the Company increased by
$2,000,000 its revolving credit facilities to finance its growth and for the
reasons set forth below in the second paragraph under ITEMS AFFECTING LIQUIDITY
AND CAPITAL RESOURCES.
The Company's stockholders' equity at December 31, 1995 was $9,339,304, which
increased approximately $1,268,137 from December 31, 1994, including the effect
of the restatement for the merger of HHCC which was accounted for as a pooling
of interests. The Company's debt-to-equity ratio improved from 2.42 to 2.11
between these dates, due to the increase in stockholders' equity at December 31,
1995.
ITEMS AFFECTING LIQUIDITY AND CAPITAL RESOURCES
After the debt refinancing more fully described in Note 5 to the accompanying
consolidated financial statements, the Company's total debt outstanding
(including capitalized lease obligations) will require approximately $2,225,000
for principal and interest payments during the twelve months ending December 31,
1996, based on the assumptions that interest rates and the Company's borrowing
levels after the debt refinancing in March 1996 remain constant. The Company
also has commitments under employment agreements to various officers and other
employees, as well as a contractual obligation to the former owners of PVNS,
that require total payments over the twelve months ending December 31, 1996 of
approximately $332,000. In addition, the Company is committed under various
operating leases (primarily office facilities and equipment), for payments
totalling approximately $2,208,000 (including month-to-month leases that are
expected to be continued or replaced) over the twelve months ending December 31,
1996. As of December 31, 1995, the Company had no other significant commitments
and no material planned purchases of property and equipment.
Primary sources of liquidity include cash generated from operations (which has
been used to support accounts receivable growth), amounts available under the
Company's revolving credit facilities, and loans from and guarantees of loans by
the Company's president and another director. At December 31, 1995, (i)
approximately $1,300,000 of claims were receivable from a Texas welfare program
that exceed the normal amount of receivables outstanding for this operation,
(ii) approximately $590,000 of claims were receivable from the Nevada Medicaid
intermediary relating to untimely billing thereof, for which an informal appeal
for payment has been made to the Nevada Medicaid program (see also Note 6 to the
accompanying consolidated financial statements), and (iii) approximately
$600,000 was receivable under a management services contract, collection of
which is being litigated. These withheld and delayed receivable collections were
the primary reasons for the Company's need to obtain the additional working
capital loans during 1995 and early 1996. With respect to the receivables of
$2,490,000 set forth in (i) through (iii) above, $1,300,000 is related to timing
and documentation delays and as such is not believed to be subject to any
material collection risk. Of this amount, the Company has collected
approximately $435,000 through March 8, 1996 and expects to collect a
substantial portion of the remaining amount ($865,000) by the end of the second
quarter of 1996. The other $1,190,000 of receivables set forth in (ii) and (iii)
above are in informal appeal or litigation and thus, the timing and amount of
collection are less certain. At December 31, 1995, the Company had reserves of
approximately $600,000 attributable to the receivables set forth in (i) through
(iii) above, which it believes to be adequate for any loss that will be incurred
thereon.
The receivable amounts referred to above, not yet collected as of March 8, 1996,
could be withheld longer than expected, could continue to be delayed in
collection and could be adversely impacted by third-party determinations. While
the Company believes that it is taking appropriate actions to collect the
amounts described above and to manage its investment in accounts receivable, its
anticipated growth may continue to require cash for working capital in excess of
cash generated from operations.
17
Taking into account the commitments and the matters described above, management
believes that the Company's existing capital resources and sources of liquidity
are sufficient to finance its existing operations during the next twelve months.
If cash generated from operations is less than anticipated, or if other
currently unforeseen events occur including the outcome of the matters described
above, the Company may be required to seek additional financing. Potential
sources of additional financing include private or public equity, debt financing
or additional bank financing. The Company's credit facilities with its primary
lender generally prohibit additional borrowings by the Company without the
bank's consent. Although the Company has historically been able to obtain
additional financing from the bank, as needed, there can be no assurance thereof
or that the Company would be able to obtain alternative financing, if required,
on acceptable terms. As of March 8, 1996, the Company had available borrowing
capacity of $1,750,000 under its existing revolving credit facilities.
YEAR END 1995 COMPARED TO YEAR END 1994
Cash decreased by approximately $1,323,000 from December 31, 1994 to December
31, 1995, primarily due to the growth in the Company's accounts receivable and
its cash needs for other purposes. Working capital increased by approximately
$1,411,000 from December 31, 1994 to December 31, 1995 and the current ratio
increased from 1.43 at December 31, 1994 to 1.61 at December 31, 1995, due to
various factors including an increase in net accounts receivable and a decrease
in current debt maturities. Accounts receivable, net of reserves, at December
31, 1995 increased by approximately $2,151,000, or 22%, from December 31, 1994,
due to the Company's growth in revenues and other matters as set forth above.
Additionally, accounts payable and accrued liabilities increased by
approximately $247,000 and accrued compensation and benefits increased by
approximately $234,000 from December 31, 1994 to December 31, 1995. For the year
ending December 31, 1995, net cash of approximately $142,100 was provided from
operating activities, while the Company used cash of approximately $1,138,700
for financing activities during this period. In 1995, the Company used cash of
approximately $97,600 in the acquisition of the PharmaThera Branch and
approximately $229,400 to acquire property and equipment.
YEAR END 1994 COMPARED TO YEAR END 1993
Working capital increased by approximately $1,821,000 from December 31, 1993 to
December 31, 1994 and the current ratio increased from 1.23 at December 31, 1993
to 1.43 at December 31, 1994, primarily due to the extension of certain of the
Company's debt maturities into 1996, a portion of which was classified as
current at December 31, 1993. Accounts receivable, net of reserves, at December
31, 1994 increased by approximately $2,031,000, or 26%, from December 31, 1993,
due to the Company's growth in revenues, which resulted primarily from the
Company's various acquisitions, the growth of the Company's existing operations,
and other matters as set forth above. Additionally, accounts payable and accrued
liabilities increased by approximately $268,000 and accrued compensation and
benefits increased by approximately $685,000 from December 31, 1993 to December
31, 1994. For the year ending December 31, 1994, net cash of approximately
$2,735,000 was provided from financing activities, while the Company used cash
of approximately $1,397,000 for operating activities during this period. In
1994, the Company used cash of approximately $277,000 in the acquisition of
STAT, approximately $908,000 in the acquisition of PRN Nevada, and approximately
$682,000 to acquire property and equipment.
The Company received proceeds, net of offering costs, of $2,627,315 from its
Warrant Offering completed in December 1993. In 1994, $1,981,000 of such
proceeds were used to repay principal on the debt incurred to acquire PVNS. The
remaining proceeds were utilized for working capital purposes. No similar
offering of the Company's common stock or other equity securities occurred in
1994.
18
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Index to Financial Statements and Notes to Financial Statements of Medical
Innovations, Inc., referred to in Item 14 (a)(1) of this Report is included at
page F-1.
RECENT ACCOUNTING PRONOUNCEMENT
In October 1995, Statement of Financial Accounting Standards No. 123, ACCOUNTING
FOR STOCK-BASED COMPENSATION, was issued which covers the accounting for
stock-based compensation, principally stock options. The Company believes at
this time, as permitted by the standard, that it will not change its existing
accounting for stock options. Additional disclosures, including pro forma
effects on income of the difference between existing and the new accounting
methods, will be required. The Company is required to adopt the standard no
later than January 1, 1996.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None
19
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The following table sets forth certain information with respect to the executive
officers and directors of the Company, as of March 8, 1996. Each of the
directors are elected annually by the stockholders of the Company, to serve
until the next annual meeting of the stockholders, or until their successors are
elected and qualified. Executive officers are elected by the Board of Directors
to serve until their successors are elected and qualified.
NAME AGE POSITION(S) WITH COMPANY
Mark H. Fisher 43 President, Chief Executive Officer
and Chairman of the Board of Directors
Thomas J. Kaled 42 Executive Vice President, Chief Operating
Officer and Director
David C. Horn 49 Vice President, Chief Financial Officer
and Treasurer
Douglas S. Johnston 45 General Counsel and Secretary
Arthur L. Rice 54 President - HHCC and Director
Luis T. Campos, M.D. 51 Director
Harvey R. Houck, Jr 66 Director
Philip A. Tuttle 54 Director
MARK H. FISHER was named President, Chief Executive Officer and
Chairman of the Board of Directors when he joined the Company in November 1992.
Since 1988 Mr. Fisher has also served as President of Northwest Stationers &
Supply Co., Inc. ("Northwest"), a privately held company. In April 1994,
Northwest sold all of its operating assets.
THOMAS J. KALED has served as Executive Vice President and a director
of the Company since its organization as a Delaware corporation in May 1989.
Effective January 1, 1996, Mr. Kaled was also named Chief Operating Officer of
the Company. Since 1989, Mr. Kaled has also served as a director of Cytastar,
Inc., a diagnostic laboratory.
DAVID C. HORN has served the Company as Vice President, Chief Financial
Officer and Treasurer since he joined the Company in December 1993. From June
1989 to December 1993 he owned and operated a real estate and financial
consulting business that conducted business under the name "Quantum Interests."
Mr. Horn is a certified public accountant and is a member of the American
Institute of Certified Public Accountants.
DOUGLAS S. JOHNSTON has served the Company as General Counsel and
Secretary since December 1993. Prior to joining the Company as a full time
employee in May 1994, he was President and sole shareholder of Johnston and
Associates, P.C., a law firm. Mr. Johnston served as general counsel to Grasso
Corp. and Coastwide Energy Services, Inc., from October 1993 until April 1994.
20
ARTHUR L. RICE has served as President of HHCC since 1985. On June 14,
1995, Mr. Rice was named as a director of the Company pursuant to the terms of
the agreement under which the Company acquired HHCC, dated May 19, 1995.
LUIS T. CAMPOS, M.D. was named as a director effective June 15, 1992.
Dr. Campos is Board Certified in both Internal Medicine and Medical Oncology,
President of Oncology Consultants, P.A., an oncology group that practices in
Houston, Texas, and President of Oncology Consultants International. Dr. Campos
serves as a Clinical Professor in the Department of Internal Medicine at the
University of Texas Medical School at Houston. Among his numerous professional
memberships, Dr. Campos is a member of the American Society of Clinical
Oncology, past President of the Houston Oncology Research Group, founding member
of the M.D. Anderson Associates and is Co-Chairman of the Texas Cancer Outreach
Network (T-CON), which is sponsored by M.D. Anderson Medical Center. He has
published over 100 articles in various medical journals primarily directed to
basic and clinical research of neoplastic disorders.
HARVEY R. HOUCK, JR. was named as a director effective November 19,
1992. Since receiving his undergraduate degree in business from the University
of Houston in 1949, Mr. Houck has been a real estate developer in the Houston,
Texas area.
PHILIP A. TUTTLE has served as a director of the Company since its
organization as a Delaware corporation in May 1989 and was Chairman of the Board
from May 1989 to August 1990. Since May 1989, Mr. Tuttle has been a general
partner in Davis Venture Partners, L.P., a venture capital firm, and is
currently President of Sherry Lane Capital Advisors, Inc. Mr. Tuttle serves on
the board of directors of Drypers Holding Corp., a publicly traded company
listed on Nasdaq that manufactures disposable diapers, and also serves on the
board of directors of Zydeco Energy, Inc., a publicly traded company listed on
Nasdaq engaged in acquiring oil and gas leases, drilling and producing reserves
utilizing focused geologic concepts and advanced 3D seismic and computer aided
exploration technology.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Under Section 16(a) of the Securities Exchange Act of 1934, directors,
certain officers, and beneficial owners of 10% or more of the Company's common
stock are required from time to time to file with the Securities and Exchange
Commission (the "Commission") reports on Forms 3, 4 or 5, relating principally
to transactions in Company securities by such persons. Based solely upon a
review of Forms 3 and 4 and amendments thereto furnished to the Company during
its fiscal year 1995 and thereafter, Forms 5 and amendments thereto furnished to
the Company with respect to its fiscal year 1995, and any written
representations received by the Company from a director, officer or beneficial
owner of more than 10% of the common stock ("reporting persons") that no Form 5
is required, the Company believes that the following reporting persons did not
file on a timely basis the following reports required by Section 16(a) of the
Securities Exchange Act of 1934 during the Company's fiscal year 1995.
Thomas J. Kaled, Executive Vice President, Chief Operating Officer and
a director of the Company, filed on February 10, 1996 a Form 4 with respect to
the transfer of 15,000 shares of stock to Mr. Kaled's wife in August 1993. In
connection with the same transaction, Mr. Kaled did not file a Form 5 with
respect to the Company's fiscal year 1993 until February 10, 1996. J. D. Smith,
who was deemed to be a 10% owner at the time, filed on February 13, 1996 a Form
4 with respect to the issuance of 100,000 shares of stock to Mr. Smith in July
1993. In connection with the same transaction, Mr. Smith did not file a Form 5
with respect to the Company's fiscal year 1993 until February 13, 1996.
21
ITEM 11. EXECUTIVE COMPENSATION.
SUMMARY COMPENSATION TABLE
The following table sets forth for the fiscal years ended December 31,
1993, 1994 and 1995 the compensation paid by the Company to (i) its chief
executive officer, (ii) all executive officers at year end whose annual salary
and bonus exceeded an aggregate of $100,000 for such year and (iii) up to two
additional individuals who would have been included in (i) or (ii) above but for
the fact that they were not executive officers at year end:
SUMMARY COMPENSATION TABLE
NAME AND
PRINCIPAL ANNUAL COMPENSATION
POSITION YEAR SALARY BONUS
Mark H. Fisher, 1995 $150,000 $ 0
President and Chief 1994 85,867 0
Executive Officer 1993 0 0
Thomas J. Kaled, 1995 125,000 0
Executive Vice President 1994 125,000 0
and Chief Operating Officer 1993 106,250 68,740
Larry V. Campbell, 1995 150,000 0
Vice President and 1994 142,542 0
Chief Operating Officer(1)
David C. Horn, 1995 140,564 0
Vice President, Chief 1994 116,790 0
Financial Officer and
Treasurer
Douglas S. Johnston 1995 100,398 0
General Counsel and Secretary
(1) Mr. Campbell served as Chief Operating Officer until his resignation,
effective December 31, 1995.
INFORMATION REGARDING STOCK OPTIONS
There were no stock options granted in 1995 to the named executive
officers included in the Summary Compensation Table.
The Company has not granted any stock appreciation rights.
22
Set forth in the following table is summary information regarding the number of
all unexercised options as of the end of 1995 for each of the executive officers
included in the Summary Compensation Table:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED OPTIONS IN-THE MONEY OPTIONS AT
AT FISCAL YEAR END FISCAL YEAR END($)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
<S> <C> <C>
Mark H. Fisher (1) 0/0 $0.00/$0.00
Thomas J. Kaled 0/250,000 $0.00/$0.00
Larry V. Campbell (2) 68,000/302,000 $0.00/$200,000.00
David C. Horn 50,000/200,000 $0.00/$125,000.00
Douglas S. Johnston 20,000/80,000 $0.00/$0.00
</TABLE>
(1) Excludes warrants to purchase a total of 483,773 shares granted to Mr.
Fisher in 1993 in exchange for certain loans and guarantees, which
grants were independent of his compensation as an employee of the
Company.
(2) Mr. Campbell resigned effective December 31, 1995. As a result of that
resignation, the 200,000 options granted to Mr. Campbell under the
Company's 1993 Executive Security Stock Option Plan automatically
expired and the 175,000 options granted to Mr. Campbell under the 1993
Employee Stock Option Plan expire on March 30, 1996.
No executive officer of the Company exercised options in fiscal 1995.
LONG-TERM INCENTIVE PROGRAM
The Company has no long-term incentive programs other than the
Company's stock option plans.
PENSION PLAN
The Company has no defined benefit or actuarial plan.
DIRECTOR COMPENSATION
In June 1992, the Company granted to Dr. Campos options to purchase 250,000
shares of the Company's common stock for $1.50 per share, which became
exercisable beginning January 1, 1996 and expire on April 29, 1996.
At present the Company has no standard arrangement pursuant to which directors
of the Company are compensated for their services as directors. In the future
the Company may compensate its outside directors for serving in such capacity
with options to purchase common stock or such other remuneration as determined
by the Board of Directors.
23
EMPLOYMENT CONTRACTS
David C. Horn, Vice President, Chief Financial Officer and Treasurer of the
Company, is employed by the Company pursuant to a written employment agreement
dated December 6, 1993 and amended effective July 5, 1994. Under the terms of
the employment agreement, Mr. Horn is employed through December 6, 1996 and
thereafter from year to year at an annual salary which is currently $150,000. In
addition, pursuant to the terms of the employment agreement, on December 6,
1993, Mr. Horn was granted options to purchase 125,000 shares of the Company's
common stock for $1.875 per share under the terms of the Company's 1993 Employee
Stock Option Plan. The options vest ratably over a five year period. In
addition, pursuant to the terms of the employment agreement, on December 6,
1993, Mr. Horn was granted options to purchase 125,000 shares of the Company's
common stock under the terms of the Company's 1993 Executive Security Stock
Option Plan (see below).
Douglas S. Johnston, General Counsel and Secretary of the Company, is employed
by the Company pursuant to a written employment agreement dated May 1, 1994.
Under the terms of the employment agreement, Mr. Johnston is employed through
May 1, 1996 and thereafter from year to year, at an annual salary of $100,000.
In addition, pursuant to the terms of the employment agreement, on May 1, 1994,
Mr. Johnston was granted options to purchase 100,000 shares of the Company's
common stock for $1.84375 per share under the terms of the Company's 1993
Employee Stock Option Plan. The options vest ratably over a five year period.
Larry V. Campbell, who resigned as Vice President and Chief Operating Officer of
the Company effective December 31, 1995, was employed by the Company pursuant to
a written employment agreement dated August 4, 1993 and amended effective
December 6, 1993. Under the terms of the employment agreement, Mr. Campbell was
employed from year to year at an annual salary, which was $150,000 at the end of
fiscal 1995. In addition, pursuant to the terms of the amended employment
agreement on December 6, 1993, Mr. Campbell was granted options to purchase
170,000 shares of the Company's common stock for $1.875 per share under the
terms of the Company's 1993 Employee Stock Option Plan. The options vested
ratably over a five year period. Mr. Campbell can exercise the vested options to
purchase 68,000 shares of stock for three months after the date of his
resignation. In addition, pursuant to the terms of the amended employment
agreement, on December 6, 1993, Mr. Campbell was granted options to purchase
200,000 shares of the Company's common stock under the terms of the Company's
1993 Executive Security Stock Option Plan (see below).
1993 EXECUTIVE SECURITY STOCK OPTION PLAN
Effective December 6, 1993, the Board of Directors adopted the 1993 Executive
Security Stock Option Plan (the "Executive Plan"). The Executive Plan provides
that options to purchase up to 500,000 shares of the Company's common stock may
be granted to executive officers by the Board of Directors. The options granted
under the Executive Plan are exercisable at the purchase price of $.50 per share
for one year after the termination of the executive officer without cause or any
transaction that results in a majority of the outstanding common stock being
held by a person or group that does not include Mark H. Fisher. To date, the
only options granted under the Executive Plan include an option to purchase
200,000 shares of common stock granted to Mr. Campbell and an option to purchase
125,000 shares of common stock granted to Mr. Horn. The option granted to Mr.
Campbell under the Executive Plan automatically terminated upon the voluntary
resignation of Mr. Campbell, effective December 31, 1995.
24
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
The Compensation Committee is composed of Mark H. Fisher, Harvey R. Houck, Jr.,
and Philip A. Tuttle. Mr. Fisher is the President and Chief Executive Officer of
the Company.
On April 10, 1995, the Company borrowed $300,000 from Mark H. Fisher. Mr. Fisher
received interest equal to the prevailing prime rate per annum as compensation
for making this loan to the Company. The loan from Mr. Fisher was made to
provide the Company with necessary working capital.
On March 15, 1996, the Company refinanced all of its bank debt. Of the new bank
debt, the $3,625,000 New Term Note and $1,575,000 of the revolving credit
facilities (the "Guaranteed Revolver") are secured by collateral (marketable
securities) owned by the Collateral Guarantors, including Mr. Fisher and Mr.
Houck. The remaining $5,725,000 of the revolving credit facilities are
guaranteed by Mr. Fisher and Mr. Houck. The new debt replaced the $5,200,000
Term Note, which was secured by the same collateral as that now securing the New
Term Note and the Guaranteed Revolver, and $5,725,000 in revolving credit
facilities, which were also guaranteed by Mr. Fisher and Mr. Houck. See also
Note 5 to the accompanying consolidated financial statements.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership, as of the close of business on March 8, 1996, of shares of common
stock by each person who is known to the Company to be a beneficial owner of 5%
or more of the common stock, each current director, each executive officer named
in the Summary Compensation Table hereinafter set forth, all current directors
and executive officers of the Company as a group. The common stock is the only
class of voting securities outstanding. Unless otherwise indicated, each person
or entity set forth in the table has sole investment and voting power with
respect to all shares shown as beneficially owned, subject to community property
laws, where applicable. Shares are owned beneficially and of record, unless
otherwise specified.
25
SHARES BENEFICIALLY OWNED
NAME AND ADDRESS -----------------------------------------
OF BENEFICIAL OWNER(1) NUMBER PERCENT
- ----------------------------- ------------- -----------
Mark H. Fisher 934,529 (2) 5.7%
Thomas J. Kaled 1,213,409 (3) 7.5%
Larry V. Campbell 70,000 (4) *
David C. Horn 70,000 (5) *
Douglas S. Johnston 81,945 (6) *
Arthur L. Rice 2,033,609 (7) 12.7%
Luis T. Campos, M.D. 999,795 (8) 6.2%
Harvey R. Houck, Jr. 2,324,683 (9) 13.5%
Philip A. Tuttle 468,004 2.9%
All executive officers and
directors as a group (9 persons) 8,195,974 (10) 44.8%
Horizon/CMS Healthcare Corporation 9,068,287 (11) 49.9%
6001 Indian School Road, Suite 500
Albuquerque, New Mexico 87110
John Schurwon 351,430 (12) 2.2%
One Riverway #2300
Houston, Texas 77056
- --------------
* Less than 1%
(1) The address for all officers and directors is One Riverway, Suite 2300,
Houston, Texas 77056.
(2) Includes 450,755 shares owned of record by Mr. Fisher and 483,774
shares purchasable by Mr. Fisher under warrants exercisable within 60
days of March 8, 1996.
(3) Includes 948,409 shares owned of record by Mr. Kaled, 15,000 shares
owned by his spouse, and 250,000 shares purchasable by Mr. Kaled under
options exercisable within 60 days.
(4) Includes 2,000 shares owned of record by Mr. Campbell and 68,000 shares
purchasable by Mr. Campbell under options exercisable within 60 days of
March 8, 1996.
(5) Includes 20,000 shares owned of record by Mr. Horn and 50,000 shares
purchasable by Mr. Horn under options exercisable within 60 days of
March 8, 1996.
(6) Includes 41,945 shares owned of record by Mr. Johnston and 40,000
shares purchasable by Mr. Johnston under options exercisable within 60
days of March 8, 1996.
(7) Includes shares owned of record by Mr. Rice and his wife, of which
101,680 shares are held in escrow. Such escrowed shares will be
transferred to Mr. and Mrs. Rice, subject to any right of offset the
Company may have against such shares for indemnification claims
relating to the acquisition of HHCC. Excludes 1,228,864 shares held by
members of Mr. Rice's family, the beneficial ownership of which Mr.
Rice disclaims.
(8) Includes 744,795 shares owned of record by Dr. Campos, 5,000 shares
owned by his spouse, and 250,000 shares purchasable by Dr. Campos under
options exercisable within 60 days of March 8, 1996.
(9) Includes 489,241 owned of record by Mr. Houck, 224,396 shares owned of
record by his wife, 400,000 shares owned of record by the Harvey R.
Houck and Patricia W. Houck Foundation, Inc., a foundation controlled
by Mr. and Mrs. Houck, and 1,211,046 shares purchasable by Mr. Houck
under warrants exercisable within 60 days of March 8, 1996. Excludes
1,389,564 shares held by members of Mr. Houck's family, the beneficial
ownership of which Mr. Houck disclaims.
(10) Includes 2,352,820 shares purchasable by executive officers and
directors under warrants and options exercisable within 60 days of
March 8, 1996.
26
(11) Includes 6,855,285 shares owned by certain stockholders of the Company,
including executive officers and directors, who executed the Voting
Agreement with Horizon described below, and 2,213,002 shares
purchasable by such stockholders under warrants and options exercisable
within 60 days of March 8, 1996. All but 987,224 of the shares listed
as beneficially owned by Horizon are also listed as being beneficially
owned by others in the table. These shares have been included as being
beneficially owned by Horizon solely because Horizon may, under Rule
13d-3 promulgated under the Securities Exchange Act of 1934, be deemed
to have shared voting power as to such shares for the sole purpose of
approving the proposed merger of Horizon and the Company (and various
related matters). Horizon does not have any investment power, or voting
power for any other purpose. Horizon disclaims any beneficial ownership
of any of such shares.
(12) Mr. Schurwon may be deemed a beneficial owner of over 5% of the common
stock, as described below. Includes 333,248 shares owned of record by
Mr. Schurwon and 18,182 shares purchasable by Mr. Schurwon under
warrants exercisable within 60 days of March 8, 1996.
The Collateral Guarantors (Mark H. Fisher, Harvey R. Houck, Jr. and John
Schurwon) received, among other consideration, warrants to purchase an aggregate
of 100 shares of the Company's authorized Class A preferred stock for the
purchase price of $100.00 per share (the "Preferred Warrants"), as compensation
for their financing of the PVNS acquisition in 1993. The Preferred Warrants are
currently exercisable only in the event of certain defaults by the Company or
the Collateral Guarantors under (i) the New Term Note, (ii) the loan documents
representing the Guaranteed Revolver, or (iii) the related collateral
maintenance agreements, or the Bank liquidates the collateral of the Collateral
Guarantors. The Preferred Warrants expire when the aggregate outstanding
balances of the New Term Note and the PVNS Note, added to the Guaranteed
Revolver, is $1,175,000 or less and the Company is not in default under the New
Term Note or the Guaranteed Revolver. If the Preferred Warrants are exercised
and the aggregate outstanding balances of the New Term Note, the PVNS Note, and
the Guaranteed Revolver are $3,625,000 or more, the holders of the preferred
stock have the right to elect a majority of the members of the Company's Board
of Directors. See also Note 5 to the accompanying consolidated financial
statements. The Collateral Guarantors have executed a Voting Trust Agreement
governing the Preferred Warrants, which provides for Mr. Houck, as trustee, to
vote all shares of preferred stock issued upon exercise of the Preferred
Warrants, until such shares are redeemed. Mr. Houck, therefore, upon exercise of
the Preferred Warrants, may obtain the right to elect additional directors that
constitute a majority of the Board of Directors of the Company. The total
aggregate balance of the New Term Note, the PVNS Note and the Guaranteed
Revolver as of March 15, 1996, was $5,202,340. The Collateral Guarantors may be
deemed to be a "group" under the rules of the Securities and Exchange Commission
and may each, therefore, be deemed to beneficially own all of the shares of the
Company's common stock held by the other Collateral Guarantors. Each of the
Collateral Guarantors disclaim any beneficial ownership of the shares of common
stock held by the others.
On February 13, 1996, certain stockholders of the Company executed a Voting
Agreement (the "Voting Agreement") with Horizon, under which the stockholders
agreed to vote their shares of common stock in favor of the merger of the
Company with a wholly-owned subsidiary of Horizon pursuant to an Agreement and
Plan of Merger, dated February 13, 1996, by and between the Company and Horizon.
In the proposed merger with the Horizon subsidiary, the Company's stockholders
would receive shares of Horizon common stock and the Company would become a
wholly-owned subsidiary of Horizon. The stockholders executing the Voting
Agreement, including certain executive officers and directors of the Company,
hold an aggregate of 6,855,285 shares of common stock, and warrants and options
to purchase an additional 2,213,002 shares of common stock.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On April 10, 1995 the Company borrowed $300,000 from Mark H. Fisher, President
and Chief Executive Officer. Mr. Fisher received interest equal to the
prevailing prime rate per annum as compensation for making this loan to the
Company. The loan from Mr. Fisher was made to provide the Company with necessary
working capital, which was repaid on May 26, 1995.
27
On May 19, 1995, the Company acquired from Arthur L. Rice, a current director of
the Company, and members of Mr. Rice's immediate family, in a stock for stock
transaction, all of the issued and outstanding shares of common stock of HHCC
pursuant to an Agreement and Plan of Reorganization (the "HHCC Agreement"). The
Company acquired the HHCC stock in exchange for 3,262,473 newly-issued shares of
the Company's common stock. Of the shares issued, 163,124 shares were delivered
to an escrow agent to be held in escrow for a period of four years to satisfy
possible claims by the Company for indemnification under the HHCC Agreement. In
connection with the transaction, the Company named Mr. Rice as a director and
Mr. Rice entered into a three year employment agreement with the Company, under
which Mr. Rice will receive an annual salary of $50,000 for serving as President
of HHCC. In connection with the employment agreement, Mr. Rice also received,
under the Company's 1988 Stock Option Plan, an option to purchase 100,000 shares
of common stock at the price of $1.6875 per share.
On February 13, 1996, the Company entered into an Agreement and Plan of Merger
with Horizon, under which Horizon will acquire the Company in a stock for stock
merger, subject to approval by the stockholders of the Company and other
contingencies. Horizon is deemed to beneficially own more than 5% of the
Company's common stock because of the Voting Agreement described above, which
was also executed on February 13, 1996.
On March 15, 1996, the Company refinanced all of its bank debt. Of the new bank
debt, the $3,625,000 New Term Note and the $1,575,000 Guaranteed Revolver are
secured by collateral (marketable securities) owned by the Collateral
Guarantors. The remaining $5,725,000 of the Company's revolving credit
facilities are guaranteed by Mr. Fisher and Mr. Houck. The new debt replaced the
$5,200,000 Term Note, which was secured by the same collateral as that now
securing the New Term Note and the Guaranteed Revolver, and $5,725,000 in
revolving credit facilities, which were also guaranteed by Mr. Fisher and Mr.
Houck. See also Note 5 to the accompanying consolidated financial statements.
28
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents filed as part of this Report:
1. and 2. The Company's consolidated financial statements and required schedules
thereto are indexed on page F-1 and appear on pages F-2 through F-24 of this
report.
3. Exhibits are listed on the following pages. Each management contract or
compensatory plan or arrangement required to be filed as an exhibit to this Form
10-K is indicated by an asterisk (*) below.
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
<S> <C>
3.1 Certificate of Incorporation of the Registrant. (2) (2.1)
3.1(a) Certificate of Amendment of the Certificate of Incorporation of the Registrant. (10)
3.2 By-Laws of the Registrant. (3) (28.2)
4.1 Specimen Unit Certificate (including Specimen Certificate for Shares of Common Stock. (1)
(4.1(a))
9.1 Voting Trust Agreement dated June 28, 1993. (5) (Exhibit 8 to Amendment No. 3)
10.1 1988 Stock Option Plan of the Registrant, as amended. (3) (28.11)*
10.1(a) Amendment No. 2 to 1988 Stock Option Plan. (7) (10.8(a))*
10.1(b) Amendment No. 3 to 1988 Stock Option Plan (filed herewith)*
10.2 1993 Employee Stock Option Plan of the Registrant. (7) (10.8(b))*
10.3 1993 Executive Security Stock Option Plan of the Registrant. (7) (10.8(c))*
10.4 Employment Agreement between the Registrant and David C. Horn, dated as of December 6, 1993. (7)
(10.11)*
10.4(a) Amendment to Employment Agreement between the Registrant and David C. Horn, dated July 5, 1994.
(8) (10.11(a))*
10.6 Employment Agreement between the Registrant and Douglas S. Johnston, dated May 1, 1994. (8)
(10.28)*
10.7 Amendment No. 1 to Employment Agreement with Thomas J. Kaled, dated November 13, 1992. (4)
(10.6(b))*
10.8 Warrant Agreement between the Registrant and Luis Campos, dated as of March 29, 1992. (6)
(10.12)*
29
10.9 Amended Credit and Financing Support Agreement by and among the Registrant and Mark H. Fisher,
Harvey R. Houck, Jr. and John Schurwon, dated August 12, 1994, and attachments. (8) (10.20(b))
10.9(a) Amendment No. 1 to Amended Credit and Financing Support Agreement, dated March 15, 1996. (filed
herewith)
10.10 Warrant Agreements and Certificates by and between the Registrant and Harvey R. Houck, Jr., dated
as of July 21, 1993. (7) (10.16)
10.11 Warrant Agreements and Certificates by and between the Registrant and Mark H. Fisher, dated as of
July 21, 1993. (7) (10.17)
10.12 Amended and Restated Warrant Agreement and Certificate by and between Registrant and Mark H.
Fisher, dated March 23, 1994. (7) (10.27)
10.13 Credit Agreement by and between the Registrant and Texas Commerce Bank National Association,
dated March 23, 1994, and attachments. (7) (10.13)
10.13(a) Credit Agreement by and between Physician's Visiting Nurse Service, Inc. and Texas Commerce Bank
National Association, dated March 23, 1994, and attachments. (7) (10.13(a))
10.13(b) Fourth Amendment to Credit Agreement by and between Registrant and Texas Commerce Bank National
Association, dated March 15, 1996, and attachments. (filed herewith)
10.13(c) Fourth Amendment to Credit Agreement by and between Physician's Visiting Nurse Service, Inc. and
Texas Commerce Bank National Association, dated March 15, 1996, and attachments. (filed herewith)
10.14 Term Promissory Note by and between Registrant and Texas Commerce Bank National Association,
dated March 15, 1996, and attachments. (filed herewith)
10.15 Promissory Note by and between Physician's Visiting Nurse Service, Inc. and Texas Commerce Bank
National Association, dated March 15, 1996, and attachments. (filed herewith)
10.16 Revolving Promissory Note by and between PRN Home Health Care, Inc. and Texas Commerce Bank
National Association, dated March 15, 1996, and attachments. (filed herewith)
10.17 Revolving Promissory Note by and between Registrant and Texas Commerce Bank National Association,
dated March 15, 1996, and attachments. (filed herewith)
10.18 Revolving Promissory Note by and between Physician's Visiting Nurse Service, Inc. and Texas
Commerce Bank National Association, dated March 15, 1996, and attachments. (filed herewith)
10.19 Stock Purchase Agreement by and among Registrant, Robert Gentile, and PRN Home Health Care, Inc.
of Nevada and its affiliated companies, dated June 29, 1994, and attachments. (9) (2.1)
30
10.20 Agreement and Plan of Reorganization, dated as of May 19, 1995, by and among Registrant, Hospital
HomeCare Corporation, and the shareholders of Hospital HomeCare Corporation (11) (2.1)
10.21 Employment Agreement between Registrant and Arthur L. Rice, dated May 19, 1995. (filed herewith)*
10.22 Agreement and Plan of Merger, dated February 13, 1996, by and among Registrant, Horizon/CMS
Healthcare Corporation and Horizon MI Corporation. (12) (B)
11 Computation of Per Share Earnings (filed herewith)
22 List of Subsidiaries of the Company (filed herewith)
</TABLE>
(1) Incorporated by reference from the like-numbered exhibits,
or parenthetically noted exhibit if a different number,
filed with the Company's Registration Statement No.
33-22898-D on Form S-18 dated July 19, 1991.
(2) Incorporated by reference from the like-numbered exhibits,
or parenthetically noted exhibit if a different number,
filed with the Company's Registration Statement on Form
8-A dated May 26, 1989.
(3) Incorporated by reference from the like-numbered exhibits,
or parenthetically noted exhibit if a different number,
filed with the Company's Current Report on Form 8-K dated
May 31, 1989.
(4) Incorporated by reference from the like-numbered exhibits,
or parenthetically noted exhibit if a different number,
filed with the Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1992.
(5) Incorporated by reference from the like-numbered exhibits,
or parenthetically noted exhibit if a different number, of
the Schedule 13D dated November 19, 1992 filed on behalf
of Mark H. Fisher, or amendments thereto.
(6) Incorporated by reference from the like-numbered exhibits,
or parenthetically noted exhibit if a different number, as
filed with the Company's Registration Statement No.
33-68618 on Form S-1 dated September 13, 1993, or
Amendments thereto.
(7) Incorporated by reference from the like-numbered exhibits,
or parenthetically noted exhibit if a different number,
filed with the Annual Report on Form 10-K for the year
ended December 31, 1993.
(8) Incorporated by reference from the like-numbered exhibits,
or parenthetically noted exhibit if a different number,
filed with the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1994.
(9) Incorporated by reference from the like-numbered exhibits,
or parenthetically noted exhibit if a different number,
filed with the Company's Current Report on Form 8-K, dated
June 29, 1994.
31
(10) Incorporated by reference from the like-numbered exhibits,
or parenthetically noted if a different number, filed with
the Annual Report on Form 10-K for the year ended December
31, 1994.
(11) Incorporated by reference from the parenthetically noted
exhibit filed with the Company's Current Report on Form
8-K dated May 19, 1995.
(12) Incorporated by reference from the parenthetically noted
exhibit of the Schedule 13D dated February 13, 1996 filed
on behalf of Horizon/CMS Healthcare Corporation.
(b) Reports on Form 8-K since the filing of the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1995.
None.
(c) Required exhibits are attached hereto and are listed in
Item 14(a)3. of this report.
(d) Required financial statement schedules are attached hereto and are
listed in Item 14(a)2. of this report.
32
SIGNATURES
Pursuant to requirements of Section 13 or 15(d) of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
Date: March 19, 1996 MEDICAL INNOVATIONS, INC.
(Registrant)
By: /S/ MARK H. FISHER
Mark H. Fisher,
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
<S> <C> <C>
/S/ MARK H. FISHER President, Chief Executive Officer March 19, 1996
Mark H. Fisher and Director
(Principal Executive Officer)
/S/ THOMAS J. KALED Executive Vice President March 19, 1996
Thomas J. Kaled and Director
/S/ DAVID C. HORN Vice President, Chief Financial Officer March 19, 1996
David C. Horn and Treasurer
(Principal Financial Officer)
/S/ ROGER S. HUNTINGTON Controller March 19, 1996
Roger S. Huntington (Principal Accounting Officer)
/S/ PHILIP A. TUTTLE Director March 19, 1996
Philip A. Tuttle
/S/ HARVEY HOUCK, JR. Director March 19, 1996
Harvey Houck, Jr.
/S/LUIS T. CAMPOS Director March 19, 1996
Luis T. Campos
/S/ARTHUR L. RICE Director March 19, 1996
Arthur L. Rice
</TABLE>
33
<PAGE>
MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
1995 FORM 10-K ANNUAL REPORT
ITEMS 8 AND 14(A)(1) AND (2)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Report of Independent Accountants F-2
Consolidated Financial Statements as of December 31, 1995 and 1994 and for the
Years Ended December 31, 1995, 1994 and 1993:
Balance Sheets F-3
Statements of Operations F-4
Statements of Stockholders' Equity F-5
Statements of Cash Flows F-6
Notes to Consolidated Financial Statements F-8
Financial Statement Schedules as of December 31, 1995 and 1994 and for the
Years Ended December 31, 1995, 1994 and 1993:
Schedule II - Valuation and Qualifying Accounts F-24
</TABLE>
All other schedules are omitted because they are not applicable or the required
information is shown in the Consolidated Financial Statements or the Notes
thereto.
F-1
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of
Medical Innovations, Inc.
In our opinion, the accompanying consolidated financial statements listed in the
accompanying index on page F-1 present fairly, in all material respects, the
financial position of Medical Innovations, Inc. and its subsidiaries at December
31, 1995 and 1994, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1995, in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of the Company's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
As discussed in Note 14 to the consolidated financial statements, the Company
entered into an agreement in February 1996 to merge with Horizon/CMS Healthcare
Corporation.
PRICE WATERHOUSE LLP
Houston, Texas
March 18, 1996
F-2
<PAGE>
MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------
ASSETS 1995 1994
----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents ...................................................... $ 292,666 $ 1,415,294
Short-term investments ......................................................... -- 201,000
Accounts receivable, net ....................................................... 11,981,393 9,830,269
Inventories .................................................................... 324,750 257,360
Deferred income taxes .......................................................... 546,227 347,047
Other .......................................................................... 632,104 532,046
----------- -----------
Total current assets ...................................................... 13,777,140 12,583,016
Property and equipment, net ........................................................ 2,120,249 1,926,209
Excess cost over net assets of acquired companies,
net of amortization of $761,383 and $438,896 ................................... 12,008,946 12,258,000
Other, net ......................................................................... 1,183,821 825,656
----------- -----------
Total assets .............................................................. $29,090,156 $27,592,881
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and other debt ................................................... $ 1,171,193 $ 1,773,798
Accounts payable and accrued liabilities ....................................... 2,871,216 2,623,754
Accrued compensation and benefits .............................................. 2,752,828 2,518,077
Reserve for government program settlements ..................................... 917,199 1,784,256
Income taxes payable ........................................................... 841,887 70,773
----------- -----------
Total current liabilities ................................................. 8,554,323 8,770,658
Notes payable and other debt ....................................................... 10,590,163 10,040,016
Other accrued liabilities .......................................................... 498,913 678,236
Deferred income taxes .............................................................. 107,453 32,804
----------- -----------
Total liabilities ......................................................... 19,750,852 19,521,714
----------- -----------
Stockholders' equity:
Preferred stock - par value $.01 per share; 3,000,000
shares authorized, none issued or outstanding ............................... -- --
Common stock - par value $.0075 per share; 75,000,000
shares authorized, 15,927,873 and 15,828,873 shares
issued and outstanding ...................................................... 119,459 118,717
Additional paid-in capital ..................................................... 7,506,917 7,349,517
Retained earnings .............................................................. 1,712,928 602,933
----------- -----------
Total stockholders' equity ................................................. 9,339,304 8,071,167
----------- -----------
Commitments and contingencies ...................................................... -- --
----------- -----------
Total liabilities and stockholders' equity ................................ $29,090,156 $27,592,881
=========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS STATEMENT.
F-3
<PAGE>
MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Revenues ...................................................... $69,389,360 $60,378,148 $34,577,204
----------- ----------- -----------
Costs and expenses:
Direct patient care ........................................ 41,731,088 37,749,829 21,411,834
Selling, general and administrative ........................ 23,576,444 19,731,382 10,885,997
Provision for doubtful accounts ............................ 1,159,695 933,151 647,036
Merger transaction costs ................................... 61,774 178,265 --
----------- ----------- -----------
Total costs and expenses ............................. 66,529,001 58,592,627 32,944,867
----------- ----------- -----------
Income from operations ........................................ 2,860,359 1,785,521 1,632,337
Gain on sale of minority interest ............................. -- 128,500 --
Interest expense .............................................. 1,067,189 859,746 420,839
----------- ----------- -----------
Income before income taxes .................................... 1,793,170 1,054,275 1,211,498
Provision for income taxes .................................... 683,175 444,469 469,465
----------- ----------- -----------
Net income .................................................... $ 1,109,995 $ 609,806 $ 742,033
=========== =========== ===========
Net income per common and common
equivalent share ......................................... $ .07 $ .04 $ .05
=========== =========== ===========
Weighted average common and common
equivalent shares outstanding ............................ 16,697,192 17,374,982 15,899,342
=========== =========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS STATEMENT.
F-4
<PAGE>
MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RETAINED
-------------------------- PAID-IN EARNINGS
SHARES AMOUNT CAPITAL (DEFICIT) TOTAL
---------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1993
As previously reported 9,541,341 $71,560 $2,216,535 $(442,923) $1,845,172
Pooling of interests with HHCC 3,262,473 24,469 547,470 (305,983) 265,956
---------- ---------- ------------ ------------ ------------
Balance, January 1, 1993, as restated 12,803,814 96,029 2,764,005 (748,906) 2,111,128
Stock issued for acquisitions of:
Preferred 300,000 2,250 89,055 91,305
PVNS 1,100,000 8,250 1,575,248 1,583,498
Advance 203,934 1,530 380,845 382,375
Warrants issued for debt guarantees 200,000 200,000
Exercise of warrants from public offering 1,796,336 13,472 2,879,921 2,893,393
Offering costs (266,078) (266,078)
Stock issued for services 47,837 359 47,478 47,837
Net income 742,033 742,033
---------- ---------- ----------- ------------ ------------
Balance, December 31, 1993 16,251,921 121,890 7,670,474 (6,873) 7,785,491
Stock issued for acquisition of PRN Nevada 380,952 2,857 747,143 750,000
Tax benefit of warrants exercised 38,282 38,282
Stock returned in connection with PVNS settlement
and subsequently cancelled (850,000) (6,375) (1,268,625) (1,275,000)
Merger transaction costs paid by shareholder 100,000 100,000
Exercise of stock options, including tax benefit 46,000 345 62,243 62,588
Net income 609,806 609,806
---------- ---------- ---------- ------------ ------------
Balance, December 31, 1994 15,828,873 118,717 7,349,517 602,933 8,071,167
Purchase of minority interest 85,000 637 142,800 143,437
Exercise of stock options, including tax benefit 14,000 105 14,600 14,705
Net income 1,109,995 1,109,995
---------- ---------- ---------- ----------- -----------
Balance, December 31, 1995 15,927,873 $119,459 $7,506,917 $1,712,928 $9,339,304
========== ======== ========== ========== ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS STATEMENT.
F-5
<PAGE>
MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income ................................................................ $ 1,109,995 $ 609,806 $ 742,033
Noncash adjustments:
Depreciation and amortization ........................................... 1,024,316 959,979 437,335
Deferred income taxes ................................................... (124,531) 388 99,380
Provision for doubtful accounts ......................................... 1,159,695 933,151 647,036
Income recognized in connection with
PVNS settlement ....................................................... -- (285,016) --
Professional fees incurred by shareholder ............................... -- 100,000 --
Other ................................................................... (8,544) 16,855 24,951
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable ................................................... (3,310,819) (2,317,631) (3,112,067)
Income taxes .......................................................... 790,341 119,073 520,284
Other assets .......................................................... (120,403) (294,405) (264,426)
Accounts payable and accrued liabilities,
including compensation and benefits ................................. 483,943 (267,683) 788,131
Reserve for government program settlements ............................ (867,057) (934,894) --
Other liabilities ..................................................... 5,184 (36,760) 59,760
----------- ----------- -----------
Net cash provided (used) by operating activities ...................... 142,120 (1,397,137) (57,583)
----------- ----------- -----------
Cash flows from investing activities:
Sale of short term investments ............................................ 201,000 -- 414,216
Acquisition of PVNS ....................................................... -- -- (5,300,654)
Acquisition of Advance .................................................... -- -- (374,873)
Acquisition of STAT ....................................................... -- (276,992) --
Acquisition of PRN Nevada ................................................. -- (907,533) --
Acquisition of PharmaThera Branch ......................................... (56,468) -- --
Acquisition expenses ...................................................... (41,116) (97,021) (133,579)
Purchases of property and equipment ....................................... (229,445) (681,637) (178,052)
Other ..................................................................... -- 57,389 --
----------- ----------- -----------
Net cash used by investing activities ............................... (126,029) (1,905,794) (5,572,942)
----------- ----------- -----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS STATEMENT.
F-6
<PAGE>
MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from financing activities:
Proceeds from notes payable ............................................... $ -- $ 9,960,297 $ 797,976
Proceeds from subordinated note and demand
loans payable to related parties ........................................ 300,000 2,600,000 5,524,000
Revolving credit facilities:
Borrowings .............................................................. 11,670,000 15,261,764 4,307,507
Repayments .............................................................. (10,370,000) (12,036,764) (5,407,507)
Payments on notes payable and capital lease
obligations, including related party debt ............................... (2,474,527) (12,844,831) (390,688)
Payments on obligation to former
owners of PVNS .......................................................... (272,592) (256,996) --
Proceeds from exercise of warrants, net ................................... -- -- 2,627,315
Proceeds from exercise of stock options ................................... 8,400 51,880 --
----------- ----------- -----------
Net cash provided (used) by financing activities .................... (1,138,719) 2,735,350 7,458,603
----------- ----------- -----------
Net increase (decrease) in cash and equivalents .............................. (1,122,628) (567,581) 1,828,078
Cash and equivalents at beginning of year .................................... 1,415,294 1,982,875 154,797
----------- ----------- -----------
Cash and equivalents at end of year .......................................... $ 292,666 $ 1,415,294 $ 1,982,875
=========== =========== ===========
Cash paid during the period for:
Interest .................................................................. $ 1,123,760 $ 862,684 $ 338,460
Income taxes .............................................................. 48,769 319,376 37,079
Noncash transactions (not otherwise disclosed):
Assets acquired under capital lease obligations ........................... $ 348,113 $ 640,323 $ 104,872
Issuance of stock to acquire minority interest ............................ 143,437 -- --
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS STATEMENT.
F-7
<PAGE>
MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION AND BUSINESS
Medical Innovations, Inc. and its subsidiaries (collectively referred to as the
"Company") specialize in providing intermittent and extended healthcare
services, intravenous therapies and personal care services to patients in their
home and homecare management and consulting services to hospitals, skilled
nursing facilities, and other providers under contractual arrangements. As more
fully described in Note 3, a large portion of the Company's business is
concentrated in providing services to beneficiaries of government health
programs.
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Medical
Innovations, Inc. and its majority-owned subsidiaries. All significant
intercompany accounts and transactions are eliminated in consolidation.
The consolidated financial statements for prior years have been restated to
reflect a merger, accounted for as a pooling of interests, completed in May 1995
as more fully described in Note 2. In addition, certain amounts previously
reported have been reclassified to conform with their 1995 presentation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenues and expenses, and
disclosure of contingent assets and liabilities. Because of the inherent
subjectivity of this process, actual future results could differ from that
expected at the reporting date.
REVENUE RECOGNITION
Revenue for healthcare services (including related products) is recognized when
services are rendered at the net realizable amounts expected to be received from
payors, patients, and others. Management and consulting fee revenue is recorded
in accordance with contract terms and in the period which the services are
performed. Amounts reimbursed by certain payors of healthcare services are
subject to examination and retroactive adjustment. Anticipated adjustments are
accrued on an estimated basis and adjusted in future periods as the final
settlements are determined. Earnings are also charged with a provision for
doubtful accounts based on an ongoing review of collectibility.
CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
For purposes of the accompanying statements of cash flows, cash equivalents
include highly liquid investments with original maturities of three months or
less. Similar investments with original maturities beyond three months are
considered short-term investments. Investments in marketable debt securities, if
any, are reported (1) at amortized cost if the Company's intent and ability is
to hold such securities to maturity or (2) at fair value with unrealized gains
and losses reflected as a separate component of stockholders' equity if the
investments are available for use in current operations. Short-term investments
at December 31, 1994 consisted of a bank certificate of deposit carried at cost
which approximated market value. There were no short-term investments at
December 31, 1995.
F-8
INVENTORIES
Inventories consist of medical supplies and pharmaceuticals and are stated at
the lower of cost (first-in, first-out basis) or market.
EXCESS COST OVER NET ASSETS OF ACQUIRED COMPANIES
The purchase price of an acquired company is allocated to the fair value of the
tangible and identifiable intangible assets (such as contracts) and liabilities
of such company as of the effective date of the acquisition, with any excess
cost allocated to "excess cost over net assets of acquired companies" and
amortized on a straight-line basis over forty years. In the acquisition of PVNS,
Advance and PRN Nevada, their respective reputations, locations, growth
potential and significant market shares, combined with (i) the Company's managed
care, administrative and related synergies and (ii) each acquired entity's
contribution to the Company's strategy of achieving geographical strength and
economies of scale, were the principal aspects of value received by the Company.
These factors are indicative of going concern value rather than separate
intangible assets and, accordingly, the Company allocated substantially all of
the excess purchase prices for these companies to this asset.
Management believes that the "excess cost over net assets of acquired companies"
has an unlimited useful life and therefore has assigned a forty-year
amortization period for this asset. In determining that the life of this asset
is unlimited, management considered factors such as: (1) the market share,
locations, reputation and related business attributes of each acquisition as
discussed above; (2) the nature of the home healthcare industry which is
positively impacted by aging trends and the continued transfer of patients from
high-cost, acute care settings to home healthcare; (3) the increasing acceptance
by medical professionals of home healthcare as a better alternative to
institutionalized care; and (4) the nature of the personal services provided
which will be continuously needed in the future and are not subject to
obsolescence.
The Company reviews the realizability of this asset whenever events or
circumstances occur which indicate the recorded cost may not be recoverable.
Principal factors considered by the Company in this review include changes in
market share and competitive conditions, technological and regulatory changes
(including reimbursement), demand trends, and earnings trends of the acquired
companies. If such a review indicates that the undiscounted future cash flows
from operations of the acquired business are less than the recorded asset, its
carrying amount will be reduced to its estimated fair value. In the absence of
an active market for the asset, fair value will be estimated using accepted
valuation techniques, including discounted cash flow analysis. While projection
of current facts and circumstances to future periods is inherently uncertain,
the Company is not aware of any adverse changes in the above referenced factors.
ACCOUNTING FOR IMPAIRMENT OF LONG-LIVED ASSETS
Effective January 1, 1995, the Company adopted Statement of Financial Accounting
Standards No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR
LONG-LIVED ASSETS TO BE DISPOSED OF, which covers the accounting for the
impairment of long-lived assets such as "excess cost over net assets of acquired
companies." The Company believes that its previous impairment policy was
substantially similar to the new requirements. Accordingly, the new standard did
not have a significant effect on the Company's financial position or results of
operations.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Major additions or improvements to
property and equipment are capitalized and depreciated over the estimated useful
lives of the related assets. Routine maintenance and repair costs are expensed
as incurred. Depreciation is computed on a straight-line basis over estimated
useful lives of three to five years.
F-9
OTHER ASSETS
Other assets consist primarily of debt issuance costs, which are deferred and
amortized over the terms of the related debt agreements, and the allocated cost
of acquired customer lists and contracts, which are amortized on a straight-line
basis over their estimated useful lives of five to ten years. Additionally,
costs incurred by the Company to develop its home infusion software programs for
sale to third parties were capitalized and are being amortized on a
straight-line basis over an estimated useful life of five years. Such costs were
capitalized only after technological feasibility was reached as demonstrated by
the Company's successful use in its operations. The rights to these programs
were subsequently sold as described in Note 11 and no further costs were
capitalized; however, the Company retained the right for their use in its
internal operations. Other assets are shown net of accumulated amortization of
$585,344 in 1995 and $345,564 in 1994.
INCOME TAXES
Deferred income taxes are accounted for using an asset and liability approach
which requires the recognition of deferred tax liabilities and assets for the
expected future tax consequences of temporary differences between the carrying
amounts and the tax bases of assets and liabilities. This method gives immediate
effect to changes in income tax laws when enacted and the income statement
effect is derived from changes in deferred income taxes on the balance sheet.
PER SHARE DATA
Net income per common and common equivalent share is based on the weighted
average number of common shares and equivalents outstanding during the period,
which has been restated to reflect the merger completed in 1995 as more fully
described in Note 2. Common stock equivalents consisting of stock options and
warrants are included in the computation of weighted average shares when their
effect is dilutive.
SEGMENT INFORMATION
The Company operates solely within the United States in the home healthcare
industry segment.
NOTE 2 - ACQUISITIONS:
PREFERRED PHARMACY AND PREFERRED HOMECARE
Effective January 1, 1993, the Company acquired substantially all of the
operating assets, except cash and accounts receivable, of Preferred Homecare,
Inc.("Homecare") and Preferred Pharmacy, Inc. ("Pharmacy" and, collectively with
Homecare, referred to as "Preferred"), for 200,000 and 100,000 restricted shares
of the Company's common stock, respectively. The acquisition was accounted for
by the purchase method. Accordingly, the results of operations of the acquired
companies are included with those of the Company for periods subsequent to the
date of the acquisition.
PHYSICIAN'S VISITING NURSE SERVICE
Effective May 1, 1993, the Company purchased all of the outstanding common stock
of Physician's Visiting Nurse Service, Inc. ("PVNS"), a provider of skilled
homecare and homemaker services. Consideration for the purchase consisted of
$5,312,000 in cash, 1,100,000 restricted shares of the Company's common stock,
and a note payable to the former owners in the principal amount of $1,000,000.
The Company also entered into agreements to make future payments to the former
owners resulting in a total obligation of approximately $1,211,000, net of
amounts attributable to compensation and imputed interest at 7-1/2%. Of the
remaining
F-10
obligation of $753,644 at December 31, 1995, $298,819 is included in current
accrued liabilities. This obligation is secured by a subordinated lien on
accounts receivable of the Company, is payable in approximately equal monthly
installments through June 1998 and is not contingent upon any future event or
action by the Company or the former owners. The acquisition was accounted for by
the purchase method. Accordingly, the results of operations of PVNS are included
with those of the Company for periods subsequent to the effective date of the
acquisition. Substantially all of the purchase price of approximately $9,209,000
has been allocated to excess cost over net assets of acquired companies.
Effective November 18, 1994, the Company entered into an agreement with the
former owners of PVNS to settle claims for certain acquisition contingencies. In
connection with the settlement, the Company received (i) 850,000 shares of its
common stock issued to the former owners and escrowed since the acquisition
date, which were valued at $1.50 per share, the fair market value at the
settlement date, and (ii) a reduction of $275,000 in the principal amount of the
above referenced note payable (see also Note 5), in exchange for the release of
all further obligations under an indemnification received by the Company from
the former owners for acquisition contingencies. As a result, the Company
assumed and recorded total estimated liabilities, aggregating approximately
$1,265,000, pertaining to any adjustments from open pre-acquisition Medicare
cost reimbursement reports ("Cost Reports") (see also Note 6) and other matters
for which the Company received the settlement consideration as set forth above.
In 1994, the Company also recorded pre-tax income of $285,000 in connection with
the settlement, representing a recovery of costs associated with the acquisition
contingencies previously charged against income by the Company after the
acquisition date.
ADVANCE HEALTHCARE
Effective September 1, 1993, the Company acquired all of the outstanding common
stock of Advance Healthcare, Inc. ("Advance") for 203,934 restricted shares of
the Company's common stock and $382,375 in cash. The acquisition was accounted
for by the purchase method. Accordingly, the results of operations of Advance
are included with those of the Company for periods subsequent to the date of the
acquisition. Substantially all of the purchase price of approximately $765,000
has been allocated to excess cost over net assets of acquired companies.
STAT SPECIALTY HOME HEALTH
Effective February 11, 1994, the Company acquired certain assets of STAT
Specialty Home Health Care, Inc. ("STAT") for cash in the amount of
approximately $285,000, of which approximately $119,000 was allocated to
purchased contracts and the remainder to property and equipment. The acquisition
was accounted for by the purchase method. Accordingly, the results of operations
of STAT are included with those of the Company for periods subsequent to the
effective date of the acquisition.
PRN NEVADA
Effective April 1, 1994, the Company purchased all of the outstanding common
stock of PRN Home Health Care, Inc. of Nevada and its affiliated companies
(collectively "PRN Nevada"), a provider of skilled homecare services. Total
consideration to the seller consisted of $1,825,000 in cash, 380,952 restricted
shares of the Company's common stock, a note payable to the former owner in the
principal amount of $850,000, and an additional contingent payment estimated to
be approximately $73,000, which is expected to be paid in 1996. The acquisition
was accounted for by the purchase method. Accordingly, the results of operations
of PRN Nevada are included with those of the Company for periods subsequent to
the effective date of the acquisition. Of the total purchase price of
approximately $3,726,000, the amount allocated to excess cost over net assets of
acquired companies is approximately $3,169,000.
F-11
PHARMATHERA BRANCH
On January 31, 1995, the Company acquired certain assets, consisting primarily
of inventory, equipment, provider contracts and a customer base, of PharmaThera,
Inc.'s branch operation in Pensacola, Florida ("PharmaThera Branch"), a provider
of infusion therapy services, for cash of approximately $56,000 and two notes
with obligations totalling approximately $474,000, after adjustment. The
acquisition was accounted for by the purchase method. Accordingly, the results
of operations of the PharmaThera Branch are included with those of the Company
for periods subsequent to the acquisition date. The price paid for provider
contracts and a customer base, together with related transaction costs,
totalling $441,116 was allocated to purchased contracts and is being amortized
over ten years. See also Note 13.
HOSPITAL HOMECARE
In May 1995, the Company issued 3,262,473 shares of its common stock in exchange
for all of the issued and outstanding common stock of Hospital HomeCare
Corporation ("HHCC"), a provider of hospital-based home healthcare management
services. Five percent of the shares issued to HHCC have been escrowed to
indemnify the Company for certain specified pre-merger contingencies. This
transaction was accounted for as a pooling of interests. Accordingly, the
Company's consolidated financial statements have been restated to include the
assets, liabilities and results of operations of HHCC, as more fully described
below.
Prior to the combination, HHCC's fiscal year ended on March 31, which has been
subsequently changed to conform with that of the Company. HHCC's results of
operations for the fiscal year ended March 31, 1995 and 1994 are combined with
the Company for the years ended December 31, 1994 and 1993, respectively.
Accordingly, the Company's results of operations for the three months ended
March 31, 1995 did not include HHCC. Separate results of operations of the
Company and HHCC for the pre-merger annual periods included herein are as
follows:
REVENUES COMPANY HHCC COMBINED
- -------- ------- ---- --------
Year ended:
December 31, 1994 $59,110,330 $ 1,267,818 $60,378,148
December 31, 1993 33,482,504 1,094,700 34,577,204
NET INCOME (LOSS)
Year ended:
December 31, 1994 $ 804,026 $ (194,220) $ 609,806
December 31, 1993 845,690 (103,657) 742,033
Transaction costs of $240,039 (without income tax benefit) were incurred by the
Company and HHCC, of which $61,774 were expensed by the Company in 1995. The
remaining costs of $178,265 were incurred by HHCC in the fiscal year ended March
31, 1995, and therefore, were included in the restated combined net income of
the Company for the year ended December 31, 1994. Such costs are separately
presented as merger transaction costs in the consolidated statement of
operations.
PURCHASE PRICE ALLOCATIONS
Set forth below are the principal reasons that a significant portion of the
purchase prices of the PVNS, Advance and PRN Nevada acquisitions was not
allocated to the following intangible assets: (1) there were no formal or
informal contracts acquired except for certain PVNS contracts which were valued
at $250,000; (2) physician relationships were considered to be inseparable from
going concern value and the relationships were
F-12
not contractual and not exclusive; (3) patients have a generally high turnover
rate and, since patients do not determine the services provided or the duration
thereof, and the Company is prohibited from marketing additional services to
them, patients cannot be used to expand the business; and (4) the assembled
workforce is readily replaceable at low cost, market rates are paid, clinical
expertise is the responsibility of the employee and no significant proprietary
training is provided.
PRO FORMA INFORMATION
The pro forma combined results of operations of the Company and its 1994 and
1995 acquisitions (STAT, PRN Nevada and PharmaThera Branch), after giving effect
to certain pro forma adjustments and assuming the acquisitions had been
completed effective January 1, 1994, are as follows:
Year Ended
December 31, 1994
------------------
(Unaudited)
Revenue ................................................. $64,467,782
Net income .............................................. 970,489
Net income per common and common equivalent share ....... 0.06
The PharmaThera Branch acquisition completed on January 31, 1995 did not have a
material pro forma effect on 1995 results of operations.
The pro forma information is not necessarily indicative of results which may
occur in the future.
NOTE 3 - ACCOUNTS RECEIVABLE:
Accounts receivable at December 31, consisted of the following:
1995 1994
----------- -----------
Accounts receivable .......................... $12,977,110 $10,618,965
Less allowance for doubtful accounts ......... 995,717 788,696
----------- -----------
$11,981,393 $ 9,830,269
=========== ===========
A large portion of the Company's revenues is derived from services to
beneficiaries of government health programs. The percentages of the Company's
net revenues derived from Medicare and state government programs were
approximately 51% and 26% in 1995, 55% and 24% in 1994, and 42% and 26% in 1993,
respectively.
The Company does not require collateral for its receivables, but believes that
due to the diversity of third-party payors and the concentration of receivables
from government health programs (57% of receivables at December 31, 1995),
credit risk is generally not significant. The Company continually monitors the
adequacy of its allowance for doubtful accounts based on historical experience,
collection trends and other factors.
F-13
NOTE 4 - PROPERTY AND EQUIPMENT:
Property and equipment at December 31, consisted of the following:
1995 1994
---------- ----------
Furniture and fixtures ............................. $1,383,716 $1,341,684
Equipment, including computers ..................... 2,062,862 1,480,624
Transportation equipment ........................... 316,839 329,767
Leasehold improvements ............................. 195,528 167,365
---------- ----------
3,958,945 3,319,440
Less accumulated depreciation and amortization ..... 1,838,696 1,393,231
---------- ----------
$2,120,249 $1,926,209
========== ==========
Property and equipment under capital leases and the accumulated amortization
thereon totalled $1,099,351 and $268,528, respectively, at December 31, 1995,
and $816,088 and $134,253, respectively, at December 31, 1994.
Depreciation expense totalled $454,009 in 1995, $442,835 in 1994 and $184,408 in
1993.
NOTE 5 - NOTES PAYABLE AND OTHER DEBT:
Notes payable and other debt at December 31, consisted of the following:
1995 1994
----------- -----------
Bank revolving credit facilities ............... $ 4,725,000 $ 3,425,000
Notes payable to Bank .......................... 5,200,000 5,450,000
Term note payable to Bank ...................... -- 400,000
Notes payable to former owners of PVNS ......... 222,365 752,638
Note payable to former owner of PRN Nevada ..... 425,000 708,333
Note payable to former owner of PharmaThera
Branch ......................................... 339,320 --
Notes payable to Bank and others, at rates
ranging from 8% to 14%, with various
maturities through 1997, secured by
property and equipment ......................... 35,398 378,439
Capital lease obligations ...................... 814,273 699,404
----------- -----------
11,761,356 11,813,814
Less current portion ........................... 1,171,193 1,773,798
----------- -----------
Noncurrent portion ............................. $10,590,163 $10,040,016
=========== ===========
F-14
BANK REVOLVING CREDIT FACILITIES
At December 31, 1995, the Company had revolving credit facilities totalling
$4,725,000 with a bank (the "Bank") that were to mature at various dates from
March 31, 1996 through April 30, 1996. The interest rates on the credit
facilities were prime plus 1/4% (8.75% at December 31, 1995), payable monthly.
The credit facilities were secured by a first priority lien on all accounts
receivable of the Company and were guaranteed by the President and another
director of the Company. The related loan agreements covering $2,550,000 of the
credit facilities included covenants to maintain certain net worth and a debt to
net worth ratio and prohibited certain additional indebtedness and the payment
of dividends. At December 31, 1995, the Company was in compliance with such loan
covenants.
On March 15, 1996, the Company refinanced all of its debt with the Bank,
including the above referenced revolving credit facilities, an additional
revolving credit facility of $1,000,000 entered into on January 31, 1996, and
the notes payable described below. The new revolving credit facilities total
$7,300,000, bear interest at rates ranging from prime to prime minus 1%, payable
monthly, and mature April 15, 1997. Such credit facilities totalling $5,725,000
are secured by a first priority lien on all accounts receivable of the Company
and $1,575,000 of such credit facilities are secured by collateral (marketable
securities) pledged to the Bank by the President, another director and a
shareholder of the Company ("Collateral Guarantors"), and are guaranteed in the
amount of $5,725,000 by the President and another director of the Company. The
related loan agreements do not include any covenant requirements; however, such
agreements do prohibit certain additional indebtedness and payments of
dividends.
NOTES PAYABLE TO BANK
In June 1994, the Company borrowed $5,450,000 from the Bank ("Term Note") for
the purpose of repaying a demand note of $1,650,000 and substantially all of the
remaining balance on the subordinated note payable as described below. The
$1,650,000 demand note was executed in March 1994 when the Company entered into
a demand loan agreement with the Collateral Guarantors. The interest rate on the
Term Note, which was to mature June 6, 1996, was prime minus 1% (7.5% at
December 31, 1995), payable monthly. The Term Note was secured by collateral
(marketable securities) pledged to the Bank by the Collateral Guarantors.
Previously, this collateral was held by the Bank as security for its loan to the
Collateral Guarantors which was used by these individuals to make loans to the
Company. During 1995, the Company repaid $250,000 on the Term Note, resulting in
an outstanding principal balance of $5,200,000 at December 31, 1995.
As described above, the Company refinanced all of its debt with the Bank on
March 15, 1996. In connection therewith, the Company borrowed $3,625,000 from
the Bank ("New Term Note"), which matures April 15, 1997. The New Term Note
bears interest at prime minus 1%, payable monthly, and is secured by collateral
(marketable securities) pledged to the Bank by Collateral Guarantors (see also
discussion above regarding such collateral security).
NOTES PAYABLE TO FORMER OWNERS OF PVNS
In connection with the acquisition of PVNS in 1993, the Company issued a
$1,000,000 note payable to the former owners of PVNS ("PVNS Note") which is
secured by a subordinated lien on accounts receivable of the Company and is
guaranteed by the President of the Company. In January 1994, the Company repaid
principal of $306,000 on this note, pursuant to its contractual obligation to
apply as debt reduction, a portion of the net proceeds from the Company's
offering of common stock in connection with the exercise of various outstanding
warrants ("Warrant Offering") completed in December 1993. Also, the principal
balance of the PVNS Note was further reduced by $275,000 in November 1994 as a
result of the settlement with the former owners of PVNS as more fully described
in Note 2. This note reduction was required to be applied to principal in
inverse order of maturity. Scheduled monthly principal payments of $20,833
commenced on August 1, 1994, together with interest at prime through June 28,
1995, on which date the interest rate increased to prime plus 1% (9.5% at
December 31, 1995). At December 31, 1995, the principal balance of the PVNS Note
was $44,006.
F-15
In November 1994, the Company borrowed $458,636 of previously escrowed cash from
the former owners of PVNS for working capital purposes. Interest only was due on
this note through February 1, 1995, at which date monthly principal and interest
payments commenced in eighteen equal installments with a final payment due on
July 1, 1996. The interest rate on the note was at prime through June 30, 1995,
on which date the interest rate increased to prime plus 1% (9.5% at December 31,
1995). At December 31, 1995, the principal balance of this note was $178,359.
NOTE PAYABLE TO FORMER OWNER OF PRN NEVADA
In connection with the Company's acquisition of PRN Nevada, the Company issued
an $850,000 note payable to the former owner of PRN Nevada. The note bears
interest at prime (8.5% at December 31, 1995), payable monthly, and is secured
by the common stock of PRN Nevada. Monthly principal payments of $23,611
commenced August 1, 1994 and are payable in such amount through July 1, 1997.
During 1995, scheduled payments on this note were offset by $125,776 due from
the former owner of PRN Nevada for indemnification of applicable adjustments to
PRN Nevada's pre-acquisition Cost Reports through December 31, 1993 (see also
Note 6).
NOTES PAYABLE TO FORMER OWNER OF PHARMATHERA BRANCH
In connection with the acquisition of the PharmaThera Branch, the Company issued
two notes payable to the former owner of the PharmaThera Branch. The larger note
in the amount of $500,000, subsequently reduced to $400,000, is secured by all
equipment of the Company's Florida operation, is non-interest bearing, and is
payable at various dates through maturity on May 15, 1996. The other note in the
amount of $73,956 was paid in six equal monthly principal installments of
$12,326 through August 1, 1995.
SUBORDINATED NOTE PAYABLE
In connection with the acquisition of PVNS, the Company issued a $5,500,000 note
payable to the Collateral Guarantors (as defined above). In March 1994, the
Company repaid principal of $1,675,000 on the note, pursuant to its contractual
obligation to apply as debt reduction a portion of the net proceeds from the
Company's Warrant Offering completed in December 1993. On the date of such
repayment, a replacement note was issued to the Collateral Guarantors in the
amount of $3,802,370, which was repaid in June 1994 as described above.
In connection with making this subordinated loan, the Collateral Guarantors were
granted warrants to purchase 100 shares of the Company's Class A preferred stock
at $100 per share. As previously described, the collateral (marketable
securities) that the Collateral Guarantors pledged to the Bank as security for
the Term Note and New Term Note was previously held by the Bank as security for
a loan to the Collateral Guarantors which was used by these individuals to make
loans to the Company. Thus, the Collateral Guarantors' risk position has not
significantly changed and accordingly, the agreement governing the preferred
stock warrants has been amended so that the warrants remain outstanding under
substantially the same terms, except that the exercisability of the warrants now
relates to the New Term Note and $1,575,000 of the new revolving credit
facilities rather than the subordinated loan. Such warrants are now exercisable
only in the event of certain defaults of the Company or the Collateral
Guarantors under the New Term Note, $1,575,000 of the new revolving credit
facilities, or the related collateral maintenance agreements with the Bank, or
in the event the Bank liquidates the Collateral Guarantors' collateral. The
warrants expire when the aggregate outstanding balance of the New Term Note,
$1,575,000 of the new revolving credit facilities, and the PVNS Note is
$1,175,000 or less and the Company is not in default under the New Term Note and
$1,575,000 of the new revolving credit facilities. If the warrants are exercised
and the aggregate outstanding balance of the New Term Note, $1,575,000 of the
new revolving credit facilities, and the PVNS Note is
F-16
$3,625,000 or more, the holders of the preferred stock have the right to elect
seven of thirteen Company directors. At December 31, 1995, the aggregate
principal outstanding on the Term Note and the PVNS Note was $5,244,006. At all
other times after warrant exercise, the holders of the preferred stock have the
right to elect three of nine Company directors. If the warrants are exercised,
the Company may redeem the preferred stock, at the price of $100 per share, at
any time after the aggregate outstanding principal balances of the above
referenced debt are less than $1,175,000.
OTHER
On June 7, 1994, the Company borrowed $500,000 from its President for working
capital purposes at prime plus 2%, which was repaid on June 28, 1994. The
Company also borrowed $400,000 and $50,000 from its President on September 12,
1994 and September 15, 1994, respectively, for working capital purposes at prime
plus 2%, which were repaid on September 26, 1994. On April 10, 1995, the Company
borrowed $300,000 from its President for working capital purposes at prime,
which was repaid on May 26, 1995.
FAIR VALUE OF INDEBTEDNESS
Substantially all of the Company's indebtedness bears current rates of interest
and the terms thereof are considered normal for the nature of the instruments.
Accordingly, the Company believes that the carrying value of indebtedness
approximates its fair value.
FUTURE MINIMUM MATURITIES
Future minimum maturities of the above described notes payable and other debt
outstanding at December 31, 1995, taking into consideration the Company's debt
refinancing with the Bank in March 1996 as more fully described above, were as
follows:
1996 $ 1,171,193
1997 10,380,734
1998 157,317
1999 35,544
2000 and thereafter 16,568
-----------
$11,761,356
===========
NOTE 6 - RESERVE FOR GOVERNMENT PROGRAM SETTLEMENTS:
The Company's Medicare operations are subject to regulations administered by the
Health Care Financing Administration. Other government programs served by the
Company are also subject to regulations of various state agencies. Amounts
reimbursed by the Medicare and other government programs are subject to audit
and retroactive adjustment. Such adjustments which affect income are included in
revenue.
In reviewing its reserve for government program settlements for adequacy, the
Company considers, among other factors, recent Medicare intermediary audit
results, the effect of final adjustments on open Cost Reports, recent
interpretations of regulations and cost reporting principles, and other
available current information.
In connection with the acquisition of PRN Nevada, the Company received an
indemnification from the former owner of PRN Nevada for adjustments to PRN
Nevada's pre-acquisition Cost Reports open for examination. Cost Reports through
December 31, 1994 have been settled. The amounts due the Company pursuant to the
indemnification for Cost Reports through December 31, 1993 have been received
(see also Note 5). Adjustments to the 1994 pre-acquisition Cost Report period
will be recovered from the above referenced indemnification and any amounts not
to be recovered therefrom have been applied against the historical
F-17
reserve recorded by PRN Nevada in periods prior to the acquisition date and
carried forward by the Company in the acquisition. Also, PRN Nevada is
experiencing difficulties in obtaining reimbursement of certain receivable
claims from Nevada Medicaid due to untimely billing of such claims and a reserve
has been established for estimated losses that may result therefrom. Collection
of such receivables has been delayed awaiting resolution of a regulatory
investigation for which no claim has been asserted and for which the Company's
internal review indicates that it should have no material liability related
thereto.
In 1994, the historical reserve of $893,000 attributable to the PVNS
preacquisition Cost Reports was reduced by $533,000 and taken to income. Such
historical reserve was considered necessary by PVNS and recorded in periods
prior to the acquisition due to the magnitude of the audit adjustments proposed
by the Medicare intermediary. Such reserve was recorded by the Company as a
liability assumed at the acquisition date. The reserve reduction resulted from
settlements and audit notifications for preacquisition PVNS Cost Reports
received from the intermediary more than one year after the PVNS acquisition
date. Of the reserve reduction, $200,000 was recorded in the second quarter of
1994 when the Company received final "desk review" audit results of $52,000 for
the June 30, 1992 PVNS Cost Report and $333,000 was recorded in the third
quarter of 1994 when the Company was notified of the revised field audit
adjustments of $1,640,000 (reduced from $2,200,000) for the June 30, 1990 and
1991 PVNS Cost Reports, of which the total adjustments included approximately
$1,200,000 of various transportation costs. The Company's reserve adjustment in
the third quarter of 1994 was recorded as a result of the reduced audit
adjustments for these Cost Reports, the reopening of such Cost Reports for
further review by the intermediary, and certain of the larger cost adjustments
therein having been allowed in the settled June 30, 1992 Cost Report; thus,
substantially reducing the Company's estimated total exposure for the remaining
Cost Reports to be settled. In early 1994, the Company also recorded $138,000 as
a reduction in "excess cost over net assets of acquired companies" due to a
favorable result in connection with the 1988 Cost Report which was determined
prior to the end of the PVNS acquisition allocation period. Expense of $54,000
was also recorded in 1994 related to changes in estimates for post-acquisition
cost reporting periods.
Subsequently, as more fully described in Note 2, the Company entered into a
settlement in November 1994 with the former owners of PVNS pertaining to various
acquisition contingencies including open preacquisition Cost Reports. In
connection with this settlement, the Company assumed the total liability for
final adjustments on the June 30, 1990, 1991 and 1993 PVNS Cost Reports which
were still outstanding. In recognition thereof, the Company re-evaluated its
exposure for estimated final adjustments to these open Cost Reports, which was
previously the responsibility of the former owners of PVNS, and determined an
additional reserve of approximately $975,000 was needed, and accordingly,
increased the reserve in this amount. As of December 31, 1995, all such Cost
Reports have been settled in a total amount less the reserve established.
During 1995, expense of $315,000 was recorded for increases to the reserve
pertaining to estimated adjustments for current year Cost Reports and for Nevada
Medicaid receivable claims. The reserve was reduced by payments of approximately
$957,000 as a result of final settlements of PVNS and PRN Nevada preacquisition
and post-acquisition Cost Reports. All preacquisition Cost Reports have been
settled as of December 31, 1995. The reserve was also reduced by approximately
$252,400, of which $200,000 was transferred to a receivable contractual
allowance and approximately $52,400 was credited to income in connection with
the settlements of various Cost Reports.
Although the process for estimating final settlements related to government
programs is inherently subjective and such estimates can change as new
developments occur, the Company believes the reserve for government program
settlements is adequate to cover estimated adjustments to open Cost Reports and
settlements with other government programs, and that any final determinations in
connection therewith will not have a material adverse effect on the Company's
financial position or results of operations.
F-18
NOTE 7 - INCOME TAXES:
The provision (benefit) for income taxes for the years ended December 31,
consisted of the following:
1995 1994 1993
--------- --------- --------
Federal:
Current ............................ $ 771,844 $ 455,741 $528,460
Deferred ........................... (124,532) (42,272) 1,600
Change in deferred tax
asset valuation allowance ....... -- (100,980)
State .................................. 35,863 31,000 40,385
--------- --------- --------
$ 683,175 $ 444,469 $469,465
========= ========= ========
The tax effects of temporary differences related to deferred tax assets
(liabilities) at December 31, consisted of the following:
1995 1994
--------- ---------
Prepaid expenses ............................. $ (43,916) $ (99,467)
Depreciation and amortization ................ (105,536) (44,431)
Other ........................................ (1,919) --
--------- ---------
Deferred tax liabilities ............ (151,371) (143,898)
--------- ---------
Provision for doubtful accounts .............. 287,635 220,619
Accruals not currently deductible ............ 132,838 132,909
Compensation ................................. 158,629 92,986
Other ........................................ 11,043 11,627
--------- ---------
Deferred tax assets ................. 590,145 458,141
--------- ---------
Net deferred tax asset .............. $ 438,774 $ 314,243
========= =========
The following table reconciles the federal statutory income tax rate and the
Company's effective income tax rate for the years ended December 31:
1995 1994 1993
------- ----- ------
Federal income taxes at statutory rates .......... 34.0% 34.0% 34.0%
Nondeductible amortization ....................... 5.9 8.1 3.5
Other permanent differences ...................... 1.3 1.6 5.3
Utilization of operating loss carryforwards ...... -- -- (4.0)
Income tax effect of PVNS settlement ............. -- (7.8) --
Recovery of nontaxable payroll related costs ..... (4.6) -- --
State income taxes ............................... 2.0 2.5 3.1
Change in deferred tax asset valuation
allowance ...................................... -- -- (7.7)
Changes in prior year estimates and other ........ (.5) 3.8 4.6
------- ----- ------
Effective income tax rate .............. 38.1% 42.2% 38.8%
======= ===== ======
F-19
NOTE 8 - EMPLOYEE BENEFIT PLANS:
Through December 31, 1995, the Company provided 401(k) savings plans for most of
its employees who may contribute up to a certain percentage of their annual
gross wages into the plans, with the Company matching the employees'
contributions up to certain levels, as defined in the plans. A similar
retirement savings plan was also provided to certain employees of HHCC.
Effective January 1, 1996, a single 401(k) savings plan is provided for all of
the Company's eligible employees. Company contributions to these plans were
$176,940 in 1995, $165,406 in 1994 and $68,620 in 1993.
NOTE 9 - STOCK OPTIONS:
In May 1988, the Company adopted the 1988 Stock Option Plan, as amended in May
1989 and December 1993 ("1988 Plan"), which reserves 600,000 common shares for
issuance to officers, directors and employees of the Company. In December 1993,
the Company adopted the 1993 Employee Stock Option Plan ("1993 Plan") which
reserves 1,000,000 common shares for issuance to officers and employees of the
Company.
Options under the 1988 and 1993 Plans are granted at an exercise price equal to
at least 100% of the fair market value of the common stock on the date of grant
in the case of incentive stock options. Nonqualified option grants are generally
at 85% of the fair market value under the 1988 Plan and as determined by the
Stock Option Committee under the 1993 Plan. All options generally vest over a
five year period from the date of grant and expire within ten years. The Plans
restrict the rights to exercise based on employment status and percentage of
stock ownership in accordance with Section 422 of the Internal Revenue Code.
The following schedule summarizes the changes in options outstanding under the
1988 and 1993 Plans:
SHARES PRICE RANGE
Outstanding, December 31, 1992 552,500 $ .60 - 1.67
Granted 350,000 1.38 - 1.94
Cancelled (52,500) .60 - 1.67
----------
Outstanding, December 31, 1993 850,000 .60 - 1.94
Granted 405,000 1.38 - 2.13
Exercised (46,000) .60 - .67
Cancelled (97,500) .60 - 1.67
----------
Outstanding, December 31, 1994 1,111,500 .60 - 2.13
Granted 184,500 1.38 - 1.78
Exercised (14,000) .60
Cancelled (250,000) .60 - 2.06
---------
Outstanding, December 31, 1995 1,032,000 .60 - 2.13
=========
At December 31, 1995, options to purchase 438,100 shares were exercisable and
options to purchase 508,000 shares were available for future grant.
F-20
In December 1993, the Company also adopted the 1993 Executive Security Stock
Option Plan ("1993 Executive Plan") which reserves 500,000 common shares for
issuance to officers of the Company. The option price for all grants under the
1993 Executive Plan is $.50 per share. The options, which expire ten years from
plan formation, are exercisable only if the officer's employment is t erminated
without cause or a majority of the issued and outstanding common shares is
acquired by a person or group not including the current President of the
Company. The Company will recognize compensation expense related to these
options if and when such events occur. A total of 325,000 nonqualified options
have been granted under the 1993 Executive Plan, of which 125,000 of such
options are outstanding at December 31, 1995. The remaining 200,000 options have
been cancelled. None of the options are currently exercisable.
In April 1992, the Company granted stock options (not included in the 1988 Plan
or 1993 Plans described above) to the then President of the Company and a
current officer and director of the Company and in June 1992, the Company
granted a like stock option to another director of the Company. The stock
options entitle each of these individuals to purchase 250,000 shares of the
Company's common stock at $1.50 per share. The options became exercisable on
January 1, 1996 and expire on April 29, 1996.
Compensation associated with options granted at less than quoted market value
is expensed over the vesting period and totalled $1,695 in 1995, $10,385 in
1994, and $18,160 in 1993.
In October 1995, Statement of Financial Accounting Standards No. 123, ACCOUNTING
FOR STOCK-BASED COMPENSATION, was issued which covers the accounting for
stock-based compensation, principally stock options. The Company believes at
this time, as permitted by the standard, that it will not change its existing
accounting for stock options. Additional disclosures, including pro forma
effects on income of the difference between existing and the new accounting
methods, will be required when adopted. The Company is required to adopt the
standard no later than January 1, 1996.
NOTE 10 - STOCK WARRANTS:
In April 1992, the Company entered into an agreement with an investment banking
firm to provide investment banking services to the Company for a two and
one-half year term. In consideration of these services, the investment banking
firm was granted warrants to purchase up to 350,000 shares of common stock of
the Company at $1.50 per share, which are exercisable anytime through June 30,
1996. The warrants include customary demand and piggyback registration rights
for the underlying shares. As of December 31, 1995, none of the warrants had
been exercised.
In May 1992, the Company entered into an agreement with a public relations firm
to provide consultation to the Company. In addition to a monthly fee, the public
relations firm was granted warrants to purchase up to 64,000 shares of the
Company's common stock at $1.56 per share, which are exercisable anytime through
May 14, 1997. The warrants include customary piggyback registration rights for
the underlying shares. As of December 31, 1995, none of the warrants had been
exercised.
In June 1993, in connection with the issuance of the subordinated note payable
to finance the acquisition of PVNS and a guarantee of the PVNS Note, the
Collateral Guarantors were granted warrants to purchase a total of 1,000,000
shares of the Company's common stock for the price of $1.45625 per share, which
are exercisable anytime through June 29, 1998. As of December 31, 1995, none of
the warrants had been exercised. The warrants were assigned a value of $150,000,
which is being amortized over a five year period, and include customary demand
and piggyback registration rights for the underlying shares. Also, as described
in Note 5, the Collateral Guarantors were granted warrants to purchase preferred
stock of the Company.
F-21
On July 21, 1993, in connection with the guarantee of the Company's Bank debt,
including the Bank debt of PVNS, the President and another director of the
Company were also granted warrants to purchase a total of 713,000 shares of the
Company's common stock at prices ranging from $1.2375 to $1.5844 per share,
which are exercisable anytime through the one-year anniversary of the date that
their guarantees are no longer required by the Bank. As of December 31, 1995,
none of the warrants had been exercised. The warrants include customary demand
and piggyback registration rights for the underlying shares.
NOTE 11 - RELATED PARTY TRANSACTIONS:
As more fully described in Note 5, the Company borrowed various amounts from the
President, another director and a shareholder of the Company (also referred to
herein as the Collateral Guarantors). All such loans were repaid as of December
31, 1995. However, these individuals continue to guarantee and collaterize
various borrowings by the Company from unrelated third parties. In connection
with such borrowings and related security provided, these individuals were
granted warrants to purchase the Company's common stock as described in Note 10
and the Company's preferred stock as described in Note 5, and certain of these
individuals also received fees totalling $20,000. In addition, the Company has
borrowings from a family member of another director with total outstanding
principal balances of $19,479 at December 31, 1995.
Through April 30, 1994, the President and another director of the Company were
stockholders of a company that sold office supplies to the Company. Total
purchases from this company were $73,708 in 1994 and $112,878 in 1993.
Effective January 1, 1993, the Company acquired substantially all of the
operating assets of Preferred, of which the President and another director of
the Company were shareholders (see Note 2).
In 1993, as compensation for services rendered in connection with the Company's
acquisition of PVNS, a shareholder was awarded 100,000 shares of the Company's
unregistered common stock valued at $83,500.
A director of the Company, previously the principal shareholder of HHCC, paid
merger transaction costs of $100,000 on HHCC's behalf which were expensed in
1994 and included in the Company's stockholders' equity as additional paid-in
capital.
In March 1993, the Company sold the rights to its home infusion software
programs to a start-up company, Sequel Solutions, Inc. ("SSI"), owned by a group
of employees including a shareholder (until January 1995) who was also a
director of the Company until August 1994. In connection with the sale, the
Company received notes of $335,000, which were reserved to their cost basis of
$245,000. No gain was recognized at the sale date because the Company concluded
that the business risks had not transferred to SSI because it was a thinly
capitalized start-up company and the related party aspects of the transaction.
After the sale, through December 31, 1993, the Company provided personnel,
office space and administrative services to SSI for which the Company received a
reimbursement of approximately $56,000. The Company continued to utilize the
software support services provided by SSI for which the Company paid $9,412 in
1995, $13,670 in 1994 and $6,610 in 1993. In December 1993, the Company entered
into an agreement with the above referenced individual in which the Company
exchanged the aforementioned notes and its future rights to royalties from the
SSI software sales in return for the relinquishment by such individual of all
rights to past and future bonuses stipulated in an employment agreement that
terminated May 31, 1995. As a result of this agreement, the Company recorded a
pretax charge to income of $26,000 in 1993, which is included in general and
administrative expenses.
F-22
NOTE 12 - LEASE COMMITMENTS:
At of December 31, 1995, future minimum payments under noncancellable lease
obligations for office space and various property and equipment, were as
follows:
CAPITAL OPERATING
LEASES LEASES
---------- -------------
1996 $ 377,688 $ 2,208,047
1997 354,376 1,360,868
1998 169,781 723,832
1999 41,329 84,129
2000 and thereafter 16,951 66,885
---------- -------------
Total minimum lease payments 960,125 $4,443,761
==========
Less imputed interest 145,852
---------
Present value of minimum lease payment 814,273
Less current portion 300,891
---------
Noncurrent portion $513,382
========
The amounts under capital leases above are included in notes payable and other
debt in Note 5.
Rental expense under noncancellable operating leases was $2,853,043 in 1995,
$2,414,910 in 1994, and $645,124 in 1993.
NOTE 13 - MINORITY INTEREST:
In June 1994, the Company sold a 20% ownership interest and a 5% net profits
interest in its then existing Pensacola, Florida homecare business for cash and
realized a pretax gain of $128,500. The acquiring company also held a 12-1/2%
net profits interest in this business which it received for services provided in
connection with the start-up of this operation in April 1994. In July 1995, the
Company reacquired the 20% ownership interest and the 17-1/2% net profits
interest for cash of $13,000 and issued 85,000 shares of its unregistered common
stock, which was valued at $1.6875 per share, the fair market value on the
transaction date. The total purchase price of $156,437 was allocated to
purchased contracts and is being amortized over a ten year period.
NOTE 14 - SUBSEQUENT EVENT: PROPOSED MERGER OF COMPANY
In February 1996, the Company agreed to be acquired by Horizon/CMS Healthcare
Corporation ("Horizon") pursuant to a merger agreement. Under the terms of the
agreement, the Company's stockholders will receive .0645 shares of Horizon
common stock for each share of the Company's common stock; provided that in no
event will the value of the Horizon common stock received for each share of the
Company's common stock be less than $1.60 nor more than $1.90, which equates to
$24.787 and $29.48, respectively, in Horizon stock value. For final exchange
ratio determination, the value per share of the Horizon common stock will be
equal to its average daily closing price for the twenty trading-day period
preceding the closing of the transaction. This transaction is intended to be tax
free to the Company's stockholders and to be accounted for as a pooling of
interests. Completion of the transaction is subject to, among other conditions,
the effectiveness of a registration statement covering the shares to be issued
in the merger, compliance with, and expiration of, the applicable waiting period
under the Hart-Scott-Rodino Act and healthcare regulatory approvals; and
approval by the stockholders of the Company. Certain affiliates of the Company
holding approximately forty-three percent of the outstanding common stock of the
Company have signed a voting agreement under which they have agreed to vote
their shares in favor of the merger. The merger, if completed, is expected to
occur in the latter part of the second quarter of 1996.
F-23
SCHEDULE II
MEDICAL INNOVATIONS, INC.
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS
------------------------
BALANCE AT CHARGED TO CHARGED
BEGINNING COSTS AND TO OTHER BALANCE AT
OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS END OF PERIOD
------------ ------------ ---------- ------------ --------------
<S> <C> <C> <C> <C> <C>
DECEMBER 31, 1995
Allowance for doubtful accounts $ 788,696 $ 1,159,695 $925,674 (A) $ 995,717
27,000 (B)
Reserve for government program
settlements 1,784,256 315,000 $ 27,000 (C) 956,618 (D) 917,199
252,439 (E)
DECEMBER 31, 1994
Allowance for doubtful accounts $ 592,330 $ 933,151 $ 67,000 (F) $803,785 (A) $ 788,696
Reserve for government program
settlements 893,126 54,000 974,931 (G) 533,000 (H) 1,784,256
962,625 (F) 567,426 (I)
DECEMBER 31, 1993
Allowance for doubtful accounts $ 141,553 $ 647,036 $285,000 (J) $481,259 (A) $ 592,330
Reserve for government program
settlements -- 893,126 (J) 893,126
</TABLE>
(A) Bad debts charged off against allowance.
(B) Transferred to reserve to reflect proper classification.
(C) Transferred from allowance to reflect proper classification.
(D) Utilization of reserve for payments resulting from net final settlements of
PVNS and PRN Nevada preacquisition and post-acquisition Cost Reports.
(E) Reduction of reserve due to final settlements of PVNS and PRN Nevada
preacquisition and post-acquisition Cost Reports, of which $200,000 was
transferred to a receivable contractual allowance to reflect proper
classification and $52,439 was credited to income due to change in
estimates.
(F) Recorded in connection with the acquisition of PRN Nevada, effective April
1, 1994.
(G) Recorded in connection with PVNS settlement.
(H) Reduction in reserve credited to income due to change in estimates.
(I) Utilization of reserve for settlements of PVNS and PRN Nevada
preacquisition Cost Reports.
(J) Recorded in connection with the acquisition of PVNS, effective May 1, 1993.
F-24
EXHIBIT 10.1(b)
MEDICAL INNOVATIONS, INC.
(formerly Bryce Financial, Inc.)
1988 STOCK OPTION PLAN
AMENDMENT NO. THREE
Effective as of the 9th day of February, 1996, the board of
directors approved the following amendment to the 1988 Stock Option Plan (the
"Plan").
"Section 8(i)(2) of the Plan is hereby deleted in its
entirity and the following is substituted in its place:
'(2) In the event of a dissolution or liquidation of the
Corporation or a merger or consolidation in which the Corporation is not the
surviving corporation, any outstanding options hereunder may be terminated by
the Corporation as of the effective date of such dissolution, liquidation,
merger or consolidation by giving notice to each holder thereof of its intention
to do so not less than ten (10) days preceding such effective date and
permitting the exercise of all of outstanding options until such effective date,
or the termination of such options if earlier. Notwithstanding the preceding
sentence, if the Corporation is not the surviving corporation as a result of the
Corporation being reorganized or merged or consolidated with another corporation
while unexercised options are outstanding under this Plan, the surviving
corporation may assume the unexercised options outstanding under this Plan or
substitute new options in the surviving corporation for the outstanding options;
provided, however, that the excess of the aggregate fair market value of the
securities subject to the options immediately after the substitution or
assumption over the aggregate option price of such shares is not less than the
excess of the aggregate fair market value of the Common Stock subject to the
outstanding option immediately before such substitution or assumption over the
aggregate option price of such Common Stock.' "
EXHIBIT 10.9(a)
AMENDMENT NO. 1 TO
AMENDED CREDIT AND FINANCING SUPPORT AGREEMENT
This Amendment No. 1 to Amended Credit and Financing Support
Agreement (the "Amendment"), dated effective the 15th day of March, 1996, among
Medical Innovations, Inc., a Delaware corporation ("MI"), and Mark H. Fisher,
Harvey R. Houck and John Schurwon (collectively, "F/H/S"). Unless otherwise
indicated herein, all capitalized terms have the meanings assigned to them in
that certain Amended Credit and Financing Support Agreement (the "Agreement")
dated as of August 12, 1994, executed by MI and F/H/S.
RECITALS:
A. On even date herewith, MI and Physicians Visiting Nurse
Service, Inc., a wholly-owned subsidiary of MI ("PVNS"), have
borrowed from the Bank the aggregate sum of $5,200,000, as
evidenced by that certain promissory note executed by MI and
delivered to the Bank in the principal amount of $3,625,000
(the "Note"), and that certain promissory note executed by
PVNS and delivered to the Bank in the principal amount of
$1,575,000 (the "Other Note"), the proceeds of which were used
to refinance the current outstanding balances of the Bank
Notes.
B. F/H/S, the Bank, MI and PVNS have each executed a Collateral
Maintenance Agreement of even date herewith (the "Collateral
Agreement"), pursuant to which F/H/S has pledged certain
assets to secure repayment of the Note and the Other Note.
C. MI and F/H/S desire to amend certain terms of the Preferred
Warrants and to further amend the Agreement to reflect the
refinancing of the Bank Notes with the Note and the Other
Note.
1
AGREEMENT:
1. TERMS OF THE PREFERRED WARRANTS. Upon demand by F/H/S, and
surrender by F/H/S of the Second Amended Preferred Warrant Certificate, MI will
deliver to F/H/S a replacement certificate, duly executed by MI, in the form of
Exhibit "E" attached hereto.
2. RIGHTS AND PRIVILEGES OF CLASS A PREFERRED
STOCK. Section 3 of the Agreement is deleted in its entirety and replaced
with the following:
"3. RIGHTS AND PRIVILEGES OF CLASS A PREFERRED STOCK.
Upon demand by F/H/S, the Board of Directors will adopt, and
MI will file with the Secretary of State of the State of
Delaware, a Statement of Designations relating to the Class A
Preferred Stock in the form of Exhibit `F' attached hereto."
3. AGREEMENT TO RENEGOTIATE THE BANK NOTES. F/H/S
hereby agrees and consents to MI's renegotiation of the terms of the Bank
Notes so as to extend the maturity dates thereof, as reflected in the Note and
the Other Note. MI agrees that so long as the Collateral Agreement remains in
force, MI will not renegotiate the terms of the Note or the Other Note so as to
extend the maturity dates thereof or increase the obligations of MI thereunder.
4. REMAINDER OF AGREEMENT. Except as set forth above,
all of the terms and conditions of the Agreement remain in full force and
effect and will not be deemed to be waived or modified hereby.
5. SEVERABILITY. The invalidity or unenforceability
of any provision of this Amendment shall not invalidate or effect the
enforceability of any other provision of this Amendment or the Agreement.
2
6. GOVERNING LAW. This Amendment has been executed
in 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
applicable in the State of Texas.
7. COUNTERPARTS. This Amendment may be executed in
multiple counterparts, each of which shall have the force and effect of an
original, and all of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, each of the parties hereto has executed or
caused this Amendment to be executed on its behalf by its duly authorized
officer, as appropriate, as of the day and year first above written.
MEDICAL INNOVATIONS, INC.
By: /s/ THOMAS KALED
Thomas Kaled, Executive Vice President
/s/ MARK H. FISHER
Mark H. Fisher
/s/ HARVEY R. HOUCK
Harvey R. Houck
/s/ JOHN SCHURWON
John Schurwon
3
EXHIBIT E
THE WARRANTS REPRESENTED HEREBY AND ANY SHARES OF COMMON STOCK ISSUABLE UPON
EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND ARE "RESTRICTED SECURITIES" AS THAT TERM IS DEFINED IN
RULE 144 UNDER THE ACT. THE WARRANTS REPRESENTED HEREBY AND ANY SHARES OF COMMON
STOCK ISSUABLE UPON EXERCISE HEREOF MAY NOT BE OFFERED FOR SALE, SOLD OR
OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS UNDER THE ACT, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO
THE SATISFACTION OF THE COMPANY.
THIRD AMENDED AND RESTATED
WARRANT AGREEMENT AND CERTIFICATE
FOR THE PURCHASE OF SHARES OF CLASS A PREFERRED STOCK,
PAR VALUE $100.00 PER SHARE
OF
MEDICAL INNOVATIONS, INC.
(A DELAWARE CORPORATION)
In amendment, restatement and replacement of that certain Second
Amended and Restated Warrant Agreement and Certificate dated to be effective
June 6, 1994, and in consideration of ten dollars ($10.00) and other good and
valuable consideration received from Harvey R. Houck, Jr., Trustee under that
certain Voting Trust and Agency Agreement dated June 28, 1993 by and among
Harvey H. Houck, Jr., Mark H. Fisher and John Schurwon ("Holder"), by MEDICAL
INNOVATIONS, INC., a Delaware corporation (the "Company"), the Company hereby
grants to Holder one (1) Warrant (the "Warrant"), exercisable to purchase one
hundred (100) shares of Class A Preferred Stock, $100.00 par value per share, of
the Company (the "Preferred Stock"), on the terms set forth in this Third
Amended and Restated Warrant Agreement and Certificate (the "Agreement").
1. NUMBER OF SHARES OF PREFERRED STOCK AND EXERCISE PRICE OF THE
WARRANT. The Warrant evidenced hereby shall be exercisable to purchase one
hundred (100) shares of Preferred Stock at $100.00 per share (the "Exercise
Price").
2. EXERCISE PERIOD OF THE WARRANT. The Warrant shall be exercisable
during the Exercise Period. For purposes of this Agreement, the term "Exercise
Period" shall mean that period commencing on the first to occur of (i) the 5th
business day following the date, if any, that a default occurs under that
certain Collateral Maintenance Agreement dated March 15, 1996 by and among Texas
Commerce Bank National Association (the "Bank"), the Company, Mark H. Fisher,
Sheryl W. Fisher, Harvey R. Houck, Jr. and John Schurwon (the Collateral
Agreement"), or (ii) the date, if any, that the Bank liquidates any of the
collateral described in the Collateral Agreement. The Exercise Period shall
continue until the first date on which both (a) the aggregate outstanding and
unpaid balance of the Note (as such term is defined in the Collateral Agreement)
and that certain $1,000,000 promissory note, dated June 29, 1993, issued by the
Company to the former shareholders of Physicians Visiting Nurse Service, Inc.
(the "PVNS Note"), when added to the principal amount of the Other Note (as such
term is defined in the Collateral Agreement), is less than one million one
hundred seventy-five thousand dollars ($1,175,000), and (b) the Company is not
in default under the Note or the Other Note.
3. METHOD OF EXERCISE, MEDIUM AND TIME OF PAYMENT.
(a) The Warrant represented hereby may be exercised at any
time during the Exercise Period.
(b) Exercise of the Warrant represented hereby shall be by
written notice to the Treasurer of the Company and shall be accompanied by
payment in full of the Exercise Price together with any written statements
reasonably required by the Company in order to fulfill its obligations under any
applicable securities laws.
(c) The Exercise Price shall be paid in cash or by cashier's
check.
4. NO STOCKHOLDER RIGHTS CONFERRED BY THE WARRANT REPRESENTED HEREBY.
The Holder will not have any rights to dividends or any other rights of a
stockholder with respect to any shares of Preferred Stock underlying the Warrant
represented hereby until such shares shall have been issued to the Holder (as
evidenced by the records of the transfer agent of the company) upon purchase of
such shares through exercise of the Warrant represented hereby.
5. RESTRICTED SECURITIES. The Holder understands that the Warrant
represented hereby are not registered under the Securities Act of 1933, as
amended (the "Act") and that the Company has no obligation to register the
shares of Preferred Stock subject hereto and issuable upon the exercise hereof
under the Act. The Holder represents that the Warrant represented hereby is
being acquired by it and that upon exercise hereof, unless a registration
statement covering the shares underlying the Warrant is then in effect, the
underlying shares of Preferred Stock will be acquired by it for investment and
all certificates for the shares issued upon exercise of the Warrant represented
hereby will bear the following legend unless such shares are registered under
the Act prior to their issue.
The shares represented by this certificate have not been registered
under the Securities Act of 1933 (the "Act"), and are "restricted
securities" as that term is defined in Rule 144 under the Act. The
shares may not be offered for sale, sold or otherwise transferred
except pursuant to an effective registration statement under the Act or
pursuant to an exemption from registration under the Act.
-2-
6. BENEFITS OF AGREEMENT. This Agreement will be binding upon each
successor and/or assignee of the Company and each successor of the Holder.
IN WITNESS WHEREOF, this Agreement has been duly executed by the
Company and Holder to be effective as of March 15, 1996.
MEDICAL INNOVATIONS, INC.
By:_________________________________
Thomas J. Kaled,
Executive Vice President
The undersigned Holder understands the terms of this Agreement and
hereby agrees to comply therewith.
------------------------------------
HARVEY R. HOUCK, TRUSTEE under
that certain Voting Trust and
Agency Agreement dated June 28,
1993 by and between Harvey R.
Houck, Jr., Mark H. Fisher and
John Schurwon
Address: P.O. Box 22011
Houston, Texas 77227
-3-
EXHIBIT F
STATEMENT OF DESIGNATIONS
FOR THE
CLASS A PREFERRED STOCK
OF
MEDICAL INNOVATIONS, INC.
* * * * *
PURSUANT to the provisions of Section 151 of the Delaware
General Corporation Law, the undersigned corporation (the "Corporation") makes
the following statement:
FIRST: The name of the Corporation is MEDICAL INNOVATIONS,
INC.
SECOND: Set forth below is a copy of the resolution of the
Board of Directors of the Corporation (the "Resolution") establishing and
designating the Corporation's Preferred Stock, $100.00 par value, Class A (the
"Class A Stock"), and determining the preferences, limitations and relative
rights of the Class A Stock:
"RESOLVED, that pursuant to the authority expressly
granted and vested in the Board of Directors of the
Corporation in accordance with Article Fourth of its
Certificate of Incorporation, the issuance of one hundred
(100) shares of the Class A Stock upon the exercise of that
certain Third Amended and Restated Warrant Agreement and
Certificate for the Purchase of Shares of Class A Stock, dated
__________, 199_, is hereby in all respects authorized,
adopted, ratified, confirmed and approved, with such Class A
Stock having the designations, preferences, limitations and
relative rights, set forth below:
A. VOTING RIGHTS:
1. So long as the aggregate outstanding and unpaid
balance of the Note, as such term is defined in Amendment No. 1 to Amended
Credit and Financing Support Agreement, dated March 15, 1996, by and among the
1
Corporation, Mark H. Fisher, Harvey R. Houck, Jr., and John Schurwon (the
"Amendment"), and that certain $1,000,000 note, dated June 29, 1993, issued by
the Corporation to the former shareholders of Physicians Visiting Nurse Service,
Inc. (the "PVNS Note"), when added to the principal amount of the Other Note, as
such term is defined in the Amendment, is equal to or exceeds an aggregate
amount of three million six hundred twenty-five thousand dollars
($3,625,000.00), the holders of the Class A Stock of the Corporation, voting
separately as a class, shall be entitled to elect seven (7) directors of the
Corporation and the holders of the Common Stock, voting separately as a class,
shall be entitled to elect six (6) directors of the Corporation. So long as the
aggregate outstanding and unpaid balance of the Note and the PVNS Note, when
added to the principal amount of the Other Note, is less than an aggregate
amount of three million six hundred twenty-five thousand dollars
($3,625,000.00), the holders of the Class A Stock of the Corporation, voting
separately as a class, shall be entitled to elect three (3) directors of the
Corporation and the holders of the Common Stock, voting separately as a class,
shall be entitled to elect six (6) directors of the Corporation. The right of
the holders of the Class A Stock of the Corporation shall continue so long as
there are any shares of Class A Stock issued and outstanding.
2. The right of the holders of the Preferred Stock with
respect to the election of directors of the Corporation may be exercised at any
annual meeting of shareholders, or, within the limitations hereinafter provided,
at a special meeting of shareholders held for such purpose. If the date on which
such right of the holders of the Preferred Stock shall become vested shall be
more than thirty (30) days preceding the date of the next annual meeting of
shareholders as fixed by the bylaws of the Corporation, the President of the
Corporation shall, within five (5) days after delivery to the Corporation at its
principal office of a request to such effect signed by the holders of at least
fifty percent (50%) of the Preferred Stock then outstanding, call a special
meeting of the holders of the Preferred Stock and of the Common Stock to be held
within twenty (20) days after the delivery of such request for the purpose of
electing a new Board of Directors to serve until the next annual meeting and
until their successors shall be elected and shall qualify. Notice of such
meeting shall be mailed to each shareholder not less than ten (10) nor more than
fifty (50) days prior to the date of such meeting. The term of office of all
directors of the Corporation shall terminate at the time of any such meeting
held for the purpose of electing a new Board of Directors, notwithstanding that
the term for which such directors had been elected shall not then have expired.
In the event that at any such meeting at which the holders of the Preferred
Stock shall be entitled to elect directors, a quorum, as defined in
Sub-paragraph 3 hereof, of the holders of such Preferred Stock shall not be
present in person or by proxy, the holders of the Common Stock, if a quorum
thereof be present, may temporarily elect the directors whom the holders of the
Preferred Stock were entitled but failed to elect, such directors to be
designated as having been so elected and their term of office to expire at such
time thereafter as their successors shall be elected by the holders of the
Preferred Stock as herein provided. Whenever the holders of Preferred Stock have
been entitled to elect directors, any such holder shall have the right, during
regular business hours, in person or by a duly
2
authorized representative, to examine and to make transcripts of the stock
records of the Corporation for the Preferred Stock for the purpose of
communicating with other holders of such Preferred Stock with respect to the
exercise of such right of election.
3. At any annual or special meeting of stockholders held
for the purpose of electing directors of the Corporation when the holders of the
Preferred Stock shall be entitled to elect directors, the presence in person or
by proxy of the holders of a majority of the outstanding Preferred Stock shall
be required to constitute a quorum for the election by such class of such
directors, and the presence in person or by proxy of the holders of a majority
of the outstanding Common Stock shall be required to constitute a quorum for the
election by such class of the remaining directors or for the election
temporarily by such class as herein provided for the members of the Board of
Directors whom the holders of the Preferred Stock cannot at the time, for the
want of a quorum, elect; provided, however, that the majority of the holders of
any such class of shares who are present in person or by proxy shall have power
to adjourn such meeting for the election of directors by such class from time to
time, for a period of less than five (5) days, without notice other than
announcement at the meeting. No delay or failure by the holders of either such
class of capital stock to elect the members of the Board of Directors whom such
holders are entitled to elect shall invalidate the election of the remaining
members of the Board of Directors by the holders of the other such class of
capital stock.
4. If, during any interval between annual meetings of
shareholders for the election of directors and while the holders of the
Preferred Stock shall be entitled to elect directors, the number of directors in
office who have been elected by the holders of the Preferred Stock or the Common
Stock, as the case may be, shall, by reason of resignation, death, or removal,
be less than the total number of directors subject to election by the holders of
shares of such class:
(a) The vacancy or vacancies in the directors elected by
the holders of such class shall be filled by a
majority vote of the remaining directors then in
office, although less than a quorum, on nomination by
a majority of the remaining directors elected by the
holders of such class or their successors, or by the
sole remaining director elected by the holders of
such class or succeeding a director so elected; and
(b) If not so filled within five (5) days after the
creation thereof, the President of the Corporation
shall call a special meeting of the holders of the
shares of such class and such vacancy or vacancies
shall be filled at such special meeting.
5. Any director may be removed from office by vote of
the holders of a majority of the shares of the class of capital stock by which
his
3
successor would be elected. A special meeting of the holders of shares of
such class may be called by a majority vote of the Board of Directors for the
purpose of removing a director in accordance with the provisions of this
subparagraph. The President of the Corporation shall, in any event, within five
(5) days after delivery to the Corporation at its principal office of a request
to such effect signed by the holders of at least fifty percent (50%) of the
outstanding shares of such class, call a special meeting for such purpose to be
held within twenty (20) days after the delivery of such request.
6. While any Preferred Stock of any series are
outstanding, the Corporation, without first obtaining the consent, either
expressed in writing or by affirmative vote at a meeting called for that
purpose, of the holders of at least two-thirds of the total number of shares of
all series of Preferred Stock then outstanding, as a class, shall not:
(a) Change, amend, or repeal any of the provisions
applicable to the Preferred Stock which would
adversely affect the preferences, voting power, or
other rights of the Preferred Stock; and
(b) Increase the presently authorized number of shares of
Preferred Stock, or authorize any stock (or any
security convertible into such stock) ranking on a
parity with the Preferred Stock; provided, however,
that the foregoing shall not be deemed or construed
to limit the right of the Corporation to authorize a
new series of Preferred Stock for the purpose of
redeeming or retiring all of the outstanding shares
of another series of Preferred Stock.
B. REDEMPTION. At any time after the aggregate
outstanding and unpaid balance of the Note and the PVNS Note, when added to the
principal amount of the Other Note, is less than one million one hundred
seventy-five thousand dollars ($1,175,000), the Corporation shall have the right
to redeem all or any of the issued shares of Class A Stock of the Corporation by
paying the holder or holders thereof the par value of such shares."
THIRD: The Resolution was adopted by the Board of Directors of
the Corporation on __________, 199_.
FOURTH: The Resolution was duly adopted by all necessary
action on the part of the Corporation.
DATED: __________, 199_.
MEDICAL INNOVATIONS, INC.
By:
Mark H. Fisher, President
4
EXHIBIT 10.13(b)
FOURTH AMENDMENT TO CREDIT AGREEMENT
THIS FOURTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment") dated
effective as of March 15, 1996 (the "Effective Date"), is by and between MEDICAL
INNOVATIONS, INC., a Delaware corporation, MEDICAL INNOVATIONS, INC. OF NEW
JERSEY, a Delaware corporation, MEDICAL INNOVATIONS (TEXAS), INC., a Texas
corporation, THE GREAT EASTERN NURSING CORP., a Texas corporation, NURSES PRN OF
VIRGINIA, INC., a Texas corporation, NURSING INNOVATIONS, INC. a Texas
corporation, MEDICAL INNOVATIONS OF VIRGINIA, INC, a Texas corporation and
PHYSICIAN'S VISITING NURSE SERVICE, INC., a Texas corporation (singly, a
"Borrower" and collectively, "Borrowers"), and TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, a national banking association whose principal office is located in
Houston, Texas (the "Bank").
PRELIMINARY STATEMENT
The Bank and the Borrower have entered into a Credit Agreement (with
Borrowing Base) dated as of March 23, 1994 as amended by that certain First
Amendment to Credit Agreement (with Borrowing Base) dated as of June 30, 1994,
by that certain Second Amendment to Credit Agreement (with Borrowing Base) dated
as of August 31, 1994 and as amended by that certain Third Amendment to Credit
Agreement (with Borrowing Base) dated as of December 22, 1994 (the "Credit
Agreement"). The "Agreement", as used in the Credit Agreement, shall also refer
to the Credit Agreement as amended by this Amendment. All capitalized terms
defined in the Credit Agreement and not otherwise defined herein shall have the
same meanings herein as in the Credit Agreement. The Bank and the Borrowers have
agreed to amend the Credit Agreement to the extent set forth herein, and in
order to, among other things, renew, modify and extend the Commitment and to
delete the Borrowing Base provisions from the Agreement.
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the parties hereto, the Bank and the Borrower hereby agree as
follows:
I. REVOLVING CREDIT NOTE. Section 1.1 of the Credit Agreement is
amended by substituting the following for the Section 1.1 of the Credit
Agreement:
"Subject to the terms and conditions hereof, the Bank agrees to make
loans ("Loan" or "Loans") to any Borrower from time to time before the
Termination Date, not to exceed at any one time outstanding for all
Borrowers $600,000.00 (the "Commitment"), each Borrower having the
right to borrow, repay and reborrow. Each Loan shall be in an amount
not less than $10,000.00 or the balance of the Commitment, whichever is
less and each repayment shall be in an amount of not less than
$10,000.00 or the principal balance of the Note, whichever is less. The
Bank and the Borrowers agree that Chapter 15 of the Texas Credit Code
shall not apply to this Agreement, the Note or any Loan. The Loans
shall be evidenced by and shall bear interest and be payable as
provided in the promissory note of Borrowers dated the Effective Date
(together with any and all renewals, extensions, modifications,
replacements, and rearrangements thereof and substitutions therefor,
the "Note") which is given in renewal, modification and extension of
that certain promissory note dated December 22, 1994 in the original
principal amount of $600,000.00 (including all prior notes of which
said note represents a renewal, extension, modification, increase,
substitution, rearrangement or replacement thereof, the "Renewed
Note"). The parties hereto agree that there is as of the Effective Date
an outstanding principal balance of $400,000.00 under the Note leaving
a balance as of the Effective Date of $200,000.00 under the Commitment
available for Loans subject to the terms and conditions of this
Agreement. The "Note" as used in the Credit Agreement shall also refer
to the "Note" as used in this Amendment. The purpose of the Loans is to
support working capital for the Borrowers."
II. The Credit Agreement is amended by deleting therefrom Sections 1.2,
1.3, 1.4 and 1.5 in their entirety.
III. Sections 1.6 through 1.9 of the Agreement are amended by
redesignating the same as Sections 1.3, 1.4, 1.5, 1.6 and 1.7, respectively.
IV. Section 1.7 of the Credit Agreement is amended by substituting the
following for the Section 1.7 of the Credit Agreement.
"CONFIRMATION AND AMENDMENT OF SECURITY INTERESTS SECTION 1.7. Each
Borrower confirms and ratifies each of the liens, security interests
and other interests granted in each and all security agreements
executed in connection with, related to, or securing the Renewed Note
as extending to and securing the Loans and the Notes including but not
limited to each of those interests and liens described in the following
listed Security Agreements. Each Borrower further agrees and
acknowledges that the terms "secured indebtedness" and "indebtedness
secured hereby" as used in any security agreement including any
supplemental security agreements executed in connection with or related
to, or securing the Renewed Note, or any other indebtedness of Borrower
to Bank, including but not limited to the following security agreements
executed by Borrower and delivered to Bank: Security Agreement -
Accounts and General Intangibles executed by Medical Innovations of
Virginia, Inc. dated March 28, 1994; Security Agreement
Page 1 of 4 Pages
- Accounts and General Intangibles executed by Medical Innovations
(Texas), Inc. dated March 28, 1994; Security Agreement - Accounts and
General Intangibles executed by Nursing Innovations, Inc. dated March
28, 1994; Security Agreement - Accounts and General Intangibles
executed by The Great Eastern Nursing Corp. dated March 28, 1994;
Security Agreement - Accounts and General Intangibles executed by
Medical Innovations, Inc. of New jersey dated March 28, 1994; Security
Agreement - Accounts and General Intangibles executed by Nurses PRN of
Virginia, Inc. dated March 28, 1994; Security Agreement - Accounts and
General Intangibles executed by Physician's Visiting Nurse Service,
Inc. dated March 28, 1994; and Security Agreement executed by Medical
Innovations, Inc., including any Supplemental Security Agreements
supplementing any of the foregoing, and any other security agreements
previously executed by Borrower and delivered to Bank and not released
by Bank and all security agreements executed as of the Effective Date
(each and all "Security Agreements") include, but are not limited to,
each and all indebtedness of all character and kind related to or
evidenced by the Renewed Note, the Note and related to the Loan
Documents. The parties hereto agree to amend the Security Agreements as
follows: (1) representation and warranty (a) on page 1 of the Security
Agreements is deleted therefrom in its entirety; (2) ss.4.1(g) of the
Security Agreements is amended by adding the following to the end of
ss.4.1(g): "except for in the normal course of business;" (3) ss.4.1(l)
of the Security Agreements is amended by adding the following to the
end of ss.4.1(l): "except for in the normal course of business;" and
(4) ss.4.1(n) of the Security Agreements is amended by deleting
therefrom the words: "and its proceeds." The Note is further secured by
each of the Continuing Guaranties dated December 22, 1994 executed by
each of Harvey R. Houck, and Mark H. Fisher and delivered to Bank."
V. Section 2.1 of the Credit Agreement is amended by substituting the
following for Section 2.1 of the Credit Agreement:
"ALL LOANS 2.1 Bank is not obligated to make any Loan unless: (a) Bank
has received the following, duly executed and in Proper Form: (1) a
Request for Loan, substantially in the form of EXHIBIT A, not later
than one (1) Business Day before the date (which shall also be a
Business Day) of the proposed Loan; provided however, Bank may accept
and act upon verbal advance requests received from Borrower's
representative reasonably believed by Bank to be authorized to make
such requests; and (2) such other documents as Bank reasonably may
require; (b) no Event of Default exists; and (c) the making of the Loan
is not prohibited by, or subjects Bank to any penalty or onerous
condition under any Legal Requirement."
VI. Section 4.3 of the Credit Agreement is amended by substituting the
following for the Section 4.3 of the Credit Agreement.
"FINANCIAL INFORMATION: Furnish to the Bank one copy of each of the
following: (i) for Medical Innovations, Inc.: (a) as soon as available and in
any event within 90 days after the end of each fiscal year of Medical
Innovations, Inc., Medical Innovations, Inc.'s annual financial statements,
prepared in conformity with GAAP and accompanied by a report and opinion of
independent certified public accountants satisfactory to the Bank; (b) as soon
as available and in any event within 45 days after the end of each month, the
consolidated financial statements of Medical Innovations, Inc. for such period,
and for the year to date, prepared in conformity with GAAP accompanied by
computations and workpapers to establish compliance or noncompliance with the
financial covenants set forth on Annex III; (c) copies of special audits,
studies, reports and analysis prepared for the management of any Borrower by
outside parties; and (d) promptly after such request is submitted to the
appropriate Governmental Authority, any request for waiver of funding standards
or extensions of amortization periods with respect to any employee benefit plan;
(ii) for guarantors, no later than 15 days after request therefor by the Bank,
and no later than April 30 of each year, the personal financial statement of
such guarantor, in form and containing such information and detail as is
satisfactory to the Bank; and (iii) for all Borrowers or guarantors, such
information relating to the financial condition and affairs of the Borrowers or
guarantors and their Subsidiaries as from time to time may be requested by the
Bank in its discretion."
VII. Section 8. Definitions. Subsection (a) of the definition of
Termination Date in the Credit Agreement is hereby amended by replacing "(a)
March 31, 1996; or" with "(a) April 15, 1997; or."
VIII. EXHIBIT A of the Credit Agreement is hereby amended by replacing
prior EXHIBIT A with the EXHIBIT A attached hereto and hereby incorporated into
this Amendment and the Credit Agreement for all purposes.
IX. The Credit Agreement is hereby amended by deleting therefrom EXHIBIT
B in its entirety.
X. ANNEX I of the Credit Agreement is hereby amended by replacing prior
ANNEX I with the ANNEX I attached hereto and hereby incorporated into this
Amendment and the Credit Agreement for all purposes.
XI. The Borrowers hereby represent and warrant to the Bank that after
giving effect to the execution and delivery of this Amendment: (a) the
representations and warranties set forth in the Credit Agreement are true and
correct on the date hereof as though made on and as of such date; and (b) no
Event of Default, or event which with passage of time, the giving of notice or
both would become an Event of Default, has occurred and is continuing as of the
date hereof.
Page 2 of 4 Pages
XII. This Amendment shall become effective as of the Effective Date upon
its execution and delivery by each of the parties named in the signature lines
below, and the "Agreement" as used in the Credit Agreement shall also refer to
the Credit Agreement as amended by this Amendment.
XIII. The Borrowers further acknowledge that each of the other Loan
Documents is in all other respects ratified and confirmed, and all of the
rights, powers and privileges created thereby or thereunder are ratified,
extended, carried forward and remain in full force and effect except as the
Credit Agreement is amended by this Amendment.
XIV. This Amendment may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed an original and all of which taken together shall
constitute but one and the same agreement.
XV. This Amendment shall be included within the definition of "Loan
Documents" as used in the Agreement.
XVI. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF TEXAS AND AS APPLICABLE, THE LAWS OF THE UNITED
STATES OF AMERICA.
THIS WRITTEN AMENDMENT AND THE OTHER LOAN DOCUMENTS CONSTITUTE A "LOAN
AGREEMENT" AS DEFINED IN SECTION 26.02(A) OF THE TEXAS BUSINESS & COMMERCE CODE,
AND 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 UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed
effective as of the Effective Date.
BORROWER: MEDICAL INNOVATIONS, INC.
By: /S/ MARK H. FISHER
Name: Mark H. Fisher
Title: President
Address: One Riverway, Suite 2300, Houston, Texas 77056
BORROWER: MEDICAL INNOVATIONS, INC. OF NEW JERSEY
By: /s/ MARK H. FISHER
Name: Mark H. Fisher
Title: President
Address: One Riverway, Suite 2300, Houston, Texas 77056
BORROWER: MEDICAL INNOVATIONS (TEXAS), INC.
By: /s/ MARK H. FISHER
Name: Mark H. Fisher
Title: President
Address: One Riverway, Suite 2300, Houston, Texas 77056
BORROWER: MEDICAL INNOVATIONS OF VIRGINIA, INC.
Page 3 of 4 Pages
By: /s/ MARK H. FISHER
Name: Mark H. Fisher
Title: President
Address: One Riverway, Suite 2300, Houston, Texas 77056
BORROWER: THE GREAT EASTERN NURSING CORP.
By: /s/ MARK H. FISHER
Name: Mark H. Fisher
Title: President
Address: One Riverway, Suite 2300, Houston, Texas 77056
BORROWER: NURSES PRN OF VIRGINIA, INC.
By: /s/ MARK H. FISHER
Name: Mark H. Fisher
Title: President
Address: One Riverway, Suite 2300, Houston, Texas 77056
BORROWER: NURSING INNOVATIONS, INC.
By: /s/ MARK H. FISHER
Name: Mark H. Fisher
Title: President
Address: One Riverway, Suite 2300, Houston, Texas 77056
BORROWER: PHYSICIAN'S VISITING NURSE SERVICE, INC.
By: /s/ MARK H. FISHER
Name: Mark H. Fisher
Title: President
Address: 7999 Gladys, Beaumont, Texas 77706
BANK: TEXAS COMMERCE BANK NATIONAL ASSOCIATION
By: /s/ GARY WHITT
Name: Gary Whitt
Title: VP
Address:
Page 4 of 4 Pages
EXHIBIT A
REQUEST FOR LOAN
LETTERHEAD OF BORROWER
Texas Commerce Bank National Association
[branch address]
Re: Request for Loan under Agreement
Attention: GARY WHITT
Gentlemen:
This letter confirms our oral or telephonic request of , 19 , for a Loan in
accordance with that certain Credit Agreement (as amended, restated and
supplemented from time to time, the "Agreement") dated as of March 23, 1994
between you and us. Any term defined in the Agreement and used in this letter
has the same meaning as in the Agreement.
The proposed Loan is to be in the amount of $ and is to be made on , 19 ,
which is a Business Day at least one (1) Business Day after the date of this
letter. The proceeds of the proposed Loan should be (check one:) [ ] deposited
into account number with the Bank; or [ ]_____________________________________.
The undersigned hereby certifies that:
(1) The representations and warranties made by the Borrower or by any
other Person in the Agreement and the other Loan Documents are
true and correct on and as of this date as though made on this
date.
(2) The proposed Loan complies with all applicable provisions of the
Agreement.
(3) No Event of Default has occurred and is continuing.
Sincerely,
BORROWER:
By:
Name:
Title:
EXHIBIT A Page 1 of 1
ANNEX I
LOAN DOCUMENTS
"Loan Documents" includes, but is not limited to, the following:
1. Agreement
2. Note
3. [ ] Assignment covering:
[ ] Life insurance
[ ] Deposit account
[ ] Other (specify)
4. Compliance Certificate
5. |X| Security Agreements, in Proper Form, covering:
|X| Accounts and general intangibles
[ ] Equipment
[ ] Inventory
[ ] Securities
[ ] Secured note
[ ] Certificate of deposit or deposit account
[ ] Partnership interest
[ ] Rights under contract
[ ] Other (specify)
6. [ ] Deed of Trust covering the real property described on the Real
Property Addendum, attached hereto.
7. [ ] Title Insurance Policy
8. |X| Financing Statements
9. |X| Guaranty by each of: HARVEY R. HOUCK, JR.; MARK H. FISHER
10. |X| Certificate of Account Status
11. [ ] Opinion of Borrower' Counsel
12. |X| Certified Copies of Organizational and Authority Documents
13. [ ] Insurance policies and certificates
14. [ ] Subordination Agreement covering: [ ] debt to:
[ ] lien of:
15. |X| Financial Statements of: BORROWER; HARVEY R. HOUCK, JR.; MARK H.
FISHER
16. |X| UCC search
17. [ ] Regulation U Purpose Statement (U-1)
Loan Documents -- ANNEX I Page 1 of 1
EXHIBIT 10.13(c)
FOURTH AMENDMENT TO CREDIT AGREEMENT
THIS FOURTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment") dated
effective as of March 15, 1996 (the "Effective Date"), is by and between
PHYSICIAN'S VISITING NURSE SERVICE, INC., a Texas corporation (the "Borrower"),
and TEXAS COMMERCE BANK NATIONAL ASSOCIATION, a national banking association
whose principal office is located in Houston, Texas (the "Bank").
PRELIMINARY STATEMENT
The Bank and the Borrower have entered into a Credit Agreement (with
Borrowing Base) dated as of March 23, 1994, as amended by that certain First
Amendment to Credit Agreement (with Borrowing Base) dated as of June 30, 1994,
by that certain Second Amendment to Credit Agreement (with Borrowing Base) dated
as of August 31, 1994 and as amended by that certain Third Amendment to Credit
Agreement (with Borrowing Base) dated as of December 22, 1994 (the "Credit
Agreement"). The "Agreement", as used in the Credit Agreement, shall also refer
to the Credit Agreement as amended by this Amendment. All capitalized terms
defined in the Credit Agreement and not otherwise defined herein shall have the
same meanings herein as in the Credit Agreement. The Bank and the Borrower have
agreed to amend the Credit Agreement to the extent set forth herein, and in
order to, among other things, renew, extend, modify, and consolidate the
Commitment with two other revolving loans to Borrower and to delete the
Borrowing Base provisions from the Agreement.
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the parties hereto, the Bank and the Borrower hereby agree as
follows:
1. REVOLVING CREDIT NOTE. Section 1.1 of the Credit Agreement is
amended by substituting the following for the Section 1.1 of the Credit
Agreement:
"Subject to the terms and conditions hereof, the Bank agrees to make
loans ("Loan" or "Loans") to Borrower from time to time before the
Termination Date, not to exceed at any one time outstanding
$3,950,000.00 (the "Commitment"), Borrower having the right to borrow,
repay and reborrow. Each Loan shall be in an amount not less than
$10,000.00 or the balance of the Commitment, whichever is less and each
repayment shall be in an amount of not less than $10,000.00 or the
principal balance of the Note, whichever is less. The Bank and the
Borrower agree that Chapter 15 of the Texas Credit Code shall not apply
to this Agreement, the Note or any Loan. The Loans shall be evidenced
by and shall bear interest and be payable as provided in the promissory
note of Borrower dated the Effective Date (together with any and all
renewals, extensions, modifications, replacements, and rearrangements
thereof and substitutions therefor, the "Note") which is given in
renewal, modification, extension, and consolidation of that certain
promissory note dated December 22, 1994 in the original principal
amount of $1,950,000.00, that certain promissory note dated November 1,
1995 in the original principal amount of $1,000,000.00, and that
certain promissory note dated January 31, 1996 in the original
principal amount of $1,000,000.00, (including all prior notes of which
said notes represent a renewal, extension, modification, increase,
substitution, rearrangement or replacement thereof, the "Renewed
Note"). The parties hereto agree that there is as of the Effective Date
an outstanding principal balance of $2,450,000.00 under the Note
leaving a balance as of the Effective Date of $1,500,000 under the
Commitment available for Loans subject to the terms and conditions of
this Agreement. The "Note" as used in the Credit Agreement shall also
refer to the "Note" as used in this Amendment. The purpose of the Loans
is to support Borrower's working capital."
2. The Credit Agreement is amended by deleting therefrom Sections 1.2,
1.3 and 1.4 in their entirety.
3. Sections 1.5 through 1.8 of the Agreement are amended by
redesignating the same as Sections 1.3, 1.4, 1.5, and 1.6, respectively.
4. Section 1.6 of the Credit Agreement is amended by substituting the
following for Section 1.6 of the Credit Agreement:
"CONFIRMATION AND AMENDMENT OF SECURITY INTERESTS SECTION 1.6. Borrower
confirms and ratifies each of the liens, security interests and other
interests granted in each and all security agreements executed in
connection with, related to, or securing the Renewed Note as extending
to and securing the Loans and the Note including but not limited to
each of those interests and liens described in the following listed
Security Agreements. Borrower further agrees and acknowledges that the
terms "secured indebtedness" and "indebtedness secured hereby" as used
in any security agreement including any supplemental security
agreements executed in connection with or related to, or securing the
Renewed Note, or any other indebtedness of Borrower to Bank, including
but not limited to the following security agreements executed by or for
the benefit of Borrower and delivered to Bank: Security Agreement -
Accounts and General Intangibles executed by Physician's Visiting Nurse
Service, Inc. dated June 17, 1994; Security Agreement - Accounts and
General Intangibles executed by Medical Innovations of Virginia, Inc.
dated June 17, 1994; Security Agreement - Accounts and General
Intangibles executed by Medical Innovations (Texas), Inc. dated June
17, 1994; Security Agreement - Accounts and General Intangibles
executed by The Great Eastern Nursing Corp. dated June 17, 1994;
Security Agreement - Accounts and General Intangibles executed by
Medical Innovations, Inc. dated June 17, 1994; Security Agreement -
Accounts and General Intangibles executed by Medical Innovations, Inc.
of New Jersey dated June 17, 1994; Security Agreement - Accounts and
General Intangibles executed by Nurses PRN of Virginia, Inc. dated June
17, 1994; and Security Agreement executed by Nursing Innovations, Inc.,
including any Supplemental Security Agreements supplementing any of the
foregoing, and any other security agreements previously executed by or
for the benefit of Borrower and delivered to Bank and not released by
Bank and all security agreements executed as of the Effective Date
(each and all "Security Agreements") include, but are not limited to,
each and all indebtedness of all character and kind related to or
evidenced by the Renewed Note, the Note and related to the Loan
Documents. The parties hereto agree to amend the Security Agreements as
follows: (1) representation and warranty (a) on page 1 of the Security
Agreements is deleted therefrom in its entirety; (2) ss.4.1(g) of the
Security Agreements is amended by adding the following to the end of
ss.4.1(g): "except for in the normal course of business;" (3) ss.4.1(l)
of the Security Agreements is amended by adding the following to the
end of ss.4.1(l): "except for in the normal course of business;" and
(4) ss.4.1(n) of the Security Agreements is amended by deleting
therefrom the words: "and its proceeds." The Note is further secured by
each of the Continuing Guaranties of even date herewith executed by
each of Harvey R. Houck, and Mark H. Fisher and delivered to Bank."
5. Section 2.1 of the Credit Agreement is amended by substituting the
following for Section 2.1 of the Credit Agreement:
"ALL LOANS 2.1 Bank is not obligated to make any Loan unless: (a) Bank
has received the following, duly executed and in Proper Form: (1) a
Request for Loan, substantially in the form of EXHIBIT A, not later
than one (1) Business Day before the date (which shall also be a
Business Day) of the proposed Loan; provided however, Bank may accept
and act upon verbal advance requests received from Borrower's
representative reasonably believed by Bank to be authorized to make
such requests; and (2) such other documents as Bank reasonably may
require; (b) no Event of Default exists; and (c) the making of the Loan
is not prohibited by, or subjects Bank to any penalty or onerous
condition under any Legal Requirement."
6. Section 4.3 of the Credit Agreement is amended by substituting the
following for Section 4.3 of the Credit Agreement:
"FINANCIAL INFORMATION 4.3 Furnish to the Bank one copy of each of the
following: (i) for Medical Innovations, Inc.: (a) as soon as available and in
any event within 90 days after the end of each fiscal year of Medical
Innovations, Inc., Medical Innovations, Inc.'s annual financial statements,
prepared in conformity with GAAP and accompanied by a report and opinion of
independent certified public accountants satisfactory to the Bank; (b) as soon
as available and in any event within 45 days after the end of each month, the
consolidated financial statements of Medical Innovations, Inc. for such period,
and for the year to date, prepared in conformity with GAAP accompanied by
computations and workpapers to establish compliance or noncompliance with the
financial covenants set forth on Annex III; (c) copies of special audits,
studies, reports and analysis prepared for the management of any Borrower by
outside parties; and (d) promptly after such request is submitted to the
appropriate Governmental Authority, any request for waiver of funding standards
or extensions of amortization periods with respect to any employee benefit plan;
(ii) for guarantors, no later than 15 days after request therefor by the Bank,
and no later than April 30 of each year, the personal financial statement of
such guarantor, in form and containing such information and detail as is
satisfactory to the Bank; and (iii) for all Borrowers or guarantors, such
information relating to the financial condition and affairs of the Borrowers or
guarantors and their Subsidiaries as from time to time may be requested by the
Bank in its discretion."
7. The Credit Agreement is amended by deleting therefrom Section 4.8 in
its entirety.
8. Section 8. Definitions. Subsection (1) of the definition of
Termination Date in the Credit Agreement is hereby amended by replacing "(a)
March 31, 1996; or" with "(a) April 15, 1997; or."
9. EXHIBIT A of the Credit Agreement is hereby amended by replacing
prior EXHIBIT A with the Exhibit A attached hereto and hereby incorporated into
this Amendment and the Credit Agreement for all purposes.
10. The Credit Agreement is hereby amended by deleting therefrom
EXHIBIT B in its entirety.
11. ANNEX I of the Credit Agreement is hereby amended by replacing
prior ANNEX I with the ANNEX I attached hereto and hereby incorporated into this
Amendment and the Credit Agreement for all purposes.
12. The Borrower hereby represents and warrants to the Bank that after
giving effect to the execution and delivery of this Amendment: (a) the
representations and warranties set forth in the Credit Agreement are true and
correct on the date hereof as though made on and as of such date; and (b) except
as previously disclosed to Bank in writing, no Event of Default, or event which
with passage of time, the giving of notice or both would become an Event of
Default, has occurred and is continuing as of the date hereof.
13. This Amendment shall become effective as of the Effective Date upon
its execution and delivery by each of the parties named in the signature lines
below, and the "Agreement" as used in the Credit Agreement shall also refer to
the Credit Agreement as amended by this Amendment.
14. The Borrower further acknowledges that each of the other Loan
Documents is in all other respects ratified and confirmed, and all of the
rights, powers and privileges created thereby or thereunder are ratified,
extended, carried forward and remain in full force and effect except as the
Credit Agreement is amended by this Amendment.
Page 2 of 3 Pages
15. This Amendment may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed an original and all of which taken together shall
constitute but one and the same agreement.
16. This Amendment shall be included within the definition of "Loan
Documents" as used in the Agreement.
17. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF TEXAS AND AS APPLICABLE, THE LAWS OF THE UNITED
STATES OF AMERICA.
18. WAIVER AGREEMENT. Pursuant to Section 4.8 of the Agreement,
Borrower agreed to make a principal prepayment on the Renewed Note in an amount
sufficient to bring the outstanding principal balance on the Renewed Note to not
more than Six Hundred Twenty Five Thousand Dollars ($625,000.00) for a period of
thirty (30) consecutive days at least one time prior to the maturity of this
Note. Borrower has informed Bank that Borrower is out of compliance with this
covenant. Although Borrower is in default under the Credit Agreement because of
the failure to comply with the above-referenced covenant as required, Bank is
electing to waive this specific default. This waiver does not constitute a
waiver of any other defaults that may currently exist or that may hereafter
occur, including but not limited to the above cited Section of the Agreement.
Bank's delay in exercising any of its rights under the Credit Agreement does not
constitute a waiver of any rights or interests of Bank except as specifically
agreed to in writing by Bank. This Section is not a general waiver of the
above-referenced covenant or any other requirements contained in the Agreement
or any other Loan Document. In the past Bank may have made advances under the
Commitment at times when Borrower did not satisfy all of the conditions
precedent to advances and/or because Borrower was in default under the Credit
Agreement. Bank has the right to refuse to fund an advance at any time that
Borrower is not in compliance with the terms of the Agreement. If Bank elects to
make any advance to Borrower while Borrower is out of compliance with the
Agreement, the making of such advances shall not constitute a waiver of any
defaults then existing or thereafter arising under the Agreement, and will not
constitute the agreement of Bank to make further advances in similar
circumstances. This Section constitutes the only evidence of Bank's waiver of
compliance with the above cited Section of the Credit Agreement.
THIS WRITTEN AMENDMENT AND THE OTHER LOAN DOCUMENTS CONSTITUTE A "LOAN
AGREEMENT" AS DEFINED IN SECTION 26.02(A) OF THE TEXAS BUSINESS & COMMERCE CODE,
AND 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 UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed effective as of the Effective Date.
BORROWER: PHYSICIAN'S VISITING NURSE SERVICE, INC.
By: /s/ MARK H. FISHER
Name: Mark H. Fisher
Title: President
Address: 7999 Gladys
Beaumont, Texas 77706
BANK: TEXAS COMMERCE BANK
NATIONAL ASSOCIATION
By: /s/ GARY WHITT
Name: Gary Whitt
Title: VP
Page 3 of 3 Pages
EXHIBIT A
REQUEST FOR LOAN
LETTERHEAD OF BORROWER
Texas Commerce Bank National Association
[branch address]
Re: Request for Loan under Agreement
Attention: GARY WHITT
Gentlemen:
This letter confirms our oral or telephonic request of , 19 , for a Loan in
accordance with that certain Credit Agreement (as amended, restated and
supplemented from time to time, the "Agreement") dated as of March 23, 1994
between you and us. Any term defined in the Agreement and used in this letter
has the same meaning as in the Agreement.
The proposed Loan is to be in the amount of $ and is to be made on , 19 ,
which is a Business Day at least one (1) Business Day after the date of this
letter. The proceeds of the proposed Loan should be (check one:) [ ] deposited
into account number with the Bank; or [ ]_____________________________________.
The undersigned hereby certifies that:
(1) The representations and warranties made by the Borrower or by any
other Person in the Agreement and the other Loan Documents are
true and correct on and as of this date as though made on this
date.
(2) The proposed Loan complies with all applicable provisions of the
Agreement.
(3) No Event of Default has occurred and is continuing.
Sincerely,
PHYSICIAN'S VISITING NURSE SERVICE, INC.
By:
Name:
Title:
EXHIBIT A Page 1 of 1
ANNEX I
LOAN DOCUMENTS
"Loan Documents" includes, but is not limited to, the following:
1. Agreement
2. Note
3. [ ] Assignment covering:
[ ] Life insurance
[ ] Deposit account
[ ] Other (specify)
4. Compliance Certificate
5 |X| Security Agreements, in Proper Form, covering:
|X| Accounts and general intangibles
[ ] Equipment
[ ] Inventory
[ ] Securities
[ ] Secured note
[ ] Certificate of deposit or deposit account
[ ] Partnership interest
[ ] Rights under contract
[ ] Other (specify)
6. [ ] Deed of Trust covering the real property described on the Real
Property Addendum, attached hereto.
7. [ ] Title Insurance Policy
8. |X| Financing Statements
9. |X| Guaranty by each of: HARVEY R. HOUCK, JR.; MARK H. FISHER
10. |X| Certificate of Account Status
11. [ ] Opinion of Borrower' Counsel
12. |X| Certified Copies of Organizational and Authority Documents
13. [ ] Insurance policies and certificates
14. [ ] Subordination Agreement covering: [ ] debt to:
[ ] lien of:
15. |X| Financial Statements of: BORROWER; HARVEY R. HOUCK, JR.;
MARK H. FISHER
16. |X| UCC search
17. [ ] Regulation U Purpose Statement (U-1)
Loan Documents -- ANNEX I Page 1 of 1
EXHIBIT 10.14
TERM PROMISSORY NOTE
(this "Note")
NAME AND ADDRESS OF MAKER:
MEDICAL INNOVATIONS, INC.
One Riverway, Suite 2300
Houston, Texas 77056
DATE: MATURITY DATE:
March 15, 1996 April 15, 1997 AMOUNT OF NOTE: $3,625,000.00
INTEREST CALCULATION BASIS: ACCOUNT NO.: NOTE NO.: RENEWAL CODE:
360 004-1101070 9003 R
INTEREST RATE (ANNUAL RATE OF INTEREST):
FIXED RATE OF THE LIBOR RATE PLUS ONE
TELLER: OFFICER: PERCENT (1)%, OR FLOATING RATE OF
VRL GXW THE PRIME RATE MINUS ONE PERCENT (1)%
FOR VALUE RECEIVED, on or before the Maturity Date, Maker promises to pay to
the order of Texas Commerce Bank National Association (the "Bank"), at its
office in Houston, Texas, in immediately available funds and lawful money of the
United States of America, the Amount of Note THREE MILLION SIX HUNDRED
TWENTY-FIVE THOUSAND AND NO/100THS DOLLARS ($3,625,000.00) or so much thereof as
may be advanced, plus interest on the unpaid Amount of Note from the date of
advance to the Maturity Date at the Interest Rate calculated on the basis of the
actual number of days elapsed and a year comprised of the number of days set
forth above under the Interest Calculation Basis, either 360 or 365 (and 366 as
the case may be), provided that if the Interest Calculation Basis is a 360 day
year for the actual number of days elapsed and such calculation would result in
a usurious interest rate, then in such event, interest shall be calculated on
the basis of a 365 or 366 day year, as the case may be, provided however, in no
event shall the Interest Rate exceed the Highest Lawful Rate. If the Interest
Rate is stated in terms of the Prime Rate and at any time would exceed the
Highest Lawful Rate, but for the limitation contained herein, the actual rate of
interest to accrue on the unpaid principal amount of this Note shall be limited
to the Highest Lawful Rate, but any subsequent reductions in the Prime Rate
shall not reduce the interest rate payable upon the unpaid Amount of Note below
the Highest Lawful Rate until such time as the total amount of interest accrued
on the unpaid principal amount of this Note equals the amount of interest which
would have accrued if the Interest Rate had at all times been in effect. The
"Highest Lawful Rate" means, on any day, the maximum nonusurious rate of
interest permitted for that day by whichever of applicable federal or Texas law
permits the higher interest rate, stated as a rate per annum. On each day, if
any, as Texas law shall establish the Highest Lawful Rate, the Highest Lawful
Rate shall be the "indicated rate ceiling" (as defined in the Texas Credit Code,
V.T.C.S. Art. 5069-1.01 et seq. ("Chapter One") in effect on such day.
"Business Day" means a day: (i) on which the Bank and commercial banks in
New York City are generally open for business; and (ii) with respect to the
LIBOR Rate, on which dealings in United States Dollar deposits are carried out
in the London interbank markets.
"LIBOR Rate" means a per annum interest rate determined by Bank by DIVIDING:
(i) the average rate per annum (rounded upwards, if necessary, to the next 1/16
of 1%) of the rates per annum at which United States dollar deposits in an
amount comparable to the principal amount of the LIBOR Loan to which such LIBOR
Rate is applicable for a term equal to or substantially equal to the Interest
Period are offered by Bank to prominent banks in the London interbank market at
approximately 11:00 a.m., London time, two Business Days prior to the
commencement of the applicable Interest Period; by (ii) Statutory Reserves.
"Interest Period" means the period for which this Note shall bear interest
at either the LIBOR Rate or the Prime Rate as elected by Maker consistent with
the following provisions. The duration of each Interest Period shall be: (a) in
the case of the Prime Rate, a period of up to 90 days; and (b) in the case of
the LIBOR Rate, 1, 2, 3 or 6 months; provided, however, that the Maker's choice
of Interest Period is subject to the following limitations: (i) No Interest
Period shall end on a date after the Maturity Date; and (ii) If the last day of
an Interest Period would be a day other than a Business Day, the Interest Period
shall end on the next succeeding Business Day (unless the Interest Period
relates to the LIBOR Rate and the next succeeding Business Day is in a different
calendar month than the day on which the Interest Period would otherwise end, in
which case the Interest Period shall end on the next preceding Business Day).
The "Interest Rate Change Date" shall be the first day of an Interest Period.
"Statutory Reserves" shall mean the DIFFERENCE (expressed as a decimal) of
the number one minus the aggregate of the maximum reserve percentages
(including, without limitation, any marginal, special, emergency, or
supplemental reserves) expressed as a decimal established by the Board of
Governors of the Federal Reserve System and any other banking authority to which
the Bank is subject with respect to the LIBOR Rate, for Eurocurrency Liabilities
(as defined in Regulation D of the Board). Such reserve percentages shall
include, without limitation, those imposed under such Regulation D. Amounts
outstanding under this Note at the LIBOR Rate shall be deemed to constitute
Eurocurrency Liabilities and as such shall be deemed to be subject to such
reserve requirements without benefit of or credit for proration, exceptions or
offsets which may be available from time to time to any Bank under such
Regulation D. Statutory Reserves shall be adjusted automatically on and as of
the effective date of any change in any reserve percentage.
Maker's selection of the Interest Rate shall be made on Maker's irrevocable
notice, given not later than 10:00 A.M. (Houston time) on, in the case of the
LIBOR Rate, the third Business Day prior to the proposed Interest Rate Change
Date or, in the case of the Prime Rate, the first Business Day prior to the
proposed Interest Rate Change Date, from the Maker to the Bank. Each such notice
of a requested borrowing (a "Notice of Requested Borrowing") under this
paragraph may be oral or written, and shall specify whether the requested
Interest Rate is to be the LIBOR Rate or the Prime Rate and the Interest Period
requested. If any Notice of Requested Borrowing shall be oral, the Maker shall
deliver to the Bank prior to the Interest Rate Change Date a confirmatory
written Notice of Requested Borrowing.
In the event Maker shall fail to select an Interest Rate as provided herein,
then the Interest Rate shall be the Prime Rate until such time as Maker shall
select the LIBOR Rate as provided herein.
If at any time the Bank determines in good faith (which determination shall
be conclusive) that any change in any applicable law, rule or regulation or in
the interpretation, application or administration thereof makes it unlawful, or
any central bank or other governmental authority asserts that it is unlawful,
for the Bank or its foreign branch or branches to maintain or fund any loan by
means of dollar deposits obtained in any London interbank market (any of the
above being described as a "LIBOR Event"), then, at the option of the Bank, the
principal amount of the Note then outstanding, which is are directly affected by
such LIBOR Event, shall be prepaid by the Maker. Upon the occurrence of any
LIBOR Event, and at any time thereafter so long as such LIBOR Event shall
continue, the Bank may exercise its aforesaid option by giving written notice
thereof to the Maker.
Any prepayment of this Note which is required under the preceding paragraph
shall be made, together with accrued and unpaid interest and all other amounts
payable to the Bank under this Note with respect to such prepaid amount on the
date stated in the notice to the Maker referred to above, which date ("required
prepayment date") shall be not less than 15 days from the date of such notice.
If
Page 1 of 4 Pages
this Note is required to be prepaid under the preceding paragraph, the Bank
shall change the Interest Rate on this Note on the required prepayment date to
the Prime Rate for an Interest Period ending on the same day as that which was
so prepaid.
If any domestic or foreign law, treaty, rule or regulation (whether now in
effect or hereinafter enacted or promulgated, including Regulation D of the
Board of Governors of the Federal Reserve System) or any interpretation or
administration thereof by any governmental authority charged with the
interpretation or administration thereof (whether or not having the force of
law): (a) changes, imposes, modifies, applies or deems applicable reserve,
special deposit or similar requirements in respect of any amounts outstanding
under this Note or against assets of, deposits with or for the account of, or
credit extended or committed by, the Bank; or (b) imposes on the Bank or the
interbank eurocurrency deposit and transfer market or the market for domestic
bank certificates or deposit any other condition affecting any amounts
outstanding under this Note; and the result of any of the foregoing is to impose
a cost to the Bank of funding or maintaining any amounts outstanding under this
Note or to reduce the amount of any sum receivable by the Bank in respect of any
amounts outstanding under this Note, then the Bank may notify the Maker in
writing of the happening of such event and Maker shall upon demand pay to the
Bank such additional amounts as will compensate the Bank for such costs. Without
prejudice to the survival of any other agreement of the Maker under this Note,
the obligations of the Maker under this paragraph shall survive the termination
of this Note.
"Prime Rate" means the prime rate of the Bank as determined from time to
time by Bank and thereafter entered in the minutes of Bank's Loan and Discount
Committee. Without notice to Maker or any other person or entity, the Prime Rate
shall automatically fluctuate upward and downward as and in the amount by which
such prime rate fluctuates. MAKER UNDERSTANDS THAT THE PRIME RATE IS A REFERENCE
RATE AND MAY NOT REPRESENT THE LOWEST OR BEST RATE ACTUALLY CHARGED TO ANY
CUSTOMER, AND ANY STATEMENT, REPRESENTATION OR WARRANTY IN THAT REGARD OR TO
THAT EFFECT IS EXPRESSLY DISCLAIMED BY BANK. BANK MAY MAKE LOANS AT RATES OF
INTEREST AT, ABOVE OR BELOW THE PRIME RATE.
It is the intention of the Maker and the Bank to conform strictly to the
usury laws in force in the state of Texas and in the United States of America,
as applicable. It is therefore agreed that: (i) in the event that the maturity
hereof is accelerated by reason of an election by the Bank or if the same is
prepaid prior to the maturity, all unearned interest shall be canceled
automatically or, if theretofore paid, shall either be refunded to the Maker or
credited on the unpaid principal amount of this Note, whichever remedy is chosen
by the Bank; (ii) the aggregate of all interest and other charges constituting
interest under applicable law and contracted for, chargeable or receivable under
this Note or otherwise in connection with this loan transaction shall never
produce a rate in excess of the maximum nonusurious rate of interest that the
Bank may charge the Maker under applicable law; and (iii) if any excess interest
is contracted for, charged or received, it shall be deemed a mistake and any
excessive interest received shall be either refunded to the Maker or credited on
the unpaid principal amount hereof, and this Note and any document which
evidences a charging of or contracting for excessive interest shall be
automatically deemed reformed so as to permit only the collection of the maximum
nonusurious rate and amount of interest; provided, however, that all sums paid
or agreed to be paid for the use, forbearance or detention of the loan evidenced
hereby shall, to the extent permitted by applicable law, be amortized, prorated,
allocated and spread throughout the full term of this Note.
All past due principal and, to the extent permitted by applicable law,
interest on this Note shall bear interest at the Highest Lawful Rate, or, if
applicable law shall not provide for a maximum nonusurious rate of interest, at
a rate per annum equal to the Prime Rate plus five percent (5%).
If any holder of this Note retains an attorney in connection with any
default or to collect, enforce or defend this Note or any papers intended to
secure or guarantee this Note in any lawsuit or in any probate, reorganization,
bankruptcy or other proceeding, or if Maker sues any holder in connection with
this Note or any such papers and does not prevail, Maker shall pay to each such
holder, in addition to principal and interest, all reasonable costs and expenses
incurred by such holder in trying to collect this Note or in any such suit or
proceeding, including reasonable attorneys' fees.
The term "Loan Documents" shall refer to this Note and any security
agreements executed as security for this Note and all such other written
agreements, guaranties, documents, instruments and other writings required by
Bank and executed and delivered to Bank in connection with or in any way related
to this Note or any security for the Note.
This Note is given in renewal, extension, modification and increase of that
certain Term Promissory Note dated December 22, 1994 executed by Maker and
payable to the order of Bank in the original principal amount of $3,800,000.00
(the "Renewed Note"). The Renewed Note is secured by Third Party Security
Agreement - Pledge dated June 29, 1994 executed by Harvey R. Houck, Jr.; Third
Party Security Agreement - Pledge dated June 29, 1994 executed by Mark H. and
Sheryl W. Fisher; Third Party Security Agreement - Pledge dated June 29, 1994
executed by Mark H. Fisher; and by Third Party Security Agreement - Pledge dated
June 30, 1994 executed by John Schurwon. Maker specifically acknowledges the
validity and enforceability of each of the Security Agreements and Maker agrees,
ratifies and confirms that each and all the liens, security interests and other
interests as more fully described in the Security Agreements are hereby granted,
renewed, extended and hereby brought forward to secure this Note. Maker agrees
and acknowledges that the terms "secured indebtedness" and "indebtedness secured
hereby" as used in each of the Security Agreements and any security agreement
executed in connection with or arising under or related to the Renewed Note
includes all indebtedness arising under or related to this Note (including all
subsequent renewals, extensions, increases, modifications, rearrangements
thereof and substitutions or replacements thereto of the foregoing) and related
to or arising under any of the Loan Documents. This Agreement in no way acts as
a release and/or relinquishment of any liens, security interests and/or rights
in connection with any collateral securing payment of this Note or the Renewed
Note. Maker agrees to execute security agreements and financing statements, all
in such form and substance acceptable to Bank and its counsel to further
evidence such security interests if so requested by Bank.
PAYMENT SCHEDULE
This Note shall be due and payable as follows: ACCRUED AND UNPAID INTEREST
is due monthly, beginning on April 15, 1996 and continuing on the 15th day of
each month thereafter until the Maturity Date when all remaining unpaid Amount
of Note and accrued and unpaid interest is finally due and payable.
All payments and prepayments hereon may, at Bank's sole option, be applied
to accrued interest, to principal, or to both.
Each maker, guarantor, cosigner, surety and endorser waives grace, demand,
presentment, notice of dishonor, notice of acceleration, notice of intent to
accelerate, protest, notice of protest and diligence in collecting and the
bringing of suit against any party hereto for the purpose of fixing liability;
agrees to application of any Bank balance to payment hereof; agrees that
extensions and renewals without limit as to number, acceptance of any number of
partial payments, and releases or substitutions of or changes in any guaranty or
collateral, with or without notice, before or after the Maturity Date, any
failure to perfect or maintain perfection of any lien against or security
interest in any such collateral or the partial or complete unenforceability of
any guaranty or other surety obligation, in each case in whole or in part, shall
not release or discharge his obligation hereunder; and agrees that waiver of any
default shall not constitute waiver of any prior or subsequent default.
Terms used in this Note shall have the meanings indicated in the boxes above
or as defined herein. Where appropriate, the masculine gender includes the
feminine and the neuter and the singular number includes the plural number.
"Loan Document" means any document or instrument evidencing, securing,
guaranteeing or given in connection with this Note. "Obligations" means all
Page 2 of 4 Pages
principal, interest and other amounts which are or become owing under this Note
or any other Loan Document. "Obligor" means Maker and any guarantor, surety,
co-signer, general partner or other person who may now or hereafter be obligated
to pay all or any part of the Obligations.
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. THIS
NOTE HAS BEEN ENTERED INTO IN THE COUNTY OF THE BANK'S PRINCIPAL OFFICE IN
TEXAS, SHALL BE PERFORMABLE FOR ALL PURPOSES IN SUCH COUNTY AND THE MAKER AND
THE BANK AGREE THAT THE COUNTY IN WHICH BANK'S PRINCIPAL OFFICE IS LOCATED IN
TEXAS IS PROPER VENUE FOR ANY ACTION OR PROCEEDING BROUGHT BY THE MAKER OR THE
BANK, WHETHER IN CONTRACT, TORT, OR OTHERWISE. ANY ACTION OR PROCEEDING AGAINST
THE MAKER MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT IN SUCH COUNTY. THE MAKER
HEREBY IRREVOCABLY (A) SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURTS,
AND (B) WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY
SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT OR THAT ANY SUCH COURT IS AN
INCONVENIENT FORUM. THE MAKER AGREES THAT SERVICE OF PROCESS UPON IT MAY BE MADE
BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, AT ITS ADDRESS
SPECIFIED BELOW. NOTHING HEREIN OR IN ANY OF THE OTHER LOAN DOCUMENTS SHALL
AFFECT THE RIGHT OF THE BANK TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW OR SHALL LIMIT THE RIGHT OF THE BANK TO BRING ANY ACTION OR PROCEEDING
AGAINST THE MAKER OR WITH RESPECT TO ANY OF ITS PROPERTY IN COURTS IN OTHER
JURISDICTIONS OR VENUES.
Bank reserves the right, in its sole discretion, without notice to Maker, to
sell participations or assign its interest, or both, in all or any part of this
Note or the debt evidenced hereby.
The Maker may on any Business Day prepay all or any part of this Note
without the payment of any premium or fee, provided the Interest Rate is the
Prime Rate. Partial prepayments shall be in an aggregate principal amount of
$250,000.00 or a greater integral multiple of $100,000.00. Except as specified
in this paragraph, the Maker shall have no right to prepay this Note.
The Maker will indemnify the Bank against, and reimburse the Bank on demand
for, any loss, cost or expense incurred or sustained by the Bank (including
without limitation any loss, cost or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by the Bank to
fund or maintain loans bearing interest at the LIBOR Rate as a result of: (a)
any payment or prepayment (whether permitted by the Bank or required hereunder
or otherwise) of all or a portion of this Note when the Interest Rate is the
LIBOR Rate other than on the last day of the Interest Period; (b) any payment or
prepayment, whether required hereunder or otherwise, of this Note when the
Interest Rate is the LIBOR Rate made after the delivery of a Notice of Requested
Borrowing but before the applicable Interest Rate Change Date if such payment or
prepayment prevents the proposed Interest Rate Change from becoming fully
effective. For purposes of this paragraph, funding losses arising by reason of
liquidation or reemployment of deposits or other funds acquired by the Bank to
fund or maintain loans bearing interest at the LIBOR Rate shall be calculated as
the remainder obtained by subtracting: (i) the yield (reflecting both stated
interest rate and discount, if any) to maturity of obligations of the United
States Treasury in an amount equal or comparable to such Loan for the period of
time commencing on the date of the payment, prepayment or change of rate as
provided above and ending on the last day of the subject Interest Period; from
(ii) the interest payable at the LIBOR Rate for the period commencing on the
date of such payment, prepayment or change of rate and ending on the last day of
such Interest Period. Such funding losses and other costs and expenses shall be
calculated and billed by the Bank and such bill shall, as to the costs incurred,
be conclusive absent manifest error.
Time is of the essence with respect hereto. If any of the following events
("Events of Default") shall occur, then the Bank may do any or all of the
following: (i) declare this Note to be, and thereupon the principal balance of
this Note shall forthwith become, immediately due and payable, together with all
accrued and unpaid interest thereon and all other obligations and indebtedness
of the Maker under the Loan Documents, without notice of acceleration or of
intention to accelerate, presentment and demand or protest, all of which are
hereby expressly waived; (ii) set off, in any order, against the indebtedness of
the Maker under the Loan Documents any debt owing by the Bank to any Maker,
including, but not limited to, any deposit account, which right is hereby
granted by Maker to the Bank; and (iii) exercise any and all other rights
pursuant to the Loan Documents, at law, in equity or otherwise: Each of the
following events or conditions is an "Event of Default:" (1) any Obligor fails
to pay any of the Obligations when due; (2) any warranty, representation or
statement now or hereafter contained in or made in connection with any Loan
Document was false or misleading in any respect when made; (3) any Obligor
violates any covenant, condition or agreement contained in any Loan Document;
(4) any Obligor fails or refuses to submit financial information requested by
Bank or to permit Bank to inspect its books and records on request; (5) any
event of default occurs under any other Loan Document; (6) any individual
Obligor dies, or any Obligor that is an entity dissolves; (7) a receiver,
conservator or similar official is appointed for any Obligor or any Obligor's
assets; (8) any petition is filed by or against any Obligor under any
bankruptcy, insolvency or similar law; (9) any Obligor makes an assignment for
the benefit of creditors; (10) a final judgment is entered against any Obligor
and remains unsatisfied for 30 days after entry, or any property of any Obligor
is attached, garnished or otherwise made subject to legal process; and (11) any
material adverse change occurs in the business, assets, affairs or financial
condition of any Obligor.
Maker warrants and represents to Bank, and to all other holders of any
indebtedness evidenced hereby, that the loan evidenced by this Note is for
business, commercial, investment or other similar purpose and not primarily for
personal, family, household or agricultural use, as such terms are used in
Chapter One. No amounts loaned hereunder may be used for the purchase or
carrying of any margin stock as that term is defined in Regulation U of the
Board of Governors of the Federal Reserve System. Notwithstanding anything
contained herein or in any other separate security agreement or other writing
executed heretofore, herewith or hereafter in connection with or related to this
credit obligation, if this is a consumer credit obligation (as defined or
described in 12 C.F.R. 227, Regulation AA, promulgated by the Federal Reserve
Board), the security for this credit obligation shall not extend to any
nonpossessory security interest in household goods (as defined in Regulation AA)
other than a purchase money security interest, and no waiver of any notice
contained herein or therein shall be construed under any circumstances to extend
to any waiver of notice prohibited by Regulation AA.
Each Maker and cosigner represents and warrants to Bank that if it is not a
natural person, it is duly organized and validly existing and in good standing
under the laws of the state of its incorporation or organization; has full power
to own its properties and to carry on its business as now conducted; and is duly
qualified to do business and is in good standing in each jurisdiction in which
the nature of the business conducted by it makes such qualification desirable;
and has not commenced any dissolution proceedings. Each Maker that is subject to
the Texas Revised Partnership Act waives compliance by Bank with Section 3.05(d)
of the Texas Revised Partnership Act and agrees that Bank may proceed directly
against one or more partners or their property without first seeking
satisfaction from partnership property. Each Maker and cosigner represents and
warrants that if it conducts business under an assumed business or professional
name it has properly filed Assumed Name Certificate(s) in the office(s) required
by Chapter 36 of the Texas Business and Commerce Code. Each of the persons
signing below as Maker or cosigner represents and warrants that he/she has full
requisite power and authority to execute and deliver this Note to Bank on behalf
of the party for whom he/she signs and to bind such party to the terms and
conditions of this Note and that this Note is enforceable against such party.
Page 3 of 4 Pages
THIS NOTE AND THE OTHER LOAN DOCUMENTS REPRESENT 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 UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
SIGNATURE OF MAKER: MEDICAL INNOVATIONS, INC.
By: /s/ MARK H. FISHER
Name: Mark H. Fisher
Time:
Date: 3-18-96
(The Bank's signature is provided as its acknowledgement of the above as the
final written agreement between the parties and as its agreement with each Maker
that is a partnership that Bank is not required to comply with Section 3.05(d)
of the Texas Revised Partnership Act.)
BANK: TEXAS COMMERCE BANK NATIONAL ASSOCIATION
By: /s/ GARY WHITT
Name: Gary Whitt
Title: VP
Page 4 of 4 Pages
<PAGE>
COLLATERAL MAINTENANCE AGREEMENT
March 15, 1996
Medical Innovations, Inc. Physician's Visiting Nurse Service, Inc.
One Riverway, Suite 2300 1110 N. Post Oak Road #140
Houston, Texas 77056 Houston, Texas 77056
Sheryl W. Fisher Harvey Houck, Jr.
One Riverway, Suite 2300 One Riverway, Suite 2300
Houston, Texas 77056 Houston, Texas 77056
Mark H. Fisher
One Riverway, Suite 2300
Houston, Texas 77056
John Schurwon
One Riverway, Suite 2300
Houston, Texas 77056
Ladies and Gentlemen:
Texas Commerce Bank National Association (the "Bank") has extended
certain loans (the "Loans") to Medical Innovations, Inc. and Physician's
Visiting Nurse Service, Inc. (each a "Borrower") and as a condition precedent to
making the Loans, Mark H. Fisher, Sheryl W. Fisher, Harvey R. Houck, Jr., and
John Schurwon (jointly and severally, "Pledgor") granted the Bank a security
interest in certain bonds described on the EXHIBIT A attached hereto and
incorporated herein for all purposes (the "Collateral") and other property
pursuant to the terms of, and as described in various Third Party Security
Agreements - Pledge, executed by Pledgors as of June 30, 1994 and June 29, 1994
and delivered to Bank (the "Security Agreement"). Each and all of the Collateral
secures, among other of Borrower's indebtedness to Bank, now or hereafter
existing in favor of the Bank, the Loan evidenced by the promissory note
executed by Medical Innovations, Inc. and delivered to Bank dated March 15, 1996
in the principal amount of $3,625,000.00 (together with each and every renewal,
extension, modification and rearrangement thereof, replacement and substitution
therefor, the "Note") and that certain promissory note executed by Physicians
Visiting Nurse Service, Inc. and delivered to Bank in the principal amount of
$1,575,000.00 dated March 15, 1996 (together with any and all renewals,
extensions and modifications thereof, the "Other Note").
For the mutual agreements herein set forth and in consideration of the
making of the Loans, each of the undersigned Borrower and Pledgor ("You")
jointly and severally agree to the following terms and conditions (hereinafter
this "Collateral Maintenance Agreement"). The aggregate total amounts
outstanding under the Note, both principal and accrued and unpaid interest, plus
the aggregate total amounts outstanding under the Other Note, both principal and
accrued and unpaid interest, is hereinafter referred to as the "Aggregate
Balance". "Collateral Value" shall refer to the market value of the Collateral
in which Bank has a first and perfected security interest, as such value is
determined by Bank. Bank may determine the market value of the Collateral by any
reasonable method, which determination shall be deemed conclusive absent
manifest error. Using published figures in THE WALL STREET JOURNAL is deemed
reasonable. You agree that so long as any amounts remain outstanding under the
Note or the Other Note, the Collateral Value shall at all times be at least
equal to 100% of the Aggregate Balance (the "Collateral to Loan Percentage"). In
the event the Collateral to Loan Percentage is ever less than 100%, then within
ten (10) days of notice by Bank to each of You at the address set forth above
(such notice deemed sufficient if given by mail, telephone, telex or facsimile
machine), You shall: (i) make a prepayment on the Note or the Other Note or
both; (ii) deliver additional cash collateral and/or marketable securities
acceptable to Bank along with properly executed financing statements and
security agreements to evidence a first and continuing perfected security
interest in the property so delivered and such additional property taken by Bank
as collateral shall be deemed "Collateral" as such term is used herein; or (iii)
do any combination of (i) and (ii) so that the Collateral Value is at least 100%
of the Aggregate Balance.
In the event You fail to take one of the steps outlined above (or a
combination of such steps) within ten (10) business days after notice by Bank to
You or any of You so that the Collateral Value is at least equal to 100% of the
Aggregate Balance, then a default shall occur under this Collateral Maintenance
Agreement and under the Note and under the Other Note and the Bank shall be
entitled to liquidate the existing Collateral and apply such proceeds to the
then outstanding indebtedness (both principal and accrued and unpaid interest)
in whatever order Bank chooses and/or exercise any other right, power, or
privilege provided to Bank in the Note, in the Other Note or related Loan
Documents for a default.
You have represented to Bank that the proceeds of the Note or the Other
Note will not be used for the purpose, whether immediate, incidental, or
ultimate of buying or carrying margin stock as that term is used in Regulation U
of the Board of Governors of the Federal Reserve System ("Regulation U").
Bank has expressly reserved the right to change the Collateral to Loan
Percentage and Bank may at any time upon notice to You change the Collateral to
Loan Percentage to comply with the requirements of Regulation U, which
regulation
Page 1 of 3 Pages
from time to time sets the maximum loan value for margin stock which, as of the
date of this letter, for margin stock (except options/puts/calls/and
combinations) is set at fifty percent (50%) of the stock's current market value
as defined in Regulation U which would require a Collateral to Loan Percentage
of two hundred percent (200%) under this Collateral Maintenance Agreement. The
change in Collateral to Loan Percentage shall be effective ten (10) days
following notice to You, unless the change is necessary to comply (in Bank's
sole discretion and determination) with Regulation U or any other legal
requirement affecting the Loan evidenced by the Note or the Other Note in which
case the change is effective immediately.
"Loan Documents" shall refer to the Note, the other Note, the Security
Agreement together with all such other agreements, instruments and other
writings required by Bank and executed and delivered to Bank in connection with
or in any way related to the Note or the Other Note or any security for the Note
or the Other Note.
The Bank may waive any default without waiving any prior or subsequent
default. The Bank may remedy any default without waiving the default remedied.
The failure of the Bank to exercise any right, power or remedy upon any default
shall not be construed as a waiver of such default or as a waiver of the right
to exercise any such right, power or remedy at a later date. This Collateral
Maintenance Agreement is a continuing agreement and shall remain in full force
and effect until all indebtedness evidenced by the Note and the Other Note is
paid in full.
YOU AGREE THAT PURSUANT TO THE SECURITY AGREEMENTS ANY ADDITIONAL
SECURITIES DELIVERED TO THE BANK PURSUANT TO THIS COLLATERAL MAINTENANCE
AGREEMENT (IN ADDITION TO OTHER PROPERTIES DELIVERED TO THE BANK AFTER THE DATE
OF THE SECURITY AGREEMENTS) SHALL BE INCLUDED IMMEDIATELY IN THE COLLATERAL
PLEDGED TO THE BANK UNDER THE SECURITY AGREEMENTS, WITHOUT THE NECESSITY FOR THE
ADOPTION OF ANY AMENDMENT OR REVISED LISTING IN THIS COLLATERAL MAINTENANCE
AGREEMENT OR THE SECURITY AGREEMENTS.
This Collateral Maintenance 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 constitute one and the same agreement.
If any of the Collateral consists of securities which are subject to
any restrictions on volume of sales under securities laws, and which restricts
aggregate sales by You and the Bank in determining such limitation, You shall
not sell securities of the same issue as those pledged to Bank nor shall You
pledge such securities without the Bank's prior written permission.
THIS COLLATERAL MAINTENANCE AGREEMENT SHALL BE CONSTRUED AND GOVERNED
BY THE LAWS OF THE STATE OF TEXAS AND OF THE UNITED STATES OF AMERICA AS
APPLICABLE.
THIS WRITTEN AGREEMENT AND THE OTHER WRITTEN LOAN DOCUMENTS CONSTITUTE
A "LOAN AGREEMENT" AS DEFINED IN SECTION 26.02(A) OF THE TEXAS BUSINESS &
COMMERCE CODE, AND 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 UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Please acknowledge your acceptance of the terms and conditions of this
letter by signing both counterparts in the space provided and returning one to
my attention.
Sincerely,
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
By: /s/ GARY WHITT
Name: Gary Whitt
Title: VP
Page 2 of 3 Pages
Accepted and Agreed to effective as of March 15, 1996.
MEDICAL INNOVATIONS, INC.
By: /s/ MARK H. FISHER
Typed Name: Mark H. Fisher
Title: President
Date: 3-18-96
/s/ MARK H. FISHER
Mark H. Fisher
Date: 3-18-96
/s/ SHERYL W. FISHER
Sheryl W. Fisher
Date: 3-18-96
/s/ HARVEY R. HOUCK, JR.
Harvey R. Houck, Jr.
Date: 3-19-96
/s/ JOHN SCHURWON
John Schurwon
Date: 3-18-96
PHYSICIAN'S VISITING NURSE SERVICE, INC.
By: /s/ MARK H. FISHER
Typed Name: Mark H. Fisher
Title: President
Date: 3-18-96
Page 3 of 3 Pages
EXHIBIT A
$150,000.00 BOARD OF REGENTS UNIVERSITY OF HOUSTON, TX., CONSOLIDATED REVENUE
19193 DATED 8/5/93 DUE 2/15/2013 @ 5.5% I/N/O MARK H. FISHER CUSIP #914301SA5 -
$100,000.00 LOWER COLORADO RIVER AUTHORITY REVENUE RFOG BOND DATED 8/1/92 DUE
1/1/2017 @ 5.625% F/B/O MARK H. FISHER & SHIRLEY W. FISHER CUSIP #548100H90
$100,000.00 AUSTIN TEXAS UTILITY SYSTEM REVENUE COMB. RFDG SERIES B BIG TCC
DATED 10/15/88 DUE 11/15/2012 @ 7.80% F/B/O MARK H. FISHER CUSIP #052473YV1
$50,000.00 AUSTIN TEXAS SERIES C PUB IMPT. L T DATED 11/1/90 DUE 9/1/2008 @
7.00% F/B/O MARK FISHER CUSIP #062394HNG
$50,000.00 BRAZOS RIVER AUTHORITY TEXAS SPECIAL FACILITIES REVENUE DATED
10/15/89 DUE 8/15/2009 @ 6.90% F/B/O MARK FISHER CUSIP #105912AQ2
$100,000.00 BEXAR COUNTY TEXAS HEALTH FACILITIES DEVELOPMENT CORPORATION
HOSPITAL REVENUE BAPTIST MEMORIAL DATED 10/1/90 DUE 8/15/2005 @ 7.24% F/B/O MARK
FISHER CUSIP #088350CY7
$50,000.00 TEXAS STATE NATIONAL RESEARCH LAB DATED 5/1/90 DUE 4/1/2011 @ 7.125%
F/B/O MARK FISHER HELD CUSIP # 882716KM4
$50,000.00 LOWER COLORADO RIVER AUTHORITY TEXAS REVENUE DATED 7/1/85 DUE
1/1/2014 @ 8.00% F/B/O MARK FISHER CUSIP #548100PJ9
$4,750,000.00 US TREASURY NOTE DATED 7/15/92 MATURING 7/15/99 COUPON @ 6.375%
I/N/O HARVEY R. HOUCK CUSIP #921827F98
$120,000.00 MARICPOA COUNTY ARIZONA UNI SCHOOL DATED 3/30/93 DUE 7/1/96 I/N/O
JOHN SCHURWON CUSIP #567219K22
EXHIBIT A Page 1 of 1 Page
EXHIBIT 10.15
PROMISSORY NOTE
(this "Note")
U.S. $1,575,000.00 March 15, 1996 ("Date")
FOR VALUE RECEIVED, PHYSICIAN'S VISITING NURSE SERVICE, INC. ("Borrower"), a
Texas corporation, promises to pay to the order of TEXAS COMMERCE BANK NATIONAL
ASSOCIATION ("Bank") on or before April 15, 1997, (the "TERMINATION DATE"), at
its banking house at 712 Main Street, Houston, Harris County, Texas, or at such
other location as Bank may designate, in lawful money of the United States of
America, the lesser of: (i) the principal sum of ONE MILLION FIVE HUNDRED
SEVENTY-FIVE THOUSAND AND NO/100THS UNITED STATES DOLLARS (U.S. $1,575,000.00)
(the "Maximum Loan Total"); or (ii) the aggregate unpaid principal amount of all
loans made by Bank (each such loan being a "LOAN"), which may be outstanding on
the Termination Date. Each Loan shall be due and payable on the maturity date
agreed to by Bank and Borrower with respect to such Loan (the "MATURITY DATE").
In no event shall any Maturity Date fall on a date after the Termination Date.
Subject to the terms and conditions of this Note and the Loan Documents,
Borrower may borrow, repay and reborrow all or any part of the credit provided
for herein at any time before the Termination Date, there being no limitation on
the number of Loans made so long as the total unpaid principal amount at any
time outstanding does not exceed the Maximum Loan Total.
"BOARD" means the Board of Governors of the Federal Reserve System of
the United States.
"BORROWING DATE" means any Business Day on which Bank shall make a Loan
hereunder.
"BUSINESS DAY" means a day: (i) on which Bank and commercial banks in
New York City are generally open for business; and (ii) with respect to LIBOR
Loans, on which dealings in United States Dollar deposits are carried out in the
interbank markets.
"HIGHEST LAWFUL RATE" means the maximum nonusurious rate of interest
from time to time permitted by applicable law. If Texas law determines the
Highest Lawful Rate, Bank has elected the "indicated" (weekly) ceiling as
defined in the Texas Credit Code or any successor statute. Bank may from time to
time, as to current and future balances, elect and implement any other ceiling
under such Code and/or revise the index, formula or provisions of law used to
compute the rate on this open-end account by notice to Borrower, if and to the
extent permitted by, and in the manner provided in such Code.
"INTEREST PERIOD" means the period commencing on the Borrowing Date and
ending on the Maturity Date, consistent with the following provisions. The
duration of each Interest Period shall be: (a) in the case of a Prime Rate Loan,
a period of up to the Termination Date unless any portion thereof is converted
to a LIBOR Loan hereunder; and (b) in the case of a LIBOR Loan, a period of up
to one, two, three or six months; in each case as selected by Borrower and
agreed to by Bank. Borrower's choice of Interest Period is subject to the
following limitations: (i) No Interest Period shall end on a date after the
Termination Date; and (ii) If the last day of an Interest Period would be a day
other than a Business Day, the Interest Period shall end on the next succeeding
Business Day (unless the Interest Period relates to a LIBOR Loan and the next
succeeding Business Day is in a different calendar month than the day on which
the Interest Period would otherwise end, in which case the Interest Period shall
end on the next preceding Business Day).
"LIBOR LOAN" means a Loan which bears interest at a rate determined by
reference to the LIBOR Rate.
"LIBOR RATE" means a per annum interest rate determined by Bank by
DIVIDING: (i) the average rate per annum (rounded upwards, if necessary, to the
next 1/16 of 1%) of the rates per annum at which United States dollar deposits
in an amount comparable to the principal amount of the LIBOR Loan to which such
LIBOR Rate is applicable for a term equal to or substantially equal to the
Interest Period are offered by Bank to prominent banks in the London interbank
market at approximately 11:00 a.m., London time, two Business Days prior to the
commencement of the applicable Interest Period; by (ii) Statutory Reserves.
"LOAN DOCUMENTS" means this Note and any document or instrument
evidencing, securing, guaranteeing or given in connection with this Note.
"OBLIGATIONS" means all principal, interest and other amounts which are
or become owing under this Note or any other Loan Document.
"OBLIGOR" means Borrower and any guarantor, surety, co-signer, general
partner or other person who may now or hereafter be obligated to pay all or any
part of the Obligations.
"PRIME RATE" means the rate determined from time to time by Bank as its
prime rate. The Prime Rate shall change automatically from time to time without
notice to Borrower or any other person. THE PRIME RATE IS A REFERENCE RATE AND
MAY NOT BE BANK'S LOWEST RATE.
"PRIME RATE LOAN" means a Loan which bears interest at a rate
determined by reference to the Prime Rate.
"STATUTORY RESERVES" means the DIFFERENCE (expressed as a decimal) of
the number one minus the aggregate of the maximum reserve percentages
(including, without limitation, any marginal, special, emergency, or
supplemental reserves) expressed as a decimal established by the Board and any
other banking authority to which Bank is subject to, with respect to the LIBOR
Rate, for Eurocurrency Liabilities (as defined in Regulation D of the Board).
Such reserve percentages shall include, without limitation, those imposed under
such Regulation D. LIBOR Loans shall be deemed to constitute Eurocurrency
Liabilities and as such shall be deemed to be subject to such reserve
requirements without benefit of or credit for proration, exceptions or offsets
which may be available from time to time to any bank under such Regulation D.
Statutory Reserves shall be adjusted automatically on and as of the effective
date of any change in any reserve percentage.
Loans may be either Prime Rate Loans or LIBOR Loans. Borrower shall pay
interest on the unpaid principal amount of each Prime Rate Loan at a rate per
annum equal to the lesser of: (i) the Prime Rate in effect from time to time
minus one percent (1%)(the "EFFECTIVE PRIME RATE"); or (ii) the Highest Lawful
Rate. Accrued interest on each Prime Rate Loan is due and payable on the last
day of each month and at the Maturity Date. Borrower shall pay interest on the
unpaid principal amount of each LIBOR Loan for the Interest Period with respect
thereto at a rate per annum equal to the lesser of: (i) the LIBOR Rate plus one
percent (1%) (the "EFFECTIVE LIBOR RATE"); or (ii) the Highest Lawful Rate.
Accrued interest on each LIBOR Loan is due on the last day of each Interest
Period applicable thereto, and in the case of an Interest Period in excess of
three months, on each day which occurs every three months after the initial date
of such Interest Period, and on any prepayment (on the amount prepaid).
If at any time the effective rate of interest which would otherwise be
payable on any Loan evidenced by this Note exceeds the Highest Lawful Rate, the
rate of interest to accrue on the unpaid principal balance of such Loan during
all such times shall be limited to the Highest Lawful Rate, but any subsequent
reductions in such interest rate shall not become effective to reduce such
interest rate below the Highest Lawful Rate until the total amount of interest
accrued on the unpaid principal balance of such Loan equals the total amount of
interest which would have accrued if the Effective Prime Rate, or Effective
LIBOR Rate, whichever is applicable, had at all times been in effect.
Each LIBOR Loan shall be in an amount not less than $500,000.00 and an
integral multiple of $100,000.00. Each Prime Rate Loan shall be in an amount not
less than $100,000.00 and an integral multiple of $25,000.00. Interest shall be
computed on the basis of the actual number of days elapsed and a year comprised
of 360 days, unless such calculation would result in a usurious interest rate,
in which case such interest shall be calculated on the basis of a 365 or 366 day
year, as the case may be.
The unpaid principal balance of this Note at any time will be the total
amounts advanced by Bank, less the amount of all payments or prepayments of
principal. Absent manifest error, the records of Bank will be conclusive as to
amounts owed.
Page 1 of 4 Pages
Loans shall be made on Borrower's irrevocable notice to Bank, given not
later than 10:00 A.M. (Houston time) on, in the case of LIBOR Loans, the third
Business Day prior to the proposed Borrowing Date or, in the case of Prime Rate
Loans, the first Business Day prior to the proposed Borrowing Date. Each notice
of a requested borrowing (a "NOTICE OF REQUESTED BORROWING") under this
paragraph may be oral or written, and shall specify: (i) the requested amount;
(ii) proposed Borrowing Date; (iii) whether the requested Loan is to be a Prime
Rate Loan or LIBOR Loan; and (iv) Interest Period for the LIBOR Loan. If any
Notice of Requested Borrowing shall be oral, Borrower shall deliver to Bank
prior to the Borrowing Date a confirmatory written Notice of Requested
Borrowing.
Borrower may on any Business Day prepay the outstanding principal
amount of any Prime Rate Loan, in whole or in part. Partial prepayments shall be
in an aggregate principal amount of $100,000.00 or a greater integral multiple
of $25,000.00. Borrower shall have no right to prepay any LIBOR Loan.
Provided that no Event of Default has occurred and is continuing,
Borrower may elect to continue all or any part of any LIBOR Loan beyond the
expiration of the then current Interest Period relating thereto by providing
Bank at least three Business Day's written or telecopy notice of such election,
specifying the Loan or portion thereof to be continued and the Interest Period
therefor and whether it is to be a Prime Rate Loan or LIBOR Loan provided that
any continuation as a LIBOR Loan shall not be less than $500,000.00 and shall be
in an integral multiple of $100,000.00. If an Event of Default shall have
occurred and be continuing, the Borrower shall not have the option to elect to
continue any such LIBOR Loan or to convert Prime Rate Loans into LIBOR Loans.
Provided that no Event of Default has occurred and is continuing, Borrower may
elect to convert any Prime Rate Loan at any time or from time to time to a LIBOR
Loan by providing Bank at least three Business Day's written or telecopy notice
of such election, specifying each Interest Period therefor. Any conversion of
Prime Rate Loans shall not result in a borrowing of LIBOR Loans in an amount
less than $500,000.00 and in integral multiples of $100,000.00.
If at any time Bank determines in good faith (which determination shall
be conclusive) that any change in any applicable law, rule or regulation or in
the interpretation, application or administration thereof makes it unlawful, or
any central bank or other governmental authority asserts that it is unlawful,
for Bank or its foreign branch or branches to maintain any LIBOR Loan by means
of dollar deposits obtained in the London interbank market (any of the above
being described as a "LIBOR Event"), then, at the option of Bank, the aggregate
principal amount of all LIBOR Loans outstanding shall be prepaid; however the
prepayment may be made at the sole option of the Bank with a Prime Rate Loan.
Upon the occurrence of any LIBOR Event, and at any time thereafter so long as
such LIBOR Event shall continue, the Bank may exercise its aforesaid option by
giving written notice thereof to Borrower.
If any domestic or foreign law, treaty, rule or regulation (whether now
in effect or hereinafter enacted or promulgated, including Regulation D of the
Board) or any interpretation or administration thereof by any governmental
authority charged with the interpretation or administration thereof (whether or
not having the force of law): (a) changes, imposes, modifies, applies or deems
applicable any reserve, special deposit or similar requirements in respect of
any Loan or against assets of, deposits with or for the account of, or credit
extended or committed by, Bank; or (b) imposes on Bank or the interbank
eurocurrency deposit and transfer market or the market for domestic bank
certificates or deposit any other condition affecting any such Loan; and the
result of any of the foregoing is to impose a cost to Bank of agreeing to make,
funding or maintaining any such Loan or to reduce the amount of any sum
receivable by Bank in respect of any such Loan, then Bank may notify Borrower in
writing of the happening of such event and Borrower shall upon demand pay to
Bank such additional amounts as will compensate Bank for such costs as
determined by Bank. Without prejudice to the survival of any other agreement of
Borrower under this Note, the obligations of Borrower under this paragraph shall
survive the termination of this Note.
Borrower will indemnify Bank against, and reimburse Bank on demand for,
any loss, cost or expense incurred or sustained by Bank (including without
limitation any loss, cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by Bank to fund or maintain
LIBOR Loans) as a result of: (a) any payment or prepayment (whether permitted by
Bank or required hereunder or otherwise) of all or a portion of any LIBOR Loan
on a day other than the Maturity Date of such Loan; (b) any payment or
prepayment, whether required hereunder or otherwise, of any LIBOR Loan made
after the delivery of a Notice of Requested Borrowing but before the applicable
Borrowing Date if such payment or prepayment prevents the proposed Loan from
becoming fully effective; or (c) the failure of any LIBOR Loan to be made by
Bank due to any action or inaction of Borrower. Such funding losses and other
costs and expenses shall be calculated and billed by Bank and such bill shall,
as to the costs incurred, be conclusive absent manifest error.
All past-due principal and interest on this Note, will, at Bank's
option, bear interest at the Highest Lawful Rate, or if applicable law does not
provide for a maximum nonusurious rate of interest, at a rate per annum equal to
the Prime Rate plus five percent (5%).
In addition to all principal and accrued interest on this Note,
Borrower agrees to pay: (a) all reasonable costs and expenses incurred by Bank
and all owners and holders of this Note in collecting this Note through probate,
reorganization, bankruptcy or any other proceeding; and (b) reasonable
attorney's fees if and when this Note is placed in the hands of an attorney for
collection.
Borrower and Bank intend to conform strictly to applicable usury laws.
Therefore, the total amount of interest (as defined under applicable law)
contracted for, charged or collected under this Note will never exceed the
Highest Lawful Rate. If Bank contracts for, charges or receives any excess
interest, it will be deemed a mistake. Bank will automatically reform the
contract or charge to conform to applicable law, and if excess interest has been
received, Bank will either refund the excess to Borrower or credit the excess on
the unpaid principal amount of this Note. All amounts constituting interest will
be spread throughout the full term of this Note in determining whether interest
exceeds lawful amounts.
This Note is given in renewal, extension, modification and increase of
that certain Term Promissory Note dated December 22, 1994 executed by Borrower
and payable to the order of Bank in the original principal amount of
$1,650,000.00 (the "Renewed Note"). The Renewed Note is secured by Third Party
Security Agreement - Pledge dated June 29, 1994 executed by Harvey R. Houck,
Jr.; Third Party Security Agreement - Pledge dated June 29, 1994 executed by
Mark H. and Sheryl W. Fisher; Third Party Security Agreement - Pledge dated June
29, 1994 executed by Mark H. Fisher; and by Third Party Security Agreement
Pledge dated June 30, 1994 executed by John Schurwon. Borrower specifically
acknowledges the validity and enforceability of each of the Security Agreements
and Borrower agrees, ratifies and confirms that each and all the liens, security
interests and other interests as more fully described in the Security Agreements
are hereby granted, renewed, extended and hereby brought forward to secure this
Note. Borrower agrees and acknowledges that the terms "secured indebtedness" and
"indebtedness secured hereby" as used in each of the Security Agreements and any
security agreement executed in connection with or arising under or related to
the Renewed Note includes all indebtedness arising under or related to this Note
(including all subsequent renewals, extensions, increases, modifications,
rearrangements thereof and substitutions or replacements thereto of the
foregoing) and related to or arising under any of the Loan Documents. This
Agreement in no way acts as a release and/or relinquishment of any liens,
security interests and/or rights in connection with any collateral securing
payment of this Note or the Renewed Note. Borrower agrees to execute security
agreements and financing statements, all in such form and substance acceptable
to Bank and its counsel to further evidence such security interests if so
requested by Bank.
Loans under this Note shall be used solely for the purpose of working
capital for the Borrower.
Each of the following events or conditions is an "EVENT OF DEFAULT:"
(1) any Obligor fails to pay any of the Obligations when due; (2) any warranty,
representation or statement now or hereafter contained in or made in connection
with any Loan Document was false or misleading in any respect when made; (3) any
Obligor violates any covenant, condition or
Page 2 of 4 Pages
agreement contained in any Loan Document; (4) any Obligor fails or refuses to
submit financial information requested by Bank or to permit Bank to inspect its
books and records on request; (5) any event of default occurs under any other
Loan Document; (6) any individual Obligor dies, or any Obligor that is an entity
dissolves; (7) a receiver, conservator or similar official is appointed for any
Obligor or any Obligor's assets; (8) any petition is filed by or against any
Obligor under any bankruptcy, insolvency or similar law; (9) any Obligor makes
an assignment for the benefit of creditors; (10) a final judgment is entered
against any Obligor and remains unsatisfied for 30 days after entry, or any
property of any Obligor is attached, garnished or otherwise made subject to
legal process; (11) any material adverse change occurs in the business, assets,
affairs or financial condition of any Obligor; and (12) Borrower is in default
of any other obligation to or any other agreement with Bank.
If any Event of Default occurs, then Bank may do any or all of the
following: (i) cease making Loans hereunder; (ii) declare the Obligations to be
immediately due and payable, without notice of acceleration or of intention to
accelerate, presentment and demand or protest or notice of any kind, all of
which are hereby expressly waived; (iii) set off, in any order, against the
Obligations any debt owing by Bank to any Obligor, including, but not limited
to, any deposit account, which right is hereby granted by each Obligor to Bank;
and (iv) exercise any and all other rights under the Loan Documents, at law, in
equity or otherwise.
No waiver of any default is a waiver of any other default. Bank's
delay in exercising any right or power under any Loan Document is not a waiver
of such right or power.
Each Obligor severally waives notice, demand, presentment for payment,
notice of nonpayment, notice of intent to accelerate, notice of acceleration,
protest, notice of protest, and the filing of suit and diligence in collecting
this Note and all other demands and notices, and consents and agrees that its
liabilities and obligations will not be released or discharged by any or all of
the following, whether with or without notice to it or any other Obligor, and
whether before or after the stated maturity hereof: (i) extensions of the time
of payment; (ii) renewals; (iii) acceptances of partial payments; (iv) releases
or substitutions of any collateral or any Obligor; and (v) failure, if any, to
perfect or maintain perfection of any security interest in any collateral. Each
Obligor agrees that acceptance of any partial payment will not constitute a
waiver and that waiver of any default will not constitute waiver of any prior or
subsequent default.
Where appropriate the neuter gender includes the feminine and the
masculine and the singular number includes the plural number.
Borrower represents and agrees that: all Loans evidenced by this Note
are and will be for business, commercial, investment or other similar purpose
and not primarily for personal, family, or household use as such terms are used
in Chapter One of the Texas Credit Code. Borrower represents and agrees that
each of the following statements is true: (i) No advances will be used primarily
for agricultural purposes as such term is used in the Texas Credit Code. (ii) No
advances will be used for the purpose of purchasing or carrying any margin stock
as that term is defined in Regulation U of the Board. Notwithstanding anything
contained herein or in any other Loan Document, if this is a consumer credit
obligation (as defined or described in 12 C.F.R. 227, Regulation AA, promulgated
by the Board), the security for this credit obligation will not extend to any
non-possessory security interest in household goods (as defined in Regulation
AA) other than a purchase money security interest, and no waiver of any notice
contained herein or therein will extend to any waiver of notice prohibited by
Regulation AA.
Chapter 15 of the Texas Credit Code shall not apply to this Note or to
any Loan evidenced by this Note.
This Note is governed by Texas law. If any provision of this Note is
illegal or unenforceable, that illegality or unenforceability will not affect
the remaining provisions of this Note. BORROWER AND BANK AGREE THAT THE COUNTY
IN WHICH BANK'S PRINCIPAL OFFICE IS LOCATED IN TEXAS IS PROPER VENUE FOR ANY
ACTION OR PROCEEDING BROUGHT BY BORROWER OR BANK, WHETHER IN CONTRACT, TORT, OR
OTHERWISE. ANY ACTION OR PROCEEDING AGAINST BORROWER MAY BE BROUGHT IN ANY STATE
OR FEDERAL COURT IN SUCH COUNTY TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW.
TO THE EXTENT PERMITTED BY APPLICABLE LAW BORROWER HEREBY IRREVOCABLY (A)
SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURTS, AND (B) WAIVES ANY
OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT OR THAT ANY SUCH COURT IS AN INCONVENIENT
FORUM. BORROWER AGREES THAT SERVICE OF PROCESS UPON IT MAY BE MADE BY CERTIFIED
OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, AT ITS ADDRESS SPECIFIED BELOW.
BANK MAY SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW AND MAY BRING ANY
ACTION OR PROCEEDING AGAINST BORROWER OR WITH RESPECT TO ANY OF ITS PROPERTY IN
COURTS IN OTHER PROPER JURISDICTIONS OR VENUES.
For purposes of this Note, any assignee or subsequent holder of this
Note will be considered the "Bank," and each successor to Borrower will be
considered the "Borrower."
Each Borrower and cosigner represents that if it is not a natural
person, it is duly organized and validly existing and in good standing under the
laws of the state of its incorporation or organization; has full power to own
its properties and to carry on its business as now conducted; is duly qualified
to do business and is in good standing in each jurisdiction in which the nature
of the business conducted by it makes such qualification desirable; and has not
commenced any dissolution proceedings. Each Borrower and cosigner that is
subject to the Texas Revised Partnership Act ("TRPA") agrees that Bank is not
required to comply with Section 3.05(d) of the TRPA and agrees that Bank may
proceed directly against one or more partners or their property without first
seeking satisfaction from partnership property. Each Borrower and cosigner
represents that if it conducts business under an assumed business or
professional name it has properly filed Assumed Name Certificate(s) in the
office(s) required by Chapter 36 of the Texas Business and Commerce Code. Each
of the persons signing below as Borrower or cosigner represents that he/she has
full requisite power and authority to execute and deliver this Note to Bank on
behalf of the party for whom he/she signs and to bind such party to the terms
and conditions of this Note and that this Note is enforceable against such
party.
NO COURSE OF DEALING BETWEEN BORROWER AND BANK, NO COURSE OF
PERFORMANCE, NO TRADE PRACTICES, AND NO EXTRINSIC EVIDENCE OF ANY NATURE MAY BE
USED TO CONTRADICT OR MODIFY ANY TERM OF THIS NOTE OR ANY OTHER LOAN DOCUMENT.
THIS NOTE AND THE OTHER WRITTEN LOAN DOCUMENTS REPRESENT 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 UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, Borrower has executed this Note effective
the day, month and year first aforesaid.
BORROWER: PHYSICIAN'S VISITING NURSE SERVICE, INC.
Page 3 of 4 Pages
By: /s/ MARK H. FISHER
Name: Mark H. Fisher
Title: President
(Bank's signature is provided as its acknowledgment of the above as the final
written agreement between the parties and as its agreement with each Borrower
subject to TRPA that Bank is not required to comply with Section 3.05(d) of
TRPA.)
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
By: /s/ GARY WHITT
Name: Gary Whitt
Title: VP
EXHIBIT 10.16
REVOLVING PROMISSORY NOTE
(FLOATING RATE)
(this "Note")
THIS IS A RENEWAL, EXTENSION, MODIFICATION
OR DEFERRAL OF NOTE
004-0077644-000001
NAME(S) AND ADDRESS(ES) OF B0RROWER(S)
PRN HOME HEALTH CARE, INC.
6233 S. INDUSTRIAL RD, BLDG. C LAS VEGAS NV 89118-
U.S. $ (THE "DATE")
1,175,000.00 MARCH 15, 1996
ACCOUNT NUMBER/NOTE NUMBER TRANSACTION CODE TELLER OFFICER
004-0077644-000001 R VRL GKW
FOR VALUE RECEIVED, the "Borrower," (jointly and severally if more
than one), promises to pay to the order of
TEXAS COMMERCE BANK NATIONAL ASSOCIATION ("Bank") on or before APRIL 15,
1997, at its office at 712 MAIN HOUSTON, TEXAS 77252-2558, or at such other
location as Bank may designate, in immediately available funds
***ONE MILLION ONE HUNDRED SEVENTY FIVE THOUSAND AND NO/100***
UNITED STATES DOLLARS (U.S. $1,175,000.00) (the "Maximum Amount of
Note") or the aggregate unpaid amount of all advances hereunder,
whichever is less. Borrower will also pay interest on the unpaid
principal balance outstanding from time to time at a rate per annum
equal to the lesser of (i) the sum of the Prime Rate (as hereinafter
defined) from time to time in effect plus
ZERO
percent (0.000%), (the "STATED RATE") or (ii) the maximum nonusurious
rate of interest from time to time permitted by applicable law, (the
"HIGHEST LAWFUL RATE"). If the Stated Rate at any time exceeds the
Highest Lawful Rate, the actual rate of interest to accrue on the unpaid
principal amount of this Note will be limited to the Highest Lawful
Rate, but any subsequent reductions in the Stated Rate due to reductions
in the Prime Rate will not reduce the interest rate payable upon the
unpaid principal amount of this Note below the Highest Lawful Rate unto
the total amount of interest accrued on this Note equals the amount of
interest which would have accrued if the Stated Rate had at all times
been in effect.
"PRIME RATE" means the rate determined from time to time by Bank as
its prime rate. The Prime Rate shall change automatically from time to
time without notice to Borrower or any other person. THE PRIME RATE IS A
REFERENCE RATE AND MAY NOT BE BANK'S LOWEST RATE.
If Texas law determines the Highest Lawful Rate, Bank has elected
the "indicated" (weekly) ceiling as defined in the Texas Credit Code or
any successor statute. Bank may from time to time, as to current and
future balances, elect and implement any other ceiling under such Code
and/or revise the index, formula or provisions of law used to compute
the rate on this open-end account by notice to Borrower, if and to the
extent permitted by, and in the manner provided in such Code.
Each advance must be at least
N/A
UNITED STATES DOLLARS (U.S.$ N/A ) unless the amount available
for borrowing under this Note is less.
Accrued and unpaid interest is due and payable MONTHLY, beginning
on APRIL 15, 1996, and continuing on the 15TH day of each MONTH
thereafter and at maturity when all unpaid principal and accrued and
unpaid interest is finally due and payable.
Interest will be computed on the basis of the actual number of days
elapsed and a year comprised of: [ ] 365 (or 366 as the case may be)
days [X] 360 days, unless such calculation would result in a usurious
interest rate, in which case such interest will be calculated on the
basis of a 365 or 366 day year, as the case may be.
All past-due principal and interest on this Note will, at Bank's
option, bear interest at the Highest Lawful Rate, or if applicable law
does not provide for a maximum nonusurious rate of interest, at a rate
per annum equal to 18%.
In addition to all principal and accrued interest on this Note,
Borrower agrees to pay: (a) all reasonable costs and expenses incurred
by Bank and all owners and holders of this Note in collecting this Note
through probate, reorganization, bankruptcy or any other proceeding; and
(b) reasonable attorney's fees if and when this Note is placed in the
hands of an attorney for collection.
Borrower and Bank intend to conform strictly to applicable usury
laws, Therefore, the total amount of interest (as defined under
applicable law) contracted for, charged or collected under this Note
will never exceed the Highest Lawful Rate. If Bank contracts for,
charges or receives any excess interest, it will be deemed a mistake.
Bank will automatically reform the contract or charge to conform to
applicable law, and if excess interest has been received, Bank will
either refund the excess to Borrower or credit the excess on the unpaid
principal amount of this Note. All amounts constituting interest will be
spread throughout the full term of this Note in determining whether
interest exceeds lawful amounts.
The unpaid principal balance of this Note at any time will be the
total amounts advanced by Bank, less the amount of all payments or
prepayments of principal. Absent manifest error, the records of Bank
will be conclusive as to amounts owed. Subject to the terms and
conditions of this Note and the Loan Documents, Borrower may use all or
any part of the credit provided for herein at any time before the
maturity of this Note and may borrow, repay and reborrow. There is no
limitation on the number of advances made so long as the total unpaid
principal amount at any time outstanding does not exceed the Maximum
Amount of Note.
Borrower may at any time pay the full amount or any part of this
Note without the payment of any premium or fee. Any partial prepayment
will be in the amount of U.S.$ N/A (U.S.$ N/A ), or an
integral multiple thereof. All payments may, at Bank's sole option, be
applied to accrued interest, to principal, or to both.
"LOAN DOCUMENT" means this Note and any document or instrument
evidencing, securing, guaranteeing or given in connection with this
Note. "OBLIGATIONS" means all principal, interest and other amounts
which are or become owing under this Note or any other Loan Document.
"OBLIGOR" means Borrower and any guarantor, surety, co-signer, general
partner or other person who may now or hereafter be obligated to pay all
or any part of the Obligations. Where appropriate the neuter gender
includes the feminine and the masculine and the singular number includes
the plural number.
Each of the following events or conditions is an "EVENT OF
DEFAULT:" (1) any Obligor fails to pay any of the Obligations when due;
(2) any warranty, representation or statement now or hereafter contained
in or made in connection with any Loan Document was false or misleading
in any respect when made; (3) any Obligor violates any covenant,
condition or agreement contained in any Loan Document; (4) any Obligor
fails or refuses to submit financial information requested by Bank or to
permit Bank to inspect its books and records on request; (5) any event
of default occurs under any other Loan Document; (6) any individual
Obligor dies, or any Obligor that is an entity dissolves; (7) a
receiver, conservator or similar official is appointed for any Obligor
or any Obligor's assets; (8) any petition is filed by or against any
Obligor under any bankruptcy, insolvency or similar law; (9) any Obligor
makes an assignment for the benefit of creditors; (10) a final judgment
is entered against any Obligor and remains unsatisfied for 30 days after
entry, or any property of any Obligor is attached, garnished or
otherwise made subject to legal process; (11) any material adverse
change occurs in the business, assets, affairs or financial condition of
any Obligor; and (12) Borrower is in default of any other obligation to
or any other agreement with Bank.
If any Event of Default occurs, then Bank may do any or all of the
following: (i) cease making advances hereunder; (ii) declare the
Obligations to be immediately due and payable, without notice of
acceleration or of intention to accelerate, presentment and demand or
protest or notice of any kind, all of which are hereby expressly waived;
(iii) set off, in any order, against the Obligations any debt owing by
Bank to any Obligor, including, but not limited to, any deposit account,
which right is hereby granted by each Obligor to Bank; and (iv) exercise
any and all other rights under the Loan Document, at law, in equity or
otherwise.
No waiver of any default is a waiver of any other default. Bank's
delay in exercising any right or power under any Loan Document is not a
waiver of such right or power.
Each Obligor severally waives notice, demand, presentment for
payment, notice of nonpayment, notice of intent to accelerate, notice of
acceleration protest, notice of protest, and the filing of suit and
diligence in collecting this Note and all other demands and notices, and
consents and agrees that its liabilities and obligations will not be
released or discharged by any or all of the following, whether with or
without notice to it or any other Obligor, and whether before or after
the stated maturity hereof: (i) extensions of the time of payment; (ii)
renewals; (iii) acceptances of partial payments; (iv) releases or
substitutions of any collateral or any Obligor, and (v) failure, if any,
to perfect or maintain perfection of any security interest in any
collateral. Each Obligor agrees that acceptance of any partial payment
will not constitute a waiver and that waiver of any default will not
constitute waiver of any prior or subsequent default.
F-250-00835C (3/95)
CML Revolving Floating Rate Page 1 of 2
0780479 004-0077644-000001
Borrower represents and agrees that: all advances evidenced by this
Note are and will be for business, commercial, investment or other
similar purpose and not primarily for personal, family, or household use
as such terms are used in Chapter One of the Texas Credit Code.
Borrower represents and agrees that each of the following
statements is true unless the box preceding that statement is checked
and initialed by
Borrower and Bank: (i): [ ] ____________ ____________ No advances will
be used primarily for agricultural purposes as such term is used in the
Texas Credit
Code. (ii) [ ] ____________ ____________ No advances will be used for
the purpose of purchasing or carrying any margin stock as that term is
defined in Regulation U of the Board of Governors of the Federal Reserve
System (the "Board"). Notwithstanding anything contained herein or in
any other Loan Document, if this is a consumer credit obligation (as
defined or described in 12 C.F.R. 227, Regulation AA, promulgated by the
Board), the security for this credit obligation will not extend to any
non-possessory security interest in household goods (as defined in
Regulation AA) other than a purchase money security interest, and no
waiver of any notice contained herein or therein will extend to any
waiver of notice prohibited by Regulation AA.
Chapter 15 of the Texas Credit Code shall not apply to this Note or
to any advance evidenced by this Note.
This Note is governed by Texas law. If any provision of this Note
is illegal or unenforceable, that illegality or unenforceability will
not affect the remaining provisions of this Note. BORROWER(S) AND BANK
AGREE THAT THIS NOTE WILL BE PERFORMED IN THE COUNTY IN WHICH BANK'S
PRINCIPAL OFFICE IS LOCATED IN TEXAS, AND THAT SUCH COUNTY IS PROPER
VENUE FOR ANY ACTION OR PROCEEDING BROUGHT BY BORROWER(S) OR BANK,
WHETHER IN CONTRACT, TORT, OR OTHERWISE. ANY ACTION OR PROCEEDING
AGAINST BORROWER(S) MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT IN SUCH
COUNTY TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW. TO THE EXTENT
PERMITTED BY APPLICABLE LAW BORROWER(S) HEREBY IRREVOCABLY (A) SUBMITS
TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURTS, AND (B) WAIVES ANY
OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH
ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT OR THAT ANY SUCH COURT IS
AN INCONVENIENT FORUM. BORROWER(S) AGREES THAT SERVICE OF PROCESS UPON
IT MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT
REQUESTED, AT ITS ADDRESS SPECIFIED ABOVE. BANK MAY SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW AND MAY BRING ANY ACTION OR PROCEEDING
AGAINST BORROWER(S) OR WITH RESPECT TO ANY OF ITS PROPERTY IN COURTS IN
OTHER PROPER JURISDICTIONS OR VENUES.
For purposes of this Note, any assignee or subsequent holder of
this Note will be considered the "Bank," and each successor to Borrower
will be considered the "Borrower."
Each Borrower and cosigner represents that if it is not a natural
person, it is duly organized and validly existing and in good standing
under the laws of the state of its incorporation or organization; has
full power to own its properties and to carry on its business as now
conducted; is duly qualified to do business and is in good standing in
each jurisdiction in which the nature of the business conducted by it
makes such qualification desirable; and has not commenced any
dissolution proceedings. Each Borrower and cosigner that is subject to
the Texas Revised Partnership Act ("TRPA") agrees that Bank is not
required to comply with Section 3.05(d) of the TRPA and agrees that Bank
may proceed directly against one or more partners or their property
without first seeking satisfaction from partnership property. Each
Borrower and cosigner represents that if it conducts business under an
assumed business or professional name it has properly filed Assumed Name
Certificate(s) in the office(s) required by Chapter 36 of the Texas
Business and Commerce Code. Each of the persons signing below as
Borrower or cosigner represents that he/she has full requisite power and
authority to execute and deliver this Note to Bank on behalf of the
party for whom he/she signs and to bind such party to the terms and
conditions of this Note and that this Note is enforceable against such
party.
NO COURSE OF DEALING BETWEEN BORROWER AND BANK, NO COURSE OF
PERFORMANCE, NO TRADE PRACTICES, AND NO EXTRINSIC EVIDENCE OF ANY NATURE
MAY BE USED TO CONTRADICT OR MODIFY ANY TERM OF THIS NOTE OR ANY OTHER
LOAN DOCUMENT.
THIS NOTE AND THE OTHER WRITTEN LOAN DOCUMENTS REPRESENT 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 UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, Borrower has executed this Note effective as of the Date.
Signature(s) of BORROWER(S):
PRN HOME HEALTH CARE, INC.
MARK H. FISHER Date: 3-18-96
BY: Mark H. Fisher TITLE: PRESIDENT
___________________________________________________ Date: __________________
___________________________________________________ Date: __________________
___________________________________________________ Date: __________________
___________________________________________________ Date: __________________
___________________________________________________ Date: __________________
The undersigned hereby cosigns this Note:
Signature of COSIGNER:________________________________________________________
Address of Cosigner:__________________________________________________________
(Bank's signature is provided as its acknowledgement of the above as the
final written agreement between the parties and as its agreement with
each Borrower subject to TRPA that Bank is not required to comply with
Section 3.05(d) of TRPA.)
BANK: TEXAS COMMERCE BANK NATIONAL ASSOCIATION
By: GARY K. WHITT
Title: VP
F-250-00835C (3/95)
CML Revolving Floating Rate Page 2 of 2
0780479 004-0077644-000001
CONTINUING LIMITED GUARANTY
(this "Guaranty")
1. GUARANTY. The undersigned Guarantor (jointly and severally if more than
one) agrees to pay TEXAS COMMERCE BANK NATIONAL ASSOCIATION, herein called
"Lender" at 712 Main Street, P.O. Box 2558, Houston, Harris County, Texas
77252-2558, or such other address as Lender designates, when due or
declared due, the Guaranteed Indebtedness. This Guaranty is an
unconditional, absolute and continuing guaranty of payment and performance
and not of collection. "Guaranteed Indebtedness" means all debts,
obligations, and liabilities of every kind and character, whether joint or
several, contingent or otherwise, of PRN HOME HEALTH CARE, INC. (together
with its successors, "Borrower") now or hereafter existing in favor of
Lender evidenced by that one certain promissory note dated March 15, 1996
in the original principal amount of $1,175,000.00 (including each and every
renewal, extension and modification thereof, rearrangement and substitution
therefor, the "Note") and all indebtedness under the Loan Documents.
Guaranteed Indebtedness includes any post-petition interest and expenses
(including, but not limited to, attorneys' fees) whether or not allowed as
a claim against Borrower under any bankruptcy, insolvency, or other similar
law. All Guaranteed Indebtedness is conclusively presumed to have been made
or acquired in reliance on this Guaranty. Guarantor's liability under this
Guaranty shall be limited in the aggregate at any one time to the principal
sum of $587,500.00 together with all interest thereon, and all penalties,
costs, fees and expenses (including, but not limited to, attorneys' fees)
as provided for under any of the Loan Documents and as incurred by Lender
in connection with any Guaranteed Indebtedness, including, but not limited
to collecting or attempting to collect any of the foregoing indebtedness
from Borrower. This Guaranty does not in any way cancel, amend, discharge
or limit any other guaranty executed by Guarantor in favor of Lender. "LOAN
DOCUMENTS" means any document or instrument evidencing, securing or
executed in connection with Guaranteed Indebtedness.
2. TERMINATION OF GUARANTY. This Guaranty will continue to be in effect until
final payment in full of the Guaranteed Indebtedness. Any Guarantor may
terminate its liability for Guaranteed Indebtedness not in existence
(whether by advance, commitment or otherwise) by delivering written notice
to Lender, to be effective 5 business days after received under written
receipt by Lender. After termination of this Guaranty, Guarantor will
continue to be liable for all Guaranteed Indebtedness existing on the
effective date of termination, and for all Guaranteed Indebtedness arising
under any written agreement to make loans or extensions of credit entered
into between Lender and Borrower prior to the effective date of termination
(whether or not Lender is contractually obligated to make the loans or
extensions of credit).
3. CONTINUATION AND REINSTATEMENT OF GUARANTY. If any petition or other action
is filed by or against Borrower under the Bankruptcy Code or any other law
relating to liquidation, insolvency or reorganization of debtors, or any
other proceeding involving the estate or assets of the Guarantor, this
Guaranty will remain effective or be reinstated, as the case may be (even
if the Guaranteed Indebtedness has been paid in full), with respect to any
payments or transfer of assets with respect to Guaranteed Indebtedness, to
the extent such payment or transfers are or may be voidable or otherwise
subject to rescission or return as a preferential transfer, fraudulent
conveyance or otherwise.
4. CHANGES TO GUARANTEED INDEBTEDNESS. Guarantor authorizes Lender, without
notice, consent or demand, before and after termination of this Guaranty,
without affecting Guarantor's liability hereunder: to take and hold
security for the payment of this Guaranty and/or the Guaranteed
Indebtedness, and exchange, enforce, foreclose, waive and release any
security and to apply the proceeds of such security as Lender in its
discretion determines; to obtain a guaranty of the indebtedness from any
one or more other persons or entities whomsoever and at any time or times
to enforce, waive, rearrange, modify, limit or release such other persons
or entities from their obligations under such guaranties; and to extend,
rearrange, supplement, modify, settle, compromise, discharge or subordinate
any of the Guaranteed Indebtedness.
5. UNENFORCEABILITY OR UNCOLLECTIBILITY OF THE GUARANTEED INDEBTEDNESS.
Guarantor will remain liable for the Guaranteed Indebtedness even though
the Guaranteed Indebtedness may be unenforceable against or uncollectible
from the Borrower or any other person due to incapacity, lack of power or
authority, discharge, or for any reason whatsoever.
6. GUARANTOR REPORTING. Guarantor will furnish to Lender such financial
statements and other information relating to the financial condition,
properties and affairs of Guarantor as Lender requests from time to time.
7. RIGHT OF OFFSET. Guarantor grants to Lender a right of setoff against every
deposit account and all personal property in Lender's possession, whether
tangible or intangible, and any claim of Guarantor (whether individual,
joint, several or otherwise) against Lender, now or hereafter existing.
This right of setoff is not exclusive. In addition to Lender's right of
setoff and as further security for this Guaranty and the Guaranteed
Indebtedness, Guarantor hereby grants Lender a security interest in all
deposits and all other accounts and property of Guarantor now or hereafter
on deposit with or held by Lender and all other sums at any time credited
by or owing from Lender to Guarantor. These rights and remedies of Lender
are in addition to other rights and remedies (including, without
limitation, other rights of setoff) which Lender may have.
8. AUTOMATIC ACCELERATION. Guarantor agrees that if the maturity of any
Guaranteed Indebtedness is accelerated by bankruptcy or otherwise, such
maturity shall also be deemed accelerated for the purpose of this Guaranty
without demand on or notice to Guarantor.
9. WAIVERS OF GUARANTOR. Guarantor waives (i) diligence and promptness in
preserving liability of any person on Guaranteed Indebtedness, and in
collecting or bringing suit to collect Guaranteed Indebtedness; (ii) all
rights of Guarantor under Rule 31, Texas Rules of Civil Procedure, or
Chapter 34 of the Texas Business and Commerce Code, or Section 17.001 of
the Texas Civil Practice and Remedies Code; (iii) to the extent Guarantor
is subject to the Texas Revised Partnership Act ("TRPA"), compliance by
Lender with Section 3.05(d) of TRPA; (iv) protest; (v) notice of
extensions, renewals, modifications, rearrangements and substitutions of
Guaranteed Indebtedness; (vi) notice of acceptance of this agreement,
creation of Guaranteed Indebtedness, failure to pay Guaranteed Indebtedness
as it matures, any other default, adverse change in Borrower's financial
condition, release or substitution of collateral, subordination of Lender's
rights in any collateral, and every other notice of every kind. If any part
of the Guaranteed Indebtedness is secured by an interest in real property
("Real Property"), and such interest is foreclosed upon pursuant to a
judicial or nonjudicial foreclosure sale, Guarantor agrees that
notwithstanding the provisions of Section 51.003, 51.004, and 51.005 of the
Texas Property Code (as amended from time to time), and to the extent
permitted by law, Lender may seek a deficiency judgment from Guarantor and
any other party obligated on the Guaranteed Indebtedness equal to the
difference between the amount owing on the Guaranteed Indebtedness and the
amount for which the Real Property was sold at judicial or nonjudicial
foreclosure sale. Guarantor irrevocably waives and shall not seek to
enforce or collect upon any rights which it now has or may acquire against
the Borrower, either by way of subrogation, indemnity, reimbursement or
contribution, for any amount paid under this Guaranty or by way of any
other obligations of the Borrower to Guarantor until 91 days after the
Guaranteed Indebtedness is paid in full.
10. REPRESENTATIONS AND AGREEMENTS. This Guaranty constitutes a legal, valid,
binding obligation of and is enforceable against Guarantor. Guarantor has
filed all federal and state tax returns which are required to be filed, and
has paid all due and payable taxes and assessments against the property and
income of Guarantor. Guarantor has determined that this Guaranty will
benefit Guarantor directly or indirectly. The value of the consideration
received by Guarantor is reasonably worth at least as much as its liability
hereunder and is fair and reasonably equivalent value for this Guaranty. No
material adverse change has occurred in Guarantor's financial condition or
business operations reflected in the last financial statement and
application for credit provided to Lender. Guarantor has not relied and is
not relying on Lender to provide to Guarantor information regarding
Borrower's assets or financial condition and Lender has no duty to provide
such information.
11. APPLICABLE LAW AND VENUE. This Guaranty is governed by Texas law. If any
provision of this Guaranty is illegal or unenforceable, that illegality or
unenforceability will not affect the remaining provisions of this Guaranty.
GUARANTOR AND LENDER AGREE THAT THIS GUARANTY WILL BE PERFORMED IN THE
COUNTY IN WHICH LENDER'S PRINCIPAL OFFICE IN TEXAS IS LOCATED, AND THAT
SUCH COUNTY IS PROPER VENUE FOR ANY ACTION OR PROCEEDING BROUGHT BY THE
GUARANTOR OR LENDER, WHETHER IN CONTRACT, TORT, OR OTHERWISE. ANY ACTION OR
PROCEEDING AGAINST GUARANTOR MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT
IN SUCH COUNTY TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW. TO THE
EXTENT PERMITTED BY APPLICABLE LAW GUARANTOR HEREBY IRREVOCABLY (A) SUBMITS
TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURTS, AND (B) WAIVES ANY
OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH ACTION
OR PROCEEDING BROUGHT IN ANY SUCH COURT OR THAT ANY SUCH COURT IS AN
INCONVENIENT FORUM. GUARANTOR AGREES THAT SERVICE OF PROCESS UPON IT MAY BE
MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, AT ITS
ADDRESS SPECIFIED BELOW. LENDER MAY SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW AND MAY BRING ANY ACTION OR PROCEEDING AGAINST GUARANTOR
OR WITH RESPECT TO ANY OF ITS PROPERTY IN COURTS IN OTHER PROPER
JURISDICTIONS OR VENUES.
12. NOTICE. Any notice required or permitted under this Guaranty must be given
in writing by United States mail, by hand delivery or delivery service, or
by telegraphic, telex, telecopy or cable communication, sent to the
intended addressee at the address shown in this Guaranty, or to such
different address as the addressee designates by 10 days notice. Notice by
United States mail will be effective when mailed. All other notices will be
effective when received. Written confirmation of receipt will be
conclusive. Notice of terminations, as provided in Section 2, will not be
deemed given until actually received by a commercial lending officer with
the rank of Vice President or above at the address of Lender shown in this
Guaranty.
13. COSTS AND EXPENSES. To the extent permitted by applicable law, Guarantor
will pay on demand all attorneys' fees and all other costs and expenses
incurred by Lender in connection with the preparation, administration,
enforcement, or collection of this Guaranty including but not limited to
Lender's standard Documentation Preparation and Processing fees.
14. MISCELLANEOUS. This Guaranty binds each Guarantor and its successors and
assigns and benefits Lender. The term "Lender" also includes all successors
and assigns of Lender. Guarantor may not assign its obligations under this
Guaranty without the prior written consent of Lender. This Guaranty may be
executed in multiple counterparts, and each counterpart will be deemed an
original, without the need to produce any counterpart other than the one to
be enforced. Any gender designation used herein includes all genders and
the singular number includes the plural. Lender's delay or failure to
exercise its rights is not a waiver of those rights. This Guaranty may not
be amended except in a writing signed by an authorized officer of Lender
and no waiver will be effective unless it is in writing. Any waiver is
applicable only for the specific situation for which it is given.
THIS GUARANTY is executed as of MARCH 15, 1996.
Page 1 of 2
THIS GUARANTY REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES WITH
RESPECT TO GUARANTOR'S GUARANTY OF GUARANTEED INDEBTEDNESS AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. NO COURSE OF DEALING BETWEEN GUARANTOR AND LENDER, NO
COURSE OF PERFORMANCE, NO TRADE PRACTICES, AND NO EXTRINSIC EVIDENCE OF ANY
NATURE MAY BE USED TO CONTRADICT OR MODIFY ANY TERM OF THIS GUARANTY.
THERE ARE NO ORAL AGREEMENTS BETWEEN GUARANTOR AND LENDER.
GUARANTOR:
MARK H. FISHER Date: 3-18-96
ADDRESS OF
GUARANTOR: 17 Carolane Trail
Houston, Harris County
Texas 77024
LENDER: (Lender's signature is provided as its acknowledgement of the above as
the final written agreement between the parties.)
BY: GARY K. WHITT
TITLE: VP
CONTINUING LIMITED GUARANTY
(this "Guaranty")
1. GUARANTY. The undersigned Guarantor (jointly and severally if more than
one) agrees to pay TEXAS COMMERCE BANK NATIONAL ASSOCIATION, herein called
"Lender" at 712 Main Street, P.O. Box 2558, Houston, Harris County, Texas
77252-2558, or such other address as Lender designates, when due or
declared due, the Guaranteed Indebtedness. This Guaranty is an
unconditional, absolute and continuing guaranty of payment and performance
and not of collection. "Guaranteed Indebtedness" means all debts,
obligations, and liabilities of every kind and character, whether joint or
several, contingent or otherwise, of PRN HOME HEALTH CARE, INC. (together
with its successors, "Borrower") now or hereafter existing in favor of
Lender evidenced by that one certain promissory note dated March 15, 1996
in the original principal amount of $1,175,000.00 (including each and every
renewal, extension and modification thereof, rearrangement and substitution
therefor, the "Note") and all indebtedness under the Loan Documents.
Guaranteed Indebtedness includes any post-petition interest and expenses
(including, but not limited to, attorneys' fees) whether or not allowed as
a claim against Borrower under any bankruptcy, insolvency, or other similar
law. All Guaranteed Indebtedness is conclusively presumed to have been made
or acquired in reliance on this Guaranty. Guarantor's liability under this
Guaranty shall be limited in the aggregate at any one time to the principal
sum of $587,500.00 together with all interest thereon, and all penalties,
costs, fees and expenses (including, but not limited to, attorneys' fees)
as provided for under any of the Loan Documents and as incurred by Lender
in connection with any Guaranteed Indebtedness, including, but not limited
to collecting or attempting to collect any of the foregoing indebtedness
from Borrower. This Guaranty does not in any way cancel, amend, discharge
or limit any other guaranty executed by Guarantor in favor of Lender. "LOAN
DOCUMENTS" means any document or instrument evidencing, securing or
executed in connection with Guaranteed Indebtedness.
2. TERMINATION OF GUARANTY. This Guaranty will continue to be in effect until
final payment in full of the Guaranteed Indebtedness. Any Guarantor may
terminate its liability for Guaranteed Indebtedness not in existence
(whether by advance, commitment or otherwise) by delivering written notice
to Lender, to be effective 5 business days after received under written
receipt by Lender. After termination of this Guaranty, Guarantor will
continue to be liable for all Guaranteed Indebtedness existing on the
effective date of termination, and for all Guaranteed Indebtedness arising
under any written agreement to make loans or extensions of credit entered
into between Lender and Borrower prior to the effective date of termination
(whether or not Lender is contractually obligated to make the loans or
extensions of credit).
3. CONTINUATION AND REINSTATEMENT OF GUARANTY. If any petition or other action
is filed by or against Borrower under the Bankruptcy Code or any other law
relating to liquidation, insolvency or reorganization of debtors, or any
other proceeding involving the estate or assets of the Guarantor, this
Guaranty will remain effective or be reinstated, as the case may be (even
if the Guaranteed Indebtedness has been paid in full), with respect to any
payments or transfer of assets with respect to Guaranteed Indebtedness, to
the extent such payment or transfers are or may be voidable or otherwise
subject to rescission or return as a preferential transfer, fraudulent
conveyance or otherwise.
4. CHANGES TO GUARANTEED INDEBTEDNESS. Guarantor authorizes Lender, without
notice, consent or demand, before and after termination of this Guaranty,
without affecting Guarantor's liability hereunder: to take and hold
security for the payment of this Guaranty and/or the Guaranteed
Indebtedness, and exchange, enforce, foreclose, waive and release any
security and to apply the proceeds of such security as Lender in its
discretion determines; to obtain a guaranty of the indebtedness from any
one or more other persons or entities whomsoever and at any time or times
to enforce, waive, rearrange, modify, limit or release such other persons
or entities from their obligations under such guaranties; and to extend,
rearrange, supplement, modify, settle, compromise, discharge or subordinate
any of the Guaranteed Indebtedness.
5. UNENFORCEABILITY OR UNCOLLECTIBILITY OF THE GUARANTEED INDEBTEDNESS.
Guarantor will remain liable for the Guaranteed Indebtedness even though
the Guaranteed Indebtedness may be unenforceable against or uncollectible
from the Borrower or any other person due to incapacity, lack of power or
authority, discharge, or for any reason whatsoever.
6. GUARANTOR REPORTING. Guarantor will furnish to Lender such financial
statements and other information relating to the financial condition,
properties and affairs of Guarantor as Lender requests from time to time.
7. RIGHT OF OFFSET. Guarantor grants to Lender a right of setoff against every
deposit account and all personal property in Lender's possession, whether
tangible or intangible, and any claim of Guarantor (whether individual,
joint, several or otherwise) against Lender, now or hereafter existing.
This right of setoff is not exclusive. In addition to Lender's right of
setoff and as further security for this Guaranty and the Guaranteed
Indebtedness, Guarantor hereby grants Lender a security interest in all
deposits and all other accounts and property of Guarantor now or hereafter
on deposit with or held by Lender and all other sums at any time credited
by or owing from Lender to Guarantor. These rights and remedies of Lender
are in addition to other rights and remedies (including, without
limitation, other rights of setoff) which Lender may have.
8. AUTOMATIC ACCELERATION. Guarantor agrees that if the maturity of any
Guaranteed Indebtedness is accelerated by bankruptcy or otherwise, such
maturity shall also be deemed accelerated for the purpose of this Guaranty
without demand on or notice to Guarantor.
9. WAIVERS OF GUARANTOR. Guarantor waives (i) diligence and promptness in
preserving liability of any person on Guaranteed Indebtedness, and in
collecting or bringing suit to collect Guaranteed Indebtedness; (ii) all
rights of Guarantor under Rule 31, Texas Rules of Civil Procedure, or
Chapter 34 of the Texas Business and Commerce Code, or Section 17.001 of
the Texas Civil Practice and Remedies Code; (iii) to the extent Guarantor
is subject to the Texas Revised Partnership Act ("TRPA"), compliance by
Lender with Section 3.05(d) of TRPA; (iv) protest; (v) notice of
extensions, renewals, modifications, rearrangements and substitutions of
Guaranteed Indebtedness; (vi) notice of acceptance of this agreement,
creation of Guaranteed Indebtedness, failure to pay Guaranteed Indebtedness
as it matures, any other default, adverse change in Borrower's financial
condition, release or substitution of collateral, subordination of Lender's
rights in any collateral, and every other notice of every kind. If any part
of the Guaranteed Indebtedness is secured by an interest in real property
("Real Property"), and such interest is foreclosed upon pursuant to a
judicial or nonjudicial foreclosure sale, Guarantor agrees that
notwithstanding the provisions of Section 51.003, 51.004, and 51.005 of the
Texas Property Code (as amended from time to time), and to the extent
permitted by law, Lender may seek a deficiency judgment from Guarantor and
any other party obligated on the Guaranteed Indebtedness equal to the
difference between the amount owing on the Guaranteed Indebtedness and the
amount for which the Real Property was sold at judicial or nonjudicial
foreclosure sale. Guarantor irrevocably waives and shall not seek to
enforce or collect upon any rights which it now has or may acquire against
the Borrower, either by way of subrogation, indemnity, reimbursement or
contribution, for any amount paid under this Guaranty or by way of any
other obligations of the Borrower to Guarantor until 91 days after the
Guaranteed Indebtedness is paid in full.
10. REPRESENTATIONS AND AGREEMENTS. This Guaranty constitutes a legal, valid,
binding obligation of and is enforceable against Guarantor. Guarantor has
filed all federal and state tax returns which are required to be filed, and
has paid all due and payable taxes and assessments against the property and
income of Guarantor. Guarantor has determined that this Guaranty will
benefit Guarantor directly or indirectly. The value of the consideration
received by Guarantor is reasonably worth at least as much as its liability
hereunder and is fair and reasonably equivalent value for this Guaranty. No
material adverse change has occurred in Guarantor's financial condition or
business operations reflected in the last financial statement and
application for credit provided to Lender. Guarantor has not relied and is
not relying on Lender to provide to Guarantor information regarding
Borrower's assets or financial condition and Lender has no duty to provide
such information.
11. APPLICABLE LAW AND VENUE. This Guaranty is governed by Texas law. If any
provision of this Guaranty is illegal or unenforceable, that illegality or
unenforceability will not affect the remaining provisions of this Guaranty.
GUARANTOR AND LENDER AGREE THAT THIS GUARANTY WILL BE PERFORMED IN THE
COUNTY IN WHICH LENDER'S PRINCIPAL OFFICE IN TEXAS IS LOCATED, AND THAT
SUCH COUNTY IS PROPER VENUE FOR ANY ACTION OR PROCEEDING BROUGHT BY THE
GUARANTOR OR LENDER, WHETHER IN CONTRACT, TORT, OR OTHERWISE. ANY ACTION OR
PROCEEDING AGAINST GUARANTOR MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT
IN SUCH COUNTY TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW. TO THE
EXTENT PERMITTED BY APPLICABLE LAW GUARANTOR HEREBY IRREVOCABLY (A) SUBMITS
TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURTS, AND (B) WAIVES ANY
OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH ACTION
OR PROCEEDING BROUGHT IN ANY SUCH COURT OR THAT ANY SUCH COURT IS AN
INCONVENIENT FORUM. GUARANTOR AGREES THAT SERVICE OF PROCESS UPON IT MAY BE
MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, AT ITS
ADDRESS SPECIFIED BELOW. LENDER MAY SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW AND MAY BRING ANY ACTION OR PROCEEDING AGAINST GUARANTOR
OR WITH RESPECT TO ANY OF ITS PROPERTY IN COURTS IN OTHER PROPER
JURISDICTIONS OR VENUES.
12. NOTICE. Any notice required or permitted under this Guaranty must be given
in writing by United States mail, by hand delivery or delivery service, or
by telegraphic, telex, telecopy or cable communication, sent to the
intended addressee at the address shown in this Guaranty, or to such
different address as the addressee designates by 10 days notice. Notice by
United States mail will be effective when mailed. All other notices will be
effective when received. Written confirmation of receipt will be
conclusive. Notice of terminations, as provided in Section 2, will not be
deemed given until actually received by a commercial lending officer with
the rank of Vice President or above at the address of Lender shown in this
Guaranty.
13. COSTS AND EXPENSES. To the extent permitted by applicable law, Guarantor
will pay on demand all attorneys' fees and all other costs and expenses
incurred by Lender in connection with the preparation, administration,
enforcement, or collection of this Guaranty including but not limited to
Lender's standard Documentation Preparation and Processing fees.
14. MISCELLANEOUS. This Guaranty binds each Guarantor and its successors and
assigns and benefits Lender. The term "Lender" also includes all successors
and assigns of Lender. Guarantor may not assign its obligations under this
Guaranty without the prior written consent of Lender. This Guaranty may be
executed in multiple counterparts, and each counterpart will be deemed an
original, without the need to produce any counterpart other than the one to
be enforced. Any gender designation used herein includes all genders and
the singular number includes the plural. Lender's delay or failure to
exercise its rights is not a waiver of those rights. This Guaranty may not
be amended except in a writing signed by an authorized officer of Lender
and no waiver will be effective unless it is in writing. Any waiver is
applicable only for the specific situation for which it is given.
THIS GUARANTY is executed as of MARCH 15, 1996.
Page 1 of 2
THIS GUARANTY REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES WITH
RESPECT TO GUARANTOR'S GUARANTY OF GUARANTEED INDEBTEDNESS AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. NO COURSE OF DEALING BETWEEN GUARANTOR AND LENDER, NO
COURSE OF PERFORMANCE, NO TRADE PRACTICES, AND NO EXTRINSIC EVIDENCE OF ANY
NATURE MAY BE USED TO CONTRADICT OR MODIFY ANY TERM OF THIS GUARANTY.
THERE ARE NO ORAL AGREEMENTS BETWEEN GUARANTOR AND LENDER.
GUARANTOR:
HARVEY R. HOUCK, JR. Date: 3-19-96
ADDRESS OF
GUARANTOR: One Riverway #2300
Houston, Harris County
Texas 77056
LENDER: (Lender's signature is provided as its acknowledgement of the above as
the final written agreement between the parties.)
BY: GARY K. WHITT
TITLE: VP
Page 2 of 2
EXHIBIT 10.17
REVOLVING PROMISSORY NOTE
(FLOATING RATE)
(this "Note")
THIS NOTE IS SUBJECT TO A CREDIT AGREEMENT
THIS IS A RENEWAL, EXTENSION, MODIFICATION
OR DEFERRAL OF NOTE
004-1638147-000001
NAME(S) AND ADDRESS(ES) OF B0RROWER(S)
MEDICAL INNOVATIONS INC., MEDICAL INNOVATIONS INC OF NEW JERSEY
MEDICAL INNOVATIONS (TEXAS), INC., THE GREAT EASTERN NURSING CORP.,
NURSES PRN OF VIRGINIA INC., MEDICAL INNOVATIONS OF VIRGINIA INC.,
PHYSICIAN'S VISITING NURSE SERVICE, INC.
NURSING INNOVATIONS, INC.
ONE RIVERWAY, SUITE 2300 HOUSTON TX 77056-
U.S. $ 600,000.00 (THE "DATE")
MARCH 15, 1996
ACCOUNT NUMBER/NOTE NUMBER TRANSACTION CODE TELLER OFFICER
004-1638147-000001 R VRL GKW
FOR VALUE RECEIVED, the "Borrower," (jointly and severally if more than
one), promises to pay to the order of
TEXAS COMMERCE BANK NATIONAL ASSOCIATION ("Bank") on or before APRIL 15,
1997, at its office at 712 MAIN HOUSTON, TEXAS 77252-2558, or at such other
location as Bank may designate, in immediately available funds,
***SIX HUNDRED THOUSAND AND NO/100***
UNITED STATES DOLLARS (U.S. $600,000.00) (the "Maximum Amount of Note") or the
aggregate unpaid amount of all advances hereunder, whichever is less. Borrower
will also pay interest on the unpaid principal balance outstanding from time to
time at a rate per annum equal to the lesser of (i) the sum of the Prime Rate
(as hereinafter defined) from time to time in effect plus ZERO percent (0.000%),
(the "STATED RATE") or (ii) the maximum nonusurious rate of interest from time
to time permitted by applicable law, (the "HIGHEST LAWFUL RATE"). If the Stated
Rate at any time exceeds the Highest Lawful Rate, the actual rate of interest to
accrue on the unpaid principal amount of this Note will be limited to the
Highest Lawful Rate, but any subsequent reductions in the Stated Rate due to
reductions in the Prime Rate will not reduce the interest rate payable upon the
unpaid principal amount of this Note below the Highest Lawful Rate unto the
total amount of interest accrued on this Note equals the amount of interest
which would have accrued if the Stated Rate had at all times been in effect.
"PRIME RATE" means the rate determined from time to time by Bank as its
prime rate. The Prime Rate shall change automatically from time to time without
notice to Borrower or any other person. THE PRIME RATE IS A REFERENCE RATE AND
MAY NOT BE BANK'S LOWEST RATE.
If Texas law determines the Highest Lawful Rate, Bank has elected the
"indicated" (weekly) ceiling as defined in the Texas Credit Code or any
successor statute. Bank may from time to time, as to current and future
balances, elect and implement any other ceiling under such Code and/or revise
the index, formula or provisions of law used to compute the rate on this
open-end account by notice to Borrower, if and to the extent permitted by, and
in the manner provided in such Code.
Each advance must be at least
N/A
UNITED STATES DOLLARS (U.S.$ N/A ) unless the amount available for
borrowing under this Note is less.
Accrued and unpaid interest is due and payable MONTHLY, beginning on
APRIL 15, 1996, and continuing on the 15TH day of each MONTH thereafter and at
maturity when all unpaid principal and accrued and unpaid interest is finally
due and payable.
Interest will be computed on the basis of the actual number of days
elapsed and a year comprised of: [ ] 365 (or 366 as the case may be) days [X]
360 days, unless such calculation would result in a usurious interest rate, in
which case such interest will be calculated on the basis of a 365 or 366 day
year, as the case may be.
All past-due principal and interest on this Note will, at Bank's option,
bear interest at the Highest Lawful Rate, or if applicable law does not provide
for a maximum nonusurious rate of interest, at a rate per annum equal to 18%.
In addition to all principal and accrued interest on this Note, Borrower
agrees to pay: (a) all reasonable costs and expenses incurred by Bank and all
owners and holders of this Note in collecting this Note through probate,
reorganization, bankruptcy or any other proceeding; and (b) reasonable
attorney's fees if and when this Note is placed in the hands of an attorney for
collection.
Borrower and Bank intend to conform strictly to applicable usury laws,
Therefore, the total amount of interest (as defined under applicable law)
contracted for, charged or collected under this Note will never exceed the
Highest Lawful Rate. If Bank contracts for, charges or receives any excess
interest, it will be deemed a mistake. Bank will automatically reform the
contract or charge to conform to applicable law, and if excess interest has been
received, Bank will either refund the excess to Borrower or credit the excess on
the unpaid principal amount of this Note. All amounts constituting interest will
be spread throughout the full term of this Note in determining whether interest
exceeds lawful amounts.
The unpaid principal balance of this Note at any time will be the total
amounts advanced by Bank, less the amount of all payments or prepayments of
principal. Absent manifest error, the records of Bank will be conclusive as to
amounts owed. Subject to the terms and conditions of this Note and the Loan
Documents, Borrower may use all or any part of the credit provided for herein at
any time before the maturity of this Note and may borrow, repay and reborrow.
There is no limitation on the number of advances made so long as the total
unpaid principal amount at any time outstanding does not exceed the Maximum
Amount of Note.
Borrower may at any time pay the full amount or any part of this Note
without the payment of any premium or fee. Any partial prepayment will be in the
amount of U.S.$ N/A (U.S.$ N/A ), or an integral multiple
thereof. All payments may, at Bank's sole option, be applied to accrued
interest, to principal, or to both.
"LOAN DOCUMENT" means this Note and any document or instrument
evidencing, securing, guaranteeing or given in connection with this Note.
"OBLIGATIONS" means all principal, interest and other amounts which are or
become owing under this Note or any other Loan Document. "OBLIGOR" means
Borrower and any guarantor, surety, co-signer, general partner or other person
who may now or hereafter be obligated to pay all or any part of the Obligations.
Where appropriate the neuter gender includes the feminine and the masculine and
the singular number includes the plural number.
Each of the following events or conditions is an "EVENT OF DEFAULT:" (1)
any Obligor fails to pay any of the Obligations when due; (2) any warranty,
representation or statement now or hereafter contained in or made in connection
with any Loan Document was false or misleading in any respect when made; (3) any
Obligor violates any covenant, condition or agreement contained in any Loan
Document; (4) any Obligor fails or refuses to submit financial information
requested by Bank or to permit Bank to inspect its books and records on request;
(5) any event of default occurs under any other Loan Document; (6) any
individual Obligor dies, or any Obligor that is an entity dissolves; (7) a
receiver, conservator or similar official is appointed for any Obligor or any
Obligor's assets; (8) any petition is filed by or against any Obligor under any
bankruptcy, insolvency or similar law; (9) any Obligor makes an assignment for
the benefit of creditors; (10) a final judgment is entered against any Obligor
and remains unsatisfied for 30 days after entry, or any property of any Obligor
is attached, garnished or otherwise made subject to legal process; (11) any
material adverse change occurs in the business, assets, affairs or financial
condition of any Obligor; and (12) Borrower is in default of any other
obligation to or any other agreement with Bank.
If any Event of Default occurs, then Bank may do any or all of the
following: (i) cease making advances hereunder; (ii) declare the Obligations to
be immediately due and payable, without notice of acceleration or of intention
to accelerate, presentment and demand or protest or notice of any kind, all of
which are hereby expressly waived; (iii) set off, in any order, against the
Obligations any debt owing by Bank to any Obligor, including, but not limited
to, any deposit account, which right is hereby granted by each Obligor to Bank;
and (iv) exercise any and all other rights under the Loan Document, at law, in
equity or otherwise.
No waiver of any default is a waiver of any other default. Bank's delay
in exercising any right or power under any Loan Document is not a waiver of such
right or power.
Each Obligor severally waives notice, demand, presentment for payment,
notice of nonpayment, notice of intent to accelerate, notice of acceleration
protest, notice of protest, and the filing of suit and diligence in collecting
this Note and all other demands and notices, and consents and agrees that its
liabilities and obligations will not be released or discharged by any or all of
the following, whether with or without notice to it or any other Obligor, and
whether before or after the stated maturity hereof: (i) extensions of the time
of payment; (ii) renewals; (iii) acceptances of partial payments; (iv) releases
or substitutions of any collateral or any Obligor, and (v) failure, if any, to
perfect or maintain perfection of any security interest in any collateral. Each
Obligor agrees that acceptance of any partial payment will not constitute a
waiver and that waiver of any default will not constitute waiver of any prior or
subsequent default.
F-250-00835C (3/95)
CML Revolving Floating Rate Page 1 of 2
0780150 004-1638147-000001
Borrower represents and agrees that: all advances evidenced by this Note
are and will be for business, commercial, investment or other similar purpose
and not primarily for personal, family, or household use as such terms are used
in Chapter One of the Texas Credit Code.
Borrower represents and agrees that each of the following statements is
true unless the box preceding that statement is checked and initialed by
Borrower and Bank: (i): [ ] ____________ ____________ No advances will be used
primarily for agricultural purposes as such term is used in the Texas Credit
Code. (ii) [ ] ____________ ____________ No advances will be used for the
purpose of purchasing or carrying any margin stock as that term is defined in
Regulation U of the Board of Governors of the Federal Reserve System (the
"Board"). Notwithstanding anything contained herein or in any other Loan
Document, if this is a consumer credit obligation (as defined or described in 12
C.F.R. 227, Regulation AA, promulgated by the Board), the security for this
credit obligation will not extend to any non-possessory security interest in
household goods (as defined in Regulation AA) other than a purchase money
security Interest, and no waiver of any notice contained herein or therein will
extend to any waiver of notice prohibited by Regulation AA.
Chapter 15 of the Texas Credit Code shall not apply to this Note or to
any advance evidenced by this Note.
This Note is governed by Texas law. If any provision of this Note is
illegal or unenforceable, that illegality or unenforceability will not affect
the remaining provisions of this Note. BORROWER(S) AND BANK AGREE THAT THIS NOTE
WILL BE PERFORMED IN THE COUNTY IN WHICH BANK'S PRINCIPAL OFFICE IS LOCATED IN
TEXAS, AND THAT SUCH COUNTY IS PROPER VENUE FOR ANY ACTION OR PROCEEDING BROUGHT
BY BORROWER(S) OR BANK, WHETHER IN CONTRACT, TORT, OR OTHERWISE. ANY ACTION OR
PROCEEDING AGAINST BORROWER(S) MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT IN
SUCH COUNTY TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW. TO THE EXTENT
PERMITTED BY APPLICABLE LAW BORROWER(S) HEREBY IRREVOCABLY (A) SUBMITS TO THE
NONEXCLUSIVE JURISDICTION OF SUCH COURTS, AND (B) WAIVES ANY OBJECTION IT MAY
NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING BROUGHT
IN ANY SUCH COURT OR THAT ANY SUCH COURT IS AN INCONVENIENT FORUM. BORROWER(S)
AGREES THAT SERVICE OF PROCESS UPON IT MAY BE MADE BY CERTIFIED OR REGISTERED
MAIL, RETURN RECEIPT REQUESTED, AT ITS ADDRESS SPECIFIED ABOVE. BANK MAY SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW AND MAY BRING ANY ACTION OR
PROCEEDING AGAINST BORROWER(S) OR WITH RESPECT TO ANY OF ITS PROPERTY IN COURTS
IN OTHER PROPER JURISDICTIONS OR VENUES.
For purposes of this Note, any assignee or subsequent holder of this
Note will be considered the "Bank," and each successor to Borrower will be
considered the "Borrower."
Each Borrower and cosigner represents that if it is not a natural
person, it is duly organized and validly existing and in good standing under the
laws of the state of its incorporation or organization; has full power to own
its properties and to carry on its business as now conducted; is duly qualified
to do business and is in good standing in each jurisdiction in which the nature
of the business conducted by it makes such qualification desirable; and has not
commenced any dissolution proceedings. Each Borrower and cosigner that is
subject to the Texas Revised Partnership Act ("TRPA") agrees that Bank is not
required to comply with Section 3.05(d) of the TRPA and agrees that Bank may
proceed directly against one or more partners or their property without first
seeking satisfaction from partnership property. Each Borrower and cosigner
represents that if it conducts business under an assumed business or
professional name it has properly filed Assumed Name Certificate(s) in the
office(s) required by Chapter 36 of the Texas Business and Commerce Code. Each
of the persons signing below as Borrower or cosigner represents that he/she has
full requisite power and authority to execute and deliver this Note to Bank on
behalf of the party for whom he/she signs and to bind such party to the terms
and conditions of this Note and that this Note is enforceable against such
party.
NO COURSE OF DEALING BETWEEN BORROWER AND BANK, NO COURSE OF
PERFORMANCE, NO TRADE PRACTICES, AND NO EXTRINSIC EVIDENCE OF ANY NATURE MAY BE
USED TO CONTRADICT OR MODIFY ANY TERM OF THIS NOTE OR ANY OTHER LOAN DOCUMENT.
THIS NOTE AND THE OTHER WRITTEN LOAN DOCUMENTS REPRESENT 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 UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, Borrower has executed this Note effective as of the Date.
Signature(s) of BORROWER(S):
<TABLE>
MEDICAL INNOVATIONS INC, MEDICAL INNOVATIONS INC OF NEW JERSEY, PHYSICIAN'S
VISITING NURSE SERVICE, INC.
<S> <C>
Date: 3-18-96
MARK H. FISHER MARK H. FISHER MARK H. FISHER
BY: Mark H. Fisher TITLE: PRESIDENT BY: Mark H. Fisher TITLE: PRESIDENT BY: Mark H. Fisher TITLE: PRESIDENT
______________________________________________________________________________________ Date: ______________________________
MEDICAL INNOVATIONS (TEXAS), INC, THE GREAT EASTERN NURSING CORP, NURSING
INNOVATIONS, INC.
MARK H. FISHER MARK H. FISHER MARK H. FISHER
BY: Mark H. Fisher TITLE: PRESIDENT BY: Mark H. Fisher TITLE: PRESIDENT BY: Mark H. Fisher TITLE: PRESIDENT
______________________________________________________________________________________ Date: ______________________________
NURSES PRN OF VIRGINIA INC, MEDICAL INNOVATIONS OF VIRGINIA INC
MARK H. FISHER MARK H. FISHER
BY: Mark H. Fisher TITLE: PRESIDENT BY: Mark H. Fisher TITLE: PRESIDENT Date: ______________________________
______________________________________________________________________________________ Date: ______________________________
</TABLE>
The undersigned hereby cosigns this Note:
Signature of COSIGNER: _________________________________________________________
Address of Cosigner: ___________________________________________________________
(Bank's signature is provided as its acknowledgement of the above as the final
written agreement between the parties and as its agreement with each Borrower
subject to TRPA that Bank is not required to comply with Section 3.05(d) of
TRPA.)
BANK: TEXAS COMMERCE BANK NATIONAL ASSOCIATION
By: GARY K. WHITT
Title: VP
F-250-00835C (3/95)
CML Revolving Floating Rate Page 2 of 2
0780150 004-1638147-000001
OFFICER'S/SECRETARY'S CERTIFICATION
(this "Certificate")
The undersigned acknowledges that this Certificate is being delivered to
TEXAS COMMERCE BANK NATIONAL ASSOCIATION (the "Bank") and that the Bank may rely
on the statements and certifications set forth herein until such time as Bank
receives a notice from MEDICAL INNOVATIONS, INC. OF NEW JERSEY, a corporation/
association ("Company") of a change in this Certificate and such notice is
accompanied by an Officer's/Secretary's Certificate replacing this one.
The undersigned hereby certifies that he/she is the duly elected and authorized
_______________ of Company and in such capacity the undersigned is generally
familiar with the books, records and organization of Company and in such
capacity certifies that:
1. ARTICLES
(Check "A" or "B" as applicable: "A" must be checked if new loan
relationship or if Articles have been modified or revised since the
last Certificate delivered to the Bank, and Articles attached as
Exhibit "A").
[X] A. A true and correct copy of the Articles of
Incorporation/Association of Company is attached hereto as Exhibit
"A" and such are in full force and effect as of the date hereof.
[ ] B. There have been no changes or amendments to the Articles of
Incorporation/Association dated or previously provided to the Bank
on or about _____________________________________________, in
connection with a prior loan(s) to and/or guaranty and/or pledge of
assets of Company and such are still in full force and effect as of
the date hereof.
2. RESOLUTIONS
(Check "A" or "B" as applicable: "A" must be checked if new loan
relationship or Resolutions have been changed and in that case
Resolutions must be attached as Exhibit "B").
[X] A. A true and correct copy of Resolutions of the Board of Directors
of the Company are attached hereto as Exhibit "B"; such resolutions
have not been modified or rescinded and are in full force and
effect as of the date hereof.
[ ] B. The certified Resolutions previously certified to the Bank
dated ______________________________ in connection with a prior
loan(s) to and/or guaranty and/or pledge of assets of Company are
still in full force and effect as of the date hereof.
3. BYLAWS (Complete this Section only if Bylaws are requested by the
Bank, [ ] Yes [ ] No)
(Check "A" or "B" as applicable. "A" must be checked and Exhibit
"C" attached, if a new loan relationship or if Bylaws have
changed.)
[ ] A. A true and correct copy of the Bylaws of Company are
attached hereto as Exhibit "C" and such are in full force and
effect as of the date hereof.
[ ] B. There have been no changes or amendments to the Bylaws of
Company dated or previously provided to the Bank on or about
_____________________________________________ in connection with a
prior loan(s) to and/or guaranty and/or pledge of assets of Company
and such are still in full force and effect as of the date hereof.
4. Company is duly organized and validly existing under the laws of
the state/country of its incorporation/organization.
5. If Company conducts business under an assumed business or
professional name it has properly filed Assumed Name Certificate(s)
in the offices required by Chapter 36 of the Texas Business and
Commerce Code.
6. Company is qualified to do business in the state of Texas and is in
good standing in such states wherein its property and assets are
located and it is required to qualify.
IN WITNESS WHEREOF the undersigned has subscribed his/her name and
affixed the seal (if so required) of this Company this 18th day of
March, 1996.
MARK H. FISHER
Signature of Officer
Title: President
Typed/
Printed Name: MARK H. FISHER
Seal
If no seal check [ ] No Seal
F-250-00375C (7/92)
0780150 004-1638147-000001
EXHIBIT 10.18
REVOLVING PROMISSORY NOTE
(FLOATING RATE)
(this "Note")
THIS NOTE IS SUBJECT TO A CREDIT AGREEMENT
THIS NOTE IS SECURED BY ALL SECURITY THIS IS A RENEWAL, EXTENSION,
AGREEMENTS COVERING PERSONAL MODIFICATION OR DEFERRAL OR
PROPERTY EXECUTED BY BORROWER(S) DEFERRAL OF NOTE
IN FAVOR OF BANK BEFORE OR AT 1677048-01,3001,710001
THE SAME TIME AS THIS NOTE.
NAME(S) AND ADDRESS(ES) OF B0RROWER(S)
PHYSICIAN'S VISITING NURSE SERVICE, INC.
ONE RIVERWAY #2300 HOUSTON TX 77056-
U.S. $ 3,950,000.00 (THE "DATE")
MARCH 15, 1996
ACCOUNT NUMBER/NOTE NUMBER TRANSACTION CODE TELLER OFFICER
004-1677046- RI SAM 941202
FOR VALUE RECEIVED, the "Borrower," (jointly and severally if more than one),
promises to pay to the order of
TEXAS COMMERCE BANK NATIONAL ASSOCIATION ("Bank") on or before APRIL 15,
1997, at its office at 712 MAIN HOUSTON, TEXAS 77252-2558, or at such other
location as Bank may designate, in immediately available funds
***THREE MILLION NINE HUNDRED FIFTY THOUSAND AND NO/100***
UNITED STATES DOLLARS (U.S. $3,950,000.00 ) (the "Maximum Amount
of Note") or the aggregate unpaid amount of all advances hereunder,
whichever is less. Borrower will also pay interest on the unpaid
principal balance outstanding from time to time at a rate per annum
equal to the lesser of (i) the sum of the Prime Rate (as hereinafter
defined) from time to time in effect plus
ZERO
percent (0.000%), (the "STATED RATE") or (ii) the maximum nonusurious rate of
interest from time to time permitted by applicable law, (the "HIGHEST LAWFUL
RATE"). If the Stated Rate at any time exceeds the Highest Lawful Rate, the
actual rate of interest to accrue on the unpaid principal amount of this Note
will be limited to the Highest Lawful Rate, but any subsequent reductions in
the Stated Rate due to reductions in the Prime Rate will not reduce the
interest rate payable upon the unpaid principal amount of this Note below the
Highest Lawful Rate unto the total amount of interest accrued on this Note
equals the amount of interest which would have accrued if the Stated Rate had
at all times been in effect.
"PRIME RATE" means the rate determined from time to time by Bank as its
prime rate. The Prime Rate shall change automatically from time to time without
notice to Borrower or any other person. THE PRIME RATE IS A REFERENCE RATE AND
MAY NOT BE BANK'S LOWEST RATE.
If Texas law determines the Highest Lawful Rate, Bank has elected the
"indicated" (weekly) ceiling as defined in the Texas Credit Code or any
successor statute. Bank may from time to time, as to current and future
balances, elect and implement any other ceiling under such Code and/or revise
the index, formula or provisions of law used to compute the rate on this
open-end account by notice to Borrower, if and to the extent permitted by, and
in the manner provided in such Code.
Each advance must be at least
N/A
UNITED STATES DOLLARS (U.S.$ N/A ) unless the amount available
for borrowing under this Note is less.
Accrued and unpaid interest is due and payable MONTHLY, beginning on APRIL
15, 1996, and continuing on the 15TH day of each MONTH thereafter and at
maturity when all unpaid principal and accrued and unpaid interest is finally
due and payable.
Interest will be computed on the basis of the actual number of days elapsed
and a year comprised of: [ ] 365 (or 366 as the case may be) days [X] 360
days, unless such calculation would result in a usurious interest rate, in
which case such interest will be calculated on the basis of a 365 or 366 day
year, as the case may be.
All past-due principal and interest on this Note will, at Bank's option,
bear interest at the Highest Lawful Rate, or if applicable law does not provide
for a maximum nonusurious rate of interest, at a rate per annum equal to 18%.
In addition to all principal and accrued interest on this Note, Borrower
agrees to pay: (a) all reasonable costs and expenses incurred by Bank and all
owners and holders of this Note in collecting this Note through probate,
reorganization, bankruptcy or any other proceeding; and (b) reasonable
attorney's fees if and when this Note is placed in the hands of an attorney for
collection.
Borrower and Bank intend to conform strictly to applicable usury laws,
Therefore, the total amount of interest (as defined under applicable law)
contracted for, charged or collected under this Note will never exceed the
Highest Lawful Rate. If Bank contracts for, charges or receives any excess
interest, it will be deemed a mistake. Bank will automatically reform the
contract or charge to conform to applicable law, and if excess interest has
been received, Bank will either refund the excess to Borrower or credit the
excess on the unpaid principal amount of this Note. All amounts constituting
interest will be spread throughout the full term of this Note in determining
whether interest exceeds lawful amounts.
The unpaid principal balance of this Note at any time will be the total
amounts advanced by Bank, less the amount of all payments or prepayments of
principal. Absent manifest error, the records of Bank will be conclusive as to
amounts owed. Subject to the terms and conditions of this Note and the Loan
Documents, Borrower may use all or any part of the credit provided for herein
at any time before the maturity of this Note and may borrow, repay and
reborrow. There is no limitation on the number of advances made so long as the
total unpaid principal amount at any time outstanding does not exceed the
Maximum Amount of Note.
Borrower may at any time pay the full amount or any part of this Note
without the payment of any premium or fee. Any partial prepayment will be in
the amount of U.S.$ N/A (U.S.$ N/A), or an integral multiple thereof. All
payments may, at Bank's sole option, be applied to accrued interest, to
principal, or to both.
"LOAN DOCUMENT" means this Note and any document or instrument evidencing,
securing, guaranteeing or given in connection with this Note. "OBLIGATIONS"
means all principal, interest and other amounts which are or become owing under
this Note or any other Loan Document. "OBLIGOR" means Borrower and any
guarantor, surety, co-signer, general partner or other person who may now or
hereafter be obligated to pay all or any part of the Obligations. Where
appropriate the neuter gender includes the feminine and the masculine and the
singular number includes the plural number.
Each of the following events or conditions is an "EVENT OF DEFAULT:" (1)
any Obligor fails to pay any of the Obligations when due; (2) any warranty,
representation or statement now or hereafter contained in or made in connection
with any Loan Document was false or misleading in any respect when made; (3)
any Obligor violates any covenant, condition or agreement contained in any Loan
Document; (4) any Obligor fails or refuses to submit financial information
requested by Bank or to permit Bank to inspect its books and records on
request; (5) any event of default occurs under any other Loan Document; (6) any
individual Obligor dies, or any Obligor that is an entity dissolves; (7) a
receiver, conservator or similar official is appointed for any Obligor or any
Obligor's assets; (8) any petition is filed by or against any Obligor under any
bankruptcy, insolvency or similar law; (9) any Obligor makes an assignment for
the benefit of creditors; (10) a final judgment is entered against any Obligor
and remains unsatisfied for 30 days after entry, or any property of any Obligor
is attached, garnished or otherwise made subject to legal process; (11) any
material adverse change occurs in the business, assets, affairs or financial
condition of any Obligor; and (12) Borrower is in default of any other
obligation to or any other agreement with Bank.
If any Event of Default occurs, then Bank may do any or all of the
following: (i) cease making advances hereunder; (ii) declare the Obligations to
be immediately due and payable, without notice of acceleration or of intention
to accelerate, presentment and demand or protest or notice of any kind, all of
which are hereby expressly waived; (iii) set off, in any order, against the
Obligations any debt owing by Bank to any Obligor, including, but not limited
to, any deposit account, which right is hereby granted by each Obligor to Bank;
and (iv) exercise any and all other rights under the Loan Document, at law, in
equity or otherwise.
No waiver of any default is a waiver of any other default. Bank's delay in
exercising any right or power under any Loan Document is not a waiver of such
right or power.
Each Obligor severally waives notice, demand, presentment for payment,
notice of nonpayment, notice of intent to accelerate, notice of acceleration
protest, notice of protest, and the filing of suit and diligence in collecting
this Note and all other demands and notices, and consents and agrees that its
liabilities and obligations will not be released or discharged by any or all of
the following, whether with or without notice to it or any other Obligor, and
whether before or after the stated maturity hereof: (i) extensions of the time
of payment; (ii) renewals; (iii) acceptances of partial payments; (iv) releases
or substitutions of any collateral or any Obligor, and (v) failure, if any, to
perfect or maintain perfection of any security interest in any collateral. Each
Obligor agrees that acceptance of any partial payment will not constitute a
waiver and that waiver of any default will not constitute waiver of any prior
or subsequent default.
F-250-00835C (3/95)
CML Revolving Floating Rate Page 1 of 2
0740698 004-1677046-
Borrower represents and agrees that: all advances evidenced by this Note
are and will be for business, commercial, investment or other similar purpose
and not primarily for personal, family, or household use as such terms are used
in Chapter One of the Texas Credit Code.
Borrower represents and agrees that each of the following statements is
true unless the box preceding that statement is checked and initialed by
Borrower and Bank: (i): [ ] ____________ ____________ No advances will be used
primarily for agricultural purposes as such term is used in the Texas Credit
Code. (ii) [ ] ____________ ____________ No advances will be used for the
purpose of purchasing or carrying any margin stock as that term is defined in
Regulation U of the Board of Governors of the Federal Reserve System (the
"Board"). Notwithstanding anything contained herein or in any other Loan
Document, if this is a consumer credit obligation (as defined or described in
12 C.F.R. 227, Regulation AA, promulgated by the Board), the security for this
credit obligation will not extend to any non-possessory security interest in
household goods (as defined in Regulation AA) other than a purchase money
security Interest, and no waiver of any notice contained herein or therein will
extend to any waiver of notice prohibited by Regulation AA.
Chapter 15 of the Texas Credit Code shall not apply to this Note or to any
advance evidenced by this Note.
This Note is governed by Texas law. If any provision of this Note is
illegal or unenforceable, that illegality or unenforceability will not affect
the remaining provisions of this Note. BORROWER(S) AND BANK AGREE THAT THIS
NOTE WILL BE PERFORMED IN THE COUNTY IN WHICH BANK'S PRINCIPAL OFFICE IS
LOCATED IN TEXAS, AND THAT SUCH COUNTY IS PROPER VENUE FOR ANY ACTION OR
PROCEEDING BROUGHT BY BORROWER(S) OR BANK, WHETHER IN CONTRACT, TORT, OR
OTHERWISE. ANY ACTION OR PROCEEDING AGAINST BORROWER(S) MAY BE BROUGHT IN ANY
STATE OR FEDERAL COURT IN SUCH COUNTY TO THE EXTENT NOT PROHIBITED BY
APPLICABLE LAW. TO THE EXTENT PERMITTED BY APPLICABLE LAW BORROWER(S) HEREBY
IRREVOCABLY (A) SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURTS, AND
(B) WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY
SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT OR THAT ANY SUCH COURT IS
AN INCONVENIENT FORUM. BORROWER(S) AGREES THAT SERVICE OF PROCESS UPON IT MAY
BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, AT ITS
ADDRESS SPECIFIED ABOVE. BANK MAY SERVE PROCESS IN ANY OTHER MANNER PERMITTED
BY LAW AND MAY BRING ANY ACTION OR PROCEEDING AGAINST BORROWER(S) OR WITH
RESPECT TO ANY OF ITS PROPERTY IN COURTS IN OTHER PROPER JURISDICTIONS OR
VENUES.
For purposes of this Note, any assignee or subsequent holder of this Note
will be considered the "Bank," and each successor to Borrower will be
considered the "Borrower."
Each Borrower and cosigner represents that if it is not a natural person,
it is duly organized and validly existing and in good standing under the laws
of the state of its incorporation or organization; has full power to own its
properties and to carry on its business as now conducted; is duly qualified to
do business and is in good standing in each jurisdiction in which the nature of
the business conducted by it makes such qualification desirable; and has not
commenced any dissolution proceedings. Each Borrower and cosigner that is
subject to the Texas Revised Partnership Act ("TRPA") agrees that Bank is not
required to comply with Section 3.05(d) of the TRPA and agrees that Bank may
proceed directly against one or more partners or their property without first
seeking satisfaction from partnership property. Each Borrower and cosigner
represents that if it conducts business under an assumed business or
professional name it has properly filed Assumed Name Certificate(s) in the
office(s) required by Chapter 36 of the Texas Business and Commerce Code. Each
of the persons signing below as Borrower or cosigner represents that he/she has
full requisite power and authority to execute and deliver this Note to Bank on
behalf of the party for whom he/she signs and to bind such party to the terms
and conditions of this Note and that this Note is enforceable against such
party.
NO COURSE OF DEALING BETWEEN BORROWER AND BANK, NO COURSE OF PERFORMANCE,
NO TRADE PRACTICES, AND NO EXTRINSIC EVIDENCE OF ANY NATURE MAY BE USED TO
CONTRADICT OR MODIFY ANY TERM OF THIS NOTE OR ANY OTHER LOAN DOCUMENT.
THIS NOTE AND THE OTHER WRITTEN LOAN DOCUMENTS REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. <PAGE>
PAGE 5
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, Borrower has executed this Note effective as of the Date.
Signature(s) of BORROWER(S):
PHYSICIAN'S VISITING NURSE SERVICE, INC.
MARK H. FISHER Date: 3-18-96
BY: Mark H. Fisher TITLE: PRESIDENT
___________________________________________________________ Date: _________
___________________________________________________________ Date: _________
___________________________________________________________ Date: _________
___________________________________________________________ Date: _________
___________________________________________________________ Date: _________
___________________________________________________________ Date: _________
___________________________________________________________ Date: _________
___________________________________________________________ Date: _________
The undersigned hereby cosigns this Note:
Signature of COSIGNER: ______________________________________________________
Address of Cosigner: ______________________________________________________
(Bank's signature is provided as its acknowledgement of the above as the final
written agreement between the parties and as its agreement with each Borrower
subject to TRPA that Bank is not required to comply with Section 3.05(d) of
TRPA.)
BANK: TEXAS COMMERCE BANK NATIONAL ASSOCIATION
By: GARY K. WHITT
Title: VP
F-250-00835C (3/95)
CML Revolving Floating Rate Page 2 of 2
0740698 004-1677046-
CONTINUING LIMITED GUARANTY
(this "Guaranty")
1. GUARANTY. The undersigned Guarantor (jointly and severally if more than
one) agrees to pay TEXAS COMMERCE BANK NATIONAL ASSOCIATION, herein called
"Lender" at 712 Main Street, P.O. Box 2558, Houston, Harris County, Texas
77252-2558, or such other address as Lender designates, when due or
declared due, the Guaranteed Indebtedness. This Guaranty is an
unconditional, absolute and continuing guaranty of payment and performance
and not of collection. "Guaranteed Indebtedness" means all debts,
obligations, and liabilities of every kind and character, whether joint or
several, contingent or otherwise, of PHYSICIAN'S VISITING NURSE SERVICE,
INC. (together with its successors, "Borrower") now or hereafter existing
in favor of Lender evidenced by that one certain promissory note dated
March 15, 1996 in the original principal amount of $3,950,000.00 (including
each and every renewal, extension and modification thereof, rearrangement
and substitution therefor, the "Note") and all indebtedness under the Loan
Documents. Guaranteed Indebtedness includes any post-petition interest and
expenses (including, but not limited to, attorneys' fees) whether or not
allowed as a claim against Borrower under any bankruptcy, insolvency, or
other similar law. All Guaranteed Indebtedness is conclusively presumed to
have been made or acquired in reliance on this Guaranty. Guarantor's
liability under this Guaranty shall be limited in the aggregate at any one
time to the principal sum of $1,975,000.00 together with all interest
thereon, and all penalties, costs, fees and expenses (including, but not
limited to, attorneys' fees) as provided for under any of the Loan
Documents and as incurred by Lender in connection with any Guaranteed
Indebtedness, including, but not limited to collecting or attempting to
collect any of the foregoing indebtedness from Borrower. This Guaranty does
not in any way cancel, amend, discharge or limit any other guaranty
executed by Guarantor in favor of Lender. "LOAN DOCUMENTS" means any
document or instrument evidencing, securing or executed in connection with
Guaranteed Indebtedness.
2. TERMINATION OF GUARANTY. This Guaranty will continue to be in effect until
final payment in full of the Guaranteed Indebtedness. Any Guarantor may
terminate its liability for Guaranteed Indebtedness not in existence
(whether by advance, commitment or otherwise) by delivering written notice
to Lender, to be effective 5 business days after received under written
receipt by Lender. After termination of this Guaranty, Guarantor will
continue to be liable for all Guaranteed Indebtedness existing on the
effective date of termination, and for all Guaranteed Indebtedness arising
under any written agreement to make loans or extensions of credit entered
into between Lender and Borrower prior to the effective date of termination
(whether or not Lender is contractually obligated to make the loans or
extensions of credit).
3. CONTINUATION AND REINSTATEMENT OF GUARANTY. If any petition or other action
is filed by or against Borrower under the Bankruptcy Code or any other law
relating to liquidation, insolvency or reorganization of debtors, or any
other proceeding involving the estate or assets of the Guarantor, this
Guaranty will remain effective or be reinstated, as the case may be (even
if the Guaranteed Indebtedness has been paid in full), with respect to any
payments or transfer of assets with respect to Guaranteed Indebtedness, to
the extent such payment or transfers are or may be voidable or otherwise
subject to rescission or return as a preferential transfer, fraudulent
conveyance or otherwise.
4. CHANGES TO GUARANTEED INDEBTEDNESS. Guarantor authorizes Lender, without
notice, consent or demand, before and after termination of this Guaranty,
without affecting Guarantor's liability hereunder: to take and hold
security for the payment of this Guaranty and/or the Guaranteed
Indebtedness, and exchange, enforce, foreclose, waive and release any
security and to apply the proceeds of such security as Lender in its
discretion determines; to obtain a guaranty of the indebtedness from any
one or more other persons or entities whomsoever and at any time or times
to enforce, waive, rearrange, modify, limit or release such other persons
or entities from their obligations under such guaranties; and to extend,
rearrange, supplement, modify, settle, compromise, discharge or subordinate
any of the Guaranteed Indebtedness.
5. UNENFORCEABILITY OR UNCOLLECTIBILITY OF THE GUARANTEED INDEBTEDNESS.
Guarantor will remain liable for the Guaranteed Indebtedness even though
the Guaranteed Indebtedness may be unenforceable against or uncollectible
from the Borrower or any other person due to incapacity, lack of power or
authority, discharge, or for any reason whatsoever.
6. GUARANTOR REPORTING. Guarantor will furnish to Lender such financial
statements and other information relating to the financial condition,
properties and affairs of Guarantor as Lender requests from time to time.
7. RIGHT OF OFFSET. Guarantor grants to Lender a right of setoff against every
deposit account and all personal property in Lender's possession, whether
tangible or intangible, and any claim of Guarantor (whether individual,
joint, several or otherwise) against Lender, now or hereafter existing.
This right of setoff is not exclusive. In addition to Lender's right of
setoff and as further security for this Guaranty and the Guaranteed
Indebtedness, Guarantor hereby grants Lender a security interest in all
deposits and all other accounts and property of Guarantor now or hereafter
on deposit with or held by Lender and all other sums at any time credited
by or owing from Lender to Guarantor. These rights and remedies of Lender
are in addition to other rights and remedies (including, without
limitation, other rights of setoff) which Lender may have.
8. AUTOMATIC ACCELERATION. Guarantor agrees that if the maturity of any
Guaranteed Indebtedness is accelerated by bankruptcy or otherwise, such
maturity shall also be deemed accelerated for the purpose of this Guaranty
without demand on or notice to Guarantor.
9. WAIVERS OF GUARANTOR. Guarantor waives (i) diligence and promptness in
preserving liability of any person on Guaranteed Indebtedness, and in
collecting or bringing suit to collect Guaranteed Indebtedness; (ii) all
rights of Guarantor under Rule 31, Texas Rules of Civil Procedure, or
Chapter 34 of the Texas Business and Commerce Code, or Section 17.001 of
the Texas Civil Practice and Remedies Code; (iii) to the extent Guarantor
is subject to the Texas Revised Partnership Act ("TRPA"), compliance by
Lender with Section 3.05(d) of TRPA; (iv) protest; (v) notice of
extensions, renewals, modifications, rearrangements and substitutions of
Guaranteed Indebtedness; (vi) notice of acceptance of this agreement,
creation of Guaranteed Indebtedness, failure to pay Guaranteed Indebtedness
as it matures, any other default, adverse change in Borrower's financial
condition, release or substitution of collateral, subordination of Lender's
rights in any collateral, and every other notice of every kind. If any part
of the Guaranteed Indebtedness is secured by an interest in real property
("Real Property"), and such interest is foreclosed upon pursuant to a
judicial or nonjudicial foreclosure sale, Guarantor agrees that
notwithstanding the provisions of Section 51.003, 51.004, and 51.005 of the
Texas Property Code (as amended from time to time), and to the extent
permitted by law, Lender may seek a deficiency judgment from Guarantor and
any other party obligated on the Guaranteed Indebtedness equal to the
difference between the amount owing on the Guaranteed Indebtedness and the
amount for which the Real Property was sold at judicial or nonjudicial
foreclosure sale. Guarantor irrevocably waives and shall not seek to
enforce or collect upon any rights which it now has or may acquire against
the Borrower, either by way of subrogation, indemnity, reimbursement or
contribution, for any amount paid under this Guaranty or by way of any
other obligations of the Borrower to Guarantor until 91 days after the
Guaranteed Indebtedness is paid in full.
10. REPRESENTATIONS AND AGREEMENTS. This Guaranty constitutes a legal, valid,
binding obligation of and is enforceable against Guarantor. Guarantor has
filed all federal and state tax returns which are required to be filed, and
has paid all due and payable taxes and assessments against the property and
income of Guarantor. Guarantor has determined that this Guaranty will
benefit Guarantor directly or indirectly. The value of the consideration
received by Guarantor is reasonably worth at least as much as its liability
hereunder and is fair and reasonably equivalent value for this Guaranty. No
material adverse change has occurred in Guarantor's financial condition or
business operations reflected in the last financial statement and
application for credit provided to Lender. Guarantor has not relied and is
not relying on Lender to provide to Guarantor information regarding
Borrower's assets or financial condition and Lender has no duty to provide
such information.
11. APPLICABLE LAW AND VENUE. This Guaranty is governed by Texas law. If any
provision of this Guaranty is illegal or unenforceable, that illegality or
unenforceability will not affect the remaining provisions of this Guaranty.
GUARANTOR AND LENDER AGREE THAT THIS GUARANTY WILL BE PERFORMED IN THE
COUNTY IN WHICH LENDER'S PRINCIPAL OFFICE IN TEXAS IS LOCATED, AND THAT
SUCH COUNTY IS PROPER VENUE FOR ANY ACTION OR PROCEEDING BROUGHT BY THE
GUARANTOR OR LENDER, WHETHER IN CONTRACT, TORT, OR OTHERWISE. ANY ACTION OR
PROCEEDING AGAINST GUARANTOR MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT
IN SUCH COUNTY TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW. TO THE
EXTENT PERMITTED BY APPLICABLE LAW GUARANTOR HEREBY IRREVOCABLY (A) SUBMITS
TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURTS, AND (B) WAIVES ANY
OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH ACTION
OR PROCEEDING BROUGHT IN ANY SUCH COURT OR THAT ANY SUCH COURT IS AN
INCONVENIENT FORUM. GUARANTOR AGREES THAT SERVICE OF PROCESS UPON IT MAY BE
MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, AT ITS
ADDRESS SPECIFIED BELOW. LENDER MAY SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW AND MAY BRING ANY ACTION OR PROCEEDING AGAINST GUARANTOR
OR WITH RESPECT TO ANY OF ITS PROPERTY IN COURTS IN OTHER PROPER
JURISDICTIONS OR VENUES.
12. NOTICE. Any notice required or permitted under this Guaranty must be given
in writing by United States mail, by hand delivery or delivery service, or
by telegraphic, telex, telecopy or cable communication, sent to the
intended addressee at the address shown in this Guaranty, or to such
different address as the addressee designates by 10 days notice. Notice by
United States mail will be effective when mailed. All other notices will be
effective when received. Written confirmation of receipt will be
conclusive. Notice of terminations, as provided in Section 2, will not be
deemed given until actually received by a commercial lending officer with
the rank of Vice President or above at the address of Lender shown in this
Guaranty.
13. COSTS AND EXPENSES. To the extent permitted by applicable law, Guarantor
will pay on demand all attorneys' fees and all other costs and expenses
incurred by Lender in connection with the preparation, administration,
enforcement, or collection of this Guaranty including but not limited to
Lender's standard Documentation Preparation and Processing fees.
14. MISCELLANEOUS. This Guaranty binds each Guarantor and its successors and
assigns and benefits Lender. The term "Lender" also includes all successors
and assigns of Lender. Guarantor may not assign its obligations under this
Guaranty without the prior written consent of Lender. This Guaranty may be
executed in multiple counterparts, and each counterpart will be deemed an
original, without the need to produce any counterpart other than the one to
be enforced. Any gender designation used herein includes all genders and
the singular number includes the plural. Lender's delay or failure to
exercise its rights is not a waiver of those rights. This Guaranty may not
be amended except in a writing signed by an authorized officer of Lender
and no waiver will be effective unless it is in writing. Any waiver is
applicable only for the specific situation for which it is given.
THIS GUARANTY is executed as of MARCH 15, 1996.
Page 1 of 2 Pages
THIS GUARANTY REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES WITH
RESPECT TO GUARANTOR'S GUARANTY OF GUARANTEED INDEBTEDNESS AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. NO COURSE OF DEALING BETWEEN GUARANTOR AND LENDER, NO
COURSE OF PERFORMANCE, NO TRADE PRACTICES, AND NO EXTRINSIC EVIDENCE OF ANY
NATURE MAY BE USED TO CONTRADICT OR MODIFY ANY TERM OF THIS GUARANTY.
THERE ARE NO ORAL AGREEMENTS BETWEEN GUARANTOR AND LENDER.
GUARANTOR:
MARK H. FISHER Date: 3-18-96
ADDRESS OF
GUARANTOR: 17 Carolane Trail
Houston, Harris County
Texas 77024
LENDER: (Lender's signature is provided as its acknowledgement of the above as
the final written agreement between the parties.)
BY: GARY K. WHITT
TITLE: VP
Page 2 of 2 Pages
CONTINUING LIMITED GUARANTY
(this "Guaranty")
1. GUARANTY. The undersigned Guarantor (jointly and severally if more than
one) agrees to pay TEXAS COMMERCE BANK NATIONAL ASSOCIATION, herein called
"Lender" at 712 Main Street, P.O. Box 2558, Houston, Harris County, Texas
77252-2558, or such other address as Lender designates, when due or
declared due, the Guaranteed Indebtedness. This Guaranty is an
unconditional, absolute and continuing guaranty of payment and performance
and not of collection. "Guaranteed Indebtedness" means all debts,
obligations, and liabilities of every kind and character, whether joint or
several, contingent or otherwise, of PHYSICIAN'S VISITING NURSE SERVICE,
INC. (together with its successors, "Borrower") now or hereafter existing
in favor of Lender evidenced by that one certain promissory note dated
March 15, 1996 in the original principal amount of $3,950,000.00 (including
each and every renewal, extension and modification thereof, rearrangement
and substitution therefor, the "Note") and all indebtedness under the Loan
Documents. Guaranteed Indebtedness includes any post-petition interest and
expenses (including, but not limited to, attorneys' fees) whether or not
allowed as a claim against Borrower under any bankruptcy, insolvency, or
other similar law. All Guaranteed Indebtedness is conclusively presumed to
have been made or acquired in reliance on this Guaranty. Guarantor's
liability under this Guaranty shall be limited in the aggregate at any one
time to the principal sum of $1,975,000.00 together with all interest
thereon, and all penalties, costs, fees and expenses (including, but not
limited to, attorneys' fees) as provided for under any of the Loan
Documents and as incurred by Lender in connection with any Guaranteed
Indebtedness, including, but not limited to collecting or attempting to
collect any of the foregoing indebtedness from Borrower. This Guaranty does
not in any way cancel, amend, discharge or limit any other guaranty
executed by Guarantor in favor of Lender. "LOAN DOCUMENTS" means any
document or instrument evidencing, securing or executed in connection with
Guaranteed Indebtedness.
2. TERMINATION OF GUARANTY. This Guaranty will continue to be in effect until
final payment in full of the Guaranteed Indebtedness. Any Guarantor may
terminate its liability for Guaranteed Indebtedness not in existence
(whether by advance, commitment or otherwise) by delivering written notice
to Lender, to be effective 5 business days after received under written
receipt by Lender. After termination of this Guaranty, Guarantor will
continue to be liable for all Guaranteed Indebtedness existing on the
effective date of termination, and for all Guaranteed Indebtedness arising
under any written agreement to make loans or extensions of credit entered
into between Lender and Borrower prior to the effective date of termination
(whether or not Lender is contractually obligated to make the loans or
extensions of credit).
3. CONTINUATION AND REINSTATEMENT OF GUARANTY. If any petition or other action
is filed by or against Borrower under the Bankruptcy Code or any other law
relating to liquidation, insolvency or reorganization of debtors, or any
other proceeding involving the estate or assets of the Guarantor, this
Guaranty will remain effective or be reinstated, as the case may be (even
if the Guaranteed Indebtedness has been paid in full), with respect to any
payments or transfer of assets with respect to Guaranteed Indebtedness, to
the extent such payment or transfers are or may be voidable or otherwise
subject to rescission or return as a preferential transfer, fraudulent
conveyance or otherwise.
4. CHANGES TO GUARANTEED INDEBTEDNESS. Guarantor authorizes Lender, without
notice, consent or demand, before and after termination of this Guaranty,
without affecting Guarantor's liability hereunder: to take and hold
security for the payment of this Guaranty and/or the Guaranteed
Indebtedness, and exchange, enforce, foreclose, waive and release any
security and to apply the proceeds of such security as Lender in its
discretion determines; to obtain a guaranty of the indebtedness from any
one or more other persons or entities whomsoever and at any time or times
to enforce, waive, rearrange, modify, limit or release such other persons
or entities from their obligations under such guaranties; and to extend,
rearrange, supplement, modify, settle, compromise, discharge or subordinate
any of the Guaranteed Indebtedness.
5. UNENFORCEABILITY OR UNCOLLECTIBILITY OF THE GUARANTEED INDEBTEDNESS.
Guarantor will remain liable for the Guaranteed Indebtedness even though
the Guaranteed Indebtedness may be unenforceable against or uncollectible
from the Borrower or any other person due to incapacity, lack of power or
authority, discharge, or for any reason whatsoever.
6. GUARANTOR REPORTING. Guarantor will furnish to Lender such financial
statements and other information relating to the financial condition,
properties and affairs of Guarantor as Lender requests from time to time.
7. RIGHT OF OFFSET. Guarantor grants to Lender a right of setoff against every
deposit account and all personal property in Lender's possession, whether
tangible or intangible, and any claim of Guarantor (whether individual,
joint, several or otherwise) against Lender, now or hereafter existing.
This right of setoff is not exclusive. In addition to Lender's right of
setoff and as further security for this Guaranty and the Guaranteed
Indebtedness, Guarantor hereby grants Lender a security interest in all
deposits and all other accounts and property of Guarantor now or hereafter
on deposit with or held by Lender and all other sums at any time credited
by or owing from Lender to Guarantor. These rights and remedies of Lender
are in addition to other rights and remedies (including, without
limitation, other rights of setoff) which Lender may have.
8. AUTOMATIC ACCELERATION. Guarantor agrees that if the maturity of any
Guaranteed Indebtedness is accelerated by bankruptcy or otherwise,
such maturity shall also be deemed accelerated for the purpose of this
Guaranty without demand on or notice to Guarantor.
9. WAIVERS OF GUARANTOR. Guarantor waives (i) diligence and promptness in
preserving liability of any person on Guaranteed Indebtedness, and in
collecting or bringing suit to collect Guaranteed Indebtedness; (ii) all
rights of Guarantor under Rule 31, Texas Rules of Civil Procedure, or
Chapter 34 of the Texas Business and Commerce Code, or Section 17.001 of
the Texas Civil Practice and Remedies Code; (iii) to the extent Guarantor
is subject to the Texas Revised Partnership Act ("TRPA"), compliance by
Lender with Section 3.05(d) of TRPA; (iv) protest; (v) notice of
extensions, renewals, modifications, rearrangements and substitutions of
Guaranteed Indebtedness; (vi) notice of acceptance of this agreement,
creation of Guaranteed Indebtedness, failure to pay Guaranteed Indebtedness
as it matures, any other default, adverse change in Borrower's financial
condition, release or substitution of collateral, subordination of Lender's
rights in any collateral, and every other notice of every kind. If any part
of the Guaranteed Indebtedness is secured by an interest in real property
("Real Property"), and such interest is foreclosed upon pursuant to a
judicial or nonjudicial foreclosure sale, Guarantor agrees that
notwithstanding the provisions of Section 51.003, 51.004, and 51.005 of the
Texas Property Code (as amended from time to time), and to the extent
permitted by law, Lender may seek a deficiency judgment from Guarantor and
any other party obligated on the Guaranteed Indebtedness equal to the
difference between the amount owing on the Guaranteed Indebtedness and the
amount for which the Real Property was sold at judicial or nonjudicial
foreclosure sale. Guarantor irrevocably waives and shall not seek to
enforce or collect upon any rights which it now has or may acquire against
the Borrower, either by way of subrogation, indemnity, reimbursement or
contribution, for any amount paid under this Guaranty or by way of any
other obligations of the Borrower to Guarantor until 91 days after the
Guaranteed Indebtedness is paid in full.
10. REPRESENTATIONS AND AGREEMENTS. This Guaranty constitutes a legal, valid,
binding obligation of and is enforceable against Guarantor. Guarantor has
filed all federal and state tax returns which are required to be filed, and
has paid all due and payable taxes and assessments against the property and
income of Guarantor. Guarantor has determined that this Guaranty will
benefit Guarantor directly or indirectly. The value of the consideration
received by Guarantor is reasonably worth at least as much as its liability
hereunder and is fair and reasonably equivalent value for this Guaranty. No
material adverse change has occurred in Guarantor's financial condition or
business operations reflected in the last financial statement and
application for credit provided to Lender. Guarantor has not relied and is
not relying on Lender to provide to Guarantor information regarding
Borrower's assets or financial condition and Lender has no duty to provide
such information.
11. APPLICABLE LAW AND VENUE. This Guaranty is governed by Texas law. If any
provision of this Guaranty is illegal or unenforceable, that illegality or
unenforceability will not affect the remaining provisions of this Guaranty.
GUARANTOR AND LENDER AGREE THAT THIS GUARANTY WILL BE PERFORMED IN THE
COUNTY IN WHICH LENDER'S PRINCIPAL OFFICE IN TEXAS IS LOCATED, AND THAT
SUCH COUNTY IS PROPER VENUE FOR ANY ACTION OR PROCEEDING BROUGHT BY THE
GUARANTOR OR LENDER, WHETHER IN CONTRACT, TORT, OR OTHERWISE. ANY ACTION OR
PROCEEDING AGAINST GUARANTOR MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT
IN SUCH COUNTY TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW. TO THE
EXTENT PERMITTED BY APPLICABLE LAW GUARANTOR HEREBY IRREVOCABLY (A) SUBMITS
TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURTS, AND (B) WAIVES ANY
OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH ACTION
OR PROCEEDING BROUGHT IN ANY SUCH COURT OR THAT ANY SUCH COURT IS AN
INCONVENIENT FORUM. GUARANTOR AGREES THAT SERVICE OF PROCESS UPON IT MAY BE
MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, AT ITS
ADDRESS SPECIFIED BELOW. LENDER MAY SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW AND MAY BRING ANY ACTION OR PROCEEDING AGAINST GUARANTOR
OR WITH RESPECT TO ANY OF ITS PROPERTY IN COURTS IN OTHER PROPER
JURISDICTIONS OR VENUES.
12. NOTICE. Any notice required or permitted under this Guaranty must be given
in writing by United States mail, by hand delivery or delivery service, or
by telegraphic, telex, telecopy or cable communication, sent to the
intended addressee at the address shown in this Guaranty, or to such
different address as the addressee designates by 10 days notice. Notice by
United States mail will be effective when mailed. All other notices will be
effective when received. Written confirmation of receipt will be
conclusive. Notice of terminations, as provided in Section 2, will not be
deemed given until actually received by a commercial lending officer with
the rank of Vice President or above at the address of Lender shown in this
Guaranty.
13. COSTS AND EXPENSES. To the extent permitted by applicable law, Guarantor
will pay on demand all attorneys' fees and all other costs and expenses
incurred by Lender in connection with the preparation, administration,
enforcement, or collection of this Guaranty including but not limited to
Lender's standard Documentation Preparation and Processing fees.
14. MISCELLANEOUS. This Guaranty binds each Guarantor and its successors and
assigns and benefits Lender. The term "Lender" also includes all successors
and assigns of Lender. Guarantor may not assign its obligations under this
Guaranty without the prior written consent of Lender. This Guaranty may be
executed in multiple counterparts, and each counterpart will be deemed an
original, without the need to produce any counterpart other than the one to
be enforced. Any gender designation used herein includes all genders and
the singular number includes the plural. Lender's delay or failure to
exercise its rights is not a waiver of those rights. This Guaranty may not
be amended except in a writing signed by an authorized officer of Lender
and no waiver will be effective unless it is in writing. Any waiver is
applicable only for the specific situation for which it is given.
THIS GUARANTY is executed as of MARCH 15, 1996.
Page 1 of 2 Pages
THIS GUARANTY REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES WITH
RESPECT TO GUARANTOR'S GUARANTY OF GUARANTEED INDEBTEDNESS AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. NO COURSE OF DEALING BETWEEN GUARANTOR AND LENDER, NO
COURSE OF PERFORMANCE, NO TRADE PRACTICES, AND NO EXTRINSIC EVIDENCE OF ANY
NATURE MAY BE USED TO CONTRADICT OR MODIFY ANY TERM OF THIS GUARANTY.
THERE ARE NO ORAL AGREEMENTS BETWEEN GUARANTOR AND LENDER.
GUARANTOR:
HARVEY R. HOUCK, JR. Date: 3-19-96
ADDRESS OF
GUARANTOR: One Riverway #2300
Houston, Harris County
Texas 77056
LENDER: (Lender's signature is provided as its acknowledgement of the above as
the final written agreement between the parties.)
BY: GARY K. WHITT
TITLE: VP
Page 2 of 2 Pages
EXHIBIT 10.21
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), dated effective
the 19th day of May, 1995, between MEDICAL INNOVATIONS, INC., a Delaware
corporation (the "Company"), and ARTHUR L. RICE (the "Employee"). The Company
and Employee may sometimes hereinafter be referred to singularly as a "Party" or
collectively as the "Parties."
WITNESSETH:
That for and in consideration of the mutual covenants,
promises and undertakings hereinafter contained, the Parties hereby undertake
and agree as follows:
1. EMPLOYMENT TERM. The Company hereby employs the
Employee commencing on the date hereof for a term of three (3) years, unless
sooner terminated as hereinafter provided. The term of this Agreement may be
renewed or extended for one or more successive additional one (1) year terms
upon mutual agreement of the Parties prior to the expiration of the initial term
or any such renewal term. Sections 14 and 15 of this Agreement shall survive the
completion or termination of this Agreement or at such time when the Employee
ceases to be employed, for any reason whatsoever, with the Company. Section 15,
however, shall not survive termination of this Agreement by Employee pursuant to
Section 12 hereof. The Employee accepts such employment and agrees to perform
the services specified herein, all upon the terms and conditions hereinafter
stated.
2. DUTIES. The Employee shall serve as President of
the Company's wholly-owned subsidiary, Hospital HomeCare Corporation ("HHCC"),
and agrees to devote his full time and efforts to the faithful performance of
his duties to the Company. The Employee also agrees to perform, without
additional compensation, such other services for the Company, and for any
parent, subsidiary or affiliate corporations of the Company and any partnerships
in which the Company may from time to time have an interest (herein collectively
called "Affiliates"), as the Chief Executive Officer of the Company may from
time to time specify, if such services are of the nature consistent with the
duties associated with the position for which the Employee has been hired
pursuant to the terms hereof. The term "Company" as used herein shall be deemed
to include and refer to all such Affiliates.
3. EXTENT OF SERVICE. The Employee shall devote his
full time, attention and energy to the business of the Company, and shall not be
engaged in any other business activity during the term of this Agreement. The
foregoing shall not be construed as preventing the Employee from acting as
executor or trustee of certain estates or making passive investments in other
businesses or enterprises, including a partnership owning rental property, if
(i) such investments will not require services on the part of the Employee which
would in any way impair the performance of his duties under this Agreement, (ii)
such other businesses or enterprises are not engaged in any business that is in
any way competitive with the business of the Company, (iii) such other
businesses or enterprises do not transact business with the Company or any
Affiliate, and (iv) the Employee has complied with Sections 13, 14 and 15 of
this Agreement with respect to such passive investment.
4. COMPENSATION. As payment for the services to be
rendered by the Employee hereunder during the initial term, the Employee shall
be entitled to receive a salary in the amount of $4,166.67 per month effective
as of the date hereof, which shall be payable during the term of this Agreement,
or until the earlier termination of employment by the Employee, in accordance
with the payroll policies of the Company in effect from time to time.
5. BONUS. Beginning with the fiscal year ending
December 31, 1995, Employee shall be entitled to receive an annual bonus to be
determined in the sole discretion of the Board. Such bonus shall be paid on an
annual basis within ninety (90) days after each fiscal year end.
6. STOCK OPTIONS. As additional compensation to the
Employee for services to be performed hereunder, MI will grant to the Employee
stock options pursuant to MI's 1988 Stock Option Plan that will entitle the
Employee to purchase 100,000 shares of common stock, $0.0075 par value, of the
Company at the last reported sales price for such stock on May 19, 1995.
7. EXPENSES. During the term of this Agreement, the
Company shall pay or reimburse the Employee for all reasonable out-of-pocket
expenses for travel, meals, hotel accommodations and similar items incurred by
him in connection with the business of the Company and approved by the Chief
Executive Officer or the Board of Directors of the Company, upon submission by
him of an appropriate statement documenting such expenses as required by the
Internal Revenue Code, as amended from time to time.
8. EMPLOYEE BENEFITS. During the term of this
Agreement, the Employee shall be entitled to participate in all employee benefit
plans from time to time made available to the employees of the Company,
including any retirement plan, profit-sharing plan, group life plan, health or
accident insurance or other employee benefit plans. For so long as the Company
provides any of its employees with the use of automobiles owned by the Company,
the Employee will have the use of such an automobile designated by the Company.
9. VACATION. During the term of this Agreement, the
Employee shall be entitled to annual vacation time determined in accordance with
the vacation policies of the Company in effect from time to time, during which
time his compensation shall be paid in full. Unused vacation time shall not
accrue from year to year. Notwithstanding the Company's vacation policy in
effect, the Employee will be entitled to three (3) weeks of vacation in the
Company's fiscal year ending December 31, 1995.
2
10. TERMINATION OF EMPLOYMENT FOR CAUSE. The Company
may terminate the employment of the Employee For Cause. As used herein, the term
"For Cause" shall mean any one or more of the following:
(a) material or repeated violation by the Employee of the
terms of this Agreement or his material or repeated failure to perform his
duties as described in Section 2 in a manner consistent with his position;
(b) excessive absenteeism on the part of the Employee not
related to illness;
(c) the Employee's indictment for a felony;
(d) the Employee's commission of fraud, embezzlement, theft or
crimes constituting moral turpitude, in any case whether or not involving the
Company, that, in the reasonable opinion of the Company, renders the Employee's
continued employment harmful to the Company;
(e) the voluntary resignation of the Employee without the
prior consent of the Company unless such resignation arises from the breach of
the Company of this Agreement or actions of the Company that violate applicable
laws;
(f) substance abuse on the part of the Employee; or
(g) the Employee knowingly acting in bad faith relative to the
Company's business interests.
In the event of termination of his employment For Cause, the Employee shall be
entitled to receive his compensation, as determined in Section 4 of this
Agreement and excluding any profit sharing or other bonuses, due or accrued on a
pro rata basis to the date of termination.
11. DISABILITY. As used herein, "Disability" shall
mean a physical or mental incapacity of the Employee that, in the good faith
determination of the Company, has prevented him from performing the duties
assigned him by the Company for ninety (90) consecutive days or for a period of
more than ninety (90) days in the aggregate in any eighteen (18) month period
and that, in the determination of the Company after consultation with a medical
doctor appointed by the Company, may be expected to prevent the Employee for any
period of time thereafter from devoting his full time and energies to his duties
as provided hereunder. The Employee's employment hereunder shall cease as of the
date of such determination. The Employee agrees to submit to medical
examinations, at the Company's sole cost and expense, to determine whether a
Disability exists pursuant to reasonable requests that the Company may provide
from time to time. During the Period of such physical or mental incapacity as
provided above, the salary otherwise payable to the Employee may, in the
absolute discretion of the Company, be reduced by the
3
amount of any disability benefits or payments received by the Employee from the
Company or any health plan funded in whole or in part by the Company (excluding
health insurance benefits or other reimbursement of medical expenses
attributable to insurance policies).
12. TERMINATION BY EMPLOYEE FOR CAUSE. The Employee
may terminate this Agreement upon the occurrence of any Event of Default. As
used herein, the term "Event of Default" shall mean (i) the material breach of
any provision of this Agreement by the Company, (ii) if the Employee is not
elected as a member of the Board of Directors of the Company on or before June
30, 1995, or (iii) if the Employee is removed, or is not reelected, as a member
of the Board of Directors of the Company or HHCC. Notwithstanding any provision
hereof to the contrary, however, the Employee may not terminate this Agreement
until it has provided to the Company (i) written notice of the occurrence of an
Event of Default, and (ii) ten (10) days in which to cure the Event of Default.
In the event of termination of this Agreement due to the occurrence of an Event
of Default, the Employee shall have no further obligations hereunder, and the
provisions of Section 15 hereof shall have no further force or effect and shall
not survive termination of this Agreement.
13. BUSINESS OPPORTUNITIES. For as long as the
Employee shall be employed by the Company, the Employee agrees that with respect
to any new and future business opportunity or other new and future business
proposal which is offered to, or comes to the attention of, the Employee and
which is in any way related to, or connected with, the business of the Company
or its Affiliates, the Company shall have the right to take advantage of such
business opportunity or other business proposal for its own benefit. The
Employee agrees to promptly deliver notice to the Board of Directors of the
Company in writing (the "Notice of Opportunity") of the existence of such
opportunity or proposal and the Employee may take advantage of such opportunity
only if the Company does not elect to exercise its right to take advantage of
such opportunity.
14. CONFIDENTIAL INFORMATION. The Employee
acknowledges that in the course of his employment with the Company, he will
receive, and be made aware of, and exposed to certain trade secrets, know-how,
lists of customers, employee records and other confidential information and
knowledge concerning the business of the Company (hereinafter collectively
referred to as "Information") which the Company desires to protect. The Employee
understands that such Information is confidential and he agrees that he will not
reveal such Information to anyone outside the Company. The Employee further
agrees that during the term of this Agreement and thereafter he will not use
such Information in competing with the Company. Upon termination of his
employment hereunder, the Employee shall surrender to the Company all papers,
documents, writings and other property produced by him or coming into his
possession by or through his employment hereunder and relating to the
information referred to in this Section 14, which are not general knowledge in
the industry, and the Employee agrees that all such materials will at all times
remain the property of the Company.
4
15. COVENANT NOT TO COMPETE. Employee recognizes
that the Company has business goodwill and other legitimate business interests
which must be protected. In addition, Employee acknowledges that he would not
have access to the Information except through his employment with Company.
Therefore, in exchange for access to the Information and the benefits of
employment with the Company, the Employee agrees not to compete with Company for
a period of two (2) years from the date of the termination of the Employee for
any reason (subject to Section 10 hereof), in accordance with the following
provisions:
A. Employee will not in any capacity or
relationship enter into, engage in, or be connected with any business or
business operation or activity which consists in whole or in part of the
business of the Company, within the United States of America. For purposes of
this Agreement, the business of the Company is acknowledged and agreed to be
providing health care services in the home or providing consulting or management
services to hospitals and free-standing home healthcare agencies regarding home
health care programs (the "Company's Business"); and
B. Employee will not call upon any customer
whose account is serviced in whole or in part by the Company at the time of the
termination of Employee's employment, with the purpose of selling or attempting
to sell to any such customer any goods included within the product lines of the
Company; and
C. Employee will not intentionally divert,
solicit or take away any customer, supplier or employee of the Company, or the
patronage of any customer or supplier of the Company, or otherwise interfere
with or disturb the relationship existing between the Company and any of its
customers, suppliers or employees, directly or indirectly.
It is mutually understood and agreed that if any of the
provisions relating to the scope, time or territory in this paragraph 14 are
more extensive than is enforceable under applicable laws or are broader than
necessary to protect the goodwill and legitimate business interests of the
Company, then the Parties agree that they will reduce the degree and extent of
such provisions by whatever minimal amount is necessary to bring such provisions
within the ambit of enforceability under applicable law.
The Parties acknowledge that the remedies at law for breach of
Employee's covenants contained in this Section 15 are inadequate, and they agree
that the Company shall be entitled, at its election, to injunctive relief
(without the necessity of posting bond against such breach or attempted breach),
and to specific performance of said covenants in addition to any other remedies
at law or equity that may be available to the Company.
16. NOTICES. All notices, requests, consents and
other communications under this Agreement shall be in writing and shall be
deemed to have been delivered on the date personally delivered or on the date
mailed, postage prepaid, by certified mail, returned receipt requested, or
telegraphed and confirmed if addressed to the respective parties as follows:
5
If to Company: Medical Innovations, Inc.
One Riverway, Suite 2300
Houston, Texas 77056
Attn: Chief Executive Officer
Facsimile No. (713) 590-2520
Copy to: Boyer, Ewing & Harris Incorporated
Nine Greenway Plaza, Suite 3100
Houston, Texas 77046
Attention: John R. Boyer, Jr.
Facsimile No. (713) 871-2024
If to Employee: Mr. Arthur L. Rice
1140 Empire Central, Suite 500
Dallas, Texas 75247
Either Party hereto may designate a different address by providing written
notice of such new address to the other Party hereto.
17. SPECIFIC PERFORMANCE. The Employee acknowledges
that a remedy at law for any breach or attempted breach of Sections 11, 12 or 13
of this Agreement will be inadequate, the Employee agrees that the Company shall
be entitled to specific performance and injunctive and other equitable relief in
case of any such breach or attempted breach, and further agrees to waive any
requirement for the securing or posting of any bond in connection with the
obtaining of any such injunctive or any other equitable relief.
18. SEVERABILITY. Whenever possible, each provision
of this Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provisions shall be
ineffective to the extent of such provision or invalidity only, without
invalidating the remainder of such provision or the remainder of such provision
or the remaining provisions of this Agreement.
19. ASSIGNMENT. This Agreement may not be assigned
by the Employee. Neither the Employee, his spouse nor their estates shall have
any right to encumber or dispose of any right to receive payments hereunder, it
being understood that such payments and the right thereto are nonassignable and
nontransferable.
20. BINDING EFFECT. Subject to the provisions of
Section 19 of this Agreement, this Agreement shall be binding upon and inure to
the benefit of the Parties hereto, the Employee's heirs and personal
representatives, and the successors and assigns of the Company.
6
21. GOVERNING LAW. This Agreement shall be construed
and enforced in accordance with and governed by the laws of the State of Texas.
In the event of a dispute concerning this Agreement, venue shall lie in the
appropriate federal or state district courts located in, or if not applicable,
closest to Houston, Texas.
22. PRIOR EMPLOYMENT AGREEMENTS. Employee represents
and warrants to the Company that he has fulfilled all of the terms and
conditions of all prior employment agreements to which he may be or have been a
party, and at the time of execution of this Agreement is not a party to any
other employment agreement. This Agreement shall specifically replace and
supersede any employment agreement the Employee may presently have or have had
in the past with the Company.
23. PAROLE EVIDENCE. This Agreement constitutes the
sole and complete agreement between the Parties hereto, and no verbal or other
statements, inducements or representations have been made to or relied upon by
either Party, and no modification hereof shall be effective unless in writing
signed and executed in the same manner as this Agreement, provided, however, the
amount of compensation to be paid Employee for services to be performed for
Company may be changed from time to time by the Parties hereto by written
agreement without in any other way modifying, changing or affecting this
Agreement and the performance by Employee of any of the duties of his employment
with Company.
24. WAIVER. Any waiver to be enforceable must be in
writing and executed by the Party against whom the waiver is sought to be
enforced.
IN WITNESS WHEREOF, the Parties hereto have executed
this Agreement as of the date and year first above written.
THE COMPANY:
MEDICAL INNOVATIONS, INC.
By: /s/ MARK H. FISHER
Mark H. Fisher, Chairman of the Board,
President and Chief Executive Officer
THE EMPLOYEE:
/s/ ARTHUR L. RICE
Arthur L. Rice
7
EXHIBIT 11
MEDICAL INNOVATIONS, INC.
COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
PER SHARE EARNINGS
-----------------------------------------------------
YEARS ENDED DECEMBER 31: 1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
PRIMARY:
Net income applicable to common stock ............................... $ 1,109,995 $ 609,806 $ 742,033
Reduce interest expense, net of tax effect,
for assumed debt retirement resulting from
the 20% treasury stock repurchase limitation ...................... 19,616 -- 125,566
----------- ----------- -----------
Net income to common and common
equivalent shares ................................................ $ 1,129,611 $ 609,806 $ 867,599
=========== =========== ===========
Weighted average common shares outstanding .......................... 15,874,592 16,543,506 14,025,986
Effect of stock options and warrants ................................ 822,600 831,476 1,873,356
----------- ----------- -----------
Weighted average common and common
equivalent shares ................................................ 16,697,192 17,374,982 15,899,342
=========== =========== ===========
Net income per common and common
equivalent share - primary ....................................... $ 0.07 $ 0.04 $ 0.05
=========== =========== ===========
FULLY DILUTED:
Net income applicable to common stock ............................... $ 1,109,995 $ 609,806 $ 742,033
Reduce interest expense, net of tax effect,
for assumed debt retirement resulting from
the 20% treasury stock repurchase limitation ..................... 10,125 -- 80,867
----------- ----------- -----------
Net income applicable to common and
common equivalent shares ......................................... $ 1,120,120 $ 609,806 $ 822,900
=========== =========== ===========
Weighted average common and common
equivalent shares ................................................ 16,697,192 17,374,982 15,899,342
Additional effect of stock options and warrants ..................... 48,920 41,080 --
----------- ----------- -----------
Weighted average common and common
equivalent shares ................................................. 16,746,112 17,416,062 15,899,342
=========== =========== ===========
Net income per common and common
equivalent share - fully diluted ................................. $ 0.07 $ 0.04 $ 0.05
=========== =========== ===========
</TABLE>
EXHIBIT 22
MEDICAL INNOVATIONS, INC.
LIST OF SUBSIDIARIES
Nurses PRN of Virginia, Inc. - incorporated in Texas
Medical Innovations of Virginia, Inc. - incorporated in Texas
Physician's Visiting Nurse Service, Inc. - incorporated in Texas
Desert Corporation - incorporated in Nevada
Home Health Associates, Inc. - incorporated in Nevada
Home Care Management Corporation - incorporated in Nevada
PRN Home Health Care, Inc. - incorporated in Nevada
Nevada Home Care Partners, Inc. - incorporated in Nevada
Hospital HomeCare Corporation - incorporated in Texas
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1995
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 292,666
<SECURITIES> 0
<RECEIVABLES> 11,981,393
<ALLOWANCES> 0<F1>
<INVENTORY> 324,750
<CURRENT-ASSETS> 13,777,140
<PP&E> 2,120,249
<DEPRECIATION> 0<F2>
<TOTAL-ASSETS> 29,090,156
<CURRENT-LIABILITIES> 8,554,323
<BONDS> 0
0
0
<COMMON> 119,459
<OTHER-SE> 9,219,845<F3>
<TOTAL-LIABILITY-AND-EQUITY> 29,090,156
<SALES> 0
<TOTAL-REVENUES> 69,389,360
<CGS> 41,731,088<F4>
<TOTAL-COSTS> 66,529,001
<OTHER-EXPENSES> 23,576,444
<LOSS-PROVISION> 1,159,695
<INTEREST-EXPENSE> 1,067,189
<INCOME-PRETAX> 1,793,170
<INCOME-TAX> 683,175
<INCOME-CONTINUING> 1,109,995
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,109,995
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
<FN>
<F1>Allowances are netted against recievables on the balance sheet, but are
disclosed in the Notes.
<F2>Depreciation is included in PP&E and is disclosed in Notes seperately.
<F3>Additional Paid-In Capital and Retained Earnings.
<F4>Direct Patient Care Costs.
</FN>
</TABLE>
